text:
    Walter WAX and Lawrence Levine, Petitioners, v. Honorable Constance Baker MOTLEY, United States District Judge, Respondent. UNITED STATES of America, v. Norman RUBINSON et al., Defendants.
    No. 732, Docket 75-3003.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 16, 1975.
    Decided Jan. 21, 1975.

      Thomas A. Andrews, New York City (Shea, .Gould, Climenko, Kramer & Casey and John J. Grimes, New York City, of counsel), for petitioners Wax and Levine.
    Frank Wohl, Asst. U. S. Atty., Southern District of New York, New York City (Paul J. Curran, U. S. Atty., for the Southern District of New York, Jo Ann Harris, and John D. Gordan, III, Asst. U. S. Attys., of counsel), for respondent.
    Before WATERMAN, FRIENDLY and GURFEIN, Circuit Judges.
   PER CURIAM:

This is a petition for a writ of prohibition and mandamus directed against Honorable Constance Baker Motley, United States District, Judge for the Southern District of New York, to dismiss an indictment against certain defendants upon the ground that the indictment is void because the term of the grand jury had allegedly expired prior to the return of the indictment, and seeking a stay of the trial thereon which had been scheduled for January 20, 1975. Upon hearing the oral argument, we granted a stay until January 22nd. We now decide the petition for mandamus on the merits, and we deny it for the reasons set forth.

In United States v. Fein, 504 F.2d 1170 (1974), this court upheld the dismissal of an indictment on the ground that it was invalid because returned by the grand jury after the expiration of an 18 month term although a court order had provided for a six months’ extension of the grand jury before the termination of the 18 month term. As a result of the decision in Fein, petitioners here seek to void their indictment. We find that the circumstances involved in Fein were significantly different from the circumstances here involved.

In Fein the order empanelling the grand jury, while referring to it as a “special grand jury” provided that it was being empanelled “pursuant to Rule 6(a) and (g), Federal Rules of Criminal Procedure” and that it was “to serve for a period not to exceed eighteen (18) months from the date it is convened.” 504 F.2d at 1171. In Fein, in the eighteenth month of the grand jury’s life, an Assistant United States Attorney for the Eastern District of New York who was supervising the grand jury’s investigation orally applied to Chief Judge Mishler for an extension of the term of the grand jury. On August 30, 1972, in the eighteenth month of the grand jury, Judge Mishler signed an order extending its term for an additional six months “upon the authority of 18 U.S.C. § 331” (Ibid.). To understand the ruling in Fein, it is necessary to review its rationale of decision. A regular grand jury is empanelled pursuant to Rule 6(a), “at such times as the public interest requires.” Under Rule 6(g) “[N]o grand jury may serve more than 18 months.”

In 1970 Congress enacted the Organized Crime Control Act of 1970, part of which became Section 3331(a) of Title 18. Section 3331(a) provided that in addition to such other grand juries as shall be called from time to time, each district court which is located in a judicial district containing more than four million inhabitants, may order a special grand jury to be summoned at least once in each period of 18 months unless another special grand jury is then serving. The section provides that the grand jury shall serve for a term of 18 months, but that if at the end of such term or any extension thereof the district court determines that the business of the grand jury has not been completed, the court may enter an order extending such term for an additional period of six months. But no special grand jury term so extended shall exceed 36 months except under circumstances not involved in Fein. We held in Fein that since the grand jury is a creature of statute the original order stating that the grand jury in the Eastern District had been empanelled pursuant to Rule 6(a) and (g) specifically to serve for a period not to exceed 18 months made this a regular grand jury, which could not be converted into a special grand jury under § 3331 with its provisions for extension. We held that in these circumstances the grand jury simply became functus officio.

It was natural enough that defendants in criminal cases involving other extended grand juries would seek to find grounds for dismissal of their indictments under our decision in Fein. We think in the case at bar that the attempt should be held unsuccessful. In the case at bar the original order did not refer to § 3331 nor, on the other hand, did it refer, as in Fein, to Rule 6(a) and (g). The order in this case did not specify that the jury was to sit 18 months, as did the order in Fein. As a result, we have an order which literally sheds no light on what sort of grand jury actually had been empanelled.

The original order of Honorable David N. Edelstein, Chief District Judge • for the Southern District of New York, dated March 17, 1972, recited that the United States Attorney for the Southern District of New York, having duly verified in writing on the 17th day of March, 1972 that the exigencies of public service required the empanelling of an additional grand jury for the disposal of Government business of the said Southern District of New York, ordered that there shall be empanelled an additional grand jury to serve from April 18, 1972. There was no termination date given. In its eighteenth month of service, Honorable Dudley B. Bonsai, United States District Judge, on October 5, 1973 extended the term of the grand jury specifically pursuant to 18 U.S.C. § 3331(a). A similar order was filed by Chief Judge Edelstein on April 15, 1974 and by Honorable Lloyd F. MacMahon, United States District Judge, on October 11, 1974. Each of the extension orders, as noted, extended the term pursuant to 18 U.S.C. § 3331(a). Thus, it would appear that the extension order in the Eastern District, which purported to extend the life of the grand jury involved in Fein, dealt with a regular Rule 6 grand jury. The orders in the Southern District in this case, on the other hand, purporting to extend the term of the grand jury, did not extend a grand jury that was empanelled specifically under Rule 6(a) and (g) or which had, by order, been limited to an 18 months term. In these respects, this case differs from Fein. The indictment herein was filed on June 4, 1974, so that if the extensions were improper, it should be dismissed because of “irregularity with respect to the grand jury.” See 18 U.S.C. § 3288. While it is true that the judicial orders are generally deemed to be integrated so as to make inadmissible parol evidence to vary their terms, In re Crosby Stores, Inc., 65 F.2d 360, 361 (2 Cir. 1933), that does not preclude the court from amending its record nunc pro tunc so as to remove errors. Wigmore, Evidence (3d Ed.) § 2450, and cases cited. ‘Whatever may be the rule where parol evidence is sought to be used in an effort to contradict a judicial record, here there is a patent ambiguity on the face of Chief Judge Edelstein’s original order. It is completely unclear on the face of the order whether he intended to empanel an additional regular grand jury with a term of 18 months or whether he intended to empanel a special grand jury under § 3331. In these limited circumstances, it is open, therefore, for the court to correct its own judgment if, indeed, the ambiguity resulted from initial error in drafting the order. To resolve this question, Judge Motley received affidavits which related to the circumstances under which Chief Judge Edelstein’s order was made. Judge Motley found from the evidence tendered by affidavit that the Chief Judge intended to empanel a special grand jury under § 3331. Myles J. Ambrose, at the time was a Special Assistant Attorney General and Director of the Office of Drug Abuse Law Enforcement (“O.D.A.L.E.”) within the Department of Justice. He swore that the use of special grand juries summoned pursuant to the unique provisions of the Organized Crime Control Act were deemed essential by the President and the Attorney General to the achievement of O.D.A. L.E. goals. He directed all O.D.A.L.E. regional directors to obtain special grand juries under the Organized Crime Control Act. He spoke with Whitney North Seymour, Jr., then United States Attorney for the Southern District of New York, and requested his cooperation in empanelling a special grand jury in the Southern District of New York. On January 6, 1972, Mr. Ambrose told Chief Judge Edelstein that he intended to ask him to summon a special grand jury under the provisions of the Organized Crime Control Act; that he desired to have a grand jury with the power to issue special reports and that it was therefore necessary that the grand jury be an Organized Crime Control Act special grand jury. Chief Judge Edelstein agreed to empanel such a special grand jury. Mr. Ambrose’s assistant in New York, Andrew Maloney, was ordered to request such a special grand jury. Chief Judge Edelstein has affirmed that he was “aware that Mr. Ambrose wanted empanelled a special grand jury within the meaning of the Organized Crime Control Act of 1970 for use by the Office of Drug Abuse Law Enforcement” and that this was the nature of the additional grand jury which he ordered to be empanelled. It appears that an Assistant United States Attorney in charge of grand juries drew the actual order which failed to make specific reference to the purpose of Chief Judge Edelstein in empanelling it.

