author: WISDOM, Circuit Judge:

text:
    Marvin E. JENSEN et al., Plaintiffs-Appellees, v. UNITED STATES of America, Defendant-Appellant.
    No. 74-1514.
    United States Court of Appeals, Fifth Circuit.
    April 10, 1975.

      Scott P. Crampton, Asst. Atty. Gen., Daniel C. Perri, Atty., Meyer Rothwacks, Chief, Appellate Sec., Tax Div., Dept, of Justice, Washington, D. C., John L. Briggs, U. S. Atty., Kendell W. Wherry, Asst. U. S. Atty., Jacksonville, Fla., Elmer J. Kelsey, Donald H. Olson, Attys., Tax Div., Dept, of Justice, Washington, D. C., for defendant-appellant.
    Marvin E. Jensen, Margaret F. Jensen, pro se.
    Before TUTTLE, WISDOM and GOLDBERG, Circuit Judges.
   WISDOM, Circuit Judge:

In this refund suit Marvin Jensen seeks to recover $1,400 in income taxes he allegedly overpaid for 1968, 1969, and 1970. The controversy turns on whether payments made by Graybar Electric Company to the estate of its deceased employee, Mrs. Marguerite Jensen, wife of the complainant, on the redemption of Graybar stock held by her estate, constitute taxable income or nontaxable gifts.

Mrs. Jensen had been employed for Graybar for twenty-five years. In 1944, at the age of fifty, she retired as secretary to Graybar’s president and chairman of the board. During her employment she had participated in the company’s stock purchase plan and, at the time of her death in 1967, owned 1,308 shares of Graybar stock. A stock dividend of 327 shares, paid some three weeks after her death, increased to 1,635 the number of shares held by her estate. One year after her death, the company exercised its option to redeem those shares at par: $20 per share. In addition to that redemption price, Graybar made payments to the estate, under its “Special Death Benefits Plan”, of $4,087.50 for each of the years in suit: 1968, 1969, and 1970. The tax treatment of these additional payments is the focus of this controversy-

Jensen reported the payments as long-term capital gains. He now asserts that they were nontaxable gifts and that he is, accordingly, entitled to a refund. The government takes the position that they were payments with respect to redeemed stock and were properly reported and taxed as long-term capital gain. The district court agreed with the taxpayer. We reverse.

The pertinent facts were stipulated. Graybar, since 1928, has encouraged its employees to purchase shares in the company through stock purchase plans. Only employees of Graybar have been entitled to subscribe under these plans, and, since 1939, Graybar employees have owned all the company’s outstanding common stock, although not all employees are stockholders. The stock is sold subject to a restrictive agreement prohibiting sale or transfer to any party other than Graybar and reserving to Graybar the right to repurchase the employee’s shares on his death. All shares so sold are held by a voting trust. The amount of stock an employee is entitled to purchase varies according to his rate of compensation, length of service, and, in some instances, his position with the company. The stock is sold at par: $20 per share. On an employee’s death, Graybar is entitled to repurchase his shares at par. Under the original stock purchase plan, however, the redemption price also included additional payments above the par price, to reflect any excess of fair market value over par.

In 1938 the company announced a change in policy. The board recommended that the company cease making these additional payments to reflect the excess of fair market value over par and that it pay, on redemption, only the par price. This recommendation was explained in a letter to shareholders:

The experience of the last ten years has shown that due to the extensive and rapid fluctuations in business conditions this arrangement [payment of additional amounts representing excess of fair market value over par] may work out unfairly to other stockholders. During and immediately after a period of prosperity the stock may have a substantially increased value which to a greater or lesser extent may shrink during a subsequent period of depression. This means Graybar Management and its remaining shareholders may suffer severe losses with respect to the stock purchased from pensioners and estates during or immediately following periods of prosperity.

Three years after this recommendation was adopted, Graybar’s board reexamined the company’s stock purchase plan. It passed a resolution authorizing the company’s officers to formulate “an amendment to the certificate of incorporation of the company and to the stock purchase plans” to provide that the company, in redeeming shares, pay “in addition to the repurchase price now provided for, additional amounts over a limited period of five years equivalent to any dividends” that would have been paid on the stock had it remained outstanding. One month later, the board again discussed “additional payments”, recharacterizing them, however, as “additional death benefits.” The minutes of the board meeting disclose the following discussion:

The matter was discussed at some length. It was pointed out that this would give greater benefits to those who are stockholders than to those who were not. It was the consensus of opinion of those present that it would be fair to pay some additional death benefits upon the death of an employee or a pensioner who as a stockholder has furnished part of the working capital of the company during his life-time and whose estate by reason of his death is compelled to surrender his stock to the company.

Accordingly, the board rescinded its earlier resolution to amend the stock purchase plan and amended, instead, the “Plan for Employees’ Pensions, Disability Benefits, and Death Benefits”, to include a provision for “special death benefits”. The new provision empowered the board, on redeeming shares, to make payments (“special death benefits”) for five years to the shareholder’s estate or beneficiaries, in amounts equal to the cash dividends paid during that period on the equivalent number of outstanding shares. This plan for “special death benefits” included, however, a caveat: stockholders had no right, either legal or equitable, to receive these payments, and action or inaction of the company in any one case would not constitute a precedent or give rise to any obligation in any other case.

Despite this caveat, the company has paid “special death benefits” consistently. From 1941, the year the plan was adopted, until 1957, the company made the additional payments in 189 of 193 redemptions and, in more recent years, 1960 through 1972, in 271 of 273 redemptions. In the two cases in which the company declined to make payments, it concluded that the recipients designated by the shareholders’ wills were “too remotely related.” In short, in carrying out its written plan, the company has followed a policy of paying additional amounts on the redemption of stock in all eases where the designated beneficiaries are not “too remotely related” to the deceased shareholder. This practice is, to all appearances, consistent with the plan as written, specifically, with the provision of the plan that grants discretion to the board to such payments either to the estate of the shareholder or “to those beneficiaries of the deceased employee or pensioner as would be entitied to receive Regular Death Benefits in the event any Regular Death Benefits should be payable.” For at least twelve years, Graybar has not deviated from this policy.

In the early years of the plan, Graybar claimed a deduction for the benefits paid, as additional compensation for previous services. The tax court and the court of appeals agreed that the payments were “strictly attributes of stock” not deductible as post-mortem compensation. Graybar Electric Company v. Commissioner, 2 Cir. 1959, 267 F.2d 403, 404, aff’g 29 T.C. 818. Each court noted that Graybar, in addition to its plan for special death benefits, maintained for all its employees, irrespective of stockholding, a comprehensive plan of extra compensation, pensions, disability benefits, and death benefits. Only under the plan for “special death benefits” is eligibility tied in any way to ownership of stock.

Mrs. Jensen’s estate was one of hundreds to receive these additional payments following the redemption of their Graybar stock. The payments were made under a plan that had been in existence for twenty-six years and that continued after payment of the sums in controversy here. Nothing in the record suggests that Mr. Jensen’s case is in any way distinguishable from the other cases in which these payments were made. So the question we address here is not simply the appropriate tax treatment of these particular payments but also, generally, the payments made under Gray-bar’s special death benefits plan. Two other courts addressing this question have held in favor of the taxpayer, concluding that the “special death benefit” payments constitute nontaxable gifts. Harper v. United States, 9 Cir. 1971, 454 F.2d 222, aff’g C.D.Cal.1970, 314 F.Supp. 360; Pearson v. United States, E.D.Va., U.S.Tax Cas. (74-1, at 33,984), ¶ 9406, appeal docketed, No. 74-2040, 4 Cir., 1974. We cannot agree.

The touchstone in this area of tax law is Commissioner v. Duberstein, 1960, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218. There the Court emphasized that “the most critical consideration” in determining whether ■ a given transfer constitutes a gift is “the transferor’s ‘intention’.” 363 U.S. at 286-87, 80 S.Ct. 1190. “A gift”, the Court observed “proceeds from a detached and disinterested generosity, out of affection, respect, admiration, charity or like impulses.” 363 U.S. at 285, 80 S.Ct. at 1197 [citations omitted]. When, on the other hand, “the payment proceeds from ‘the constraining force of any moral or legal duty’ or from ‘the incentive of anticipated benefit’ of an economic nature, it is not a gift.” 363 U.S. at 285, 80 S.Ct. at 1196, 4 L.Ed.2d at 1225. In sum, the court concluded that the “nontechnical” nature of the statutory standard, its “close relationship to the data of human experience”, and the variety of fact patterns in which the gift issue arises require close analysis of the factual elements present in each case. But, as Judge Friendly has observed, the Court did not mean “that every trier of facts was to be free for all future time to disregard guidelines that other trial and appellate courts had developed concerning the weight to be given to recurring ‘relevant factual elements, with their various combinations.’ ” Estate of Carter v. Commissioner, 2 Cir. 1971, 453 F.2d 61, 64. Decisional consistency, within the limitations imposed by the variability of human affairs, is as much a goal in this as in other areas of law.

The district court here, in concluding that the “special death benefits” paid Mrs. Jensen’s estate were gifts, adopted the reasoning and holding of the Ninth Circuit in Harper. There the court applied five factors recognized in Poyner v. Commissioner, 4 Cir. 1962, 301 F.2d 287, as pertinent tests: (1) that the payments were made to the spouse of the deceased shareholder, not to his estate; (2) that Graybar had been under no obligation to make the payments and had, in fact, decided on previous occasions not to make payments to persons qualified; (3) that the company derived no benefit of an economic nature from the payments; (4) that the recipient had never performed any services for the company; and (5) that the services of the deceased employee-shareholder had been fully compensated during his lifetime.

