author: CASTLE, Senior Circuit Judge.

text:
    The HANOVER INSURANCE COMPANY, Plaintiff-Third Party Plaintiff-Appellee, v. Van HAWKINS and Violet Hawkins, d/b/a Custom Camper, Defendants-Counter-Claimants-Appellants. Verdon E. STEWART and Iris C. Stewart, Defendants-Appellants, v. Richard E. POWELL and Falendar-Ludlow Corporation, Third Party Defendants-Appellees.
    No. 73-1261.
    United States Court of Appeals, Seventh Circuit.
    Argued Jan. 22, 1974.
    Decided March 18, 1974.

      Robert V. Bridwell, Richard L. Fair-child, Indianapolis, Ind., for appellants.
    Lloyd H. Milliken, Jr., Carl G. Winter, Indianapolis, Ind., for appellee.
    Before CASTLE and KILEY, Senior Circuit Judges, and STEVENS, Circuit Judge.
   CASTLE, Senior Circuit Judge.

Defendants Van and Violet Hawkins, doing business as Custom Camper, and Verdón E. and Iris C. Stewart appeal from an order granting summary judgment to the plaintiff, Hanover Insurance Co., in an action for a declaratory judgment in which Hanover contended that a policy issued to the Hawkinses did not insure them against claims asserted by the Stewarts arising from an explosion in the Stewarts’ trailer caused by a gas heater installed by Custom Camper. The Hawkinses also appeal from the granting of summary judgment to Hanover on a counterclaim in which they sought to have their manufacturers and contractors’ liability insurance policy issued by Hanover reformed to cover both product liability and completed operations risks. The defendants essentially claim on appeal that the court erred in determining that the explosion occurred after the installation “operations” were “completed,” while the Hawkinses contend that the court erroneously found that Hanover’s agent, Richard E. Powell, had not engaged in fraudulent or inequitable conduct in insuring the Hawkinses. We have considered these questions, and we affirm.

The facts are essentially undisputed. On November 2, 1970, Stewart drove his camping trailer to Custom Camper to purchase a heater for his camper and to arrange for its installation. When he returned to Custom Camper on November 5 to pick up the trailer, Stewart noted that the heater had been installed but was not operating, even though Robert Hawkins (son and employee of the defendants Hawkins) stated that his father had lit the heater on the previous evening. On investigation, Robert Hawkins located and repaired a leaking joint in the gas line of the heater. He subsequently relit the heater and advised Stewart to leave the heater operating overnight in order to facilitate relighting on later use. At this time, Stewart also observed that the installation of the heater was inadequate in two respects: First, the heater, which was mounted on a block of wood on the camper floor, “wiggled around when you would take ahold of it.” Second, the heater had not yet been encased in paneling which was to be secured to the camper wall according to the installation instructions. Only the rear portion of the paneling had been constructed and affixed to the heater. On the assurance that the paneling and bracing would be finished whenever Stewart returned the camper to Hawkins, Stewart paid for the work and drove the camper to his home to prepare for a week-end camping trip. The following morning, Stewart stepped into the trailer and was in the process of lighting a cigarette when the trailer, which had apparently filled with escaped gas from the heater, exploded.

At the time of the explosion, the Hawkinses carried manufacturers and contractors’ liability insurance issued by Hanover. This policy provided coverage for personal injury and property damage resulting from certain Custom Camper operations, but it specifically excluded coverage for liability resulting from a “completed operations hazard” or a “products hazard.” The products hazard included injury or damage which occurred away from the manufacturer’s or contractor’s premises and after physical possession of the product had been relinquished. The completed operations hazard included injury or damage occurring after completion of operations, which the policy defined as the earliest of the following times: (1) when all operations to be performed had been completed, (2) when all operations to be performed at the site of operations had been completed, or (3) when the portion of the work out of which the injury or damage arose had been put to its intended use by any person. Moreover, the policy specifically noted that operations which required “further service or maintenance work, or correction, repair or replacement because of any defect or deficiency” but which were “otherwise complete” were to be deemed completed for purposes of the policy.

Hanover concedes that the undisputed facts of this case would properly prevent the court from granting it summary judgment on the basis of the “completed operations hazard” exclusion if a completed operation were only defined in terms of the first two definitions stated above. The crux of the case, then, is whether the third alternative definition of a completed operation, “the portion of the work out of which the injury or damage arises has been put to its intended use by any person,” applies to the facts presented here.

In urging the inapplicability of the definition, the defendants first contend that the heater had not yet been put to its intended use at the time of the explosion, because it was being operated solely to “break it in” rather than to heat the trailer for human habitation. We note that in Indiana Insurance Co. v. Fidelity General Insurance Co., 393 F.2d 204, 208 (7 Cir. 1968), this court stated, “The word ‘use’ is ‘one of the most comprehensive words in our language’ and is to be given its ordinary meaning” [citations omitted]. It is patently undeniable that the heater’s pilot light had been lit and left operating in the camper in a manner envisioned by both the contractor and the consumer. Under the Indiana Insurance case, it is clear that both Custom Camper and Stewart intended to operate the heater and thus put it to its intended use when the pilot light was lit. The fact that the heater had been put to its intended use is not negatived simply by the exclusion from the camper of individuals who might have benefited from the heater’s warmth. Secondly, the defendants argue that because Stewart’s claim was not premised on the use of the heater but rather on its original improper installation, the exclusionary definition does not apply. Under the terms of the exclusion, however, the factual basis of the claim is legally irrelevant to a determination of the extent of the policy’s coverage. That is, whatever the cause of the injury, coverage is excluded if the heater had already been put to its intended use. Thirdly, the defendants argue that the heater was not intended to be used unless securely fastened to the interior of the camper. The defect of that reasoning is that it presupposes an extremely restrictive definition of “intended use.” It cannot be gainsaid that since the instructions required the paneling to be braced to the trailer for proper functioning, the heater should not have been used with only a portion of the paneling affixed. Nonetheless, both Stewart and Hawkins intended and, in fact, operated the heater in exactly the fashion foreseen by the manufacturer, despite the inadequate bracing. Fourthly, the defendants maintain that Stewart’s injury did not arise from a “portion of the work” but rather from the failure of Custom Camper to do certain work. That is a frivolous distinction, however, as the latter is implied in the former. The gist of the definition is that the work is only sufficiently finished to be put to its intended use. Here, it is clear that whatever the source of the injury, the installation was sufficiently completed such that the heater could be operated by Hawkins and Stewart in the customary manner.

The defendants also contend that certain facts specifically found by the lower court pursuant to a local court rule are not undisputedly supported by the record. This court’s power on review to determine whether there is any genuine issue of fact underlying the adjudication when such issues of fact are plainly disclosed in the trial court is, of course, unaffected by the local rule of the lower court. See, 6 J. Moore, Federal Practice, ¶ 56.27 [1] (2d ed. 1948); rule 83, Fed.R.Civ.P. However, this court will not reverse an order granting summary judgment unless such issues of fact are material. Id. Thus, for example, whether the heater was in fact still operating when the camper was parked in front of the Stewart home, whether Stewart’s injuries resulted from a negligent installation or from a defective product, and whether the gas lines which Robert Hawkins testified he installed and connected were inadequately tightened or became loose in transit, are either immaterial or irrelevant to a determination that the explosion occurred after the installation operation was completed. We therefore conclude that the lower court correctly determined from the undisputed material facts that under the policy’s third alternative definition, Hawkins’ operation respecting the installation of the Stewart heater was complete prior to the accident.

Regarding the counterclaim for reformation of the insurance contract to include coverage for both completed operations hazards and products hazards, the following facts are uncontested. After purchasing Custom Camper in 1966, the Hawkinses contacted Powell, who had agency agreements with several insurance companies including Hanover, about insurance for the business. Hawkins stated that he “wanted liability insurance to cover everything” or “complete coverage,” and Powell assured him that he would take care of it. Hawkins did not request either product liability or completed operations coverages. Powell did not mention either type of coverage to Hawkins, because he believed that none of the companies he represented would underwrite such insurance for a new venture in which the owner had no previous experience. Subsequently, Powell submitted an application to Hanover on the Hawkinses’ behalf for manufacturers and contractors’ liability insurance and for workman’s compensation insurance. When the policies were issued, Powell delivered them to Hawkins and explained them to him briefly. The liability policy was renewed for an additional year on three later occasions. Without specific authorization from Hawkins, Powell requested that Hanover increase the amount of coverage; this change was approved by Hanover, and the Hawkinses paid the higher premium. In 1968, without specific authorization, Powell decided to “test the waters” by requesting that the liability policy be issued on a comprehensive general liability form to include products liability coverage written in conjunction with completed operations coverage. Hanover advised Powell that, despite the Hawkinses’ two years of experience with Custom Camper, it was unable to expand its coverage beyond the premises and operations portion provided in prior years.

The Hawkinses contend that the failure of Powell tb disclose the distinctions between manufacturers and contractors’ liability insurance and products liability and completed operations insurance (in light of Powell’s experience in evaluating risks, his awareness of the Hawkins-es’ need for such coverage, and the Hawkinses’ ignorance of their own insurance needs) coupled with their reliance on Powell’s promise to take care of them amounted to either fraudulent or inequitable conduct. The Hawkinses further argue that such conduct by Powell concurrent with their mistake of fact as to the scope of their “liability insurance” is sufficient grounds to warrant the reformation of the insurance contract. See, Holly Stores, Inc., v. Judie, 179 F.2d 730 (7th Cir. 1950); Hammond Hotel & Improvement Co. v. Per-rin, 96 Ind.App. 311, 184 N.E. 906 (1933) (standard for reformation of written instrument); McKay Corp. v. Home Insurance Co., 130 F.Supp. 633 (N.D.Ind.1955) (application of general rules of reformation to insurance contract) . It is well-established in the case law, however, that a general request for full coverage is insufficient to support an action for reformation of an insurance contract. In Vobill Homes v. Hartford Accident & Indemnity Co., 179 So. 2d 496 (La.App.1965), a manufacturers and contractors’ liability policy which excluded coverage for product liability and completed operations hazards was issued. In opposing a motion for summary judgment, the insured contended that genuine issue of fact existed as to the intention of the parties to the insurance contract, since the insured had requested “complete liability coverage.” The Supreme Court of Louisiana affirmed the summary judgment, stating, “Nor are we cited to any authority in support of the proposition that a policy should be reformed because of some general impression that coverage would include some particular type of risk not specifically discussed with the agent before the policy was issued or the loss occurred.” Id. at 498. See also, Ahnapee & Western Railway Co. v. Challoner, 34 Wis.2d 134, 148 N.W.2d 646, (1967). The Hawkinses attempt to distinguish Vobill by arguing that Hanover, unlike the insurance company in that case, had issued .policies insuring against the specific type of loss involved in the case. That distinction is without merit, however, since as a practical matter, Hanover did not issue product liability and completed operations hazards insurance to novice manufacturers such as the Hawkinses. That was proven by Hanover’s denial of Powell’s request for such coverages even after the Hawkinses had been in the business for two years. Clearly, the agents in both cases obtained all the liability insurance which their companies issued under the circumstances.