In these unusual circumstances, we agree with Judge Motley “that the grand jury which returned this indictment was intended to be and was consistently treated as a special grand jury.” There is no doubt that the extensions sought treated this grand jury as having been empanelled under § 3331 but that, in itself, would be of no more avail then it was in Fein if the original order negated such a construction. Here it did not.

By acknowledging that Judge Motley did not exceed her authority in refusing to dismiss the indictment we should not be considered as expressing contentment with the course of events here revealed. While we recognize the pressures on district court judges, we trust that in the future more care will be exercised with respect to the form of their orders, particularly since we now have different types of grand juries with different attributes and longevities.

The petitioners contend, finally, that if resort is to be had to what they call parol evidence, a hearing is required so that they may cross-examine and rebut the evidence tendered. The argument mistakes the ground of Judge Motley’s decision with which we agree. This involves a nunc pro tunc amendment to an order in practical effect and the only question is a unilateral one, namely, whether the court’s present expression of its original intention can be applied nunc pro tunc. We hold that this is not a proper subject for an adversary proceeding, recognizing, of course, that the judicial power to correct errors must be sharply restricted and based upon clear recollections excluding any considerations arising after the event.

The story of the creation of the Special Narcotics Unit and its desire to have a special grand jury under the Organized Crime Control Act communicated to Chief Judge Edelstein fully supports his own recollection of the matter and his own intentions with regard thereto. We hold that in these unusual circumstances Judge Motley’s refusal to dismiss the indictment was proper and that the petition for mandamus or prohibition should be denied on the merits.

      . We agree with the Seventh Circuit that 18 U.S.C. § 3332(b) should not require the limitation to two of the number of special grand juries in the district, Korman v. United States, 486 F.2d 926, 934 (1973), but that the matter rests in the informed discretion of the District Court.


source: Caselaw Access Project

author: WYZANSKI, Senior District Judge. PELL, Circuit Judge

license: Public Domain

text:
    HAWKEYE CHEMICAL COMPANY, and Mutual Boiler & Machinery Insurance Company, Plaintiffs-Appellees, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendant-Appellant, and Oil Insurance Association, Defendant.
    Nos. 74-1174, 74-1175.
    United States Court of Appeals, Seventh Circuit.
    Argued Nov. 21, 1974.
    Decided Jan. 20, 1975.
    Rehearing and Rehearing En Banc Denied Feb. 11, 1975.
    Certiorari Denied May 12, 1975.
    See 95 S.Ct. 1955.

      Lawrence Zelle, Minneapolis, Minn., Robert A. Downing, Chicago, 111., C. E. Talley, Tulsa, Okl., for Hawkeye Chemical.
    James T. Ferrini, Chicago, 111., for St. Paul Fire.
    Before FAIRCHILD and PELL, Circuit Judges, and WYZANSKI, Senior •District Judge.

       Senior District Judge Charles Edward Wyzanski, Jr., of the District of Massachusetts, is sitting by designation.

   WYZANSKI, Senior District Judge.

This diversity jurisdiction case comes before us on an appeal and a cross-appeal from a judgment, following a jury verdict on special questions, which allows plaintiffs a recovery on a fire insurance policy, but denied plaintiffs claimed interest. The central question, involving interpretation of Iowa statutes, is whether two fire insurance policies issued by St. Paul Fire and Marine Insurance Company to Hawkeye Chemical Company, and providing that the issuing “company shall not be liable for loss occurring. . . while the hazard is increased by any means within the control or knowledge of the insured,” were, at the time of Hawkeye’s loss, suspended by its violation of a policy condition which did not contribute to that loss.

Hawkeye operates at Clinton, Iowa a nitrogen fertilizer plant. It effectuated with St. Paul two fire insurance policies with the suspension provision just quoted, and with Mutual Boiler and Machinery Insurance Company a policy insuring a boiler and machinery. The St. Paul policies had an extended coverage endorsement for an explosion loss; the Mutual policy also covered explosion damage.

While the policies were in effect, Hawkeye’s personnel detected, in its ammonia plant, gas leaks from weep holes in a cold exchanger, a multi-layered pressure vessel where gas was being expelled from the interior. Those leaks increased the fire hazard.

March 30, 1970, during the period named in the three insurance policies, the cold exchanger in Hawkeye’s plant exploded causing extensive damages to the exchanger and the plant. After investigation, St. Paul declined coverage. In its pleading in this case, St. Paul gave as its ground that there was a causal connection between leakage which had occurred through weep holes in the cold exchanger before March 31, 1970 and the explosion.

Hawkeye and Mutual (the latter because of its status as a co-insurer) brought, in the United States District Court for the Southern District of Illinois, suit seeking recovery for Hawkeye on the St. Paul policies. Oil Insurance Association, which had acted on behalf of St. Paul, was also named as a defendant. In its defense, St. Paul relied principally upon Section 515.102(8) which, so far as pertinent, provides:

“515.102 Conditions invalidating policy Any condition or stipulation referring:
* * * * * *
8. To a change in the occupancy or use of the property insured, if such change or use makes the risk more hazardous,
“shall not be changed or affected by the provision of section 515.101.”

The citation in the just-quoted statute to section 515.101 is a reference to the following Iowa code provision:

“Any condition or stipulation in an application, policy, or contract of insurance, making the policy void before the loss occurs, shall not prevent recovery thereon by the insured, if it shall be shown by the plaintiff that the failure to observe such provision or, the violation thereof did not contribute ' to the loss.”