We have no quarrel with this analysis as it was adopted and applied in Poyner. We have indicated above our agreement that tests earlier developed by courts were not invalidated by Duberstein. And we agree that generally, and on the facts present in Poyner, the factors listed above are relevant in determining whether specific payments are gifts. But they are not, as the court in Poyner explicitly indicated, the only relevant factors. Nor are they necessarily of equal relevance when transposed to a different fact situation. Indeed, Duberstein makes clear that these factors, helpful though they are, are not rules susceptible of axiomatic application.

We cannot go along with the Harper court’s application of the Poyner analysis. We differ, in the main, over the proper characterization of payments made under Graybar’s special death benefit plan. Payment under the Graybar plan is made to the shareholder’s estate, as was the case here, or directly to the designated beneficiaries. In such circumstances, especially where the employee-shareholder had a reasonable expectation that such payments would be made, we are disinclined to attribute significance to whether payment is made to the estate or to the beneficiaries.

Furthermore, whether the recipient had ever performed any services for the company and whether the services of the decedent had been fully compensated during his lifetime are factors of limited persuasiveness on the facts of this ease. They are useful, no doubt, in determining whether specific ad hoc payments constitute gifts or compensation for services rendered. It was in aid of that determination that these guidelines were developed and have been applied. See Poyner v. Commissioner, 4 Cir. 1962, 301 F.2d 287; Florence S. Luntz, 1958, 29 T.C. 647; Estate of Hellstrom, 1955, 24 T.C. 916. But there is no contention here that Graybar’s “special death benefits” constitute additional compensation. Thus we may concede that these factors aid in dispelling any suggestion that the payments were made as compensation, without in any way advancing the contention that they are gifts. There are pitfalls to argument by exclusion.

Moreover, the Harper version of the Poyner analysis does not weigh elements directly responsive to the facts of this case: that the payments were made under a long-established plan and practice and without consideration of the needs and circumstances of the recipients. Finally, we cannot accept the finding that Graybar derived no benefit from these payments and was under no moral obligation to make them.

Of overriding significance is the fact that these payments were made pursuant to a longstanding plan and practice. “The existence of a plan or practice”, this Court has remarked, “is most persuasive against the theory that a payment is a gift, and, we think it is decisive where a benefit to the Company is expected.” Tomlinson v. Hine, 5 Cir. 1964, 329 F.2d 462, 466. Other courts, called on to characterize payments made under a plan or practice, have consistently refused to characterize them as gifts. See, e. g., Cronheim’s Estate v. Commissioner, 8 Cir. 1963, 323 F.2d 706; Gaugler v. United States, 2 Cir. 1963, 312 F.2d 681; Smith v. Commissioner, 3 Cir. 1962, 305 F.2d 778; Simpson v. United States, 7 Cir. 1958, 261 F.2d 497; Bausch’s Estate v. Commissioner, 2 Cir. 1951, 186 F.2d 313. When, on the other hand, courts have characterized payments to a widow as gifts, they have commonly emphasized that the company had no plan, policy, or practice of making such payments. See, e. g., Grinstead v. United States, 7 Cir. 1971, 447 F.2d 937; United States v. Pixton, 5 Cir. 1964, 326 F.2d 626; Carson v. United States, 1963, 317 F.2d 370, 161 Ct.Cl. 548; United States v. Frankel, 8 Cir. 1962, 302 F.2d 666, cert. denied, 371 U.S. 903, 83 S.Ct. 208, 9 L.Ed.2d 165; Rice v. United States, E.D.Wis.1961, 197 F.Supp. 223. See also Poyner v. Commissioner, 4 Cir. 1962, 301 F.2d 287.

The Graybar plan, as written and as administered, effectively dispels any suggestion of elements of affection, admiration, respect, or charity. Although the company retains discretion as to whether to make payments in individual cases, nothing in the record suggests that the personal qualities or contributions of the decedents or their beneficiaries ever affected the exercise of that discretion. Indeed, we would be surprised to find in a company of Graybar’s size that more than a few of the shareholders, much less their beneficiaries, were personally known to those authorizing the payments. So also, nothing suggests that Graybar inquired into, or tailored payments to, the circumstances and needs of individual recipients. Certainly there is no indication in the record that Graybar gave any consideration to Mr. Jensen’s circumstances. On the contrary, Gray-bar makes these payments only to the estates or beneficiaries of stockholders and only on the redemption of their stock. It calculates the amounts to be paid exclusively by reference to the number of shares redeemed. And these benefits are paid in addition to, and irrespective of, amounts which may be receivable under the company’s regular death benefits plan.

If there is little in this plan to suggest generosity or sympathetic beneficence, there is much to suggest corporate self-interest. Certainly the plan must serve as an inducement to employees to participate in the company’s stock purchase plan, through which Graybar receives, presumably, a good portion of its working capital. Indeed, in formulating the plan, the company expressly acknowledged the contribution of the employee “who as a shareholder has furnished part of the working capital of the company during his lifetime”.

The company, in instituting the “special death benefits plan”, was undoubtedly mindful of the effect the plan might have on employee willingness to participate in the company’s stock purchase plan. The genesis of the “special death benefits plan” is, alone, enough to suggest such an awareness. The plan, when first considered, was expressly conceived as an amendment to the stock purchase plan and designed to provide additional redemption payments. It followed directly on the earlier amendment to the stock purchase plan that had reduced the redemption price. The operative event that triggers the discretion under the plan to make payments is not the stockholder’s death itself but the ensuing redemption of his shares. These benefits, then, are essentially substitutes for, and, arguably, equivalents to, the additional payments made under the original plan to reflect increases in fair market value.

That Graybar is under no legal obligation to make these payments does not vitiate the tax importance of Gray-bar’s plan and practice. The voluntariness of even an isolated transfer does not require the conclusion that the transfer constitutes a gift. See Commissioner v. Duberstein, 1960, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218; Old Colony Trust Company v. Commissioner, 1929, 279 U.S. 716, 49 S.Ct. 499, 73 L.Ed. 918. And, as numerous decisions indicate, the existence of a plan or practice remains persuasive against the contention that payments under it constitute gifts even though their disbursement is discretionary with the transferor. See, e. g., Tomlinson v. Hine, 5 Cir. 1964, 329 F.2d 462; Simpson v. United States, 7 Cir. 1958, 261 F.2d 497; Bausch’s Estate v. Commissioner, 2 Cir. 1951, 186 F.2d 313.

Finally, we are unable • to accept the conclusion reached in Harper and Pearson that Graybar had no moral obligation to pay special death benefits. Both courts, in reaching that conclusion, stressed the discretionary aspect of the plan and the refusal to pay benefits in certain cases. But Graybar has declined to pay these benefits in only six of four hundred and sixty-six redemptions. While the record casts no light on the company’s reasons for denial of benefits in the first four cases, it does show that in the only two cases from 1960 through 1972 in which benefits were denied, the sole reason was that the designated beneficiaries were deemed too remotely related to the deceased shareholders. These denials, then, are consistent with the limitation implicit in the plan to make payments only to those close relatives of the shareholder who would be eligible to receive “regular death benefits”. There have been no deviations from the plan as so administered.

The court in Pearson admitted that “the inference is reasonably drawn that employees of Graybar buy stock in the expectation that ‘special death benefits’ will be paid to the beneficiary [sic] of their estates.” Yet it concluded that the explicit caveat included in the plan put purchasers on notice that their expectations are “based only on ... a long standing custom.” We pass the question, whether the expectations generated by this plan and practices followed under it entail a moral obligation to continue the plan. But we are convinced that, so long as the plan remains in effect, Graybar must perceive a moral obligation to administer that plan evenhandedly and to base the determination whether to make payments on neutral criteria. The plan did, in fact, continue after these payments had been made. We cannot believe that Graybar could in good conscience have refused to make the payments to Mrs. Jensen’s estate while continuing to make them to others similarly situated.

The taxpayer bears the burden of showing that he was entitled to exclude these payments from his gross income. Welch v. Helvering, 1933, 290 U.S. 111, 54 S.Ct. 8, 78 L.Ed. 212; Gibbs v. Tomlinson, 5 Cir. 1966, 362 F.2d 394. We have canvassed the record for evidence to support the lower court’s conclusion that the taxpayer has shouldered his burden. But the sole support we find for the contention that these payments, made under a long standing and published plan, constitute gifts, is the absence of legal obligation. This alone is not enough. We find nothing to indicate affection, admiration, respect, charity, or like impulses as the dominant reasons for these payments. Instead we find substantial benefits to the corporation and its shareholders. The trial court erred, therefore, in holding that these payments were gifts.

Because these payments have not been shown to come within a specific statutory exemption, they must fall within the broad language of Section 61(a) of the Internal Revenue Code, which defines gross income as “all income from whatever source derived”. In this refund suit, we need not reach the question whether these payments with respect to redeemed stock” and treated as long term capital gains, or whether, for example, they constitute distribution of corporate profits taxable under Section 301 of the Code, or simply “other income”. They are, in any event, taxable items, so that the taxpayer is entitled to no refund.

The judgment of the district court is therefore

Reversed.

      . Since 1939, Graybar has exercised this option in every case.

      . As part of the recommended change in policy, each stockholder, in exchange for surrender of his rights to additional redemption payments, received $1 for each share of stock he held.

