text:
    B & J MANUFACTURING COMPANY, Appellant, v. SOLAR INDUSTRIES, INC., Appellee.
    No. 73-1022.
    United States Court of Appeals, Eighth Circuit.
    Submitted May 17, 1973.
    Decided Aug. 1, 1973.
    Rehearing and Rehearing En Banc Denied Sept. 11, 1973.
    Edward A. Craig, Detroit, Mich, for appellant.
    Robert T. Edell, Minneapolis, Minn., for appellee.
    Before VAN OOSTERHOUT, Senior Circuit Judge HEANEY, Circuit Judge, and TALBOT SMITH, Senior District Judge.

       District of Eastern Michigan, sitting by designation.

   HEANEY, Circuit Judge.

Solar Industries, Inc., sought a declaratory judgment under 28 U.S.C. § 2201, that a patent owned by the defendant for a “tire bead seater” was invalid and/or was not infringed by the plaintiff. Service of process on the defendant was obtained pursuant to Minnesota’s “long-arm” statutes, M.S.A. §§ 303.13 and 543.19, as permitted by Rule 4(e), Fed. R.Civ.P. The defendant, appearing specially, moved to dismiss the action or, alternatively, to quash the return of service on the ground, inter alia, that the court was without personal jurisdiction over the defendant. The District Court ruled that it had personal jurisdiction over the defendant, and certified the issue for an interlocutory appeal to this Court.

The pertinent facts, for the most part, are the following which were found by the trial court:

“1. Plaintiff, Solar Industries, Inc., is a Minnesota corporation having its principal place of business at * * * Osseo, Minnesota 55369.
“2. Defendant, B & J Manufacturing Co., is an Illinois corporation having its principal place of business at Glen-wood, Illinois.
“3. On September 15, 1971, process was served on the Minnesota Secretary of State, pursuant to M.S.A. § 303.13, who thereafter mailed a copy of the process to the defendant at Glenwood, Illinois.
“4. On September 27, 1971, personal service was made on Mr. W. E. Jensen, Executive Vice President of defendant, by a United States Marshal for the Northern District of Illinois pursuant to M.S.A. § 543.19.
“5. Defendant is not licensed to do business in Minnesota, and does not maintain a bank account or inventory here, or own, use or possess any real property located here.
“6. Defendant has not and does not maintain any offices or place of business in Minnesota, and does not have any employees in Minnesota. Defendant does have ‘sales service personnel’ which travel all over the country (presumably including Minnesota) visiting retread shops to make sure defendant’s products are performing properly. The last employee to be in Minnesota was such a technical representative who was here in August, 1970.
“7. Defendant has sold its line of Rocket rasps, its line of carbide wheels and tools, and its pollution control equipment in Minnesota. Defendant has made such sales to * * * [six] Minnesota companies in the last two years:
* * * -x- -x- -x-
“In addition to the above, drop shipments were made in the State of Minnesota for the accommodation of buyers outside of Minnesota.
“8. These sales totaled $15,903.09 from July 19, 1969 to December 31, 1969, $50,549.85 in 1970, and $41,287.-03 from January 1, 1971 to November 19, 1971.
“9. The vast majority of the sales were made to N. R. Hansemann Co. which is defendant’s distributor in Minnesota.
“10. Defendant advertises in various national publications which are distributed in Minnesota, and Minnesota readers of these publications who make inquiry are sent informative literature by defendant’s sales department and advised to contact defendant’s local distributor. In some cases, N. R. Hansemann Co. is directly informed of the inquiry. Defendant is certain that some sales have resulted from this process.
“11. Defendant’s products sold in Minnesota are sent to defendant’s plant in Glenwood, Illinois for any needed repairs.
“12. N. R. Hansemann Co. was provided with certain of defendant’s catalogs, imprinted with defendant’s name, address and various trademarks and tradenames, to be used in making sales of defendant’s products in Minnesota.
“13. N. R. Hansemann Co. carries a complete line of defendant’s products except the tire bead seater of the type disclosed by Patent Number 3,552,469, the subject of this suit. The reasons for this are that N. R. Hansemann Co. has not ordered any such tire bead seaters and that defendant does not want plaintiff to be able to establish jurisdiction over defendant in this action.
“14. Defendant purchased the patent in question from Bruce Caulkins, Inc. of Harper Woods, Michigan in July 1971. Prior to such purchase, Bruce Caulkins, Inc. manufactured the tire bead seater in question and distributed it in Minnesota through a distributor. Defendant began to market the tire bead seater on October 4, 1971.
“15. Defendant has instituted a patent infringement action involving Patent Number 3,552,469 in the Northern District of Ohio against one of the plaintiff’s distributors who handles plaintiff’s tire bead seaters. In addition, defendant has threatened such actions against other distributors of plaintiff's tire bead seater.
“16. Plaintiff and defendant have had no direct business or contractual relationships in Minnesota.”

The District Court found personal jurisdiction under both of the cited statutes. - Initially, it indicated that the Minnesota Supreme Court has interpreted these statutes to extend the extraterritorial jurisdiction of the Minnesota courts to its maximum reach consistent with the constitutional limitations of due process. Next, it reviewed Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); and International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and concluded that the defendant had sufficient contacts with Minnesota in the instant case so that personal jurisdiction could be obtained over it without offending “traditional notions of fair play and substantial justice.”

The plaintiff makes alternative arguments for jurisdiction. First, the plaintiff contends that service of process was made consistent with due process and that it is not necessary to tie the grounds of jurisdiction to specific provisions in the “long-arm” statutes. See, Japan Gas Lighter Association v. Ronson Corp., 257 F.Supp. 219, 231-232 (D.N.J.1966). Plaintiff maintains this approach is proper because the Minnesota Supreme Court specifically stated that the legislature by enacting the “long-arm” statutes intended “to extend jurisdiction of [the state's] courts to the maximum limits consistent with constitutional limitations.” Hunt v. Nevada State Bank, 285 Minn. 77, 172 N.W.2d 292, 304 (1969), cert. denied, 397 U.S. 1010, 90 S.Ct. 1239, 25 L.Ed.2d 423 (1970). See also, Ellwein v. Sun-Rise, Inc., 295 Minn. 109, 203 N.W.2d 403 (1972); Mid-Continent Freight L. v. Highway Trailer Indus., 291 Minn. 251, 190 N.W.2d 670, 673 (1971). Defendant, in turn, strenuously argues that the language of statutes must be closely adhered to and that in every instance where the Minnesota court has found personal jurisdiction, one of the statutory elements relating to the acts enumerated in the statute has been found to exist by the court.

Plaintiff, in the alternative, argues that the defendant performed acts in Minnesota which make jurisdiction proper under two of the instances enumerated in M.S.A. § 543.19. First, relying on an unpublished opinion of Judge Larson, the plaintiff contends that the threat of enforcement of a United States patent against a Minnesota resident was the use of personal property within Minnesota and, thus, satisfied M.S.A. § 543.-19, subd. 1(a). See, Imperial Products Inc. v. Zuro, et al., No. 4-70-Civ. 471 (D.Minn. July 1, 1971). The defendant, on the other hand, reasons that the situs of a patent is limited to the residence of its holder — here, Illinois — and that, therefore, there was no ownership, use or possession of the patent in Minnesota. Second, the plaintiff contends that the defendant transacted business in Minnesota by charging the plaintiff with patent infringement and demanding that it cease manufacturing its product. This act, of course, is that enumerated in M.S.A. § 543.19, subd. 1(b). See, n. 2, supra. The defendant, however, without further reasoning, maintains that this did not constitute the transaction of business in the forum.

We do not find it necessary here to rule on each of the possible grounds for jurisdiction which are asserted by the plaintiff. Rather, we are convinced the plaintiff’s cause of action arose from the defendant’s transaction of business in Minnesota and, therefore, personal jurisdiction was properly obtained in accordance with M.S.A. § 543.19, subd. 1(b). Our review is accordingly limited, and we express no opinion as to the validity of the other grounds asserted by the plaintiff.

In view of the fact that the Minnesota Supreme Court has indicated that M.S.A. § 543.19 should be interpreted broadly to “afford maximum protection to [the] state’s residents injured by acts of nonresidents,” Hunt v. Nevada State Bank, supra, 172 N.W.2d at 304, it is proper to employ a liberal construction in determining whether the cause of action has arisen from the transaction of business in Minnesota.

It is undisputed that the plaintiff’s action arose directly from the fact that through their attorneys, the defendant and the assignor of its patent advised the plaintiff, by letters received in Minnesota, to refrain from infringing on the “tire bead seater” patent and, further, threatened that a suit for infringement would be brought against the plaintiff if it refused to discontinue the manufacture and sale of its competing product. Regardless of the valid- ’ ity of the defendant’s patent, there is no doubt but that the requests and threats were designed to reduce competition and thereby improve defendant’s marketing and economic position. As such, we are convinced that the sending of these letters did, in a very real sense, constitute a transaction of business in Minnesota. Moreover, we note that the defendant is no stranger to Minnesota, and that it had a number of related contacts in the forum. The defendant advertised its products in national publications which were distributed in Minnesota, and it sold a number of its other products to independent distributors located in the state. It maintained “trouble shooters” who were available to visit the state when necessary to aid users of the firm’s products, and the firm also repaired its products, though these ha<j to be shipped to the firm’s Illinois office for such service. Furthermore, it is significant that prior to the defendant’s acquisition of the patent, its assignor had threatened the plaintiff with an infringement suit; that the assignor had sold the disputed product in Minnesota; and that the assignor and the defendant, as well, had discussed the question of licensing the patent with the plaintiff.

The fact that the defendant has, itself, not directly or indirectly sold the “tire bead seater” in the state because it did not wish the plaintiff to be able to obtain jurisdiction over it in this action hardly defeats jurisdiction here. Rather, the extensive contacts, taken together with the admonition of the Minnesota court in Hunt, compel the conclusion that service of process was properly made and jurisdiction over the defendant was obtained pursuant to M.S.A. § 543.19, subd. 1(b).

