author: CHOY, Circuit Judge:

text:
    SESSIONS, INC., a California Corporation, Plaintiff-Appellant, v. Rogers C. B. MORTON, Secretary of the Interior et al., Defendants-Appellees.
    No. 72-3062.
    United States Court of Appeals, Ninth Circuit.
    Jan. 31, 1974.
    Rehearing Denied March 18, 1974.

      James M. Schlecht, Allen 0. Perrier (Argued), Schlecht, McCullough & Perrier, Palm Springs, Cal., for plaintiff-appellant.
    Kent Frizzell, Asst. Atty. Gen., Carl Strass, Peter R. Steenland (Argued), U. S. Dept. of Justice, Washington, D. C., William D. Keller, U. S. Atty., Philip S. Malinsky, Asst. U. S. Atty., Los Angeles, Cal., for defendants-appellees.
    Before HAMLEY and CHOY, Circuit Judges, and SMITH, District Judge.

       The Honorable Russell E. Smith, United States District Judge for the District of Montana, sitting by designation.

   CHOY, Circuit Judge:

Sessions, Inc., a California corporation and lessee of certain Indian lands, filed a complaint in the district court seeking review under 5 U.S.C. § 702 (1970) of the Secretary of Interior’s (the Secretary) decision cancelling its lease, and a declaration of its rights against the Indian lessors, Pierce and McCoy, under the Declaratory Judgment Act, 28 U.S.C. § 2201 (1970). The district court determined that the Secretary's administrative action merely permitted the Indian lessors to invoke the default provisions of the lease, and accordingly found nothing to review under the Administrative Procedure Act. The court also held Sessions was in default for not performing its obligations under the lease. Sessions appeals from judgment for the Indian lessors. We affirm.

The facts of this case are recited in the district court’s opinion, and in a part of the administrative record reprinted in the appendix thereto. 348 F.Supp. 694 (C.D.Cal.1972). Since these facts are for the most part undisputed it is unecessary that they be fully repeated here. Essentially this appeal involves the cancellation of one of a total of seven leases acquired by Sessions on January 1, 1962. The leases are identical except for differing parties, land descriptions and rental arrangements. The lessors are members of the Agua Caliente Band of Mission Indians whose land is held in trust for their use and benefit by the United States. Mission Indian Relief Act of January 12, 1891, 26 Stat. 712.

The lease in question, No. PSL-37, covers about two acres of land at the south end of a larger 34.5 acre tract leased by Sessions from other Indian members of the Band. The land is located on South Palm Canyon Drive, a principal street in Palm Springs California. The lease requires Sessions to fully develop and improve the land, which was then being used as a trailer park. To this end, the terms of the lease provide that Sessions was to submit to the Secretary’s representatives in the Bureau of Indian Affairs (B.I.A.) for approval, a general plan and architect’s design for the leasehold’s improvement by January 27, 1963. If approved, construction of such improvements was to be completed by January 27, 1966.

After much fruitless negotiation between Sessions, the Indians, and B.I.A. representatives, and with still no construction even begun, on July 10, 1969, Pierce and McCoy requested that the B. I.A. cancel their lease. On September 23, 1969 the B.I.A. mailed to Sessions a notice that it was in default under the lease. On October 16, 1969 Sessions was given sixty days to cure the alleged defaults. Upon Sessions’ failure to cure the defaults, the Acting Area Director of the B.I.A. notified Sessions the lease was cancelled on December 16, 1969. The Commissioner of the B.I.A. sustained the cancellation of PSL-37 on December 16, 1970, and his decision was affirmed on January 11, 1971 by the Secretary. This action in the district court followed.

Sessions concedes that no general plan and architect’s design were submitted by the 1963 date and that no construction was completed by 1966. Although thus admitting its noncompliance with the lease, Sessions maintains that its obligations under the lease were extended and default thereafter excused when the B. I.A. did not fulfill its duties under the lease to either approve or disapprove, with reasons, a general plan submitted to them on March 24, 1966. While there were three extensions, we do not agree that Sessions was excused from its performance.

By létter of March 24, 1966 Sessions allegedly submitted two design plans for the improvement of PSL-37 to the Area Director of the B.I.A. The first plan called in part for the construction of an eight-unit apartment-hotel on the premises. The second, though outlining the same development for PSL-37, was for a far more elaborate development of the entire 34.5 acres. Sessions does not challenge the B.I.A.’s failing to respond to the second plan, for it admits that this plan was not in accordance with the terms of the lease since it required substantial changes and amendments in the existing lease. Rather, Sessions relies solely upon the B.I.A.’s failure to act on the first plan to support its contention that this excused its further obligations.

Both plans required that the Indians dedicate part of their land to the city of Palm Springs for the widening of South Palm Canyon Drive, and the extension of the Belardo Road through the middle of’ their property. The lease as written contained no mention of this as a requirement for the property’s development. Nor can it be fairly inferred that any dedication was ever intended, since an intent to dedicate land for public use must be established by a clear manifestation of the owner’s desire to part with the land. Irwin v. Dixion, 9 How. 10, 30, 13 L.Ed. 25 (1850); Munoz v. Porto Rico Ry. Light & Power Co., 74 F.2d 816, 820-821 (1st Cir. 1934); Sacramento v. Jensen, 146 Cal.App.2d 114, 303 P.2d 549 (1956). Accordingly, the district court did not err by concluding that this plan required a substantial amendment to the lease. This being so, the B.I.A. was not required to approve or disapprove the plan since it was not one to commercially develop the property within the terms of the lease.

Sessions contends that Indian approval of street dedications was an implied obligation of the lessors. It is true that there is an implied covenant in every contract that each party will do nothing to deprive the other of the benefits arising from the contract. Vanadium Corp. v. Fidelity & Deposit Co., 159 F.2d 105, 108 (2d Cir. 1947). See generally 6 Williston on Contracts § 887 at 420-55 (3rd ed. 1962). This “covenant of fair dealing” imposes the duty on each party to do everything that the contract presupposes will be done in order to accomplish the purpose of the contract. However, this implied obligation “must arise from the language used or it must be indispensable to effectuaté the intention of the parties.” United States v. Outer Harbor Dock & Wharf Co., 124 F.Supp. 337, 344 (S.D.Cal. 1954). As indicated, there is absolutely no mention in the lease of land dedication. And, it is unclear whether any development of PSL-37 required such, the only indication in the record being that the plans which Sessions proposed required street dedications. Where the Indians have expressed an unequivocal opposition to any transfer of their land, we can not assume that this was an implied covenant in the lease, which would have been made express if only it had been called to the parties’ attention. See United States v. Outer Harbor Dock & Wharf Co., supra at 344.

Moreover, there was just cause for the Indians’ refusal to dedicate their land. Apparently, the dedication of Berlardo Road through the center of the land would have destroyed future commercial use of the property. In a letter to his attorney dated November 11, 1965, T. J. Sessions, president of Sessions, Inc. stated, “if Belardo Road is a requirement [for city approval of the development] both of the projects would be killed and there would be great loss in the value of the subject property.” The Indians’ reluctance in these circumstances to dedicate their land was hardly unreasonable.

Rent for the subject land has been paid by Sessions and accepted by the Indians since the time of Sessions’ default. Sessions contends that by accepting such rent, the Indians have waived the right to claim a breach of the lease’s terms. While it is a generally stated rule that the lessor’s acceptance of rent after the lessee’s breach implies a waiver of that breach, this concept, involving the knowing relinquishment of a right, is a matter of intent which necessarily depends on the factual circumstances of each case. Jose v. Iglesias, 462 F.2d 214, 216 (9th Cir. 1972); In re Wil-Low Cafeterias Inc., 95 F.2d 306, 309 (2d Cir.), cert. denied, sub nom., Wil-Low Cafeterias Inc. v. 650 Madison Avenue Corp., 304 U.S. 657, 58 S.Ct. 950, 82 L.Ed. 1533 (1938). Thus, “ [acceptance of rent is evidence to be considered by the trier of fact, but it is not necessarily conclusive.” Jose v. Iglesias, supra, 462 F.2d at 216; cf. Bledsoe v. United States, 349 F.2d 605, 607 (10th Cir. 1965); Smith v. United States, 113 F.2d 191, 193 (10th Cir. 1940).

Negotiations among the parties continued for some three years after Sessions defaulted in January, 1966. Some of the options being considered during that time were whether Sessions would pay an increased rental, proceed with full development based on a new, long term lease, or surrender the premises to the lessors. The district court found that under these circumstances the Indians had not so conducted themselves as to permit the conclusion that they had waived Sessions’ default. This finding was not clearly erroneous.

Although we might have concluded differently from the district court were this issue being tried before us in the first instance, it is not our function to review the evidence de novo. Zenith Corp. v. Hazeltine, 395 U.S. 100, 123, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969). Under Rule 52(a) of the Federal Rules of Civil Procedure, we must accept the district court’s findings of fact unless we are convinced that they are clearly erroneous. We are not left with a definite and firm conviction that a mistake was committed by the district court. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948).

Affirmed.

      . Section 702 provides: “A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.”

      . Section 2201 provides in pertinent part: “In a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.”

      . The Secretary does not appeal from this decision.

      . The district court found the evidence confusing as to whether plans were received on 'this date and stated that “it appears that no plans were ever received by the Area Director of the Bureau of Indian Affairs.” 348 F.Supp. at 697 n. 1. Since the district court reached no firm conclusion on this point, and because the record shows that Sessions did send a letter containing such plans on this date, we must assume that it was received in due course by the B.I.A. At any rate, Sessions made the same proposals to the Indians and the B.I.A. through its attorneys on October 28, 1966. It was these plans which the district court found required substantial changes in the terms of the lease. Id. at 698.