In the District Court no one suggested that the crucial aspect of the questions of Iowa state law made it desirable for the federal court to abstain from deciding the case, or to withhold decision until, by declaratory judgment or otherwise, the opinion of the Iowa state courts might be elicited.

At trial, the District Judge separated the issues and put special questions, relevant to some issues of liability, to the jury. The court’s interrogatories and the jury’s answers were as follows:

“No. 1. Was the hazard increased with respect to the Hawkeye pressure vessel known as the Cold Exchanger and Secondary Separator prior to its failure of March 30, 1970?
Answer: Yes.
No. 2. Did the plaintiff, Hawkeye Chemical Company, have knowledge of the increase in hazard found in response to interrogatory No. 1?
Answer: Yes.
No. 3. Was the increase in hazard found in response to interrogatory No. 1 within the control of plaintiff, Hawk-eye Chemical Company?
Answer: Yes.
No. 4. Did the increase in hazard found in response to interrogatory No. 1 cause or contribute to the loss occasioned by the catastrophe on March 30, 1970 in the Hawkeye plant?
Answer: No.”

Thereafter plaintiffs moved for summary judgment on liability. The court ruled that St. Paul’s policies had not been suspended and granted the motion. Then, after denying defendant St. Paul’s motion for a new trial, the court set the case for trial without a jury upon the issue of damages. After hearing the evidence, the court entered judgment for Hawkeye against St. Paul in the amount of $1,976,827.37. In so doing, the court denied Hawkeye’s claim for pre-judgment interest at 5% beginning at the date the damages had been completed and the plant restored to normal operation.

Defendants appealed to this court from the judgment imposing liability on St. Paul; Hawkeye cross-appealed from the District Court’s failure to allow prejudgment interest.

We dismiss the appeal and direct the District Court to modify its judgment in accordance with the cross-appeal.

Our first inquiry, logically, must be addressed to defendants’ contention, made for the first time in this court, that in view of our unfamiliarity with the mixture of Iowa statutory and case law governing insurance coverage, and, in defendants’ view, in the absence of a clear line of decisions in the Iowa Supreme Court on the precise issues here presented, we should either abstain from decision until the parties may procure a response from the Iowa state courts to a petition for declaratory judgment (there being no certification procedure of the type found in some states and under statutes like those recited in footnote 7 of Lehman Brothers v. Schein, 416 U.S. 386, 390, 94 S.Ct. 1741, 40 L.Ed.2d 215 (1974)) or, alternatively, reverse the District Court’s judgment and dismiss the case.

We recognize that there is no insuperable obstacle to application of the doctrines of abstention even if they are invoked only on appeal. See Lehman Brothers v. Schein, supra. However, as Mrs. Justice Rehnquist stressed in that case, pp. 392-395, 94 S.Ct. 1741, it is always relevant to consider not only how difficult it is for a federal court to ascertain the local law, but also how great are the financial or other burdens caused by the delay due to a late claim of abstention. Here, as we shall later demonstrate, we do not find much difficulty in discovering the Iowa law. And we are mindful that, in this era of double digit interest available for large funds, it is a serious matter to delay the payment of almost $2 million upon which there would be payable only about half of the interest which the open market would offer. Therefore, on both grounds, we conclude that this is not an appropriate case for abstention.

We turn to the merits. The governing law, obviously, is that of the state of Iowa. Its usual statutory rule, established by Section 515.101, heretofore quoted, forthrightly states that “any condition ... in [a] ... policy ... of insurance, making the policy void before the loss occurs, shall not prevent recovery thereon by the insured, if it shall be shown by the plaintiff that the failure to observe such provision or the violation thereof did not contribute to the loss.” This language speaks so clearly and to the point that one who has not been inoculated by the virus of insurance policies and statutes governing them would be surprised to know how there could be much dispute as to its effect. However, there is, as always with lawyers, room for argument, and for a delving into precedents, legislative history, and general principles of the common law.

Both sides ask us to examine the legislative history of Section 515.101 and its cognate, Section 515.102. These twins had as their parent Section 1743 of the Iowa Code of 1897 which provides:

“Conditions. Any condition or stipulation in an application, policy or contract of insurance, making the policy void before the loss occurs, shall not prevent recovery thereon by the insured, if it shall be shown by the plaintiff that the failure to observe such provision or the violation thereof did not contribute to the loss: provided, however, that any condition or stipulation referring to any other insurance, valid or invalid, or to vacancy of the insured, or to liens or incumbrances thereon created by voluntary act of the insured and within his control, or to the suspension or forfeiture of the policy during default or failure to pay any written obligation given to the insurance company for the premium, or to the assignment or transfer of such policy of insurance before loss without the consent of the insurance company, or to the removal of the property insured, or to a change in the occupancy or use of the property insured, if such removal, change or use makes the risk more hazardous, or to the fraud of the insured in the procurement of the contract of insurance, shall not be changed or affected by this provision. . . . ”

It is obvious that the first portion of the foregoing 1897 statute has become Section 515.101 of the present Iowa Code, and that the remainder of the first sentence after the word, “provided,” has become Section 515.102.

It is also plain to those familiar with this country’s history of fire insurance that Iowa’s 1897 statutory provisions were part of a nationwide movement to change from the strict common law rule that any breach of a policy condition avoided coverage regardless of whether the breach caused the loss or increased the risk to a new rule allowing the insured to recover despite a breach of condition if it did not contribute to the loss sought to be indemnified. See Patterson, Essentials of Insurance Law (1957) § 72, pp. 353-355.

We are aware that in some states, perhaps a majority, there has been what may appear to be some recession from the tidal changes of the early twentieth century. See Note, The Increase of Hazard Clause in The Standard Fire Insurance Policy, 76 Harv.L.Rev. 1472 (1963). We are also mindful that in 1947 Iowa legislatively altered the 1907 Iowa Standard Form Policy of Fire Insurance to conform to the New York Standard Form, that the New York and most other, but not all other, courts have construed the New York form so as to give insurance companies the benefit of an Increase-of-Hazard clause to the prejudice of a generous interpretation of a Contribution-To-The-Loss clause, and that when one state borrows another state’s statute the borrowing state is usually presumed to have accepted the borrowed statute as it had previously been interpreted in the state of origin. But we are not now called upon, in the manner of the helpful Harvard Law Review Note already cited, to rehearse with elaborate analysis and citation the history of the New York statute or the conflict in opinions in those states which have borrowed the New York statute. For after Iowa had borrowed the New York statute, the Supreme Court of Iowa in 1951 in Carr v. Iowa Mut. Tornado Ins. Assn., 242 Iowa 1084, 49 N.W.2d 498, where an insurer who relied on its policy’s “increase of hazard” clause as the basis of a refusal to pay a claimed windstorm clause was held liable because the evidence did not prove that the increase of hazard had been by a means within the knowledge and control of the insured, stated:

“It is only when there has been sufficient proof of some act of the insured which would ordinarily abrogate the contract, that section 515.101 has any effect or meaning. Then the insured may show that his action, although technically a violation of some provision of the policy did not in fact contribute to the damage.”