We are also satisfied that the District Court’s assumption of personal jursdiction over the defendant did not violate the defendant’s right to due process. See, Aftanase v. Economy Baler Company, 343 F.2d 187 (8th Cir. 1965). It is evident from the trial court’s findings of fact that the quantity, quality and nature of the defendant’s contacts with the jurisdiction are substantial. The defendant has voluntarily entered into a number of business transactions, including the acquisition of the patent and attempts at enforcement, which it knew would have consequences in the state. Moreover, in view of the defendant’s extensive contacts with the forum, we believe that the contacts are sufficiently connected with the cause of action to satisfy due process. See, Id., at 196; 2 J. Moore, Federal Practice ¶ 4.25 [5] (2d ed.1970). Furthermore, Minnesota most certainly has an interest in providing a forum for a resident who claims that a foreign corporation is attempting to prevent it from manufacturing and marketing its product. This is especially true in the instant ease as the defendant has threatened and brought independent actions against a number of the plaintiff’s customers and distributors in other states. And finally, while it may be more convenient for the defendant to litigate in Illinois, the convenience of all parties must be considered. No exceptional hardship is suffered by the defendant having to litigate in Minnesota, and we are satisfied that it is in the best interests of all to have the case heard in Minnesota. Thus, we are convinced that the subjection of the defendant to in per-sonam jurisdiction comports with due process.

Affirmed.

      . “303.13 Service of Process

        “Subdivision 1. Foreign corporation. A foreign corporation shall be subject to service of process, as follows :
      * * * * #
      “(3) If a foreign corporation makes a contract with a resident of Minnesota to be performed in whole or in part by either party in Minnesota, or if such foreign corporation commits a tort in whole or in part in Minnesota against a resident of Minnesota, such acts shall be deemed to be doing business in Minnesota by the foreign corporation and shall be deemed equivalent to the appointment by the foreign corporation of the secretary of the state of Minnesota and his successors to be its true and lawful attorney upon whom may be served all lawful process in any actions or proceedings against the foreign corporation arising from or growing out of such contract or tort. * * * The making of the contract or the committing of the tort shall be deemed to be the agreement of the foreign corporation that any process against it which is so served upon the secretary of state shall be of the same legal force and effect as if served personally within the state of Minnesota.”
      M.S.A. § 303.13.

      . "5Jf8.19 Personal jurisdiction over nonresidents

      “Subdivision 1. As to a cause of action arising from any acts enumerated in this subdivision, a court of this state with jurisdiction of the subject matter may exercise personal jurisdiction over any foreign corporation or any nonresident individual, or his personal representative, in the same manner as if it were a domestic corporation or he were a resident of this state. This section applies if, in person or through an agent, the foreign corporation or nonresident individual:
      “(a) Owns, uses, or possesses any real or personal property situated in this state, or
      “ (b) Transacts any business within the state, * * *
      * sfc * *
      “Subd. 2. The service of process on any person who is subject to the jurisdiction of the courts of this state, as provided in this section, may be made by personally serving the summons upon the defendant outside this state with the same effect as though the summons had been personally served within this state.
      “Subd. 3. Only causes of action arising from acts enumerated in subdivision 1 may be asserted against a defendant in an action in which jurisdiction over him is based upon this section.”
      M.S.A. § 543.19.

      . The unpublished opinion and order of the District Court was filed by Judge Miles W. Lord on November 17,1972.

      . The trial court apparently adopted this theory, albeit sub silentio, in finding personal jurisdiction in the instant case. Moreover, this same theory involving the Missouri parallel to M.S.A. § 543.19 was recently discussed by Chief Judge Matthes in R. H. Fulton, etc. v. Chicago, Rock Island and Pacific Railroad Company et al., 481 F.2d 326, at 334 n. 5 (8th Cir. 1973) :
      “A third independent ground for finding the long-arm statute applicable here could be the view taken by the Sixth and Seventh Circuits of similar statutes. See Fisons Ltd. v. United States, 458 F.2d 1241 (7th Cir.), cert. denied, 405 U.S. 1041, 92 S.Ct. 1312, 31 L.Ed.2d 581 (1972) ; Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374 (6th Cir. 1968). In those cases, the courts dealt with the long-arm statutes of Illinois and Tennessee, respectively, which are marketedly similar to the Missouri statute sub judioe. The courts of both those states had construed their statutes ‘to assert jurisdiction over nonresident defendants to tlie extent permitted by the’ Constitution. 458 F.2d at 1250. Consequently, the federal courts held they should not view the statutes as merely erecting a few enumerated, inflexible circumstances in which service could be effected, but as establishing one broad flexible test, to wit: if the service satisfies the Constitution, it satisfies the statute. Since Missouri has likewise construed § 506.500 as intended to reach the constitutional limits, Missouri ex rel. Deere & Co. v. Pinnell, supra, we could also adopt this test and avoid ‘a pedantic quibbling with the wording of the statute,’ 401 F.2d at 378, making it unnecessary to ask whether only g 506.500 (1) (3) applies, whether it applies only to tort actions, whether a Carmack claim sounds in tort, etc. However, considering the answers to those questions given above, we find it unnecessary to take this expansive view of a state statute.”

      . A contrary position is taken in affidavits submitted by the plaintiff which were obtained subsequent to the trial court’s decision. However, in view of the time of submission of these affidavits, we shall ignore them on this appeal.


source: Caselaw Access Project

author: McWILLIAMS, Circuit Judge.

license: Public Domain

text:
    In the Matter of FOUR SEASONS NURSING CENTERS OF AMERICA, INC., Debtor-Appellee, as relating to Four Seasons Overseas, N. V., et al. subsidiaries to the original debtor. In the Matter of FOUR SEASONS EQUITY CORPORATION, Debtor-Appellee. Northern Illinois Mortgage Co., Appellant.
    No. 72-1763.
    United States Court of Appeals, Tenth Circuit.
    Argued and Submitted May 22, 1973.
    Decided Aug. 22, 1973.
    John W. Swinford, Oklahoma City, Okl., for appellant, Northern 111. Mortgage Co.

      Robert E. Manchester, Oklahoma City, OkL, for debtor-appellees Four Seasons Nursing Centers of America, Inc., Four Seasons Overseas, N. V., Embassy Construction Co., Inc., National Medical Supply, Inc., Four Seasons Franchise Centers, Inc., Four Seasons Equity Corp.
    Before PICKETT, McWILLIAMS and BARRETT, Circuit Judges.
   McWILLIAMS, Circuit Judge.

This is a bankruptcy ease. Four Seasons Equity Corporation and Four Seasons Nursing Centers of America, which entities will hereinafter be referred to as Four Seasons, were in the business of constructing and operating nursing homes, and in connection therewith owned certain property in Rockford, Illinois, on which it proposed to build a nursing home. Needing financing to begin this particular project, Four Seasons entered into a loan commitment agreement with Northern Illinois Mortgage Co., a lending institution. By this agreement, Northern committed itself to make a construction loan to Four Seasons in the sum of $900,000, and in return therefor Four Seasons agreed, inter alia, to pay a loan commitment fee of 3% of $900,000, namely $27,000. And the single issue in this appeal is when this fee was earned.

As concerns the loan commitment fee, the loan commitment agreement provides as follows:

“The construction loan fee will be 3% of the amount of the mortgage; 1% payable at the time of the first disbursement; 1% payable when the first one-half of the construction loan is disbursed; and, 1¡% upon final disbursement.”

Northern made an initial disbursement of $360,000, and at that time Four Seasons paid Northern $9,000, this sum representing one-third of the total loan commitment fee. Thereafter, Four Seasons entered into a Chapter X bankruptcy proceeding and Four Seasons did not draw any additional monies from the sum Northern had committed itself to lend.

Northern filed a secured claim in the Chapter X proceeding in the amount of $360,000, which was allowed by the bankruptcy court as a first mortgage lien against the Rockford property. Additionally, Northern also filed an unsecured claim for $18,000, representing the balance due on the total loan commitment fee, which Northern asserted was fully earned even though it had only actually lent Four Seasons $360,000. This claim was resisted by the trustee on the ground that it could not be verified on the books of Four Seasons. After hearing, a Special Master recommended that this particular claim be disallowed, and, upon review, the District Court for the Western District of Oklahoma approved such recommendation and disallowed the claim.

As far as the record before us reveals, neither the Special Master nor the district court gave any reason for their dis-allowance of the claim, and hence we do not have the benefit of their thinking on the matter. However, as indicated, the position of Northern is that the entire fee was fully earned when the loan commitment agreement was entered into, and that the deferred payments were merely an accommodation to Four Seasons. It is the position of Four Seasons that the contract provision is ambiguous and should accordingly be construed against the party causing the uncertainty to exist, which in this instance was Northern, who drew the agreement. Alternatively, the trustee argues that in a bankruptcy proceeding the court is empowered to do equity and that the disal-lowance of the claim was well within its broad equitable powers.

Before examining the law on this subject, we note that the only evidence before the Special Master as to the meaning of the agreement came from the former vice-president of Four Seasons who had himself negotiated the loan commitment agreement with Northern. It was his testimony that the entire commitment fee was earned when the agreement was signed, and that the deferred payments were simply an accommodation to Four Seasons. Additionally, this witness also testified that a commitment fee of 3% of the total amount committed was not excessive and was in line with the amounts being thus charged by other lenders.