In Volf v. Ocean Accident and Guarantee Corp., Ltd., 50 Cal.2d 373, 325 P.2d 987 (1958), the California Supreme Court denied reformation of an insurance contract to include completed operations coverage where the plaintiff had merely requested “ ‘full coverage as far as materials and workmanship’ [is] concerned,” because, as Justice Traynor succinctly noted for the court, “There was no discussion of particular risks.” Id. at 989. Similarly, in E. K. Hardi-son Seed Co. v. Continental Casualty Co., 56 Tenn.App. 644, 410 S.W.2d 729 (1967), the court denied reformation where the insured had requested “full coverage for the business operation” but had not specifically discussed breach of warranty hazard coverage with the agent. Both of these cases strikingly parallel the pertinent facts of the case at bar, in which the Hawkinses request was simply limited to full liability coverage without any discussion of risks arising from either product liability or completed operations hazards.

The Hawkinses contend, however, that the present case is controlled by Vernon Fire and Casualty Insurance Co. v. Thatcher, Ind.App., 285 N.E.2d 660 (1972), an action to recover damages for false representation by the insurer’s agent as to the scope of coverage of the fire insurance policy. But a close examination of the facts reveals crucial distinctions between that case and our case. In Vernon, the insured, Thatcher, operated two geographically separate enterprises, a farm and a saddle barn. Thatcher held a farmowners’ policy on the farm which insured, inter alia, “unscheduled personal property” wherever located, provided that property pertaining to a business was excluded from coverage of property off the premises. Thatcher stored both unrelated personal property and personal property used in his business at the saddle barn; all of the property was destroyed in a fire, and the suit involved the insurance company’s liability for the personal property used in the saddle barn business. There was evidence that the insurance agent in soliciting the farmowners’ policy expressly represented on numerous occasions that all of the personal property in the saddle barn would be covered in the policy. Also, both the agent and the company’s field representative made the same express representation to Thatcher about a year later. Finally, at the time of the fire, the agent again represented that Thatcher’s personal property was insured by the policy. Moreover, the insurance company had in fact paid a prior, smaller claim for the loss of personal property used in the saddle barn business.

In contrast, in the present case, Powell made no representation concerning the scope of coverage provided in the policy to the Hawkinses and, in fact, secured as much liability insurance for them as the circumstances indicated that he could obtain. Such conduct is neither fraudulent nor inequitable, and the low er court correctly so found. Moreover, even if Powell’s conduct were unlawful, nothing in the record indicates that Hanover had either actual or implied knowledge of any misrepresentation which must be shown before an insurance company may be held liable for a soliciting agent’s false representation of policy coverage. Cadez v. General Casualty Co. of America, 298 F.2d 535 (10th Cir. 1961). Vernon Fire & Casualty Insurance Co. v. Thatcher, supra, 285 N.E.2d at 671. Unlike Vernon, Hanover did not pay a prior claim on an identical kind of loss, and no special representative of the company ever reiterated any misrepresentations concerning the scope of the policy. Thus, there is nothing in the record from which knowledge of any misrepresentation by an agent could be imputed to the company. Cf., Cadez v. General Casualty Co. of America, supra. Since there was neither evidence of fraudulent or inequitable conduct by the agent nor knowledge of such conduct by the insurance company, the lower court properly granted summary judgment to Hanover on the Hawkinses’ counterclaim for reformation of the insurance contract.

Affirmed.

      . Following the explosion in which Stewart was injured, he and his wife made claims for tlieir damages against Van Hawkins and Violet Hawkins on the theory that Custom Camper’s services had been negligently and incompetently performed. The Hawkinses referred the claims to the Hanover Insuranee Co. for defense and further handling, contending that the occurrence was covered under the terms and conditions of the manufacturers and contractors’ liability policy which Hanover had issued to them. Hanover then instituted the present action for a declaratory judgment against both the Hawkinses and the Stewarts seeking a deda-ration that the occurrence was not covered by the policy, and the Hawkinses filed the counterclaim at issue seeking reformation of the policy to include completed operations and product liability coverage.


source: Caselaw Access Project

author: HEANEY, Circuit Judge.

license: Public Domain

text:
    The MORNING PIONEER, INC., Appellant, v. The BISMARCK TRIBUNE COMPANY, a corporation, Appellee and Cross Appellant.
    Nos. 73-1036, 73-1049.
    United States Court of Appeals, Eighth Circuit.
    Submitted Sept. 11, 1973.
    Decided March 12, 1974.

      Bruce B. Bair, Mandan, N. D., for appellant.
    Daniel J. Chapman, Bismarck, N. D., for appellee.
    Before HEANEY, STEPHENSON and WEBSTER, Circuit Judges.
   HEANEY, Circuit Judge.

This appeal arises out of a private antitrust suit between the publishers of two daily newspapers in southwestern North Dakota. The Morning Pioneer, Inc., publishes a morning paper, “The Morning Pioneer,” in Mandan. Seven' miles away in Bismarck, an evening paper, “The Bismarck Tribune,” is published by The Bismarck Tribune Company.

For several years, there was very little competition for circulation or advertising between the newspapers in their respective hometowns. Consequently, the Pioneer’s Bismarck circulation was very limited as was the Tribune’s Mandan circulation. The papers entered into agreements under which virtually all national and some local advertising was solicited jointly for publication in both papers, and the proceeds were distributed to reflect relative shares of the total circulation — seventy-five percent to the Tribune and twenty-five percent to the Pioneer. In 1963, the management of the Tribune shifted to an aggressive publisher, and a Bismarck family with a printing background — the Conrads— purchased the Pioneer. The previous noncompetitive atmosphere was replaced by aggressive competition. Each paper initiated measures to increase its circulation and advertising in the other’s hometown.

In August, 1969, the Pioneer brought this action, seeking damages and injunc-five relief. It alleged that the Tribune’s practice of selling its carrier-delivered newspapers for a lesser price in Mandan and elsewhere than in Bismarck constituted price discrimination in violation of § 2(a) of the Clayton Act as amended by the Robinson-Patman Act. It also complained that the Tribune engaged in practices constituting an “attempt to monopolize” as prohibited by § 2 of the Sherman Anti-Trust Act by: (1) attempting to purchase the Pioneer; (2) cancelling the joint advertising agreements; (3) hiring Pioneer employees; (4) granting certain advertisers rates more favorable than the published rates to encourage advertising in the Tribune rather than the Pioneer; (5) giving premiums to new subscribers; (6) selling the Tribune for a lesser price in Mandan than in Bismarck; and (7) blanketing Mandan homes with free copies of the Tribune on numerous occasions.

The District Court held that three periods of blanketing had been of sufficient intensity to constitute an “attempt to monopolize” in violation of the Sherman Act, but that the other practices, considered individually or collectively, did not constitute such an attempt. It further held that the Clayton Act had not been violated. It denied injunctive relief but awarded the Pioneer nominal single damages of one dollar (three dollars trebled) and attorney’s fees of $7,350, plus costs for the Sherman Act violation.

The Pioneer asserts on this appeal that the District Court erred in: (1) finding that the intensive blanketing during the three periods was the only Sherman Act violation; (2) awarding only nominal damages for this violation; (3) failing to find that the price difference violated the Clayton Act and not awarding damages for that violation. It asks this Court to assess substantial damages for the claimed violations or to remand to the District Court with instructions to it to determine damages for the violations, or to grant a new trial. No request for injunctive relief is made. The Tribune, on the other hand, asserts that the District Court erred in: (1) holding that the blanketing violated the Sherman Act; and (2) awarding excessive attorneys’ fees for the violation. It asks that the court be affirmed except insofar as it found a violation of the Sherman Act and granted attorneys’ fees to the Pioneer. It requests that these fees be disallowed or reduced.

THE SHERMAN ACT VIOLATIONS

To establish an “attempt to monopolize” in violation of § 2 of the Sherman Act, it is necessary to prove: (1) a specific intent to monopolize; (2) an overt act or acts; and (3) a dangerous probability of monopolization of a specific product market in a particular geographic market. See, Acme Precision Products, Inc. v. American Alloys Corp., 484 F.2d 1237, 1240 (8th Cir. 1973); Agrashell, Inc. v. Hammons Products Company, 479 F.2d 269, 284-286 (8th Cir.), cert. denied 414 U.S. 1022, 94 S.Ct. 445, 38 L.Ed.2d 313 (1973). See also, Hibner, Attempts to Monopolize: A Concept in Search of Analysis, 34 ABA Antitrust L.J. 165 (1967); Smith, Attempt to Monopolize: Its Elements and Their Definition, 27 Geo.Wash.L.Rev. 227 (1959).

The court properly found that each of the necessary elements was present here. The Tribune was the dominant daily newspaper in southwestern North Dakota. If it succeeded in driving the Pioneer out of business, a dangerous probability existed that it would achieve a monopolistic position in the daily newspaper market and would be able to exploit that position to the disadvantage of the people and businesses in the area. The fact that television and radio would continue to compete in the news and advertising field would not prevent the Tribune from exploiting its position as the only daily newspaper because electronic media is not wholly competitive with respect to some types of news and advertising. These include: in depth stories on local and national affairs; detailed stories on births, deaths, marriages and social engagements; stock market statistics; detailed sports stories; and price advertising, particularly in the grocery field.