Perhaps this was technically not part of the ratio decedendi; but we are persuaded that it was a considered dictum revealing that today, as since its enactment, Section 515.101 of the Iowa Code ordinarily applied to a case where the defense of “increase of hazard” was relied upon by the insurer to avoid coverage.

We are unimpressed by defendants’ attempt to avoid liability by reliance on Section 515.102’s special provision for two particular kinds of increase of hazard. That statutory section recites nine specific conditions or stipulations upon which non-liability might be premised. Only one of those conditions refers directly or indirectly to increase of hazard. And that is not now relevant. It provides as one of the conditions invalidating a policy. “Any condition or stipulation. ... To a change in the occupancy or use of the property insured, if such change or use makes the risk more hazardous.” What the words say, and what the sense and spirit of the eighth clause suggest, is that an insurance policy may be invalidated if there has been an increase of hazard caused by, and only if caused by, a change in the occupancy or a change in the use of the property. An increase in the hazard due to gas leaks is not either a change in occupancy, or a change in use and is not ejusdem generis. It is wholly different. No court has authority to extend the statutory catalog of invalidating conditions. In Iowa, as generally elsewhere, the courts are barred from additions to a prescribed list by the maxim expressio unió est exclusio alterius. Lindstrom v. Aetna Ins. Co., 203 N.W.2d 623, 627 (1973); North Iowa Steel Co. v. Staley, 253 Iowa 355, 112 N.W.2d 364, 365 (1961).

It follows that that clause in the St. Paul policies which provides that the [insurance] “company shall not be liable for loss occurring . . . while the hazard is increased by any means within the control or knowledge of the insured” is inoperative in relation to the facts of this case. The attempt of defendant St. Paul in its policies to avoid liability whenever there has been any increase of hazard is not authorized by Section 515.-102 and is repugnant to Section 515.101. In short, St. Paul’s liability is governed not by its contracts but by Section 515.-101, which provides that a policy condition “shall not prevent recovery if it shall be shown by the plaintiff that the failure to observe such provision or the violation thereof did not contribute to the loss.”

There being no merit to the appeal, we now consider the prayer for pre-judgment interest presented by the cross-appeal.

It is undisputed that St. Paul categorically denied policy coverage and instructed Hawkeye that filing of proof of claim was unnecessary. Thus St. Paul waived the policy provisions that claims are payable only 60 days after proof of loss is filed. Under these circumstances, we accept plaintiffs’ proposal that the date from which interest became payable was September 24, 1970 when the damages were complete and the plant returned to operation at normal rates, and we ignore any possible earlier date. See Abel v. Dodge, 261 Iowa 1, 152 N.W.2d 823 (1967); Glandon v. Farmers’ Mut. Hail Ins., 211 Iowa 60, 232 N.W. 804 (1930); Aetna Ins. Co. v. Barnett Bros., Inc., 289 F.2d 30 (8th Cir. 1961). We suppose that the denial of pre-judgment interest by the District Court was attributable to inadvertent confusion between the rule in insurance contract claim cases and the rule in tort cases presenting unliquidated claims.

The appropriate calculation of interest based on Section 535.2(1) of the Iowa Code may best be made by the District Court on remand.

Defendants’ appeals dismissed; plaintiffs’ cross-appeals granted; case remanded to the District Court for proceedings in accordance with this opinion.

PELL, Circuit Judge

(dissenting).

In my opinion the trial court committed basic and reversible error in submitting the fourth interrogatory to the jury thereby adding an improper issue for jury determination. The error, of course, was compounded by the district court treating the issue as dispositive of the case. Accordingly, I respectfully dissent.

I agree with the majority opinion that the wording of the policy issued by St. Paul cannot override statutory circumscription pertaining to insurance policies.

The key matter here, it appears to me, is one of the legislative wording of Section 515.102(8):

“To a change in the occupancy or use of the property insured, if such change or use makes the risk more hazardous

Both the district court and the majority opinion construe the words as follows:

“To a change in the occupancy or use of the property insured, if such change of occupancy or change of use makes the risk more hazardous . . . .”

Such a construction, in my opinion, does violence to the plain meaning of the words. If the legislature had so intended all that need to have been said was:

“To a change in the occupancy or use of the property insured, if such change makes the risk more hazardous tt

By using the combination of words it did, it appears clear to me that the legislature did not intend to modify “use” by “change.” A change in occupancy is frequently consistent with a potential increase of hazard. The use of a product in the manner in which it has theretofore been used is just as consistent with an increase of hazard as is a change of use. The district court in defining a change of use used the example of converting an ice cream plant to an anhydrous ammonia plant. On this hypothesis if a boiler was consistently overheated so as to result in an explosion there would be no change of use so as to bring to bear the excepting clause of 515.102(8). This strikes me as an improper narrowing of the plain words of the statute. The increase of hazard from a misuse can be every bit as perilous as from a change of use and I fail to find any logical reason for the legislature to have made one of them inferior to the other in determining what conditions will have the effect of suspending the coverage of a policy. I discern nothing violative of either the sense or spirit of the eighth clause in the construction which appears proper to me.

In writing insurance, the company must perforce look at its potential exposure or risk. The operative time for the suspension of coverage should be logically when the hazard is increased or the conditions upon which the policy was issued change, whether the change of conditions results from misuse or from change of use.

This is the prevailing view:

“It should be made clear that, since the clause is concerned with the area of risk or uncertainty, potential rather than actual causes of loss are relevant to this inquiry. It is true that there are statements in some early cases that a causal link between the changed condition and the actual loss is necessary to establish the defense of increased hazard, and a few states have statutes — denominated contribute-to-the-loss acts — which have the same effect. Yet there is now no dispute among the authorities that the meaning of increased hazard under the language of the standard policy does not turn on whether the changed condition in fact contributed to the particular fire loss. Note, The Increase of Hazard Clause in The Standard Fire Insurance Policy, 76 Harv.L.Rev. 1472, 1474 (1963).

Ordinarily we need not look at legislative history in the absence of ambiguity but may assume where clear and explicit language is used that the legislature meant what it plainly said. Since the present panel is not in agreement as to the proper construction of the statutory section in question it perhaps could be said arguably that the necessity for resort to legislative history is in order.

It appears to me that Section 1743 of the Iowa Code of 1897, quoted in the majority opinion, does support the construction which appears to me to be the correct one. Thus, “or to a change in the occupancy or use of the property insured, if such removal, change or use makes the risk more hazardous . shall not be changed or affected by this provision . . . ” (Emphasis added.)

