author: WISDOM, Circuit Judge: RONEY, Circuit Judge BY THE COURT:

text:
    Limmie WEST, III, Plaintiff-Appellee, v. STATE OF LOUISIANA, Defendant-Appellant.
    No. 72-1338.
    United States Court of Appeals, Fifth Circuit.
    May 1, 1973.
    Rehearing En Bane Granted Sept. 5, 1973.

      Wm. J. Guste, Jr., Atty. Gen. of La., Baton Rouge, La.; Jim Garrison, Dist. Atty., Shirley Wimberly, Jr., Asst. Dist. Atty., Byron P. Legendre, New Orleans, La., for defendant-appellant.
    George M. Leppert, New Orleans, La., Court appointed, for plaintiff-appellee.
    Before RIVES, WISDOM and RO-NEY, Circuit Judges.
   WISDOM, Circuit Judge:

Limmie West was convicted of armed robbery after a jury trial in the Criminal District Court for the Parish of Orleans, Louisiana. On June 12, 1969, he was sentenced to forty-nine years and six months at hard labor. He did not appeal his conviction. A year after his conviction he filed a petition for habeas-corpus in the state trial court. West’s petition alleged that his lawyer, private-ly retained, had conferred with him for only five minutes before the trial, had no opportunity to subpoena witnesses, and had no time to prepare an effective defense. After holding an evidentiary hearing the state court denied the petition. The Supreme Court of Louisiana denied review. West then filed what he termed a “petition for rehearing” with the trial court, alleging in addition that he had been denied his right to appeal. After forty-five days elapsed without action by the trial court, West sought a writ of mandamus from the Louisiana Supreme Court. This writ was denied for West’s failure to comply with procedural requirements.

After five and one-half months passed without action by the state trial court on his petition for rehearing, West sought habeas corpus relief from federal district court. His petition named the State of Louisiana as respondent. While this federal habeas petition was pending, the state court finally denied his petition for rehearing, seven months after it was filed. The federal district court subsequently granted West’s petition without holding a further hearing, and ordered the State to release or retry West within thirty days. The State appeals from this order. It does not appear that the State presented any of its contentions to the district court, nor does the State contest the district court’s holding that West was denied adequate representation by counsel. Though we amend the district court’s order to direct it against West’s immediate custodian rather than against the State of Louisiana, we affirm the holding of the district court in all other respects.

I.

The State first contends that West’s petition must be dismissed on the ground that he failed to name a proper respondent. The federal habeas corpus statute requires that an application for habeas corpus

shall allege the facts concerning the applicant’s commitment or detention, the name of the person who has custody over him and by virtue of what claim or authority, if known.

28 U.S.C. § 2242 (1972). West was in the immediate custody of the warden of the Louisiana State Penitentiary. His federal habeas corpus petition, however, named the State of Louisiana as respondent, rather than the warden. . The State argues on this appeal that the failure to name a proper respondent is sufficient ground for dismissing a habeas corpus petition.

Failure to name a proper respondent is a procedural rather than a jurisdictional defect, and it may be corrected by amendment of the petition. See Ashley v. State, 9 Cir. 1968, 394 F.2d 125; Developments in the Law — Federal Habeas Corpus, 83 Harv.L.Rev. 1038, 1167 (1970).

It is true that in the present case West apparently made no effort to correct his petition, and the district court did not amend it on its own initiative. But since West’s unamended petition supplied in substance all the information which a habeas petition must contain, denial of his petition would give an unreasonably narrow reading to the habeas corpus statute.

In preparing his petition West utilized a standard form supplied by the District Court for the Eastern District of Louisiana. He entered “State of Louisiana” as respondent at the head of the form. Line 1 of the form requires the petitioner to state his place of detention. West entered “Louisiana State Penitentiary, Angola, Louisiana” as his place of detention on this line. This entry makes it plain that his immediate custodian was the warden of the Angola penitentiary

West’s petition therefore adequately conforms with 28 U.S.C. § 2242. The statute requires the petitioner to “allege the name of the person who has custody over him.” It does not specify that his allegation must be in the title of the case. Nor does it suggest that, an allegation contained in the body of the petition may or must be disregarded by the courts.

The purposes of the statutory requirement are equally well served whether the immediate custodian is named as respondent or is identified elsewhere in the petition. Some courts have held it necessary to name the immediate custodian as respondent on the ground that it is he who must certify the cause of detention and respond to the court’s order. See, e. g., Johnson v. State, 1968, S.D.Fla., 283 F.Supp. 494, 495-496; Osborn v. Court of Common Pleas, 1967, W.D.Pa., 277 F.Supp. 756. In fact, however, the role of the warden in habeas corpus litigation is limited to performing the perfunctory duties of producing the prisoner for a hearing or of releasing the prisoner should the petition be granted. Indeed, the response to the petition is customarily prepared by the state’s attorney. Thus in this case the district attorney’s office for the Parish of Orleans responded both to West’s state habeas corpus petition, in which he named the warden as respondent, and to the federal habeas corpus petition, in which West named the State as respondent. The warden had no interest in the proceeding independent of that of the State. By supplying the locus of his detention, together with other information required by the standard form for habeas petitions, West furnished sufficient information to enable the state’s attorney to represent the interests of the State and the warden, and to enable the court to frame a proper order. There is therefore no reason not to consider his petition as though he had named the proper respondent. See Wooley v. Consolidated City of Jacksonville, 5 Cir. 1970, 433 F.2d 980.

Strict interpretation of the procedural requirements of § 2242 is sometimes justified as necessary to protect the courts from the burden of entertaining frivolous petitions. Developments, supra, 83 Harv.L.Rev. at 1175. Precisely the opposite result would occur were we to dismiss West’s petition for failure to name a proper respondent. Dismissal for this reason would be without prejudice to West’s right to submit a petition naming the correct respondent. See, e. g., Burns v. Welch, 1947, 81 U.S.App.D.C. 384, 159 F.2d 29. Thus West would once more have to labor up the judicial ladder, and the judiciary would once more have to consider his case. The result would only be to delay granting the relief to which West is entitled.

This case exemplifies well the need for giving a liberal construction to habeas corpus pleadings. See Gibbs v. Burke, 1949, 337 U.S. 773, 69 S.Ct. 1247, 93 L.Ed. 1686; Cisneros v. Beto, 5 Cir. 1970, 423 F.2d 201, cert. denied, 1970, 400 U.S. 839, 91 S.Ct. 78, 27 L.Ed.2d 72; Aiken v. United States, 4 Cir. 1960, 282 F.2d 215, 216; R. Sokol, Federal Habeas Corpus 99-102 (2d rev. ed. 1969); Developments, supra, 83 Harv.L.Rev. 1174-75. West prepared his petition without the assistance of counsel. The record shows that he had only a limited education and had subnormal intelligence. His petition is meritorious and adequately prepared in every respect save his failure to designate the proper respondent. It is possible that this error may have been induced by the standard habeas corpus form. The form is designated for the use of “Persons in State Custody,” but nowhere does it explain that, for purposes of pleading, the petitioner is to regard himself as in the warden’s custody and not the state’s.

We are unwilling to disregard a violation of a petitioner’s constitutional rights solely because he has tripped on a procedural hurdle of the kind involved in this case. See Chapman v. Texas, 1965, S.D.Tex., 242 F.Supp. 378, 381. When, as here, a layman preparing his own petition supplies in substance all the information which the statute requires, the petition may and should be considered on its merits.

Though the district court would thus have been justified in treating West’s petition as though he had named the warden rather than the State as respondent, the district court’s order nevertheless was directed against the State. The order to release West should have been directed to the warden, as the state official responsible for carrying out the release. The order is affirmed, subject to the condition that it be amended to direct'the warden to release West unless the State retries him within a reasonable time, preferably thirty days.

II.

The State next contends that the district court erred in granting relief without holding an evidentiary hearing and without giving comity to the findings of the state courts. This contention is without merit.

Under the standards enunciated by the Supreme Court in Townsend v. Sain, 1963, 372 U.S. 293, 83 S.Ct. 745, 9 L.Ed.2d 770, a federal evidentiary hearing is required in habeas cases only when factual issues are not fully and fairly developed at the state level. In the present case all the relevant witnesses testified extensively at the state hearing. The state court’s findings of fact pertinent to this appeal were that (1) West’s lawyer had adequate time to prepare for the trial; (2) West conferred with his lawyer for more than five minutes; (3) West’s lawyer was not appointed by the court in place of any other attorney. The district court in granting relief did not reject these findings of fact. Rather, the district court in effect adopted the state court’s findings of fact and differed with the state court only on a matter of law: whether in view of the facts of this case West’s constitutional rights had been violated.

Regardless of the thoroughness of state factfinding procedures, considerations of comity do not obligate federal courts in habeas corpus cases to defer to state determinations on matters of federal law. The obligation of the federal judge is the opposite: to apply the proper federal constitutional standards based on the underlying facts, although the conclusions drawn from the facts may differ from the state court’s conclusions. Townsend v. Sain, supra, 372 U.S. at 318, 83 S.Ct. 745; Brown v. Allen, 1953, 344 U.S. 443, 506-507, 73 S.Ct. 397, 97 L.Ed. 469 (Frankfurter, J.).

Where state factfinding procedures are adequate, comity and judicial economy dictate that the federal courts should not hold separate evidentiary hearings. To hold a federal hearing is to call state factfinding procedures into question. But comity does not govern the application by federal courts of their independent judgment as to federal law. That is their obligation in all cases, an obligation the district court in this case properly discharged.

III.

The State contends that even if the district court was correct in finding that West’s lawyer furnished inadequate representation this finding was irrelevant, since the State was in no way responsible for this inadequate representation. West was represented not by appointed counsel but by a privately retained attorney. The actions of a privately retained attorney, the State contends, cannot constitute state action, and consequently West cannot complain that he was denied effective assistance of counsel in violation of his Fourteenth Amendment due process rights.

