author: LUMBARD, Circuit Judge: FEINBERG, Circuit Judge

text:
    UNITED STATES of America, Appellee, v. John DIOGUARDI and Louis Ostrer, Defendants-Appellants.
    Nos. 113-114, Dockets 73-1759, 73-1769.
    United States Court of Appeals, Second Circuit.
    Argued Sept. 13, 1973.
    Decided Jan. 4, 1974.

      Harold F. McGuire, Jr., Asst. U. S. Atty., S. D. N. Y. (Paul J. Curran, U. S. Atty., S.D.N.Y., S. Andrew Schaffer and John W. Nields, Jr., Asst. U. S. Attys., S. D. N. Y., on the brief), for appellee.
    Gretchen White Oberman, New York City (Jay Goldberg, New York City on the brief), for appellant Dioguardi.
    Sheldon H. Elsen, New York City (Orans, Elsen & Polstein, Lewis, Shapiro, Anthony J. Ferrara and Henry J. Boitel, New York City, on the brief), for appellant Ostrer.
    Before LUMBARD, FRIENDLY and FEINBERG, Circuit Judges.
   LUMBARD, Circuit Judge:

John Dioguardi and Louis Ostrer appeal from judgments of conviction entered on April 12, 1973, after a three-week jury trial held in January 1973 in the Southern District, and from the denial by Chief Judge Edelstein of new trial motions. The forty-count indictment was filed May 27, 1971, against the appellants and seven others. Count one charged the defendants with conspiring, in violation of 18 U.S.C. § 371 to violate provisions of the federal securities laws and regulations, 15 U.S.C. §§ 77q(a), 77x, 78j(b), and 78ff, and Rule 10b-5, 17 CFR 240.-10b-5, and the federal mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343. The remaining counts charged substantive violations of these same provisions, except 18 U.S.C. § 1343.

On January 26, 1973, the jury found Ostrer guilty on eleven of the seventeen counts submitted to them by the court, and Dioguardi on four of the nineteen counts submitted as to him. Prior to sentencing, the defendants moved for a new trial or, in the alternative, for an evidentiary hearing. The. basis for this motion was an unsolicited letter from one of the jurors to Dioguardi which allegedly established the ineompetency of that juror. In reliance on this, and on. the provisions of 28 U.S.C. § 1865 (b)(4), they claim that they had been deprived of their right to have their ease heard and decided by a panel of twelve competent jurors. Judge Edel-stein denied the motion on April 12th. He sentenced Dioguardi to nine years’ imprisonment and a $30,000 fine, and Ostrer to three years’ imprisonment and a $55,000 fine.

In addition to their objections relating to alleged juror incompetency, the defendants raise four other claims of error in the conduct of the trial: first, that the government prosecutor’s argument in summation, to the effect that neither defendant called witnesses to contradict the government’s testimony, was improper comment on each appellant’s failure to testify in view of the assertion by each that he alone was in a position to contradict the government’s witnesses; secondly, that it was error for the trial court to have refused to charge, as requested, that the testimony of admitted perjurers and felons was to be scrutinized with care and caution; thirdly, that it was improper for the trial court to have ruled that Dioguar-di’s acquittal of another crime could not be proved when the government intended to utilize the acts underlying the acquittal to show a prior course of illegal conduct; finally, that consecutive sentences for Dioguardi on two of the counts charging securities law violations, counts 16 and 17, were improper since the underlying facts constituted only a single offense.

We find the defendants’ arguments unpersuasive and we accordingly affirm the convictions below and let Dioguardi’s sentences stand.

I.

The evidence at trial revealed a scheme to manipulate the price of the stock of Belmont Franchising Corporation (“Belmont"), a substantially worthless over-the-counter security. The book value of the stock was almost negligible (Belmont’s assets were essentially paper holdings in other concerns); it had been traded for only a short time for at most a few dollars a share.

In January of 1970 Michael Heller-man, who pleaded guilty and testified for the government, began steps to drive up the price of Belmont stock, first to $5 or $6 a share and then to nearly $50 a share. At that time two stock manipulators, Anthony Soldano and Fred Goodman, in concert with Hellerman, commenced acquiring substantially all of the 28,720 known publicly tradeable shares of Belmont. Goodman and Sol-dano executed their purchases ostensibly through the open market, using brokers who quoted prices for Belmont through the National Quotation Bureau’s pink sheets for over-the-counter securities. These purchases created the appearance of an active public market in the stock.

By early March, 1970 Goodman and Soldano had caused the market price of Belmont as quoted in the pink sheets to reach $15 a share. They did this primarily through directions to their brokers, who traded small quantities of the stock among themselves. In the meantime, Goodman and Soldano had acquired control, they believed, of all the outstanding stock.

At this point Hellerman’s role became paramount. According to his testimony, he already had an understanding with Dioguardi that “whatever I did in the future, ... he would have 25 per cent.” It had also been agreed between Hellerman, on one side, and Goodman and Soldano on the other that once the price of Belmont stock reached $15, Hel-lerman and his associates would purchase all the stock at the $15 level, with a $5 per share kickback, prior to further manipulation upwards. In confirming this arrangement with Goodman and Soldano, Hellerman took Soldano to Dioguardi’s office “to make sure it was on the record.”

According to Hellerman, it was at this time in early March that he brought Os-trer into the scheme, although the two were only recently acquainted. Ostrer agreed to commit himself to buy 14,000 shares of Belmont at $15 a share ($210,000 total), with the understanding that he would split any future profits with Hellerman, that Hellerman would guarantee him against loss, and that a loan of the purchase money would be arranged so that he would not have to “lay out a quarter” of the $210,000. Purchase orders in Ostrer’s name or in his behalf were to be made through various New York Stock Exchange firms.

Ostrer then placed orders in his own name and in his sister’s for 14,000 shares of Belmont. However, most Exchange firms which he approached refused to accept his orders, and he was forced to place relatively large block orders through firms where brokers were already in league with Hellerman.

Contemporaneously, Hellerman made arrangements with others to purchase the remaining 14,000 or so shares of Belmont. These individuals were able to pay the selling brokers (at the $15 a share price), but Ostrer was unable to raise the $210,000 needed to “hold up” his end of the deal, a circumstance which left his brokers unpaid. According to Hellerman, he thereupon obtained a loan for Ostrer through Dioguardi. The funds, totalling $60,000, came from Hickey DiLorenzo, at an interest rate of íVz% a week. DiLorenzo also demanded and received $24,000 from Hellerman for this favor (part of the kickback profits already made). In addition, Heller-man also advanced Ostrer $52,500, and Ostrer obtained the balance he needed from other sources.

Thereafter, from the end of March through late April, 1970, Hellerman directed purchases' and sales of Belmont stock at ever-increasing prices among the individuals and brokers whom he controlled. He kept Dioguardi, Ostrer, and DiLorenzo informed as the price rose. He also arrranged for Ostrer to sell off enough stock, through a nominee, to repay the $60,000 loan from Di-Lorenzo — with a $1700 profit left over which he split with Ostrer. By the end of April he had received approximately $140,000 in kickbacks from Goodman and Soldano. He gave $30,000 to Dio-guardi, and invested $9,000 more in a business in which Dioguardi had an interest.

In early May, 1970, the scheme failed. The president of Belmont through a broker unknown to the manipulators, began to sell heavily his own “investment” stock in the corporation. The market was unable to absorb the sales, and Hellerman was unwilling tp buy the stock and could not find 'other purchasers. Consequently the ¡market for Belmont collapsed, leaving Ostrer (among others) with large quantities of unsold stock. Ostrer then tried to bold Hellerman responsible for his losses. Hellerman became worried because Di-Lorenzo took Ostrer’s side. Dioguardi subsequently arbitrated the dispute to some extent, and arranged for partial compensation to Ostrer to the sum of $25,000.

At trial Dioguardi called no witnesses. and based his defense primarily on cross-examination going to the lack of credibility of the government’s major witnesses, who were all accomplices. Ostrer did not testify but he did call two witnesses whose testimony indicated that Ostrer had been a “victim” of Hel-lerman’s machinations.

About ten days after trial, Dioguardi received a letter from one of the jurors, Miss Genena Rush, a nurse’s aide employed at Flower Fifth Avenue Hospital in New York City. The letter was written on stationery bearing the zodiac sign of Libra, and on one page the legend that it was “the heavenly house under which I was born.” The juror wrote of her clairvoyant powers which enabled her to see that Dioguardi was basically a good person. She stated her belief that he was guilty, “Your mistake your guilty,” and questioned him about Heller-man, “Why you let such a relationship exist between you and a man like Heller-man?,” and called upon him to repent, “One word appear before me repent. If you repent and run a clean business it is the good within you that will save you, and you will gain what you have lost.” Miss Rush stated that

I have eyes and ears that I can see things before it happen. I can tell you about other and what they are thinking and doing,

and that her eyes

are only partly open .... Unfortunate, a curse was put upon them some years ago. I have some people working on them.

The letter is reproduced in full in the margin.

Dioguardi’s attorneys sent copies of the letter to seven psychiatrists, all of whom responded (one in an affidavit) to the effect that, in their opinion, what Miss Rush had written indicated hallucinatory tendencies, symptoms of possible psychosis, paranoia, and grandiosity, and in general an inability to appreciate reality without fantasizing. The psychiatrists also pointed out that further psychiatric analysis was needed before a diagnosis could be ventured with any certainty, or before it could be said that Miss Rush’s infirmities, whatever their nature and extent, might have rendered her unable to comprehend the proceedings at trial. The psychiatrists were given no information about the juror or about the trial and the issues, and the court had forbidden anyone to seek to interview her.

On the basis of Miss Rush’s letter and the opinions of the psychiatrists, Dioguardi and Ostrer moved pursuant to Rule 33, F.R.Crim.P., for a new trial or in the alternative, for an evidentiary hearing on the competency of Miss Rush as a juror. They asserted that an uncontroverted showing of ineompeteney had been made out, in violation of 28 U.S.C. § 1865(b)(4) and their constitutional rights.