I cannot as lightly as does the majority dismiss the opinion of District Judge Hanson, an Iowa lawyer, in Commercial Standard Insurance Company v. Haley, 282 F.Supp. 16 (S.D.Ia.1968). It is true that that case involved an automobile policy but Judge Hanson was addressing an underlying principle of Iowa insurance law. The case upon which the insured relied was Baird v. Kaskaskia Live Stock Ins. Co., 198 Iowa 905, 200 N.W. 575 (1924), a case not involving automobile insurance but concerned with an interpretation of Section 1743. The insured contended that “that a condition or stipulation in an insurance contract making the policy void before a loss occurs cannot prevent recovery unless it is shown that a violation of the condition contributed to the loss. The correct statement of the rule is that breach of a condition must be shown to have contributed to the loss or in fact made the risk more hazardous. Taylor v. National Livestock Co., 192 Iowa 1118, 185 N.W. 992; Kinney v. Farmers’ Mutual Fire & Ins. Soc. of Kiron, Iowa, 159 Iowa 490, 141 N.W. 706. There can be no doubt that Haley’s breach of the Limitation of Use Endorsement increased the risk for the Company. In the event the Court were to decide otherwise, a universally legal and valid fleet policy clause would be rendered nugatory.” (Emphasis added.) 282 F.Supp. at 24-25.

This case is one which would have lent itself ideally to a certification procedure. See Lillich & Mundy, Federal Courts Certification of Doubtful State Law Questions, 18 U.C.L.A.L.Rev. 888 (1971). Unfortunately, we must because of Iowa not having such procedure available embark upon a determination of what the Iowa legislature meant, and have reached unfortunately a result which I do not believe the Iowa courts would have.

As I read the law of Iowa since there was clearly an increase in the hazard it was immaterial- whether the increase caused or contributed to the explosion and judgment should have been entered for the defendant. In any event, even assuming arguendo that the district court’s requirement of cause of contribution was proper there should have been at the very least a new trial ordered on the issues.

The evidence in this case is overwhelming that there was leakage in the weep holes, that the vessel should have been shut down to determine the cause but that this was not done. The inference is clear that the plaintiff ignored warning signals because it was involved in the height of the manufacturing season. The eruption of gas into the atmosphere brought about the inevitable result, an explosion. From the record, it appears equally clear to me that the answer to the fourth interrogatory was inconsistent with the answers to the first three and therefore a new trial should have been ordered. 9 Wright & Miller, Federal Practice and Procedure: Civil § 2510 at 517-18 (1971).

      . We do not pause to comment on appellant’s analogy drawn from Commercial Standard Ins. Co. v. Haley, 282 F.Supp. 16 (S.D.Ia. W.D.1968) relating to automobile insurance policies whose conditions relating to use limitations have a wholly different ambience. The governing considerations in interpreting an increase of hazard clauses in automobile policies are manifestly different from those used to interpret unique statutory language controlling fire insurance policies,


author: HAYS, Circuit Judge:

text:
    In the Matter of D. H. OVERMYER, CO., INC., et al., Debtors-Appellants, and Robert P. Herzog, Receiver-Appellant.
    No. 470, 484, Docket 74-2326, 74-2445.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 18, 1974.
    Decided Feb. 5, 1975.

      Gary L. Blum, New York City (Levy, Levy & Ruback, New York City, on the brief), for debtors-appellants.
    W. B. Sandler, New York City (Booth, Lipton & Lipton, New York City, on the brief), for receiver-appellant.

      Zalkin, Rodin & Goodman, New York City (Richard S. Toder, New York City, of counsel), for appellees Civic Parking Square, Inc., and others.
    Abberly, Kooiman, Marcellino & Clay, New York City, for appellee E. R. Carpenter Co.
    Reavis & McGrath, New York City (Stephen R. Steinberg, David C. Birdoff, Stephen H. Lewis, New York City, of counsel), for appellee Fiduciary Research, Inc.
    Hahn, Hessen, Margolis & Ryan, New York City (Daniel A. Zimmerman, New York City, of counsel), for appellees Norman S. Glauber, Jr., and others.
    McManus & Ernst, New York City, for appellees Robert S. Kahn, and others.
    Martin F. Brecker, New York City (Henry & Brecker, New York City, on the brief), for appellees Florence Lazar, and others.
    Wachtell, Lipton, Rosen & Katz, New York City (Theodore Gewertz and Allen P. Rosiny, New York City, of counsel), for appellees Samuel H. Pokrass, and others.
    Nickerson, Kramer, Lowenstein, Nessen, Kamin & Soil, New York City (Harold P. Weinberger, New York City, of counsel), for appellee The 614 Company.
    Howard R. Slater, Chicago, 111. and Weinstein, Skoller & Kaye, P. C., New York City (William S. Kaye, New York City, of counsel), for appellee David Spatz.
    Bachner, Tally & Mantell, New York City, for appellee Torrano.
    Before SMITH, HAYS and MANSFIELD, Circuit Judges.
   HAYS, Circuit Judge:

This appeal concerns 15 warehouse leases held by subsidiaries of the D. H. Overmyer Company. On November 16, 1973, Overmyer and its subsidiaries filed petitions for an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C. § 701 et seq. (1970). Upon application by Overmyer’s landlords, Bankruptcy Judge Roy Babitt ordered the termination of the leases in question and the return of possession to the landlords. His orders were affirmed by the United States District Court for the Southern District of New York.

I.

Since the business background of this case has already been outlined in the opinions of Bankruptcy Judge Babitt and District Judge Werker, see In re D. H. Overmyer Co., 383 F.Supp. 21 (S.D.N.Y.1974), we will set out only those facts necessary for an understanding of this appeal. Overmyer is in the business of renting warehouse space. Its practice has been to purchase parcels of land upon which to construct warehouses, sell the warehouses to investors under a lease-back arrangement, and then sublease them to the actual users. While the leases between Overmyer and its landlords are generally long-term, the subleases between Overmyer and its tenants are short-term and, of course, are for a higher rental than Overmyer pays. It is generally Overmyer’s responsibility to maintain the premises and pay the taxes.

By the time the Chapter XI petitions were filed, relations between Overmyer and its landlords were already strained. Several had initiated procedures to terminate their leases on the ground that Overmyer had failed to pay its rent and to fulfill its other contractual obligations. Several had begun proceedings in state courts to regain possession of their premises. After the petitions were filed, the bankruptcy judge stayed all such proceedings. However, virtually all the landlords soon initiated proceedings before him in which they sought to terminate the leases on the basis of the bankruptcy default clause, which provided for termination upon the filing by the tenant of a petition for a reorganization or arrangement under the Bankruptcy Act. A few of the landlords continued to rely on the rent default termination provisions which they had previously invoked.