In Williams v. Beto, 5 Cir. 1965, 354 F.2d 698, 704, the Court repeated “the general rule that relief from a final conviction on the ground of incompetent or ineffective counsel will be granted only when the trial was a farce, or a mockery of justice, or was shocking to the conscience of the reviewing court, or the purported representation was only perfunctory, in bad faith, a sham, a pretense, or without adequate opportunity for conference and preparation”. But as then Chief Judge Tuttle said in Bell v. Alabama, 5 Cir. 1966, 367 F.2d 243, 247:

“It is clear that this test [after quoting from Williams v. Beto, 354 F.2d 698, 704] applies to cases in which counsel is retained by or for an accused as well as to cases in which counsel is appointed to represent an indigent defendant. Scott v. United States, 334 F.2d 72 (6th Cir. 1964).”

Earlier, Judge Brown had written for the panel of Brown,. Wisdom, and Bell in Porter v. United States, 5 Cir. 1962, 298 F.2d 461, 463, “The Constitution assures a defendant effective representation by counsel whether the attorney is one of his choosing or court-appointed.” See also Holland v. Henderson, 5 Cir. 1972, 460 F.2d 978, 981, United States v. Pinc, 5 Cir. 1971, 452 F.2d 507, the long footnote written as dictum in Breedlove v. Beto, 5 Cir. 1968, 404 F.2d 1019, 1021, and Judge Rives’s dissent in Langford v. Alabama, 5 Cir. 1970, 442 F.2d 760, 764-768.

In Holland v. Henderson, E.D.La.1970, 317 F.Supp. 438, 442, aff’d, 460 F.2d 978, 981, Judge Cassibry carefully considered the question. He wrote:

“Where a defendant has been denied effective assistance of counsel it does not matter, in the absence of a knowledgeable waiver, whether his counsel was court-appointed or privately employed. ‘The prejudice to a defendant from the failure to have the effective assistance of counsel results whether counsel is court appointed or selected by the accused.’ Craig v. United States, 217 F.2d 355, 359 (6th Cir. 1954) ; Cf. Larry Buffalo Chief v. State of South Dakota, 425 F.2d 271, 279 (8th Cir. 1970).”

We agree with the perceptive analysis by Professor James R. Craig in his article, The Right to Adequate Representation in the Criminal Process: Some Observations, 22 S.W.L.J. 260, 272 (1968):

Early lower court decisions on effectiveness of counsel often drew distinctions between retained and appointed counsel, with the work of retained counsel being virtually immune from review. That seems now, at least doctrinally, to be a thing of the past. The distinction was supported, or explained, on two discrete grounds. The latter in time was that the state action required to energize the fourteenth amendment prohibitions was not present where review of the work of retained counsel was sought. That concept was subject to the obvious criticism that what was really being claimed was that the trial at the hands of the state was unfair, although caused by something over which the state ostensibly had no direct control. A useful analogy existed in the mob influence cases, where the existence of the requisite state action was not questioned. [Citing Moore v. Dempsey, 261 U.S. 86 [43 S.Ct. 265, 67 L.Ed. 543] (1923)]. Further, the state action theory was attacked by the argument that the necessary state action could be found in the fact that attorneys were licensed by the state. But the state action concept of old, no matter what its past vitality, has little influence today. [Referencing Shelley v. Kraemer and its progeny]. Perhaps the more viable explanation of the distinction was the earlier one that referred to a principal-agent relationship between defendant and defender. That explanation was forcefully attacked as simply unrealistic in fact in most cases. Whatever the rationale, if the distinction had not been discarded before Gideon, Massiah, and Escobedo, it would seem now to be effectively foreclosed. [Referencing basis of Gideon that a man is not competent to represent himself at trial and therefore would seem to be incompetent to evaluate his lawyer’s actions]. See also Williams, The Twilight of State Action, 41 Tex.L.Rev. 347 (1963).”

This Court’s decision in Bell v. Alabama applies to retained counsel the low standard of effectiveness required by Williams v. Beto which would do no more than prevent the trial from becoming “a farce, or a mockery of justice.” We hold that the applicable standard should be that stated in MacKenna v. Ellis, 5 Cir. 1960, 280 F.2d 592, 599:

“We interpret the right to counsel as the right to effective counsel. We interpret counsel to mean not error-less counsel, and not counsel judged ineffective by hindsight, but counsel reasonably likely to render and rendering reasonably effective assistance.” (Emphasis by the Court.)

To “administer justice without respect to persons, and do equal right to the poor and to the rich” we must apply the same standard, whether counsel be court-appointed or privately retained. From the facts of this case it is plain that West’s lawyer fell far short of this standard. West might just as well have had no lawyer. By his own admission West’s attorney conferred with West for no more than an hour prior to trial, and perhaps for little more than five minutes. He conducted no investigation. At the trial he called no witnesses for the defense. After the prosecution presented its ease, the defense moved for a directed verdict. When the court de~ nied this motion, the defense immediately rested. We hold that the district court was correct in finding that West’s legal representation was so inadequate as to deny his constitutional rights.

IV.

Finally, the State argues that West’s petition should have been denied for failure to exhaust state remedies. West unquestionably did exhaust state remedies with respect to his claim of ineffective assistance of counsel. He raised this claim in his original petition for ha-beas corpus; it was denied by the trial court and unsuccessfully appealed to the Supreme Court of Louisiana.

West’s petition for rehearing contained an entirely new claim. He alleged that his lawyer had erroneously informed him that the denial of his motion for a new trial exhausted his right to appeal. West argued in his petition for rehearing that this misleading statement by his lawyer constituted a denial of his right to appellate review. The trial court denied the petition for rehearing, but West never appealed this denial to the Supreme Court of Louisiana. Consequently, the highest state court has not had an opportunity to pass on West’s right-to-appeal claim.

Ordinarily a state prisoner seeking federal habeas corpus must exhaust available state remedies with respect to each claim in his habeas petition, or his petition will be denied by the federal courts. Burroughs v. Wainwright, 5 Cir. 1972, 454 F.2d 1165; Garrett v. Texas, 5 Cir. 1970, 435 F.2d 709; Wheeler v. Beto, 5 Cir. 1969, 407 F.2d 816. The requirement that a petitioner exhaust state remedies before seeking federal relief is, however, not a jurisdictional prerequisite. It is founded on flexible considerations of comity. Fay v. Noia, 1963, 372 U.S. 391, 83 S.Ct. 822, 9 L.Ed.2d 837; Darr v. Burford, 1950, 339 U.S. 200, 70 S.Ct. 587, 94 L.Ed. 761; United States ex rel. Gockley v. Myers, 3 Cir. 1969, 411 F.2d 216 (en banc); Waddell v. Wainwright, 5 Cir. 1969, 410 F.2d 736; Beto v. Martin, 5 Cir. 1968, 396 F.2d 432. In some cases, therefore, the need to assure prompt protection for federal rights may supersede the policy in favor of deference to state judicial processes so that a federal court may proceed to the merits of a habeas petition even though the petitioner has not exhausted state remedies. See Developments, supra, 83 Harv.L.Rev. at 1094-1103.

Two considerations in the present case undercut the usual policy of requiring exhaustion. First, the state proceedings were marked by delay. The principle that federal courts should defer to state courts in the interests of comity assumes that the state courts will give prompt consideration to claims of violation of federal rights. See Bartone v. United States, 1963, 375 U.S. 52, 84 S.Ct. 21, 11 L.Ed.2d 11; Parker v. Texas, 5 Cir. 1972, 464 F.2d 572, 573; St. Jules v. Beto, 5 Cir. 1972, 462 F.2d 1365; Dixon v. Florida, 5 Cir. 1968, 388 F.2d 424, 426; R. Sokol, supra, at 173. West waited five and one-half months between the time he submitted his petition for rehearing and the time he filed his federal habeas petition. The state court took no action on West’s petition for rehearing until a total of seven months had elapsed, when it denied the petition without written reasons during the pendency of West’s federal habeas action. Lengthy delay in state proceedings, if unjustified, may itself be sufficient reason for waiving the exhaustion requirement. See Dixon v. Florida, 5 Cir. 1968, 388 F.2d 424; Smith v. Kansas, 10 Cir. 1966, 356 F.2d 654, cert. denied, 1967, 389 U.S. 871, 88 S.Ct. 154, 19 L.Ed.2d 151.

If delay were the only consideration, the proper course would be to remand the case to the district court for a hearing as to whether the delay was justified. But there is another reason for waiving the exhaustion requirement in this case. The State did not contend in the district court that West had failed to exhaust his state remedies. Failure to raise the contention of lack of exhaustion at the district court level is ordinarily a bar to its consideration on appeal. See Jenkins v. Fitzberger, 4 Cir. 1971, 440 F.2d 1188, 1189 & n. 2; Brown v. Fogel, 4 Cir. 1967, 387 F.2d 692; Wade v. Peyton, 4 Cir. 1967, 378 F.2d 50, 51 (dictum); cf. Tolg v. Grimes, 5 Cir. 1966, 355 F.2d 92; Goins v. Allgood, 5 Cir. 1968, 391 F.2d 692. By failing to press this issue below, the State implicitly acknowledged the insubstantiality of its interest in further adjudicating West’s claim. Against this minimal state interest, there is a substantial interest on the part of both the defendant and the federal courts in promptly resolving this case. West’s constitutional rights were plainly violated by the complete inadequacy of the representation accorded him at his state trial. We see no reason to delay longer in vindicating these rights.

The order of the district court is amended to direct the warden of the Louisiana State Penitentiary to release West if he is not retried by the State within a reasonable time, preferably within 30 days. In all other respects the judgment is affirmed.