      . Section 8 — Special Death Benefits.
      In the event of the Death of any employee or of any person receiving a service or disability pension under this Plan who at the time of death is a holder of shares of Common Stock of the Company which the Company shall reacquire pursuant to any option or contract, the Committee may recommend to the Board of Directors that the Board authorize payments (hereinafter called “Special Death Benefits”) during a limited period of five years from the last dividend date preceding the date of the reacquisition of such shares by the Company (in addition to any payments or benefits otherwise provided for in Section 7 of the Plan) in amounts not exceeding the cash dividends, if any, that may be paid during such limited period on a number of shares of Common Stock of the Company equal to the number of such shares reacquired by the Company from the estate of such decedent. No such special death benefits shall be or become payable in any event except as such dividends are declared and paid upon the shares of the Company during such limited period and then only if and to the extent authorized by the Board of Directors pursuant to the recommendation of the Committee.
      Any payments authorized pursuant to the preceding paragraph of this Section 8 shall be made to the estate of the decedent or at the option of the Committee to such beneficiaries of the deceased or pensioner as would be entitled to receive Regular Death Benefits in the event any Regular Death Benefits should be payable. * * *

      . Neither the provisions of this Section 8 nor the action or inaction of the Committee or the Board of Directors as to the payment or nonpayment of a Special Death Benefit shall give rise to or create in any person any right whatsoever, either legal or equitable, against the Company, the Board of Directors, the Committee or any member thereof for the payment of any Special Death Benefit, and the action or inaction of the Committee or the Board of Directors, or both, as to the payment or nonpayment of a Special Death Benefit in any case shall not constitute a precedent or give rise to any obligation to take similar action in any other case or instance.

      . In one case, the beneficiaries under the employee’s will would have been two colleges, a church, and three cousins. In the other, the recipients would have been two unrelated friends. In both cases, we infer, the potential recipients were not “such beneficiaries as would be entitled to receive Regular Death Benefits”.

      . The record does not show whether Mr. Jensen received “regular” as well as “special” death benefits.

      . For discussion of Duberstein’s impact on “widow gift” cases, see Crown, Payments to Corporate Executives’ Widows, N.Y.U. 19th Inst, on Fed. Tax 815 (1961); Note, Voluntary Payments to Widows of Corporate Executives: Gifts or Income?, 62 Mich.L.Rev. 1216 (1964); Note, Payments to Widows of Corporate Executives and Employees — Gifts or Income?, 49 Va.L.Rev. 74 (1963). See generally Klein, An Enigma in the Federal Income Tax: The Meaning of the Word “Gift”, 48 Mich.L. Rev. 215 (1963). See also Blum, Motive, Intent and Purpose in Federal Income Taxation, 34 U.Chi.L.Rev. 485 (1967).

      . See also Fitch v. United States, D.Kan.1969, 299 F.Supp. 1170; Security First National Bank v. United States, S.D.Cal.1966, 66-2 U.S.Tax Cas. 87,058; Joyce v. Commissioner, 1966, 25 CCH Tax Ct.Mem. 914; Meyer v. United States, S.D.Cal.1965, 244 F.Supp. 103; Spear v. Vinal, D.Neb.1965, 240 F.Supp. 33; McCarthy v. United States, D.Mass.1964, 232 F.Supp. 605; Landry v. United States, E.D.La. 1964, 227 F.Supp. 631; Froehlinger v. United States, D.Md.1963, 217 F.Supp. 13, aff’d, 3 Cir. 1964, 331 F.2d 849; Wilner v. United States, S.D.N.Y.1961, 195 F.Supp. 786. But see Kaiser v. United States, 1960, 363 U.S. 299, 80 S.Ct. 1204, 4 L.Ed.2d 1233; United States v. Allinger, 6 Cir. 1960, 275 F.2d 421.

      . Recall that between 1960 and 1972 there were no fewer than 273 redemptions.

      . We might also note that the authors of the plan were, presumably, among its potential beneficiaries.

      . Section 101(b) of the Internal Revenue Code exempts from taxable income the first $5,000 paid the beneficiaries or estate of a deceased employee, “by reason of the death of the employee.” Apart from the fact that this section has not been put in issue here, it is, we think, inapplicable as these payments were made in connection with the redemption of stock, and not simply “by reason of the death of the employee.” Graybar does have a “regular death benefits” plan whose coverage is in no way related to stockholding.


source: Caselaw Access Project

author: GOLDBERG, Circuit Judge: THORNBERRY, Circuit Judge, with whom GODBOLD, Circuit Judge,

license: Public Domain

text:
    EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellant, v. INTERNATIONAL LONGSHOREMEN’S ASSOCIATION et al., Defendants-Appellees.
    No. 74-1053.
    United States Court of Appeals, Fifth Circuit.
    April 11, 1975.

      William A. Carey, Gen. Counsel, Joseph T. Eddins, Assoc. Gen. Counsel, Charles L. Reischel, Beatrice Rosenberg, Richard S. Cohen, Asst. Gen. Counsels, Washington, D. C., for plaintiff-appellant.
    Warner F. Brock, Chris Dixie, Houston, Tex., D. J. Lerma, Brownsville, Tex., Michael Crawford, Arthur J. Mandell, Herman Wright, Houston, Tex., L. Dewitt Hale, Corpus Christi, Tex., for defendants-appellees.
    Before THORNBERRY, GOLDBERG and GODBOLD, Circuit Judges.
   GOLDBERG, Circuit Judge:

This suit poses for us, in the year 1975, the question of the legality of maintaining segregated black and white unions. Workers in these unions perform the same basic functions, for the same bosses, in the same ports but do so out of different locals. Defendants claim that this division is no more than an amenity for those who wish to associate with “their own”. We believe that the effect, if not the intention, is far more invidious, in that it denies equal opportunities to workers and potential workers, and is thus in violation of 42 U.S.C. § 2000e et seq.

The defendants in this suit are the International Longshoremen’s Association, the South Atlantic and Gulf Coast District of the Association and 37 local unions within the State of Texas which are chartered by the Association. Save for one of the locals, all, whether black or white, are opposed to a merger with their “sister” unions within each port.

All of the locals involved in this suit were chartered before the passage of Title VII, the Civil Rights Act of 1964. The unions have had what was admittedly a progressive interracial arrangement when the unions were first chartered. In most of the ports the work was divided on a 50%-50% basis between the black and white locals. There were no wage differentials between those in the white and those in the black locals. The defendants contend, and the plaintiff, the Equal Employment Opportunity Commission, does not dispute, that the union committee, which bargains with the shippers for the labor agreements which control the Texas ports, is made up equally of black and white members. Finally, while in some of the ports the mean take home pay for a white longshoreman is higher than that for a black longshoreman, this is at least in part a function of the fact that black locals have chosen in their own discretion to confer seniority and therefore job eligibility on more men by employing laxer standards.

Nonetheless, the United States in 1969 brought suit, claiming that what was progressive many years ago has become, because of the march of law, illegal now.

I

FACTS

The Government’s suit claimed that the pattern of union organization violated 42 U.S.C. § 2000e-2(c)(2), which says that it will be an unlawful employment practice for any labor organization:

[T]o limit, segregate, or classify its membership or applicants for membership or to classify or fail to refuse to refer for employment any individual, in any way which would deprive or tend to deprive any individual of employment opportunities ... or otherwise adversely affect his status as an employee or as an applicant for employment, because of such individual’s race, color, religion, sex or national origin.

The plaintiff asked the district court to hold that segregated unions are, per se, a violation of the statute and therefore to order that the paired local unions be merged. The defendants essentially argued that no economic deprivation resulted from the existence of separate locals and therefore that their organizational structure did not violate the law.

In his opinion, United States v. Int’l Longshoremen’s Ass’n, S.D.Tex.1971, 334 F.Supp. 976,' the district judge found that the maintenance of completely separate unions would, in fact, tend to deprive individuals of employment on the basis of their race. Judge Garza decided that while the 50%-50% rule had the superficial look of equality, in fact it had discriminatory potential:

If in any port there are one hundred Whites available to work on the waterfront as longshoremen and two hundred Negroes, and the work is divided fifty-fifty it is obvious that the one hundred Whites will work more hours than the Negroes.
It is not the racial composition of the community that should control, but the number of Blacks and Whites that make themselves available for long-shore work that counts.

334 F.Supp. at 979. However, he declined to find that segregated unions in themselves were in violation of the Civil Rights Act of 1964 and stated that he thought he could shape a decree short of merger which would remedy the economic deprivation. He held the formulation of a decree in abeyance, however, and certified to this Court, under 28 U.S.C. § 1292(b), the question of whether the segregated locals had to be merged.

For reasons known only to it, or perhaps for no reason at all, the plaintiff did not take an appeal but decided instead to enter into negotiations with the unions, still, apparently, maintaining its “merge or no deal” approach throughout. This approach did not result in a resolution of the issues, and on November 6, 1972, a year after Judge Garza entered his first order, the Government made a motion for entry of judgment. In its Memorandum in Support of Plaintiff’s Motion for Entry of Judgment, the Government said: “We believe that an Order should be entered requiring merger in the manner suggested by our Proposed Decree, and also requiring the other elements of relief contained in that proposal.” A year after this motion on October 1, 1973, the district court entered an Interlocutory Decree which held that the defendants were not required to merge and that “therefore such relief is hereby denied;” and proceeded to hold that the violations of Title YII of the Civil Rights Act of 1964 “can be fully corrected by the abolishment of separate hiring halls and the establishment of a common hiring hall” and by the establishment of common seniority classifications. The Equal Employment Opportunity Commission appeals from this Interlocutory Order.

II

JURISDICTION

A panel of this Court denied appellee’s motion to dismiss the appeal on February 12, 1974. We agree with that panel’s action and believe that the appeal is correctly before this Court. The jurisdictional posture of this case is a peculiar one. The district court’s order is definitely interlocutory in nature. It orders the parties to confer in establishing common seniority systems and hiring halls and to submit a plan back to the district court so that it can entertain objections. The order goes on to state that the district court is retaining jurisdiction in the matter with “full power and authority to issue any additional Orders necessary to insure equal employment opportunities . .” In so ordering, however, the judge denied the plaintiff’s motion for a permanent injunction merging the locals.