Judge Edelstein, after hearing oral arguments and receiving briefs, denied the motion for a new trial and for further investigation of the juror’s competency on April 12, 1973, and later filed a thorough and considered opinion on July 18, 1973. 361 F.Supp. 954. He stated:

Moreover, there was nothing in the demeanor of the juror during voir dire, trial or deliberations to indicate that she was anything but competent to serve on the jury. On voir dire, the jurors were asked group questions in an effort to elicit from them their feelings of bias or prejudice which would prevent them from rendering a fair and impartial verdict, [footnote omitted] In direct colloquy with me, the juror answered directly and responsively, stating that she understood my questions and comments, and specifying the particular one which applied to her. Nothing in her responses and demeanor indicated that her reasoning abilities or mental processes were deficient. Indeed, her ability to recall my questions applicable to her, conveyed the opposite impression. Likewise, during the three weeks of trial and three days and nights of deliberations, I did not notice anything unusual about her. Nor was anything unusual concerning her brought to my attention by either the attorneys or jurors.

Examination of the juror on the voir dire had disclosed that she was then employed by Flower Fifth Avenue Hospital as a patient attendant assisting the nurses and had been so employed for four years. In answer to the court’s question as to whether any questions or comments applied to her, she stated that in 1944 she was employed by the Navy Department in Cleveland as assistant to the foreman in the cleaning department. Prior to her current hospital employment she was a silk finisher in a cleaning shop in the Bronx.

II.

A — Competency of Juror Rush

It is well settled that only clear evidence of a juror’s incompetence to understand the' issues and to deliberate at the time of his service requires setting aside a verdict. And only strong evidence that it is likely that the juror suffered from such incompetence during jury service will justify an inquiry into whether such incompetence in fact did exist. In our view the juror’s letter, and the essentially horseback uninformed opinions of the psychiatrists regarding the letter, fall considerably short of justifying any further inquiry. Furthermore, the appellants have not cited a single authority which supports a grant of their motion on this record. Judge Edelstein was entirely correct in denying the motion.

Reluctance to inquire into the state of mind of any juror and into the conduct of the jurors during their deliberations rests on sound reasons. The rule against any inquiry whatever recognizes exceptions only where there is clear and incontrovertible evidence of incompetence shortly before or after jury service, clear evidence of some criminal act, or evidence of some “objective fact” of interna] impropriety. Even in the case of recent incompetence a hearing will be had to establish that it must have existed during jury service.

The strong policy against any post-verdict inquiry into a juror’s state of mind was stated by this court regarding an analogous situation in United States v. Crosby, 294 F.2d 928, 950 (2d Cir. 1961), cert. denied sub nom. Mittelman v. United States, 368 U.S. 984, 82 S.Ct. 599, 7 L.Ed.2d 523 (1962):

There are many cogent reasons militating against post-verdict inquiry
Nor have the courts favored any public or private post-trial inquisition of jurors as to how they reasoned, lest it operate to intimidate, beset and harass them. This Court will not accept their own disclosure of forbidden quotient verdicts in damage eases. McDonald v. Pless, 238 U.S. 264, [35 S.Ct. 783, 59 L.Ed. 1300]. Nor of compromise in a criminal case whereby some jurors exchanged their convictions on one issue in return for concession by other jurors on another issue. Hyde v. United States, 225 U.S. 347, [32 S.Ct. 793, 56 L.Ed. 1114], “If evidence thus secured could be thus used, the result would be to make what was intended to be a private deliberation, the constant subject of public investigation — to the destruction of all frankness and freedom of discussion and conference.” McDonald v. Pless, [238 U.S. 264 (1915)] at pages 267-268 [35 S.Ct. at page 784], into jurors’ motives for decision. The jurors themselves ought not be subjected to harassment; the courts ought not be burdened with large numbers of applications mostly without real merit; the chances and temptations for tampering ought not be increased; verdicts ought not be made so uncertain.

We cited this language in Miller v. United States, 403 F.2d 77 (2d Cir. 1968) where the court also emphasized, at page 82, the importance of the dangers presented by inquiries that go beyond objective facts: “inhibition of jury-room deliberations, harassment of jurors, and increased incidence of jury tampering.” See also Stein v. New York, 346 U.S. 156, 178, 73 S.Ct. 1077, 97 L.Ed. 1522 (1953); McDonald v. Pless, 238 U.S. 264, 268, 35 S.Ct. 783, 59 L.Ed. 1300 (1915); and Mattox v. United States, 146 U.S. 140, 147-151, 13 S.Ct. 50, 36 L.Ed. 917 (1892).

With respect to post-verdict evidence of possible juror incompetency during the trial, courts have refused to set aside a verdict, or even to make further inquiry, unless there be proof of an adjudication of insanity or mental incompetence closely in advance of the time of jury service. Only when proof of this nature has been offered, or proof of a closely contemporaneous and independent posttrial adjudication of incompetency, have courts conducted hearings to determine whether the disability in fact affected the juror at the time of trial.

But absent such substantial if not wholly conclusive evidence of incompetency, courts have been unwilling to subject a juror to a hearing on his mental condition merely on the allegations and opinions of a losing party. In Peterman v. Indian Motorcycle Co., 216 F.2d 289 (1st Cir. 1954), the plaintiff, shortly after judgment against him in a civil suit for personal injury, moved for a new trial on the grounds “that certain information, discovered since the trial, disclosed the mental unfitness of the foreman of the jury, whose condition, if it had been known . . . would

have been a ground for disqualification.” Judge Wyzanski heard counsel on the motion and requested an offer of proof from the plaintiff’s attorney.

The offer of proof was . . . that the juror in question, because of his mental disturbance, has been receiving disability compensation from the Veterans Bureau; that he has difficulty in sleeping and concentrating; that his memory is not good; that he has had depressed periods during which he entertained the idea of suicide; that he has had to undergo treatment for anxiety reaction to a psychic episode expressed by auditory hallucinations; that he has been under the care of a psychiatrist for an extended period, with little prospect of an early overcoming of his difficulties. [Id., at 293.]

Judge Wyzanski held that the offer of proof was inadequate and denied the plaintiff’s motion The Court of Appeals for the First Circuit agreed, stating that:

Considering the strong policy against the too-ready impeachment of jury verdicts on the basis of such afterthoughts suggested by a disappointed litigant, . . . the trial judge cannot be held to have abused his discretion in declining to grant a new trial on this ground. [Id.]

See also United States ex rel. Daverse v. Hohn, 198 F.2d 934 (3rd Cir. 1952).

In light of this legal background, we do not believe appellants made enough of a case to justify further inquiry into the competence of Juror Rush. No evidence was offered of any history of mental instability on the part of Miss Rush, much less evidence of any adjudication of insanity or incompetence. Indeed, what we do know of her past, although it is little, reflects quite the contrary situation. She has held steady employment over the past four years as a nurse’s aide at Flower Fifth Avenue Hospital, and apparently had steady employment before that as well. The trial judge, as noted above, found the juror alert and responsive and he noted nothing unusual about her during the three weeks of trial and three days and nights of deliberation. Although the opinions of experts are not to be dismissed altogether, they were here of necessity formed in a vacuum, based on one piece of evidence, and fall far short of constituting the sort of “objective fact” which can justify inquiry into the internal workings of the jury. The fact that there is no evidence of harassment of Miss Rush or solicitation of the letter does not render irrelevant the policy considerations which forbid inquiry into the internal workings of the jury absent objective evidence of impropriety. In another case a letter could be fabricated or solicitation could be disguised; a'decision for appellants on this issue would therefore raise very real risks of “inhibition of jury room deliberations, harassment of jurors, and increased incidence of jury tampering.” Indeed, even where such a letter is as fully voluntary as the one in this case appears to be, it surely was not thought by its author tó be an invitation to “develop evidence by investigating the juror’s background or by persuading her to undergo a voluntary mental examination” — the suggestions of the dissent for possible proceedings on remand. We conclude that the action of the district court in denying the defendants’ motion was entirely proper.

B — Prosecutor’s Comments in Summation

The government prosecutor, in his summation, noted that, apart from the two quasi-character witnesses called by defendant Ostrer, the defendants had called no witnesses to contradict the factual content of the government’s case. Defense counsel objected to these remarks, and the appellants argue that the remarks were improper in that only they themselves (or co-conspirators whose testimony they could not compel) could have testified in contradiction to the government’s witnesses. We do not agree.

It is true that it has been frequently held impermissible for the prosecution to comment on a defendant’s failure to call witnesses where only the defendant could offer countertestimony or where the jury will “naturally and necessarily” interpret this as a comment upon the defendant’s silence, otherwise constitutionally protected. See, e. g., United States v. Lipton, 467 F.2d 1161 (2d Cir. 1972); United States v. Flannery, 451 F.2d 880 (1st Cir. 1971); United States v. Handman, 447 F.2d 853 (7th Cir. 1971); Desmond v. United States, 345 F.2d 225 (1st Cir. 1965).

However, this danger can be neutralized by a prompt corrective instruction to the jury. Such an instruction was given by Judge Edelstein. Moreover, this was not the close situation in which it was a question of a defendant’s word against the word of one other (cf. Handman, where the defendant was implicated solely by an informer’s testimony about a telephone conversation between himself and the defendant). Thus, even though many of the meetings between Hellerman, Ostrer, Dioguardi, and DiLorenzo were private, their activities also involved numerous stock brokers and other Wall Street figures, several of whom also testified at trial. See fn. 1, supra. Given the breadth of the operation, it was not improper for mention to have been made of the dearth of defense witnesses from so large a cast of characters. The record supports the conclusion that there were meetings between the persons involved in the Belmont stock manipulation at which more were present than the defendants and the government’s witnesses at trial, and that some of these persons could have been called to testify or at least that in many other ways defendants could have waged factual war with the detailed evidence of the government’s witnesses.

