author: HASTIE, Circuit Judge.

text:
    William A. STRETCH and Douglas A. Campbell v. Caspar W. WEINBERGER, Secretary, U. S. Department of Health, Education and Welfare, Appellant.
    No. 73-1547.
    United States Court of Appeals, Third Circuit.
    Argued Oct. 30, 1973.
    Decided March 5, 1974.
    Herbert J. Stern, U.S. Atty., Newark, N. J., Harlington Wood, Jr., Asst. Atty. Gen., Walter H. Fleischer, Michael Kim-mel, Dept, of Justice, Washington, D. C., for appellant.
    Charles Lee Harp, Jr., Archer, Grei-ner & Read, Camden, N. J., for appel-lees.
    Before HASTIE, ALDISERT and WEIS, Circuit Judges.
   OPINION OF THE COURT

HASTIE, Circuit Judge.

In the order from which this appeal has been taken, the district court required the Secretary of Health, Education and Welfare to make public disclosure of New Jersey extended care facility survey reports compiled before January 31, 1973. These are reports through which state agencies annually inform the Secretary about the performance of nursing and old age homes which receive federal funds under the medicare program. The Secretary uses the reports in determining whether these health care facilities are conforming to federal standards, as they must to continue to receive federal funds.

The plaintiffs contend and the district court held that disclosure is required by the Freedom of Information Act, 5 U.S. C. § 552. However, the Secretary insists that subsection (b) (3) of section 552, coupled with section 1306(a) of Title 42, U.S.Code, makes the Act inapplicable to the reports here in question. It is agreed, and properly so, that but for subsection 552(b)(3), the Act would require the requested disclosure. Subsection (b)(3) reads:

“(b) This section does not apply to matters that are . . . (3) specifically exempted .- . .by statute; T*

Section 1306(a) of Title 42 reads:

“No disclosure of any ... report . . . obtained at any time by the Secretary . . . or by any officer or' employee of the Department . in the course of discharging their respective duties under this chapter [the chapter on social security] shall be made except as the Secretary . . . may by regulations prescribe.”

Thus, the precise question here is whether, within the meaning of section 552(b)(3), such reports as are sought in this case are “specifically exempted from disclosure” by 42 U.S.C. § 1306(a), an enactment that antedated section 552(b) (3).

The Secretary argues that it is enough that the language of the earlier exempting statute, however general, is on its face clearly an authorization for administrative exemption of the reports in controversy., In his view, if an earlier statute gave him unrestricted discretion to exempt an undefined range of social security information from disclosure, then the effect of subsection 552(b)(3) is to preserve that unfettered and unguided power. In effect, he argues that as used in subsection 552(b) (3) “specifically” does not mean “with some degree of particularity.”

On the other hand, the plaintiffs argue that “matters are . . . specifically exempted from disclosure by statute” only if a statute either identifies some class or category of items that Congress considers appropriate for exemption or, at least, sets out legislatively prescribed standards of guidelines that the Secretary must follow in determining what matter shall be exempted from disclosure. We agree, as did the district court, that the exempting statute must prescribe some basis upon which the Secretary is to decide. Otherwise, there would be no escape from the unacceptable conclusion that the word “specifically,” as used in section 552(b) (3), is surplusage.

Section 1306(a) was enacted as part of the Social Security Amendments of 1939, one stated general purpose of which was “to insure efficient administration and to protect recipients from humiliation and exploitation.” S.Rep.No. 734, 76th Cong., 1st Sess. 29 (1939). This occurred long before the Department had any concern with surveys of or reports upon local extended care facilities, and our attention has not been directed to anything analogous to them which Congress might have had in mind. The social security information that the Secretary gathered at that time was highly personal data about social security applicants and registrants. Thus, in 1939 Congress could not have considered whether the type of information that concerns us here merited exemption from disclosure. Neither did section 1306(a) provide any standards or guides through which legislative judgment would be reflected in the making of administrative exemptions. Thus, in no meaningful sense can it be said that section 1306(a) “specifically exempted” the matters now in controversy from disclosure.

This reading of the relevant statutes is in accord with the manifest purpose of the Freedom of Information Act. As the relevant committee reports make clear, Congress acted because of outspoken dissatisfaction with existing law. It was complained that the then controlling section 3 of the Administrative Procedure Act, although entitled “Public Information” and intended to increase public access to agency documents, was being used more as a sanction for withholding documents than as a mandate for disclosure. The House Committee documented recurring abuse of broad discretion which the existing law allowed officers of the executive branch, and the Senate report concurred.

In these circumstances, Congress adopted the reforming statute to enable citizens and the press to find out how their government operates. Its purpose, full disclosure subject only to narrow and well-defined exemptions, is reflected in its structure as well as its history. The bulk of the Act requires every agency to make available broad categories of information. Subsection (e) (relettered (b) in U.S.C.) lists nine categories of exemptions from the Act, but subsection (f) (relettered (c)) makes it clear that the disclosure sections are to be read broadly, and the exemptions narrowly. A reading of the committee reports and debates leads to a firm conviction that the absence of standards to govern broad agency discretion was the chief evil at which Congress aimed.

Finally, in our judgment, Environmental Protection Agency v. Mink, 1973, 410 U.S. 73, 93 S.Ct. 827, 35 L.Ed.2d 119, upon which the Secretary relies heavily, does not require a different conclusion. The Mink case involved a different provision of section 552, numbered (b)(1), that exempted matters “specifically required by Executive order to be kept secret in the interest of the national defense or foreign policy; . . . . ” It was sufficient for the decision of that case that the Court found that Executive Order 10501, under which the President had caused the sought documents to be classified as secret, had been specifically identified in the legislative history of the Freedom of Information Act as a valid exemption from disclosure that the Act would not alter. 410 U.S. at 82-83, 93 S.Ct. 827, 833.

For these reasons, the judgment of the district court will be affirmed.

      . The Complaint sought reports compiled both before and after January 31, 1973. The Secretary supplied reports compiled after that date, pursuant to the Social Security Act Amendments of 1972, §§ 2490, 299D, 86 Stat. 1329, 1428, 1461-1462 ; 42 Ü.S.C. §§ 1306, 1395aa(a). This appeal concerns only the pre-January 31, 1973 reports.

      . S.Rep.No.813, 89th Cong., 1st Sess. (1965), reproduced in part, 111 Cong.Ree. 26821 (1965); H.R.Rep.No. 1497, 89th Cong., 2d Sess. (1966), reproduced, U.S.Code Cong. & Admin.News 1966, pp. 2418, 2421-23.

      . S.Rep. at 3, 5, 10.