RONEY, Circuit Judge

(dissenting):

I respectfully dissent. There are two important issues in this case: first, the showing required to raise the denial of a continuance of a trial to a denial of constitutional due process, and second, the extent to which the amount of preparation for trial by privately retained counsel is to be deemed state action within the meaning of the Fourteenth Amendment. I would remand this case for a full development of the facts because it involves critical matters that all court systems are facing, which cannot be properly resolved on the slim 33-page transcript of the state habeas corpus hearing.

This dissent is not written for the purpose of resolving the complex problems involved in this case, but rather for the purpose of recognizing that the ramifications were not fully and properly considered before the issuance of the writ of habeas corpus. Perhaps before the result reached by the majority becomes the binding precedent in this Court, it would be well to consider some of the thoughtful suggestions made by Judge Henry J. Friendly in Is Innocence Irrelevant? Collateral Attack on Criminal Judgments, 38 U.Chi.L.Rev. 142 (1970).

The crime of attempted armed robbery was committed on April 25, 1969; petitioner was charged in a bill of information on April 30, 1969; he was arraigned on May 8, 1969, at which time he was represented by retained counsel; he stood in a lineup on May 13, 1969, represented by his retained counsel; and he was tried on June 12, 1969, represented by the same retained counsel. The retained counsel had represented petitioner in prior criminal cases. Petitioner was found guilty and was sentenced on July 2,' 1969. A year later, he first applied for release on the ground that he was deprived of his constitutional right to counsel. The District Court granted the writ, on the state record, without any further evidentiary hearing. On the same record, the state court had resolved the factual issues against petitioner. The District Court resolved them in favor of petitioner.

I.

Petitioner’s counsel requested a continuance of the state trial on the ground that he had no opportunity to confer with the petitioner and was not prepared to go to trial. The continuance was denied. The state court felt that the petitioner was attempting to evade trial:

After the court denied the motion for a continuance, Mr. Masinter [West’s attorney] conferred with relator [West], and then came up to the Bench and informed the Court that his client had advised him that his mother had retained the services of another attorney, George Sladovich, Esq., [the attorney who associated Mr. Masinter in the ease]. The Court advised Mr. Masinter that the ease was going to trial because the Court felt that this was a ploy on the part of the defendant to evade trial. The evidence also discloses that Mr. Masinter had been representing relator for several years, and had represented him in several cases prior to this one in the Criminal District Court.

Since, the denial of a continuance is clearly state action under the Fourteenth Amendment, it is the crux of the problem in this case, and the majority neither mentions it nor pays the slightest heed to the long standing rule in this Circuit, and in most states, that the grant or denial of a continuance is within the sound discretion of the trial judge. See, e. g., United States v. Abshire, 471 F.2d 116 (5th Cir. 1972); 17 Am.Jur.2d Continuance § 27 (1964); 17 C.J.S. Continuances § 5 (1963).

At the admonition of the Judicial Conference of the United States, every district court in this Circuit has recently adopted a plan for expediting criminal trials. Many state courts are pursuing similar measures. The criminal justice system now seems firmly committed to the doctrine that the public has as great an interest in expeditious trials as do any defendants.

Every trial judge of experience has probably heard most of the excuses that can be given for delaying the trial of criminal defendants. A person who knows himself to be guilty and who recognizes that there is little or no chance of escaping long term confinement has little interest in a speedy trial. Often, the most effective thing counsel can do is to postpone the trial as long as possible. Evidence may be lost, witnesses may become unavailable or their memories may fade, the case may pass into the hands of less zealous prosecutors, and a number of other things might happen that would make time work to the advantage of the defendant. Any means used for a continuance of his trial may help the defendant. If this delay can be accomplished by lack of preparation, then lack of preparation may be exactly what the defendant wants.

But great pressures are being brought on each trial court to dispose promptly of the business before it, and therefore, to deny motions for continuance. Yet, needless to say, constitutional rights cannot be foreclosed in the interest of speed and current, up-to-date dockets.

This brings us face to face with the critical question: what latitude will be given to trial judges in actually controlling this area of the judicial system— and more importantly, in the federal-state context, how tightly does the Constitution control the state trial judge’s decision as to whether a trial should be postponed at the request of defendant and his retained counsel? There seems little point in following a broad rule as; to the discretion of trial judges on the continuance of cases if we are to follow a narrow rule in the effective counsel-trial preparation dichotomy.

To resolve this question, facts are needed. Was the counsel’s protestation as to other pressing matters that prevented preparation factually based? Was the state trial court’s determination that the requested continuance was a ploy on the part of defendant to evade trial erroneous? At the heart of the matter: To what extent will the criminal justice system allow the public requirement to expedite the trial of cases to be thwarted by retained counsel’s failure to prepare for trial? As an overlay to the whole problem, we should remember that the greatest right preserved to an accused citizen by the Constitution is the right to retain his own counsel, including busy counsel who have other responsibilities in addition to the representation of the defendant in the case at bar. I would require an eviden-tiary hearing to determine the facts concerning the requested continuance and the state court’s denial thereof.

II.

This Court has not resolved the question as to what conduct of retained trial counsel the state is responsible for under the Fourteenth Amendment. Although McGriff v. Wainwright, 431 F.2d 897 (5th Cir. 1970), stated flatly that “misfeasance by privately retained counsel is not state action and therefore does not constitute a deprivation of due process or equal protection,” 431 F.2d at 899, it has apparently enjoyed little recognition in the opinions in this Court. Neither has Andrews v. Robertson, 145 F.2d 101 (5th Cir. 1944), which held that the effectiveness or ineffectiveness of retained counsel in state criminal trials is beyond the purview of the federal courts.

In Bell v. Alabama, 367 F.2d 243 (5th Cir. 1966), the Court said that there is no difference between appointed and retained counsel, but the Court there merely remanded for an evidentiary hearing. The ease is not a definitive holding as to the standard to be applied. In several cases panels of this Court have said that retained counsel and appointed counsel are subject to the same standard of effectiveness, but then they have held that counsel in those cases met the standard, so the question did not have to be decided to dispose of those cases. E. g., Holland v. Henderson, 460 F.2d 978 (5th Cir. 1972). Of course, the Court was at one time concerned with whether appointed counsel had to meet the same standard as retained counsel, but it had little- trouble deciding that the ineffectiveness of state-appointed counsel is a state responsibility. See United States v. Pinc, 452 F.2d 507 (5th Cir. 1971); Worts v. Dutton, 395 F.2d 341 (5th Cir. 1968); Williams v. Beto, 354 F.2d 698 (5th Cir. 1965).

Although involving retained counsel in a federal prosecution, the case of Porter v. United States, 298 F.2d 461 (5th Cir. 1962), is not decisive of the point because the case was remanded for an evi-dentiary hearing on the charge that, unknown to the defendant, the retained attorney was in such a duplicitous position that he refused to call a key witness, the narcotics officer, whom he also represented.

Regardless of what analysis may be made of the various eases in our Court, it is safe to say that we have indicated contrary dispositions of the problem. But by affirming the District Court’s grant of the writ of habeas corpus to a state prisoner in this case, this majority clearly holds that the apparent failure of retained counsel to prepare properly for trial constitutes state action which reaches constitutional proportions. On the record before us, I am unwilling to charge the state with this responsibility.

Although the state trial transcript has not been made available in the Federal Court, it appears that petitioner was identified at the lineup and at the trial by several eyewitnesses. Fifteen witnesses were subpoenaed by the prosecution. There is nothing in the record before us to indicate what prepared counsel might have done. Although this consideration is irrelevant in the Gideon context where there is a complete absence of counsel, it should become highly important in judging state responsibility for unpreparedness of retained counsel. The system will serve no useful purpose in requiring retained counsel to run up expense in preparation that will obviously be of no use to his client. What would an investigation have uncovered? What witnesses could have been called? How was petitioner’s defense prejudiced ? Petitioner has never, in any court, shown how his defense would have benefited by delay for further preparation by his trial counsel. The record indicates that he contemplated an alibi defense. At the very least, we should require a showing of what that defense might have been, including the identity of corroborating witnesses — some showing that the defense could be asserted in good faith.

At the very least, the trial record should be studied before the state judgment is set aside on the ground that petitioner was not adequately represented at the trial.

ON PETITION FOR REHEARING AND PETITION FOR REHEARING EN BANC

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

BY THE COURT:

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

It is ordered that the cause shall be reheard by the Court en banc with oral argument on a date hereafter to be fixed. The Clerk will specify a briefing schedule for the filing of supplemental briefs.

      . See Olson v. California Adult Authority, 9 Cir. 1970, 423 F.2d 1326, cert. denied, 1970, 398 U.S. 914, 90 S.Ct. 1717, 26 L.Ed.2d 78; Mihailoviki v. California, 9 Cir. 1966, 364 F.2d 808; King v. California, 9 Cir. 1966, 356 F.2d 950; Gaito v. Strauss, 3 Cir. 1966, 368 F.2d 787, cert. denied, 1967, 386 U.S. 977, 87 S.Ct. 1173, 18 L.Ed.2d 139; Dunbar v. Cranor, 9 Cir. 1953, 202 F.2d 949.
      Though the State as well as the warden may be said to have “custody” over state prisoners, courts have long held that in habeas corpus cases the warden, as immediate custodian, is the only proper respondent. Wales v. Whitney, 1885, 114 U.S. 564, 574, 5 S.Ct. 1050, 29 L.Ed. 277; Sanders v. Bennett, 1945, 80 U.S.App.D.C. 32, 148 F.2d 19.

      . Occasional cases contain dicta to the effect that the failure to name the proper respondent is a jurisdictional defect requiring immediate dismissal. E. g., Olson v. California Adult Authority, 9 Cir. 1970, 423 F.2d 1326, cert. denied, 1970, 398 U.S. 914, 90 S.Ct. 1717, 26 L.Ed.2d 78, citing Morehead v. California, 9 Cir. 1964, 339 F.2d 170. Courts seldom dismiss for this reason alone, however, and often reach the merits of the petition even when purporting to apply strict rules of pleading. E. g., Morehead v. California, supra; Gaito v. Strauss, 3 Cir. 1966, 368 F.2d 787; Mihailoviki v. California, 9 Cir. 1966, 364 F.2d 808; Schnepp v. Oregon, 9 Cir. 1964, 333 F.2d 288.