Loan commitment fees have been referred to as a “fact of financial life” and have been the subject of considerable judicial discussion. Contracts calling for the payment of a loan commitment fee by the borrower to the lender have generally been enforced, even though the borrower for one reason or another does not thereafter draw on the committed funds, or does not draw out the committed amount in its entirety. Enforcement of the payment of such fees, or the refusal to grant a refund where the fee has been paid, has been on the ground that the consideration for the fee is the promise of the lender to commit a specified sum of his money for a specified time for the use and benefit of the lender and that the lender’s obligation to commit, as well as the borrower's obligation to pay a fee in return for such commitment, is fixed as of the date of the loan commitment agreement is executed. And it has been held that the fact that the borrower thereafter does not draw on the committed funds does not excuse the borrower from payment of the entire commitment fee as called for in the loan commitment agreement. For a general discussion of loan commitment fees, see such cases as White Lakes Shopping Center, Inc. v. Jefferson Standard Life Insurance Company, 208 Kan. 121, 490 P.2d 609 (1971); Goldman v. Connecticut General Life Insurance Co., 251 Md. 575, 248 A.2d 154 (1968); and Paley v. Barton Savings and Loan Ass’n, 82 N.J.Super. 75, 196 A.2d 682 (1964).

In Goldman v. Connecticut General Life Insurance Co. appears the following pertinent background statement, 248 A. 2d at 157:

“In today’s world, the commitment fee has become a fact of financial life. Most large projects are financed under agreements substantially similar to the one entered into between Greenspring and Connecticut. [Citing eases]. The commitment fees are substantial, but are usually stated as a small percentage of the amount ultimately to be loaned. The courts, in holding that the fees were non-refundable in the event that the project is abandoned or that the borrower fails to take down the funds, have supported their conclusions by finding that the fee was intended to constitute liquidated damages, as in Boston Road [Boston Road Shopping Center v. Teachers Ins. & Annuity Ass’n, 13 A.D.2d 106, 213 N.Y.S.2d 522 (1961), aff’d 11 N.Y.2d 831, 227 N.Y.S.2d 444, 182 N.E.2d 116 (1962)]; as a fee for the commitment, as in Regional Enterprises and Paley [Regional Enterprises, Inc. v. Teachers Ins. & Annuity Ass’n, 352 F.2d 768 (9th Cir. 1965), and Paley v. Barton Savings & Loan Ass’n, 82 N.J.Super. 75, 196 A.2d 682 (1964), aff’d 41 N.J. 602, 198 A.2d 446 (1964)]; as a stand-by fee, as in Chambers [Chambers & Co. v. Equitable Life Assurance Soc., 224 F.2d 338 (5th Cir. 1955)]; or as standby interest, as in Continental Assurance [Continental Assurance Co. v. Van Cleve Bldg. & Const. Co., 260 S.W.2d 319 (Ct.App.Mo.1953) ].”

Based on the rationale of the foregoing authorities, Northern asserts that the entire commitment fee, as called for by the loan commitment agreement, namely, 3% of $900,000, .or $27,000, became “fully earned” on the date the agreement was signed, and that the fact that payments were on a deferred basis did not alter such obligation. As concerns the matter of deferred payments of a loan commitment fee, counsel draws our attention to such cases as Wisznia v. Wilcox, 438 S.W.2d 874 (Tex.Ct.Civ. App.1969), where it was held that if the parties intend that a debt shall be absolute, and merely fix upon some future event as a convenient time for payment, the debt is not contingent and if the future event does not occur, the law will require the payment to be made within a reasonable time. In support of the foregoing, see Williston on Contracts, Third Edition, Vol. 5, § 799. See also Byler v. Great American Insurance Company, 395 F.2d 273 (10th Cir. 1968), where, after recognizing that a contract may contain a condition which makes performance dependent upon the happening of a future event, we nonetheless observed that courts generally look with disfavor upon such contract stipulations and. will not construe them as conditions precedent unless required to do so by the plain and unambiguous language of the contract. It is on this general basis, then, that Northern asserts that its claim for $18,000, i. e., the unpaid balance of the total commitment fee, should have been allowed.

Four Seasons resists this claim on two grounds: (1) The contract as it concerns the loan commitment fee and the dates for payment thereof is ambiguous and should accordingly be construed against Northern; and (2) in a bankruptcy proceeding, the court is empowered to sift the circumstances surrounding any claim to see that “injustice and unfairness” is not done and that to allow this claim would be “inequitable.” In our view, neither of these arguments is tenable.

As mentioned above, the only testimony before the Special Master came from the former vice-president of Four Seasons, who had himself negotiated the loan commitment with Northern. His testimony, which is in nowise refuted, was to the effect that the 3% loan commitment fee was not excessive and was fully earned when the agreement was signed and that the deferred payments were only an accommodation to Four Seasons. On this state of the record, then, any ambiguity, if such there be, was cleared up in favor of Northern and, under such circumstances, the contract should not be given a meaning different from the meaning given the contract by both of the parties thereto. United States v. F. D. Rich Company, 434 F.2d 855 (9th Cir. 1970); Demarco v. Edens, 390 F.2d 836 (2d Cir. 1968); El Paso Natural Gas Company v. Kelly, 308 F.2d 820 (10th Cir. 1962); and Eastmount Const. Co. v. Transport Mfg. & Equip. Co., 301 F.2d 34 (8th Cir. 1962). Accordingly, although we do not know the reason for the action of either the Special Master or the trial court, the disallowance of the claim cannot be upheld on the ambiguity argument.

Four Seasons argues, alternatively, that the disallowance of the claim was well within the broad equitable powers possessed by a bankruptcy court. In this regard our attention has not been drawn to any case where an otherwise valid and lawful claim has been disallowed in a bankruptcy proceeding solely on so-called “equitable” grounds unless there be operative facts which would themselves bring into play recognized equitable principles. In the instant case, we perceive of no facts or circumstances which would form the basis for denying on equitable grounds Northern’s claim.

The principal cases relied on by Four Seasons in this phase of their argument in fact support the contrary of the proposition. In Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939), it was declared that bankruptcy courts, in passing upon the validity of a claim, exercise equity powers and have not only the power, but the duty to disallow claims to the end that, for example, “fraud will not prevail, that substance will not give way to form, that technical considerations will not prevent substantive justice from being done.” Id. at 305, 60 S.Ct. at 244. And in Pepper, the claim disallowed would have inured to the benefit of one who owed a fiduciary duty to the bankrupt, thus bringing into play long recognized principles of equity. In the instant case, there are not even overtones of fraud.

Similarly, Rader v. Boyd, 252 F.2d 585 (10th Cir. 1957), does not really support the position taken by Four Seasons. In that case, we did state that, in accord with Pepper, a bankruptcy court exercises "equitable powers of broad sweep” and that accordingly it is empowered to sift the circumstances to insure that “injustice or unfairness” is not done in the administration of the bankrupt’s estate. In Rader, however, it was determined that there was no fiduciary duty owed the bankrupt by the claimant and that accordingly the claim should be allowed. So, in Rader, as in the instant case, there were no operative facts sufficient to invoke equitable principles which would defeat an otherwise lawful claim against the bankrupt. Merely because a court may be exercising equitable powers does not permit it to change the terms of a contract in the absence of fraud, accident or mistake. Manufacturers’ Finance Co. v. McKey, Trustee in Bankruptcy, 294 U.S. 442, 55 S.Ct. 444, 79 L.Ed. 982 (1935), and Hedges v. Dixon County, 150 U.S. 182, 14 S.Ct. 71, 37 L.Ed. 1044 (1893).

In sum, then, Northern’s claim is based on a valid, binding contract whereby Northern committed itself to lend Four Seasons up to $900,000 and in return therefor Four Seasons agreed to pay a loan commitment fee of $27,000. This obligation to pay a commitment fee was fixed and fully earned when the loan commitment agreement was signed, and the fact that Four Seasons did not borrow the full $900,000 is of no consequence. On the basis of the authorities set forth above, we see no real ambiguity in the loan commitment agreement; but if there be an ambiguity, on the basis of the record, i. e., the undisputed testimony of the former vice-president of Four Seasons, any ambiguity arising from the fact of deferred payments of the fee must under the circumstances of this case be resolved in favor of the interpretation argued for by Northern. Neither the Special Master nor the trial court could under the circumstances substitute their interpretation of the contract for that of the contracting parties. And finally, the claim cannot be disallowed on equitable grounds where there are no operative facts which would justify application of any equitable principle to defeat an otherwise lawful claim.

Judgment reversed and cause remanded with directions that Northern’s claim be allowed.


author: AINSWORTH, Circuit Judge: THORNBERRY, Circuit Judge BY THE COURT:

text:
    MOBIL OIL CORPORATION et al., Plaintiffs-Appellees, v. OIL, CHEMICAL AND ATOMIC WORKERS INTERNATIONAL UNION, AFLCIO, et al., Defendants-Appellants.
    No. 72-3272.
    United States Court of Appeals, Fifth Circuit.
    Aug. 10, 1973.
    Rehearing Eh Banc Granted Dea 3, 1973.

      Chris Dixie, Houston, Tex., for defendants-appellants.
    James W. Hambright, John G. Tucker, Beaumont, Tex., Warren H. Greene, Jr., New York City, for plaintiffs-appellees.
    Before THORNBERRY, AINS-WORTH and RONEY, Circuit Judges.
   AINSWORTH, Circuit Judge:

This suit was brought by Mobil Oil Corporation Marine Transportation Department, Gulf-East Coast Operations [Employer] against the Oil, Chemical and Atomic Workers International Union AFL-CIO and Maritime Local No. 8-801 of that Union [Union] for a declaratory judgment under section 301 of the Labor Management Relations Act of 1947, 29 U.S.C. § 185(a), (c) and 28 U. S.C. § 2201. It concerns the validity of an agency shop clause contained in a collective bargaining agreement-between Employer and Union, which clause is in apparent conflict with Texas right-to-work laws. The district court held that the Texas laws should take precedence, and rendered a declaratory judgment in favor of Employer, holding the agency shop clause void and unenforceable.

Union appeals, presenting a number of issues which we summarize as follows:

1) that this is an exceptional ease where the N.L.R.B. should have primary jurisdiction and preempt judicial proceedings because the employees are seamen who work exclusively aboard deep sea tankers engaged in coastwise commerce and some foreign commerce. Alternatively, that in the exercise of sound discretion the court should have declined to render a declaratory judgment;

2) that the district court erred in applying Texas right-to-work statutes to all its covered employees; and

3) that there is no case or controversy and the dispute was not ripe for declaratory judgment.