The intent to monopolize was adequately shown by the Tribune’s distribution of thousands of free newspapers to Mandan housing units during April and May and September and October of 1963, and during January through March of 1965. Much of the blanketing during these periods was done on Wednesday, the heavy grocery ad days. It was sometimes accompanied by an appeal to Mandan grocery advertisers to place ads on those days. Because advertising constituted eighty percent of the Pioneer’s revenue and a significant portion of that revenue came from grocery advertising, the dangerous probability that the Pioneer would be driven out of business by a continuation of the practice is evident. Accord, Kansas City Star Company v. United States, 240 F.2d 643, 662 (8th Cir.), cert. denied, 354 U.S. 923, 77 S.Ct. 1381, 1 L.Ed.2d 1438 (1957). The blanketing condemned by the court clearly exceeded that permissible in furtherance of a legitimate attempt by the Tribune to enter the Mandan market and properly served as a basis for the court’s implicit finding of an intent to monopolize by the Tribune.

The Pioneer would have us go a step further and find that the District Court erred in failing to find that other acts also were illegal attempts to monopolize. We decline to do so. There is adequate evidence in the record to support the court’s findings that: the cancellation of the joint advertising agreement served to terminate an anti-competitive agreement; that the Tribune did not act improperly in hiring former employees of the Pioneer; that the premium giveaway programs engaged in by the Trib-r une were reasonable and done in accordance with accepted practices in the newspaper industry; and that no improper advertising rate discrimination occurred.

The Pioneer would also have us reverse the court’s implicit holding that the Tribune’s practice of charging a lower price in Mandan was not violative of the Sherman Act. We reject the invitation. That holding is supported by the evidence demonstrating that the pricing practice was one of over thirty years standing.

Finally, the Pioneer urges that the District Court erred by not viewing all of the acts of the Tribune together in determining whether there was an attempt to monopolize. The Pioneer is correct in asserting that the trier of fact must adopt that approach, see, Sanitary Milk Producers v. Bergjans Farm Dairy, Inc., 368 F.2d 679, 691 (8th Cir. 1966), but the Pioneer is mistaken in its assertion that the court failed to do so. After considering each act individually, the court stated that it was required to view “the evidence as a whole and * * * not tightly compartmentalize the various components, and wipe the slate clean after scrutiny of each.” It then stated:

* * * Nevertheless, I find that the conduct of the Bismarck Tribune, whether considered in its separate parts or as a whole, did not constitute an act in restraint of trade. I reiterate that both papers, following March of 1962, responded to the termination of a non-competitive agreement with aggressive, but reasonably competitive conduct, except for the blanketing per-viously discussed. 342 F.Supp. at 1142.

DAMAGES FOR THE SHERMAN ACT VIOLATION

Any person injured in his business or property by reason of another’s violation of the antitrust laws may recover treble damages from the wrongdoer. 15 U.S.C. § 15. But it is not enough for recovery of damages to prove that an antitrust law was violated by the defendant. Cf., Duff v. Kansas City Star Company, 299 F.2d 320, 323 (8th Cir. 1962). Rather, the rule is that damages may not be awarded to a litigant unless he also proves “with a fair degree of certainty, the fact of damage and the causal connection between the antitrust violation and the injury.” ABA Antitrust Section, Antitrust Developments: 1955-1968, at 282 (1968). See, Atlas Building Prod. Co. v. Diamond Block & Gravel Co., 269 F.2d 950, 957-958 (10th Cir. 1959), cert. denied, 363 U.S. 843, 80 S.Ct. 1608, 4 L.Ed.2d 1727 (1960). Cf., Perkins v. Standard Oil Co., 395 U.S. 642, 648, 89 S.Ct. 1871, 23 L.Ed.2d 599 (1969); Story Parchment Co. v. Paterson P. Paper Co., 282 U.S. 555, 51 S.Ct. 248, 75 L.Ed. 544 (1931).

The Pioneer’s claims for damages for the Sherman Act violation were premised on two factors — loss of advertising revenue and loss of circulation. The District Court found that Pioneer lost one-third of its grocery advertising during a five-week period in 1965, that this was the only advertising loss, and that it was caused by the illegal blanketing in 1965. It declined to award more than nominal damages for the loss because no evidence was introduced to show what the advertising revenue actually was or would have been absent the blanketing. We are satisfied that the court’s findings and conclusions with respect to the loss of advertising revenue are supported by substantial evidence. This is not an instance where the defendant’s actions prevented a precise computation of the damage. Rather, the fault lies in the plaintiff’s failure to introduce any evidence as to the value of its grocery advertisements, normal or actual, during the five-week period. The plaintiff’s witness merely related that the loss was one-third of the normal. To have awarded more than nominal damages under these circumstances would have been to engage in impermissible speculation and conjecture. See, e. g., Siegfried v. Kansas City Star Company, 298 F.2d 1, 5-8 (8th Cir.), cert. denied, 369 U.S. 819, 82 S.Ct. 831, 7 L.Ed. 2d 785 (1962).

The court properly declined to award damages for loss of circulation. While there was evidence in the record to support a finding that Pioneer lost three hundred paid subscribers between 1963 and 1964, the court’s finding that it was impossible to determine that the loss in subscription was caused by the Tribune’s wrongdoing was not clearly erroneous. The reduction, as the court indicated, could have been caused by one or more of the following facts: (1) the Pioneer was changed from an evening to a morning paper on May 19, 1963; (2) the arrangement between the Pioneer and the Tribune owners of not competing in the other’s hometown was also curtailed in 1963; (3) the Pioneer, especially its circulation department, was poorly managed; and (4) the Pioneer’s editorial policy was shifted to a more liberal position by the Conrads. The Pioneer made an attempt to prove that these factors did not cause the reduction, but its proof did not satisfy the District Court. We cannot say that the court erred in concluding that the proof of causation was inadequate.

THE CLAYTON ACT ISSUES

. The District Court found that for over thirty years, the Tribune, by carrier, was sold for a lower price in Man-dan than in Bismarck. It held that this practice did not violate § 2(a) of the Clayton Act for two reasons: (1) The Tribunes delivered in the two cities were not of “like grade and quality” as the Tribune had a lesser value to Mandan readers than Bismarck readers. (The court reasoned that the paper arrived later in Bismarck, contained little Mandan news, and less advertising of interest to Mandan readers.) (2) The effect of the price discrimination was not “substantially to lessen competition or tend to. create a monopoly.”

We need not decide whether the court erred in concluding that the Tribune did not violate § 2(a) of the Clayton Act .by its price discrimination practice. Even if we resolved all the Clayton Act liability contentions in the Pioneer’s favor — i. e., that newspapers are “commodities” subject to the Act, that the Tribunes delivered in Mandan and Bismarck were of “like grade and quality” and that the price discrimination had the prohibited effect on competition — a reversal and remand of this ease to the District Court would be unnecessary. This is true because the Pioneer failed to prove that it was injured by the Tribune’s price discrimination.

The basic injury alleged to have been caused by the price discrimination was a loss in the Pioneer’s Mandan circulation, and proof that this loss was caused by the price discrimination was properly found by the District Court to be wholly inadequate. We also note that the price discrimination complained of was terminated in October 1970, and there is no showing or contention that it is likely to be reinstituted.

ATTORNEYS’ FEES

The award of attorneys’ fees to successful plaintiffs is sanctioned by 15 U.S.C. § 15. Where no factual error is claimed, the amount assessed by the District Court must stand unless the party seeking review establishes that the court has abused its discretion. Armco Steel Corporation v. State of North Dakota, 376 F.2d 206, 212 (8th Cir. 1967). When the damages recovered are relatively small, as is the case here, it is not necessarily an abuse of discretion to grant attorneys’ fees in excess of the damage award. Advance Business Systems & Supply Co. v. SCM Corporation, 415 F.2d 55, 70 (4th Cir. 1969), cert. denied, 397 U.S. 920, 90 S.Ct. 928, 25 L. Ed.2d 101 (1970). In arriving at the fee, the court considered the proper factors, and we find no abuse of discretion here.

We deny the Pioneer’s request for attorneys’ fees on this appeal.

Each party will bear its own costs on this appeal.

Affirmed.

      . The opinion of the District Court details the history of the newspapers’ ownership and competitive practices. 342 F.Supp. 1138, 1139-1140 (D.N.D.1972).

      . At trial, the Pioneer limited its claim and proof of damages from price discrimination to that discrimination existing between Bismarck and Mandan.

      . That section provides:
      It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States * * * and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: * * *
      15 U.S.C. §13(a) (1970).

      . Section 2 of the Sherman Act, makes it unlawful to “attempt to monopolize * * * any part of the trade or commerce among the several states * * 15 U.S.C. § 2 (1970).

      . See, United States v. Times Mirror Company, 274 F.Supp. 606, 618 (C.D.Cal.1967), aff’d mem., 390 U.S. 712, 88 S.Ct. 1411, 20 L.Ed.2d 252 (1968) ; Roberts, Antitrust Problems in the Newspaper Industry, 82 Harv.L.Rev. 319, 320-322 (1968). See also, United States v. Grinnell Corp., 384 U.S. 563, 572, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966), where the Supreme Court sanctioned the recognition of submarkets for antitrust purposes.

      . The blanketing in April and May of 1963 began on the same day as the commencement of the publication of the Pioneer by its new owners, the Conrads. It continued daily for three weeks; and on each day, between 1,600 and 2,000 papers were distributed. The blanketing in September and October was continuous for one week; and for the balance of the two-month period, it was done each week on Wednesday. On most of these days, 1,500 copies of the Tribune were distributed. Finally, during January of 1965, blanketing took place on eight occasions and between 1,000 and 2,400 copies were distributed on each day. This was followed by blanketing of similar intensity on eight days in February and on seven days in March of 1965.