In United States ex rel. Leak v. Follette, 418 F.2d 1266 (2d Cir. 1969), cert. denied, 397 U.S. 1050, 90 S.Ct. 1388, 25 L.Ed.2d 665 (1970) which concerned similar comments by the prosecutor on the strength of the government’s case against the accused and on the lack of any contradictory evidence, we reviewed the many precedents which, in almost every instance, have “held that remarks concerning lack of contradiction are forbidden only in the exceedingly rare case where the defendant alone could possibly contradict the government’s testimony,” id., at 1269, and then concluded that

where the prosecutor confines himself to arguing the strength of his case by stressing the credibility and lack of contradiction of his witnesses, we will not be astute to find in this a veiled comment on the defendant’s failure to testify even if in practical fact, although not in theory, no one else could controvert them. [Id., at 1270.]

The defendants’ objections to the prosecutor’s comments in summation were properly denied.

C — Specific Charge on Accomplice Testimony

Both defendants argue that it was error for the trial court to have refused to instruct the jury specifically that the testimony of accomplices who were confessed perjurers or convicted felons was to be scrutinized with particular care. There is no merit to this argument. The trial court’s charge to the jury was amply cautionary on this point. A similar charge was recently sustained by us in United States v. Projansky, 465 F.2d 123, 136-137 and nn. 24-25 (2d Cir.), cert. denied, 409 U.S. 1006, 93 S.Ct. 432, 34 L.Ed.2d 299 (1972).

D — The Evidentiary Ruling

At one point in the trial Heller-man testified that Dioguardi had used some of the proceeds of the Belmont stock scheme to help pay off a mortgage on his summer home. Apparently this statement was incorrect. To help pay off the mortgage Dioguardi had used funds obtained through a prior stock manipulation, but one on which he had been acquitted at a previous trial. At the side bar, counsel for Dioguardi argued that the prosecution should correct Hellerman’s testimony. The trial court stated that correction was properly the responsibility of defense counsel. Dioguardi’s lawyer, however, was unwilling to raise the issue unless proof could also be introduced of the earlier acquittal. The trial judge at this point expressed himself somewhat ambiguously, and the parties differ whether we should read him as having refused to give a ruling in advance on the question whether he would allow proof of acquittal, holding that admissibility would depend on the course of testimony, or as having held that proof of acquittal would not in any case toe admissible in this context. In either event, as a consequence of the trial judge’s action, Hellerman’s testimony was allowed to stand, and the issue was not raised again.

Dioguardi claims that the court’s ruling or failure to rule was improper and that it permitted false testimony to reach the jury. This claim, while perhaps technically valid, is essentially groundless. The circumstances behind the controversy at issue were never pursued in testimony in open court. No facts behind it were ever in evidence. While the record does reveal occasional allusions to the prior stock manipulation, the so-called “Imperial deal,” none of these could be considered prejudicial in reference to Dioguardi. Hellerman’s statement was de minimis in view of the other evidence. No reversible error was committed by the trial court under the circumstances. It was a matter fully within the trial court’s discretion. See United States v. Kahn, 472 F.2d 272, 282 (2d Cir.), cert. denied, 411 U.S. 982, 98 S.Ct. 2270, 36 L.Ed.2d 958 (1973).

E — Consecutive Sentences for Stock Fraud

Lastly, Dioguardi claims that it was improper for the trial court to impose separate consecutive sentences and separate fines upon him for the violations in counts 16 and 17 of the indictment. Count 16 involved confirmation of the purchase in Ostrer’s name, with Dioguardi’s approval, of 2000 shares of Belmont stock through Bruce & Co. on March 10, 1970. Count 17 involved confirmation of the similar purchase of 3500 shares through Kelsey & Co. on March 11th. See fn. 6, supra. Diorguardi argues that these purchases, and their confirmations, were part of a single transaction, namely Ostrer’s purchasing half (14,000) of the supposed outstanding shares of Belmont stock, and that hence they cannot constitute separate violations of the securities laws.

It is true that there has been debate in the past over whether such transactions constitute a multiple offense, the essence of the violation being illegal use of the mails, or a single offense, the essence being fraud. See 3 Loss, Securities Regulation 1521 (2d ed., 1961); and also United States v. Hughes, 195 F. Supp. 795 (S.D.N.Y.1961). However, recent litigation involving fraud under the securities laws has resolved this debate in favor of the position that each transaction in a securities fraud case constitutes a separate offense. Sanders v. United States, 415 F.2d 621 (5th Cir. 1969), cert. denied, 397 U.S. 976, 90 S.Ct. 1096, 25 L.Ed.2d 271 1970); see also United States v. Binstock, 37 F.R.D. 13 (S.D.N.Y.1965). This position acknowledges the fact that activity such as the kind Dioguardi engaged in here in relation to the two Ostrer purchases on March 10th and 11th was fraudulent in each instance, not necessarily in respect to the scheme as a whole, nor even necessarily in respect to the sellers on those two days (who may have been coconspirators or perhaps simply others pleased to sell at a gain), but in respect to the investing public. Thus although a situation can be envisioned in which consecutive sentences on multiple fraud convictions would be questionable, cf. United States v. Brown, 36 F.R.D. 207 (D.D.C.1964), in the instant case the determination and sequence of the sentences imposed on defendant Dioguardi were matters within the discretion of the trial court. See Sanders v. United States, supra, 415 F.2d at 626, and the cases there cited. The consecutive sentences on counts 16 and 17 were therefore proper.

Judgments of conviction affirmed.

FEINBERG, Circuit Judge

(dissenting) :

The majority opinion holds that an unsolicited, bizarre letter from a juror, who claims to be able to “see things before it happen” and to know what other people “are thinking,” does not justify further inquiry into the juror’s competence, even though seven psychiatrists preliminarily diagnose her as mentally ill. From this holding, I emphatically dissent.

There is no need to rehearse in great detail the basic principles of law that govern the issue before us. As the majority points out, after a trial is over, there is a great judicial “[r]eluctance to inquire into the state of mind of any juror[s] . . . during their deliberations,” and that reluctance rests upon “sound reasons.” But reluctance to inquire is not the same as obdurate refusal to face facts, especially such “objective” facts as a rambling, unsolicited letter, sent 13 days after verdict, that strongly suggests severe mental illness. A close look at that letter and the comments upon it of the seven doctors, whose six letters and one affidavit were submitted to the district judge is instructive.

The letter from juror Rush was written on stationery which bears the Zodiac sign “Libra” at the top over a picture of a woman holding scales. It stated as follows:

February 8th — 1973
Dear Mr. Dioguardi,
Under the situation and such circumstance I hope that I have made the right decision. I talk to may friends Bertha and her husband Olive about this, Olive agree that I write to you. Bertha, however, was against it. Nevertheless, I felt I had to write you. I cannot omit what I have seen. When I saw the good within you and how hard your wife was trying; I prayed about it. One word appear before me repent. If you repent and run a clean business it is the good within you that will save you, and you will gain what you have lost. Before I continue I must explain something to you. I have eyes and ears that I can see things before it happen. I can tell you about other and what they are thinking and doing. If I am wrong about this it is the first time.
I would like to visit you. I would like to do so when my eyes fully open. I would like to talk to you about what appear before me. They are only partly open. I don’t know at the present when they will open. Unfortunate, a curse was put upon them some years ago. I have some people working on them. Everything is being done that can be done. So we will have to wait. As I stated I cannot omit what appear before me, when I was on the jury bench. You feel that this is the end for you. However, it is not. Something appear before me that I must do. It is the good within you that I must use and within that good, you will gain what you have lost. If, however, I am wrong it is the first time.
Why, you let such a relationship exist between you and a man like Heller-man? When I think of the good that I saw within you it does not add up. Where did Hellerman get those fur coats? Does he have any for sail? Omit the question. I really can’t afford one, and if I could I probably be afraid to wear it.
Why persecute your wife? Your mistake your guilty then take it out on her. The ordeal you put her through I wonder how she survive through it. One word appear before me brave. She is a brave girl. She love you. She never stop loving you not a single moment. Tell her to please be careful. From what I can see she is still in business. I suggest it is not wise at this time. I believe she is being watch.
That was a good lawyer you had. I entain to send him some custom as soon as my eyes open.
Tell Ostrer I am praying for him.
Mr. Dioguardi, I want to ask a favor of you please.
I want you to look upon me as a woman and I look upon you as a man and not white man and black woman. Olive agree with me.
Let’s leave color out, OK.
I was told you will only have to serve one third of the time given. So relax this is not the end. Soon you will be free.
When I call the Federal information center and the record room yesterday they all know you. They all seem to have it in for you. Its seated deep within them like a personal matter.
Sincerely,
Genena

Thus, the juror claims that she has “eyes and ears that . . . can see things before it happen.” She can “tell” what other people “are thinking and doing.” Her eyes are now “only partly open” because “a curse was put upon them some years ago.” She is writing this letter because “[sjomething appear before me that I must do.” Although Dioguardi’s wife was never in the courtroom, the juror somehow knows that Mrs. Dioguardi “is a brave girl” and “is still in business,” but is being watched. As soon as the juror’s “eyes open” she intends to send Dioguardi’s lawyer some customers. And when she “saw the good within” Dioguardi and how hard his wife “was trying,” the word “repent” appeared before her.

The letter is staggering in its implications. No special training is needed to appreciate that this juror seems to believe she is clairvoyant and can see things that may not, or could not, be apparent to others, such as what people think or an event before it happens. And if juror Rush actually did believe she was clairvoyant in this way, is it really necessary to spell out why she could not fairly try the guilt or innocence of any man? It seems obvious to me that a “clairvoyant” juror might honestly “see” a defendant’s guilt despite the lack of evidence because she can see into the defendant’s mind. Or conversely, she might for the same reason divine a defendant’s innocence, in the face of overwhelming proof of guilt. A person who was known to regard herself as clairvoyant would certainly not be allowed on a jury in the first place. United States v. Silverman, 449 F.2d 1341, 1344 (2d Cir. 1971), cert. denied, 405 U.S. 918, 92 S.Ct. 943, 30 L.Ed.2d 788 (1972); United States v. Benson, 31 F. 896, 900 (D.Cal.1887). Such a woman would clearly be “incapable, by reason of mental . . . infirmity, to render satisfactory jury service ...” under 28 U.S.C. § 1865(b)(4). Cf. Jorgensen v. York Ice & Machinery Corp., 160 F.2d 432, 435 (2d Cir.), cert. denied, 332 U.S. 764, 68 S.Ct. 69, 92 L.Ed. 349 (1947). Moreover, the incapacity on such a ground of even one juror would poison the verdict regardless of the competence of the remaining 11. Parker v. Gladden, 385 U.S. 363, 366, 87 S.Ct. 468, 17 L.Ed.2d 420 (1966) (per curiam); United States v. Rattenni, 480 F.2d 195, 198 (2d Cir. 1973).