      . Our holding in this ease is a narrow one since we conclude that the B.I.A. was under no obligation to respond to Sessions’ first plan. Hence, we need not consider the consequences of the B.I.A.’s failure to faithfully discharge its responsibilities toward the Indians in the management of the trust obligations. Nevertheless, we doubt that the B.I. A.’s negligence can be imputed to the Indians so as to estop them from exercising their rights under contract. See United States v. Forness, 125 F.2d 928, 932-933 (2d Cir.), cert. denied sub nom., City of Salamanca v. United States, 316 U.S. 694, 62 S.Ct. 1293, 86 L.Ed. 1764 (1942).


source: Caselaw Access Project

author: DOYLE, Circuit Judge.

license: Public Domain

text:
    Fred BALDRIDGE et al., Plaintiffs-Appellants, v. John R. HADLEY et al., Defendants-Appellees, and United States of America, Intervenor-Appellee, Cross-Appellant.
    Nos. 73-1320, 73-1321.
    United States Court of Appeals, Tenth Circuit.
    Argued Nov. 13, 1973.
    Decided Jan. 9, 1974.
    Rehearing Denied January 30, 1974.

      Lynell G. Skarda, Clovis, N. M. (Michael T. Garrett, Garrett & Hartley, Clovis, N. M., on the brief), for plaintiffs-appellants.
    Michael H. Stein, Atty., Dept. of Justice, Washington, D. C. (Irving Jaffe, Acting Asst. Atty. Gen., Victor Ortega, U. S. Atty., and Robert Kopp, and Walter H. Fleischer, Attys., Dept. of Justice, on-the brief), for defendants-appellees, intervenor-appellee.
    Before SETH, ALDISERT and DOYLE, Circuit Judges.
   DOYLE, Circuit Judge.

This is an action which was. commenced by Fred Baldridge, Travis W. Taylor and Herman D. Terry, seeking to set aside the determination of the New Mexico State Agricultural Stabilization and Conservation Committee, which determination had been affirmed by the Secretary of Agriculture, holding that the plaintiffs and others had engaged in a scheme or device designed to evade the limitation placed upon producers who participate in the Conservation Reserve Program under the Soil Bank Act, 7 U. S.C. § 1801 et seq. The Committee ruled that the device was entered into for the purpose of gaining reserve contracts. It was held that these contracts were void in that they were part of a fraudulent' scheme to circumvent the limitation of the Act and that as a consequence Baldridge was liable for the monies which had been paid by the government in the belief that the parties involved were bona fide owners. The amount of the judgment was $232,211.10 plus an additional sum against Fred Baldridge in the amount of $31,966.56, pursuant to the False Claims Act, 31 U. S.C. § 231. The appeal here' is from a judgment of the district court which generally upheld the administrative actions.

The governing jurisdictional statute is 7 U.S.C. § 1831(d) which authorizes a trial de novo in United States District Court of the decision of the Agricultural Stabilization and Conservation Committee. The United States intervened in the district court asserting claims against the plaintiffs on the independent jurisdictional basis of the False Claims Act, 31 U.S.C. § 231 et seq., and for misrepresentation, 28 U.S.C. § 1345.

The transaction giving rise to these proceedings in question commenced in 1958, at which time Robert Draper was the owner of a 4,300 acre farm in New Mexico. He entered into negotiations with Fred Baldridge and T. E. Bald-ridge, son and father, for the sale of this farm. For the purpose of the transaction the farm was divided into seven tracts of 640 acres each. Six of these were transferred to Fred Bald-ridge, Travis W. Taylor, Sam L. Henderson, Thomas Fred Adams, Henry E. Baldridge, Jr. and Herman D. Terry. Robert Draper retained the seventh tract. An agreement was entered into under the terms of which each of the grantees would with his particular tract become a participant in the Conservation Reserve Program. Each of the grantees executed a promissory note to Draper secured by a mortgage on the parcel deeded. The note provided in essence that the payee agreed to look solely to the property described in the mortgage and that no deficiency would be entered against the maker of the note. Each of the grantees executed a warranty deed on the property to Fred Bald-ridge. These deeds were delivered to the Citizens Bank of Clovis, New Mexico, to be held in escrow pursuant to contracts of sale from the five relatives and Draper to Fred Baldridge. The contracts expressed the consideration as being Fred Baldridge’s performance of all work necessary under the Conservation Reserve Program for the ten-year period commencing in 1959, that is, the cultivation and seeding required by the Department of Agriculture. A further provision was that the sellers were to pay to Baldridge all sums received by them from the Department of Agriculture in connection with work performed on the land, and finally provided that after completion of the ten-year Soil Bank contracts the deeds were to be delivered to Baldridge.

The original grantor, Robert Draper, entered into the same kind of an arrangement, that is, he executed a note in favor of Fred Baldridge for $47,464.77 and was also a party to the contract. The purchasers, including Draper, applied for participation in the Conservation Reserve Program. The County A. S.C. Committee the first year denied the applications, but granted them the next year.

Significantly, all of the participants in this were relatives of Baldridge with the exception of Robert Draper, the grantor. A regulation, 22 Fed.Reg. 9641, provides that eligibility hinges on the understanding that the property for which application is made would, in the absence of the granting of the award, be farmed by the new owner. Very soon after the approval of the tracts of land for participation in the program, the participants, as noted, signed contracts of sale for their respective sections to Fred Baldridge.

The - trial court’s further findings, supported by the record, are as follows:

Fred Baldridge performed under the contracts and brought all the tracts into compliance with Conservation Reserve Program requirements. A temporary cover crop of maize and hygeria was planted in 1959. The crop was allowed to fall in the field for the purpose of protecting the permanent cover crop to be planted the following year. Several miles of fence were constructed to complete enclosure of the farms. In 1960 Fred Baldridge planted a permanent cover of African Weeping Lovegrass. From 1960 to 1968 all that was required of Fred Baldridge to keep the farms in compliance was to replant several small areas in Weeping Lovegrass, control noxious weeds and repair fences when necessary to keep stock out of the fields.
In return for Fred Baldridge’s work, annual payments were made under the Conservation Reserve Program in the following totals:
Travis Taylor $33,906.60
Sam Henderson 34,894.30
Thomas F. Adams 28,931.40
Henry E. Baldridge 26,371.20
Herman Terry 39,655.70
Fred Baldridge 28,551.00
Robert Draper 39,900.90

Payments on the land to or for Robert Draper were made by the participants in the following totals:

Travis W. Taylor $22,162.14
Sam Henderson 19,445.40
Thomas Adams 18,686.46
Henry E. Baldridge, Jr. 17,174.43
Herman 0. Terry 25,855.83
Fred Baldridge 32,016.23
Robert Draper, T. E. Baldridge and Fred Baldridge, without disclosing their intention to the other parties involved, agreed among themselves in 1958 that the entire farm would be sold for around $160,000.00. They then computed the payments to be made by the buyers to total about $210,000.00. The excess $50,000.00 was to be rebated to Fred Baldridge over the ten year period at the rate of $3,352.11 for the first six years and $8,000.00 per year thereafter. This accounts for the $47,464.77 note Robert Draper executed in favor of Fred Baldridge on March 3, 1958, and under which he made payment of $3,352.11 in 1959.
The applicable regulations in force in 1959 provided in pertinent part:
“The total of all annual payments under the conservation reserve program to pay any producer for any year with respect to all farms in which he has an interest shall not exceed $5,000.00. ... All or any part of the annual payment which otherwise would be due any producer may be withheld, or required to be refunded, if he has adopted or participated in adopting any scheme or device or by any other means designed to evade, or which has the effect of evading the provisions of this section.” 21 Fed.Reg. 6296, 8793 (1956).
“In the event the Secretary determines that there has been a violation of any contract during the time the producer has control of the farm, and that such violation is of such a substantial nature as to warrant termination of the contract, all rights to annual and cost share payments and grants under the contract shall be forfeited and all such payments and grants received by the producer shall be refunded with interest at the rate of 6% per annum.” 21 Fed.Reg. 6297 (1956).

In 1965 one of the relatives (Henderson) decided to drop out of the program and he refused to make his annual payment to Draper. However, the payment was made by Fred Baldridge’s mother and Baldridge immediately withdrew from escrow Henderson’s deed and the deed to the' land of Draper, who obtained a Conservation Reserve contract on it. About this same time the contract on Draper’s farm, that is the one that he had retained, expired. As to the farm that Draper had retained, that is A-109, Baldridge had the legal right to take possession of it. Notwithstanding this, however, Draper executed another deed in favor of Baldridge and Bald-ridge entered into an option agreement to purchase this farm and to lease it. He then applied to receive payments under the Crop Land Adjustment Program, 7 U.S.C. § 1838. On the assumption that he was a lessee, the government paid him $14,983.28.

The trial court found that the ultimate object of the program was to have the government pay the full purchase price of the farm. The court further found as evidencing the scheme that Baldridge withdrew all of the remaining warranty deeds from the relatives in March 1969, notwithstanding that under their terms they were not to be delivered until December 1969. The district court, in addition, made the following findings of fact:

1. That Baldridge received kickbacks on rebates from Draper in the form of payments on Draper’s $47,464.77 promissory note.

2. That in 1959 Baldridge received $3,684.00 directly from his Conservation Reserve Program contract annual payment, and in the same year he received an additional $3,352.11 in the form of a rebate from Robert Draper. The court was of the opinion that this of itself constituted a violation of the contract between Baldridge and the Conservation Reserve Program.