      . We are convinced that the court misstated when it used the term “restraint of trade” here. We are satisfied that the court meant to use the term “attempt to monopolize,” as that was the question before the court,

      . The court stated that the Pioneer’s circulation records were so questionable and unreliable that it would have been improper to find a loss in circulation by relying on them. While this fact precluded the court from estimating the Pioneer’s circulation after Marcli 31, 1966, it could have determined the paper’s circulation with the necessary degree of certainty prior to that date by relying on the reports of the Audit Bureau of Circulations (ABC).
      The ABC report for the nine-month period ending March 31, 1963, shows an adjusted figure for “Carrier and Dealer” circulation of the Pioneer in Mandan to be approximately 2,250, while the same adjusted figure for the twelve-month period ending March 31, 1964, is about 1,925. In reaching these figures, we assumed that the adjustments made were attributable to the “Carrier and Dealer” category rather than the “Mail” category ns the latter appeared to have less variation during the years in question. This Mandan reduction of approximately three hundred continued through March 31, 1966, when the Pioneer’s last audited report by the ABC was prepared. After that date, the Pioneer terminated its affiliation with the ABC.

      . The record reveals that during this period, the Mandan price was five cents per week less than the Bismarck price. The practice of charging less for carrier-delivered Tribunes in Mandan was curtailed on October 26, 1970, but a differential was continued in other communities. Except for the period of September 1966-September 1967, the price of the Tribune by carrier in Mandan was less than or equal to the price of the Pioneer by carrier in Mandan. The higher Pioneer price in the period of exception resulted from an increase in the Pioneer’s price, and the difference was five cents per week.

      . The parties agree that “price discrimination” between different purchasers was proven. See Federal Trade Com. v. Anheuser-Busch, 363 U.S. 536, 549, 80 S.Ct. 1267, 4 L.Ed.2d 1385 (1960), where the Supreme Court held “a price discrimination within the meaning of [§ 2(a)] is merely a price difference.” They also agree, as they had stipulated at trial, that the interstate commerce requirements of the antitrust laws were met in this case. While we are satisfied that there was sufficient connection with interstate commerce under the Sherman Act, there is doubt as to whether third commerce requirements of § 2(a) of the Clayton Act, was met — i. e., that “either or any of the purchases involved in such discrimination [were] in commerce.” 15 U.S.C. § 13(a). See, e. g., Stickells, Federal Control of Business-Antitrust Laws § 126 (1972) ; Rowe, Discriminatory Sales of Commodities in Commerce: Jurisdictional Criteria Under the Robinson-Patman Act, 67 Yale L.J. 1155, 1166-1168 (1958). See also, Little-john v. Shell Oil Company, 483 F.2d 1140 (5th Cir.) (en banc), cert. denied, 414 U.S. 1116, 94 S.Ct. 849, 38 L.Ed.2d 743 (1973). Nonetheless, we decline to examine this question any further because it was not raised by the parties and its resolution either way would not affect our disposition of the appeal.

      . The term “commodity” is not defined in the Act, but it is generally thought to include only tangible items of commerce and not services. See, Tri-State Broadcasting Co. v. United Press Internat’l, Inc., 369 F.2d 268, 270 n. 2 (5th Cir. 1966). See also, Stickells, Federal Control of Business-Antitrust Laws § 129, at 449-450 (1972) ; Rowe, Discriminatory Sales of Commodities in Commerce: Jurisdictional Criteria Under the Robinson-Patman Act, 67 Yale L.J., supra at 1163-1165. We recognize that the production of a newspaper requires and incorporates the services of a great number of people, but the fact remains that when finally published, the paper takes on a tangible form and it is bought and sold in the market place. As such, it is predominantly a tangible good and, thus, a “commodity” subject to the Act.

      . In reaching its decision as to “like grade and quality,” the court appears to have applied the “market acceptance” standard. While that standard is not without support among the commentators, see, e. g., Cassa-dy & Grether, The Proper Interpretation of “like Grade and Quality” Within the Meaning of Section 2(a) of the Robinson-Patman Act, 30 S.Cal.L.Rev. 241 (1957), it was rejected by the Supreme Court in Federal Trade Com. v. Borden Co., 383 U.S. 637, 640-641, 86 S.Ct. 1092, 16 L.Ed.2d 153 (1966). There, the Court indicated the proper test is that of “physical comparison.”

      . The court appears to have required that the Pioneer prove the Tribune’s price discrimination in fact had the prohibited effect on competition. Such a burden is not required under the statute. It is only necessary for the plaintiff to prove there is a “reasonable possibility” that the price discrimination may have the prohibited effect on competition. Federal Trade Com. v. Morton Salt Co., 334 U.S. 37, 47, 68 S.Ct. 822, 92 L.Ed. 1196 (1948). See, Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 701, 87 S.Ct. 1326, 18 L.Ed.2d 406 (1967) ; Atlas Building Prod. Co. v. Diamond Block & Gravel Co., 269 F.2d 950, 957 (10th Cir. 1959), cert. denied, 363 U.S. 843, 80 S.Ct. 1608, 4 L.Ed.2d 1727 (1960). But see, Federal Trade Com. v. Morton Salt Co., supra, 334 U.S. at 55-61, 68 S.Ct. 822 (Jackson & Frankfurter, J.J., dissenting) and Moog Industries v. Federal Trade Commission, 238 F.2d 43, 61 (8th Cir. 1956), where the standard of “reasonable probability” was advanced.

      . The theory that the price discrimination caused the loss in the Pioneer’s Mandan circulation is weakened by the evidence showing that the Tribune’s Mandan circulation remained stable after it terminated the price differential in October of 1970. The ABC’s report for the twelve-month period ending March 31, 1970, reveals that the Tribune’s Mandan “Carrier and Dealer” circulation was then 1,811, while the ABC’s report for the twelve-month period ending March 31, 1971, shows the circulation increased to 1,895.

      . The court indicated it was considering the following factors in determining the award of attorneys’ fees: (1) the fact that plaintiff’s counsel had not had the benefit of a prior judgment or decree in a case brought by the government; (2) the standing at the bar of counsel on both sides; (3) the time spent by plaintiff’s counsel; (4) the magnitude and complexity of the litigation; (5) the responsibility undertaken by counsel; (6) the amount recovered; and (7) the court’s knowledge of the quality of counsel’s work done on the case in and out of court. See generally, Comment, Attorneys’ Fees in Individual and Class Action Antitrust Litigation, 60 Calif.L.Rev. 1656 (1972).


author: SPENCER WILLIAMS, District Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Donald Elroy GOODRICH, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Rex LeFEVRE, Defendant-Appellant.
    Nos. 73-2633, 73-2556.
    United States Court of Appeals, Ninth Circuit.
    March 8, 1974.

      Richard J. Dowdall, Robert A. Schu-ler (argued) Johnson, Hayes & Dowdall, Ltd., Tucson, Ariz., for defendant-appellant in 73-2633.
    Fred T. Scanlan (argued) Scanlan, Schiesel & Jurkowitz, Tucson, Ariz., for defendant-appellant in 73-2556.
    Sarah Ann Bailey, Asst. U. S. Atty. (argued), William C. Smitherman, U. S. Atty., Ann Bowen, Asst. U. S. Atty., Tucson, Ariz., for plaintiff-appellee.
    Before BROWNING and WALLACE, Circuit Judges, and WILLIAMS, District Judge.

       Honorable Spencer Williams, United States District Judge, Northern District of California, sitting by designation.

   OPINION

SPENCER WILLIAMS, District Judge:

Defendants Goodrich and LeFevre appeal from a conviction by a jury of conspiring to transport in foreign commerce an aircraft knowing the same to be stolen. 18 U.S.C. § 2312.

Defendants were initially charged with flying a stolen piper Axtec from Tucson, Arizona to Sonora, Mexico on June 2, 1972. Subsequent to this indictment their counsel discussed a disposition of the charge with the prosecuting Assistant United States Attorney. Although the briefs differ on this point (appellants assert that the AUSA promised "if you get Mr. LeFevre out of Mexico, I will dismiss the case,” and the appellee asserts only that the AUSA promised “ . . . if I become convinced the defendant is innocent of the charge I will seek to have the indictment dismissed.”) an agreement was reached that if LeFevre could prove he was not in Mexico the prosecutor would dismiss the case. LeFevre evidently proved through the testimony of six witnesses, that he could not have been in Mexico June 2. Thus on February 26, 1973, the government dismissed the indictment, indicating it had new information that the overt act had been committed June 3. Thereafter the grand jury returned a new indictment identical to the first except charging that the overt act occurred June 3. Prior to the trial, defendants filed motions objecting to the dismissal of the first indictment on the basis it was dismissed without their knowledge and requesting dismissal of the second indictment on the grounds that the United States had promised to dismiss the case upon the establishment of an alibi. Although the trial court’s orders are not included in the record presumably these motions were denied.

During the trial several references were made to June 2 as being the date of the overt act. LeFevre presented alibi witnesses as to both dates. He testified that he placed his family on a commercial flight to Utah on the morning of June 2, making impossible his presence in Mexico on that date. He also testified and introduced telephone records to show that on the evening of June 2 he placed a call from his home in Tucson to his wife at his brother-in-law’s home in Draper, Utah. This alibi testimony as to June 2 was never controverted.

In reliance however on the government charge that the overt act occurred on June 3, he elected to not call the additional six witnesses who would have further substantiated his presence in Tucson on June 2.

LeFevre’s alibi evidence as to June 3 consisted of the testimony of one eyewitness, a Mrs. Bryson, and an entry in a church log which indicated he worked at the church on that date. It was argued in contravention of this alibi that the eye-witness could have been in error and that the entry in the log could have been entered at a later date. In fact, one rebuttal witness testified that LeFevre had informed her of his plan to do so.

The judge instructed the jury in pertinent part that “The proof need not establish with certainty the exact date of the alleged offense. It is sufficient if the evidence in the case establishes beyond a reasonable doubt that the offense was committed on a date reasonably near the date alleged.” Appellants raise two points on appeal: (1) the second indictment should have been dismissed since it breached the promise of the government to dismiss the case; (2) the trial court’s instruction on the time of the offense was in error in light of a possible alibi.

The government contends that the appeal of the first issue should be dismissed without consideration of the merits, in accordance with the holding in United States v. Martinez, 429 F.2d 971, 976 (9th Cir. 1970). In Martinez the defense alleged without specific contentions or record references that the co-defendant’s counsel’s opening remarks were prejudicial to the defendant. While we agree with Martinez that such general allegations do not warrant consideration on appeal, there are in this ease specific contentions and record references which raise important questions of law.