The ultimate question, of course, is whether juror Rush was in fact “incapable” of rendering satisfactory jury service, but the precise legal issue before us is whether enough was presented to the district judge to require holding a hearing to determine her capacity to serve. The district court had before it the juror’s letter and the views of seven reputable psychiatrists, all of whom rendered expert opinions that the writer of the letter suffered from severe mental illness. According to some of these doctors, the precise diagnosis of her problem would require clinical evaluation through interviews and tests, but all of the phychiatrists agreed on the existence of a seriously disabling thought disorder which in their opinion would have impaired her mental functioning during the trial and her ability to judge the case intelligently. These expert views stand uncontradieted on the record before us. True, the majority opinion refers to them as “essentially horseback uninformed.” However, in view of the district judge’s oral order, that no one was to contact the juror, these adjectives are simply not justified. Several of the psychiatrists made clear that they would like to know more about the juror. Obviously, the directive prevented defense counsel from attempting any interview, and both defense and government counsel apparently interpreted the order as inhibiting any investigation of the juror, even apart from talking to her.

The combined effect of the uncontradicted record and the apparently intended scope of the judge’s order requires a remand for a further hearing. The unsolicited letter is bizarre, and seven psychiatrists have given their opinion on the basis of it that the juror was seriously mentally ill during the trial. I do not see how the district court, or we, can disregard these facts. Certainly a defendant is entitled to 12 sane jurors, Parker v. Gladden, supra, 385 U.S. at 366, 87 S.Ct. 468, 17 L.Ed.2d 420; United States v. Rattenni, supra, 480 F.2d at 198, and if one is incompetent, we should exercise our supervisory power to order a hearing or a new trial just as we would if one turned out to be blind or deaf although no one had noticed it. Possibly this juror is not incompetent; she may just be peculiar. But the record as it now stands cannot justify such a conclusion. It may be that after the record is amplified — at least by cross-examination of appellants’ witnesses and by testimony of government experts — the district court might be warranted in finding juror Rush to have been capable of jury service. I express no view as to that. However, at the very least, defendants are entitled to a full hearing on the issue of the juror’s competence.

The majority cites a good deal of authority for the proposition that unless there is “substantial if not wholly conclusive evidence” of a juror’s incompetence during trial, a post-trial inquiry will not be ordered “merely on the allegations and opinions of a losing party.” See, e. g., Peterman v. Indian Motorcycle Co., 216 F.2d 289 (1st Cir. 1954). I do not quarrel with this statement of the law. Indeed, I heartily endorse it since the evidence on this record of the mental incompetence of juror Rush is, as I have indicated, quite “substantial.” Moreover, the inquiry here was not triggered solely by “the allegations and opinions of a losing party,” but by the unsolicited letter of the juror herself, which was sent only 13 days after the verdict and is itself persuasive evidence of incapacity. None of the decisions cited by the majority involved such an unusual objective fact. In Peterman, supra, for example, there was no communication by the juror, which was itself an overt symptom of mental disorder. On the contrary, there was “no suggestion that the juror was insane,” 216 F.2d at 293, whereas here the uncontradicted record supports the opposite conclusion. Furthermore, in many cases of alleged juror taint, hearings were actually held or ordered upon remand. See, e. g., Remmer v. United States, 347 U.S. 227, 74 S.Ct. 450, 98 L.Ed. 654 (1954); United States v. Hand, 472 F.2d 162 (5th Cir. 1973) (per curiam); United States v. Silverman, supra; United States ex rel. Owen v. McMann, 435 F.2d 813 (2d Cir. 1970), cert. denied, 402 U.S. 906, 91 S.Ct. 1373, 28 L.Ed.2d 646 (1971). Cf. Smith v. Cox, 435 F.2d 453 (4th Cir. 1970), vacated on other grounds sub nom. Slayton v. Smith, 404 U.S. 53, 92 S.Ct. 174, 30 L.Ed.2d 209 (1971).

I would only add the observation that, far from loosing a Pandora’s box of challenges to jury verdicts (as the district court feared), a remand for a hearing here would have almost no preceden-tial value because of the uniqueness of the facts. Nor would a hearing under these circumstances raise the twin spectres of juror harassment or incursion on jurors’ privacy during their deliberations. Cf. Miller v. United States, 403 F.2d 77, 82 (2d Cir. 1968). The letter which forms the basis of the present attack on the verdict below was, as I have stressed, unasked for, and not the product of a fishing expedition. Moreover, an inquiry into competence need not entail a probe of jury discussions. I have already mentioned such alternative possibilities of enlarging the record as cross-examination of appellants’ witnesses and testimony by government experts. Counsel may also develop evidence by investigating the juror’s background or by persuading her to undergo a voluntary mental examination. I see no need to explore every conceivable avenue of investigation, but merely wish to make the point that I am not counseling any general break with the wise policy of protecting the sanctity of the jury room and the privacy of individual jurors.

For these reasons, I strongly believe that the district court erred in refusing to make further inquiry into the competence of juror Rush. Therefore, I dissent from the affirmance of the order denying a new trial without a hearing.

      . Of the seven other defendants named in the indictment, three entered guilty pleas (Michael Hellerman, Fred Goodman, and Michael Caricato). Three were tried jointly in a separate trial and were convicted of one or two offenses (Gary Fredericks, Richard Greenberg, and Anthony Soldano), see United States v. Greenberg, 472 F.2d 1404 (2d Cir.), aff’d from the bench, Feb. 16, 1973. The case of the seventh defendant (Morris Winter) was not tried in view of his cooperation with the government and his guilty plea in a related case. Winter, Hellerman, and Goodman testified for the government, as did Steven Schoengold and Bruce Ilalpern, both named as co-conspirators.

      . 15 U.S.C. § 77q(a) codifies section 17(a) of the Securities Act of 1933, prohibiting fraud in the sale of securities. Wilful violation of this section is made criminally punishable by section 24 of the Securities Act of 1933, now 15 U.S.C. § 77x. Rule 10b-5 of the Securities and Exchange Commission (17 C.F.R. § 240.10b-5), which prohibits fraud or the use of manipulative devices in both the purchase and sale of securities, was promulgated under 15 U.S.C. § 78j(b), originally section 10(b) of the Securities Exchange Act of 1934. Wilful violation of this rule is made criminally punishable by section 32(a) of the Securities Exchange Act of 1934, now 15 U.S.C. § 78ff.

      . Both defendants were found guilty on the conspiracy count (18 U.S.C. § 371). Ostrer was found guilty on the following substantive counts:
      9 — Causing a sale confirmation to be placed in the mail in furtherance of a fraudulent scheme for the sale of stock (15 U.S.C. §§ 77q(a), 77x);
      16 through 19 — Causing purchase confirmations to be placed in the mail as part of a manipulative device in contravention of Rule 10b-5 (17 C.F.R. § 240.10b-5; 15 U.S.C. §§ 78j (b), 78ff);
      31, 33 through 36 — Use of the mails as part of a scheme to defraud (18 U.S.C. § 1341).
      Dioguardi was found guilty on only three of the substantive counts: 16, 17, and 31.

      . The sentences imposed by Judge Edelstein were as follows: in the case of Dioguardi, a prison term of 5 years and a $10,000 fine on count 1, 2 years and $10,000 on count 16 and similarly on count 17, and 5 years and $1000 on count 31; and in the case of Os-trer, 3 years and a $10,000 fine on count 1, 3 years and a $5000 fine on count 9, 2 years and a $10,000 fine on each of counts 16 through 19; 3 years on each of counts 31 and 33 through 35, and 5 years on count 36. Dioguardi’s prison terms are consecutive, Ostrer’s concurrent. The sentence imposed on Dioguardi on count 31 was suspended, with five years’ probation. The sentence imposed on Ostrer on count 36 was also suspended, with one day’s probation.

      . Belmont’s initial offering of stock to the public was made in the spring of 1969. In an offering circular dated March 21, 1969, and under the statutory exemption from registration for small issues, Belmont offered 100,000 shares out of an authorized 1,000,000, par value 1^, at an offering price of $3 a share. The circular stated that the offering was speculative and that the price of the shares bore no relation to tho book value of the company. In fact, at the time, Belmont’s total assets amounted to roughly $10,000 and its liabilities to roughly $7000.
      By October 20, 1969, according to the 2A form filed by Belmont with the Securities and Exchange Commission on that date, only 870 shares of the offering had been sold, with 99,130 unsold shares remaining.
      On January 2, 1970, in exchange for a total of 195,000 restricted shares of Belmont stock, Belmont acquired 100% holdings in three other concerns: Top Secret International Programming, Slimerama International Corp., and Wonderful World of Grooming. Prior sales of these newly-acquired companies amounted to merely a few thousands of dollars, and net profits for each were about $1000. Nonetheless they listed total assets slightly in excess of $1,000,000. Top Secret International Programming listed a “computer program” valued at $500,000, and the other two enterprises each listed “formula rights” valued at $250,000. These assets were reflected in supplementary notes in Belmont’s financial statements for the end of 1969, but the underlying statements of the three subsidiaries, conveniently acquired after the start of the year, were unaudited.
      Belmont’s second 2A statement, filed with the SEC in April, 1970, indicated that 28,720 shares of the March 21, 1969, offering had been sold, and that no more of the original 100,000 shares were still being offered.

      . Among these orders were ones through Bruce & Co. on March 10, 1970, for 2000 shares, and through Kelsey & Co. on March 11, 1970, for 3500 shares. Co-conspirator Bruce Halpern, see fn. 1 supra) was a principal of Bruce & Co. Co-conspirator Sehoengold was a vice president of Kelsey & Co., and Hellerman was an undisclosed owner of Kelsey.
      These particular purchases on March 10th and 11th are relevant to defendant Dioguar-di’s challenge (discussed further below) to alleged pyramiding of offenses.