We hold that a controversy existed, that jurisdiction properly vested in the district court, and that there was no abuse by that court in declining to defer to N.L.R.B. jurisdiction. We further hold that the agency shop clause is valid and enforceable with respect to all employees covered by the collective bargaining agreement.

Sections 7 and 8(a)(3) [29 U.S.C. §§ 157, 158(a)(3)] of the Labor Management Relations Act specifically authorize a union shop, wherein employment is contingent on membership in a union. These sections have been interpreted to authorize an agency shop,.which is a union security agreement conditioning employment, in lieu of actual union membership, on the payment of regular union dues and initiation fees. N.L.R.B. v. General Motors Corporation, 373 U.S. 734, 738-739, 83 S.Ct. 1453, 1457, 10 L.Ed.2d 670 (1963); Retail Clerks Inter. Ass’n v. Schermerhorn, 373 U.S. 746, 751-752, 83 S.Ct. 1461, 1464-1465, 10 L.Ed.2d 678 (1963).

The agency shop clause involved here states:

“For the duration of the Agreement all employees hired shall, as a condition of employment, become members of the Union and/or in the alternative pay the regular union dues and initiation fees within 31 days from the employment date.”

Despite the provisos in sections 7 and 8(a)(3), recognizing the validity of union security agreements, section 14(b) of the Taft-Hartley Act [29 U.S.C. § 164(b)] provides that such agreements must give way to state law where the state prohibits the conditioning of employment upon union membership. Such a prohibition is expressed in Texas’ right-to-work laws and it is conceded that these Texas statutes bar an agency shop clause.

Mobil Oil Corporation is a New York corporation. Employer is a division of Mobil’s Marine Transportation Department and has its headquarters in Beaumont, Texas. Prior to 1962 the headquarters were in New York. It operates eight oceangoing tankers, which ply the waters of the East and Gulf Coasts of the United States, principally between the State of Texas and the State of New York. It employs unlicensed seamen from various states. Of a total of 289 employees, 123 have reported that Texas is their state of residence. Further, a total of 152 out of 289 have requested Employer to list Beaumont, Texas, as their shipping port.' All of the work performed by the seamen here is aboard ships and the men have no shore duties. They are usually paid in cash, generally at a northern port such as New York or Providence. At the Beaumont, Texas, headquarters payroll records are kept and various bookkeeping functions are performed including the withholding of federal income and FICA taxes and collection of union dues. Unemployment taxes are paid only to the State of Texas. Of the hiring of employees, 60 per cent occurs in Beaumont and 40 per cent at New York.

Union is the exclusive collective bargaining representative of the unlicensed seamen employed on Employer’s tankers. The collective bargaining agreement, the subject of this controversy, was negotiated and executed in the State of New York. It was prepared in final form and retyped in Texas. Since 1942, a year after Union’s certification to Mobil, labor contracts for the employee unit involved have been negotiated in New York. Present negotiations for a successor contract have been taking place in New York.

The district judge found that a more substantial part of the administration of the collective bargaining agreement occurred in Texas than in any other state, and held that the enforcement or attempted enforcement by the Union of the agency shop clause directly involves the Company’s Texas employees, as well as activities and administration of the agreement in Texas, in contravention of the Texas right-to-work laws. He there-' fore declared the clause to be void and unenforceable.

THE PREEMPTION ISSUE

Union concedes that generally N.L.R.B. preemption will not prevail in a section 301 suit, but contends that in exceptional cases, such as this involving extraterritorial problems, the district court should have declined jurisdiction. We disagree.

While section 301 of the Labor Management Relations Act is applicable to suits for violation of contracts, this section has been broadly construed to encompass suits invoking the judicial process for determination of the validity of a collective bargaining agreement, El Paso Bldg. & Const. Tr. Coun. v. El Paso Chap. Assoc. Gen. Con., 5 Cir., 1967, 376 F.2d 797, as well as suits seeking a declaration of various rights and obligations of parties to such contracts, Allied Oil Workers Union v. Ethyl Corporation, 5 Cir., 1965, 341 F.2d 47. The Supreme Court has approved the deliberate choice of Congress to leave the enforcement of collective agreements “to the usual processes of the law.” Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 513, 82 S.Ct. 519, 526, 7 L.Ed.2d 483 (1962). We observe no exceptional circumstances here which justify N.L.R.B. preemption of a proceeding clearly within the contemplation of section 301.

THE CASE OR CONTROVERSY ISSUE

Nor do we agree with appellants that the dispute has not ripened to a present case or controversy. On April 23, 1970, five months subsequent to the execution of the present collective bargaining agreement, Employer wrote to Union stating that the agency shop clause of the contract “is invalid under Texas law” and evidencing Employer’s intention to require new employees to sign a certificate which would advise them that union membership would be on a purely voluntary basis. The policy was effectuated and new employees were so advised. Union made no response to Employer’s letter. In July 1971, however, Union in a newsletter to its members wrote that

“As far as this Union is concerned any employee in our division of Mobil will either join our Union or pay dues to the Union. We intend to exercise our right to have the employment of any unlicensed seaman terminated who does not join or pay dues to the Union. We hope this answers all questions regarding this point.”

Employer obtained a copy of the newsletter and shortly thereafter filed this complaint to declare the agency clause invalid.

Whether a case or controversy is presented must be determined on a case-by-case basis.

“Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”

Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826 (1941).

Applying these principles to this case, we have no difficulty concluding that a substantial controversy involving diametrically opposed interests between Union and Employer existed. Union intended to enforce its agency shop policy; Employer, on the other hand, intended to abolish it, and each party was aware of the intentions of the other. The complaint was, therefore, not premature.

THE VALIDITY OF THE AGENCY SHOP CLAUSE

This is a case of first impression. We have found no direct authority bearing on the issue involved. Employer contends in essence that the law of Texas is predominant because it is in the locale of Employer’s headquarters, the state in which (compared to the other states) the greater number of significant transactions and contacts occur, and the state in which a more substantial part of the administration and performance of the collective bargaining agreement occurs. Union contends that the situs of the employees’ work, the high seas, is determinative, and that Texas state law is therefore inapplicable. Reliance is placed on Western Electric Co., Inc., 84 N.L.R.B. No. 111 (1949) and Northland Greyhound Lines, Incorporated, 80 N.L.R.B. No. 60 (1949), in support of Union’s contention.

In Western Electric, the Union (Communication Workers of America, CIO, Installation Division # 6) petitioned for a union-shop election. The Board was called upon to determine an appropriate unit of mobile telephone installation employees who performed their work in the District of Columbia and 45 states, some of which prohibited union security. The Board determined the appropriate unit to include only members of the contract unit subject to state laws which did not prohibit the union shop. In deciding the applicable state law by which the members would be governed, the Board used as a criterion the headquarters of the individual workers, and relied on its prior decision in Northland Greyhound Lines, Inc., 80 N.L.R.B. No. 60 (1949). In Northland Greyhound, the Board held that “headquarters” are “where the employees report to work, receive their instructions, and are paid their salaries.” The Board in Western held that the headquarters of the installation employees appeared “to be at their job site, as that is where they report for work, receive their instructions, and are paid their wages.” Accordingly, the Board considered each employee “to be subject to the law of the State in which his job site is located,” and excluded “all employees whose job sites are located in States which prohibit union-shop agreements” from the unit.

Union contends that Western Electric recognizes employee job situs as the test for deciding the law applicable to an-agency shop clause in a collective bargaining agreement. Employer contends that Western Electric and Northland Greyhound do not bind this Court and distinguishes them on their facts, pointing out that neither the hiring or firing nor the managerial activity or other incidents of employment occurred in one state alone, as in the present case. Employer further contends that if any rule can be gleaned from these cases it is a rule establishing “headquarters” of employees as the proper criterion as opposed to “job situs” but that in either event the State of Texas meets both criteria. In Western Electric and Northland Greyhound the Board apparently believed that “headquarters” and “job situs” were more or less equivalent under the facts of those cases. The matter before us presents a more complex question. Unlike the cited Board cases, in which headquarters coincided with jobsites in various states, in this case we have only one headquarters, in Texas, with job situs not in individual states but on the high seas.

In the cited N.L.R.B. cases, the Board solved the problem by recommending separate units which would be subject to the laws of the respective states in which the employees were headquartered, that is, the state in which most of their employment contacts occurred, the state in which they were working. In the present case, the operation being sea-based, with work performance occurring on the high seas, we are unable to reach a solution as simple as that employed by the Board.

Conceding, arguendo, that the district court correctly found that a more substantial part of the administration and performance of the collective bargaining agreement occurs in the State of Texas than in any other state, such a finding is not decisive of the issues in this ease. In making such a finding the district judge took into consideration various facts associated with Texas, and acts occurring therein, thereby weighing the interests of Texas against other states. In so doing the court failed to give proper consideration to the most important factor in the case, that is, the situs of the work performance of the covered employees. The trial judge, in written factual findings, held in this regard that

“Substantially all of the employees’ work time is spent aboard Plaintiff’s tankers, and such vessels are located on the high seas or in ports other than ports located in the State of Texas approximately 80% to 90% of the time, but at any given point in time one of the vessels generally is located in Texas or Texas waters.”

Use of Employers’ headquarters as the decisive criterion in this case would allow an employer to make an arbitrary choice, and could produce bizarre consequences. Headquarters could be shifted about by large national companies to states with favorable labor laws, such as the right-to-work statutes. The purpose of sections 7 and 8 of the Labor Management Relations Act or of section 14(b) of the Taft-Hartley Act, the applicable statutes here, could easily be defeated. Under the facts of this case the job situs of the employees is the most important and logical factor. As the Union has pointed out to us, Mobil’s top headquarters is in New York, and prior to 1962 its Marine Transportation Department was likewise headquartered in New York. Thus, as the Union states, the change in headquarters from New York to Beaumont did not substantially change the working location of the men which remained the same.