      . S.Rep. at 10; cf., Vaughn v. Rosen, D.C. 2Cir. 1973, 484 F.2d 820, 823.

      . S.Rep. at 5; U.S.Code Cong. & Admin. News 1966 at p. 2422 (H.R.Rep.) ; 112 Cong.Rec. 11434 et seq. (1966).


source: Caselaw Access Project

author: FRANK W. WILSON, District Judge.

license: Public Domain

text:
    Joseph E. DOWDELL, Plaintiff-Appellant, v. U. S. INDUSTRIES, INC., Defendant-Appellee.
    No. 73-1424.
    United States Court of Appeals, Sixth Circuit.
    Argued Dec. 6, 1973.
    Decided April 30, 1974.

      Martin S. Goldberg, Youngstown, Ohio, on brief for appellant.
    John T. Milligan, Warren, Ohio, for appellee; John L. Pogue, Warren, Ohio, on brief.
    Before CELEBREZZE and LIVELY, Circuit Judges, and WILSON, District Judge.

       Honorable Frank W. Wilson, Chief Judge, United States District Court for the Eastern District of Tennessee, sitting by designation.

   FRANK W. WILSON, District Judge.

This is an appeal from a directed verdict of dismissal in a negligence action. The plaintiff (appellant) was injured when a heavy lifting ring on a large metal press fell and crushed his leg as the equipment was being installed. At the completion of all proof in the case, the District Court concluded that the evidence of negligence on the part of the defendant was insufficient to warrant submitting the case to the jury and directed a verdict of dismissal.

The settled rule for testing on appeal the action of a trial court in withdrawing a case from the jury and directing a verdict is for the appellate court to review the evidence and determine whether it is such that, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, there can be but one conclusion as to the verdict that a reasonable person could reach. Brady v. Southern Railway Co., 320 U.S. 476, 64 S.Ct. 232, 88 L.Ed. 239 (1943); Fortner Enterprises, Inc. v. United States Steel Corp., 452 F.2d 1095 (6th Cir. 1971). In performing this function an appellate court is bound to view the evidence in the light most favorable to the party against whom the motion for directed verdict was made and give that party the advantage of every fair and reasonable inference that the evidence may justify. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962); Wright & Miller, Federal Practice and Procedure, Civil § 2524.

When all reasonable inferences are accorded the plaintiff and the evidence in this record is viewed most favorably to him, the following may be said to have been the testimony on the issue of liability. The defendant is a manufacturer of heavy machinery, including large metal presses used in the automotive industry. Its plant is located in Chicago, Illinois. Over a period of years the General Motors Corporation purchased for installation at its automobile assembly plant at Lordstown, Ohio, a number of metal presses manufactured by the defendant, including a number of presses designated as Model 150 OBI, meaning that the presses were open back inclinable presses having a 150 ton pressing capacity. Mounted on top of the Model 150 press was a ring or bail for use in the movement and location of the press by means of an overhead crane. The size of the press was reflected in photographs and drawings and can be surmised from the fact that the bail itself weighed approximately 200 pounds. The bail was mounted in a hinged manner and was capable of swinging from horizontal to vertical to horizontal. However, to maintain the bail in a semivertical position, both as a means of enabling the crane hook to be readily inserted and removed and as a safety factor to anyone assisting in this operation, blocks of metal, referred to as “keepers” or “stops”, were welded to the press on either side of the bail hinge so as to prevent the bail from swinging more than 30° from vertical when disengaged from the crane hook. The welded metal keepers had a maximum strength or retaining capacity of 20,000 pounds. The bail was designed for lifting the press only when the press was vertical. The keepers were not designed to withstand the stress that would be imposed if the bail were used to lift the press from a horizontal position to a vertical position, but no warning was given by the defendant in this regard although the defendant was aware that the presses would be shipped in a horizontal position and that in erecting them they would have to be raised from a horizontal to a vertical position.

Sometime prior to January 1970 the defendant manufactured and sold a number of Model 150 presses to General Motors Corporation for installation at its Lordstown, Ohio, automobile assembly plant. These were manufactured at the defendant’s Chicago plant. They were picked up at that plant and delivered to the Lordstown site by an independent motor carrier. There is no evidence, however, of any improper handling of the press by the motor carrier. Another independent contractor then removed the presses from the motor carrier trailers, raised them from a horizontal carrying position to a vertical operating position and installed them in the automobile assembly plant. The plaintiff, an iron worker of long experience and having prior experience in the installation of presses of this model, was employed by the contractor making the installation. In the course of installing one of these presses on January 16, 1970, the plaintiff mounted to the top of the press to disengage the crane hook from the bail. When he did so, the bail fell to a horizontal position, crushing the plaintiff’s right leg. The plaintiff had performed this same operation on other presses of the same model, but had never experienced or known of a press on which the bail would fall to a horizontal position on removing the crane hook. As pres-viously indicated, no advice or warning was given by the defendant to those making the installation with regard to the condition or the use of the bail.

Although there was no evidence introduced at the trial regarding any inspection of the particular press upon which the accident occurred to determine the cause of the bail falling to a horizontal position, a mechanical engineer testified that it could only have occurred by reason of an absence of the keeper or by reason of the keeper failing to perform in the manner in which it was designed to perform. In the course of a general inspection of all newly installed presses following the accident, keeper bars were discovered to have been left off or broken off of four of the presses being installed at that time.

Upon the foregoing record the trial court concluded that the plaintiff had failed to carry the burden of proving any negligence upon the part of the defendant, stating that “[t]here is no evidence that the press was defective when it left the defendant.” In reaching this conclusion, the district judge relied upon the case of Gedra v. Dallmer Co., 153 Ohio St. 258, 91 N.E.2d 256 (1958), wherein the Ohio Supreme Court stated the law in that jurisdiction to be that “if the cause of the injury to a plaintiff may be as reasonably attributed to an act for which the defendant is not liable as to one for which he is liable, the plaintiff has not sustained the burden of proving that his injury is the direct result of the defendant’s negligence.”

The principle of law just stated is not only settled law in Ohio, see Stevens v. Industrial Commission, 145 Ohio St. 198, 61 N.E.2d 198 (1945); Kata v. Second National Bank of Warren, 26 Ohio St.2d 210, 271 N.E.2d 292 (1971), but is a universally accepted principle of negligence law. As stated by the late Professor Prosser:

“It is never- enough for the plaintiff to prove merely that he has been injured by negligence of someone unidentified. Even though there is beyond all possible doubt negligence in the air, it is still necessary to bring it home to the defendant. On this, too, the plaintiff has the burden of proof by a preponderance of the evidence; and in any case where it is clear that it is at least equally probable that the negligence was that of another, the court must direct the jury that the plaintiff has not proved his case. The injury must either be traced to a specific instrumentality or cause for which the defendant was responsible, or it must be shown that he was responsible for all reasonably probable causes to which the accident could be attributed.” W. Prosser, Law of Torts 218 (4th ed. 1971).