      . For a discussion of standard forms for habeas corpus petitions, see Applications for Writs of Habeas Corpus and Post Conviction Review of Sentences in the United States Courts, 33 F.R.D. 363, 382-384, 391-408.

      . Identification of tlie immediate custodian by official title, rather than name, is sufficient under Rule 25(d)(2) of the Federal Rules of Civil Procedure. R. Sokol, Federal Habeas Corpus 83; Developments in tlie Law — Federal Habeas Corpus, 83 Harv.L.Rev. 1038, 1167 (1970).

      . That the standard form for federal ha-beas petitions may have led West astray is suggested by the fact that his state habeas petition correctly named the warden as respondent.

      . The State’s argument that West’s petition is barred by the doctrine of sovereign immunity is of no merit, since we regard this petition, like all other habeas corpus actions, as having been brought not against the State but against the warden. See Chessman v. Teets, 9 Cir. 1956, 239 F.2d 205, 214; R. Sokol, supra, at 84; Note, Remedies Against the United States, 70 Harv.L.Rev. 827, 865 (1957).

      . The state court’s findings at the state habeas hearing were as follows:
      The Court finds that the defendant was not denied due process of law. That counsel for the defendant had adequate time within which to prepare this ease for trial. The Court finds that the defendant had more than a five minute consultation with his counsel.
      The Court also finds that the Court did not appoint Mr. Masinter in place of any other attorney as a substitute counsel for the defendant in this case. Now, Paragraph Three of the issues involved, petitioner alleges by asking the following question: “Can the pe-tioner be guilty of attempted armed robbery without attempting to take anything of value?” This of course, is a question of fact to be determined by tlie jury, and w,as determined by the jury.
      The Court therefore, finds as a matter of fact and as a matter of law, the defendant was not deprived of any of his constitutional rights; and consequently, denies petitioner’s application for a writ of habeas corpus and orders that the defendant be transported forthwith to the Louisiana State Penitentiary at Angola under the original commitment herein.

      . Credit for the reference to and quotation from Professor Craig’s article should go to the excellent brief filed by John L. Jeffers, Jr., Esq., court-appointed counsel for appellant in case No. 72-2459 on the docket of this Court. Fitzgerald v. Beto, Director, argued and submitted on March 13, 1973.

      . See also Pennington v. Beto, 5 Cir. 1971, 437 F.2d 1281, 1285-1286; Caraway v. Beto, 5 Cir. 1970, 421 F.2d 636, 637; Brown v. Beto, 5 Cir. 1967, 377 F.2d 950, 957-958; cf. Williams v. United States, 5 Cir. 1971, 443 F.2d 1151; United States v. Rubin, 5 Cir. 1970, 433 F.2d 442, 444-445.

      . 28 U.S.C. § 453.


source: Caselaw Access Project

author: SPRECHER, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America and Wallace S. Oshiro, Special Agent, Internal Revenue Service, Petitioners-Appellees, v. Earl BROWN, as Partner of Arthur Andersen & Company, Respondent-Appellant, and Delbert W. Coleman, Inter-venor-Appellant.
    Nos. 72-1865, 72-1946.
    United States Court of Appeals, Seventh Circuit.
    Argued Feb. 20, 1973.
    Decided May 9, 1973.
    Rehearing Denied June 28, 1973.
    Daniel S. Greenfield, Charles H. Miller, New York City, Charles W. Boand, George W. Thompson, William A. Barnett, Chicago, III., for respondent-appellant.
    James R. Thompson, U. S. Atty., William T. Huyck, Asst. U. S. Atty., Chicago, 111., Scott P. Crampton, Asst. Atty. Gen., Richard Farber, Atty., Tax Div., Dept, of Justice, Washington, D. C.,_ for petitioners-appellees.

      Before SPRECHER, Circuit Judge, GRANT Senior District Judge, and GORDON , District Judge.

       Senior District Judge Robert A. Grant of the Northern District of Indiana is sitting by designation.

       District Judge Myron L. Gordon of the Eastern District of Wisconsin is sitting by designation.

   SPRECHER, Circuit Judge.

On September 11, 1972, the district court for the Northern District of Illinois, following an in camera inspection and an evidentiary hearing, ruled that the accounting firm of Arthur Andersen & Company was required to comply with a summons issued by the Internal Revenue Service to produce certain documents concerning its client, Delbert Coleman. Coleman, allowed to intervene in this action by the district court, appealed the court’s order requiring production of the Andersen documents. Earl Brown, a partner of Arthur Andersen, has appealed, asking this court to disapprove certain unfavorable references to the Andersen firm made by the district court in its opinion, 349 F.Supp. 420. On October 25, 1972, this Court entered an order staying enforcement of the district court order pending disposition of the appeals.

This action began with an Internal Revenue Service- investigation of Coleman for the years 1965 through 1969. Pursuant to 26 U.S.C. § 7602 a summons was served on Arthur Andersen & Company, demanding all records pertaining to Coleman. A second summons was issued on the firm on May 26, 1971, after Andersen refused to produce a portion of these records. Andersen thereafter formally protested that some of the required documents were protected by the attorney-client privilege and attorney’s work product doctrine. A preliminary hearing was held in the district court and Andersen agreed to turn over additional documents. Three more documents were produced subsequent to the trial in this case. This appeal concerns only two remaining documents.

The first of these (Document 7) is a three-page memorandum, dated October 7, 1968, prepared by David N. Hurwitz, an attorney and member of the law firm of Marshall, Bratter, Greene, Allison & Tucker, which represented Coleman, as well as a cover letter regarding the memorandum. The memorandum summarizes notes and legal judgments made by attorney Hurwitz at a meeting attended by Mr. Seiden, an aide to Coleman, Mr. Ruther, an associate of Arthur Andersen, and Hurwitz, on October 2, 1968.

The second (Document 8) consists of six pages of handwritten notes prepared by Andersen’s Ruther at the October 2, 1968 meeting concerning the accounting assistance rendered by Ruther at that meeting.

The purpose of the October meeting was to discuss the tax consequences of a potential Coleman business transaction. The IRS states as its reason for seeking the documents a need to gain a full understanding of the details of this transaction and thereby to ascertain whether Coleman properly reported the tax consequences.

I.

The classic statement of the attorney-client privilege is the formulation in 8 Wigmore, Evidence § 2292:

“(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived.”

It is clear from this definition that neither document is protected by the privilege. In regard to the handwritten notes taken by accountant Ruth-er concerning accounting assistance, although the attorney-client privilege may in some instances extend to communications to accountants providing assistance to an attorney, “(w)hat is vital to the privilege is that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer. If what is sought is not legal advice but only accounting service, . . . or if the advice sought is the accountant’s rather than the lawyer’s, no privilege exists.” United States v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961) (emphasis in original). In this case the accounting firm was retained by the taxpayer and not the attorney, and the accountant’s presence at the October meeting was requested by the taxpayer’s assistant and not by the attorney. We agree with the district court that “[n]otes taken by an accountant at such a meeting should not be considered privileged simply because an attorney is present at the meeting.” We also agree that there has been an insufficient showing that these notes reflect communications between an attorney and his client.

Nor is Document 7 covered by the attorney-client privilege. In the first place, there is severe doubt that this document, held in the files of the accountant and not in those of the attorney, retained any confidential nature. See Couch v. United States, 409 U.S. 322, 335, 93 S.Ct. 611, 619, 34 L.Ed.2d 548 (1973), where the Supreme Court stated that “there can be little expectation of privacy where records are handed to an accountant, knowing that mandatory disclosure of much of the information therein is required in an income tax return.” Furthermore, the Supreme Court held in Hickman v. Taylor, 329 U.S. 495, 508, 67 S.Ct. 385, 91 L.Ed. 451 (1947), that the privilege did not attach to “memo-randa, briefs, communications and other writings prepared by counsel for his own use in prosecuting his client’s case; and it is equally unrelated to writings which reflect an attorney’s mental impressions, conclusions, opinions or legal theories.” The district court found that the document in question summarized attorney Hurwitz’ notes and legal judgments made at the October meeting. Our agreement with that conclusion disposes of this question.

The contention that the documents are nevertheless protected from discovery by the attorney’s work product doctrine is equally without merit. The Supreme Court in Hickman v. Taylor, supra, held that papers prepared by an attorney which were unprotected by the attorney-client privilege might still be immune from production under the work product doctrine. Under this doctrine, documents written in preparation for litigation are immune from discovery absent an adequate showing of necessity. One court has held that the power of the Commissioner of Internal Revenue to investigate the records of taxpayers makes doubtful the relevancy of the work product privilege enunciated in Hickman to a proceeding for the enforcement of the Commissioner’s summons. United States v. McKay, 372 F.2d 174, 176 (5th Cir. 1967). The Supreme Court has also noted the strong Congressional evidence of intent that the Commissioner of Internal Revenue not be impeded in his investigation of taxpayers:

“Section 7601 of the 1954 Code, 26 U.S.C. § 7601, directs the Secretary or his delegate ‘to the extent he deems it practicable’ to cause Treasury Department officers or employees ‘to proceed . . . and inquire after and concerning’ all persons ‘who may be liable to pay any internal revenue tax.’ The section thus flatly imposes upon the Secretary the duty to canvass and to inquire.” Donaldson v. United States, 400 U.S. 517, 523, 91 S.Ct. 534, 539, 27 L.Ed.2d 580 (1971).

We think the work product doctrine does have applicability to a proceeding for the enforcement of an Internal Revenue summons. The strong public interest as expressed by Congress in enforcement of the Internal Revenue Act may, however, be relevant in considering the degree of necessity which need be shown prior to the enforcement of an order to produce.