28 U.S.C. § 1292(a)(1) provides in relevant part that the courts of appeals shall have jurisdiction of appeals from “interlocutory orders of the district courts of the United States, . . . granting(,) refusing or dissolving injunctions . . . In a number of cases we have upheld the appealability of denials of preliminary injunctions. See, e. g., Mercury Motor Express, Inc. v. Brinke, 5 Cir. 1973, 475 F.2d 1086; Southeastern Promotions, Ltd. v. City of Mobile, 5 Cir. 1972, 457 F.2d 340; Smith v. Grady, 5 Cir. 1969, 411 F.2d 181; Dilworth v. Riner, 5 Cir. 1965, 343 F.2d 226; Bd. of Pub. Instr. v. Braxton, 5 Cir. 1964, 326 F.2d 616.

The only jurisdictional question in the present case is whether § 1292(a)(1) applies to give us jurisdiction of denials of permanent injunctions. We conclude that it does. In Ferrara v. Louisiana, 5 Cir. 1971, 443 F.2d 344, while recognizing our lack of jurisdiction we said “. . . [W]e concede that the denial of a preliminary or permanent injunction is appealable, . . . ” and go on to decide the case by noting “But the critical fact is that plaintiffs in the proceedings on defendants’ motions to dismiss merely opposed those motions and did not ask for a preliminary injunction, much less a permanent one.” 443 F.2d at 345, 346. Though dicta, Ferrara's language traces the correct path.

First, we note that in granting the jurisdiction to hear an appeal from the denial of an injunction, the statute draws no distinction based upon the type of injunction which a party has requested. Second, to the extent that jurisdiction over only certain interlocutory orders — those involving injunctions — has been granted in furtherance of the general policy against piecemeal appeals, see Andrews v. United States, 1963, 373 U.S. 334, 83 S.Ct. 1236, 10 L.Ed.2d 383, that purpose is as well, or better served, in the adjudication of motion for a permanent rather than a preliminary injunction. In many cases issues will be finally resolved by the grant or denial of a permanent injunction, while no such resolution will stem from a decision on a motion for a preliminary injunction. This will be the case when, as in the present situation, the question of the appropriate remedy is itself a matter of law. Finally, the factor which singles out injunctions as those matters which will be appealable from an interlocutory order, the potential for irrecompensible injury, Di Bella v. United States, 1962, 369 U.S. 121, 82 S.Ct. 654, 7 L.Ed.2d 614; Baltimore Contractors, Inc. v. Bodinger, 1955, 348 U.S. 176, 75 S.Ct. 249, 99 L.Ed. 233, is just as likely to be present when an injunction is denied or granted for a time period extending beyond the final order in the trial. These considerations compel the conclusion that the appeal at bar is properly before us.

Ill

MERITS

In United States v. Jacksonville Terminal Co., 5 Cir. 1971, 451 F.2d 418, we gave comprehensive attention to the evidentiary issues surrounding a showing of discrimination. That opinion dealt in part with the interpretation of section 2000e-2(c)(2), noting that “there appears no valid justification for preservation of these locals as separate entities. The record clearly discloses that the existence of ‘separate but equal’ locals has had, and may continue to have, post-Act deleterious effects on blacks.” 451 F.2d at 457. We ordered the merger of segregated unions, but in doing so did not need to inquire further into the meaning of the statute before us.

Reading § 2000e-2(c)(2) by its literal terms, as we ordinarily do, Perry v. Commerce Loan Co., 1966, 383 U.S. 392, 400, 86 S.Ct. 852, 857, 15 L.Ed.2d 827, 833; Mumford v. Glover, 5 Cir. 1974, 503 F.2d 878 at 882, I believe that the statute puts an extremely heavy burden on those who wish to maintain segregated unions. They must show that this organizational structure would not tend to deprive any individual of employment opportunities or affect his status as an employee.

I conclude that the unions cannot make such a showing, even granting that present longshoremen, whether black or white, are paid the same wages, have equal numbers of representatives on the contract negotiating committee, and, under a common seniority and hiring hall system, could be assured of an equal chance of obtaining longshore work. There are two reasons for this decision. First, black individuals who might potentially seek employment opportunities as longshoremen would tend to be dissuaded by the onus they would then have to bear of working through an involuntarily all-black organization. Second, there is a significant likelihood that the contracts which would emerge from bargaining sessions in which all of labor’s representatives were charged with serving all of the employees would better the employment status of present and potential black employees than does a bargaining committee in which half of the representatives are charged with serving white employees and the other half with serving black employees.

A. Stigma

In Brown v. Board of Educ., 1954, 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873, in which the Supreme Court held that segregated schools denied to blacks the equal protection guaranteed by the Fourteenth Amendment, the Court said: “To separate [black school children] from others of similar age and qualifications solely because of their race generates a feeling of inferiority as to their status in the community that may affect their hearts and minds in a way unlikely ever to be undone.” 347 U.S. at 494, 74 S.Ct. at 691, 98 L.Ed. at 880. The Court then quoted from the lower court in one of the cases consolidated in Brown: “Segregation of white and colored children in public schools has a detrimental effect upon the colored children. The impact is greater when it has the sanction of the law; for the policy of separating the races is usually interpreted as denoting the inferiority of the negro group.” Id. The Supreme Court found that regardless of the equality of the material inputs, segregated schools could not be equal because the very segregation causes psychic trauma to the black children.

The racial stigma which prevents segregated schools from offering equal educational opportunities is not felt exclusively by children, nor is it felt exclusively in the educational context. The Supreme Court subsequently summarily decided a series of cases in which it held that racially separate facilities were inherently unconstitutional; the Court came to those decisions without regard to any evidence of material equality. See, e. g., New Orleans City Park Improvement Ass’n v. Detiege, 1958, 358 U.S. 54, 79 S.Ct. 99, 3 L.Ed.2d 46, aff’g 5 Cir. 1958, 252 F.2d 122 (segregated parks). Gayle v. Browder, 1956, 352 U.S. 903, 77 S.Ct. 145, 1 L.Ed.2d 114, aff’g Browder v. Gayle, M.D.Ala.1956, 142 F.Supp. 707 (segregated sectioning of buses); Mayor and City Council of Baltimore v. Dawson, 1955, 350 U.S. 877, 76 S.Ct. 133, 100 L.Ed. 774, aff’g Dawson v. Mayor and City Council of Baltimore, 4 Cir. 1955, 220 F.2d 386 (segregated beaches).

We must address ourselves to the terms of § 2000e-2(c)(2) in light of this judicial recognition of the harm to self-esteem that attaches to many black persons at the prospect of obtaining their goal through an involuntarily segregated mechanism — whether that goal be education, transportation, recreation or, in the present case, employment. Once we do so it becomes apparent to me why the segregated locals currently before us must be merged. The statute says that any segregation which tends to deprive an individual of employment opportunities is illegal. Many black people who are about to embark upon a career will be dissuaded from becoming longshoremen because of the extra burden which attaches to that profession in the form of the psychic discomfort of segregation. That extra obstacle, in other words, tends to deprive them of their opportunity to become longshoremen. It does not matter that many of the blacks currently in the segregated local have come to regard it as a voice of the black community. The effect of such segregation is likely to be viewed as a negative one by many blacks considering potential jobs and so long as one black so views it, the result of the practice is discrimination; Nor does it matter that those who continue the system may not have a discriminatory intent. The statute which we are construing calls for a finding of illegitimacy where the classification tends to effect a denigration of employment opportunities. It does not look to the intention of those who segregate nor to the satisfaction with which they may view the job they have done.

B. Negotiations

The other detriment which blacks will tend to suffer relates to the adverse effect upon their employment status and employment opportunities of the contractual terms which emerge from bargaining sessions in which only some of labor’s negotiators are charged with representing their point of view. The problem is well expressed in an analogous case to the present one, faced by the Fourth Circuit:

Abolition of the dual hiring halls and the other reforms decreed by the district court do not eliminate the necessity of merging the locals. The ILA’s failure to secure equal employment opportunities for its black members in all jobs for which they are qualified is an example of the inherent inequality that the district judge correctly concluded can be remedied only by merger. Apart from further litigation, discrimination against black workers who aspire to non-gang jobs, such as gearmen, mechanics, and foremen, can only be accomplished by bargaining with the stevedores. But the officers of the white local owe no duty to the members of the black local, and it is unrealistic to expect them to participate in hard bargaining on behalf of black longshoremen. ... At best, the union’s committee approaches the bargaining table with divided legal responsibilities and loyalties. However, merger of the locals will place on all bargaining representatives, not just black bargaining representatives, the statutory duty to eliminate racial discrimination throughout the Port. Steele v. Louisville & Nashville Railroad Co., 323 U.S. 192, 203, 65 S.Ct. 226, 89 L.Ed. 173 (1944).

United States v. Int’l Longshoremen’s Ass’n, 4 Cir. 1972, 460 F.2d 497 at 501. This reasoning is as relevant in our case as it was in the case before the Fourth Circuit. As Judge Garza noted below:

Much of this disparity [in total earnings by locals] is due to the earnings of individual workers on the waterfront who are members of the locals, but who are hired directly by the employers, and who are not referred by the locals, most of whom are Whites, such as the so-called Gearmen. This situation has been known for a long time, and yet the contracts entered into by and between the industry and the longshoremen have not attempted to correct this situation.

334 F.Supp. at 979.

I believe that this type of discrimination is more likely to be overcome when all of labor’s negotiators have the statutory duty to oppose it, as compared to the case when only some will oppose it and others will be willing, at least, to tolerate the discrimination in return for other types of benefits.