Accordingly, to the extent that the plaintiff casts his case upon the theory of negligent manufacture only, and relies upon the failure or the absence of the keeper as being that negligence, he clearly failed to establish a jury issue. Even though the defendant might reasonably be found to be responsible for a failure of the keeper to prevent the bail from falling, if that were shown to be the source of the accident, the plaintiff’s proof establishes as the equally probable cause of the accident a total absence of the keeper upon the press. Since the press had been handled both by a motor carrier and by an erector after it left the defendant’s custody, and since the evidence reflects that the erector in lifting the press from a horizontal to a vertical position could as likely have been responsible as the defendant for the absence of the keeper (by breaking it off), the doctrine of res ipsa loquitur would not apply. Rather, in the words of Professor Prosser, “[i]t is at least equally probable that the negligence was that of another.” A directed verdict would be proper upon this state of the record.

The plaintiff practiced this lawsuit, however, upon three theories of negligence: (1) negligence in design, (2) negligence in manufacture, and (3) negligence in failure to warn. Just as negligence may occur in the manufacture of a product, negligence may also arise from a lack of proper care by the manufacturer in the design of a piece of equipment, thereby creating an unreasonable risk of injury to others. Mob-berly v. Sears, Roebuck & Co., 4 Ohio App.2d 126, 211 N.E.2d 839. Negligence may also arise from a failure of a manufacturer to warn those who use his equipment of a known but latent defect in the equipment rendering the equipment hazardous in certain foreseeable uses. See Burns v. Pennsylvania Rubber & Supply Co., 117 Ohio App. 12, 189 N.E.2d 645; Caruloff v. Emerson Radio & Phonograph Corp., (D.C.N.Y.1970) 314 F.Supp. 631 (applying Ohio law), affirmed (2nd Cir.) 445 F.2d 873; Sam v. Englewood Ready-Mix Corp., 22 Ohio App.2d 168, 259 N.E.2d 507. See also Powell v. E. W. Bliss Co., (D.C.Mich. 1972) 346 F.Supp. 819.

It should be noted that there was evidence in this case that the defendant had designed the bail keepers in such a manner that they were not adequate to withstand the stress should the bail be used to raise the press from a horizontal shipping position to a vertical operating position, a likely use of the bail in the absence of a warning. It should also be noted that the defendant was aware of this latent design condition, but gave no warning of any restricted use of the bail. When this evidence is considered and when it is recalled that there was evidence in the record that the accident could only have occurred from one of two causes, either an absence of the keeper, or a failure of the keeper to perform in the manner in which it was designed to perform, it becomes apparent that a jury issue existed as to negligence upon the part of the defendant. If the failure of the keeper to function were considered as the source of the accident, then reasonable minds might well conclude that the sole source of the accident lay with the defendant and further conclude that the defendant failed to use proper care in manufacturing the press with a defective keeper. Upon the other hand, if the absence of the keeper were considered to be the source of the accident, a condition that might reasonably have been occasioned either by the defendant in the manufacture of the press or by the erector in the erection of the press, reasonable minds could conclude negligence upon the part of the defendant in either eventuality. If the absence of the keeper were occasioned by the defendant, a lack of due care in the manufacturing process might well be concluded. Upon the other hand, if the absence of the keeper were attributed to the activities of the erector, reasonable minds might nevertheless conclude that the defendant failed to use proper care in designing the keeper to withstand the stresses of a foreseeable use, and/or that the defendant failed to use proper care to warn a foreseeable user of this latent hazardous condition, thereby rendering the defendant responsible for the keeper being broken or rendered ineffective in the course of erection. In reaching this conclusion it is appropriate to note that neither the trial court nor this court has purported to deal with the issue of contributory negligence, if any, on the part of the plaintiff.

When the evidence is viewed in this manner, it becomes apparent that a jury issue would exist as to the defendant’s negligence, and this regardless of whether the accident occurred as a consequence of the failure of the keeper or whether it occurred as a consequence of an absence of the keeper, the only two explanations for the accident. When the evidence is viewed in this manner, it becomes apparent that the jury was not confronted with a choice of possibilities between the defendant and a third party, a situation to which Gedra v. Dallmer Co., supra, might apply, but rather that the -defendant could be found responsible for all reasonably probable causes to which the accident could be attributed. When the evidence is viewed in this manner, it becomes apparent that a jury issue existed as to the defendant’s liability for the plaintiff’s injury. As stated by Professor Prosser:

“The question then is what the reasonable man would have done under the circumstances. Under our system of procedure, this question is to be determined in all doubtful cases by the jury, because the public insists that its conduct be judged in part by the man in the street rather than by lawyers, and the jury serves as a shock absorber to cushion the impact of the law.” W. Prosser, Law of Torts 207 (4th ed. 1971).

This case will be reversed and remanded for a new trial.


author: CHOY, Circuit Judge:

text:
    Betty EBY, a widow, Plaintiff-Appellee, v. REB REALTY, INC., an Arizona corporation, and Don Dailey Realty, an Arizona corporation, Defendant-Appellant.
    No. 72-2345.
    United States Court of Appeals, Ninth Circuit.
    April 1, 1974.

      George W. Oglesby (argued), Phoenix, Ariz., for defendant-appellant.
    James K. LeValley (argued), Phoenix, Ariz., for plaintiff-appellee.
    Before ELY, CHOY and GOODWIN, Circuit Judges.
   OPINION

CHOY, Circuit Judge:

Betty Eby brought an action in two counts under the Truth in Lending Act, 15 U.S.C. §§ 1601-1665, seeking (1) rescission of a secured real estate credit transaction under section 1635 of the Act and (2) twice the amount of the finance charge paid by her in the same transaction under section 1640. The suit was based on the admitted failure of the defendant, Reb Realty, to make certain disclosures of credit terms and rescission rights normally required by the Act. The parties filed cross motions for summary judgment, and the district court granted Eby both forms of relief she requested. Reb Realty appeals. We affirm.