The district court adopted this viewpoint and held that, assuming the taxpayer otherwise stated a valid work product claim, the government had met its initial burden of showing “good cause” in expressing a good faith belief that Document 7 was necessary for a correct determination of the taxpayer’s liabilities and that the information contained therein could not be obtained from any other source. The court permitted the taxpayer to rebut this belief by seeking to prove to the court that the documents were not essential. The court found that sufficient good cause had been shown with regard to Document 7 and our examination of the materials leads us to the same result.

Document 8 is clearly outside the scope of the work product doctrine. That document was prepared by an accountant giving accounting advice to his client, the taxpayer. United States v. McKay, supra, 372 F.2d at 177.

We conclude that the district court correctly determined that Documents 7 and 8 should be produced.

II.

The second appeal in his case, brought by Earl Brown, a partner of Arthur Andersen & Company, seeks this court’s disapproval of the district court’s statements’ in its opinion that the accountants involved responded to the IRS summons with a lack of candor and forthrightness and that they turned over fewer than all papers required by the IRS summons. Brown argues that the district court’s statements dealt with matters which were neither issues in the case nor nec.essary for resolution of those issues; that Brown was not an active participant in the case as a result of a stipulation approved by the court and thus presented no evidence and interrogated no witnesses; and that the evidence in the case does not support the statement. ,

We agree that the district court comments were improper surplusage in the context of this case. All relevant documents were produced in response to the summons involved in this case, subject to a determination that no privilege existed, and the court’s comments related to Andersen’s response to an earlier summons, judicial enforcement of which was never sought. Although the merits of the accounting firm’s response to the earlier summons have been argued by both sides, we do not feel it necessary to dwell on the issue. Since the Andersen firm responded properly to the only summons before the district court, the comments relating to other irrelevant matters should not have been made.

The judgment appealed from is affirmed as modified.

      . Jurisdiction in the district court was invoked pursuant to 26 U.S.C. §§ 7402(b) and 7604(a).

      . Section 7602 of the Internal Revenue Code of 1954 provides that:
      “For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax . . . the Secretary ... is authorized — •
      (1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;

      (2) To summon the x>erson liable for tax or required to perform the act, or any officer or emxdoyee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary or his delegate may deem proper, ... to imoduce such books, papers, records, or other data, ...”

      . There is no accountant-client privilege in the federal system. Couch v. United States, 409 U.S. 322, 93 S.Ct. 611, 34 L.Ed.2d 548 (1973).


author: ELY, Circuit Judge:

text:
    UNITED STATES of America, Appellee, v. 201.19 ACRES OF LAND, MORE OR LESS, IN GRAYS HARBOR COUNTY, STATE OF WASHINGTON, SIMPSON TIMBER COMPANY, et al., and unknown owners, Appellants.
    No. 26918.
    United States Court of Appeals, Ninth Circuit.
    May 14, 1973.
    Dale E. Kremer (argued), Ryan, Carlson, Bush, Swanson & Hendel, Seattle, Wash., for appellants.
    Carl Strass, Washington, D. C. (argued), Stan Pitkin, U. S. Atty., Shiro Kashiwa, Asst. U. S. Atty., Kent Friz-zell, Asst. Atty. Gen., Dept, of Justice, Washington, D. C., Jerald Olson, Asst. U. S. Atty., Seattle, Wash., Ronald R. Hull, Asst. U. S. Atty., Tacoma, Wash., Dirk Snel, Robert S. Lynch, App. Section, Dept, of Justice, Washington, D. C., for appellee.
    Before ELY, WRIGHT and WALLACE, Circuit Judges.
   OPINION

ELY, Circuit Judge:

Simpson Timber Company (“Simpson”) appeals from a condemnation award of $51,408.00. It vigorously asserts that this sum inadequately compensates for the taking by the United States of a “permanent and exclusive” easement through timber lands located adjacent to the Olympic National Forest in the State of Washington.

In support of its timbering activities conducted on the Olympic Peninsula, Simpson founded a company town in the Wynooehee Valley. Christened Camp Grisdale, the town provides repair yards and railroad reloading stations, as well as housing and other employee facilities. Connecting the town to the outside world as it winds through the Wynooehee Valley is the gravel-surfaced Grisdale Road, a portion of which Simpson holds in fee simple absolute. This road provides not only the most convenient access to Camp Grisdale, but also the target of the condemnation and the subject of this appeal.

Although prior to the condemnation there was some limited use of the road by the public and the Forest Service. Simpson has continually exercised control over the road and its use. When, for example, the Forest Service requested a public right-of-way over the road during the 1950’s, Simpson refused on the ground that expanded public use would adversely affect its logging operations. Simpson has used the road since the 1930’s to move equipment and supplies incident to those operations. Moreover, due to Simpson’s forestry management practices, it was quite definitely established that logging and concomitant traffic will increase substantially in the next ten to fifteen years.

A few years ago the Government approved the construction of a water storage and flood control dam across the Wynooehee River on nearby national park lands. The dam reservoir was intended for multipurpose uses, including recreation. Since the area would be accessible by means of the Grisdale Road, the Forest Service sought to obtain control through condemnation in order to improve the road surface and accommodate the anticipated traffic needs.

No suggestion is made that the condemnation itself was improper. The sole issue here raised is whether the amount awarded was so inadequate that it unconstitutionally deprived Simpson of property without just compensation. Specifically, Simpson contends (1) that the trial court’s award was predicated upon erroneous interpretations of the Sustained Yield Agreement and the Declarations of Taking, and (2) that the trial court improperly rejected Simpson’s appraisal testimony and relied solely on the testimony of United States appraisers who allegedly inaccurately evaluated the rights acquired and the damages suffered.

As a basis for fixing conpensation, the District Court sought to contrast Simpson’s interest before and after the condemnation. In formulating this contrast, the court specifically found that (1) all the proposed public uses were already permissible under the Sustained Yield Agreement; (2) all scheduled improvements were similarly allowable under the Agreement; (8) Simpson’s right to use Grisdale Road following its condemnation remained essentially unchanged; and (4) all of Simpson’s future needs would be accommodated by the road as improved by the United States. These four determinations provided the bases for the challenged award made by the District Court.

Woven throughout the four findings is a 1946 Sustained Yield Agreement between Simpson and the United States. Formally entitled “Cooperative Agreement for the Management of the Participating Forest Properties in the Shelton Cooperative Sustained Yield Unit,” and authorized by 16 U.S.C. § 583 et seq., the one-hundred year contract was intended to stabilize forest industry employment in the area by implementing sustained-yield forestry.

I

Underlying the first formulation was the court’s observation that, construing the Agreement with “long established national public policy”, Simpson and the Government “clearly” contemplated “continued public use” of Grisdale Road “throughout the term of the [Agreement] . . . and afterward.”

We cannot agree with this interpretation, for the agreement expressly provides that the road would be available for public use only to the extent consistent with the objectives of the Agreement, Agreement at § 9, which included “continuous and sustained forest production,” id. at § 2, and “growing the maximum volume of forest trees to sizes suitable for conversion of salable forest products in the shortest possible time . . . .” Id. at § 5. It was therefore clearly contemplated that any permissive public access to the road was to be subservient to the dominant purpose of forestry.

The District Court also sought to justify its first finding by reference to a 1957 amendment to the Agreement, which provided that Grisdale Road would be classed a general service road and thus

“available for public use except when Company log traffic ... is sufficiently heavy to constitute a definite safety hazard, in which case public use requirements may be met by the provision of alternate routes or by appropriate regulation of traffic after classification as Special Service roads under the procedure outlined in Regulation U-14, issued by the Secretary of Agriculture.”

Since Regulation U-14 specifically provided that a road could not be classified as a “Special Service” road unless the Government already controlled the right of way, the Forest Service was without authority to, and did not in fact, route public use over Grisdale Road in derogation of Simpson’s interests. Reference to the 1957 amendment was, we think, irrelevant to the formulation adopted by the court.

Similarly misplaced was the District Court’s reliance upon “long established national public policy”. The program relating to multiple use of national forests, thereby embracing recreational use, was not initiated until 1960; consequently it sheds no light on the intentions of Simpson and the Government as of the time of their 1946 agreement. Multiple-Use-Sustained-Yield Act, 16 U.S.C. § 528.

As a final basis for its first formulation, the court found “substantial prior public use” of the Grisdale Road. We cannot discern adequate substantial evidence to justify this finding. Even after the road became a general service road in 1957, the Government itself admits that there was “relatively little recreational use” with only about “300 people per season stay[ing] a full day or overnight” in the area, and most of these were local fishermen. At the time of condemnation, the entire acreage contained only one ten-unit campground.

In sum, we reject as clearly erroneous the finding that the public use anticipated after condemnation would not exceed the use already permitted.

II

In its second formulation, the District Court found that the improvements now planned for Grisdale Road had -already been contemplated and authorized by the terms of the Agreement. Consequently, according to the court, no injury to Simpson would be occasioned by postcondem-nation improvements because they would not increase the use rights already exercisable by the United States.

The record does not support this conclusion. First, the Agreement itself contains absolutely no language supporting the interpretation under discussion. Secondly, the practices that had actually been followed undercut the finding. Pri- or to condemnation, for example, all road construction and maintenance costs were borne initially by Simpson and were only indirectly reimbursed by the Government. In fact, as the Government’s brief declares: “Forest Service officials believed that only the acquisition of a permanent easement over the [Grisdale] roads would enable them to make direct maintenance and construction expenditures. . . . ”

We cannot avoid the conclusion, contrary to that reached by the District Court, that road improvements, inasmuch as they will enlarge the Government’s prior use, will inflict compensable loss on Simpson.

Ill

The third formulation, that Simpson’s use rights to the road were not adversely affected by the taking, was predicated upon a finding that the Declaration of Taking did not diminish use rights secured to Simpson under the Agreement. The overwhelming evidence was to the contrary.