Moreover, merger eliminates the possibility of internecine strife between the segregated unions either in the negotiation process or in other phases of union activity. For, where different unions have different interests we cannot be assured of continuing amicable relations. I read another salutary effect of this construction of the statute to be the prevention of any such interunion carnage under black and white flags.

IV

CONCLUSION

Plessy v. Ferguson, 1896, 163 U.S. 537, 16 S.Ct. 1138, 41 L.Ed. 256, with all of its “separate but equal” paraphernalia has failed the constitutional test of time for a good reason. The involuntary separation of people engenders a psychological harm which puts the lie to contentions of equality. It is ludicrous to say in the seventh decade of the twentieth century, 20 years after Brown v. Board of Education gave us our forceful education in race relations, as our society and courts have struggled with the great task of cleansing the vicious inequities which have beset our black citizens, that segregated unionism is to receive the statutory or constitutional blessing of our Congress or this Court.' Congress would be shocked to hear that their legislation entrenches the inequality inherent in segregated locals. And I would not undo twenty years of judicial travail to allow that same result. Unions are not entitled to any separate enclave in our legal and sociological stratification. A union is not a social club; it is a fundamental economic instrument in our society and we have a whole body of law regulating it. The statute we have under consideration is addressed to the potential employment of every citizen as well as to post-employment conditions. The segregated unions that we have before us, by their very nature, deny equal employment opportunities and conditions because of the psychological harm they inflict. This is an intolerable situation. Congress designed the statute we have before us to abrogate racism 'and does not allow us to sanctify segregated unions when they perpetuate unequal effects. It may cost some money to merge these unions; there may be some disruption in activities, but I would not ever condemn black workers to the Hobson’s choice of living in an involuntarily black niche or foregoing employment opportunities on the waterfront.

I must conclude, then, that the district court erred when it refused to grant plaintiffs’ motion for the entry of a permanent injunction against the continued operation of segregated locals. I find that the edict of 42 U.S.C. § 2000e-2(c)(2) cannot be satisfied in the present case by measures short of the merger in each particular port of the racially segregated locals within that port. On that basis I would reverse and remand this case.

Reversed and remanded.

THORNBERRY, Circuit Judge, with whom GODBOLD, Circuit Judge,

joins (specially concurring):

We concur in the court’s judgment, and in Parts I and II of Judge Goldberg’s opinion. In our view, however, the merits of this case can be decided without holding that segregated locals constitute a per se violation of Title VII. As Judge Goldberg notes, p. 275, ante, the lower court here specifically found that “the Government has discharged . . [its] burden . [of showing] that the maintenance of 'segregated locals constitutes a pattern or ' practice depriving individuals of working opportunities, because of their race or national origin.” 334 F.Supp. at 980. In United States v. Jacksonville Terminal Co., 5 Cir. 1971, 451 F.2d 418 this court wrote:

The record clearly discloses that the existence of ‘separate but equal’ locals has had, and may continue to have, post-Act deleterious effects on blacks We conclude that the District Court erred in refusing to hold that the failure to consolidate the locals violates section 703(c) of the Act, 42 U.S.C.A. § 2000e-2(c).

451 F.2d at 457. We read this language to make merger of segregated locals mandatory whenever they are shown to have had actual discriminatory effect on employment opportunities. Since in this case Judge Garza found that employment discrimination resulted from the existence of segregated locals, Jacksonville Terminal left him no discretion to refuse merger. Hence, the order on appeal must be reversed. If a case ever comes to us with a finding by the district court that no actual employment discrimination arose from segregated locals, we may then properly consider the necessity for a rule of per se illegality. On this basis we join the court’s judgment.

      . Local 1368, in Brownsville, Texas is made up mostly of blacks with some Mexican-Americans. Brownsville appears to be a special case, in .which this union local receives only 25% of the work. It appeals for a “fair share” for its members by whatever means necessary and does not necessarily oppose merger of locals.

      . 42 U.S.C. § 2000e et seq.

      . The suit was originally brought by the Attorney General under 42 U.S.C. § 2000e~6(a), which gave him jurisdiction when he had reasonable cause to believe that a person or group of persons were engaged in a pattern or practice of resistance to the enjoyment of any of the rights secured by the Act. Effective as of March, 1974, this jurisdiction was transferred to the Equal Employment Opportunity Commission by 42 U.S.C. § 2000e-6(c); § 2000e-6(d) continued without abatement all suits brought by the Attorney General by substituting the Commission as the party.

      . 28 U.S.C. § 1292(b) reads, in relevant part: When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order: .

      . Indeed, it might appear that once a panel of this Court had made a legal determination that jurisdiction exists, no subsequent panel on its own could make a contrary determination. Rather the original panel’s action would appear, at the least, the law of the case, and could not. be overruled except by this Court sitting en banc. Nonetheless, this Court has held that the panel deciding the case must make a de novo determination of jurisdiction. We have said: “Although motions to dismiss have been denied under our administrative procedures, the Court of Appeals is not precluded from a further inquiry as to its jurisdiction and is not relieved of the duty to dismiss the appeal if it appears there is no jurisdiction.” Austracan, Inc. v. M/V Lemon-core, 5 Cir. 1974, 500 F.2d 237 at 239; see also Cook v. Eizenman, 5 Cir. 1963, 312 F.2d 134 at 136. Thus we must make the independent inquiry above.

      . We note that dicta in the Supreme Court’s opinion in Switzerland Cheese Ass’n v. Horne’s Mkt., 1966, 385 U.S. 23, 87 S.Ct. 193, 17 L.Ed.2d 23, is consistent with our conclusion. The Court said: “We take the other view [that the petitioner could not appeal] not because ‘interlocutory’ or preliminary may not at times embrace denials of permanent injunctions, but for the reason that the denial of a motion for a summary judgment because of unresolved issues of fact does not settle or even tentatively decide anything about the merits of the claim.” 385 U.S. at 25, 87 S.Ct. at 195, 17 L.Ed.2d at 25.

      . The Court was not presented with motions for remedies short of merger and did not directly deal with the validity of such remedies.

      . The defendants note that there is no requirement within the rules which govern the locals that each local may service only members of its predominant race. But they admit that the locals were chartered on the basis of racé, and have been maintained on that basis. As the district court found, the exceptions to this pattern “have been few and far between”. 334 F.Supp. at 978. They are functionally segregated; neither this Court nor the statute we are applying would force blacks to undergo the tension and tribulations of joining the predominantly white local before we decide the case.

      . In addition, there are, of course, multifarious aspects of the contract negotiation process whose resolution may differentially affect a black employee’s status depending on the duties and directions of the negotiators.


author: ROSS, Circuit Judge.

text:
    SUN PIPE LINE COMPANY, Appellant, v. Robert ALTES, d/b/a A & A Materials and Landfill Company, Appellee.
    No. 74-1450.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 8, 1975.
    Decided Feb. 19, 1975.

      J. H. Evans, Fort Smith, Ark., for appellant.
    Josef V. Hobson, Fort Smith, Ark., for appellee.
    Before GIBSON, Chief Judge, HEANEY and ROSS, Circuit Judges.
   ROSS, Circuit Judge.

Sun Pipe Line Company (Sun), a Pennsylvania corporation with its principal place of business in Oklahoma, brought this diversity action against Robert Altes, a resident of Arkansas, seeking to recover in excess of $35,000 for damages incurred when one of Altes’ employees, while operating an earth moving machine, punctured a pipeline owned by Sun. After a trial in the district court the jury returned a verdict for defendant Altes, and judgment was entered accordingly. Sun appeals, alleging that the court erred in four respects: (1) in refusing to instruct the jury that Sun had the right to bring this action; (2) in instructing the jury that Sun had the duty to bury its pipeline at a depth sufficient to avoid interference with lawful activities of the owner of the land; (3) in giving instructions regarding contributory negligence; and (4) in refusing to direct a verdict for Sun. Because we agree with the first two assignments of error, we reverse and remand for a new trial.

At the time of the incident which resulted in this litigation Altes owned a parcel of land in LeFlore County, Oklahoma, on which he operated a rock quarrying and landfill business. This consisted of removing rock from below the surface, crushing it, selling it and then filling in the excavation with trash and covering it with soil. At the time he purchased the land in early 1972 Altes had noticed that there was an easement for a pipeline across it and that such a pipeline did, in fact, exist.

This right-of-way for the pipeline was acquired in 1953 by Oklahoma Mississippi River Products Line, Inc., from the Markells, who owned the property at that time. In the easement the Markells granted to the firm, “its successors and assigns,” the right “to lay, maintain, operate, inspect and remove a pipe line” on the land in question. This written agreement, which was binding on the “heirs, devisees, administrators, executors, successors, or assigns” of the parties to it, further provided:

It is agreed that the pipe line to be laid under this grant shall be constructed and maintained below cultivation depth, so that Grantors may fully use and enjoy the premises, subject to the rights of the Grantee to maintain and operate said line or lines.

Altes warned his workers not to conduct quarrying operations in the area where the pipeline was buried. Nonetheless, on March 16, 1972, one of his employees did operate a front end loader in the vicinity of the pipeline and, while digging into the soil, punctured it. A considerable amount of gasoline being pumped at high pressure escaped through the hole, and the pipeline had to be shut down for repairs. There was no question but that the employee had been negligent and that this negligence was attributable to Altes.

The principal conflict which developed during the trial testimony was whether Sun had been contributorily negligent in not marking the route of the pipeline properly and in not burying it deep enough. In this regard there was wide divergence in the testimony as to the depth at which the pipeline was buried at the point of the puncture. Likewise, there was considerable confusion as to whether the pipeline was adequately or accurately marked on the property itself or on a plat of the property.