Background

In October of 1969 Eby purchased a home from appellant for $16,700. The contract of sale provided that $600 would be paid as a down payment, that Eby would assume an existing Veterans’ Administration mortgage for $11,900, and that a second mortgage would be executed in Reb Realty’s favor for the balance of $4,200 payable in installments with 8% simple interest. Eby paid a total of $1,252 under the agreement: the down payment of $600, closing costs of $51, and $601 under the first mortgage, $239.41 of which represented interest. Nothing was paid towards the second mortgage. When this default occurred, Reb Realty instituted forcible detain-er proceedings, successfully reentering possession in March, 1970. Eby then brought the present action.

In general, the Truth in Lending Act requires a “creditor” to disclose credit terms — for example, the annual interest rate — to a borrowing consumer. See 15 U.S.C. § 1638. Failure to make the requisite disclosures can subject the creditor to civil liability in an amount equal to double the finance charge paid in connection with the transaction, but in no event less than $100 or more than $1,000. 15 U.S.C. § 1640(a)(1). Additional duties are imposed on a creditor —and different borrower rights come into play — when a security interest is retained or acquired, as part of a credit transaction, in any real property “which is used or expected to be used as the residence” of the borrower. 15 U.S.C. § 1635(a). The debtor is given a right of rescission which must normally be exercised within three days of the consummation of the transaction. The lender must provide the borrower with written notice of this limited right to rescind in addition to making all the other usual disclosures required with any extension of credit. When the creditor fails to disclose any item of the requisite information, the‘right to rescind is not limited by the normal three day period but continues until all the disclosures are made. 15 U.S.C. § 1635(a).

Under the civil liability section, section 1640, the district court awarded Eby $478.82, twice the amount of interest she paid. In granting rescission of the sale agreement and the two mortgages under the second count, the court ordered the return of the $1,252 paid by Eby under the agreement, an amount which included the principal and interest paid under the first mortgage. By stipulation this was reduced by the rental value of the premises during appellee’s possession, a sum of $830, resulting in a net rescission award of $422.

Propriety of Summary Judgment

The Act does not impose its disclosure duties on, nor accord a right of rescission against, every person extending credit, but applies only to those “who regularly extend, or arrange for the extension of, credit . . . whether in connection with loans, sales of property or services, or otherwise.” 15 U.S.C. § 1602(f). Appellant' raises two issues concerning the application of this definition to it: (1) that it was improper to decide its creditor status on summary judgment since that was a disputed issue of fact, see F.R.Civ.P.R. 56(c), and (2) that in any event it is not a creditor within the statutory definition.

As far as the record revealed at summary judgment, appellant is primarily a real estate broker acting as an intermediary between purchasers and sellers. However, between the date of its incorporation in February, 1969 and the pen-dency of this case below in September, 1970 — a time span of nineteen months —Reb Realty sold seven parcels of property for its own account. In three instances, including the sale to appellee, credit was extended by Reb Realty. The credit sales were made in April, 1969, October, 1969, and August, 1970.

Summary judgment is, of course, appropriate only when there are no disputed issues of “fact,” and only “legal” issues remain to be decided. And while the question of what is law or fact is one that has continually bedeviled courts, in this case it is neither analytically nor practically difficult to determine in which category the finding of creditor lies. The number of realty sales made by Reb Realty, the number that were on credit, etc., are facts. The application of the term “creditor” to those basic facts, a process requiring the court to look to statutory purpose and legislative intent, is a function of a court as law-finder and, hence, a legal conclusion appropriate for summary decision. See, e. g., Kentucky Rural Electric Cooperative Corp. v. Moloney Electric Co., 282 F.2d 481, 483-484 (6th Cir. 1960), cert. denied, 365 U.S. 812, 81 S.Ct. 692, 5 L.Ed.2d 691 (1961); Leas v. Courtney Co., 261 F.2d 13 (4th Cir. 1958); Koepfle v. Garavaglia, 200 F.2d 191, 192-193 (6th Cir. 1952); 10 C.A. Wright & A. Miller, Federal Practice and Procedure § 2725 at 501 (1973).

Nonetheless, even when the question is denominated one of law, it will not always be proper to enter summary judgment. In certain cases summary judgment may be inapposite because the legal issue is so complex, difficult, or insufficiently highlighted that further factual elucidation is essential for its prudently considered resolution. See, e. g., Kennedy v. Silas Mason Co., 334 U.S. 249, 68 S.Ct. 1031, 92 L.Ed. 1347 (1948); Palmer v. Chamberlain, 191 F.2d 532, 540 (5th Cir. 1951); 10 C. A. Wright & A. Miller, supra at § 2725, pp. 501-05. This is not such a case. Appellant suggests only that a trial might bring out what percentage of its profits are derived from credit transactions and the circumstances in which it acquired the properties it sold, whether by chance or design. We fail to see how knowledge of these facts would materially assist a court in applying the term “creditor.”

“Creditor” Under The Act

The issue is then presented whether, on the facts of record, Reb Realty “regularly extended credit” and was thus a creditor within the Act. The question is one of first impression upon which there is little guidance. The statutory definition only focuses inquiry on the word “regularly.” The Federal Reserve Board’s definition, contained in its interpretive regulations on the Act — Regulation Z — goes but a little further: a creditor is one “who in the ordinary course of business” regularly extends credit. 12 C.F.R. § 226.2(m) (1973).

The legislative history, though sparse on this point, is of some help. In both the House and Senate reports, the only comment relevant to the definition of creditor indicates that the term is to have a broad scope. “Thus a small retailer who extended credit ... in an isolated instance to accommodate a particular customer would not be covered [by the Act].” H.R.Rep.No.1040, 90th Cong., 2d Sess. 20 (1968); S.Rep. No.392, 90th Cong., 1st Sess. 13 (1967). 1968 U.S.Code Cong. & Admin.News, p. 1962. Reading this along with the definitions in the statute and Regulation Z, the intent seems to have been to except from the Act only those lenders whose extensions of credit are an occasional, isolated, and incidental portion of their business.

Informal letters, issued by the staff of the Federal Reserve Board, are a further indication that the term “creditor” should be expansively read. While these letters are hardly binding on a court, they do represent an “experience [d] and informed judgment to which courts . . . may properly resort for guidance.” Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944). Bone v. Hibernia Bank, 493 F.2d 135 (9th Cir. 1974); Taylor v. R. H. Macy & Co., 481 F.2d 178, 180 (9th Cir.), cert. denied 414 U.S. 1068, 94 S.Ct. 577, 38 L.Ed.2d 473 (1973). In one letter, for example, a homeowner was advised that he would not be a creditor simply because he accepted a mortgage in the sale of his own home. Letter from Milton W. Schober, Ass’t Director, Nov. 4, 1969, reported at 4 CCH Consum. Credit Guide '|f 30,206. More importantly, a 1970 staff letter opined that a corporation, distributing its stock on credit, would be a creditor for purposes of disclosing the credit terms of the sale. “[I]t appears to us that the restriction of the application of the Act to ‘creditors’ was included merely because of the unfairness in placing a burden on a private party to make disclosures in connection with his casual isolated sales.” Letter from Milton W. Schober, Ass’t Director, Feb. 19, 1970, reported at 4 CCH Consum. Credit Guide |f 30,313 (emphasis added).