The bankruptcy judge found that Overmyer’s rent defaults were “staggering.” He further found that because of Overmyer’s failure to fulfill its obligations, the landlords had to invest additional funds to pay off mortgage and tax debts and avoid foreclosure. Finally, he considered there to be little chance for Overmyer’s rehabilitation based on its proposed arrangement, which he found totally unrealistic. The bankruptcy judge concluded that the disputed leases should be terminated and possession returned to the landlords since equitable considerations did not warrant the continuation of the leases in light of the applicable termination provisions.

II.

The appellants argued in the district court and again here that the bankruptcy judge’s orders are inconsistent with the decision in Queens Boulevard Wine & Liquor Corp. v. Blum, 503 F.2d 202 (2d Cir. 1974). They contend that under Queens Boulevard, the leases should not have been terminated because they are essential to the debtor’s business and to its rehabilitation under Chapter XI and because termination "would result in a windfall for the landlords. We disagree.

Section 70b of the Bankruptcy Act, 11 U.S.C. § 110(b) (1970), provides that

“an express covenant that the bankruptcy of a specified party thereto or of either party shall terminate the lease . . . [is] enforceable.”

In Finn v. Meighan, 325 U.S. 300, 65 S.Ct. 1147, 89 L.Ed. 1624 (1945), the Supreme Court applied this section in upholding the bankruptcy court’s decision to terminate a lease held by a debtor in a Chapter X proceeding. In Smith v. Hoboken R.R., Warehouse and S.S. Connecting Co., 328 U.S. 123, 66 S.Ct. 947, 90 L.Ed. 1123 (1946), the Court reaffirmed its holding in Finn and applied it to railroad reorganizations as well as Chapter X proceedings. 328 U.S. at 126-28, 66 S.Ct. 947. However, the Court noted the public interest in successful railroad reorganizations and held that this factor should have been considered by the Interstate Commerce Commission before a decision was made to terminate a lease under § 70b. Id. at 131-33, 66 S.Ct. 947.

Extending the holding in Smith, we held in Queens Boulevard that a bankruptcy court may exercise its equitable discretion to deny enforcement of a termination clause when continuation of the lease would not prejudice the landlord and termination of the lease would render an otherwise promising arrangement under Chapter XI impossible. 503 F.2d at 206-07. See Weaver v. Hutson, 459 F.2d 741 (4th Cir. 1972), cert. denied, 409 U.S. 957, 93 S.Ct. 288, 34 L.Ed.2d 227 (1973); In re Fleetwood Motel Corp., 335 F.2d 857 (3d Cir. 1964).

The facts in this case are strikingly different from those in Queens Boulevard. The lower courts found that Overmyer’s conduct toward the landlords did not justify granting it equitable relief from the terms of its leases. 383 F.Supp. at 24-25. While the debtor in Queens Boulevard was only one month behind in rent payments and the landlord was protected by a security deposit, Overmyer had consistently been behind in payments of its rent, mortgage, and tax obligations and the landlords had frequently been forced to borrow money to make those payments. See 383 F.Supp. at 25 n.6. In addition,'the lower courts found that unlike the debtor in Queens Boulevard, Overmyer had presented no feasible plan for an arrangement with any reasonable chance of success. Id. at 25.

In light of these facts and the general rule of § 70b in favor of the enforceability of bankruptcy termination clauses, see Queens Boulevard Wine & Liquor Corp. v. Blum, supra 503 F.2d at 207, we hold that the district court did not abuse its equitable discretion by affirming the orders terminating the fifteen lease's in question and returning the landlords to possession.

III.

Appellants argue that the bankruptcy judge should have made more specific findings of fact. In particular, they contend that in the four cases in which prepetition rent default and not bankruptcy was the asserted basis for termination, the bankruptcy judge was required to list his specific findings as to each lease. Appellants also insist that the district judge erred in finding that there had been an effective termination prior to the petition in each of those instances and that in any case, his findings cannot be substituted for those of the bankruptcy judge, who, they argue, failed to consider the question.

Bankruptcy Rule 752, which requires the bankruptcy court to “find the facts specially,” is an adaptation of Rule 52 of the Federal Rules of Civil Procedure. See Advisory Committee’s Note, Bankruptcy Rule 752. The purpose of both rules is to ensure that the reviewing court is informed of the basis of the lower court’s decision. See In re Metropolitan Realty Corp., 433 F.2d 676, 679 (5th Cir. 1970), cert. denied, 401 U.S. 1008, 91 S.Ct. 1251, 28 L.Ed.2d 544 (1971). In this case, the district court was apparently satisfied that based on the findings and the record, it had a “clear understanding” of the bases of the bankruptcy judge’s decision and that effective review was therefore possible. 383 F.Supp. at 27. We agree.

The central issue in the many proceedings before the bankruptcy judge was whether he should exercise his equitable power to allow the debtors to remain in possession, despite the fact that the leases had either already been terminated at the time of bankruptcy or were subject to termination upon bankruptcy. The court declined to do so because it found a pervasive pattern of abuses by Overmyer in its relationship with the landlords and no realistic prospect for future improvement. It was not necessary for the court to list the exact figures in the case of each lease in order to justify that conclusion.

Appellants argue that in the four rent default cases, the bankruptcy judge never confronted the preliminary question of whether the leases were actually terminated before the petitions were filed. This contention is without merit. In each of the rent default cases the bankruptcy judge signed an order declaring the particular lease terminated as of the pre-petition date on which, according to his view of the evidence, the proper procedures for termination had been completed in that case.

Appellants further argue that the evidence does not support a finding either by the bankruptcy judge or by the district judge that the leases were properly terminated. We hold, however, that the finding of termination was not clearly erroneous. The arguments based upon state law, which were raised for the most part for the first time in this court, we find unpersuasive.

Affirmed.

      . § 70b is applicable in Chapter XI proceedings as well. See Queens Blvd. Wine & Liquor Corp. v. Blum, 503 F.2d 202, 204 (2d Cir. 1974); 8 Collier on Bankruptcy ¶ 6.32 n.30 (14th ed. 1971). Cf. § 302 of the Bankruptcy Act, 11 U.S.C. § 702 (1970).