Prior to condemnation, for example, Simpson could have devoted Grisdale Road solely to logging and, if necessary, could have excluded the public entirely. After the taking, in contrast, Simpson was not to “interfere with the United States of America or its assigns, or create unsafe conditions . . . .”

Similarly, although Simpson’s trucks were formerly equipped with all sized bunks and often hauled loans up to 160,000 pounds, with over half the loads exceeding 115,000 pounds, trucks were to be limited, after the condemnation, to ten foot bunks and loads of 115,000 pounds.

Moreover, the United States is now empowered, and in fact intends, to surface Grisdale Road with blacktop. Since Simpson is now liable for all road damage it causes, and since it is undisputed that normal logging operations with Simpson’s heavy equipment would inflict continuous and substantial damage, blacktopping would render Simpson’s use of the road economically unfeasible.

Finally, in abrogation of Simpson’s rights under the Agreement (which, incidentally), was not incorporated into the Declarations of Taking) and in expansion of governmental interests, the United States was given “perpetual and exclusive easements to construct, reconstruct, improve, use, control and maintain roads for [its own benefit and for . . . it assigns, contractors, licensees and permittees.” Acting upon these new grants, the Government has classified Grisdale Road as a special service road and has issued regulations that require permits for commercial hauling, apply state traffic laws to the road, and empower the Forest Service to close the road entirely to all commercial hauling, including Simpson’s, merely by posting a notice.

These radical changes in actual and potential road use rights reflect the substantial adverse impact of condemnation on Simpson and amply demonstrate, we think, the clearly erroneous nature of the third critical finding made by the District Court.

IV

The fourth basis for the District Court’s conclusion was that Simpson’s future needs would be fully accommodated by the road planned by the Government. The court was apparently convinced that the following reservations of use, in the Declaration of Taking, was sufficient to secure Simpson’s future needs:

“[Simpson reserves the rights to] cross and reeross the easement and roads at any place and by any reasonable means and for any purpose in such manner as will not unreasonably interfere with use of the roads by the United States . . . and to conduct thereon such logging operations as will not interfere with the use of the roadway by the United States of America or its assigns or create unsafe conditions. . . . ”

We take note, however, that the complexion of the description, “reasonable,” may change markedly when applied in different circumstances. Thus, a practice quite reasonable for a logging road may become wholly unreasonable when the road may be utilized for tourist access to recreational areas. Governmental discretion to limit Simpson’s use of Gris-dale Road cuts well into the vested rights that Simpson exercised prior to condemnation. Accordingly, it is not only possible, but also likely, that Simpson’s future needs may not be accommodated by the new road. Any “rights” reserved to Simpson by the Declarations of Taking are at most illusory, and should not have been considered in fixing a just amount of compensation. United States v. 339.77 Acres of Land, 420 F.2d 324 (8th Cir. 1970); United States v. 677.50 Acres of Land, 239 F.Supp. 318 (D.Kan. 1965).

Having thoroughly reviewed the record, we are left with the definite and firm conviction that a mistake has been committed. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948); United States v. Munz, 352 F.2d 196 (9th Cir. 1965). Although we do hold that the Government appraisers and the trial court adopted a clearly erroneous basis for the condemnation award, we think it unnecessary, going further, to specify the method of valuation that should be applied. The District Court will, of course, disregard the vague and gratuitous promissory declarations offered by the United States as establishing its limited future use of the condemned property. Rather, the award should be predicated upon the entire use to the Government that is possible, including all incidents of such use, and the reasonably. possible encroachment of that use upon the rights of the condemned. Beyond this, we defer to the wisdom and experience of the District Court in fashioning the approach most sure to compensate Simpson with “the full and perfect equivalent in money of the property taken.” United States v. Miller, 317 U.S. 369, 373, 63 S.Ct. 276, 279, 87 L.Ed. 336 (1943).

Reversed and remanded.

      . The trial court apparently believed that Simpson was excepted from the permit requirement. We have been unable to discover any indication of such an exception, either express or implied.


author: PER CURIAM.

text:
    W K CONTRACTING CO., INC., Appellant, v. ASHLAND OIL & REFINING CO. et al., Appellees.
    No. 72-2068.
    United States Court of Appeals, Sixth Circuit.
    Decided May 31, 1973.

      James F. Clay, Danville, Ky., for appellant; Clay & Clay, Danville, Ky., on brief.
    W. H. Dysard, Ashland, Ky., for appel-lees by Stuart E. Lampe, Louisville, Ky.; Robert L. Sloss, Stuart E. Lampe, Wyatt, Grafton & Sloss, Louisville, Ky., on brief.
    Before CELEBREZZE, MILLER and KENT, Circuit Judges.

       Judge Kent participated in the decision in this ease and concurred in this opinion prior to his death on May 27, 1973.

   PER CURIAM.

This case involves an appeal from a judgment of the District Court of the Western District of Kentucky that Appellant, W K Contracting Co. (W K), was not entitled to payment for work which it contended was extra and beyond that contemplated by the contract between W K and Appellee, Ashland Oil & Refining Co. (Ashland). It was alleged that the work had been ordered by Ashland during the performance of the contract which provided for the construction of a pipeline from Patoka, Illinois to Owens-boro, Kentucky. The District Court did permit recovery by Appellant of $24,-332.46 withheld by Appellee as a setoff against claims paid by Ashland to various property owners along the pipeline right-of-way for damage allegedly done by W K during the completion of the contract. The Court held that Ashland had withheld payment of this money contrary to the terms of the contract, which required Ashland to furnish an itemized statement showing the amount paid in settlement of any damage claims. Appellant contends it is entitled to recover interest on the money improperly withheld.

With regard to the alleged extra work, Appellant contends that it is entitled to payment under any one of three separate theories. First, it argues that the written contract requires payment for this work. The District Court found that Section 8 of the written contract anticipated the possibility of extra work and provided for a condition precedent to payment for the work — submission of invoices supported by time sheets, payroll records or other evidence of the validity of the charges. Appellant contends that the existence of a condition precedent has never been raised by Ashland and that the contract cannot be interpreted as providing for such a condition. We find it unnecessary to determine whether the submission of invoices was a condition precedent to payment for extra work, since we have determined that the finding of fact of the District Court that W K had submitted invoices for the extra work which it performed, is not clearly erroneous. As the Court found, W K had, during the course of the construction, submitted 39 such invoices supported by daily time records for work which it considered extra. All of these invoices were paid. No other invoices for extra work were submitted nor was any claim for payment for other work made during the entire construction period. We thus do not find the determination of the District Court that Appellant performed only its required work to be clearly erroneous. See Strickler v. Pfister Associated. Growers, Inc., 319 F.2d 788, 790 (6th Cir. 1963).

Appellant’s second and third contentions must also fall on the basis of the District Court’s findings of fact. It is contended that there were parol modifications of the written contract and that there was an implied contract that the extra work done would be paid for. The District Court found no evidence that the parties had agreed to modify the contract. Appellant has not attacked this finding as clearly erroneous and we do not find it to be so. Nor can we accept Appellant’s claim that Ashland impliedly agreed to pay for the extra work, in view of the District Court’s finding that the work done by W K was required by the contract and W K was therefore already bound to perform the work.

The remaining question to be considered is whether Appellant is entitled to interest on the judgment of $24,-332.46. Under Kentucky law, if there is a claim for a liquidated debt, interest is payable from the date payment is due. Perry v. Ernest R. Hamilton Associates, Inc., 485 S.W.2d 505 (Ct.App.Ky.1972), even if the refusal to pay is based on a good-faith denial of liability, Shanklin v. Townsend, 434 S.W.2d 655 (Ct.App.Ky. 1968). Thus, the question becomes whether W K’s claim is for a liquidated debt. The amount withheld by Ashland was money owed for work completed. This money was withheld because of the damages for which Ashland claimed W K was responsible. Ashland, however, did not furnish W K with any itemized statement of damages paid and thereby failed to comply with the terms of the contract in withholding payment. There was no justification, therefore, for the refusal to make payment. Since the money was due at a specified date and in a known amount, we find that the claim is for a liquidated debt. Interest

is due, therefore, from the date payment of the money was due.

The judgment of the District Court is affirmed as modified.

      . Section 8 of the contract provides :
      At any time or times prior to the completion of the work covered by this contract, Company may, by written notice to Contractor, make changes in the plans, specifications, and drawings by way of additions, omissions, or other alterations thereto, such changes to be authorized and signed by Company’s authorized representative and delivered to Contractor’s authorized representative, who shall receipt therefor in writing, or by letter agreement and/or other formal contract revision between the parties hereto. All such changes shall be reduced to writing prior to commencement of work by Contractor on the changes so authorized. For any such changes authorized by Company in the above manner which will increase or decrease the cost and expense of work to Contractor, there shall be a corresponding increase or decrease in the compensation herein provided. Where such changes shall require extra work resulting in an increase of the cost and expenses to Contractor, he shall be paid a price which has been agreed upon prior to commencement of the extra work, or, if no such price is agreed upon, the sum of the following: (1) Actual cost (net after cash discount) of materials and supplies furnished by Contractor in connection with the extra work (to be evidenced by invoices) plus 10 per cent thereon ; (2) Charges for Contractor’s direct labor (including applicable insurances taxes, payroll benefits, travel and subsistence allowances and fringe benefits, overtime premiums, small tools, overhead and profit) and Contractor’s equipment (actual operating hours of work on maintained basis including gasoline, oil, grease, other fuel and supplies, repair parts, repair labor, taxes, license fees, rentals, supervision, overhead, profit, and all other costs incident to use of equipment furnished by Contractor) used in connection with the extra work, at rates not exceeding the maximum rates set forth in the Wage and Equipment Rate Schedule in Paragraph 11. All invoices submitted by Contractor for performance of extra work except fixed price additions shall be supported by time sheets for labor and equipment, payrolls, receipted invoices, or other acceptable evidence of validity of the charge, and all such evidence must bear the approval of Company’s Inspector and be subject to review by Company’s Auditors. Time sheets for labor and equipment shall be submitted each day to Company’s Inspector who shall approve same if he finds same to be correct; if such time sheets are found by Company’s Inspector and/or Company’s Auditors to be incorrect, they shall be corrected by Contractor. For any such change which decreases the cost of work to Contractor, the amount to be deducted from the contract price for such change shall be agreed upon before the change is made and shall be included in the written instructions to Contractor.
      In addition to the work to be performed by Contractor as described herein it is contemplated that the Company may desire the Contractor to undertake and perform additional jobs and tasks not within the scope of the hereinbefore described work. In all cases where such additional work is to be performed, the Company shall deliver to the Contractor notice in writing in the form of Exhibit “B” attached hereto and made a part hereof specifying the work to be done. Upon receipt of such notice, Contractor shall be authorized and upon acceptance shall at once undertake the additional work specified in such notice. Compensation to be paid the Contractor for the additional work shall be determined on the basis of the rates for labor and equipment set forth in Paragraph 11. No claims for additional work performed by Contractor shall be valid unless ordered by Company as provided in this Section.