      . Miss Rush’s letter reads as follows:
      521 W 152 Street,
      New York, N.Y. 10031
      February 8th- — 1973
      Dear Mr. Dioguardi,
      Under the situation and such circumstance I hope that I have made the right decision. I talk to my friends Bertha and her husband Olive about this, Olive agree that I write to you. Bertha, however, was against it. Nevertheless, I felt I had to write you. I cannot omit what I have seen. When I saw the good within you and how hard your wife was trying; I prayed about it. One word appear before me repent. If you repent and run a clean business it is the good within you that will save you, and you will gain what you have lost. Before I continue I must explain something to you. I have eyes and ears that I can see things before it happen. I can tell you about other and what they are thinking and doing. If I am wrong about this it is the first time.
      I would like to visit you. I would like to talk to you about what appear before me. I would like to do so when my eyes fully open. They are only partly open. I don’t know at the present when they will open. Unfortunate, a curse was put upon them some years ago. I have some people working on them. Everything is being done that can be done. So we will have to wait. As I stated I cannot omit what appear before me, when I was on the jury bench. You feel that this is the end for you. However, it is not. Something appear before me that I must do. It is the good within you that I must use and within that good, you will gain what you have lost. If, however, I am wrong it is the first time.
      Why, you let such a relationship exist between you and a man like Hellerman? When I think of the good that I saw within you it does not add up. Where did Hellerman get those fur coats? Does he have any for sail? Omit the question. I really can’t afford one, and if I could I probably be afraid to wear it.
      Why persecute your wife? Your mistake your guilty then take it out on her. The ordeal you put her through I wonder how she survive through it. One word appear before me brave. She is a brave girl. She love you.' She never stop loving you not a single moment. Tell her to please be careful. From what I can see she is still in business. I suggest it is not wise at this time. I believe she is being watch.
      That was a good lawyer you had. I en-tain to send him some custom as soon as my eyes open.
      Tell Ostrer I am praying for him.

        Mr. Dioguardi, I want to ask a favor of you please.
      I want you to look upon me as a woman and I look upon you as a man and not white man and black woman. Olive agree with me.
      Let’s leave color out, OK.

      I was told you will only have to serve one third of the time given. So relax this is not the end. Soon you will be free.
      When I call the Federal information center and the record room yesterday they all know you. They all seem to have it in for you. Its seated deep within them like a personal matter.
      Sincerely,
      Genena
      The letter sheets were printed with the word “LIBRA” and a picture of a woman with scales. On the last page of the letter, under the picture, Miss Rush wrote, “The sign Libra is the heavenly house of the zodiac under which I was born.” The letter was addressed to “Mr. John Dioguardi, Federal Correction Institution, Dan Bury, Conn. 06813.”

      . The copy of the letter which Dioguardi’s attorneys used at first was not the original from Juror Rush. Rather it was a handwritten copy which Dioguardi had made of the original and which he had forwarded to them. Somewhere in transcribing the word “omit” was changed to “admit” in the fifth sentence of the first paragraph and also in the ninth sentence of the second paragraph. Thus “I cannot omit what I have seen .” became “I cannot admit what I have seen . . .” and, similarly, “I cannot omit what appear before me . . . ” became “I cannot admit what appear before me. . . .” Six of the seven psychiatrists (all except Dr. Portnow) received their copy of the letter in this incorrect form. These errors may have influenced their reading and subsequent analysis of the letter, but we do not think significantly. The defendants’ contentions concerning the competency of Miss Rush rest as much on the letter taken as a whole as on any particular sentences. While not belittling its importance, we do not think that reliance on the incorrect word “admit” was, as the government contended, “the cornerstone of [the] various psychiatric opinions.”

      . The supporting letters of the psychiatrists and the affidavit of Dr. Portnow need not be set out at length. Samples of their conclusions are as follows:
      1.) Dr. Stanley L. Portnow (affidavit of April 2, 1973) :
      [T]he letter makes a positive presumptive showing that . . . the juror suffered from a chronic psychotic thought disorder which so severed her relationship with reality that she was unable to exercise critical judgment or to function in an unbiased manner in the evaluation of evidence produced at the trial. Indeed, it would appear that her unsoundness of mind was so overwhelming that she was subject to auditory and visual hallucinations, delusions and a belief in her own omnipotence.
      The exact nature of the type of psychosis which the juror is afflicted, can be further investigated. . . . Such an investigation would entail clinical psychiatric interviews and, of particular importance, psychological testing. . . . 2. ) Dr. Samuel C. Karlan (letter of March 15, 1973) :
      It is clear from this letter that this patient is having imaginations about what she can see and what she can do and these are in the form of visual hallucinations and apparently auditory hallucinations. It is also clear from this letter that she had these visions while she was on the jury.
      It is therefore my opinion that the letter is evidence that this patient underwent a psychotic episode while she was on the jury and while she wrote this letter, which is suggestive of a schizophrenic mechanism and that she was not in contact with reality.
      3. ) Dr. Robert W. Damino (letter of March 15, 1973) :
      The contents of the letter written by Ge-mena (sio) Rush indicate that she is substantially disturbed in reality relationships . . . that she was having visual hallucinations . . . [and] that this woman was making an identification with the accused. . . .
      [A]t the time she served on the jury she was utterly incapable of thinking logically as to the evidence, and utterly incapable of properly evaluating the evidence.
      4. ) Dr. Jerry C. Atkins (letter of March 16, 1973) :
      My impression is judging from this letter Miss Rush would have hdd great difficulty exercising sound judgment during the trial mentioned in her letter. Her religious convictions could be classified as being ideas of grandiosity and furthermore there is evidence of auditory and visual hallucinations (sic) in her description of herself. 5. ) Dr. John J. Vetter (letter of March 15, 1973) :
      [T]here is clear cut evidence of mental disorder. . . . The abnormal thinking processes, impairment of judgment, hallucinatory experience and delusional belief directly involving the case at hand, would indicate an incapacity, by reason of mental infirmity, to render efficient jury service, or to have functioned efficiently as a juror in the case concerned. 6.) Dr. Arnold H. Zuclter (letter of March 5, 1973) :
      The writer is emotionally involved with Mr. Dioguardi, in an intensive manner.
      The writer is concerned witli Mr. Dioguar-di’s welfare and fate.
      The writer wishes to be helpful and supportive.
      The writer believes she possesses powers of clairvoyance and feels impelled to act upon her revelations.
      The writer experiences guilt about Mr. Dioguardi’s incarceration. She is convinced about his “bad” behavior (wrongdoing, association with “a man like Heller-man”) but “sees” the “good” in him. Her responses are somewhat appropriate in the context of her educational, cultural, and religious background. To alleviate her guilt feelings and “save” Mr. Dioguar-di, she urges him to “repent”, mend his ways, and maintain his faith. . . .
      I believe that the data suggests the following psychodiagnostic impressions, which require clinical confirmation (psychiatric evaluation of the writer).
      1. Above the cultural-religious beliefs, autistic (pathological fantasy preoccupation) trends are indicated. . . .
      2. Paranoid trends are significant.
      [M]y psychiatric impression is that of a highly paranoid, autistically preoccupied (probably psychotic) individual, who has maintained fairly adequate external controls and functioning, but who may be de-compensating due to the strong emotions produced by her role in the trial.
      7.) Dr. Donald M. Brough (letter of February 28, 1973) :
      [T]his letter was written consciously with every good intention on the part of Mrs. (sic) Rush in an effort to be helpful to Mr. Dioguardi. However, . . . the writer was here showing evidence of being hallucinated, delusional and would prove to be suffering from a Paranoid Condition.
      Taking it in a far less literal fashion, allowing the greatest degree of latitude interpreting what she wrote, so that it can be taken as a somewhat picturesque, idiosyncratic expression of her ideas, influenced by educational, cultural and religious factors, I still would find important grounds for believing that the letter shows that she was involved in this situation in a very unreal and unusual way.
      In my opinion it is most likely that she is, in fact, suffering from a Paranoid Condition in which she has hallucinatory experiences and delusional thinking.

        Whatever the court may consider the proper steps to take in regard to any other aspect of the case, it would be my hope that further psychiatric examination would be gently encouraged upon her, and that she would be willing to cooperate.

      . 28 U.S.C. § 1865, which is part of the Jury Selection and Service Act of 1968, P.L. 90-274, 82 Stat. 53, provides in relevant part as follows:
      (b) In making such determination [whether a juror is qualified to serve] the chief judge of the district court, or such other district court judge as the plan may provide, shall deem any person qualified to serve on grand and petit juries . unless he .
      (4) is incapable, by reason of mental or physical infirmity, to render satisfactory jury service. .
      The Act provides no guidelines, however, for what procedures are to be followed where there is, after trial, discovery of possible grounds for juror disqualification. However, see fn. 12, below. See also ABA Standards Relating to Trial by Jury, Parts II, V, and Commentary (Approved Draft 1968).