Through the collective bargaining agreement, the parties thereto agreed to an agency shop clause. This type of membership is authorized by sections 7 and 8 of the Labor Management Relations Act unless forbidden by state law applicable to these circumstances. The location of Employer’s headquarters and predominance of Texas contacts over any other state do not mandate a conclusion that the employees are Texas employees. State right-to-work laws are applicable only to employees of that particular state. The employees involved here are not for the purpose of their collective bargaining agreement employees of Texas or any other state— they are mobile, maritime employees, whose principal place of employment, or jobsite, is on the high seas.

The district court was called upon to determine the validity of a portion of the collective bargaining agreement, the agency shop clause. Our sole duty is to decide whether that determination was erroneous. We cannot rewrite the contract; that is the prerogative of the parties to the agreement through the negotiating machinery by which they are bound. Nor can we compel concessions or otherwise impose our views of a desirable settlement. N. L. R. B. v. Insurance Agents’ International Union, 361 U.S. 477, 487, 80 S.Ct. 419, 426, 4 L.Ed. 2d 454 (1970); National Labor Relations Board v. American Nat. Ins. Co., 343 U.S. 395, 404, 72 S.Ct. 824, 829, 96 L.Ed. 1027 (1952); M. R. & R. Trucking Company v. N. L. R. B., 5 Cir., 1970, 434 F.2d 689, 695. See also H. K. Porter Co., Inc. v. N. L. R. B., 397 U.S. 99, 90 S.Ct. 821, 25 L.Ed.2d 146 (1970).

When the parties to the collective bargaining agreement freely chose to be covered by an agency shop clause we must infer that they intended to be bound by their contract. They “cannot be presumed to have contemplated a law which would defeat their engagements.” Pritchard v. Norton, 106 U.S. 124, 137, 1 S.Ct. 102, 112, 27 L.Ed. 104 (1882). If there is to be a change, it must be the result of further negotiations.

Reversed.

THORNBERRY, Circuit Judge

(dissenting) :

I concur in the majority’s decision on all issues except the last one, the validity of the agency shop clause; I would hold that the district court properly applied Texas law and declared the clause invalid.

In terms of the language of § 14(b) of the Taft-Hartley Act the issue is whether the collective bargaining agreement between the employer and the union applies to “employment in any state” whose right-to-work laws would invalidate the agency shop clause, i. e. whether the agreement applies to “employment in” Texas. As the majority opinion points out, the problem of deciding where the “employment” is located when the situs of the work performed is not the same as the location of the employer’s headquarters or the place where the employees are hired and fired is one which we encounter here for the first time. The majority apparently accepts the district court’s approach to the problem, which entails examining and weighing the various contacts of the employer and its employees with the state whose laws are said to apply, but it disagrees with the district court’s conclusion that the employment contacts with Texas were sufficient to warrant considering the employment to be “in” that state. Reversal is predicated primarily on the conclusion that “[u]nder the facts of this case the job situs of the employees is the most important and logical factor.”

I, too, accept the district court’s significant-contacts approach, but would hold the district court properly concluded under it that the collective agreement in this case applied to “employment in” Texas. Beyond noting the location of the employer’s headquarters in Texas, the district court found that the employer “employs, or approves the employment of, all unlicensed seamen at its headquarters in Beaumont, Texas.” Pay records are maintained in Texas 'and funds are placed on board the ships at Texas ports for disbursements to the employees. All final hiring decisions are made in Texas, and unemployment taxes are paid to the State of Texas. Finally, a majority of the employees list Beaumont as their shipping port, and almost half reside in Texas. These contacts with Texas seem to me more than sufficient to give that State a strong interest in applying its laws to the collective agreement between the employer and the union and to warrant considering the employment to be “in” Texas within the meaning of § 14(b).

The majority argues that if location of the employer’s headquarters were regarded as the decisive criterion, employers might choose headquarters locations in states with right-to-work laws and thereby defeat national labor policy. In response, it should be pointed out initially that the district court did not designate the location of the employer’s headquarters as the decisive factor, but considered the full range of employer and employee contacts with Texas. More basically, an employer’s choice of a location for its headquarters to obtain the benefit of local right-to-work laws would not contravene national labor policy. Section 14(b) of the Taft-Hartley Act expressly permits states to enact and apply right-to-work laws, and it certainly implies no limitation on employer’s freedom to choose to locate in any of the various states. The effect of the majority’s opinion is to carve out collective’ bargaining contracts between maritime employers and employees as a special class, not subject to state laws in the same way that, for example, collective contracts between an interstate trucking or busing business with its employees would be. The majority’s emphasis' on the geographical situs of work performed outside the state’s boundaries seems to me to unduly discount other substantial aspects of the employment relationship, and I do not discern a basis in the statute or in national labor policy for the maritime exemption which the majority establishes.

ON PETITION FOR REHEARING AND PETITION FOR REHEARING EN BANC

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

BY THE COURT:

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

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

      . Vernon’s Ann.Civ.St. Art. 5154g, Section 1:
      “It is hereby declared to be the public policy of the State of Texas that the right of persons to work shall not be denied or abridged on account of membership or nonmembership in any labor union or labor organization and that in the exercise of such rights all persons shall be free from threats, force, intimidation or coercion.”
      Vernon’s Ann.Civ.St. Art. 5207a, Section 2:
      “No person shall be denied employment on account of membership or non-membership in a labor union.”
      Vernon’s Ann.Civ.St. Art. 5154a, Section 8a:
      “It shall be unlawful for any labor union, any labor organizer, any officer, any agent or representative or any member of any labor union to collect, receive or demand, directly or indirectly, any fee, assessment, or sum of money whatsoever, as a work permit or as a condition for the privilege to work from any person not a member of the union; provided, however, this shall not prevent the collection of initiation fees as above stated.”

      . 29 U.S.C. § 157:
      “Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collee-tively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as' authorized in section 158(a) (3) of this title.”
      29 U.S.C. § 158:
      “(a) It shall be an unfair labor practice for an employer—
      (3) by discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization: Provided, That nothing in this subchapter, or in any other statute of the United States, shall preclude an employer from making an agreement with a labor organization (not established, maintained, or assisted by any action defined in this subsection as an unfair labor practice) to require as a condition of employment membership therein on or after the thirtieth day following the beginning of such employment or the effective date of such agreement, whichever is the later . . . ”

      . 29 U.S.C. § 164:
      “(b) Nothing in this subchapter shall be construed as authorizing the execution or application of agreements requiring membership in a labor organization as a condition of employment in any State or Territory in which such execution or application is prohibited by State or Territorial Law.”

      . The Texas Attorney General has so ruled in his Opinion No. WW-1018.

      . There are 60 employees residing in New York, 21 in New Jersey, 16 in Florida, 13 in Louisiana, 10 in Maine, 10 in Rhode Island, and 36 other employees in 16 other states or territories.

      . 29 U.S.C. § 185:
      “(a) Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.
      “(c) For the purposes of actions and proceedings by or against labor organizations in the district courts of the United States, district courts shall be deemed to have jurisdiction of a labor organization (1) in the district in which such organization maintains its principal office, or (2) in any district in which its duly authorized officers or agents are engaged in representing or acting for employee members.”

      . Employer contends that if Board action is to be accorded any weight, a recent decision by a Board Trial Examiner supports its contention that a state’s right-to-work laws should apply to seafaring employees shipping through a port in that state, citing Seafarers Int. Union of No. America, Case No. 23-CB-1222 (N.L.R.B. March 30, 1972), an unfair labor practice case. Subsequent to the decision of the Trial Examiner (now Administrative Law Judge), the National Labor Relations Board, in reviewing that decision, expressly refused to pass on the Administrative Law Judge’s findings and conclusions with respect to the application of the Texas right-to-work law. The Board said: “The Administrative Law Judge based his finding that Respondent violated Section 8(b)(1)(A) and (2) of the Act on the effect of Texas’ right-to-work law on Charging Party James Moyles’ obligation to pay dues. While we agree that Respondent violated . . the Act, we do so only for the reasons enumerated herein.” Seafarers International Union of North America, Atlantic, Gulf, Lakes & Inland Waters District, et al., 202 N.L.R.B. No. 91.

      . Union points out in its brief, extracting information from vessel logs, that the vessels making typical trips touching the port of Beaumont, for example, the MOBIL ARROW, the MOBIL ECLIPSE, the MOBIL FUEL, and the MOBIL GAS, for a period of time in May and June 1972 were in the port of Beaumont only 5.5 per cent of the total time involved. Adding to this example the time of the MOBIL LUBE in May, June and part of July 1972, during which time the vessel did not touch Beaumont at all, our own rough calculation shows that time in the port of Beaumont was a mere 4 per cent of the total time involved.
      Many of the trips do not even touch a Texas port. For example, eight times a year a vessel makes a trip from the East Coast to Puerto Rico and return. The MOBIL LUBE, referred to above, was at the time of trial en route to Guam on a 6-month charter, and had not been in a Texas port for 50 days, yet the members of that crew were also covered by the labor agreement.

      . See also Dailey v. Transitron Electronic Corp., 5 Cir., 1973, 475 F.2d 12; Teas v. Kimball, 5 Cir., 1958, 257 F.2d 817, 823.

      . § 14(b) is quoted in note 3 to the majority opinion.


author: HEANEY, Circuit Judge.

text:
    Melvin Leroy TYLER, Appellant, v. Harold R. SWENSON, Warden, Missouri State Penitentiary, Appellee.
    No. 73-1173.
    United States Court of Appeals, Eighth Circuit.
    Submitted June 13, 1973.
    Decided Aug. 15, 1973.