3. That the relatives realized little after payment of income tax on the amounts received.

4. That the relatives acted as agents for Fred Baldridge, who was found to have been the instigator of the plan, the purpose of which was to evade the maximum payment limitation causing the government to pay for a seven tract farm rather than a single tract.

The trial court refused, however, to allow recovery of double damages under the False Claims Act. The reason for this was that they had processed the ease through the administrative procedure and obtained a full recovery from Baldridge of amounts paid to him and all of the other participants so that it would not be just to allow the government to elect to proceed under the False Claims Act after having previously elected to proceed administratively. The government has cross-appealed on this issue.

In addition to the government’s point just mentioned raised on cross-appeal, the issues revolve around these points posed by appellants:

1. The contention of appellants that the deeds were inoperative because they were in escrow, leaving Baldridge without the requisite interest.

2. The alleged insufficiency of the evidence to establish a scheme and whether the elements of actionable fraud are present.

3. The alleged insufficiency of the evidence to support the trial court’s finding of a violation of the Cropland Adjustment Program, and its assessment of double damages and forfeiture thereunder.

I.

LEGALITY AND EFFECT OF THE DEEDS

Appellant Baldridge first argues that under New Mexico law a deed placed in escrow is effective as of the date of final delivery. He relies on the decision of the New Mexico Supreme Court in Mosley v. Magnolia Petroleum Co., 45 N.M. 230, 114 P.2d 740 (1941). Here two deeds were given, one of them conveying a one-half interest in minerals and the other one-fourth. They were deposited in a bank in escrow awaiting payment of the purchase price in the amount of $800.00. The grantee obtained the deed conveying the one-half interest and did so unlawfully. He sold it to a third person for $800.00, first altering it. He then took the $800.00 back to the bank and received the deed to the undivided one-fourth. Subsequently, the previous owner sought to quiet title. The Supreme Court of New Mexico concluded that the deed originally given was void because it had not been delivered, because it had been fraudulently obtained from the escrow holder without complying with the agreement and, furthermore, had been illegally altered, and so the title of Mosley, the original owner, was recognized. This case is easily distinguishable. There the deed was illegally obtained from escrow and was invalidly altered. Assuming then that the law of New Mexico applies, the effect of this decision would not be that Bald-ridge would have no interest in the land. In truth he had all of the interest. Indeed, it was shown that he had ready access to the deeds should he need them. The relatives were thinly veiled agents who had renounced all interest in the property.

We are of the opinion that the trial court was eminently correct in ignoring the forms which were erected and recognizing the true facts. Counsel for Baldridge argues that this was all legal and therefore non-fraudulent. We disagree. The arrangement has the evidences of a devious sham which was designed to deceive. Its elaborate legal structure, while giving it the look of legality, does not bear scrutiny.

In sum, we need not here be concerned with the issue posed by appellants, namely, the effectiveness of the deeds. Our inquiry concerns the transaction in its entirety and whether it was a deceptive effort.

II.

THE CONTENTION THAT THE DEFENDANTS’ CONDUCT WAS NOT FRAUDULENT

Defendants argue that Baldridge was not the sole or even the principal actor in this effort, whereby he can be held liable for all of the Conservation Reserve payments received by the transferees. As we have indicated above, the evidence shows that the participants-relatives were, so to speak, strawmen. They merely participated as agents of Baldridge by going through the formalities. They executed warranty deeds to Baldridge for a nominal consideration and Baldridge acted as owner of the farm throughout the period of the payments. His mother made the payment on behalf of Henderson when the latter defaulted and withdrew, and subsequently he treated the Henderson parcel as if it were his own. He also paid the real estate taxes on Draper’s parcel.

The trial court relied on all of these factors in its holding that Fred Baldridge was the principal in developing a plan, scheme or device to evade the maximum payment limitation by dividing the farms and obtaining several payments rather than one. The trial court correctly found that the entire transaction was conducted by Baldridge for his own benefit. The only tenable conclusion is that there was a fraud and that Baldridge perpetrated it. The fact that it was not in the form of traditional false representations does not detract from the conclusion.

The applicable federal regulation, 7 C.F.R. § 750.164, provides for a maximum payment limitation of $5,000.00 to any producer for any year with respect to all farms in which he has an interest. The regulation further provides that it is a violation of the contract if the producer has adopted or participated in adopting a scheme or device, the effect of which is to evade or exceed the maximum payment limitation. See 7 C.F.R. § 750.294(i). Money received contrary to the maximum payment limitation is forfeited under 22 Fed.Reg. 4781 (1957) and 25 Fed.Reg. 1868 (I960], so both the letter and spirit of the regulations cover the problem at bar.

As previously noted, Baldridge was the principal actor and qualified as a producer pursuant to 7 C.F.R. § 750.-150(q). Moreover, the other relatives, including Travis Taylor and Herman Terry, do not meet the definition contained in the mentioned regulation and thus the court was correct in exonerating them.

III.

CONTENTION THAT APPELLANTS DID NOT VIOLATE CROPLAND ADJUSTMENT PROGRAM

Baldridge seeks to reverse the district court’s additional $31,966.56 judgment against him under the False Claims Act for fraudulent violation of the Cropland Adjustment Program (C. A.P.) under the Food and Agricultural Act of 1965, see 7 U.S.C. § 1838 and the applicable regulations, 7 C.F.R. § 751.-101 et seq. The evidence discloses that Fred Baldridge received C.A.P. payments by representing to the government that 1) he was a cash lessee of the farm and 2) the farm had not changed hands during the preceding three years. Baldridge supported these representations by recording a ten-year farm lease agreement entered into with Robert Draper. In actuality, however, Fred Baldridge was the owner of the land in question, a valid deed to the property having been delivered to him on January 1, 1966. Baldridge, therefore, created the artificial lessee relationship for the purpose of the claim.

The Baldridge argument is again a legalistic one, that the delivery of the deed was not effective to pass title in the absence of intention by both the grantor and grantee, who now claim that the deed was held by Baldridge solely for security. Both the argument and the lease are transparent and unconvincing. The evidence established that Robert Draper had deeded the property to Baldridge in 1958. The deed was delivered in 1966, but was not recorded. The trial court found that the subsequently recorded farm lease was wholly fictitious and presented solely for the purpose of causing the United States to pay to Baldridge money to which he knew he was not entitled. The court’s finding was supported by the facts presented. Like his efforts to receive Conservation Reserve payments, Baldridge’s actions in this endeavor were also designed to procure government payments which were not rightfully his. True, this transaction is less circular and complex than the others, but it is no less deceptive in nature.

We see no basis for disturbing the trial court’s ruling.

IV.

THE QUESTION WHETHER THE GOVERNMENT IS ENTITLED TO DOUBLE DAMAGES UNDER THE FALSE CLAIMS ACT

In the counterclaim of the government which was filed in the action which Baldridge brought seeking to set aside the A.S.C. award, the government sought double or penalty damages under the False Claims Act, 31 U.S.C. § 231 et seq. which provides for the payment of the penalty sum of $2,000.00 and, in addition, double the amount of damages which the United States may have sustained by reason of the doing or committing of such act. The trial court denied the government’s claim under the False Claims Statute on the basis that it was inconsistent and unjust to allow the government to proceed under the Soil Bank Act initially and then subsequently to file another and different claim under the False Claims Act.

We agree with the trial court’s conclusion op this. The principle which comes to mind is that of the incompatibility of the remedies of rescission and damages. It does not tolerate vacillating from one remedy to another.

At bar the government’s action in pursuing the administrative remedy is in the nature of a rescission of the contracts which it had with the several persons involved and a claim for restitution of the money paid out in the mistaken belief that the demands were bona fide and valid. The essential nature and character of the false claims demand is, on the other hand, an action in damages seeking recovery of the penalties provided by statute. We disagree with the government’s argument that these remedies are supplemental to any other remedies provided by law. There are no decisions which deal with the identical issue presented in our case either from this Circuit or elsewhere. We are persuaded, nevertheless, that the trial court’s reasoning is valid. Both claims arise from the identical set of facts, and in these circumstances at least it is unfair to allow the government to compound its measure of damages by proceeding under a supplemental remedy.

There had been an adjudication on the one theory at the administrative level prior to the filing of the action in court, and so the test of res judicata suggested by Professor Moore is also present.

Accordingly, it is our view that the trial court ruled correctly on this and, therefore, the government’s cross-appeal must be denied.

The judgment of the district court is affirmed.

      . Generally, “fraud” consists of some deceitful practice or wilful device resorted to for the purpose of inducing another, in reliance upon it, to surrender money, property, or legal rights, and it connotes perjury, falsification, concealment and misrepresentation. See Knauer v. United States, 328 U.S. 654, 66 S.Ct. 1304, 90 L.Ed. 1500 (1946) ; J. F. White Engineering Corp. v. General Ins. Co. of Amer., 351 F.2d 231 (10th Cir. 1965) ; Nichoalds v. McGlothlin, 330 F.2d 454 (10th Cir. 1964) ; 37 C.J.S. Fraud § 1.

      . See S.E.C. v. Capital Gains Research Bureau, 375 U.S. 180, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963) where the Supreme Court concluded that statutory “fraud or deceit” need not be interpreted technically so as to require the traditional misstatement and intent to injure, which are necessary elements of common law fraud. Rather Congressional enactments and administrative regulations should be interpreted broadly and liberally in order to effectuate their essential purposes.