      . See 8 Wigmore, Evidence §§ 2349, 2352-2354 (McNaughton rev., 1961). As the Supreme Court said in Stein v. New York, 346 U.S. 156, 178, 73 S.Ct. 1077, 1089, 97 L.Ed. 1522 (1953):

      . See 18 U.S.C. §§ 245(b), 1503, 1504. See also 28 U.S.C. § 1867(f). Such exceptions as these which the law has condoned to the privacy and sanctity of the jury reflect the need to preserve its impartiality. The quickness with which jury findings will be set aside when there is proof of tampering or external influence, and the severe penalties imposed on those who attempt such interference, parallel the reluctance of courts to inquire into jury deliberations when a verdict is valid on its face. See Mattox v. United States, 146 U.S. 140, 149-150, 13 S.Ct. 50, 36 L.Ed. 917 (1892). Such exceptions support rather than undermine the rationale of the rule that possible internal abnormalities m a jury will not be inquired into except “in the gravest and most important cases.” McDonald v. Pless, 238 U.S. 264, 269, 35 S.Ct. 783, 785, 59 L.Ed. 1300 (1915).
      These considerations explain the one exception to the rule against a jury impeaching its own verdict allowed in those instances when the evidence offered of internal impropriety concerns “objective facts.” This “distinction between what may and what may not be established by the testimony of jurors to set aside a verdict” lias been recognized by the Supreme Court. See Mattox v. United States, supra, 146 U.S. at 148-149, 13 S.Ct. 50. However, courts have invoked the exception and permitted inquiry into a jury’s deliberation only when there has been a strong showing of “objective” impropriety, such as blood relation between juror and defendant or extraneous material brought to the jury’s attention during deliberations. As the Supreme Court said in United States v. Reid, 53 U.S. 361, 366, 13 L.Ed. 1023 (1851), “[C]ases might arise in which it would be impossible to refuse [evidence of impropriety] without violating the plainest principles of justice.” But “[unquestionably such evidence ought always to be received with great caution.” Nor has the Court seen fit since then to relax its position, McDonald v. Pless, supra, 238 U.S. at 269, 35 S.Ct. 783. See Rotondo v. Isthmian Steamship Co., 243 F.2d 581, 583 (2d Cir. 1957); United States v. Crosby, 294 F.2d 928, 949-950 (2d Cir. 1961), cert. den. sub nom. Mittelman v. United States, 368 U.S. 984, 82 S.Ct. 599, 7 L.Ed. 2d 523 (1962); 8 Wigmore, Evidence § 2349 (McNaughton rev., 1961). See also ABA Standards Relating to Trial by Jury, Sec. 5.-7; United States ex rel. Owen v. McMann, 435 F.2d 813 (2d Cir. 1970), cert. denied, 402 U.S. 906, 91 S.Ct. 1373, 28 L.Ed.2d 646 (1971); and Judge Friendly’s discussion in Miller v. United States, 403 F.2d 77 (2d Cir. 1968), fn. 11, at 83-84.

      . See Anderson v. State, 54 Ariz. 387, 96 P.2d 281 (1939); Grand Lodge A.O.U.W. of Ark. v. Wood, 113 Ark. 502, 168 S.W. 1070 (1914); Austin v. People, 106 Colo. 506, 107 P.2d 798 (1940); Brown v. State, 219 Ark. 647, 243 S.W.2d 938 (1951); Ex parte Lovelady, 152 Tex.Cr.R. 93, 207 S.W.2d 396 (Tex.Cr.App.1947), cert. granted, 333 U.S. 867, 68 S.Ct. 787, 92 L.Ed. 787, cert. dism., 333 U.S. 879, 68 S.Ct. 914, 92 L.Ed. 1154 (1948); Durham v. State, 182 Tenn. 577, 188 S.W.2d 555 (1945); State v. Bucy, 104 Mont. 416, 66 P.2d 1049 (1937); Eastman Kodak Stores, Inc. v. Summers, Mo.App., 377 S.W.2d 476 (Kan.C.C.A.1964).

      . See Jordan v. Massachusetts, 225 U.S. 167, 32 S.Ct. 651, 56 L.Ed. 1038 (1912), aff’g Commonwealth v. Jordan, 207 Mass. 259, 93 N.E. 809 (1911); State v. Camp, 110 W.Va. 444, 158 S.E. 664 (1931); Burik v. Dundee Woolen Co., 66 N.T.L. 420, 49 A. 442 (1901); Iverson v. Prudential Ins. Co. of Amer., 126 N.J.L. 280, 19 A.2d 214 (1941); State v. Welty, 65 Wash. 244, 118 P. 9 (1911).

      . It is not clear to what extent Judge Wy-zanski treated the plaintiff’s motion for a new trial in Peterman as also being a motion for conducting a hearing into the juror’s competency. But evidently no hearing was thought required and none was held.

      . The credentials of the seven psychiatrists were set forth in varying detail, but, on this record, all appear to be qualified to give an expert opinion.

      . The judge stated in open court that juror Rush is not to be contacted by anybody or communicated with by anybody in any possible way, directly or indirectly. Is that clear, gentlemen?

      . There is no hint in the record that the letter was actually solicited or not genuine. Upon remand, those questions could, of course, be explored.

      . I agree with the majority’s disposition of the other points raised by appellants.


source: Caselaw Access Project

author: TUTTLE, Circuit Judge:

license: Public Domain

text:
    SHEL-AL CORPORATION, Plaintiff-Appellant, v. AMERICAN NATIONAL INSURANCE COMPANY and Exchange Security Bank, Defendants-Appellees.
    No. 73-1965.
    United States Court of Appeals, Fifth Circuit.
    March 25, 1974.
    April 8, 1974.
    Rehearing Denied May 8,1974.

      William M. Acker, Jr., Ferris S. Ritchey, Jr., Birmingham, Ala., for plaintiff-appellant.
    William A. Major, Jr., Drayton Nabers, Jr., Birmingham, Ala., for American National.
    C. John Holditch, Birmingham, Ala., for Exchange Security Bank.
    Before TUTTLE, GEWIN and RONEY, Circuit Judges.
   TUTTLE, Circuit Judge:

This appeal stems from the failure of American National, a provider of permanent financing, and Shel-Al, a developer of an office building, to consummate a loan agreement. Appellant Shel-Al Corporation, an Alabama corporation, instituted this action in Alabama state court to recover a $24,000 cash deposit made to American National Insurance Company, a Texas corporation, and to enjoin the honoring of a $24,000 irrevocable letter of credit payable to American National by the Exchange-Security Bank, an Alabama banking association. The state court issued a temporary injunction prohibiting payment of the letter of credit. American National filed a removal petition in federal court, alleging that the co-defendant, Exchange-Security Bank, was a mere nominal party.

The district court granted summary judgment in favor of Exchange-Security Bank and dissolved the temporary injunction, thus permitting the letter of credit to be honored. American National also interposed a claim for interest on the letter of credit. The $24,000 cash deposit and the $24,000 letter of credit were a stand-by deposit fee paid to American National at the time American National and Shel-Al entered into a loan agreement, totalling $1,600,000.

The trial court entered judgment for American National on Shel-Al’s claim which allowed American National to retain the $48,000 stand-by deposit fee and for American National in the sum of $1,872 on its counterclaim for interest on the letter of credit. Appellant ShelAl argued that American National failed to perform its commitment to furnish permanent financing and in the alternative that the $48,000 deposit constituted a penalty and not liquidated damages, thereby entitling Shel-Al to a refund of its $48,000. American National contended, and the district court agreed, that the reservation of coal and other minerals and a covenant to save a prior owner harmless for damages resulting from mining in a deed in the chain of title of Shel-Al were material defects impairing the marketability of the land, that American National had requested a cure which Shel-Al had not furnished, that Shel-Al needing additional $200,000 mortgage money was unsatisfied with the original $1,600,000 financing plan, and that, therefore, American National was entitled to retain the $48,000 standby fee as liquidated damages. We affirm.

I. FACTS

The financing arrangement in controversy was to be executed through a sale-lease back transaction whereby American National would purchase developed real estate from Shel-Al for $150,000, and lease it back to Shel-Al and lend Shel-Al $1,450,000 secured by a mortgage of the leasehold estate. For simplicity, this transaction is referred to herein in the singular as the commitment.

The tract in question was originally owned by U. S. Steel. In 1965, Basenberg purchased 6.5 acres of this land from U. S. Steel. In the deed of conveyance to Basenberg, U. S. Steel reserved the title to those minerals lying beneath the property but without the right to use the surface of the land conveyed and the deed included a damage release provision in favor of grantor for harm caused by future mining. Contemplating construction of an office building at this site, Dube and Leider, the sole stockholders of Shel-Al, purchased 3.1 acres of the Basenberg tract and proceeded with development plans. When it became necessary to obtain permanent financing, Shel-Al engaged a mortgage broker, Mortgage Corporation of America (MCA), for a fee of 1 per cent of the total amount of the mortgage money that MCA might procure. MCA approached American National, as well as other mortgage companies. American National and MCA officials met and inspected the proposed building site.

On November 19, 1969, American National issued the purchase and loan commitment documents to Dube and Leider who accepted on behalf of Shel-Al. Certain amendments to these commitment documents were negotiated by correspondence in early December, 1969, which modified the manner in which the deposit was made ($24,000 cash and $24,000 letter of credit to become due if transaction not consummated, rather than $48,000 cash) and allowed 240 days for completion of the foundation rather than 180. At the time these modifications regarding the terms of the commitment were prepared, Shel-Al did not request modifications based on the problems relating to mineral reservation in the title. Although allegedly inexperienced real estate investors, Dube and Leider did have an attorney negotiate these other amendments to the commitment documents. The district court determined that the Shel-Al attorney was aware of the title defect at this time, but found that “it may or may not be that the principals [Dube and Leider] were aware of the title defect.” Although American National had invested substantially in a shopping center less than one mile from the proposed building site and the chain of title to that property contained a similar reservation of mineral rights, the district court concluded that American National had no knowledge of the mineral reservation in ShelAl’s chain of title at this stage in the negotiations.

The purchase commitment document provided that in consideration of $150,000 to be paid on or before November 30, 1970, Shel-Al would convey to American National the land on which the building would be erected. The commitment recited that Shel-Al must convey to American National “good and, merchantable fee simple title” by a general warranty deed. (Emphasis supplied). After this conveyance, American National was to lease back the property and building to Shel-Al for a net rental of $18,000 per year. Shel-Al made a $4,500 refundable deposit with American National. A clause in this agreement provided that if all conditions of the commitment were not met, the deposit should be retained by American National as “liquidated damages.” This sale and lease-back in the purchase commitment were to be consummated concurrently with the closing of the loan.

The loan commitment document contemplated a closing date of November 30, 1970. As security for the loan and as a condition of closing, Shel-Al was to complete the building and obtain a sublease to Pennsylvania Life Insurance Company for a period of 27 years. Upon the signing of the loan commitment, Shel-Al gave American National a deposit of $43,500, which in addition to the $4,500 deposit on the purchase commitment, made the total deposit $48,000. The loan commitment contained numerous requirements, including the requirement that Shel-Al have a valid leasehold estate in the premises. This condition could be complied with only if American National consummated the purchase and then leased back the building to Shel-Al. Similar to the purchase agreement, the loan document provided that if all conditions were not met, the $43,500 deposit could be retained by American National as “liquidated damages.”