      Mark T. Keaney, St. Louis, Mo., for appellant.
    John C. Danforth, Atty. Gen., and Preston Dean, Asst. Atty. Gen., Jefferson City, Mo., for appellee.
    Before CLARK, Associate Justice, Retired, and HEANEY and BRIGHT, Circuit Judges.

       United States Supreme Court, sitting by designation.

   HEANEY, Circuit Judge.

Melvin Leroy Tyler, an inmate of the Missouri State Penitentiary, appeals from the dismissal of his habeas corpus petition by the United States District Court for the Eastern District of Missouri.

On January 18, 1965, Tyler was convicted on guilty pleas to four charges of armed robbery in the Circuit Court for the City of St. Louis, Missouri. He was sentenced on each charge to eight years imprisonment, the terms to run concurrently. Tyler was represented by appointed counsel in these proceedings. While the sentence imposed on him for these convictions has expired, he is currently serving a sentence for an unrelated crime, the punishment for which was enhanced under a habitual criminal statute by the convictions at issue here.

On November 3, 1969, Tyler instituted appropriate post-conviction proceedings pursuant to Missouri Supreme Court Rule 27.26 to vacate or set aside his convictions and sentences arising from the guilty pleas. He contended: (1) that the pleas of guilty were not voluntarily or understandingly made and were not made in compliance with Rule 25.04 of the Missouri Rules of Criminal Procedure, V.A.M.R.; and (2) that he was denied effective assistance of counsel. The state post-conviction hearing court held that the pleas were voluntarily and understandingly made even though not in compliance with Rule 25.04. It also held that Tyler was not denied effective assistance of counsel. The court did, however, set aside the judgment of conviction with respect to one of the four robbery charges. The First Division of the Missouri Supreme Court affirmed the post-conviction court’s decision and thereafter, the court denied motions for rehearing and to proceed en banc. Tyler v. State, 485 S.W.2d 102 (Mo.1972).

On October 18, 1972, Tyler filed a petition for a writ of habeas corpus in the United States District Court. He again claimed that he was denied effective assistance of counsel and that his plea of guilty was neither voluntarily nor understandingly made. He also contended that the post-conviction court had set aside the wrong sentence and that there was no basis in the record for the setting aside such sentence. It is unclear from the record as to whether this claim was no basis in the record for set-aside such sentence. It is unclear from the record as to whether this claim We interpret the claim, as finally formulated, to serve both purposes; and with respect to its independent aspect, it would seem that the appellant was asking the District Court to set aside the proper conviction with the result that he would be relieved of both convictions. It is conceded that Tyler had exhausted his state remedies in regard to the first two grounds, but the District Court denied the petition as to all claims on the ground that Tyler had not exhausted his state remedies with respect to the claim that the state court had set aside the wrong sentence. Thereafter, Tyler filed a motion to reinstate his petition with the unexhausted claim deleted and, in the alternative, he sought a certificate of probable cause for an appeal to this Court. The District Court denied both these motions, and Tyler then appealed to this Court for a certificate of probable cause. This was granted on March 15, 1973.

Tyler makes three contentions on this appeal. First, he argues that his claim that the post-conviction hearing court set aside the wrong sentence did not constitute a new issue as to which state remedies had not been exhausted. Second, he contends that even if his claim that the post-conviction hearing court set aside the wrong sentence constitutes a new issue, his state remedies are nevertheless exhausted because, as a practical matter, he cannot present this issue to the Missouri courts. Third, Tyler contends that regardless of whether he has exhausted state remedies as to the claim that the post-conviction court set aside the wrong sentence, the District Court is required to consider his other claims for which state remedies have been exhausted. We discuss these contentions seriatim.

There is no merit to the appellant’s first contention. At no time in the state proceedings did the appellant contend that the post-conviction court had set aside the wrong conviction. That claim goes to the propriety of the post-conviction court’s finding of facts. The appellant's other claims — that his pleas of guilty were not voluntarily or knowingly made, and that he was denied effective assistance of counsel— arose out of events which took place or failed to take place in the earlier state proceeding where the appellant pled guilty. The appellant has exhausted his state remedies as to these two claims. In reviewing those claims, however, it was not necessary for the Missouri Supreme Court to examine whether the post-conviction court had set aside the correct conviction; furthermore, the court was not requested to do so by the appellant. The sole import of the appellant’s contention in the state courts, that he was innocent of one of the charges that he was convicted of, was to demonstrate that he had been denied effective assistance of counsel and that his pleas were neither voluntarily nor knowingly made. It was irrelevant for that purpose as to which of the four charges the appellant was indeed not guilty of. In summary, it is clear that the appellant’s unexhausted claim is distinct from his exhausted claims; and consistent with the doctrine of comity, the state courts should be given the first opportunity to determine if the post-conviction court set aside the wrong conviction.

The appellant’s second contention is also without merit. He argues that because he could have raised the claim that the post-conviction hearing court set aside the wrong sentence in his appeal to the Missouri Supreme Court but failed to do so, he is now precluded from raising the issue in the state courts. The Missouri Attorney General submits that the appellant can present this claim in the Missouri courts either by declaratory judgment proceedings or by seeking to have the post-conviction hearing court correct the ruling of which the appellant complains by reopening the Rule 27.26 proceeding. Historically, the Missouri courts have been commendably liberal in their administration of Rule 27.26, and we agree with the Attorney General’s interpretation of Missouri law. Thus, we hold that the appellant must exhaust the available state remedies in respect to this claim before seeking federal habeas corpus relief as to it. Cf., Tyler v. Swenson, 440 F.2d 621 (8th Cir. 1971).

We do, however, find merit in the appellant’s third contention. This Court, on a number of occasions in the past, has approved the action of District Court judges who have decided the exhausted claims before them while dismissing other claims in the same petition as to which state remedies have not been exhausted. See, e. g., McClain v. Swenson, 435 F.2d 327 (8th Cir. 1970). Yet, at no time have we previously decided whether a District Court is required to consider those claims which have been exhausted when the petitioner has also set out grounds for relief which have not been exhausted. After carefully considering and weighing the competing interests, we have resolved here that in the absence of unusual circumstances, District Courts should be required to consider those claims as to which the petitioner has exhausted his remedies even though he also raises unrelated or frivolous claims in his petition as to which he has not exhausted his remedies. See, Hewett v. State of North Carolina, 415 F.2d 1316 (4th Cir. 1969); United States ex rel. Levy v. McMann, 394 F.2d 402 (2nd Cir. 1968). But see, Green v. Beto, 460 F.2d 322 (5th Cir. 1972); Hamilton v. Craven, 350 F.Supp. 1251, 1253 (N.D.Cal.1971) (dictum), aff’d mem., 469 F.2d 1394 (9th Cir. 1973).

The primary arguments advanced against this position are that it does violence to the doctrine of comity and that it fosters piecemeal litigation. The first objection, we believe, is without merit. The exhaustion requirement is not jurisdictional but, instead, it is “merely an accommodation of our federal system designed to give the State an initial ‘opportunity to pass upon and correct’ alleged violations of its prisoners’ federal rights. * " * ”. Wilwording v. Swenson, 404 U.S. 249, 250, 92 S.Ct. 407, 408, 30 L.Ed.2d 418 (1971) (Citation omitted.) By our decision, we do not deprive the state of this first opportunity as we only require the District Court to examine those claims as to which the petitioner has exhausted his state remedies. The second objection, on the other hand, is grounded in the convenience of the federal courts. This interest — the desire to avoid piecemeal litigation— must be balanced against the interests of the prisoner in obtaining prompt consideration of exhausted claims by the federal courts. In our view, justice requires that the balance must be struck in favor of the prisoners seeking relief. See, United States ex rel. Levy v. Mc-Mann, supra,, 394 F.2d at 404-405. We cannot let the convenience alone of the judiciary and governmental agencies postpone review by the federal courts.

The appellant’s claim that the state post-conviction court set aside the wrong conviction is, in the sense we use the word here, unrelated to his claims that his pleas of guilty were not voluntarily or understandingly made and that he was denied effective assistance of counsel. The post-conviction court has made it clear that one of the convictions should be set aside because it appeared that Tyler had been allowed to plead guilty to a charge of which he was innocent. It, in substance, held that this fact was not sufficient to grant relief on either of the grounds stated for all four-convictions. Regardless of which conviction should have been vacated, the District Court is in possession of all the evidence it needs to make a determination on the exhausted claims; and on remand, it must decide the exhausted claims. However, the District Court might wish to take into account the alleged fact-finding error of the post-conviction court in deciding whether or not it is necessary to grant the appellant a hearing prior to ruling on his exhausted claims.

Affirmed in part, reversed in part, and remanded to the District Court for disposition in accordance with this opinion.

      . The origin of this action was that in support of his contentions that the pleas were neither knowingly nor voluntarily made and that he had been denied effective assistance of counsel, Tyler urged that he had been allowed to plead guilty to all of the charges even though he had a good defense as to one of them. During the post-conviction hearing, the attorney, who had represented Tyler in his January 18, 1965, guilty pleas, admitted that shortly after the pleas were entered, one of the state’s witnesses informed him that Tyler had not committed one of the four robberies. The attorney, however, did not call this fact to the attention of the court which had previously entered a judgment of conviction against Tyler and sentenced him on all four charges. The victims of the four robberies were different, and the robberies took place on separate occasions. One of them involved a gas station, another a grocery store and the others, two drug stores — Klosterman’s Pharmacy and Modern Rexall Drug. The attorney did not recall precisely which of the charges his client had allegedly been innocent of, though he thought it was the one concerning Klosterman’s Pharmacy. No other evidence was put forth as to which chax-ge it was, and the post-conviction court found, in its written findings of fact, that the Klosterman’s Pharmacy charge was the one as to which Tyler had a good defense. Accordingly, the court set aside the conviction and sentence on that charge.


author: JOHN R. BROWN, Chief Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Donald TROISE, Defendant-Appellant.
    No. 73-1017
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Aug. 10, 1973.
    Certiorari Denied Dec. 3, 1973.
    See 94 S.Ct. 574.