      . This claim was not presented in the administrative proceeding but was raised by the government for the first time at the trial de novo in district court. Thus, the government is not seeking to exploit an area in which it has already had a recovery as in Part II above.

      . Compare Fleming v. United States, 336 F.2d 475 (10th Cir. 1964).

      . The trial court said :
      . . . The government lias introduced evidence which is clearly and convincingly persuasive that recovery could be allowed against Fred Baldridge under a common law fraud theory. The evidence which supports the committee’s conclusion is equally convincing that Fred Baldridge knowingly perpetrated a fraud upon the government. However, a recovery under a common law fraud theory would be no greater than the recovery already allowed by sustaining the committee action. Thus the necessity for further discussion of a common law fraud recovery is obviated. It should be noted that if the administrative procedure had been inadequate or unavailable to sustain the full recovery of $232,211.10 against Fred Baldridge, the government would be entitled under the evidence in this cause to a judgment in that amount against him for common law fraud.
      Recovery will not be allowed against Fred Baldridge under the False Claims Act. Having proceeded through the administrative process and obtained a full recovery from Baldridge of all amounts paid to him and the other participants, it would not now be just to allow the government to elect to proceed under the False Claims Act and recover the double damages provided thereunder.

      . This doctrine is discussed in IB J. Moore, Federal Practice Section 0.405, at 764-65 (2d ed. 1953) as follows :
      . . . An election of the substantive right to affirm extinguishes the substantive right to disaffirm. And' so an attempt to invoke the remedy of rescission after an action on the contract may fail, not because of election of inconsistent remedies, but because the plaintiff no longer has the substantive right to disaffirm.
      The result in other cases decided upon the basis of election of remedies can often be justified today upon general principles of res judicata. In those jurisdictions where a litigant can present all the bases for a claim, whether legal or equitable, inconsistent, alternative or hypothetical, in a single action, failure to invoke all “inconsistent remedies” in an initial suit which goes to final judgment on the merits should preclude their assertion in subsequent litigation between the parties and their privies—not because of election of remedies, but because a final judgment on the merits is res judicata as to all matters pertaining to a single cause of action which might have been litigated.


author: PELL, Circuit Judge.

text:
    LASER ALIGNMENT, INC., and Contractors Automated Devices, Inc., Plaintiffs-Appellants, v. WOODRUFF & SONS, INC., and Roy J. Woodruff, Defendants-Appellees.
    Nos. 72-1254, 72-1255.
    United States Court of Appeals, Seventh Circuit.
    Argued April 4, 1973.
    Decided Jan. 22, 1974.

      Donald- H. Zarley, Des Moines, Iowa, Lloyd A. Heneveld, Grand Rapids, Mich., for plaintiffs-appellants.
    Eugene C. Knoblock, South Bend, Ind., for defendants-appellees.
    Before CLARK, Associate Justice, and FAIRCHILD and PELL, Circuit Judges.

       Associate Justice Tom C. Clark, United States Supreme Court, Retired, is sitting by designation.

   PELL, Circuit Judge.

Plaintiffs Laser Alignment, Inc., (Alignment) and Contractors Automated Devices, Inc., (Contractors) brought this patent infringement action against Woodruff & Sons, Inc., (Woodruff) and Roy J. Woodruff, alleging infringement of Trice Patent No., 3,116,557, owned by Contractors and licensed exclusively to Alignment. The Trice patent, issued January 7, 1964, and entitled “Method and Means for Laying Sewer Pipe,” involves, in the words of the patent, “a method and means for laying said pipeline on a selected grade line by resort to establishing a light beam line of reference.” The complaint sought a permanent injunction, triple damages, and costs. In their answer and counterclaim, the defendants challenged both validity and infringement. They also asserted misuse of the patent as a defense.

After a full trial on the merits, the district court held: (1) the Trice patent is valid; (2) the defendants had not infringed the patent; and (3) the plaintiffs had not misused the patent. Plaintiffs appeal the finding of noninfringement. Defendants appeal the court’s resolution of the other two issues.

I

Prior to the development of Trice’s method for laying underground pipe, pipes usually had been laid by the batterboard or the offset batterboard methods. Both traditional methods required supporting rigid boards on support stakes at predetermined altitudes and strings tied between the stakes from which measurements were taken to align properly the sections of pipe. This procedure, despite being time-consuming and costly, was often inaccurate.

James Trice, a pipe-laying entrepreneur discomfited by the unsatisfactory prevailing methods, experimented with improvements. Eventually, he decided that the use of a collimated beam of light smaller than the inside diameter of the pipe to be laid was a better method. He thereupon developed a projector to create the parallel light rays. The apparatus projected the collimated beam into a ring-shaped target housing on which there was a piece of frosted glass with cross hairs thereon. Using his light projector and target, he was able to lay and align sections of pipe.

On December 4, 1957, Trice filed a patent application. It contained claims devoted to an apparatus, to a method, and to a system. The application pended for more than six years, following which time the Patent Office granted Trice patent No. 3,116,557 on two method or process claims. Significantly, no patent was granted on apparatus. Trice’s method, in the words of the district court,

“was characterized by a series of steps including projecting a collimated narrow beam of light in a trench along a desired course for the pipeline and then individually positioning or stacking the sections of the pipe, seriatim, end-to-end, one after another, with their axes along this beam, the light beam being projected through the pipes and the position of each pipe being observed by sighting with a target having a translucent screen removably inserted in the end of each pipe section to extend across the pipe axis.”

After receiving his patent, Trice set up a corporation, Contractors Automated Devices, Inc., which manufactured several systems called the “Beam-A-Ligner.” Three contractors bought these systems and successfully practiced the method by the use of the equipment.

At about the same time that Trice was beginning to produce his “Beam-ALigner,” a Michigan contractor, Roger Roodvoets, heard about a light beam, with a laser as its source, that Laser Lign, Inc., of Illinois was manufacturing for use in sewer construction. The laser —the device’s name is an acronym for “L(ight) a(mplification by) s(timulated) e(mission of) r(adiation)”—had not yet been invented when Trice filed his patent application in 1957. The principal features of the laser, the district court found, are “its single-frequency characteristic, its energy density characteristic, and the inherent high degree of eollimation or directionality of its beam without assistance of any kind of lens. All sources of light other than the laser and the sodium are lamp at two frequencies tend to emit light in all directions and beams therefrom are collimated by eliminating the element of divergence.” The laser became available to the public only in 1963 and was not widely known until the mid 1960’s.

Trice in his experimentation prior to the invention of the laser had achieved the nondiffusing effect apparently inherent in the laser beam by placing a lens the exact focal length away from a light source, thereby creating parallel light rays. The patent he was granted, however, was for a method and not for apparatus, and the claims of the patent here involved refer to a collimated narrow beam of light rather than to particular apparatus projecting that light.

Roodvoets’s firm experimented for over a year with the Laser Lign equipment but was unable to make the apparatus perform satisfactorily. While negotiating with a Michigan company to build a complete laser with housing and grade equipment, Roodvoets learned of the Trice patent and Trice’s “Beam-ALigner” apparatus. Roodvoets purchased one of these systems and successfully laid 200 feet of pipe with it. He decided, however, that the newly discovered laser source should be substituted for the white light source of the “Beam-A-Ligner.” Alignment, the 'firm that Roodvoets had formed, entered into an agreement with Trice, improved the equipment, adapting it to a laser light source, and later offered it commercially. Alignment followed a policy of selling its apparatus only in conjunction with the grant of a sublicense to practice the patented Trice method. However, contractors who wished to purchase equipment from other companies could obtain licenses on the same terms as Alignment’s customers did.

In November 1963, an Arkansas concern, Blount and George, was founded to further Blount’s idea, apparently conceived without knowledge of Trice’s earlier work, of laying pipe with a light beam instead of by the traditional, cumbersome batterboard method. In early 1964, after having tested other light sources, Blount and George began to experiment with lasers and b.uilt an apparatus called the “Automated Grade Light” (AGL). Several contractors used this equipment in mid 1964. Subsequently, on September 10, 1964, Blount and George filed a patent application asserting ten claims. The Patent Office in January 1966 rejected seven of the claims, one (claim no. 10) because it was deemed unpatentable over the Trice method. Blount and George amended its application, and, on October 18, 1966, the Patent Office granted patent 3,279,070 on seven claims. These claims, however, pertain only to specific apparatus.

Defendant Woodruff corporation read a December 1964 newspaper article about Blount and George’s AGL system and, as a consequence, purchased some of the equipment. Woodruff eventually became a distributor of Blount and George’s apparatus.

On or about May 8, 1968, the plaintiffs sent the defendants written notice of the existence of the Trice patent, alleged infringement, and offered the defendants a sublicense under the patent. On September 30, 1968, the plaintiffs filed the present patent infringement action.

II

Defendants challenge the validity of the Trice patent on several grounds: (1) lack of novelty under 35 U.S.C. §§ 101 and 102; (2) obviousness under 35 U.S.C. § 103; (3) failure to claim distinctly the invention and failure to describe it, 35 U.S.C. § 112; (4) old and exhausted combination; and (5) addition of new matter in violation of 35 U. S.C. § 132.

In a scholarly and detailed memorandum opinion, the district court considered and rejected each of the defendants’ contentions. Although, and unfortunately, the district court opinion has not been published, we can conceive little purpose in now proliferating this reported decision by the factual minutiae necessarily examined and reported on by the district court in its disposition. Holding that the district court’s opinion did correctly dispose of the validity issue, we therefore advert only to the principal bases on which we rest our approval and leave to those who may wish to know more about the prior art in this phase of ditehdigging the task of securing a copy of the district court’s memorandum opinion from the clerk of that court.