<[7, 8] The Truth in Lending Act is a remedial statute designed as much as possible to permit borrowers to make informed judgments about the use of credit. To effectuate this congressional purpose requires that the Act’s terms be liberally construed. See N. C. Freed Co. v. Board of Governors, 473 F.2d 1210, 1214 (2d Cir.), cert. denied 414 U.S. 827, 94 S.Ct. 38 L.Ed.2d 61 (1973); Gardner & North Roofing & Siding Corp. v. Board of Governors, 150 U.S. App.D.C. 329, 464 F.2d 838, 841 (1972). Here, realty sales were a significant aspect of appellant’s business. And in nearly half its sales, it extended credit to its customers. They were credit transactions involving a large amount of money and not, after all, like granting credit for a bag of groceries. In view of this, we cannot say Reb Realty’s extensions of credit were the type of isolated and incidental transactions the definition of creditor was meant to exempt.

To hold otherwise would undermine the remedial objective of the statute. Undoubtedly, a considerable number of land sales are effected by real estate brokers acting as sellers, and in a large percentage of those, the broker must, in this age of credit, either provide credit or arrange for its extension, both of which may subject the lender to the Act. See 15 U.S.C. § 1602(f). To except appellant here, then, might well insulate a significant credit market from the Act.

Finally, an additional factor influencing our decision is that a real estate broker like appellant is unlikely to be unduly burdened or surprised by the Act’s mandates. Probably one reason Congress exempted those not regularly extending credit from the Act was that such persons could not be expected to know the law or be able, without considerable trouble, to follow its directives. Real estate brokers constantly deal with credit, either as principals or in assisting purchasers. They are, therefore, likely to be familiar with the general requirements of the Act and to be capable of implementing its requirements. See generally Warren & Larmore, Truth in Lending: Problems of Coverage, 24 Stan.L.Rev. 793, 823-24 (1972).

The Damages Awarded

Appellant next challenges the district court’s damage award. It urges that by permitting section 1635(a) rescission of the interest paid under the first mortgage and by awarding double that same interest charge under section 1640(a)(1), that court granted a triple recovery Congress could not have intended.

Neither the words of the statute nor the legislative history refer to the intended relationship between the rescission and civil liability provisions. Doubtless, this is because the rescission provision was introduced late in the legislative process. After the Senate had passed one version of the Truth in Lending Act, another version was presented before the House. During the debate on that bill, Congressman Cahill proposed an amendment requiring lenders to make the necessary disclosures three days earlier than usual if a security interest was to be retained or acquired in the borrower’s home. Apparently, failure to comply would have subjected the creditor to civil liability equal to twice the finance charge, just like the failure to disclose any other information. The amendment was adopted without debate. 114 Cong.Rec. 1611 (1968). With no explanation the conference committee altered this to its present form to provide the limited right of rescission.

One court, relying on the absence of congressional history, has held that the two sections set forth exclusive remedies which cannot both be pursued. Bostwick v. Cohen, 319 F.Supp. 875 (N.D. Ohio 1970). Contra, Palmer v. Wilson, 359 F.Supp. 1099, 1103-1104 (N.D.Cal. 1973). The court reasoned that the provisions are remedial in nature; because of the lack of a clear legislative statement to the contrary, the court thought that the borrower should be forced to comply with the traditional rule requiring an election of remedies. Bostwick v. Cohen, supra, at 877.

We do not agree. The doctrine requiring election is premised on there being two inconsistent remedies. In Mourning v. Family Publications Service, Inc., 411 U.S. 356, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973), however, the Court entirely undercut this premise. See Palmer v. Wilson, 359 F.Supp. at 1103-1104. The Court there upheld Regulation Z’s four installment rule, 12 C.F.R. § 226.2(k), which requires credit disclosure in any transaction payable in more than four installments though no actual finance charge is exacted. The creditor had argued that there could be no civil liability under section 1640 where there was no finance charge. Mourning v. Family Publications Service, Inc., supra, at 376, 93 S.Ct. 1652. Rejecting this argument, the court characterized section 1640’s damage provision as a “civil penalty” the applicability of which depends not on the finance charge levied, but on the failure to make disclosures. See id. at 376, 93 S.Ct. 1652. See also Ratner v. Chemical Bank New York Trust Co., 329 F.Supp. 270, 280 (S.D.N.Y.1971). As the Bost-wick, court admitted, 319 F.Supp. at 877, if the civil liability provision is so viewed as penal and not remedial, it is not inconsistent with a right of rescission since civil liability is not then aimed at making the borrower whole.

The structure of section 1640 leads to the same conclusion. By providing a minimum recovery of $100 regardless of the presence of a finance charge or its de minimis amount, Congress indicated that the finance charge was to be no more than a convenient measure for damages and not a remedial trigger upon which liability was to depend. Equally inconsistent with a view of section 1640 as remedial is the recovery limit of $1,000. If the finance charge, for example, should exceed $1,000, civil liability would obviously be inadequate to compensate a debtor. Finally, a defense to section 1640 is that the creditor’s violation of the Act was unintentional. 15 U.S.C. § 1640(c). Since liability is thereby dependent to some degree on culpability, this is another index that the section could not be wholly remedial in character. In sum, since section 1640 was not intended as a remedy, it is not inconsistent with a rescission award covering the same finance charge and not, therefore, subject to election of remedies.

Even aside from the labels that might be attached, it would undermine the effectiveness of the Truth in Lending Act to require borrowers to choose their remedies. The purpose of making creditors civilly liable is to force disclosure of credit terms. The purpose of according borrowers a right of rescission is broader; not only is it designed to compel disclosure, but it also serves to blunt unscrupulous sales tactics by giving homeowners a means to unburden themselves of security interests exacted by such tactics. See 114 Cong.Rec. 1611 (1968) (remarks of Cong. Cahill). If borrowers were forced to choose their “remedies,” both objectives might be undermined. To the extent that only civil liability is pursued, the sanction against unscrupulous home sales practices is weakened. To the extent that only rescission is chosen — where available — the penalty attendant upon nondisclosure will be less severe and, consequently, the incentive to disclose diminished. See Comment, Private Remedies Under the Truth-in-Lending Act: The Relationship Between Rescission and Civil Liability, 57 Iowa L.Rev. 199, 205-07 (1971).