      Melvyn Kessler, Miami, Fla., for defendant-appellant.
    Robert W. Rust, U. S. Atty., Lawrance B. Craig, III, Asst. U. S. Atty., Miami, Fla., for plaintiff-appellee.
    Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

       Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York, et al., 5 Cir., 1970, 431 Fd.2d 409, Part I.

   JOHN R. BROWN, Chief Judge:

This appeal is taken from Appellant’s conviction by a jury trial of possessing with intent to distribute 613 pounds of marijuana in violation of 21 U.S.C.A. § 841(a)(1). Though Appellant raises three assignments of error, we consider only two worthy of discussion. These are that the court below erred in denying Appellant’s (i) motion to suppress evidence on grounds that the search and seizure violated his rights guaranteed by the Fourth Amendment and (ii) motion for mistrial based upon the prosecutions elicitation of impermissible and incurable statements from its witness during direct examination. Having carefully reviewed the record we find both to be without merit and thus affirm.

A brief statement of the facts will suffice. In early April of 1972 United States Customs agents were informed by a reliable source that contraband would be imported into the United States through the Tavernier area of the Florida Keys. The information provided was that a Boston whaler-type boat would sail to the Yucatan Peninsula, pick up the contraband, and return to the United States in tow behind a larger vessel. Customs agents placed an address in Miami under surveillance where they observed several automobiles, included among them, a gold Oldsmobile convertible. On July 27, 1972 further information was received from another informant that the registration number on the small vessel used in the smuggling operation would be MS 10 HS. The Customs agents made an attempt to locate the vessel with this identification number and actually sighted it on more than one occasion. Shortly thereafter they received information that the Boston whaler had departed on the smuggling mission. On August 12, 1972 the United States Customs air detail sighted a Boston whaler-type boat whose description matched their information in tow behind a larger vessel on a course for Key West, Florida. The following day, Customs agents observed what appeared to be the same boat being towed behind a gold Oldsmobile convertible headed north on Highway U.S. 1. The Customs agents ordered the vehicle over to the side of the road at which time they testified there was a strong odor of marijuana emanating from under the canvas covering the boat. A search revealed the presence of 613 pounds of marijuana in the cockpit area of the boat.

Propriety Of The Detention

The United States District Judge below, after conducting an evidentiary hearing on the question of suppression, found the detention and the subsequent search and seizure to be justified under what has become known as a “border search”. This term describes certain statutorily created and judicially recognized situations where the dictates of the Fourth Amendment are relaxed to allow warrantless searches, see United States v. McDaniel, 5 Cir., 1972, 463 F. 2d 129; United States v. Wright, 5 Cir., 1973, 476 F.2d 1027; United States v. Thompson, 5 Cir., 1973, 475 F.2d 1359 [1973]; United States v. DeLeon, 5 Cir., 1972, 462 F.2d 170; United States v. Maggard, 5 Cir., 1971, 451 F.2d 502; United States v. Hill, 5 Cir., 1970, 430 F.2d 129; United States v. Arroyave, 5 Cir., 1973, 477 F.2d 157 [1973], the rationale being that on balance mild intrusions upon privacy sometimes must give way to the serious and legitimate interest of the government with respect to enforcing along thousands of miles of open border valid customs, immigration and related laws. These “border searches”, however, have been limited to, and remain, a carefully defined class of eases. See Almeida-Sanchez v. United States, 1973, 413 U.S. 266, 93 S.Ct. 2535, 37 L.Ed.2d 596 [1973]; United States v. Storm, 5 Cir., 1973, 480 F.2d 701 [1973], Because we conclude from the record that Appellant’s detention was supported by probable cause, we find it unnecessary to reach the question of whether the search and seizure fell within the aegis of a “border search”.

Here the Customs agents had pieced together information from multiple informants that a gold Oldsmobile convertible and a blue and white Boston whaler-type vessel with the registration number MS 10 HS were going to be used in a scheme to illegally enter the country with contraband. The agents had consciously maintained a surveillance on the Miami address where they had observed the Oldsmobile convertible parked, initiated a search for the Boston whale-type vessel and maintained air surveillance of the coast line around Key West. Upon sighting the Boston whaler in tow behind a larger vessel and' heading for Key West, they began a surveillance of the Tavernier area of the Florida Keys, where they observed the boat in tow behind the gold Oldsmobile convertible headed north on U.S. 1. Viewing as we must the totality of the circumstances, we think the agent’s prior knowledge of the vehicles and its occupants were easily sufficient to constitute probable cause for the belief that when the vehicle was stopped it carried contraband narcotics. Once stopped, of course, the record is clear that the agents were able to detect a strong odor of marijuana emanating from the vessel, given probable cause, the law is well settled that, because of the mobility of motor vehicles, the possibility of flight, and subsequent destruction of evidence, officers may search where they have reasonable cause to believe a crime has been committed. Chimel v. California, 1969, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685; Carroll v. United States, 1925, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543.

Denial Of Mistrial

On direct examination by the prosecution of the Customs agent who made the arrest the following dialogue transpired:

Q. After you observed the occupants of the car get out, what did you next have occasion to observe?

A. Well, at this moment I, after everyone had got out, I asked who owned the boat, who owned the car, who owned the trailer. No one replied.

An objection immediately followed, coupled with the lengthy admonition to the jury by the trial judge to disregard the import of agent Thompson’s response.

It is Appellant’s contention that the trial Judge’s attempt at cautioning and instructing the jury was insufficient to cure the prejudicial effect the remark had on the minds of the jurors. It is argued that since one of the essential elements the government was required to prove was that of guilty knowledge, the jurors would infer that since Appellant knew what was in the boat he would not say that he was the owner. We are unpersuaded.

It has long been the settled rule in this Circuit that error in the admission of evidence under most circumstances may be cured by withdrawing the evidence from the jury’s consideration and instructing the jury to disregard it. United States v. Pritchard, 5 Cir., 1969, 417 F.2d 327; Hill v. United States 5 Cir., 1966, 363 F.2d 176; Conner v. United States, 5 Cir., 1962, 322 F.2d 647, cert. denied, 1964, 377 U.S. 907, 84 S.Ct. 1167, 12 L.Ed. 178; Fahning v. United States, 5 Cir., 1962, 299 F.2d 579. While we recognize that there is an exception to this rule in cases where the remark is so highly prejudicial as to be incurable by the trial court’s admonition, we don’t view this as such a situation. See United States v. Kidd, 5 Cir., 1971, 446 F.2d 1385. Our reading of the context in which the impermissible testimony was elicited convinces us that agent Thompson’s remark was inadvertent and not responsive to question.

After reviewing the totality of the testimony received, we cannot conclude that the contested statement, though impermissible, had such a prejudicial effect on the minds of the jury that it could not, and was not totally cured by the Judge’s cautionary instruction.

All of Appellant’s assignments of error are without merit.

Affirmed.

      . At the suppression hearing below the trial judge also found the existence of probable cause to support the search and seizure, but seemed to base his denial of the motion to suppress primarily on his finding that the search and seizure qualified as a “border search”. Our holding merely affirms the finding of probable cause making it unnecessary for us to address the “border search” question.

      . The instruction to the jury was as follows:
      Ladies and gentlemen, the last remark was not responsive to the question and it should not be considered by you at all. The answer about any conversations this man had with these two persons.
      Some folks say it is impossible for jurors to strike something from their minds which has been discussed in the court. I can only tell you what you are doing is weighing evidence, deciding whether or not the Government has overcome the presumption of innocence by proof beyond every reasonable doubt.
      Judges do this all day long and all week long, say, “I cannot consider this because it is inadmissible.”
      The question is, does the other evidence weigh so heavily to establish the charges beyond every reasonable doubt, so I will tell you not to consider it, the last statement made by this witness regarding some questions he asked people out at the scene.

      . We find nothing in the record to support Appellant’s argument that the response by agent Thompson was calculated to make a strong impression on the jury.

      . It is our opinion that, had the trial Judge further cautioned the jury to disregard any inferences that could have been drawn from the agent’s statement, as Appellant argues he should have, it would only have served to draw further attention to the statement thus compounding the problem.

      . Another assignment of error alleged by Appellant in this appeal challenged the trial Judge’s instruction to the jury concerning actual and constructive possession. We conclude this contention to be without merit and decline discussion.


author: CELEBREZZE, Circuit Judge.

text:
    Joseph KUKLA and Donna Kukla, Plaintiffs-Appellees, and Liberty Mutual Insurance Company, Intervenor Plaintiff-Appellant, v. NATIONAL DISTILLERS PRODUCTS COMPANY, Defendant, v. PENN CENTRAL TRANSPORTATION CO., Third-Party Defendant.
    No. 72-2152.
    United States Court of Appeals, Sixth Circuit.
    Argued April 19, 1973.
    Decided Aug. 2, 1973.
    Reginald S. Johnson, Detroit, Mich., for Liberty Mutual Ins. Co., intervenor plaintiff-appellant; Johnson, Campbell & Moesta, Detroit, Mich., on brief.
    Allan H. Tushman, Detroit, Mich., for plaintiffs-appellees; Levine & Benjamin, Detroit, Mich., on brief.
    Before PHILLIPS, Chief Judge, and CELEBREZZE and KENT, Circuit Judges.

       This case was argued to a panel consisting of Chief Judge Phillips and Judges Cele-brezze and Kent. Judge Kent died before a decision was reached and an opinion prepared,

   CELEBREZZE, Circuit Judge.

This is an appeal from the District Court’s entry of summary judgment in a diversity suit in which Plaintiffs-Appel-lees sought to recover for injuries and loss of consortium resulting from an accident which was assertedly caused by the negligence of Defendant, National Distillers. The judgment was entered upon, and incorporated the terms of, a pre-trial settlement which the District Court found to have been agreed to by all of the parties. Intervenor-Appellant, Liberty Mutual, asserts on appeal, as it did before the District Court, that it had never agreed to the terms of the settlement as adopted by the Court.