Turning to the merits, appellants concede there is no law directly on point but analogizes their situation to a series of cases enforcing breached government “deals” where defendants were promised dismissals, immunity or leniency. In State v. Davis, 188 So.2d 24 (Fla.App. 1966), the court enforced a promise not to prosecute if the defendant submitted himself to a polygraph test which showed him to be telling the truth concerning his innocence. The test exonerated the defendant, and the appellate court upheld the trial court’s dismissal of the attempted prosecution finding that “[tjhis was a pledge of public faith —a promise made by state officials— and one that should not be lightly disregarded.” Also, in Smith v. United States, 321 F.2d 954, 955 (9th Cir. 1963), the court held that a government promise that a plea to a second charge would not result in a sentence longer than that already imposed for the first plea, and that the sentences would run concurrently, was violated when the defendant was sentenced to twice the time on the second plea.

These cases along with several others similarly cited by the appellants (concerning breached promises of immunity, or fraudulently induced guilty pleas) all generally stand for the proposition that when the prosecution makes a “deal” within its authority and the defendant relies on it in good faith, the court will not let the defendant be prejudiced as a result of that reliance.

In this case there seems to be some question as to what, exactly, the bargain was.

Even if the Assistant United States Attorney promised, as the appellants assert “ . . .if you get Mr. LeFevre out of Mexico, I will dismiss the case,” it is not at all clear that the defendants did “get Mr. LeFevre out of Mexico.” The appellants merely convinced the government that Mr. LeFevre was not in Mexico on June 2, and since further investigation put him in Mexico June 3, prosecution of an overt act on that date would not abrogate either interpretation of the agreement.

This case is also distinguishable from those cited by the appellants in that here they did nothing to jeopardize themselves or waive any rights in reliance on the prosecution’s promise. They merely came forth with positive, beneficial evidence which established LeFevre’s alibi for June 2 and did not waive their Fifth Amendment rights such as by submitting themselves to polygraph tests or entering guilty pleas.

The question of whether the trial court committed error in giving the challenged instruction requires a careful review of the full record.

The government contends that an alibi defense was not alleged and an alibi instruction was not requested. There was a timely objection to the instruction given, however, and regardless of whether an alibi defense was ever alleged, there can be no question that an alibi defense was raised and that the defense was based on that premise. Appellant cites ample state authority both old and new for the proposition that when an alibi defense is asserted the time of the crime is extremely material, since any variance in time proved and the time the jury is allowed to find deprives the defendant of his alibi defense. And it is appellant’s position that under the court’s instruction the jury could have found that the overt act was committed June 2, rather than June 3.

In People v. Brown, 196 Cal.App.2d 684, 9 Cal.Rptr. 53 (1960), the court found that an instruction to the jury that the date of the alleged crime (indecent exposure) was not important as long as it was within the one year statute of limitations even though the defendant asserted an alibi defense for the specific dates charged, was misleading and confusing. Quoting from People v. Waits, 18 Cal.App.2d 20, 21, 62 P.2d 1054 the court said, “ ‘In light of the appellant’s alibi defense, the time the alleged offenses were committed became material, and it was the duty of the trial court to limit the jury in its consideration of the evidence to'the period which the prosecution selected as the time for the commission of the offenses.’ ” The court in Brown, also stated that “When a defense of alibi is interposed and an alleged offense is so narrowed as in this case, the date and even the hour may become important.” Supra, 9 Cal.Rptr. at 55.

In Commonwealth v. Boyer, 216 Pa. Super. 286, 264 A.2d 173, 176 (1970), the court found, even without objection below, that charging a jury so that they could find the offense (burglary) was committed on December 27, 28, or 29, when the charge stated December 28 and the alibi was for December 28, but all the proof indicated December 27 was clearly reversible error. The court stated, “It has been uniformly held in other jurisdictions that where the state has alleged and relies on a fixed date and the defendant also relies on that date in preparing his defense, it is error to permit a jury to find that the crime was committed on another date, time being of the essence where the defense is alibi.” [See also State v. Waid, 92 Utah 297, 67 P.2d 647 (1937), which holds that an “on or about (a certain date)” instruction is error when an alibi is interposed.]

The government contends and the appellant concedes, that absent the alibi defense problem, there is no reversible error should there be some variance between the date of the crime as charged and the date as proved. Brulay v. United States, 383 F.2d 345 (9th Cir. 1967); Riley v. United States, 411 F.2d 1146 (9th Cir. 1969). In other words, had the government in the instant ease alleged June 2 and proved June 3 as the date of the overt act, or vice versa, there would be no claim of error but for the alibi defense. And the most cogent argument for a different rule here is that it would be grossly unfair to have the government present this case as to a specific date, allow the defendant to structure his defense as to that certain date, and then permit the jury to find that the crime had been committed on some other date. Commonwealth v. Boyer, supra.

In the instant case the government prosecuted and the appellants defended on the proposition that the overt act was committed on June 3. LeFevre’s claimed prejudice is that the jury might have found that he committed the crime on June 2, and that he could have closed that door by using the six witnesses he had been misled into not calling.

We are not persuaded that the jury could have concluded the overt act might have occurred on June 2. Not only was the alibi never challenged, but in her argument to the jury, the prosecutor flatly conceded its validity. Furthermore, the great weight of the evidence and argument was directed at June 3 and the issue was simply whether the jury accepted the government’s evidence or defendant’s LeFevre’s alibi.

If the giving of the challenged instruction was error, it was harmless error for it is obvious that as the sole judge of the facts and the credibility of the witnesses, the jury rejected the June 3d alibi. Since such a result cannot be here disturbed unless it is shown to be clearly contrary to any substantial evidence (United States v. DePalma, 414 F.2d 394 (9th Cir. 1969) the Judgment is affirmed.

      . In her opening argument the prosecutor stated:
      “Now it is in evidence that Mr. Le-Fevre’s family flew to Salt Lake City in the morning of June 2d. And Mr. Kenas-ton was told that LeFevre’s family was gone. He was in the house. He knows they were gone . . . ”

      . In her closing argument the prosecutor stated:
      “Now, defense counsel made much of the fact that there was another date on a prior indictment. And I ask you, Ladies and Gentlemen, when defense counsel convinces me on a prior occasion that I am wrong on the date that I believe the aircraft was taken and I have determined June 3d to be the date by virtue of the investigation, what kind of an attorney would I be if I did not change the date to the one that I believe was the proper date it

      Appellant’s attorney also accepted the June 2d alibi as proved and the June 3d alibi as critical. He said:
      “Now it’s been established that they (the family) went to Salt Lake City on Friday, the 2d day of June. This conversation, Mi’S. Bryson said, took place (at the Church) on Saturday, the 3d day of June. Mr. LeFevre’s name appears in that book on Saturday, the 3d of June. Mrs. Bry-son’s name appears in that book on Saturday, the 3d of June . . ..”


author: WISDOM, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. John Thomas DALY, Defendant-Appellant.
    No. 72-3304.
    United States Court of Appeals, • Fifth Circuit.
    May 2, 1974.
    Jimmy James, Houston, Tex., for defendant-appellant.
    Anthony J. P. Farris, U. S. Atty., Daniel V. Alfaro, James R. Gough, Asst. U. S. Attys., Houston, Tex., for plaintiff-appellee.
    Before WISDOM, GEWIN and COLEMAN, Circuit Judges.
   WISDOM, Circuit Judge:

The critical issue in this case is the validity of a border search that occurred before the Supreme Court decided Al-meida-Sanchez v. United States, 1973, 413 U.S. 266, 93 S.Ct. 2535, 37 L.Ed.2d 596. In Miller v. United States, 5 Cir. 1974, 492 F.2d 37 this Court recently held that Almeida-Sanchez must be given prospective effect only; that decision is applicable, therefore, only to searches and seizures taking place after June 21, 1973. We hold that in this case, under pre-Almeida-Sanchez standards, the challenged search was valid. We affirm.

At about 1:00 a. m., July 27, 1972, two United States border patrol agents/custom officials, Loman and Ba-rajas, were patrolling Federal Highway 59. This is the principal highway between Laredo and Houston. Two pickup trucks, travelling from the border, passed the patrol car. One was pulling a camper; the other had what appeared to be a large toolbox in the pan of the truck. The box extended beyond the sides of the pickup. The agents stopped both trucks. This was at a point about 50 miles from Laredo and 12 miles from Freer, the closest town to Laredo on Highway 59. A map of Texas shows only two short insignificant roads which cross Highway 59 between Laredo and the point where the agents stopped Daly,

Officer Loman testified that he stopped the cars for “a routine immigration inspection”. Barajas inspected the truck pulling the camper and after a conversation with the driver allowed it to proceed. The driver of the second truck was the defendant-appellant, John Thomas Daly. He got out of- the truck as Loman approached him. Loman identified himself and asked Daly if he was an American citizen. Daly replied affirmatively. Loman noticed that the toolbox “could have held several persons”. It was padlocked. When asked what it contained, Daly said, “Just our sleeping bags”. On Loman’s request, Daly climbed into the truck, opened the padlock himself, and swung the top open. Loman climbed over the back of the truck and as soon as he did “could smell marihuana even before [he] put the light on the box”. He saw two burlap bags, which he recognized as of Mexican origin, because Mexicans use a distinctive stitch not used in this country in burlap bags. He picked up one and felt brick-like forms in it; marihuana is frequently pressed into bricks for convenience. He could tell that “the smell was definitely coming from the bags”.

Loman testified that the toolbox was homemade, and was built into the bed of the truck. He estimated that it was five and one-half feet long, two and a half feet wide, and two feet high. Daly’s attorney, in his brief, agrees with these estimates.

Loman then searched Daly and a hitchhiker (later released) who had also been in the truck, advised them that they were under arrest, and read to them the Miranda warnings. Further search of the box disclosed about seventy-three pounds of marihuana under one or more sleeping bags.

Later, Daly was charged with knowingly possessing, with intent to distribute, seventy-three pounds of marihuana in violation of 21 U.S.C. § 841(a)(1). His motion to suppress the seized marihuana was denied. He was tried to a jury, found guilty, and sentenced to thirty months imprisonment with a special parole term of two years.