But while we hold that sections 1635 and 1640 do not set forth exclusive remedies, we do not say that a court must always grant both forms of relief when requested. These two separate provisions can result in a sometimes harsh penalty. In the absence of any clear congressional statement, we think a request for both forms of relief is addressed to a court’s sense of equity and may properly be denied in appropriate cases. Here, though, the district court did not abuse its equitable discretion. Its judgment is, therefore, affirmed.

      . In addition, Eby was given her attorney’s fees, as provided by § 1640(a) (2) of the Act, for the successful prosecution of the civil liability count.

      . In granting rescission of the first mortgage, the district court may have erred, since § 1635(e) of the Act insulates from rescission “the creation or retention of a first lien against a dwelling to finance the acquisition of that dwelling.” However, appellant, though arguing this point below, did not raise it here. This court will not consider questions not presented to it except that a plain error may, at the court’s option, be noticed. Sup.Ct.R. 40(1) (d), (2), as adopted by 9th Cir.R. 5. Even assuming the district court committed plain error, we decline to notice it.

      . The terms are Professor Davis’. See K. Davis, Administrative Law Treatise § 30.01 (1958). They refer to two different approaches to the law-fact knot developed to determine which findings of administrative agencies should be accorded the deference normally given factual findings. The analytic — the approach championed by Professor Jaffe — starts with a definition of facts to reach its conclusions. See L. Jaffe, Judicial Control of Administrative Action 546 — 49 (1965). Professor Davis’ practical approach looks to which decision-maker — court or agency — would be best able or which should (i. e. as a matter of policy) decide a question. See K. Davis, supra at § 30.04. Though developed in another context, the approaches are helpful in resolving law-fact problems in a summary judgment setting.

      . It is not sufficient to say that since both parties moved for summary judgment, there were no disputed issues of fact. It is well settled that a court’s duty to ascertain whether facts remain in contention is not obviated by cross motions for summary judgment. See, e. g., Pioneer Nat. Title Ins. Co. v. American Cas. Co., 459 F.2d 963, 967 (5th Cir. 1972); Brawner v. Pearl Assurance Co., 267 F.2d 45, 46 (9th Cir. 1958); 6 J. Moore, Federal Practice § 56.13 at 2247-48 (2d ed. 1972).

      . The weight of such a judgment in a particular case will depend on the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.
      Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944).

      . See also letter from Griffith L. Garwood, Chief, Truth in Lending Section, Feb. 7, 1972, reported at 4 CCH Consum. Credit Guide K 30,802; letter from Frederic Solomon, Director, July 28, 1969, reported at 4 CCH Consum. Credit Guide If 30,117.

      . In the Board staff letter described earlier, advising a corporation to disclose the credit terms of its stock distribution plan, the writer based his opinion partially on this factor. “The reasoning behind the [non-creditor] exemption was probably that the private individual could not be presumed to know about the Regulation [Z] or have procedures to implement it.” A corporation distributing its stock, the letter concluded, is a “sophisticated party fully able to make disclosures.” Letter from Milton W. Schober, Ass’t. Director, Feb. 19, 1970, reported at 4 COH Consum. Credit Guide K 30,313.


author: PER CURIAM.

text:
    John Richard JOHNSON, Appellant, v. UNITED STATES of America, Appellee.
    No. 74-1077.
    United States Court of Appeals, Eighth Circuit.
    Submitted April 16, 1974.
    Decided April 19, 1974.

      John Richard Johnson, pro se.
    Robert G. Renner, U. S. Atty., and Daniel M. Scott, Minneapolis, Minn., for appellee.
    Before HEANEY and STEPHENSON, Circuit Judges, and SMITH, Senior District Judge.

       TALBOT SMITH, Senior District Judge, Eastern District of Michigan, sitting by designation.

   PER CURIAM.

John Richard Johnson was convicted by a jury of one count of an Information charging robbery of a federally-insured bank [18 U.S.C. § 2113(a)] accompanied by assault by the use of a dangerous weapon [18 U.S.C. § 2113(d)]. The District Court imposed a single general sentence of fifteen years imprisonment for violating 18 U.S.C. § 2113(a) and (d).

Johnson moved for correction of his sentence in the District Court under Rule 35 of the Federal Rules of Criminal Procedure. He contended that under Prince v. United States, 352 U.S. 322, 77 S.Ct. 403, 1 L.Ed.2d 370 (1957), and its progeny, it was illegal to impose a general sentence for violating both subsections (a) and (d) of 18 U.S.C. § 2113 for a single bank robbery. , The District Court denied the motion and this appeal resulted. We affirm.

The District Court correctly stated:

(1) a single offense had been committed;

(2) a consummated bank robbery may encompass several of the graduated offenses proscribed by 18 U.S.C. § 2113;

(3) Prince precluded the imposition of separate sentences for the violation of each subsection; and

(4) a single general sentence for violating (a) and (d) was permissible.

The District Court’s disposition is in accord with our opinion in Gerberding v. United States, 471 F.2d 55 (8th Cir. 1973). There, we remanded to the District Court for the imposition of a single general sentence where the defendant was convicted of violating more than one subsection of 18 U.S.C. § 2113, and was given separate sentences. See also, United States v. Corson, 449 F.2d 544, 551 (3rd Cir. 1971).

Affirmed.


author: MAX ROSENN, Circuit Judge.

text:
    H. AND G. INDUSTRIES, INC. and subsidiaries, Appellant, v. COMMISSIONER OF INTERNAL REVENUE.
    No. 73-1718.
    United States Court of Appeals, Third Circuit.
    Argued March 15, 1974.
    Decided April 18, 1974.

      Martin D. Cohen, Newark, N. J., for appellant.
    Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwaeks, Richard W. Perkins, James H. Bozarth, Attys., Tax Div., Dept, of Justice, Washington, D. C., for appellee.
    Before ALDISERT, GIBBONS and ROSENN, Circuit Judges.
   OPINION OF THE COURT

MAX ROSENN, Circuit Judge.

H.. & G. Industries, Inc., the taxpayer-appellant in this case, redeemed an issue of its preferred stock at a premium in order to relieve itself of the allegedly onerous stock purchase agreement pursuant to which the preferred was issued. The sole question on this appeal is whether the taxpayer is entitled to deduct the premium paid by it on this redemption as an ordinary and necessary business expenses under § 162(a) of the Internal Revenue Code of 1954 (the Code). The taxpayer deducted the item on its income tax return for the fiscal year ending August 31, 1968. The Tax Court denied the deduction, 60 T.C. 163, and denied reconsideration in a memorandum opinion dated June 13, 1973. This appeal followed, and we affirm.