      . ‘W K has contended that the work which is the center of the present controversy was covered by the written contract. This is not contrary to the holding of the District Court that even extra work was “specifically and carefully provided for in the contract, including the manner in which and the conditions under which W K would be compensated therefor.” The District Court found as a fact that the billing for the regular work done under the contract was submitted in a series of 16 estimates during the course of the construction. Work considered extra was billed periodically in separate invoices. The work for which payment is now sought was not the subject of an invoice submitted by W K to Ashland.

      . This finding of the District Court is contained in paragraph 3 under the heading “Conclusions of Law.” AYe have treated it as a finding of fact and as such it is within the scope of the clearly erroneous rule. Utzinger v. United States, 432 F.2d 485, 489 (6th Cir. 1970).

      . Paragraph 14 of the agreement between the parties expressly provides that “no modification or supplement (to the agreement) shall be made except by written agreement signed by both parties.”

      . Indeed, Appellant concedes that none of the findings of fact of the District Court are attacked as clearly erroneous.


author: ALFRED T. GOODWIN, Circuit Judge:

text:
    REALTY LOAN CORPORATION, Petitioner-Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant. REALTY LOAN CORPORATION, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
    Nos. 71-1194, 71-1346.
    United States Court of Appeals, Ninth Circuit.
    April 19, 1973.

      Charles P. Duffy (argued) Duffy, Stout, Georgeson & Dahl, Portland, Or., for Realty Loan Corp.
    Ernest J. Brown (argued), Johnnie M. Walters, Asst. Atty. Gen., Meyer Roth-wacks, Tax Div., Dept, of Justice, K. Martin Worthy, IRS, Washington, D. C., for C.I.R.
    Before HUFSTEDLER and GOODWIN, Circuit Judges, and THOMPSON, District Judge.

       The Honorable Bruce R. Thompson, United States District Judge for the District of Nevada, sitting by designation.

   ALFRED T. GOODWIN, Circuit Judge:

The Commissioner of Internal Revenue appeals from a Tax Court decision permitting Realty Loan Corporation, an accrual-basis taxpayer, to report the income from the sale of a business on the installment basis. 54 T.C. 1083 (1970).

Realty Loan originally sought to treat the proceeds of the sale as capital gain, and has filed a protective appeal from the Tax Court decision denying capital-gain treatment. Because we affirm the decision insofar as it permitted the taxpayer to report the proceeds of the sale on the installment basis, we do not reach the question presented in the protective appeal.

Realty Loan was a closely held corporation engaged in the mortgage-banking and mortgage-servicing business. Realty Loan processed mortgage loan applications. After completing a loan, Realty Loan ordinarily assigned the note and mortgage to one of several insurance companies with whom it regularly did business. After assignment, Realty Loan serviced the mortgages as agent for the insurance companies and received a service fee. Realty Loan had agreements formalizing this relationship with Bankers Life Company and with Mutual Trust Life Insurance Company.

In 1962 Realty Loan sold its business to Sherwood and Roberts, Inc., a Washington corporation engaged in the same type of business, but operating on a larger scale. The agreement of sale was to become effective only after the insurance companies dealing with Realty Loan consented to Sherwood and Roberts’ taking over the files. In due course the companies approved the sale.

The recital sale price of $86,500 was subject to adjustment upward or downward to reflect an accounting. The final amount paid was adjusted down to $82,688.54. The original contract called for the following annual payments: 1962, $4,197.11; 19o3, $15,840.59; 1964, $16,651.03; 1965, $17,502.93; 1966, $18,437.22; and 1967, $13,871.12.

The taxpayer reported the sale as an installment sale of a capital asset. The Commissioner filed a notice of deficiency. The Commissioner took the position that the gain was ordinary income, and, further, that it was not subject to installment reporting. Under the Commissioner’s theory, all of the income accrued in 1962.

The Tax Court held that the consideration paid to Realty Loan was primarily for the right to receive servicing fees and that only $10,000 was allocable to good will. This $10,000 had a cost basis of $2,941, and was treated as a capital gain. The Tax Court held that the remaining $72,688.54 was ordinary income, contrary to the contentions of the taxpayer, but allowed the income to be reported on the installment basis.

The Commissioner argues that the installment method of reporting under Int.Rev.Code of 1954, § 453, is not available because the contract was not for the sale of “property.” Section 453 installment reporting is available only if the contracts are “personal property.” §_ 453(b)(1)(B). The Commissioner argues that the contract rights sold would not be “property” for capital-gains purposes (§ 1221), and, therefore, cannot be “property” for purposes of § 453.

The Commissioner’s attempt to restrict the definition of property is not convincing. Because the Congressional purpose in enacting a special tax rate for capital gains was quite narrow, but the Code definition of “capital asset” was broad, the courts have refined the definitions under § 1221. Surrey, Definitional Problems in Capital Gains Taxation, 69 Harv.L.Rev. 985, 987-89 (1956). The courts have limited, for purposes of the capital-gains provisions, the definitions of “property” and “sale or exchange” in keeping with the perceived Congressional purpose. See, e. g., Commissioner v. P. G. Lake, Inc., 356 U.S. 260, 264-267, 78 S.Ct. 691, 2 L.Ed.2d 743 (1958). The Supreme Court has explicitly held that the definition of “property” for purposes of § 1221 is sui gen-eris. Commissioner v. Gillette Motor Transport, Inc., 364 U.S. 130, 80 S.Ct. 1497, 4 L.Ed.2d 1617 (1960) (“property” for purposes of fifth amendment is not “property” for § 1221); Commissioner v. P. G. Lake, Inc., supra. But we need not adopt an artificial construction of “property” for § 453 unless the Commissioner shows that there exist here, as in the capital-gains area, policy reasons for doing so.

The Commissioner suggests that his definition of “property” is necessary to prevent the installment sale of rights to receive income which had been previously earned. But a strained definition of property is not necessary to prevent that evil. If a right has matured or the income is receivable under a claim of right, the income is presently taxable regardless of any later disposition. Commissioner v. Horst, 311 U.S. 112, 61 S.Ct. 144, 85 L.Ed. 75 (1940). Incorrect treatment of accrued rights to income is also subject to attack under the requirement of § 446(b) that the method of accounting used clearly reflect income. Commissioner v. Kuckenberg, 309 F.2d 202 (9th Cir. 1962), cert. denied, 373 U.S. 909, 83 S.Ct. 1296, 10 L.Ed.2d 411 (1963); Family Record Plan, Inc. v. Commissioner, 309 F.2d 208 (9th Cir. 1962), cert. denied, 373 U.S. 910, 83 S.Ct. 1297, 10 L.Ed.2d 411 (1963).

The Commissioner’s brief suggests that his actual concern is with the installment sale of unaccrued contract rights. However, the Commissioner has not shown how the installment treatment of the sale of such rights could be an abuse of the installment-sale provisions of the Code. Allowing installment-sale treatment of unaccrued contract rights together with other kinds of property is consistent with the purpose of § 453’s predecessor as stated by the Supreme Court: the avoidance of the hardship of immediate taxation of unreceived and unreceivable sums, and the avoidance of the difficulty of valuation of installment obligations. Commissioner v. South Texas Lumber Co., 333 U.S. 496, 503, 68 S.Ct. 695, 92 L.Ed. 831 (1948). The reference to the “basis” of the property in § 453 does not indicate otherwise. Many items, such as copyrights or patents, may have no “basis” but are nonetheless “personal property” eligible for installment-sale treatment. Rev.Ruling 234, 1953-2 Cum.Bull. 29.

Nor do the demands of consistency impel us to incorporate the capital-gains definition of “property” into the installment-sale provisions. Not only is there no need to harmonize the installment-sale and capital-gains provisions, but the Commissioner’s proposed definition would not establish harmony. As he conceded in his discussion of Ann Edwards Trust, 20 T.C. 615 (1953), aff’d, 217 F.2d 952 (5th Cir.), cert. denied, 349 U.S. 905, 75 S.Ct. 581, 99 L.Ed. 1241 (1955), the differing exceptions to §§ 453 and 1221 preclude any such harmony.

The Commissioner cites several cases in which installment-sale treatment was refused, but all of them involved purposed “sales” of contract rights between the original parties to the contract. None held that a contract right could not be “property.” Billy Rose’s Diamond Horseshoe, Inc. v. United States, 448 F.2d 549 (2d Cir. 1971) ; Estate of Scharf v. Commissioner, 316 F.2d 625 (7th Cir. 1963); Town and Country Food Co., 51 T.C. 1049 (1969); Harry L. Barnsley, 31 T.C. 1260 (1959); Charles E. Sorensen, 22 T.C. 321 (1954).