Another issue which developed at trial was whether Sun had a right to prosecute the action. It was revealed that at the time of the break the pipeline was owned by OMR, Inc., a successor firm to Oklahoma Mississippi River Products, Inc., but that the litigation was initiated by Sun after its merger with OMR in August, 1972, in which Sun was the surviving corporation. Evidence was received on this issue, including the articles of merger.

Refusal to instruct jury on Sun’s right to bring action

Since the issue of Sun’s right to bring the action had been injected into the trial, Sun requested that the district judge instruct the jury that, in accordance with the merger agreement' between Sun and OMR, Sun succeeded to all of OMR’s rights and liabilities and was entitled to maintain an action for damages against Altes. The court refused to give this instruction.

During his closing argument Altes’ attorney argued to the effect that, since OMR owned the pipeline at the time of the accident, Sun had failed to prove that it had sustained any damages. When Sun objected to this line of argument on the ground that it had the right to bring suit for damages to OMR as a matter of law, the trial judge merely told the jury that it is “for you to determine the effect of the merger.” Altes’ counsel continued to argue that Sun had sustained no damages.

The instruction requested by Sun was not given and neither was the jury informed as to the law of merger. On the other hand, the jury was told that, before it could award damages to Sun, it must find that Sun had sustained damages. Thus, the jury was left in the position of determining whether Sun could recover for damages to OMR. This was error.

Fed.R.Civ.P. 17(b) states that “[t]he capacity of a corporation to sue or be sued shall be determined by the law under which it was organized.” Sun is a Pennsylvania corporation, so the law of that state determines whether it can sue to recover premerger damages to OMR.

Pa.Stat.Ann. tit. 15, § 1907 (1974 Supp.) deals with the effect of a merger or consolidation of corporations and provides:

All the property, real, personal, and mixed and franchises of each of the corporations parties to the plan of merger or consolidation, and all debts due on whatever account to any of them, including subscriptions to shares and other choses in action belonging to any of them, shall be taken and deemed to be transferred to and vested in the surviving or new corporation, as the case may be, without further act or deed. (Emphasis supplied.)

This statute makes it explicitly clear that Sun, the surviving corporation, was vested with OMR’s chose in action against Altes and could bring this lawsuit to recover for OMR’s damages. See In re Penn Central Securities Litigation, 335 F.Supp. 1026, 1034 (E.D.Pa.1971). In addition, we note that the merger agreement itself conformed to the Pennsylvania statute by providing that Sun would be vested with “all property, real, personal and mixed, and all debts due to each” of the corporations.

Finally, this Court has stated that statutes, such as Pennsylvania’s, which provide that a successor corporation inherits a chose in action from a merging corporation as a matter of law merely serve to codify the common law rule “which recognizes that a chose in action to enforce a property right upon merger vests in the successor corporation and no right of action remains in the merging corporation.” Western Auto Supply Co. v. Gamble-Skogmo, Inc., 348 F.2d 736, 741 (8th Cir. 1965), cert. denied, 382 U.S. 987, 86 S.Ct. 556, 15 L.Ed.2d 475 (1966).

In light of this well settled statutory and common law rule, the trial court should have given Sun’s requested instruction. The effect of the court’s instructions combined with the argument of Altes’ attorney was to leave this question of law to the unfettered and unguided discretion of the jury, and this constituted prejudicial error.

Instruction on the duty to bury the pipeline.

Over Sun’s objection the trial court instructed the jury that Sun, as the operator of a pipeline transporting hazardous materials, had the following duties:

To bury its pipeline at such adequate depth as to avoid interference with lawful activities which are known to the pipeline company to be conducted by the owner or user of the surface adjacent to the pipeline. To properly mark and identify the location of its pipeline.

Sun argues, and we agree, that in the context of this case that part of this instruction dealing with the depth of burial was prejudicially erroneous.

The easement for the pipeline right-of-way had originally been created by a conveyance, the written grant from the Markells. In such a situation the rights and liabilities of the parties are determined by the terms of the agreement. Potter v. Northern Natural Gas Co., 201 Kan. 528, 441 P.2d 802, 805 (1968); Minard Run Oil Co. v. Pennzoil Co., 419 Pa. 334, 214 A.2d 234, 235-236 (1965); Restatement of Property § 482 (1944).

The grant conveying this particular easement specifically stated that the pipeline would be “constructed and maintained below cultivation depth.” Therefore, Sun had a duty to maintain the pipeline below cultivation depth. It did not have the duty stated in the instruction to bury the pipeline at such a depth as to avoid interference with all possible lawful activities on the land. Cf. Buckeye Pipe Line Co. v. Keating, 229 F.2d 795, 798 (7th Cir.), cert. denied, 352 U.S. 830, 77 S.Ct. 44, 1 L.Ed.2d 51 (1956); Potter v. Northern Natural Gas Co., supra, 441 P.2d at 806; Minard Run Oil Co. v. Pennzoil Co., supra, 214 A.2d at 235-236.

The prejudice to Sun created by this erroneous instruction is manifest. There was considerable evidence introduced at trial indicating that the pipeline company knew of the quarrying operations on Altes’ land before the accident and that this quarrying was a lawful activity being carried on under applicable Oklahoma statutes and regulations. Under the erroneous instruction and the evidence the jury could have been misled into believing that Sun could not recover because it had violated a duty to bury the pipeline at a depth adequate to not interfere with Altes’ lawful quarrying business — a duty it did not legally have.

Instruction on contributory negligence and refusal to direct a verdict for Sun.

We need not and do not reach these issues in order to dispose of this appeal. However, we do note that whether or not to instruct on contributory negligence or direct a verdict will depend upon the evidence adduced at the new trial with regard to the depth of burial of the pipeline in relation to cultivation depth and the manner in which the pipeline right-of-way was posted.

If an instruction on contributory negligence is deemed necessary, it should conform to Oklahoma law which, in turn, appears to be in line with the general rules regarding this defense. See Sinclair Prairie Oil Co. v. Thornley, 127 F.2d 128, 132 (10th Cir. 1942) (Oklahoma law); Bready v. Tipton, 407 P.2d 194, 200 (Okl. 1965).

Conclusion.

For the reasons discussed in this opinion the judgment of the district court is reversed and the cause is remanded for a new trial.

      . The parties do not dispute the application ofOklahoma law to this issue.


author: SPRECHER, Circuit Judge. FAIRCHILD, Chief Judge

text:
    GARY HOBART WATER CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, and United Steelworkers of America, Intervenor.
    No. 74-1483.
    United States Court of Appeals, Seventh Circuit.
    Argued Jan. 13, 1975.
    Decided Feb. 21, 1975.

      Fred H. Daugherty, Chicago, 111., for petitioner.
    Peter G. Nash, Gen. Counsel, Paul J. Spielberg, Atty., National Labor Relations Bd., Washington, D. C., for respondent.
    Before CLARK, Associate Justice, FAIRCHILD, Chief Judge and SPRECHER, Circuit Judge.

       Associate Justice Tom C. Clark of the Supreme Court of the United States (Retired) is sitting by designation.

   SPRECHER, Circuit Judge.

The question on this review and cross-application for enforcement of a Board order is whether under the collective bargaining agreement involved, employees were engaged in protected activities when honoring another local union’s picket line and participating in a sympathy strike.

I

The Company supplies water on a wholesale basis to residential and industrial customers in Gary and Hobart, Indiana, and surrounding areas. At the time of the alleged unfair labor practices two locals of International Union of District 50, Allied and Technical Workers of the United States, represented the Company’s employees. Local 13584 represented a unit consisting of operating or production and maintenance employees, sometimes referred to as the “men’s unit,” and had a bargaining relationship with the Company since 1952.

On September 5, 1968, the Board certified Local 14321 as the representative of a unit consisting of clerical employees, sometimes known as the “women’s unit.” Commencing on March 21, 1969, the women’s unit struck the Company. During the strike, 70 of the 97 members of the men’s unit honored the women’s picket line. On April 1, 1969, the Company entered into a bargaining agreement with the women’s unit for the period up to December 31, 1971.

On June 1, 1971, following expiration of the men’s contract, the Local 13584 unit began an economic strike. Thirty-three of the 34 members of the women’s unit honored the picket line. After warnings, the Company on June 17 discharged each of the women who honored the men’s line. The discharged employees were replaced very slowly, one being replaced by June 17 and only 6 by August 17. At no time during the strike or through the summer of 1971 was there any disruption of service to the Company’s customers.

On August 18, their Union on their behalf sent a telegram to the Company offering that the women return to work immediately, which offer was rejected by the Company. On August 30, the men’s unit returned to work.

On October 27, the Company notified the Union that it was terminating the women’s contract, believing that “the contract has already been terminated by operation of law.” Prior to and after the contract expired by its terms on December 31, 1971, the Company refused to bargain with the Union in regard to the women’s unit.

As a result of charges filed on behalf of the women’s unit on June 21 and November 12, 1971, a complaint issued on January 4, 1972, alleging that the Company violated section 8(a)(3) of the National Labor Relations Act, 29 U.S.C. § 158(a)(3), by discharging 34 employees on June 17, 1971, because they engaged in a protected sympathy strike, and by refusing to reinstate them when openings occurred although they made an unconditional offer to return to work on August 18, 1971;. violated section 8(a)(5), 29 U.S.C. § 158(a)(5), of the Act by terminating its collective bargaining agreement with the Union on October 27, 1971, and by refusing to bargain with the Union; and violated section 8(a)(1), 29 U.S.C. § 158(a)(1), of the Act by each of the foregoing acts.

On June 16, 1972, the Administrative Law Judge recommended that the complaint be dismissed. On November 30, 1972, the Board ordered that the complaint be dismissed but that jurisdiction be retained for further consideration if the dispute be not resolved with reasonable promptness either by amicable settlement in the grievance procedure or by arbitration. When the Company refused to follow the grievance procedure or to arbitrate, the Union moved for further consideration.