      . Absent overriding equitable considerations, the bankruptcy judge in a Chapter X or XI proceeding is charged with enforcing valid lease terminations against debtors still in possession not only in the § 70b situation of a bankruptcy termination clause but also when termination is based on other lease provisions having nothing to do with bankruptcy. See Schokbeton Industries, Inc. v. Schokbeton Products Corp., 466 F.2d 171, 175—76 (5th Cir. 1972). Cf. In re Lane Foods, Inc., 213 F.Supp. 133, 136 (S.D.N.Y.1963).


author: ALDISERT, Circuit Judge.

text:
    CONGOLEUM INDUSTRIES, INC. v. ARMSTRONG CORK COMPANY, Appellant.
    Nos. 72-1510, 74-1366
    United States Court of Appeals, Third Circuit.
    Argued Jan. 6, 1975.
    Decided Feb. 10, 1975.
    As Amended Feb. 25, 1975.
    Certiorari Denied May 27, 1975.
    See 95 S.Ct. 1991.
    Edward W. Mullinix, Philadelphia, Pa., W. Brown Morton, Jr., Malcolm L. Sutherland, Washington, D. C., Sanford M. Litvack, New York City, for appellant; Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., Morton, Bernard, Brown, Roberts & Sutherland, Washington, D. C., Donovan, Leisure, Newton & Irvine, New York City, George L. Herr, Theodore L. Thomas, Lancaster, Pa., of counsel.
    Lewis H. Van Dusen, Jr., Philadelphia, Pa., Eben M. Graves, New York City, for appellee; Patrick T. Ryan, Drinker, Biddle & Reath, Philadelphia, Pa., Joseph D. Garon, Allan H. Bonnell, Bradley B. Geist, Brumbaugh, Graves, Donohue & Raymond, Michael M. Maney, Lawrence W. Nelson, Sullivan & Cromwell, New York City, Ralph M. Jerskey, Richard T. Laughlin, Congoleum Industries, Inc., Kearny, N. J., of counsel.
    Before ALDISERT, WEIS and GARTH, Circuit Judges.
   OPINION OF THE COURT

ALDISERT, Circuit Judge.

This appeal caps a protracted litigation of more than eight years duration for the infringement of Congoleum’s patents for chemically embossing floor coverings. Appellant Armstrong Cork Company, long the dominant firm in the floor covering industry, urges a broadside attack on the proceedings in the district court. After careful consideration of the contentions raised by brief and oral argument, we affirm the meticulous findings and conclusions of District Judge John B. Hannum. 339 F.Supp. 1036 (E.D.Pa.1972) and 366 F.Supp. 220 (E.D.Pa.1973).

The product here at stake is of great commercial interest. For years, the register or exact coincidence of colored design with embossed patterns had been desired for both the visual accent accomplished thereby and the proven commercial demand therefor. Until Congoleum’s technological breakthrough represented in its patents, the goal was economically impractical. Since the advent of chemical embossing, however, the floor covering industry has been revitalized.

Before discussing the specific issues raised on appeal, we deem it helpful to recite briefly the history of these proceedings in this court and the district court. Congoleum filed its complaint on December 20, 1966, the day the patent office granted the process and product patents. After elaborate discovery and trial, Judge Hannum found the Congoleum patents valid and the Armstrong process and product infringing. Congoleum Industries, Inc. v. Armstrong Cork Co., 339 F.Supp. 1036 (E.D.Pa.1972). Armstrong filed a notice of appeal, but then successfully sought a remand to the district court for the sole purpose of determining whether the record should be reopened to allow additional evidence. No. 72-1510 (3d Cir., Dec. 13, 1972). The district court denied Armstrong’s motion for a new trial. Civil No. 41,762 (E.D.Pa., Aug. 16, 1973). The record was then retransmitted to this court; the appeal was not prosecuted, but we amended our earlier order nunc pro tunc to retain jurisdiction. No. 72-1510 (3d Cir., Sept. 24, 1973). Meanwhile, pursuant to an agreement among counsel and the court below, trial was had on the reserved issue of whether Congoleum had vitiated its patent rights by misuse. See Tr. of Oral Arg., Jan. 6, 1975, at 36. The district court also found against appellant on these questions. 366 F.Supp. 220 (E.D.Pa.1973). Based on its prior decisions, the district court entered judgment final except for accounting on April 5, 1974. This appeal followed. We have jurisdiction pursuant to 28 U.S.C. § 1292(a)(4).

Armstrong argues that the district court committed various errors that may be categorized as relating to: (1) the infringement issue, (2) procedural rulings limiting discovery and the presentation of evidence, (3) the misuse issue, and (4) the breadth of the injunction.

At oral argument, counsel for appellant represented that its principal proposition for reversal was that, in determining the infringement issue, the district court had proceeded on an erroneous premise, viz., if Congoleum succeeded in showing that there was a difference in the amount of blowing agent in the land and mortar areas of the Armstrong product, the burden of showing that the cause of that difference was other than that involved in the Congoleum process would shift to Armstrong. See Tr. of Oral Arg., Jan. 6, 1975, at 14-15. Subsumed in this argument was the contention that one of two Armstrong theories for the difference in residual blowing agent — both relating to the possible internal effects of the uniformly applied external heat — was compatible with non-infringement. Ibid, at 17-18. Our ex-animation of the record in this case reveals that the district court considered and rejected both of Armstrong’s claimed alternative theories for the difference in residual blowing agent. 339 F.Supp. at 1048. With this background, we now inspect the district court rulings in light of the appropriate standards for an appellate court.

On review, we may not upset the district court’s findings of fact, which served as the underpinnings for its determinations on the infringement issue, unless we find them to have been clearly erroneous. Grove v. First National Bank, 489 F.2d 512, 515 (3d Cir. 1974) (per curiam); Krasnov v. Dinan, 465 F.2d 1298, 1302 (3d Cir. 1972). Applying this principle to the evidence before the fact finder we cannot construe these particular findings as clearly erroneous. Nor are we able to say that the district court erred in applying the proper legal principles to the infringement issue. Therefore, the decision of the district court on the two basic questions, that Congoleum’s patents were valid and that Armstrong’s process and product infringed those patents, will be affirmed. See 339 F.Supp. 1036.

We have also reviewed the district court’s rulings regarding the various procedural aspects of which Armstrong complains. We conclude that the district court did not err in the exercise of its judicial discretion by limiting discovery and the presentation of evidence.

As to the merits of the misuse issue, we fail to find an error in the application of appropriate legal principles and accordingly will affirm that decision of the district court. See 366 F.Supp. 220.

Finally, as regards the formulation of injunctive relief, we hold that the district court did not err in applying the appropriate principles of specificity embodied in Rule 65, F.R.Civ.P.

The judgment of the district court will be affirmed.

      . By way of example, we note in passing that Judge Hannum prepared a paper shortly after trial on the infringement issue, called an interim memorandum, in which he set forth his understandings of all the scientific facts and data. This memorandum was circulated to each of the parties for comments before preparation of his Findings of Fact. Tr. of Oral Arg., Jan. 6, 1975, at 25.