In 1789, the same Congress that proposed the Bill of Rights authorized customs officials to search, without a warrant or probable cause, anyone entering the United States. Act of July 31, 1789, ch. 5, § 24, 1 Stat. 43. The most recent pertinent statute authorizes Immigration Service officers to search vehicles within a “reasonable distance” of any boundary of the United States without a warrant, on “reasonable cause to suspect”. 8 U.S.C. § 1357(a)(3). Immigration Service regulations define “reasonable distance” to mean any distance within 100 miles of any border. 8 C.F. R. § 287.1. This Court has upheld the validity of a search made about 75 miles from the Mexican border. Ramirez v. United States, 5 Cir. 1959, 263 F.2d 385. See also United States v. De Leon, 5 Cir. 1972, 462 F.2d 170; United States v. Maggard, 451 F.2d 502 (5th Cir. 1971); United States v. Aranda, 9 Cir. 1972, 457 F.2d 761; United States v. Foerster, 9 Cir. 1972, 455 F.2d 981; United States v. Almeida-Sanchez, 9 Cir. 1971, 452 F.2d 459; Duprez v. United States, 9 Cir. 1970, 435 F.2d 1276; Fumagalli v. United States, 9 Cir. 1970, 429 F.2d 1011.

Under pre-Almeida-Sanchez standards, the agents properly stopped the car for routine inspection of its contents and questioning of its occupants. It might even be argued that the patrolling of the particular stretch of Highway 59 which was patrolled by the agents constituted a movable, but the only feasible and effective functional equivalent of a permanent border checkpoint. We need not do so far, however. The agents met the appropriate standard of “mere suspicion” that is the prerequisite for reasonable border searches. (1) The homemade toolbox built into the bed of Daly’s pickup was large enough to contain a person; many Mexicans (and others, for that matter) are short and one could have fitted into the box. (2) Highway-59 leads directly from Laredo to the point where the stop was made, virtually without any intersecting roads. (3) Daly was driving at night when the box could not be easily seen by a passing patrol car. (4) After the stop, the odor of marihuana was noticeable. (5) The burlap bags were of Mexican origin and created a suspicion that their contents consisted of marihuana bricks — before the bags were opened. In short, the search met the test of reasonable suspicion; it need not reach the level of a search on probable cause. Alexander v. United States, 9 Cir. 1966, 362 F.2d 379, 382, cert. denied, 385 U.S. 977, 87 S.Ct. 519, 17 L.Ed.2d 439; United States v. Tsoi Kwan Sang, 5 Cir. 1969, 416 F.2d 306; Walker v. United States, 5 Cir. 1968, 404 F.2d 900.

The Court has considered all of the other issues raised on appeal. They have no merit and need not be discussed.

The judgment below was correct and must be

Affirmed.


author: TUTTLE, Circuit Judge:

text:
    Ernest Jackson COTTLE, Petitioner-Appellee, v. Louie L. WAINWRIGHT, Director, Division of Corrections, Respondent-Appellant.
    No. 72-1673.
    United States Court of Appeals, Fifth Circuit.
    May 2, 1974.
    Robert L. Shevin, Atty. Gen., Wallace E. Allbritton, Asst. Atty. Gen., Tallahassee, Fla., for respondent-appellant.
    Moe B. Safer, Jacksonville, Fla. (Court-appointed), for petitioner-appel-lee.
    Before TUTTLE, WISDOM and' SIMPSON, Circuit Judges.
   TUTTLE, Circuit Judge:

This Court had initially disposed of this case by an opinion affirming the decision of the trial court granting a writ absolute in a habeas corpus proceeding following the revocation by the Florida Parole Commission of Cottle’s parole. See 477 F.2d 269 (5th Cir. 1973). This Court also, Judge Simpson dissenting, held that if the state parole commission should hold any future proceeding to revoke Cottle’s parole, evidence of the second of two North Carolina misdemeanor convictions could not be used because such conviction was invalid for want of appointment of counsel as required by the Supreme Court’s decision in Argersinger v. Hamlin, 407 U.S. 25, 92 S.Ct. 2006, 32 L.Ed.2d 530 (1971), to which this Court gave retroactive application.

This Court’s decision affirmed a determination by the trial court that the action of the Florida Parole Commission in revoking Cottle’s parole was void because, while the Florida statute permitted a parolee to be represented at a revocation hearing, it made no provision for the appointment of counsel for a parolee who was without means to provide for his own representation. In our opinion we recognized the existence of the question whether a hearing conducted under such circumstances deprived Cottle of his equal protection rights under the fourteenth amendment and also the question whether the conducting of such a hearing would require, under all circumstances, the appointment of counsel as an element of due process under the amendment. The majority opinion expressly pretermitted the second issue, although Judge Simpson, concurring in part, expressed the view that due process required the appointment of counsel.

Petition for certiorari was made by Wainwright, and the Supreme Court considered it together with Gagnon v. Scarpelli, 411 U.S. 778, 93 S.Ct. 1756, 36 L.Ed.2d 656 (1973). The Court granted certiorari in Cottle and ordered:

“Judgment vacated and case remanded for further consideration in light of Gagnon v. Scarpelli. . . .” Cottle v. Wainwright, 414 U.S. 895, 94 S.Ct. 221, 38 L.Ed.2d 138.

At issue in Gagnon was a decision by the Court of Appeals for the Seventh Circuit holding that revocation of probation without a hearing and counsel was a denial of due process. See Gunsolus v. Gagnon, 454 F.2d 416 (7th Cir. 1971). The Supreme Court held that a hearing was required but, with respect to the requirement of counsel, the Court said:

“We thus find no justification for a new inflexible constitutional rule with respect to the requirement of counsel. We think, rather, that the decision as to the need for counsel must be made on a case-by-case basis in the exercise of a sound discretion by the state authority charged with responsibility for administering the probation and parole system. Although the presence and participation of counsel will probably be both undesirable and constitutionally unnecessary in most revocation hearings, there will remain certain cases in which fundamental fairness — the touchstone of due process— will require that the State provide at its expense counsel for indigent probationers or parolees.” (Emphasis added).

It is perfectly clear that the court, by the emphasized language in the foregoing quotation holds that the determination is to be first made by the exercise of sound discretion by the state parole authority. This means, as we understand it, that no matter how clear it may appear to the appellate court that it would be error not to provide counsel in the particular case before it, it is not really within our province to make this determination without first permitting the Florida Parole Commission to consider the whole matter of Cottle’s parole revocation anew.

It is true, however, that the Supreme Court has given guidelines to be considered. by the responsible agency since the Court finds that “the facts and circumstances in preliminary and final hearings are susceptible of almost infinite variation.” 411 U.S. 778, 790, 93 S.Ct. 1756, 1764, 36 L.Ed.2d 656. These guidelines are stated as:

“Presumptively, it may be said that counsel should be provided in cases where, after being informed of his right to request counsel, the probationer or parolee makes such a request, based on a timely and colorable claim (1) that he has not committed the alleged violation of the conditions upon which he is at liberty; or (2) that, even if the violation is a matter of public record or is uncontested, there are substantial reasons which justified or mitigated the violation and make revocation inappropriate and that the reasons are complex or otherwise difficult to develop or present. In passing on a request for the appointment of counsel, the responsible agency also should consider, especially in doubtful cases, whether the probationer appears to be capable of speaking effectively for himself. In every case in which a request for counsel at a preliminary or final hearing is refused, the grounds for refusal should be stated succinctly in the record.”

As we stated in the original opinion in footnote 7:

“No better example of the importance of the revocation hearing can be imagined than the facts of the case before us. After serving five years in confinement on a 12 year sentence Cottle was released in 1961 on parole. At the time he was arrested on a revocation warrant in July, 1968, for two ‘drunk’ convictions he had less than two months to finish his entire sentence. By the order of revocation he was recommitted to the state penitentiary to serve out the seven years that remained after his 1961 release on parole.” 477 F.2d 269, 272.

Moreover, the record discloses that Cottle challenged the correctness of the convictions in North Carolina, contending they were family squabbles, but that he had not contested them because he did not wish to create any ill will with the police officials. As has already been indicated he did not have counsel in either of these minor convictions.

There is still the question as to what disposition is to be made upon remand of the case to the state parole commission with respect to the two North Carolina convictions. In our earlier opinion we concluded, Judge Simpson dissenting, that the fact of Cottle’s conviction for the second offense in North Carolina could not be used against him in the event that the parole commission were to hold a subsequent hearing. This was on the basis that he was indigent and had been denied counsel. The fact of Cottle’s indigency had been determined by the trial court on a record that was scant in this regard. However, as we pointed out earlier in that opinion, the state did not contest this issue of fact. Moreover, now that the ease has been remanded counsel for the state has been invited to file supplemental briefs and, notwithstanding the support that might be found in the dissenting opinion, the state has notified us that it will not file any supplemental briefs in the case. We think it proper, therefore, to continue to adhere to the position previously taken by the majority that the second conviction in North Carolina may not be utilized by the state in any hearing hereafter held to revoke Cottle’s parole.

As we said in the earlier opinion, the state of course is permitted to undertake to prove the facts of what Cottle is alleged to have done in North Carolina, which we understand him to have contested in the earlier hearing.

In conformity with the Supreme Court order we vacate our earlier opinion and remand the case to the trial court with directions that the case be held pending in that court while the parties are remanded for further proceedings before the Florida Parole Commission under the guidelines announced in Gagnon v. Scarpelli, supra.


author: MARIS, Circuit Judge.

text:
    Roger F. MORAN v. Marion Clark EDSON, Jr., et al., Appellants.
    No. 72-1790.
    United States Court of Appeals, Third Circuit.
    Argued at Charlotte Amalie Dec. 4, 1973.
    Decided March 15, 1974.

      Thomas D. Ireland Charlotte Amalie, St. Thomas, V. I., for appellants.
    James L. Hymes, III; Grunert, Stout, Hymes & Mayer, Charlotte Amalie, St. Thomas, V. I., for appellee.
    Before SEITZ, Chief Judge, and MARIS and GIBBONS, Circuit Judges.
   OPINION OF THE COURT

MARIS, Circuit Judge.