As the district court correctly pointed out, a party asserting a patent’s invalidity bears the burden of proving invalidity and must overcome by clear and convincing proof the presumption of validity established by 35 U.S.C. § 282. Walt Disney Productions v. Fred A. Niles Communications Center, 369 F.2d 230 (7th Cir. 1966). Further, this initial presumption is strengthened where the Patent Office, before granting the patent, has considered the prior art references, or equivalent references, relied upon by the party claiming invalidity. Ekstrom-Carlson & Co. v. Onsrud Machine Works, Inc., 298 F.2d 765 (7th Cir. 1962), cert. denied, 369 U.S. 886, 82 S.Ct. 1160, 8 L.Ed.2d 287; American Needle & Novelty Co. v. Schuessler Knitting Mills, 258 F.Supp. 98, 105 (N.D.Ill.1966).

In order to overcome the presumption of validity and to show that the Trice patent was obvious, the defendants introduced into evidence as prior art four publications and twenty-one patents, most of which had either béen before the Patent Office Examiner or were equivalent to those that had been considered. After examining the evidence, the district court upheld the validity of the Trice patent. As stated, we concur in the court’s evaluation of the exhibits and in its judgment on the validity issue.

III

Regretfully, because of the obviously careful attention given to this case by the district court, we do not agree with its holding that there had been no infringement. Our review of the issue is based on documentary evidence and substantially undisputed facts and concerns, in essence, the legal construction of the scope of the patent claims. We are not bound, therefore, by the findings of fact of the district court, Hart v. Gallis, 275 F.2d 297, 299 (7th Cir. 1960). In any event, we are, on the entire evidence, left with the definite and firm conviction that a mistake has been committed. We conclude, contrary to the district court’s opinion, that defendants did practice the patented Trice method. Having done so without having obtained a sublicense from Laser Alignment, they infringed the Trice patent.

A

The basis of the district court’s holding that defendants had not infringed the Trice patent was that “[t]he use of a beam generated by a laser in a method of laying sewer pipe cannot infringe a claim directed to use of a collimated beam of light contained in a patent whose application was filed before the invention of the laser.” In conjunction with this conclusion, the court further stated that “even if we treated the laser beam under the ‘doctrine of equivalents’ we would not find it to be an equivalent to the ‘collimated narrow beam of light’ called for in the Trice patent claims.”

We think that the district court placed undue emphasis on the apparatus creating the collimated beam of light. The important point is that the use of a collimated beam of light is a step in the Trice methods patent. The claims of a patent are the measure of its grant, see Graver Tank & Mfg. Co., Inc. v. Linde Air Products Co., 339 U.S. 605, 70 S.Ct. 854, 94 L.Ed. 1097 (1950), Milcor Steel Co. v. Fuller Company, 316 U.S. 143, 62 S.Ct. 969, 86 L.Ed. 1332 (1942), and Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 419, 28 S.Ct. 748, 52 L.Ed. 1122 (1908). A fair reading of the Trice claims indicates that Trice’s invention consisted of a method of, not an apparatus for, laying underground pipe by projecting any collimated narrow beam of light through pipes as a reference line, the intercept of which with a translucent target provides a guide for the laying of such pipes. We find no real dispute in the record of the fact that the laser beam used by the defendants was a collimated narrow beam of light. Under the simplified, literal infringement test set forth in Graver, supra, 339 U.S. at 607, 70 S.Ct. at 855,

“[i]n determining whether an accused device or composition infringes a valid patent, resort must be had in the first instance to the words of the claim. If accused matter falls clearly within the claim, infringement is made out and that is the end of it.”

We, therefore, have conceptual difficulty in typifying the laser beam when utilized in the Trice method as being a substituted process step. The laser beam, like the white light beam originally used in the practice of the Trice method, is a “collimated narrow beam of light” called for by the Trice patent. To emphasize the fact that the collimated beam of light to be used in the patented method may be produced by a variety of apparatus is to lose sight of the patent’s most significant characteristic .—it relates to a method, not to apparatus.

We find it unnecessary, however, to rest our decision on the simple Graver test, set forth above. We turn to a consideration of the applicability of the doctrine of equivalents:

“The test of identity or equivalence of two processes is not the apparatus or materials used but whether they involve identical or equivalent steps. Steps are equivalent if they work in substantially the same way to accomplish the same results.” Kemart Corp. v. Printing Arts Research Laboratories, Inc., 201 F.2d 624, 629 (9th Cir. 1953). (Footnotes omitted.)

The district court in finding the doctrine of equivalents not to be applicable focused on the fact that the laser had not been invented at the time the Trice patent application was filed. In support of the result it reached in this respect, the district court relied on three Supreme Court decisions: Gill v. Wells, 22 Wall. 1, 89 U.S. 1, 22 L.Ed. 699 (1874); Fuller v. Yentzer, 94 U.S. 288, 24 L.Ed. 103 (1876); and Halliburton Oil Well Cementing Co. v. Walker, 329 U.S. 1, 67 S.Ct. 6, 91 L.Ed. 3 (1946).

As we read these cases, ample basis exists for differentiating them factually from the case before us. Indeed, on the point in question, Fuller and Halliburton treat the matter in dicta. The decision of the Court in Gill to reverse the lower court could have rested on any one of several grounds, the timing portion pertinent here not being the primary basis of the Court’s decision. Nevertheless, there seems to be support for a doctrine in patent law that for the doctrine of equivalency to be applicable the substituted process step must have been known at the date of the patent as a proper substitute. See 69 C.J.S. Patents § 303, at 878 (1951).

Even if we assume arguendo, despite the fact that the laser beam is literally a collimated narrow beam of light, that the existence or nonexistence of the laser might have some bearing on the infringement issue, it is our opinion that the district court improperly determined the crucial 'time to be the date of the patent application, here 1957, rather than the date the patent was granted, January 1964.

The cases relied upon by the district court do not specify whether the date of application or the date of granting controls. Gill, for example, states that “the substituted ingredient in such a case must be one which was known at the date of the original patent as a proper substitute for the ingredient left out.” (Emphasis in the original, 89 U. S. at 31-32). Similar references to the vague term “date of the patent” appear in the other cases.

'A priori, it would appear to us that to carve out of infringing status an equivalent substituted step, even though it clearly is within the literal language of the claim, if that step came into existence after the filing but before the grant would be to narrow unduly the protection supposedly afforded by the patent. We recognize, of course, that for the purpose of priority of invention the effective date of a patent is the filing of the application. See, e. g., Alexander Milburn Co. v. Davis-Bournonville Co., 270 U.S. 390, 46 S.Ct. 324, 70 L.Ed. 651 (1926). The obvious necessity for a relation-back rule in cases of this type does not exist in the present situation.

In our opinion, the Supreme Court intended a patentee to be allowed to challenge successfully the use of a substituted ingredient that was known by persons reasonably skilled in the relevant art as of the date the Patent Office granted the allegedly infringed patent. For example, in Seymour v. Osborne, 11 Wall. 516, 78 U.S. 516, 555-556, 20 L.Ed. 33 (1871), decided several years prior to Gill, Mr. Justice Clifford, who also authored Gill, speaking for the Court, stated:

“They [holders of patents] cannot suppress subsequent improvements which are substantially different, whether the new improvements consist in a new combination of the same ingredients, or of the substitution of some newly-discovered ingredient, or of some old one, performing some new function not known at the date of the letters patent, as a proper substitute for the ingredient withdrawn from the combination constituting their invention. Mere formal alterations in a combination in letters patent, however, are no defence to the charge of infringement, and the withdrawal of one ingredient from the same and the substitution of another which was well known at the date of the patent as a proper substitute for the one withdrawn, is a mere formal alteration of the combination if the ingredient substituted performs substantially the same function as the one withdrawn.” (Emphasis added.)

It appears to us that the Court clearly intended to adopt the theory that he who would deny a charge of infringement on the basis of the newness of the substituted element must have utilized an element that was not known as a proper substitute at the date the patent’s claims were staked out in the public domain, i. e., at the date the patent was no longer pending but was granted.

We hold, therefore, that it was erroneous to find noninfringement on the ground that the laser was not in existence in 1957, the date of the Trice application. To the extent that the district court concluded that the laser beam as a substituted element was insufficiently known at the daté Trice was granted his patent, we cannot agree. The record fully supports the determination that in 1964, when the Trice patent was issued, “persons reasonably skilled in the art would have known,” Graver, supra, 339 U.S. at 609, 70 S.Ct. at 857, that the laser beam could properly (and profitably) be used instead of the white collimated beam of light. Defendants’ supplier, Blount and George, thought of using a light beam to lay sewer pipe in the early 1960’s, before they had heard of lasers, and by the time they made a patent search in 1963 they considered lasers to be “the ideal solution.” They investigated lasers and reached their conclusions about the lasers’ utility prior to the issuance of Trice’s patent. We also note Finding of Fact No. 48, in which the district court found that commercial use and sale of lasers commenced in 1961 or 1962 and that lasers were readily available by 1963 or 1964. The patent claims speak as of the date of issue, and on that date the laser was sufficiently known.

B

Turning now to the other defenses asserted by the defendants, we find them insufficient. The district court correctly found the Trice invention to be a valuable contribution to the art and one that fulfilled a long-felt need. The words of this court in Colgate-Palmolive-Peet Co. v. Lever Bros. Co., 90 F.2d 178, 192 (7th Cir. 1937), cert. denied, 302 U.S. 729, 58 S.Ct. 54, 82 L.Ed. 563, are apt here:

“We do not agree that the discovery is a minor one or that the patent must be given a narrow construction. Only a liberal construction of the claims will consistently recognize the character of the patent.”