On May 21, 1974, the Board decided the matter on its merits. 210 N.L.R.B. No. 87 (1974).

The Board found that the contract’s no-strike provisions did not waive the women’s unit statutory right to observe the picket line of their brother union; that the discharge of the clericals on June 17, 1971, for such activity therefore violated sections 8(a)(1) and (3) of the Act; and that, since the unlawfully discharged clericals remained employees within the meaning of the Act, the Union’s majority status continued and the Company’s subsequent refusal to bargain with it violated section 8(a)(5) of the Act.

The Board’s order directed the Company to cease and desist from the unfair labor practices found or in any other manner interfering with, restraining, and coercing its employees in the exercise of their section 7 rights. Affirmatively, the Board’s order required the Company to offer to the discharged clericals immediate and full reinstatement to their former positions or, if those positions no longer exist, to substantially equivalent positions, without prejudice to their seniority or other rights; and to make them whole for any loss of earnings they may have suffered by reason of the Company’s discrimination against them. The Board’s order further required the Company, upon request, to meet and bargain with the Union with respect to wages, hours, and other conditions of employment and embody in a signed agreement any understanding reached, and to post appropriate notices.

II

The ordinary status of a sympathy striker was well set forth in NLRB v. Southern Greyhound Lines, Inc., 426 F.2d 1299, 1301 (5th Cir. 1970):

Initially, we think it obvious that when an employee, as a matter of principle, refuses to cross a picket line at his own employer’s place of business, the employee, even though he is not a member of the striking union, has in effect plighted his troth with the strikers, joined in their common cause, and has thus become a striker himself. . . . The basis of the protection against discharge afforded an employee who refuses to cross a picket line at his employer’s business is his status as a striker. Such an employee is therefore entitled to all the protections due under the National Labor Relations Act to those strikers with whom he has joined cause. Conversely, the employer’s right to discipline such an employee to preserve the operation of his business is limited to those measures which he could lawfully use against strikers.

The right to strike guaranteed by section 7 of the Act, 29 U.S.C. § 157, may be surrendered or waived by appropriate provisions in the collective bargaining agreement. Mastro Plastics Corp. v. NLRB, 350 U.S. 270, 280, 76 S.Ct. 349, 100 L.Ed. 309 (1956).

Correlatively, the right to engage in a sympathy strike or the right to refuse to cross a picket line may be waived in the same manner. NLRB v. Rockaway News Supply Co., 345 U.S. 71, 80, 73 S.Ct. 519, 97 L.Ed. 832 (1953).

In this circuit we hold that “[i]n order to effectuate the relinquishment of a collective bargaining right under the provisions of a collective bargaining agreement, . . . the preferable rule requires that waiver be in ‘clear and unmistakable language.’ ” NLRB v. Wisconsin Aluminum Foundry Co., 440 F.2d 393, 399 (7th Cir. 1971).

“[A] no-strike obligation, express or implied, is the quid pro quo for an undertaking by the employer to submit grievance disputes to the process of arbitration.” Boys Markets, Inc. v. Retail Clerks Local 770, 398 U.S. 235, 248, 90 S.Ct. 1583, 1591, 26 L.Ed.2d 199 (1970).

“Absent an explicit expression of such [other] intention . . . the agreement to arbitrate and the duty not to strike should be construed as having coterminous application.” Gateway Coal Co. v. United Mine Workers of America, 414 U.S. 368, 382, 94 S.Ct. 629, 639, 38 L.Ed.2d 583 (1974).

Here the no-strike-arbitration clauses read as follows:

[The parties agree that] there shall be no lockouts by the Company and there shall be no strike, stoppages of work or any other form of interference with any of the production or other operations of the Company by the Union or its members, and any and all disputes and controversies arising under or in connection with the terms of provisions hereof shall be subject to the grievance procedure . . . [followed by a three-step grievance procedure resulting in binding arbitration under the third step], (Article V).
* * * * * *
The Union agrees that there shall be no strikes, slowdowns or other interruption of work by any of its members during the term of this agreement, and the Company agrees that there shall be no lockout during the term of this agreement, and both parties agree that any disputes or differences shall be taken up under the Grievance and Arbitration procedures of this agreement. (Article XVIII, para. (2)).

This language indicates an intention to treat the no-strike clause as having application coextensively with that of the arbitration clause. That application is to “any and all disputes and controversies arising under or in connection with the terms of provisions” of the bargaining agreement.

The refusal to dishonor another local union’s picket line or engaging in a sympathy strike in connection with another local’s strike are not disputes or controversies arising under or in connection with the first local union’s agreement and are therefore neither arbitrable nor subject to the no-strike provisions.

In Inland Steel Co. v. Local 1545, United Mine Workers of America, 505 F.2d 293 (7th Cir. 1974), we held that the district court could enjoin a sympathy strike or the honoring of a stranger union’s picket line where the scope of arbitrable disputes had been fixed by the parties to the collective bargaining agreement, as follows:

[Differences ... [1] as to the meaning and application of the provisions of this agreement, or [2] should differences arise about matters not specifically mentioned in this agreement, or [3] should any local trouble of any kind arise at the mine.

Id. at 297 n.5.

The court said of this agreement:

It is our conclusion that the “any local trouble of any kind aris[ing] at the mine” language contained in this exceptionally broad arbitration clause is itself expansive enough to cover the present disputes. A work stoppage which results from the honoring of stranger picket lines by company employees is certainly local trouble at the mine. Any other construction of this language would simply be ignoring the realities of the situation. Moreover, these parties agreed to arbitrate not only disputes concerning the meaning and application of the express provisions of the agreement but also disputes “about matters not specifically mentioned in this agreement.” By the use of this terminology, we conclude that the parties mutually contracted to resolve any labor difficulties arising during the life of the agreement by the arbitration process, other than disputes which are “national in character.”

Id. at 298.

The court relied upon clauses [2] and [3], supra, and in the present case the parties adopted nothing more than clause [1]. Clause [1] seems to us clearly not to affect the right to engage in a sympathy strike. In any event it is not clear and unmistakable language waiving that right.

Under these circumstances, the bargaining history between the Company and Union need not be examined in order to interpret the language of the collective bargaining agreement. Montana-Dakota Utilities Co. v. NLRB, 455 F.2d 1088, 1092 (8th Cir. 1972). But here, if we carry our consideration into that history, our conclusion is only reinforced. At the very time that the Local 14321 agreement was being negotiated, the women’s unit was on strike and the men’s unit was engaged in a sympathy strike, refusing to cross the women’s picket line. Yet no specific language dealing with sympathy strikes was included in the women’s unit agreement.

During the men’s unit strike precipitating the women’s discharges involved here, the Company submitted to the Union specific language covering sympathy strikes but the Union rejected that language. In other words the Company knew how to deal specifically with the subject when it so desired.

Even if we should assume, moreover, that the no-strike-arbitration clause of the Gary Hobart agreement was broad enough to make sympathy strikes and the honoring of a stranger local union’s picket lines arbitrable, we would nevertheless be bound to enforce the Board’s order inasmuch as it was entered only after the Board had on November 30, 1972 first found that

[Sjinee the resolution of the threshold issue (whether the no-strike clause of the grievance procedure of the collective-bargaining agreement protected the sympathy strike of the clerical unit) turns on the meaning and application of the no-strike clause, and the alleged unfair labor practices are so intimately intertwined with the interpretation of the contract, it would best effectuate the policies of the Act to defer to arbitration.

210 N.L.R.B. No. 87 at 1 (1974).

The Board retained jurisdiction and proceeded to determine the case on the merits after the Company refused to resolve the issues in dispute by settlement under the grievance procedure or by submission to arbitration. The Board found that the discharged employees had been engaged in protected activity and were entitled to relief.

We conclude that neither the employees nor their Union waived their right to engage in a sympathy strike. Kellogg Co. v. NLRB, 457 F.2d 519 (6th Cir.), cert. denied, 409 U.S. 850, 93 S.Ct. 58, 34 L.Ed.2d 92 (1972).

The Board’s findings and conclusions are supported by substantial evidence on the record considered as a whole.

Petition for review denied and order enforced.

FAIRCHILD, Chief Judge

(concurring).

I agree that, absent an unequivocal waiver by the union, the Company’s discharge of the Local 14321 employees for engaging in the concededly protected activity of observing another union’s picket line, was violative of § 8(a)(3) of the National Labor Relations Act.

The “no strike” commitment present in the instant collective bargaining agreement does not specifically waive the right to engage in a sympathy strike. Accordingly, the Company is essentially arguing for the implication of such a term into the agreement’s general proscription. Such protected rights should not be deemed waived by implication of law unless it is clear that the parties actually intended such a result.

I do not find Inland Steel Co. v. Local 1545, United Mine Workers of America, 505 F.2d 293 (7th Cir. 1974) controlling in the present case. As the court makes clear, the implication of a no-sympathy-strike agreement in Inland was founded upon an “exceptionally broad” and all-inclusive arbitration agreement. In the Gary-Hobart contract, the express no strike commitment does not specifically include a promise not to honor the picket line and the arbitration provisions are of narrower scope and application than those in Inland. I agree that the Board’s order should be enforced.


author: HILL, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Calvin D. RAHN, Defendant-Appellant.
    No. 74-1324.
    United States Court of Appeals, Tenth Circuit.
    Argued Jan. 21, 1975.
    Decided Feb. 28, 1975.
    Rehearing Denied March 25, 1975.

      Robert A. Wagner, Denver, Colo. (Marshall A. Fogel, Denver, Colo., on the brief), for defendant-appellant.
    J. Terry Wiggins, Asst. U. S. Atty. (James L. Treece, U. S. Atty., on the brief), Denver, Colo., for plaintiff-appellee.
    Before BREITENSTEIN, HILL and DOYLE, Circuit Judges.
   HILL, Circuit Judge.