We give “property” its natural and normal meaning, and hold that the mortgage-servicing contracts sold here were “property” eligible for installment-sale treatment under Int.Rev.Code of 1954, § 453. Accordingly, we do not reach the other contentions of the parties.

Affirmed.


author: BARRETT, Circuit Judge.

text:
    Daniel E. MARKEN, Plaintiff-Appellant, v. C. M. GOODALL, a widow, et al., Defendants-Appellees.
    No. 72-1882.
    United States Court of Appeals, Tenth Circuit.
    Argued and Submitted March 30, 1973.
    Decided May 21, 1973.
    Carl L. Lathrop, Cheyenne, Wyo., for plaintiff-appellant.
    H. B. Harden, Jr., Casper, Wyo., for defendants-appellees, C. M. Goodall and Goodall Oil Co.
    Donald C. McKinlay, Denver, Colo. (Ted Simóla, Cheyenne, Wyo., on the brief), for defendant-appellee, Atlantic Richfield Co.
    Before LEWIS and BARRETT, Circuit Judges, and SMITH, District Judge.

       Of tlie Eastern District of Michigan, sitting by designation.

   BARRETT, Circuit Judge.

Daniel E. Marken appeals from the decision denying his prayer for specific performance based upon his alleged preferential right to purchase the working interest in an oil and gas lease owned by one R. A. Goodall, doing business as Goodall Oil Company, a sole proprietorship. In the alternative, Marken sought damages in the amount of $50,000 together with interest and costs. The Court held that Marken had waived any preferential right by remaining silent and acquiescing in the sale of the Goodall working interest to Atlantic Richfield on May 3, 1970.

In June of 1952 Marken entered into a drilling contract with Superior Oil Company wherein Marken agreed to drill a well on lands leased by Superior from the State of Wyoming. Superior had acquired the lease by assignment from one Otto R. Bolin. Superior in turn assigned the lease to Marken in consideration for the drilling and testing of a well on the lands by Marken. Marken sold one-fourth of the working interest to R. A. Goodall before the well was tested. This sale-assignment was evidenced in part by a Joint Operating Agreement prepared and executed by Marken and sent to Goodall. Goodall executed the Agreement after making numerous changes and additions which were initialed for Goodall by George W. Osbeck, Goodall’s employee. The Agreement, as so changed, was returned to Marken for his approval. Marken neither initialed the changes nor returned a copy of the Agreement to Goodall. Goodall, however, retained an unexecuted copy of the changed Agreement in his files. Goodall died in 1953. His widow, C. M. Goodall, succeeded to his interest.

In 1966, the lands covered by the subject lease were unitized with other lands for water-flood. On June 21, 1967, Atlantic began the water-flood recovery program on the lease. It did not prove successful until April or May of 1970. On August 14, 1968, Mrs. Goodall sent an Invitation to Bid for the 25'% working interest to Atlantic Richfield who bid $20,000. It was accepted on October 14, 1968. This sale was not, however, completed until May 3, 1970, when the purchase money was paid.

On September 21, 1970, Marken for the first time asserted his alleged preferential right to purchase the working interest sold to Atlantic. Marken relied on paragraph 11 of the Joint Operating Agreement which reads in pertinent part as follows:

Before the sale by any party hereto of its interest in the Joint Leases, or any of them, the other parties hereto shall be given the refusal thereof at the price offered in good faith by a third party, and shall have the preferred right to purchase at the price stated, which right shall be exercised within five (5) days after reecipt (sic) of written notice of the offer made by a third party.

Prior to September 21, Í970, Marken had received actual notice of the proposed sale of the Goodall working interest to Atlantic Richfield. He did not, however, assert his contended preference right. As early as November of 1968, Clarence Peterson, Atlantic’s attorney, asked Marken to furnish him with two assignments from Marken to Goodall and a copy of the Joint Operating Agreement. Marken ignored the request. Peterson had already searched the records of the State Land Board and the County Clerk’s records in Douglas, Wyoming, as to Goodall’s interest. He did not find any recorded documents between Marken to Goodall. George W. Osbeck had already given Atlantic the documents in Goodall’s file, including an unexecuted copy of the Joint Operating Agreement between Goodall and Marken. Peterson asked for additional material and a signed copy of the Agreement, but Osbeck said he had given him all of the records in the Goodall files. Attorney Charles A. Redpath took over the title investigation when Peterson left Atlantic. He phoned the Markens and asked for the two assignments and the agreement. This request was ignored. Redpath prepared a Replacement Assignment to replace the two assignments between Mark-en and Goodall which Redpath believed had either been misplaced or lost. On January 27, 1969, Osbeck told Marken about the sale by Mrs. Goodall to Atlantic for $20,000. Osbeck, too, requested that Marken sign the Replacement Assignment. Marken ignored all requests from Atlantic’s attorneys and Osbeck. Marken stated during one phone conversation with Osbeck that: “Well, if they don’t pay you, pc -haps I can buy it.”

Marken contends that: (1) he has a preferred right to buy the working interest of Goodall under the Joint Operating Agreement; (2) he was not given the required notice and opportunity to purchase the working interest as provided by the Agreement; (3) Atlantic Richfield purchased the working interest with prior notice of his preferred right to buy the interest; and (4) he was not guilty of laches.

We cannot overturn the holdings of the trial court unless they are clearly erroneous. Butler Paper Company v. Business Forms, Ltd., 424 F.2d 247 (10th Cir. 1970); C. H. Codding & Sons v. Armour and Company, 404 F.2d 1 (10th Cir. 1968). Appellate courts cannot try a case de novo. The resolution of conflicting evidence, as exists in this case, is particularly within the province of the trial court and findings must be given added weight when we consider the opportunity of the trial judge to hear and observe the witnesses. United States v. 79.95 Acres of Land, More or Less, in Rogers County, State of Oklahoma, 459 F.2d 185 (10th Cir. 1972); Davis v. Cities Service Oil Company, 420 F.2d 1278 (10th Cir. 1970); McKeel v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 419 F.2d 1291 (10th Cir. 1969). Further, it is settled law in our circuit that the views of a Federal District Judge who is a resident of the state where the controversy arose in a case involving the interpretation of the laws of that state, carries extraordinary persuasive force on appeal. Hardberger and Smylie v. Employers Mutual Liability Insurance Company of Wisconsin, 444 F.2d 1318 (10th Cir. 1971); Hamblin v. Mountain States Telephone and Telegraph Company, 271 F.2d 562 (10th Cir. 1959).

Marken’s contentions are without real merit when considered in the light of the trial court’s Conclusions of Law, to-wit:

3. Plaintiff had actual knowledge of the proposed sale by Goodall to Atlantic and therefore it was not necessary that Goodall give plaintiff written notice.
4. Plaintiff waived any right which he had to acquire the interest sold by Goodall to Atlantic by remaining silent and acquiescing in the sale for a period of almost two years after acquiring actual knowledge of the proposed sale. “[W]here a plaintiff, with knowledge of the relevant facts, acquiesces for an unreasonable length of time in the assertion of a right adverse to his own, the court may presume assent to the adverse right, and the consequent waiver of the right sought to be enforced.” Pfister v. Cow Gulch Oil Co., 189 F.2d 311 (10th Cir. 1951).
5. Plaintiff, after having received actual knowledge of the proposed sale, remained silent with regard to his right of refusal while defendants entered upon the costly and risky water flood recovery program which ultimately resulted in greatly enhancing the value of the lease. It was only after the water flooding proved successful that plaintiff broke his long silence and demanded he be permitted to exercise his right of refusal. It was eloquently stated by Justice Potter in the case of Merrill v. [Rocky Mountain] Cattle Co., 26 Wyo. 219, 181 P. 964 (1918), that “[P]roperty worth thousands to-day is worth nothing to-morrow; and that which to-day would sell for a thousand dollars at its fair value may, by the natural changes of a week, or the energy and courage of desperate enterprise, in the same time be made to yield that much every day. The injustice, therefore, is obvious, of permitting one holding the right to assert an ownership in such property to voluntarily await the event, and then decide, when the danger which is over has been at the risk of another, to come in and share the profit”. (Emphasis supplied).
6. The law explicitly states that when parties are engaged in business enterprises, such as oil and gas leases, which by their very nature fluctuate substantially in value, such parties cannot demand specific performance of contracts unless they assert their rights diligently and without unreasonable delay. Socony Mobil Oil Company v. Continental Oil Company, 335 F.2d 438 (10th Cir. 1964). This axiom of law clearly applies to the circumstances leading to plaintiff’s claim for specific performance of his right of refusal as provided for in the Joint Operating Agreement.
7. The plaintiff’s conduct in failing to assert an adverse claim to Goodall’s proposed sale of the lease until Atlantic successfully completed a risky business venture which increased the value of the lease, brings into effect the doctrine of laches. This Court has previously stated “[T]he rule of laches must foreclose tardy claimants from asserting any rights in property when they sit quietly by and permit some one else ‘to bring into form and being a latent property right’ which only in recent years appeared to have considerable or potential value”. Amerada Petroleum Corporation v. Rio Oil Co., 225 F.Supp. 907 (D.C.Wyo.1964).
8. The Tenth Circuit has stated with regard to laches that “[A] person may not withhold his claim awaiting the outcome of a doubtful enterprise and, after the enterprise has resulted in financial success favorable to the claimant, assert his interest, especially where he has thus avoided the risks of the enterprise”. Pfister v. Cow Gulch Oil Co., supra. Since plaintiff failed to exercise his preferential right of refusal when he first received actual knowledge of the sale of the lease, and chose instead to sit back and allow Atlantic to undertake the doubtful water flood program the doctrine of laches prevents him from asserting his right now that the property, in which he risked nothing, proved to be successful.

See Marken v. Goodall, 357 F.Supp. 317 (D.Wyo.1972).

We have carefully reviewed the record. We hold that the evidence fully supports the trial court’s findings.

Affirmed.