Having considered the record in this light and having noted the processes employed by the defendants, there being*no real dispute as to the factual aspects thereof, we hold that those findings of the district court purporting to set down factual differentiations between the methods employed by the defendants and the Trice method claims as precluding infringement are clearly erroneous. In reaching this result we have not been faced with any question of credibility nor any factual dispute. Because it can be clearly ascertained from the record that infringement did occur, we find no necessity to remand for any further determination in that respect.

In Woodruff’s initial operation at the Lake of the Four Seasons, Crown Point, Indiana, where Woodruff used the light beam method for laying sewer pipe, the method practiced came within the Trice claims. Subsequent operations assumed a more sophisticated hue principally in regard to the sizes and shapes of the targets. Typical of the changes was projecting the light beam on an offset basis from the central axis described in the claim. Doing so, in our opinion, accomplishes the same work in substantially the same way. Likewise, whether the target was one that fitted snugly and tightly or was one that would roll to the flow line of the pipe being laid, at the moment of alignment the target of necessity had to be geometrically related to the pipe and its alignment. Also, the fact that the stub is aligned by means other than a light beam is nothing more than an obvious but unsuccessful effort to give an air of difference in method.

The underlying rationale of the doctrine of equivalents, which we hold to be dispositive here, was well stated by Mr. Justice Jackson in Graver, supra, 339 U.S. at 607, 70 S.Ct. at 856, as follows:

“But courts have also recognized that to permit imitation of a patented invention which does not copy every literal detail would be to convert the protection of the patent grant into a hollow and useless thing. Such a limitation would leave room for—indeed encourage—the unscrupulous copyist to make unimportant and insubstantial changes and substitutions in the patent which, though adding nothing, would be enough to take the copied matter outside the claim, and hence outside the reach of law. One who seeks to pirate an invention, like one who seeks to pirate a copyrighted book or play, may be expected to introduce minor variations to conceal and shelter the piracy. Outright and forthright duplication is a dull and very rare type of infringement. To prohibit no other would place the inventor at the mercy of verbalism and would be subordinating substance to form. It would deprive him of the benefit of his invention and would foster concealment rather than disclosure of inventions, which is one of the primary purposes of the patent system.”

What we have said herein on the matter of infringement applies to both claims of the Trice patent.

IV

Plaintiffs cannot, however, invoke the doctrine of equivalents to its full extent if “file wrapper estoppel” is applicable, as defendants argue it is. Under that doctrine, an applicant who has limited or modified a claim in order to avoid its rejection by the Patent Office may not later expand his claim by including the excluded matter, or its equivalents, or by omitting the limitations. See generally Schriber-Schroth Co. v. Cleveland Trust Co., 311 U.S. 211, 61 S.Ct. 235, 85 L.Ed. 132 (1940). See also Bishman Mfg. Co. v. Stewart-Warner Corp., 380 F.2d 336, 340 (7th Cir. 1967), cert. denied, 389 U.S. 897, 88 S.Ct. 216, 19 L.Ed.2d 214. “While equivalents may not be employed to enlarge patent claims to include areas explicitly abandoned before the Patent Office, a patent covers all devices which may fairly be called the equivalent of the ones described.” Dole Valve Co. v. Perfection Bar Equipment, Inc., 298 F.Supp. 401, 406 (N.D.Ill.1968), aff’d, 419 F.2d 968 (7th Cir. 1969).

Defendants contend that plaintiffs are now foreclosed from making the broad claims that they supposedly are making in this litigation. As defendants read the history of the Trice patent, Trice withdrew claims of a scope comparable to that which plaintiffs here assert. Defendants point out that, of 18 claims originally filed, only two limited claims were accepted by the Patent Office. They rely particularly on the Patent Office’s rejection of Trice’s original Claim 3.

The Patent Office had rejected amended Claim 3 as being unpatentable over Asbeck (a German patent) in view of Weser and Williamson (a German and an American patent). In response, Trice submitted several new claims and argued that the prior patents relied upon by the Examiner did not suggest the aligning of a plurality of pipe sections by projecting a light beam through the pipe section and fixing a target housing having a translucent screen to the end of a pipe. Subsequently, the Examiner no longer relied on the Asbeck patent but did continue the rejection on the basis of Weser in view of Williamson.

In his counterreply, Trice asserted that Weser does not disclose projecting a collimated beam of light along a selected axis nor the coupling of a target housing to the end of a tube and adjusting the housing and tube together until the center of the target is aligned with the beam.

After this final exchange of views, the Patent Office allowed the present claims in suit.

Plaintiffs read this file wrapper history as showing that the “primary point of novelty” of the Trice patent is :

“the projection of a narrow collimated beam of light along a selected axis so that the pipe layer can align the pipe end-to-end, seriatim, over this beam with the light beam projected through the pipe; the aligning being accomplished by a target coupled to the end of each pipe section in a rigorous geometrical relationship to the flow line and central axis of the pipe; the actual aligning step being áccomplished by moving the target and pipe together to align the crosshair of the target with the light beam.”

Plaintiffs assert that this interpretation is not as broad as or broader than Trice’s rejected Claim 3.

In candor, and although the plaintiffs by implication at least seem to say that Trice gave up something during the arduous term of his efforts to secure his patent, we are struck by the fact that semantically the claims in the patent as granted are basically a rephrasing of that which had been rejected. It appears to us that what in fact happened was that Trice weathered the storm on the sea of semantics and was finally successful in persuading the Examiner that that which Trice had rephrased in his final submission of claims was patentable as he probably should have been able to do on the initial effort.

Even though patent law lexicon may harbor semantical niceties of distinction, not always easily discernible, in looking at the claims in the patent as granted, we are convinced that we have not read them any more liberally than their fair intendment calls for and certainly not so as to include any aspect of the method foregone during the pursuit of the patent.

Accordingly, we reject the file wrapper estoppel contention.

V

Defendants allege that plaintiffs have misused the Trice patent, limited as it is to method, by requiring those in the pipe laying business to purchase or lease plaintiffs’ equipment in order to obtain a sublicense to practice the patented method. Thus, plaintiffs are accused of attempting to extend improperly a method patent to the unpatented apparatus needed to practice such method. The Patent Office had expressly refused to grant Trice his apparatus claims.

Alignment offers a different version of its business practices. It explains that it sells both licenses to practice the Trice method and a system of equipment which is designed to be used in conjunction with the Trice method. Because the apparatus is adapted for the Trice patented method, Alignment requires each purchaser of the apparatus to obtain a sublicense under the patent. Alignment contends, however, that it does not require a contractor to purchase the system in order to obtain a sublieense. Contractors may purchase equipment from whomever they choose, and Alignment offers sublicenses to purchasers of competitors’ equipment on terms that are identical to those offered to purchasers of its own equipment. See United States Gypsum Co. v. National Gypsum Co., 387 F.2d 799, 802 (7th Cir. 1967).

The district court rejected the defendants’ contentions that Alignment has failed to follow these policies and that plaintiffs have wrongfully threatened litigation in an effort to prevent any use of laser equipment to project a light through a pipe against a target within a pipe:

“Believing . . . that their method was being infringed, plaintiffs were not remiss in attempting to prevent use of such equipment since such equipment naturally was thought to encompass the Trice method. The letters advising sewer contractors and others of possible infringement plainly refer to the Trice patent as a method patent and offer for sale a license for $3,000 to practice such method. These letters do not require or even offer for sale the Alignment equipment. We do not read Alignment’s operating policy bulletins ... as evidencing any attempt to control the sale and rental of unpatented apparatus. We are unable to find any credible evidence of patent misuse by plaintiffs.”

Questions of patent misuse are for the trier of fact to determine. Beckman Instruments, Inc. v. Technical Development Corp., 433 F.2d 55 (7th Cir. 1970), cert. denied, 401 U.S. 976, 91 S.Ct. 1199, 28 L.Ed.2d 326. The evidence supports the district court’s findings.

We have considered the other contentions raised on this appeal by the defendants and find them to be without sufficient merit to warrant a further extension of this opinion.

Accordingly, the judgment insofar as it finds patent validity and no misuse is affirmed, but it is reversed insofar as it finds lack of infringement. The cause is remanded for further proceedings relating to damages and other relief appropriate under the circumstances and in accordance with this opinion.

      . Claim 1 of the patent as issued provides: “1. A method of laying a plurality of pipe sections along a selected rectilinear axis to form a subterranean string of pipe sections extending from a source position comprising the steps of projecting a collimated narrow beam of light from said source position along the selected axis, placing a first pipe section at a position wherein said light beam passes there-through with an end thereof incident to said light beam disposed closely adjacent said source position and coaxially aligned with said light beam, rigidly coupling a target housing member having a translucent target screen to the exit end of said first ' pipe section relative to said light beam at a position disposing the target screen across the axis of the pipe section, moving said target housing member transversely of said selected axis and thereby moving said exit end of said pipe section while observing said target screen to locate the light beam intercept with said target screen at a position aligned with the axis of said pipe section whereby said exit end of said first pipe section is coaxially aligned with said selected axis, fixing said first pipe section in its aligned position, and serially laying other pipe sections in coaxial alignment with said selected axis by transferring said target housing member to one end of each successive pipe section corresponding to said exit end, coupling the other end of such successive pipe sections to the exit end of the preceding section, and coaxially aligning the exit ends of such other pipe sections with said selected axis by moving said target housing member in the manner recited for aligning said first pipe section.”
      Claim 2 basically reiterates Claim 1 but adds the additional information that the collimated narrow beam of light is projected “from a projector at said source position along the selected axis” and also provides for “coaxially aligning said incident end of said first pipe section with the light beam by observing the disposition thereof relative to said projector.”