The facts of this case are not in dispute. The taxpayer 2**is a New York corporation, with its principal place of business in New Jersey, engaged in the manufacture of paint brushes and rollers. It concluded in 1963 that it needed approximately $450,000 to liquidate an existing loan account with a Newark bank and to establish and maintain adequate working capital. It borrowed $250,000 from another New Jersey bank and it obtained the balance of $200,000 from the First Small Business Investment Corporation of New Jersey (SBIC) under a Stock Purchase Agreement. Pursuant to the agreement, SBIC purchased 2,000 shares of “8% Convertible Participating Preferred Stock” of the taxpayer, having a par value of $100 per share, for $200,000. The taxpayer agreed to pay an 8% cumulative preferred dividend, as well as 12%% of annual consolidated net profits which remained after taxes and after the 8% dividend. The profit participation amount was limited to a maximum of $14,000 annually no matter how great profits were in a given year. The taxpayer retained the option to call all (but not part) of The preferred stock at any time, at $120 per share. The agreement contained various other restrictions on the taxpayer, involving such matters as the permissible levels of current assets and net worth, mergers, compensation of officers, and dividends on common stock. The agreement would terminate when the taxpayer called the preferred, or when SBIC converted its stock to common stock or else offered any of its preferred stock to the taxpayer pursuant to the taxpayer’s right of first refusal.

From the issuance of this preferred stock in 1963 until the redemption of the stock in 1967, the taxpayer carried the stock on its balance sheets in the capital account. Both the 8% dividend and the 12%% annual participation amounts were treated as dividend distributions on the taxpayer’s tax returns for those years.

A company officer testified that the payments on the preferred stock were burdensome because it “reduced our working capital and in essence strangled our corporation as far as growth was concerned.” The taxpayer therefore retired the shares in 1967 at the contract price of $120 per share, or $240,000. To replace the capital, the taxpayer thereupon negotiated a conventional mortgage loan at 7 per cent and secured a seasonal line of credit at a quarter per cent above prime.

We should first note what is not involved in this case. The taxpayer concedes that preferred stock was in reality equity rather than debt, and thus it does not contend that the redemption premium is deductible as interest under § 163 of the Code. We can therefore set aside the numerous cases which examine the characteristics of an obligation to determine whether it is in reality equity or debt.

The taxpayer contends, however, that even if the obligation is equity, the $40,000 premium, which it always eon-sidered to be a “pre-payment penalty,” should be deductible as an ordinary and necessary business expense under § 162(a) of the Code. *In support of this contention it relies on those cases which permit a deduction for payments made by a corporation to buy out of a burdensome contract obligation with another party, or which permit a deduction for the payments made by a corporation to purchase the stock of a different corporation in order to be relieved of a contract it made with the latter corporation. It argues that the deduction should also be allowed when a company purchases its own stock to disengage itself from a burdensome contract which is an adjunct to the stock issue.

The Government responds by relying first upon our decision in John Wanamaker Philadelphia v. Commissioner of Internal Revenue, 139 F.2d 644 (3d Cir. 1943). In that case the corporate taxpayer had issued obligations which were denominated preferred stock. The first question presented in the ease was whether preferred stock dividends accrued by the taxpayer on its books were deductible as interest, on the taxpayer’s theory that the obligation was in reality debt rather than equity. The court rejected the taxpayer’s contention, finding that the taxpayer had failed to establish the existence of a creditor-debtor relationship. The second question presented in the case was whether the taxpayer could deduct the redemption premium it had paid in redeeming the obligations. This court held:

In view of our conclusion that the preferred stock did not represent indebtedness it follows that the premiums paid by the taxpayer ... in connection with the redemption of its preferred stock were liquidating distributions upon stock and may not be deducted from gross income for those years as items of expense.

139 F.2d at 647-648. The Government contends that this language indicates that a premium paid on the redemption of preferred stock is not deductible as an expense under any theory.

As the Tax Court noted in its memorandum opinion in the instant case, Wanamaker was decided under Treas. Reg. § 1.61-12(c) (1), which at the time provided that if a corporation repurchased bonds at a price in excess of the issuing price or face value, “the excess of the purchase price over the issuing price or face value is a deductible expense for the taxable year.” See Roberts & Porter, Inc. v. Commissioner of Internal Revenue, 307 F.2d 745, 746 (7th Cir. 1962). The “expense” in question is now treated as interest under the regulations.

It is true that the bond premium which was deductible pursuant to this regulation was generally viewed at the time as being a business expense deduction under § 162(a) of the Code. Roberts & Porter v. Commissioner of Internal Revenue, 307 F.2d at 746. It can therefore be argued that Wanamaker, by rejecting a deduction for preferred stock premiums under a regulation which was itself based on § 162(a), in effect disallowed a deduction under § 162(a) under any theory. Supported by the broad language of the court quoted above, the Tax Court in the instant case relied upon this interpretation of Wanamaker which appears to deny a deduction as an expense under any theory.

We do not believe, however, that Wanamaker controls the instant case. The court in that ease was not presented with, and did not decide, whether or not an expense deduction under § 162(a) might be permissible under a theory other than that of Treas.Reg. § 1.61-12(c)(1), which was applicable only to debt obligations. The court was not presented with the contention that even if the obligations there at issue were equity, the premium was deductible as a business expense under § 162(a) as a payment to be relieved from a burdensome contract, totally aside from the regulation at issue which provided for a deduction for bond premium. The court cannot therefore be deemed to have decided this contention against the taxpayer, despite the broad language of the opinion.

The Government also relies upon § 311 of the Code, which provides that a corporation may not recognize a loss when it redeems its own stock from a shareholder. It urges that a taxpayer should not be permitted to claim a § 162 deduction for a sum for which § 311 prohibits a capital loss deduction. See Roberts & Porter, Inc. v. Commissioner, 37 T.C. 23, 27 (1961), reversed on other grounds, 307 F.2d 745 (7th Cir. 1962).

The force of this contention is somewhat diluted by the ease of Five Star Manufacturing Co. v. Commissioner of Internal Revenue, 355 F.2d 724 (5th Cir. 1966), which permits a § 162 deduction in a situation where a capital loss deduction would be arguably prohibited by § 311. In that case, two individuals each owned 50% of the stock of the company, which was in serious straits and near receivership. The presence of one of the individuals as a shareholder was preventing the company from entering into an agreement with an outsider which was necessary for the survival of the company. The company purchased all of that shareholder’s stock at judicial sale, and claimed a § 162 deduction for the entire purchase price. The court upheld the deduction, stating that

It can scarcely be held that the payment to [the owner whose stock was purchased] was for the acquisition of a capital asset, but rather one which would permit [the company] again to use assets for income production by freeing its management from unwarranted fetters.