Plaintiff Kukla was injured in the course of his employment as a warehouseman for Detroit Delivery, Inc., when he was unloading a box car containing cases of whiskey and a row of cases toppled upon him. Kukla filed the present suit against National Distillers claiming that the latter’s negligence in loading the box car was the proximate cause of his injuries. As the workmen’s compensation insurance carrier for Ku-kla’s employer, Liberty Mutual intervened, seeking indemnification from National Distillers for benefits it had paid to Kukla, and further seeking to redeem any future claims which Kukla might present as a result of the accident. National Distillers in turn joined Penn Central Transportation Co. as a third-party defendant.

The relevant docket entries reflect at least nine-pretrial conferences in this case. The next to the last of these conferences, which was held on May 9, 1972, was attended by the District Judge, counsel for each of the parties, Kukla and Mr. McIntyre, the workmen’s compensation supervisor for Liberty Mutual. All parties understood that a settlement had been agreed upon pending approval by the home offices of Liberty Mutual and National Distillers. The Judge, however, was not informed of the terms of the agreement, which ■were arrived at outside of his presence. That same afternoon McIntyre informed Liberty Mutual’s attorney, Mr. Zack, that the home office had approved the settlement, and Zack in turn advised Kukla’s attorney of the same. Two days later Kukla’s attorney reached a final agreement with National Distiller’s home office and advised the Court that a final settlement had been achieved.

Thereafter the proposed release, stipulation, redemption agreement, and order of dismissal were prepared. The redemption agreement, which was prepared with the approval of Liberty Mutual’s attorney, Zack, called for payment by Liberty Mutual to Kukla of $35,000, in redemption of all future liability of Liberty Mutual arising out of the accident. When approached several weeks later by Kukla’s attorney respecting execution of the above forms, McIntyre asserted that neither he nor Liberty Mutual’s home office had ever agreed to the $35,000 redemption, and that they would not approve the same.

Kukla’s attorney thereupon filed with the Court a motion for the entry of judgment incorporating the terms of the purported settlement agreement which called for, inter alia, the $35,000 redemption payment by Liberty Mutual. This motion was accompanied by an affidavit by Kukla’s attorney asserting that all persons present at the pre-trial conference, including McIntyre and Zack, had understood that the settlement called for the $35,000 redemption payment by Liberty Mutual. In response, Liberty Mutual filed an affidavit of McIntyre wherein he asserted that the settlement which was agreed to at the pre-trial conference and which Liberty Mutual’s office approved called for a redemption of all future workmen’s compensation liability at no cost to Liberty Mutual.

At a hearing on the above motion, counsel for the Plaintiffs and counsel for Liberty Mutual stated that they had understood the settlement agreement to include a $35,000 redemption payment by Liberty Mutual. Upon these state-merits of counsel and the affidavits of Plaintiffs’ counsel and McIntyre, the District Court issued a written opinion finding that Plaintiffs-Appellees were entitled to summary judgment pursuant to Rule 56, F.R.C.P., and entered a final judgment incorporating the terms of the asserted pre-trial settlement agreement, including the $35,000 redemption payment by Liberty Mutual. In a subsequent order denying Appellant’s motion for reconsideration, the District Court cited both Rule 56 and Rule 16 in support of its entry of judgment. We vacate the judgment and remand the case for an evidentiary hearing.

We initially note that the authority for a District Court’s entry of final judgment incorporating the terms of a pre-trial settlement agreement rests under neither Rule 56 nor Rule 16. See All States Investors, Inc. v. Bankers Bond Co., 343 F.2d 618, 625 (6th Cir.), cert. denied, 382 U.S. 830, 86 S.Ct. 69, 15 L.Ed.2d 74 (1965); Cia Anon Venezolana De Navegacion v. Harris, 374 F. 2d 33 (5th Cir. 1967). Rather, such a judgment “is in the nature of a judgment by consent,” All States Investors, Inc. v. Bankers Bond Co., supra,, 343 F. 2d at 625, authorized under what has teen consistently recognized as the trial court’s “inherent power to summarily enforce settlement agreements entered into by parties litigant in a pending case.” Cia Anon Venezolana De Navegacion v. Harris, supra, 374 F.2d at 36. See also Massachusetts Casualty Insurance Co. v. Forman, 469 F.2d 259, 260 (5th Cir. 1972); Autera v. Robinson. 136 U.S.App.D.C. 216, 419 F.2d 1197 1200 (1969); Kelly v. Greer, 365 F.2& 669, 671 (3d Cir. 1966), cert. denied, 385 U.S. 1035, 87 S.Ct. 772, 17 L.Ed.2d 682 (1967); Cummins Diesel Michigan, Inc. v. The Falcon, 305 F.2d 721, 723 (7th Cir. 1962).

The power of a trial court to enter a judgment enforcing a settlement agreement has its basis in the policy favoring the settlement of disputes and the avoidance of costly and time-consuming litigation. See Massachusetts Casualty Insurance Co. v. Forman, supra, 469 F.2d at 261; D. H. Overmyer Co. v. Loflin, 440 F.2d 1213, 1215 (5th Cir.), cert. denied, 404 U.S. 851, 92 S.Ct. 87, 30 L.Ed.2d 90 (1971); Autera v. Robinson, supra, 419 F.2d at 1199. To effectuate this policy, the power of a trial court to enforce a settlement agreement has been upheld even where the agreement has not been arrived at in the presence of the court nor reduced to writing. See Green v. John H. Lewis & Co., 436 F.2d 389,. 390 (3d Cir. 1970); Good v. Pennsylvania R. R. Co., 384 F.2d 989, 990 (3d Cir. 1967); Main Line Theatres, Inc. v. Paramount Film Distributing Corp., 298 F.2d 801 (3d Cir.), cert. denied, 370 U.S. 939, 82 S.Ct. 1585, 8 L.Ed.2d 807 (1962).

While summary enforcement of a settlement agreement may very well promote the above policy in cases where there exists no substantial dispute as to the entry into, or the terms of, the agreement, summary proceedings may result in inequities when — as here — such a dispute does exist. As observed by the Court of Appeals for the District of Columbia Circuit in a case involving facts comparable to those before us:

“The summary procedure is admirably suited to situations where, for example, a binding settlement bargain is conceded or shown, and the excuse for nonperformance is comparatively unsubstantial. On the other hand, it is ill-suited to situations presenting complex factual issues related either to the formation or the consummation of the contract, which only testimonial exploration in a more plenary proceeding is apt to satisfactorily resolve.” Autera v. Robinson, supra, 419 F.2d at 1200 (footnote omitted).

See also Massachusetts Casualty Insurance Co. v. Forman, supra, 469 F.2d at 260:

“A trial court has the power to summarily enforce a settlement agreement entered into by the litigants while the litigation is pending before it. Cia Anon Venezolana De Navegacion v. Harris, 374 F.2d 33 (5th Cir. 1967). However, where material facts concerning the existence of an agreement to settle are in dispute, the entry of an order enforcing an alleged settlement agreement without a plenary hearing is improper. Autera v. Robinson, 136 U.S.App.D.C. 216, 419 F.2d 1197 (1969). Theatre Time Clock Co., Inc. v. Motion Picture Advertising Corp., 323 F.Supp. 172, 174 (E.D.La.1971).”

As was the case in Autera v. Robinson, supra, and Massachusetts Casualty Insurance Co. v. Forman, supra, the purported settlement agreement here was never officially presented to the District Court prior to the motion for entry of judgment thereon. Moreover, here, as in those cases, the District Court relied upon the unsworn statements of counsel and affidavits in summarily resolving the dispute respecting the terms of the agreement — notwithstanding the fact that Liberty Mutual’s attorney offered to place McIntyre on the stand to corroborate his filed affidavit.

Despite the statements by counsel, including Liberty Mutual’s own attorney, that they understood the agreement to include a $35,000 redemption payment by Liberty Mutual — statements upon which the District Court heavily relied — we find that McIntyre’s affidavit presents allegations which, if true, would preclude enforcement of the purported agreement. In that the motion before the District Court certainly was neither ordinary nor routine, the Court could not properly resolve this substantial factual dispute and discredit McIntyre’s allegations by merely weighing the affidavits and relying upon the un-sworn statements of counsel. See Au-tera v. Robinson, supra, 419 F.2d at 1203; Massachusetts Casualty Insurance Co. v. Forman, supra, 469 F.2d at 261. Rather, we conclude that the District Court erred in failing to conduct an evi-dentiary hearing which would have at least afforded an opportunity for the Court to properly judge the credibility of the affiants and an opportunity for their cross-examination.

The judgment of the District Court is vacated and the case is remanded for an evidentiary hearing on the disputed terms of the purported settlement agreement.

      . In rejecting the allegations in McIntyre’s affidavit, the District Court relied on Goldman v. Century Insurance Co., 354 Mich. 528, 93 N.W.2d 240 (1958), for the proposition that under Michigan contract law the unexpressed thought and understanding of the parties is inadmissible to establish their intent, thus rendering McIntyre’s allegations immaterial in the present case. Goldman, however, was an action for reformation of a written insurance contract in which the insureds asserted that the contract was intended by the parties to cover a loss not expressly included in the written provisions. In contrast, there was no written proof of the parties’ agreement in the present case (with the exception of the proposed but unexecuted release and redemption agreement). Rather, the present dispute arose under an oral agreement, and McIntyre’s allegations as to his understanding of the agreement are therefore every bit as material as the contrary allegations of Kuklas’ attorney and the other counsel.
      Moreover, it is undisputed that all parties understood that neither McIntyre nor Liberty Mutual’s attorney could bind Liberty Mutual to a settlement agreement absent approval by the latter’s home office. Since McIntyre alone communicated with Liberty Mutual’s home office respecting the terms of the settlement agreement, the only evidence of the terms to which the latter agreed appears in McIntyre’s affidavit.