      . Claim 10, which the Patent Office rejected as being predated by the Trice patent, stated :
      “10. The method of aligning pipes comprising the steps of projecting a beam of light through and generally axially of the pipe and against the surface of a target, utilizing said light beam to project onto the target an image of visual markings accurately located in and on the axis of the pipe, and manipulating the pipe to cause said image to coincide with the center of the spot of light produced by said light beam on the target, and permanently positioning said pipe as thus manipulated.”
      This succinct paraphrase of the Trice claims in the patent in suit would now presumably be said by Woodruff to have been obvious in the light of prior art even in the absence of the Trice patent.

      . That claim provided :
      “3. Method of laying a sectional pipeline which comprises,
      (1) providing a collimated beam of light directed along the axis of the course of the pipeline to be laid,
      (2) placing a pipe section approximately in said course witli one end axially aligned with said light beam,
      (3) temporarily unitarily associating target means with the opposite end of said pipe section,
      (4) manipulating the end of the pipe section associated with said target means to bring it into axial alignment with said light beam,
      (5) and fixing the pipe section in its aligned position.”
      Trice also proffered an amended version of Claim 3, which subsequently was cancelled:
      “3. Method of laying a pipeline having a plurality of pipe sections which comprises,
      (1) providing a collimated beam of light directed along the axis of the course of the pipeline to be laid from one end of the course,
      (2) placing a first pipe section approximately in said course with one end axially aligned with said light beam,
      (3) temporarily unitarily associating target means with the opposite end of said first pipe section,
      (4) manipulating the end of the pipe section associated with said target means to bring it into axial alignment with said light beam, and
      (5) fixing the pipe section in its aligned position, and
      (6) thereafter for each subsequent pipe section in sequence repeating
      (7) associating said target means with the end of the pipe section corresponding to said opposite end of said first pipe section,
      (8) manipulating the end of the pipe section associated with said target means to bring it into axial alignment with said light beam, and
      (9) fixing the pipe sections in their aligned positions.”

      . The district court limited its determination of no misuse to the period prior to the issuance of its opinion. Because of its decision, with which we disagree, that the Trice patent claims do not encompass the use of a laser beam, it also warned that if the plaintiffs continued to demand that sewer contractors obtain a sublicense, plaintiffs would be misusing the patent. Our reversal of the court’s finding of noninfringement eliminates the need for such a warning.


author: PER CURIAM:

text:
    The AMERICAN ROLEX WATCH CORPORATION and Montres Rolex, S.A., Plaintiffs-Appellants, v. RICOH TIME CORPORATION, Defendant-Appellee.
    No. 69, Docket 73-1609.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 9, 1973.
    Decided Jan. 4, 1974.

      Siegrun D. Kane, New York City (Philip T. Dalsimer and Kane, Dalsimer, Kane, Sullivan, Kurucz & Goldstein, New York City, on the brief), for plaintiffs-appellants.
    Arthur M. Handler, New York City (Michael C. Silberberg and Golenboek & Bareli, New York City, on the brief), for defendant-appellee.
    Before WATERMAN, FRIENDLY and TIMBERS, Circuit Judges.
   PER CURIAM:

Appellants are Montres Rolex, S. A., the well known Swiss manufacturer of the famous Rolex watches, and its American distributor, The American Rolex Watch Corporation (together referred to hereinafter as “Rolex”). They sued appellee, Ricoh Time Corporation (hereinafter, “Ricoh”), in the Southern District of New York in an action brought under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1970). The complaint sought injunctive relief and damages based on alleged trademark infringement and unfair competition arising from Ricoh’s use on its wrist watches of a “trident” mark said to have infringed Rolex’s “crown” mark used on its watches, and from Ricoh’s use of a general configuration similar to that used by Rolex. After a three day bench trial before Harold R. Tyler, Jr., District Judge, the judge made findings of fact and conclusions of law and ordered that judgment be entered dismissing the complaint. Since we are satisfied that the district court’s findings of fact are not clearly erroneous and that its application of the controlling law to the facts was correct, we affirm.

The district court’s essential findings of fact may be briefly summarized: the configuration of Rolex watches is not unique and it had been on the market for many years; Rolex failed to establish any secondary meaning for the configuration of its watches; Ricoh had clearly labeled its product as such and had not attempted to palm it off as a product of Rolex; Ricoh’s trident mark is not so similar to Rolex’s crown mark as to give rise to confusion; and there was no likelihood that an appreciable number of average prudent purchasers of wrist watches would confuse Ricoh’s watch with the Rolex watch in view of, among other things, the widely disparate prices and marketing practices. We hold that these findings are not clearly erroneous, but are supported by substantial evidence.

Rolex’s only hope of prevailing was to show that Ricoh’s trident mark violated Rolex’s crown mark. Judge Tyler assumed arguendo that the crown was a strong mark. While such assumption may have been unduly favorable to Rolex, the record clearly establishes that, whether the crown mark was strong or weak, it was not infringed by the trident mark. The number of possible designs that can be fit into the compact space on a watch is relatively small. From a distance, they all look pretty much alike; when seen nearby, they look different. Here, the color of Ricoh’s trident is different from that of Rolex’s crown. Furthermore, the Rolex mark manifestly is a classic crown with five prongs mounted atop an elliptical base. On the other hand, the Ricoh mark, while perhaps not a trident with which one could effectively prod, nevertheless clearly is not a crown. It is readily distinguishable from the Rolex crown in at least these important respects: it has three, not five, prongs; only two of its prongs have ball tips and these are less pronounced than the Rolex balls; it lacks the base ellipse of the Rolex mark; and its overall size is noticeably smaller than the Rolex mark, although its line segments are much thicker and darker. In short, we think the evidence was overwhelming that the marks were not confusingly similar.

There remains Rolex’s contention that the district court erred in applying the rule of Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964), and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234 (1964). More specifically, Rolex claims that the evidence established product copying by Ricoh coupled with its use of a trade-mark and label similar to that of Rolex. We disagree.

Under Sears and Compco, the act of copying (even if there were proof of such) does not provide a basis for a charge of unfair competition. In both cases the Court said that a state could require that goods be labeled or that other precautionary steps be taken to prevent customers from being misled as to the source. Here appellant does not refer to any state law provisions that would require any such special labeling or other precautionary steps. And Rolex’s reliance upon the interdiction of 15 U.S.C. § 1125(a) which forbids a false designation of origin appears to be misplaced in view of the prominent display of “Ricoh” on the challenged watch. Assuming careful inquiry by a prospective purchaser of a watch, such inquiry would reveal that the country of origin of Ricoh is Japan, whereas that of Rolex is Switzerland. As we said in Bose Corp. v. Linear Design Labs, Inc., 467 F.2d 304, 310 (2 Cir. 1972), “there is hardly likelihood of confusion or palming off when the name of the manufacturer is clearly displayed.”

In short, we think Ricoh’s watch was labeled as effectively as it could be as a practical matter. To be sure, the labeling is not very visible when the watch is seen from' a distance, but that is something inherent in its being a watch rather than an automobile.

We have considered each of appellants’ claims and find them to be without merit.

Affirmed.


author: JOHN W. PECK, Circuit Judge.

text:
    JAMES TALCOTT, INC., Plaintiff-Appellee, v. ASSOCIATES CAPITAL COMPANY, INC., Defendant-Appellee, and The Highway Equipment Company, Defendant-Appellant.
    No. 73-1388.
    United States Court of Appeals, Sixth Circuit.
    Feb. 14, 1974.

      Charles G. Heyd, Bauer, Morelli & Heyd, Cincinnati, Ohio, on brief, for The Highway Equipment Co.
    Edmund J. Adams, Cincinnati, Ohio, on brief, for Associates Capital Co., Inc.; Frost & Jacobs, Cincinnati, Ohio, of counsel.
    James W. Farrell, Jr., Cincinnati, Ohio, Vincent B. Stamp, Dinsmore, Shohl, Coates & Deupree, Cincinnati, Ohio, on brief, for James Taleott, Inc.
    Before PHILLIPS, Chief Judge, and WEICK and PECK, Circuit Judges.
   JOHN W. PECK, Circuit Judge.

This action began with a complaint filed by plaintiff-appellee James Taleott, Inc. (hereinafter “Taleott”), a New York corporation engaged in commercial financing, against defendant-appellee Associates Capital Company, Inc. (hereinafter “Associates”), a Delaware financing corporation, and defendant-appellant The Highway Equipment Company (hereinafter “Highway”), an Ohio construction equipment dealer. Jurisdiction was based on diversity. Talcott’s complaint sought a declaratory judgment determining that Taleott had a security interest in certain Caterpillar tractors which Highway had sold to Ronald A. Getz, Inc. (hereinafter “Getz”), and that that interest had priority over a security interest which Highway had in the same tractors and which Highway had assigned to Associates. Associates filed a cross-claim against Highway seeking, in the event Talcott’s interest was declared senior to Highway’s, compensation for Highway’s failure to honor a repurchase agreement made by Highway in connection with the assignment to Associates. Each of the three parties moved for summary judgment. The District Court granted summary judgment in favor of Taleott on its claim and in favor of Associates on its cross-claim. Highway’s motion for summary judgment was, of course, denied. Highway perfected this appeal.