355 F.2d at 727.

We need not decide whether implicit in § 311 is an absolute bar to a § 162 expense deduction for premiums paid when preferred stock is redeemed in order to avoid an allegedly onerous stock purchase contract because we believe that on the facts of the instant case no such deduction is permissible. The taxpayer argues solely that the outstanding preferred contract “reduced our working

capital and in essence strangled our corporation as far as growth was concerned. It was an excessive amount of payment and we reviewed it . ” While this argument bears a similarity to the rationale upon which' Five Star was decided, the facts of this case do not bring it within the ambit of Five Star. Elimination of the preferred stock and the restrictions of the Stock Purchase Agreement was not necessary to the survival of H. & G. Industries, Inc. See Jim Walter Corp. v. United States (M.D.Fla. No. 72-135, August 3, 1973) [73-2 U.S.T.C. fl 9682]. Despite the burdensome provisions of the Stock Purchase Agreement, including the obligation to pay “ultra liberal dividends” on the preferred stock, the company’s financial position at the time it refinanced in 1967 was such that it was able to obtain a conventional mortgage loan at only 7% interest and a seasonal line of credit at only one-fourth of a per cent above prime.

The stock redemption in this case was no more than an astute business decision to take advantage of improved business and monetary conditions, substituting, at reduced cost, debt obligations for some highly expensive equity obligations. As succinctly stated in the taxpayer’s petition to the United States Tax Court for redetermination of the deficiencies asserted by the Commissioner of Internal Revenue:

Economic circumstances, including the current interest rates made it a prudent, ordinary and necessary business decision to pay off Investment [SBIC] in October 1967 ....

Furthermore, every non-required redemption of preferred stock is presumably made on the expectation that for one valid reason or another the issuing corporation would be better off without the outstanding preferred. Permitting a § 162 business expense deduction in such a situation would completely undercut the' specific prohibition of loss deductions under § 311. We therefore do not reach the" question of whether a § 162 deduction limited to more oppressive corporate circumstances than those presented by the instant case would be consistent with § 311.

The decision of the Tax Court will be affirmed.

      . The taxpayer’s subsidiaries are parties to this action solely because they and the taxpayer filed a consolidated income tax return.

      . SBIC was a corporation licensed under the Small Business Investment Act of 1958, 15 U.S.C. § 681 et seq. Although the Act had originally permitted a small business investment company to make only loans to small business concerns, 72 Stat. 691 (1958), the Act was amended in 1960 to permit the furnishing of equity capital as well. 74 Stat. 196 (1960), 15 U.S.C. § 684.

      . In the four fiscal years during which the stock was outstanding, the taxpayer paid $16,000, $18,307, $24,717, and $19,025, respectively. These represented returns on capital of 8, 9, 12, and 9.5 per cent respectively. Because of the varying profit participation figure, the return in any year could be as low as 8 per cent or as high as 15 per cent, depending upon profits.

      . Section 162 of the Code, 26 U.S.C. § 162, provides:
      (a) In General — There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business

      . See, e. g., Cleveland Allerton Hotel, Inc. v. Commissioner of Internal Revenue, 166 F.2d 805 (6th Cir. 1948); Cassatt v. Commissioner of Internal Revenue, 137 F.2d 745 (3d Cir. 1943); Olympia Harbor Lumber Co. v. Commissioner, 30 B.T.A. 114 (1934), aff’d on other grounds, 79 F.2d 394 (9th Cir. 1935).

      . See, e. g., Helvering v. Community Bond & Mortgage Corp., 74 F.2d 727 (2d Cir. 1935); Pressed Steel Car Co., Inc., 20 T.C. 198 (1953), acquiesced in, 1956-2 Cum.Bull. 198.

      . This provision of the regulation has since been deleted from Treas.Reg. § 1.61-12(c) (1), and inserted in modified form in Treas.Reg. § 1.163-3 (c) (1). Section 163 of the Code provides for the interest deduction.

      . Our conclusion as to the intended scope of Wanamaker is supported by our examination of the original briefs in that case. At no point did the taxpayer argue that the premium would be deductible even if the obligation involved were deemed to be equity rather than debt.

      . Section 311(a) of the Code provides that “no gain or loss shall be recognized to a corporation on the distribution, with respect to its stock, of . . . property.” The term “distribution with respect to its stock” includes distributions made in redemption of stock, Treas.Reg. § 1.311-1 (a), 26 C.P.R. § 1.311-1 (a). The term “property” includes “money”, § 317(a).

      . The Government distinguishes the Five Star case by arguing that that case, unlike the instant case, is not within the scope of § 311 and thus not controlled by it. The distinction is said to -rest upon Treas.Reg. § 1.311-1 (e), which limits the scope of § 311 to transactions involving the corporation-shareholder relationship, as distinguished, for example, from a debtor-creditor relationship in which a shareholder surrenders his stock to the corporation in payment of a debt owed the corporation. While we express some doubt that Five Star is distinguishable from the instant case in this respect, we need not decide the question in light of our disposition of this case.

      . There is a further reason, not pressed by the Government, which might prohibit the deduction of a preferred stock redemption premium whenever the reason for the redemption were to avoid allegedly onerous future dividend obligations, as opposed to other obligations, imposed by the stock purchase contract. In the cases involving payments to be relieved of onerous business contracts, see note 6 supra, the corporations’ buy out payments are substitutes for the payments which would otherwise have to be made pursuant to the allegedly onerous contract itself. The latter payments would be the typical kind of deductible business expenses under § 162, and so permitting the buy out payment to be deducted would be simply substituting one deduction for another.
      Preferred stock dividends are clearly not deductible under any section of the Code, however. See, e. g., Wanamaker, supra. If a redemption premium paid to avoid future dividend obligations were deductible, the taxpayer would have the considerable advantage of being able to deduct a payment made as a substitute for non-deductible dividend payments. This goes beyond the eases relied upon by the taxpayer. The problem might not arise if the allegedly onerous burden represented by the preferred stock purchase contract was based solely upon provisions of the contract other than the dividend obligation. Payments made pursuant to other provisions of the contract might be deductible business expenses as they were incurred.

      . An ordinary expense deduction under § 162,' of course, would be considerably more favorable to a taxpayer than would even a capital loss deduction prohibited by § 311. Compare § 161 with §§ 1211,1212.