The defendants, Marion Clark Ed-son, Jr., Kathryn L. Edson and Deseo Products Caribbean, Inc., have appealed from a judgment entered against them in the District Court of the Virgin Islands in an action brought by the plaintiff, Roger F. Moran. Moran and his wife are joint owners of 50% of the stock of Deseo, and the Edsons own jointly the remaining 50% of the stock. It appears that Deseo was organized in 1960 by Moran and one W. Hugh Maxwell to do business under a franchise from Deseo Chemical Company, of Buffalo, New York, manufacturers of roof, wall, swimming pool and other coatings. Moran and Maxwell each owned 50% of the stock of Deseo. In February, 1965, Edson purchased the stock of Maxwell in Deseo and he entered into a stockholders’ agreement with Moran with respect to their respective rights and obligations as stockholders.

The agreement provided in pertinent part:

“1. The three directors of the corporation shall be the parties hereto and a third party to be agreed upon.
“2. Edson shall be the President of the corporation and shall have final responsibility and authority in the management thereof.
“3. Moran shall be the Secretary-Treasurer of the corporation.
"4. Edson shall have the sole responsibility and authority of the corporation bank accounts and shall be authorized to draw funds therefrom on his signature alone.
“5. Each of the parties shall draw basic salaries of $6,000.00 per year. Should there be funds available, Ed-son shall draw an additional sum as salary up to an additional $12,000.00 per year. Should business and receipts above that warrant, the parties may draw additional equal salary bonuses.
“6. Moran will provide warehouse and office space for the corporation without charge.”

Difficulties and disagreements arose between Moran and Edson over the operation of Deseo and their respective rights and obligations with respect to it. About a year prior to December, 1966 Moran commenced charging Deseo $75.-00 per month for the space which he had agreed to provide without charge. In that month Edson transferred the corporate operations to space owned by a third party. Then on April 1, 1967 he transferred the operations to space which Deseo leased from a corporation wholly owned by the Edsons. In July, 1967 the Edson majority of the board of directors removed Moran as secretary and treasurer and terminated his $6,000.00 annual salary. The present suit by Moran followed. The complaint alleged that Moran had been wrongfully removed as a director and officer of Deseo and denied his salary and that the Edsons had assumed complete control of the corporation, all in violation of the stockholders’ agreement between Moran and Edson, and that the Edsons had unlawfully and corruptly voted themselves excessive salaries and other benefits and had mismanaged, misused and misappropriated substantial funds and assets of the corporation. The complaint asked for an accounting by the Edsons, an injunction against further mismanagement and misappropriations by them and an order removing them as directors and officers and directing a new election. It was alleged that Deseo was not joined as a party plaintiff because the Edsons constituted a majority of its board of directors and any demand upon them for such action would have been futile. The suit is, therefore, at least in part, in the nature of a stockholders’ derivative action. Separate answers were filed by the Edsons and by the corporation.

The case was tried by the district court without a jury. Voluminous testimony and numerous exhibits were received in evidence. Thereafter the district court filed its opinion and judgment. The judgment ordered

“1. That defendant Marion Clark Edson, Jr., pay to Deseo Products Caribbean, Inc., the sum of $6,000 as reimbursement for over-payment of salary received for the calendar year 1971;
“2. That defendants Marion Clark Edson, Jr. and Kathryn L. Edson pay to Deseo Products Caribbean, Inc. the sum of $8,255 as reimbursement to the said corporation for rental income improperly charged and received from December, 1966 to April, 1972, and that the said defendants further pay to the aforesaid corporation any additional sums improperly collected between the month of April, 1972 and the date of this Judgment; a sum to be computed at the rate of $127 per month;
“3. That the defendants, Marion Clark Edson, Jr. and Kathryn L. Ed-son, pay to defendant Deseo Products Caribbean, Inc., the following:
“a. The sum of $2,735.63 as reimbursement to the said corporation for health and life insurance, a premium improperly charged to the corporation on their behalf;
“b. The sum of $1,239 to reimburse the aforesaid corporation for personal attorney’s fees of the said defendants improperly disbursed by them from corporate funds;
“e. The sum of $249.25, reimbursement for miscellaneous personal expenditures improperly charged against and paid from the corporate account;
“4. That defendant Deseo Products Caribbean, Inc. pay to plaintiff, Roger F. Moran, the sum of $28,250, salary due to him as secretary-treasurer of the aforesaid corporation from July 3, 1967 through December 31, 1971. From this award, however, the corporation is entitled to and shall deduct the sum of $8,645 to reimburse the said corporation for rents improperly charged to it by reason of the default of plaintiff in his obligation to the corporation, together with an additional reduction for any rents improperly paid by the corporation between April, 1972 and the date hereof, computed at the rate of $133 per month;
“5. That defendants Marion Clark Edson, Jr., and Kathryn L. Edson be, and they are hereby enjoined and restrained from obstructing the right of plaintiff to perform his duties and receive his salary as secretary-treasurer of Deseo Products Caribbean, Inc.; said defendants are further enjoined and restrained from any conduct as officers, directors or employees of Deseo Products Caribbean, Inc., which confers any financial benefit upon them or either of them as individuals without the approval of a majority of the disinterested directors or shareholders ;
“6. That defendant Kathryn L. Edson be, and she is hereby enjoined from acting as an officer or employee of Deseo Products Caribbean, Inc., unless said positions shall be ratified by a majority of the disinterested directors or shareholders of the corporation ; and
“7. That plaintiff recover his costs herein and reasonable attorney’s fees in the amount of $1,750 from defendants Marion Clark Edson, Jr. and Kathryn L. Edson. The sum herein above mentioned to be paid by each of the parties shall bear interest at the rate of six per cent (6%) per annum from the date hereof until the sum shall have been paid.”

From this judgment the appeal now before us was promptly taken by all three defendants, Edson, Mrs. Edson and Deseo. Counsel of record for Deseo on the appeal filed two motions, one to delete Deseo from the appeal and the other for leave to withdraw as counsel. The former we have denied in the interest of justice. The latter we have granted in the special circumstances of the case.

Before discussing the defendants’ contentions on appeal we consider the background out of which this case arises. In this regard the district court found:

“Under this agreement [the stockholders’ agreement quoted above], the parties took their agreed positions and worked together with some success until sometime in 1966 when friction arose. . . .
“The parties’ judgment on questions of office expenditures, salary accounting and other matters differed radically. They also disagreed over plaintiff’s performance under the agreement requiring him to supply office and warehouse space. Communication deteriorated rapidly from that point, and in December, 1966, the defendants moved the corporate office out of Moran’s quarters and into a building which another corporation of theirs had purchased, effectively severing whatever had remained intact of their original working arrangement . . .
“However, the defendants were not alone in their misconduct. Under the shareholders’ agreement plaintiff had obligated himself to provide office and warehouse space without charge for the corporation, but in 1966 he indicated that he would no longer provide office accommodations, and there also developed a dispute over warehouse facilities after he began charging $75 per month for them. Although the parties disagreed over the circumstances surrounding these failures on Moran’s part, it is evident that he did cease to comply with the agreement.
“The final confrontation occurred in mid-1967, when plaintiff as secretary of Deseo refused to call the annual meeting of stockholders because the financial statement for the corporation’s fiscal year had not been made available, and he insisted he would require ten days from the date of receipt to review the records before the meeting. In June, defendants fired Moran from his office as secretary for this refusal, and at a special meeting of the board of directors, they voted to ratify this action — plaintiff, of course, dissenting.”

Moran testified that at the end of 1965, when his construction business began to slacken, he wanted to take an active part in the management of Deseo, but Edson was unwilling. In January, 1967 Moran requested that a special stockholders’ meeting be held on January 20th, but Edson, in a letter dated January 18, 1967, rejected the holding of such a meeting but suggested that an informal meeting be held where their differences might be discussed. Nonetheless Moran and his wife held a stockholders’ meeting on January 20, 1967 of which Moran took minutes and recorded a motion which, inter alia, formed a committee comprised of Edson and Moran to co-direct the Deseo operation and co-sign checks. A copy of the minutes was sent to Edson. Moran further testified that the annual stockholders’ meet-, ing was called by Edson for July 18, 1967 and was attended by the Morans and the Edsons, at which the Morans expressed their willingness to sell their stock to the Edsons. At the meeting of the board of directors which followed, Edson stated that there would be a proceeding to dissolve the corporation, to which Moran objected. There was testimony that there were meetings to end their differences and later there were negotiations, through counsel, to terminate their association. Moran wanted to sell his interest to Edson but they could not‘agree upon a price and Edson wanted to dissolve the corporation, to which Moran would not agree. And after the present action was brought in December, 1968 Moran asked the district court for an order directing Edson to purchase Moran’s share and the Edsons, in their memorandum to the trial judge following the trial of the case, asked that a receiver be appointed. Thus, as can be seen, the two factions were in hopeless deadlock. The only matter upon which they did agree was that each would like to be released from the relationship, but they obviously could not agree upon the procedure or the price whereby this could be accomplished.