Following the execution of these purchase and loan ' commitments between American National and Shel-Al, construction of the office building was commenced. In April, 1970, Shel-Al sought interim or construction loans, which were to be paid off by the permanent financing of American National. A title binder was sent by a prospective interim lender to American National for approval, so that the interim lender could be assured of being paid when the building was completed. This title binder reflected the reserved mineral rights and the damage release clause in the U. S. Steel conveyance. American National through MCA advised Shel-Al that these mineral exceptions presented a problem. The district court found that this was the first time American National was aware of the mineral reservation and damage clause. Shel-Al explained that U. S. Steel had reserved mineral rights extensively in Jefferson County, the location of the building site. After further correspondence, American National suggested three solutions: (1) Shel-Al should obtain a release or modification of the mineral reservations; (2) Shel-Al should obtain clear title insurance or casualty insurance; (3) American National might waive any objection to the reservation of mineral rights. American National officials informed Shel-Al that the final decision must be made by American National’s Executive Committee.

All three possibilities were pursued by Shel-Al and MCA. There were negotiations to obtain a release from U. S. Steel from the last of April until the first of August, 1970. Shel-Al explored the likelihood of acquiring insurance, but concluded that the premium was exhorbi-tant. Hoping to prompt a waiver by American National, Shel-Al submitted a geologist’s report reflecting that mining operations in the area had ceased. Shel-Al also sent American National some evidence of the custom and practice of lenders in the area concerning outstanding mineral reservations and damage release clauses.

Contemporaneously with the title controversy, Shel-Al considered the feasibility of adding another floor to the proposed five-story building. Shel-Al applied to American National for a $200,000 increase in the commitment. On May 22, 1970, American National took this issue of supplemental commitment money to its Executive Committee, which agreed to lend the additional amount. Another set of commitment documents was issued by American National which granted a $200,000 increase on the mortgage loan aspect, but required an additional stand-by fee of $2,000 and raised the interest rate for the entire commitment by Vs Per cent. In August, 1970, Shel-Al expressly rejected this proposal stating that the increased interest rate and request for an additional deposit made it unacceptable.

U. S. Steel advised on June 1, 1970, that it would not release its mineral rights. On June 3 or 4, 1970, in behalf of Shel-Al, MCA wrote to American National that the matter must be resolved immediately. American National responded on July 13, 1970, that it would take the issue to its Executive Committee, but on July 14, 1970, American National received a letter from an agent of Shel-Al requesting a refund of the $48,000 deposit fee. The district court found that upon receipt of the July 14th letter American National’s duty to take this matter to its Executive Committee was suspended until further developments. The district court concluded the July 14th letter placed the burden on Shel-Al to proceed with other possibilities regarding curing the title.

In July, 1970, Shel-Al approached Liberty National Life Insurance Company in Birmingham, Alabama, concerning the possibility of permanent financing for the same project, should financing not be forthcoming from American National. Approximately July 29, 1970, Liberty National advised Shel-Al that it would not issue a commitment unless Shel-Al terminated the American National commitment.

On August 4 or 5, 1970, Shel-Al advised MCA to stop all negotiations with U. S. Steel and American National. On August 17, 1970, Leider was still engaged in attempting to secure a refund from American National. During October, 1970, there were three conversations between Leider and an American National official, in essence, concerning the refund of the deposit and clarification of the stance of the parties in the matter.

The building was completed and in partial occupancy during the latter part of 1970. American National on December 7, 1970, informed Shel-Al that the commitments had expired by their own terms and that American National was retaining the $48,000 as “liquidated damages.” Shel-Al financed the building on the 90 day personal notes of its stockholders until a permanent mortgage holder was located. Shel-Al paid $16,000 commission fee to MCA and $8,000 to an interim lender for a construction loan which was never consummated. Prior to trial Shel-Al attempted to amend its complaint to include a damage claim, as well as the refund claim for $48,000, which was denied by the district court. The only issues appealed are whether the district court correctly concluded (1) American National properly raised objections to the mineral reservation and the damage release clause as a title defect and that American National demanded cure which was not furnished by Shel-Al, and (2) that the $48,000 constituted liquidated damages and not a penalty.

II. “GOOD AND MERCHANTABLE FEE SIMPLE TITLE”

The district court determined that U. 5. Steel’s mineral reservation coupled with the damage release destroyed the merchantability of the land in question and that this encumbrance prevented Shel-Al from conveying “good and merchantable fee simple title,” as required by the purchase commitment. Shel-Al argues that in determining whether title is marketable the controlling question is whether or not the market value of the estate is affected. Appellant’s contention is that the - reservation of mineral rights will not affect the use and enjoyment of the real estate because there is no right to use the surface of the land. Because U. S. Steel abandoned all mineral operations in Jefferson County in 1962, because any minerals of value under the property are of the depth greater than 450 feet, and because all the surrounding area has been developed commercially, appellant asserts that the mineral reservations here would not have the slightest effect on the use and enjoyment of the land and thus on its merchantability.

Both parties agreed that Alabama law applied. Although there was no authority directly on point, several Alabama decisions clearly indicate that such an encumbrance is sufficient to destroy merchantability. See Brooks v. Shepard, 157 F.Supp. 379 (S.D.Ala. 1957); Blaxton v. J. L. Tood Auction Co., 281 Ala. 621, 622, 206 So.2d 867, 878 (1968); Johnson v. Malone, 252 Ala. 609, 42 So.2d 505, 509 (1949). Also decisions in other jurisdictions support the conclusion that title is not merchantable when mineral rights to property are reserved to a third party. See Winter v. Mackie, 376 Mich. 11, 135 N.W.2d 364 (1965); Snaman v. Barardino, 136 Pa.Super. 177, 7 A.2d 140 (1939). Finally, the encumbrance here was more than merely the reservation to extract minerals, but also included a plenary release of all claims for injury which might be suffered by the landowner as a result of either past or future mining operations. A similar release has been held by the Alabama Supreme Court to constitute an encumbrance of property and to be enforceable. Republic Steel Corp. v. Payne, 272 Ala. 483, 132 So.2d 581 (1961). We concur with the district court that the mineral reservation coupled with the damage release clause was a sufficient impediment to title to prevent there being a “good and merchantable fee simple title.”

We find no merit in the argument that American National had previously dealt in property containing mineral reservations. This contract stands on its own terms. What was tendered was simply not a “good and merchantable fee simple title” to the land. Moreover, American National responds that its prior mortgage venture in Jefferson County did not involve a six-story structure with an existing mine shaft underneath which still contains ore and a refusal to release mineral reservations as U. S. Steel initially did. Also, American National points out that when Shel-Al approached Liberty National, Birmingham’s largest life insurance company which was totally familiar with the local situation, that they specifically had the same concern over the mineral reservation and damage release provisions in the deed.

We also agree with the trial court that American National was not dilatory with respect to notifying ShelAl of its position regarding the defective title, that it demanded a cure which was not furnished by Shel-Al and that it could not be charged with an anticipatory breach of the contract.

III. STAND-BY DEPOSIT FEE AS LIQUIDATED DAMAGES

The district court held that Shel-Al did not sustain its burden of establishing that the $48,000 stand-by deposit fee was a penalty as distinguished from liquidated damages. Shel-Al’s contentions on appeal are (1) that the trial court erroneously placed the burden of proof on this issue on Shel-Al; and (2) that these clauses providing for retention of the deposit were penal in character as a matter of Alabama law. There is no Alabama decision in point on the burden of proof issue; however, the weight of authority places the burden of establishing the contract provision to be a penalty on the party urging it. Harbor Island SPA, Inc. v. Norwegian America Line A/S, 314 F.Supp. 471, 474 (S.D.N.Y.1970); Manufacturers Cas. Ins. Co. v. Sho-Me Power Corp., 157 F.Supp. 681 (W.D.Mo.1957). But cf. Waggoner v. Johnston, 408 P.2d 761 (Okla.1965); Patterson v. Anderson Motor Co., 45 Tenn.App. 35, 319 S.W.2d 492 (1965).

Even if this burden of proof had been placed on American National, there was adequate evidence to sustain the finding that the $48,000 was liquidated damages, since American National’s probable damages were not readily capable of accurate ascertainment and were not out of proportion to the stipulated $48,000. The district court pointed out that two elements of damages could be sustained by American National as a result of the commitment’s abortion. First, for the entire period of the commitment American National had to manage its affairs so that it would have available at the correct time the $1,600,000, which would encompass possible loss of interest rate on that amount for an undefinable period. Second, another cost to American National if the commitment was not'consummated was the administrative expense involved in preparing for the proposed closing. The record showed that American National hired attorneys in Galveston and Birmingham and expended considerable time of one of its agents in letters, telephone calls and inquiries. Regardless of who had the burden of proof, there was substantial evidence to support the court’s judgment for American National.