. The essential facts are not in controversy. On December 4, 1968, Getz, a heavy construction contractor, executed a promissory note to Taleott giving Talcott a security interest in “all fixtures, equipment, chattels, machinery . and collateral of every kind, now or hereafter owned, bought for use and/or used by Mortgagor in his business . ” (Emphasis supplied.) The security agreement was filed with the Ohio Secretary of State and the proper county official on December 12, 1968. Subsequent loans were made by Taleott to Getz during 1968 and 1969, all of which were secured by the agreement of December 4, 1968.

During the early part of February, 1969, representatives of Highway and Getz commenced discussions concerning Getz’s need for some heavy construction equipment. On February 3, 1969, Getz indicated to Highway that it desired to obtain two D-9 tractors on the basis of 36 payments over a 48-month period. On February 5, the president of Getz was informed by Highway that General Electric Credit Corporation (hereinafter “GECC”) might finance the D-9s on the requested terms and that Highway would have GECC contact Getz in this regard. Getz then told Highway that it needed the equipment immediately and asked if Highway would finance the D-9s if GECC would not. Although the first reaction to Getz’s inquiry was negative, Highway later informed Getz that Highway would take the deal if GECC would not. Getz’s reason for this particular financing arrangement was, in the words of one of Highway’s salesmen, to “enable him to use the equity in the 9’s and other iron [a trade term for construction equipment] as cash and not to show the new rented iron as an obligations (sic).”

On February 17, 1969, Highway delivered one D-9 Caterpillar Tractor (hereinafter “Tractor I”) to Getz. Highway and Getz entered into an “Equipment Lease Agreement” on February 25 under the terms of which Getz was to rent Tractor I for a guaranteed minimum period of 48 months, beginning on February 17, 1969. Appended to the lease was an “Option to Purchase” agreement which provided that the purchase price would be $92,922.00, and that in the event Getz exercised its option to purchase it would receive a credit on the purchase price for rent actually paid under the lease. In addition, Getz would be required to pay interest at the rate of %o of 1% per month on the unpaid balance computed from delivery date to date of purchase.

On March 3, 1969, (more than 10 days after February 17, but within 10 days after February 25) Highway and Getz filed financing statements with the appropriate offices of the State of Ohio and the County of Richland covering Tractor I.

Highway delivered a second D-9 tractor (hereinafter “Tractor II”) to Getz on March 14, 1969. An “Equipment Lease Agreement” with an “Option to Purchase” addendum neárly identical, except as to amounts and dates, to those executed for Tractor I was entered into on April 22. Under this agreement payments were to begin on March 14. Financing statements on Tractor II were filed on April 28 (more than 10 days after March 14, but within 10 days after April 22).

Getz decided to exercise its option to purchase, and on October 27, 1969, the lease agreements as to both tractors were terminated. Highway and Getz then entered into a security agreement pursuant to which Getz purchased the tractors from Highway and granted Highway a security interest in the tractors. Highway assigned this security agreement to Associates for $152,185.83, the assignment providing:

“[T]hat the facts set forth in the agreement are true, that said property is free of all liens, incumbrances and security interests of whatever nature or kind except the lien, incumbrance and security interest created by this agreement . . . that the undersigned has title to said property and has a right to transfer title thereto . If any of the warranties herein contained are untrue, the undersigned will on demand purchase this agreement from the Assignee for the balance remaining unpaid thereunder.”

Financing statements were filed with the proper authorities within 10 days covering the tractors and naming Getz as the debtor, Highway as the secured party, and Associates as the assignee of the secured party.

Getz failed to make the required payments, and in February of 1970 Associates repossessed the tractors. Talcott learned of the proposed public sale of the repossessed tractors and protested to Associates that Talcott held a higher priority security interest in the items. The two financing corporations agreed to submit the dispute along with the proceeds from the sale of the tractors to the District Court.

Both the lease-option contracts and purchase contract between Highway and Getz, and the assignment agreement between Highway and Associates were entered into in Ohio and that state’s laws were applied by the District Court in reaching its decision.

After receiving briefs and hearing oral argument on the motions for summary judgment, the District Court found that Talcott had a security interest in the tractors; that Talcott’s interest was senior to Highway’s; that Getz owed Talcott $101,357.18 which was to be satisfied out of the $120,000 realized from the sale of the tractors; that the remainder of sale proceeds, $18,642.82, was to be applied in partial payment of Getz’s debt on the tractors; that Associates was entitled to demand that Highway purchase the security agreement from Associates; and that the balance unpaid on that agreement was $179,689.-74 less' the partial payment of $18,642.18 and appropriate interest rebates, which sum was $140,159.36. The Court also ruled that upon satisfaction of Getz’s obligation to Talcott, Associates was entitled to have assigned to it all rights that Talcott had in Getz’s collateral, and upon satisfaction of Highway’s obligation to Associates on the cross-claim, Highway was entitled to have assigned to it all rights in the Getz collateral.

The District Court reasoned that Talcott gained a security interest in the tractors by virtue of the “after-acquired property” clause in the 1968 Talcott-Getz agreement. Highway does not seriously challenge that reasoning, and indeed, it is clear that such a clause is valid under the Ohio Uniform Commercial Code. Ohio Rev.Code § 1309.15(C) (1962) (Uniform Commercial Code § 9-204(3)). Highway does assert, however, that it perfected a first priority purchase money security interest in the tractors under Ohio Rev.Code § 1309.-31(D) (U.C.C. § 9-312(4)), which provides that,

“A purchase money security interest in collateral other than inventory has priority over a conflicting security interest in the same collateral if the purchase money security interest is perfected at the time the debtor receives possession of the collateral or within ten days thereafter.”

It is undisputed that Getz obtained possession of Tractor I on February 17, signed the lease-option agreement on February 25, and that the financing statement was filed on March 3. Similarly, Getz received Tractor II on March 14, signed the agreement on April 22, and filed the statement on April 28. Also, both agreements stated that the leases dated back to the date of the original possession. The only question that remains is when did Getz receive possession of the collateral as a “debtor” as that term is defined in the context of Ohio Rev.Code § 1309.31(D). Highway contends that the dates upon which the lease-option agreements were executed were the earliest dates that Highway and Getz could have intended that the lease agreements were security, and therefore, the financing statements were filed in a timely fashion.

The District Court answered this argument by noting that “Getz’s obligation was owed in both instances on the date that he received possession, for the lease agreements stated that the lessee agreed to rent beginning on February 17, 1969 in the case of tractor 7174 and on March 14, 1969 in the case of tractor 7200 .” In addition, the record fully supports Talcott’s position that the parties had agreed to the terms on which Getz would obtain the tractors from Highway before they executed the formal agreements. See Ohio Rev.Code §§ 1302.07, 1309.01(C), 1309.15(A). Perhaps the most telling exposure of the flaw in Highway’s analysis was delivered by the District Court.

“It would be a frustration of this purpose [certainty in commercial transactions under the U.C.C.] to hold that a purchase money secured party can deliver goods to his debtor, delay indefinitely before entering into a security agreement which binds the debtor retroactively as of the delivery date, and still obtain a perfected security interest by filing within ten days of the agreement.”

Highway urges us to consider Brodie Hotel Supply, Inc. v. United States, 431 F.2d 1316 (9th Cir. 1970) as a favorable precedent for its position. We do not see its application. Brodie sold restaurant equipment to Standard Management Company in 1959, but it was later declared bankrupt. Brodie repossessed the equipment but left it in the restaurant and with the consent of Brodie, Lyon took possession of the restaurant and began operating it. Throughout the next five months Brodie and Lyon negotiated over the price and terms under which Lyon was to purchase the equipment. Lyon borrowed money from a bank on November 2, 1964, and the bank’s security interest was assigned to the Small Business Administration and a financing statement was filed. On November 12, Brodie sold the equipment to Lyon and perfected its security interest by filing a timely statement. The Ninth Circuit recognized that the first-to-file rule would apply unless Brodie could bring itself within the applicable section of the U.C.C. (which in Ohio is O.R.C. § 1309.31(D)).

The Ninth Circuit held that Brodie had fulfilled the demands of the exception provided in U.C.C. § 9-312(4) because “Although Lyon might have been liable for the reasonable rental of the equipment or for its return to Brodie, he did not owe performance of an ‘obligation secured’ by the collateral in question until” the agreement between the parties was entered into. Brodie, 431 F.2d at 1319. That is not the situation in the instant case. Here, the lease-option agreements provided that the rents would begin as of the dates of the first possession, and as pointed out above, the difference is critical.

The proposition is advanced by Highway that the prompt filing of the purchase agreement entered into on October 27, 1969, gave it a priority interest. This argument fails for the same basic reason stated above, namely, that regardless of when the agreement was entered into, Getz possessed the equipment as a “debtor” for more than ten days prior to the filing of the statement. Highway has failed to show that it complied with the provisions of Ohio Rev. Code § 1309.31(D), and therefore, Talcott’s security interest, being first in time, had priority.

On an appeal from a summary judgment the record must be viewed in the light most favorable to the appellant. Steed v. Central of Georgia Ry. Co., 477 F.2d 1303 (5th Cir. 1973); Fed.R.Civ.P. 52(a) & 56(c). Highway contends that the District Court erroneously granted summary judgment in this case because there were genuine issues of material fact in dispute. We have'reviewed the record and find this contention merit-less. Reasonable minds could not differ in the conclusions reached by the District Court on the pleadings, affidavits, answers to interrogatories, and admissions on file.

Highway also complains that the District Court erred in the computation of the judgments awarded Talcott and Associates. These complaints are without substance.

For the reasons stated herein, the judgment of the District Court is affirmed.