We turn then to the appellants’ contentions on this appeal. We consider first their contention that the district court erred in directing, by paragraph 4 of its judgment, the payment by Deseo to Moran of $28,250 salary as secretary-treasurer from July 3, 1967, the time he was removed from those offices by the Edson majority of the board of directors until the end of 1971, and, by paragraph 5, his restoration as secretary-treasurer. These actions of the court were based upon its conclusion that Moran’s dismissal was in violation of the stockholders’ agreement which the court held binding upon Ed-son in spite of Moran’s breaches of the agreement, which the court characterized as minor. We cannot so characterize them, however. Moran admitted on cross examination that his salary under the stockholders’ agreement was paid to him for the services which he was required under the agreement to perform, namely, to recognize Edson’s rights and management responsibility, to perform the duties of secretary-treasurer, and to provide warehouse and office space without charge. By July, 1967 Moran was in default in the performance of each of these services. Under these circumstances, Moran’s default cannot properly be characterized as minor. It was in fact a complete and total failure on his part to perform his obligations and amounted to an abandonment of the agreement. For such a total failure of consideration Edson was fully justified in treating the stockholders’ agreement between them as rescinded and no longer binding. Restatement, Contracts, §§ 274, 275, 317; Callanan v. Powers, 1910, 199 N.Y. 268, 92 N.E. 747; Sheehan v. Hepburn, 1958, 37 Del.Ch. 90, 138 A.2d 810; Maytag Company v. Alward, 1962, 253 Iowa 455, 112 N.W.2d 654; 17 Am. Jur.2d Contracts, §§ 502, 503, 504, 505. We have examined the case of Sternhei-mer v. Sternheimer, 1967, 208 Va. 89, 155 S.E.2d 41, upon which the district court relied in this connection, but we do not regard it as controlling under the facts of the present case. Moran’s claim to receive salary without performing services depends solely upon the continued validity of the stockholders’ agreement. Accordingly, upon the justified recision of that agreement by Edson, Moran’s right to further salary as well as his further services as secretary-treasurer became subject to the discretionary action of the board of directors of Deseo. The board having dismissed him as an officer and terminated his salary in July, 1967 its action is not subject to review in this proceeding. Paragraph 4 of the judgment and the first clause of paragraph 5, which in effect requires the Edsons to reinstate Moran as secretary-treasurer and resume payment of his salary must, accordingly, be reversed.

We turn next to Edson’s contention that the district court erred in directing him by paragraph 1 of the judgment to return to Deseo $6,000.00 of the $24,000.00 salary which he drew in 1971. This action by the court was based upon two considerations, namely, that under paragraph 5 of the stockholders’ agreement the payment of this additional salary was improper, and that, in any event, under the applicable rule of law Edson’s vote as a director could not be counted in the majority vote by the directors which authorized the additional $6,000.00 payment.

We have already indicated that the stockholders’ agreement was no longer in force in 1971, having been rescinded by Edson in 1967 because of Moran’s total default thereunder. It, therefore, does not furnish support for the district court’s conclusion. Nor does the second ground relied upon by the district court furnish such support. For in the case of a closely held corporation, such as Deseo, where the directors are also the officers and stockholders, self-dealing on salary questions may be inevitable as a practical matter. At least in such a case, therefore, self-dealing does not of itself render void the action of a board of directors, in which the interested director participated, in fixing the compensation of that director as a corporate officer. Whether the board’s action is voidable in such a case at the instance of a non-assenting stockholder depends on all the circumstances, including a consideration of the reasonableness of the action. Murphy v. Washington American League Base Ball Club, Inc., 1963, 116 U.S.App.D.C. 362, 324 F.2d 394; 5 Fletcher, Cyclopedia Corporations § 2129. Corporate directors, in fixing their salaries as officers must, of course, have regard for the reasonableness of the salaries in the light of the financial condition of the corporation. Backus v. Finkelstein, D.C.Minn.1924, 23 F.2d 531; Irwin v. West End Development Company, 10 Cir. 1973, 481 F.2d 34.

There was evidence in this case by the marketing manager of the corporation under franchise from which Deseo carried on its business, that the business under Edson’s management was well run and very sound, that it had discounted its bills since 1967 and that in the light of the size and volume of the business the salaries of the Edsons were fair and reasonable. The district court made no finding on this subject, however. This aspect of the case must, therefore, go back to that court for a reconsideration of paragraph 1 of the judgment in the light of the evidence and the legal principles which we have enunciated and the modification of the last clause of paragraph 5, so as to permit the payment of fair and reasonable salaries to the Edsons.

The Edsons’ next contention is that the district court erred in directing by paragraph 3 of the judgment that they reimburse Deseo for personal life and health insurance premiums paid by Deseo for their benefit. The district court found that these policies were not issued for the benefit of Deseo, each individual being named as beneficiary in the policies of the other. The district court stated:

“Directors and officers are not free to appropriate corporate assets in fraud of the stockholders, and any such assets taken for the exclusive benefit of favored principals are recoverable by the corporation, . Nothing less than a unanimous ratification by the shareholders can validate such personal use of the corporation’s funds and property. The Ed-sons, by their own admissions, have violated this rule of fiduciary responsibility and even if, as it appears, this violation was guileless, their obligation to indemnify the corporation remains.”

We are in complete accord with these conclusions. The case of Mutual Life Insurance Company of New York v. Mooreman, 9 Cir. 1966, 366 F.2d 686, upon which the Edsons rely, is wholly distinguishable. No objection was raised in argument to the awards made in subdivisions b and c of paragraph 3 of the judgment. The whole of that paragraph will accordingly be affirmed.

What has just been said is equally applicable to the contention of the Edsons that the district court erred in directing them by paragraph 2 of the judgment to reimburse Deseo for rental income, in the amount of $8,255.00 to April, 1972 and $127.00 per month thereafter to the date of judgment, collected from Deseo for the office and warehouse space which as majority directors they authorized Deseo to lease from their wholly-owned General Services Corporation, after Moran had declined longer to provide the space which he was obligated by the stockholders’ agreement to provide to Deseo. The district court took the view that as directors of Deseo the Edsons were not entitled to realize a profit on this transaction, but merely to recover the cost to them of providing the space, in the absence of approval by the other stockholder, Moran. We think that the district court rightly so held. But we find that the district court erred in its determination of the amount of the profit realized by the Edsons which paragraph 2 of the judgment directed them to repay to Deseo. The court found that the Edsons’ cost of providing the space was $133.00 per month and its computation was based upon its finding that the period of time involved in the General Services Corporation leasehold commenced with December, 1966 and that throughout the entire period of 65 months from that month through April, 1972 the Edsons realized a uniform profit of $167.00 per month from the lease, based on a monthly rental of $260.00. None of these findings is supported by the evidence. First with respect to the computations involved: The evidence establishes that in December, 1966 the office and warehouse of Deseo were removed by Edson fi'om the space previously provided by Moran. This removal, however, was to space owned by a third party, and it was not until April 1, 1967 that the operations were moved to the space owned by General Services Corporation. The actual period of time during which the Ed-sons were in a position to receive a profit from the leasing of space to Deseo accordingly did not begin until April 1, 1967. It fui’ther appears from the testimony that from April, 1967 through April, 1970 the monthly rental charged was only $200.00, indicating, according to the district court’s finding of cost, a profit of only $67.00 per month. This would have resulted in a total profit of $2,479.00 for those 37 months. It was not until the end of April, 1970 that the rental was increased to $260.00 per month on the basis of which figure the district court obviously computed the profit of $127.00 upon which it based its award. For the 24 months from May, 1970 through April, 1972 this profit would have amounted to $3,048.00, the total profit for the entire period thus being $5,527.00 instead of $8,255.00, the amount awarded in paragraph 2 of the judgment. We are clear, moreover, that the finding of the district court is erroneous that the Edsons’ cost of providing the space was only $133.00 per month. The evidence is that this figure represents the Edsons’ mortgage costs only and that in addition there are taxes, maintenance costs and return on capital invested. Moreover, the leases specified that General Services Corporation would provide all utilities except the power required for an air conditioner. This issue must, therefore, go back to the district court for a finding as to the actual amount of profit realized by the Edsons’ wholly-owned General Services Corporation on these rentals and an appropriate reeomputation of the sums awai'ded by paragraph 2 of the judgment.

Paragraph 6 of the judgment requires only brief mention. Its effect is to bar Mrs. Edson from serving as an officer or employee of Deseo except with the approval of Moran. In view of what has already been said with respect to the practical necessities of a close corporation such as Deseo, we think that the board of directors of Deseo is entitled to employ Mrs. Edson at a fair and reasonable rate of compensation and that the broad order contained in paragraph 6 of the judgment is unjustified. It will accordingly be vacated and remanded.

We turn then to the Edsons’ final contention, that the district court should have granted their request to appoint a receiver and order dissolution of Deseo. It will be recalled that Moran had asked the court for an order directing the Ed-sons to purchase his 50% interest in Deseo at a fair price to be set by the court. However, the district court was of the view that it had no power to grant Moran’s request, stating:

“If the orders outlined in this opinion fail to result in a workable business relationship, the parties may negotiate a mutually acceptable settlement themselves.”

No such settlement was reached and the Edsons urge that the district court does have the power under 13 V.I.C. § 195 to appoint a receiver “with all the powers of the corporation and the power to continue the corporate business until otherwise ordered by the court” where, as here, the stockholders are deadlocked on the election of directors and management of the corporation. They argue that it was error for the district court not to give them that relief.

13 V.I.C. § 195 implements the general rule that a court of equity may appoint a receiver when there are such dissensions in the board of directors of a corporation or between two groups of its stockholders, each holding an equal number of shares, that it is impossible to carry on the business with advantage to the parties interested, even though the corporation is solvent. 16 Fletcher, Cyclopedia Corporations § 7713. And in such a ease the court may direct the sale of the corporate property for the protection of the creditors and benefit of the stockholders and order a dissolution of the corporation. Saltz v. Saltz Bros., 1936, 65 App.D.C. 393, 84 F.2d 246; Weiss v. Gordon, 1969, 32 A.D.2d 279, 301 N.Y.S.2d 839; Ward v. Colcord, 1969, 110 Ill.App.2d 68, 249 N.E.2d 137.

Since this case must be remanded to the district court for further consideration of a number of the issues involved, the court upon remand will have full opportunity to consider whether, in the light of the situation as it may then exist, it will be in the interest of justice to appoint a receiver and thereafter to take such further judicial action with respect to Deseo and its property as may best be calculated to resolve the impasse between the stockholders of the corporation.

Paragraph 3 of the judgment of the district court will be affirmed. Paragraph 4 and the first clause of paragraph 5 of the judgment will be reversed. Paragraphs 1, 2, 6 and 7 and the last clause of paragraph 5 of the judgment will be vacated and the cause will be remanded to the district court for further proceedings not inconsistent with the opinion of this court.

       By agreement Mrs. Edson was elected the third director.

      . The wife of each party owns jointly the 50% of stock with her husband. There is no evidence or suggestion that either wife ever did or would cast a vote other than in conformity with her husband’s vote. Accordingly, each wife is a part of the separate faction which was created by the schism between Edson and Moran and for the purposes of this appeal, Edson and Moran may be regarded as the sole stockholders of Deseo.