According to Shel-Al, in determining the difference between a penalty and a liquidated damages provision, one line of authority examines only whether the actual amount of damages is disproportionate to the amount stipulated. Another line, asserts Shel-Al, is concerned solely with whether or not there is an agreement of the parties that damages would be difficult of ascertainment. The principal ease relied on by Shel-Al, Stratton v. Fike, 166 Ala. 203, 51 So. 874 (1909), is alleged to be in this second group which considers evidence of the actual amount of damages irrelevant and inadmissible. Shel-Al asserts that Stratton focuses on whether the parties agreed as a matter of fact that the damages were uncertain and not on whether the damages are uncertain in fact from the nature of the contract. The Supreme Court of Alabama in Stratton, supra at 876-877, stated:

“The intention of the parties to the contract, however; must control in all cases, if that can be ascertained. ‘The object and end to be attained in all construction of contracts is to ascertain the intention of the parties, and this is no exception to the rule. . •. . ’ The first general principle in the construction of all contracts is that they shall be so expounded as to carry into effect the intention of the parties. To this end, the court should, if necessary, look to the subject matter of the contract, the situation of the parties, the motives that led to it, and the objects intended to be attained by it.
“If, from the nature of the contract, the damages for the breach cannot be calculated with any degree of certainty, a stipulated sum will usually be held to be liquidated damages — that is, it will be considered that the parties agreed in advance upon the amount, and it will be so treated — but, if it is doubtful from the whole contract as to which was intended, the courts, being inclined to do equal justice to the parties if possible, will resolve the doubt in favor of the penalty construction. . . . Where the damages sustained by a breach of a single stipulation in a contract are uncertain, and there is no fixed or certain standard or data by which they can be ascertained, and the parties in the contract have fixed that amount, it is reasonable to conclude that they named and fixed that amount because the amount would be uncertain if there was a breach; and it will be so treated. It will in such case be considered by the court as the measure of compensation for the breach, if it is not out of all proportion to the probable and presumable loss. Stipulations for a certain amount of damages in ordinary building contracts for failure to complete within a given time, if not clearly disproportionate to the probable loss, will be construed to be liquidated damages and enforceable as such.”

Beginning with the central inquiry of determining the intention of the parties, Stratton examines not whether the parties themselves agreed at the time of making the contract that the damages were uncertain, but whether as a matter of fact from the “nature of the contract” damages were uncertain. Stratton implies that if a court, finds damages to have been uncertain and the amounts stipulated as damages in case of breach are not out of proportion to probable damages, then it may be concluded that the parties stipulated damages because of these combined circumstances. The parties here were competent to contract. To construe the liquidated damages provision initially as a penalty, in the language of Stratton, supra at 877, “would give the stipulation no effect whatever, and would be making a contract for the parties and not construing the one they made.”

The thrust of Shel-Al’s second contention is that the stand-by deposits are void and unenforceable as a matter of law. The principal argument is that since there were several covenants to be performed in the commitment, some of minimal or trivial importance, a stipulated sum made payable for failure to perform any condition, including the relatively unimportant ones, may be held a penalty. Shel-Al’s thesis is that a contract which calls for the forfeiture of a fixed sum for the failure to fulfill various conditions of differing importance, is invalid because the damage suffered for the failure to fulfill one condition cannot possibly be the same as for the failure to perform another. Therefore, the parties to such a contract would not have agreed that the fixed amount was a reasonable estimate of the damage to be suffered and hence the fixed amount is penal in character. Shel-Al’s authority for this proposition is again language in Stratton, supra at 876, to wit:

“Where the agreement or covenant is for the performance of several things, and the stipulation is for the payment of a sum in gross in the event of a failure to perform, in whole or in part, the sum stated will be considered as a penalty. . . . ”,

in addition to the admonishment in Keeble v. Keeble, 85 Ala. 552, 5 So. 149, 150 (1888):

“When the contract provides for the performance of several acts or different degrees of importance, and the damages resulting from the violation of some, although not all, of the provisions are of easy ascertainment, and one large gross sum is stipulated to be paid for the breach of any, it will be construed a penalty and not as liquidated damages.”

Finally, Shel-Al asserts that under Alabama law a lump sum which is forfeited is case of breach whose purpose is to secure the performance of a party is construed as an unenforceable penalty. Forsyth v. Central Foundry Co., 240 Ala. 277, 198 So. 706 (1940). Here, argues Shel-Al, exact compliance and exact performance of each of the conditions in the commitment were necessary or the $48,000 would be lost. Therefore, this fee was to secure performance and was unenforceable.

American National counters that these arguments concerning lump sum forfeiture for failure to fulfill one of many conditions are not the applicable theories in this case. Here, unlike the contract to build a house or to perform a job, the financing either takes place in which case there is a refund of the stand-by deposit, or it does not, in which case the deposit is retained. All of the various covenants of Shel-Al are parts of a single complex act, the closing of the purchase and loan, and the precise damage where the breach of covenants results in a failure to close, is incapable of being ascertained in advance and is therefore a proper situation for liquidated damages. There is a series of covenants which call for a single act which are all part of one complex act, all with one primary purpose, so that in essence the contract calls for one stipulation— the closing of the loan. The several conditions to be performed by the parties are but steps leading up to that primary purpose, and it is clear that the stipulated sum was intended to fix the amount of damages to be paid in case a single act — the closing — was not carried out.

Moreover, prior Alabama cases were not concerned with a stand-by deposit situation and Shel-Al does not cite any decision in Alabama or another jurisdiction which has held as a matter of law that a stand-by deposit in these circumstances is void as a penalty. Rather, the courts have unanimously enforced stand-by clauses as a thoroughly lawful manner of doing business in the mortgage finance world. American National cites seven decisions, in which various types of stand-by deposit provisions have been attacked in one way or another, and in each the courts have sustained the validity of the provisions. Regional Enterprises, Inc. v. Teachers Ins. & Annuity Ass’n, 352 F.2d 768 (9th Cir.1965); Chambers & Co. v. Equitable Life Assurance Soc’y, 224 F.2d 338 (5th Cir. 1955); White Lakes Shopping Center v. Jefferson Standard Life Ins. Co., 208 Kan. 121, 490 P.2d 609 (1970); Goldman v. Connecticut Gen. Life Ins. Co., 251 Md. 575, 248 A.2d 154 (1968); Paley v. Barton Savings & Loan Ass’n, 82 N.J.Super. 75, 196 A.2d 682 (Super. Ct. N.J.1964); Boston Road Shopping Center, Inc. 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); Continental Assurance Co. v. Van Cleve Bldg. & Constr. Co., 260 S.W.2d 319 (Mo.App. 1953). Although the Alabama courts may in the future conclude that stand-by deposits are inherently unconscionable and illegal, we cannot ascertain any basis in the current Alabama law, nor in other jurisdictions, to support a ruling here that stand-by deposits are per se void.

The judgment is affirmed.

      . Although the initial commitment was made to Shel-Al’s predecessor, Dube and Leider, Inc., both entities are referred to herein as “Shel-Al.”

      . The clauses in the deed from U.S. Steel to Basenberg read:
      “Reserving and accepting, (sic) however, from this conveyance all the iron ore . . . and other minerals in and under said land, together with the right to mine and remove said iron ore . . . and other minerals without using the surface of said land; and also the right to transport through said land iron ore . . . and other minerals from adjoining or other land without using the surface of the land hereby conveyed.
      * * * *
      “This conveyance is made upon the further conveyance and condition which will constitute a covenant running with said land, that no right of action for damages on account of injuries to the land herein conveyed or to any building, improvement, hereafter located upon the said land . . . resulting from past or future operations of any nature of the grantor, its successors, assigns . . . shall ever accrue to or be asserted by the grantee . . . .”

      . Clause 15 in the purchase commitment document stated:
      “At the time this agreement is accepted the Seller shall made a non-interest bearing deposit with American National of $4,500. In the event the purchase and sale are not completed in accordance with the terms of this agreement prior to the expiration of this agreement, the deposit shall be retained by American National as liquidated damages; otherwise, the deposit shall be returned upon the closing of this transaction. . . . ”

      . Pennsylvania Life Insurance Company is a holding company which owns completely a number of corporations, including both Pennsylvania Life Insurance Company and Pennsylvania Life Insurance Company of California. The two Shel-Al shareholders, Dube and Leider, were officers of that latter company, Pennsylvania Life Insurance Company of California, but were not officers of either the holding company or the life insurance company itself.

      . Clause 18 in the loan commitment document stated:
      “At the time this commitment is accepted, the applicant shall make a deposit of $43,500 as a stand-by fee. In the event all the conditions and requirements of this commitment are not satisfied and the loan is not closed prior to the expiration of this commitment, the stand-by fee shall be retained as liquidated damages; otherwise, the fee shall be refunded upon the closing of this loan.”

      . Specifically, the record showed that Liberty National’s Executive Vice President responded to Shel-Al’s attorney as follows:
      “I told Ed we would have the same reservations [ns American National] about mineral rights ; that we could just not make a loan of a large amount on a property where these rights are outstanding. I told him that were there no possibility of mining, then it appeared to me the owner of the mineral rights should be willing to sell them for a nominal sum. If they were not willing to sell them, then it created some concern that they might be hopeful of mining at some future date.”

      . Shel-Al cites these decisions from Oklahoma and Tennessee as authority for placing the burden of proof on American National. Other state decisions, agreeing with the federal decisions cited, have cast the burden of proof on the party seeking to sustain the provision as a penalty. See Canadian Mining Co. v. Creeckmore, 226 Ark. 980, 295 S.W.2d 357, 360 (1956); Electrical Products Corp. of Colorado v. Mosko, 88 Colo. 447, 297 P. 991 (1931); Howard v. Bar Bell Land & Cattle Co., 81 Idaho 189, 340 P.2d 103, 107 (1959); Silver Dollar Club v. Cosgriff Neon Co., 80 Nev. 108, 389 P.2d 923, 925 (1964); Perma Stone Bi County Corp. v. Ackerman, 15 Misc.2d 640, 182 N.Y.S.2d 655, 657 (1959).

      . The rule sustaining the validity of a liquidated damage provision in a contract containing several covenants all directed toward the consummation of one complex act has been sustained by courts outside of Alabama, see Suburban Gas Co. v. Mollica, 21 N.J.Misc. 118, 32 A.2d 462, 465 (1943); Kansas City v. Industrial Gas Co., 138 Kan. 755, 28 P.2d 968, 972 (1934); Madler v. Silverstone, 55 Wash. 159, 104 P. 165, 167 (1909).

      . It is noteworthy that in Pembroke v. Caudill, 160 Fla. 948, 37 So.2d 538 (1948), a suit by a vendor to recover casli deposit as liquidated damages from defaulting purchasers, where the Florida Supreme Court held that the deposit receipt contract clearly provided for a penalty as a matter of law, was overruled in H. D. Hutchison v. C. E. Thompkins, 259 So.2d 129, 132 (Fla.1972), where the Florida Supreme Court determined Pembroke “must have, when followed in letter and spirit, ... a chilling effect on contract negotiations where the parties wish to include a provision for liquidated damages.”