This is a direct appeal from a conviction for violations of 18 U.S.C. §§ 641 and 2.

The issues presented in this appeal involve only the denial of suppression of evidence due to an allegedly unlawful search and seizure.

On July 10, 1973, Inspector Neal of the Alcohol, Tobacco & Firearms Bureau (ATF), Office of Inspection, submitted an Affidavit for Search Warrant to a United States Magistrate seeking a warrant to search appellant’s residence. The affidavit resulted from an investigation by the ATF inspection service into alleged misuse of seized property by ATF agents. Appellant was an ATF special investigator stationed in Denver.

Based upon the affidavit, the magistrate issued the requested search warrant on July 10. The warrant was executed on July 13; searchers discovered and seized six weapons and a written list of firearms from appellant’s home. Appellant and his family were on vacation during this time period. On July 13 the ATF regional director, Billy Gaunt, telephoned appellant and ordered him to return to Denver to meet with the inspection service.

The next day appellant flew into Stapleton International Airport and was met by Jim Duff, appellant’s immediate supervisor and friend. Appellant had with him seven firearms which had been certified as destroyed. Appellant was taken to the ATF office in Denver; he made a lengthy incriminating statement and turned over the seven weapons to the ATF investigators.

Appellant and his former supervisor, Karl Terlau, were indicted for one count of violating 18 U.S.C. §§ 1001 and 2, and one count of violating 18 U.S.C. §§ 641 and 2. Terlau pled guilty to one count and testified at appellant’s trial. The weapons and list seized in the residence search, the seven firearms appellant brought back to Denver, and appellant’s July 14 statement were admitted as evidence. The jury found appellant guilty as to the second count, conversion of government property to his own use.

Appellant raises three issues. (1) The affidavit was based on observations of alleged unlawful activity made more than a year and a half before the application for a search warrant; consequently, the information in the affidavit was not recent enough to establish probable cause for the search warrant to issue. The residence search was unlawful and the evidence seized should have been suppressed. (2) The affidavit failed to give the magistrate probable cause to believe the weapons were, in fact, located in appellant’s residence. (3) The evidence obtained from appellant on July 14, 1973, was the direct result and product of the unlawful residence search.

We are guided by several general principles in our review of this affidavit. Affidavits for search warrants are to be tested and interpreted in a common sense and realistic manner. United States v. Ventresca, 380 U.S. 102, 85 S.Ct. 741, 13 L.Ed.2d 684 (1965). Reviewing courts should give deference to determinations of probable cause by issuing magistrates. United States v. Neal, 500 F.2d 305 (10th Cir. 1974); United States v. DePugh, 452 F.2d 915 (10th Cir. 1971), cert. den’d, 407 U.S. 920, 92 S.Ct. 2452, 32 L.Ed.2d 805 (1972); United States v. Berry, 423 F.2d 142 (10th Cir. 1970). Doubtful cases should be largely resolved by the preference to be given warrants. United States v. Ventresca, supra.

Appellant’s first attack on the affidavit’s sufficiency deals with the timeliness of the information. Time is a crucial element of probable cause. United States v. Holliday, 474 F.2d 320 (10th Cir. 1973); United States v. Johnson, 461 F.2d 285 (10th Cir. 1972). The Supreme Court has discussed this element of probable cause:

“. . . the proof must be of facts so closely related to the time of the issue of the warrant as to justify a finding of probable cause at that time.” Sgro v. United States, 287 U.S. 206, 53 S.Ct. 138, 77 L.Ed. 260 (1932).

In Neal, this Court stated that “[p]roba-' ble cause existing at some time in the past will not suffice unless circumstances exist from which it may be inferred that the grounds continued to the time the affidavit was filed.” However, probable cause is not determined by merely counting the number of days between the time of the facts relied upon and the warrant’s issuance. United States v. Johnson, supra.

The search warrant here was issued on July 10, 1973; the affidavit detailed several occurrences involving the property sought. Terlau, in an interview the day before the warrant issued, stated that in 1971 he and appellant each had agreed to take several of the weapons. Terlau also said that appellant had commented when they took the weapons that several of the weapons were too nice to destroy and would be worth more money if kept for several years. The affidavit recounted Special Agent Carl Newton’s statement in which he remembered seeing appellant in the fall of 1971 using a Browning over/under 12 gauge shotgun identical to one Newton had seen in the ATF vault. That weapon was one subject to the destruction order according to the affidavit. The affidavit indicated Terlau had sold his weapons to Lakewood Pawnbrokers; the affiant had investigated two pawnbrokers in Lakewood and had checked the Denver Police pawn shop records. This search had not revealed any sales of weapons by appellant.

The affidavit clearly would give a magistrate probable cause to believe appellant had taken some of the weapons. Because of the unique facts of this case, we believe the affidavit also gave the magistrate probable cause to believe appellant still possessed the weapons in spite of the lapse of time between the facts relied on and the warrant’s issuance. Newton’s account indicates appellant had appropriated at least one of the weapons for his personal use. This appropriation combined with the comment Terlau remembered that appellant believed the weapons would appreciate in value would give more than a suspicion appellant still possessed the weapons. The investigation, although far from extensive, disclosed appellant apparently had not disposed of the weapons in the manner Terlau had utilized. Furthermore, the magistrate, employing the common sense interpretation of affidavits approach, may have recognized appellant’s awareness, as an ATF agent, that in selling the guns he would be taking a real risk of detection. Consequently, we believe the affidavit provided circumstances from which it could be inferred that the probable cause clearly existing in the past continued to the time the affidavit was filed. The affidavit information was recent enough to establish probable cause in this case.

Appellant also attacks the sufficiency of the affidavit by contending it did not show probable cause to believe the articles listed in it would be found in the residence. Both parties cite United States v. Lucarz, 480 F.2d 1051 (9th Cir. 1970), where the Ninth Circuit upheld the search of a residence and said:

“The situation here does not differ markedly from other cases wherein this court and others, albeit usually without discussion, have upheld searches although the nexus between the items to be seized and the place to be searched rested not on direct observation . . but on the type of crime, the nature of the missing items, the extent of the suspect’s opportunity for concealment, and normal inferences as to where a criminal would be likely to hide stolen property.”

Lucarz and the other cases cited by appellant and the government state the general rules in this area; those cases, however, are persuasive only to the degree they present facts similar to those now before the court. The issue for our determination is whether the facts and circumstances described in the affidavit would warrant a man of reasonable caution to believe that the articles' sought were located at appellant’s residence. Lucarz v. United States, supra. The affidavit need not contain information providing “. . . certainty that the objects sought will be found as a result of the search.” Porter v. United States, 335 F.2d 602 (9th Cir. 1964), cert. den’d, 379 U.S. 983, 85 S.Ct. 695, 13 L.Ed.2d 574 (1965).

As appellant points out, the affidavit does not contain anyone’s observation of the property at the residence; that missing information, however, is not fatal to a determination that probable cause existed to search the residence. See United States v. Mulligan, 488 F.2d 732 (9th Cir. 1973), cert. den’d, 417 U.S. 930, 94 S.Ct. 2640, 41 L.Ed.2d 233 (1974); United' States v. Lucarz, supra. The affidavit, as we have determined, gave probable cause to believe appellant still possessed the weapons. The affidavit contained the report indicating appellant had used one of the weapons for hunting purposes. The statement concerning the guns’ appreciation potential indicates appellant would have given some care to their storage. As Chief Judge Arraj stated, in denying the original motion to suppress: “It is reasonable to assume that his house was where he kept things and it is pretty normal I believe for individuals to keep weapons in their homes, particularly hunting weapons and weapons which may be kept for the safety of the family.” Here an ATF agent was believed to possess the weapons; certainly, he would not have had the weapons at his office. Admittedly there are other places where the guns might have been stored; yet, we believe these facts and circumstances gave the magistrate probable cause to believe the weapons would be found as a result of the search of appellant’s present residence.

In making these decisions concerning the affidavit’s sufficiency, we have given deference to the issuing magistrate’s determination and have remembered that even doubtful cases are to be resolved largely by the preference to be given warrants. Having determined that the affidavit provided probable cause for the search warrant to issue, we hold the search was proper. Consequently, we do not reach appellant’s third contention concerning “fruit of the poisonous tree”.

Affirmed.

      . 18 U.S.C. § 641 provides:
      “Whoever embezzles, steals, purloins, or knowingly converts to his use or the use of another, or without authority, sells, conveys or disposes of any record, voucher, money, or thing of value of the United States or of any department or agency thereof, or any property made or being made under contract for the United States or any department or agency thereof; or
      “Whoever receives, conceals, or retains the same with intent to convert it to his use or gain, knowing it to have been embezzled, stolen, purloined or converted—
      “Shall be fined not more than $10,000 or imprisoned not more than ten years, or both; but if the value of such property does not exceed the sum of $100, he shall be fined not more than $1,000 or imprisoned not more than one year, or both.
      “The word ‘value’ means face, par, or market value, or cost price, either wholesale or retail, whichever is greater.”
      18 U.S.C. § 2 provides:
      “(a) Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.
      “(b) Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.”

        It is generally recognized that probable cause is one of probabilities and a valid warrant may issue when the circumstances before a proper officer are such that a person of reasonable prudence would believe that a crime was being committed on the premises to be searched or evidence of a crime was being concealed there. United States v. Neal, supra.

      Probable cause is not determined by hindsight but as of the time the affidavits were presented to the magistrate. Schoeneman v. United States, 115 U.S. App.D.C. 110, 317 F.2d 173 (1963).