      . An example of chemically embossed floor covering is the simulated brick pattern found in many kitchens today. The vinyl sheet exposed to the chemical embossing process contains a “blowing agent” which will foam when heated. Selected portions of the sheet are printed with an "inhibitor” which alters the decomposition temperature of the blowing agent so that they become raised or lowered with respect to the rest of the sheet after application of heat. Usually, the inhibitor is incorporated in one of the inks used to print the overall design on the sheet. Apparently deriving from bricklaying terminology, the portions of the embossed product are referred to in the trade as “land” (raised) and “mortar” (depressed) areas.

      . The controversy whether the standard of appellate review of non-jury fact determinations should differ where credibility of witnesses is not an issue need not detain us. Cf. 9 C. Wright & A. Miller, Federal Practice and Procedure § 2587 (1971). Compare Butler v. Colfelt, 439 F.2d 882, 884 (3d Cir. 1971) (per curiam) (“We need not . . . pursue to its ultimate refinement the interesting distinction in the application of the ‘clearly erroneous’ doctrine under Rule 52(a) . . between cases where the fact-finder deals with demeanor evidence and those involving only documentary or recorded evidence or whether the findings of the district court are entitled, at the least, to some consideration.” (footnotes omitted)), with Demirjian v. Commissioner of Internal Revenue, 457 F.2d 1, 4 (3d Cir. 1972); Consolidated Sun Ray, Inc. v. Lea, 401 F.2d 650, 659 n.34 (3d Cir. 1968), cert. denied, 393 U.S. 1050, 89 S.Ct. 688, 21 L.Ed.2d 692 (1969); United States v. United Steelworkers, 271 F.2d 676, 685 (3d Cir.), aff’d, 361 U.S. 39, 80 S.Ct. 1, 4 L.Ed.2d 12 (1959); In re Kellett Aircraft Corp., 186 F.2d 197, 200 (3d Cir. 1950). Our ultimate determination on this point incorporates the conclusion that the findings here were not erroneous under either the clearly erroneous standard articulated in Grove and Krasnov or a standard of de novo review.


author: ROBERT P. ANDERSON, Circuit Judge:

text:
    VANITY FAIR MILLS, INC., Plaintiff-Appellant, v. OLGA COMPANY (INC.), Defendant-Appellee.
    No. 124, Docket 74-1559.
    United States Court of Appeals, Second Circuit.
    Argued Dec. 4, 1974.
    Decided Feb. 4, 1975.

      Willis H. Taylor, Jr., New York City (Pennie & Edmonds and Philip T. Shannon, New York City, on the brief), for plaintiff-appellant.
    Stuart A. White, New York City (Anderson, Russell, Kill & Click, P. C., and Nicholas L. Coch, New York City, on the brief), for defendant-appellee.
    Before KAUFMAN, Chief Judge, and ANDERSON and OAKES, Circuit Judges.
   ROBERT P. ANDERSON, Circuit Judge:

This case concerns patents numbered 3,142,300 (“300”) and 3,142,301 (“301”), for women’s panty briefs, initially issued to Mrs. Olga Erteszek on July 28, 1964 and subsequently assigned by her to appellee, Olga Company. Since 1963 Olga Company has marketed a brief embodying the patents. The appellant, Vanity Fair, Inc., (Vanity Fair) is also a manufacturer of women’s undergarments and lingerie and between 1967 and 1969, marketed a brief, Style 40-28, which Olga Company alleges infringed the patents in question.

The brief, or panty brief, is one of three different types of body control undergarments in the girdle family; the other are the girdle proper, or “skirt girdle,” and the so-called “panty girdle.” The panty brief basically consists of an elastic member which encircles the abdomen and hips, and a crotch piece, which creates individually defined leg openings. Despite the advantages of a panty brief in terms of versatility and freedom of movement, for over 20 years it proved difficult to create a garment with sufficient elastic strength to flatten the abdomen without causing discomfort from binding in the crotch and around the legs.

In 1962 Mrs. Erteszek worked out the design of the brief, covered by the “301” patent, which basically consists of two constituent members. The first, the girdle-member, is a torso-encircling elastic body which provides stomach control. The second is a separate piece of fabric cut and sewn so as to constitute a panel which overlays the girdle member in the front and which extends down under the crotch and is attached to the lower back edge of the girdle member. Because the panel-crotch member is sewn only perpendicularly part way down the girdle member at the side edges and is not stitched horizontally to the front of the girdle member at any point, the two members can move independently of one another. This independence of movement allegedly makes it possible for the leg openings to adjust naturally as the position of the wearer changes.

It was apparent to Mrs. Erteszek, however, that the “301” brief had a major flaw — the front lower portion of the girdle member tended to ride up beneath the overlying panel-crotch member. Her solution was to add a piece of tricot material inside the original crotch piece to connect the front lower border of the girdle member with the crotch piece. The tricot piece was loose enough to permit the adjustment of the leg openings as in the initial design of the “301” brief, while at the same time it prevented the girdle member from riding up.

Olga Company never marketed a garment based on the “301” design, but instead marketed a garment based on the “300” patent in 1963 which met with immediate commercial success. This success had continued for over ten years at the time this action came to trial below. See, Vanity Fair Mills, Inc. v. Olga Company (Inc.), 369 F.Supp. 1233, 1237 (S.D.N.Y.1974).

Mrs. Erteszek’s applications for patents on “300” and “301” were initially rejected, but, after she made some amendments to them and a further explanation of claimed functional differences between her garments and the design in the Rosenthal Patent No. 2,763,-008, the Examiner allowed the applications, and Letters Patent for each of “300” and “301” were issued July 28, 1964.

Meanwhile, Vanity Fair, in its efforts to remedy the control and leg binding problems in its panty briefs, produced and marketed the alleged infringing garment, Vanity Fair Model 40-28, in which, as the district court noted, “the unique, patented features of the Olga garment appeared virtually without change . . ..” 369 F.Supp. at 1238. From the time of its introduction into the market in the fall of 1967 until its discontinuance sometime in 1969, it was Vanity Fair’s largest selling brief.

On October 27, 1967, Vanity Fair filed a complaint in the district court seeking a declaratory judgment that Olga Company’s “301” and “300” patents were each invalid and not infringed by Vanity Fair. By counterclaim Olga Company sought a determination that said patents were valid and that Vanity Fair had infringed each of them. Since Vanity Fair’s only creditable defense to Olga Company’s counterclaim for infringement was the invalidity contention, however, the central issue below was whether or not Olga Company’s patents were invalid because “obvious” within the meaning of 35 U.S.C. § 103.

The district court, characterizing the Olga Company’s panty briefs as involving “a novel type of garment construction, which was far from obvious, as demonstrated by the history of unsuccessful efforts by other designers to solve certain basic structural problems” (369 F.Supp. at 1239), held the “301” and “300”. patents each valid and infringed. This appeal followed.

To be patentable a product must be (1) useful, (2) novel, and (3) non-obvious. See, 35 U.S.C. §§ 101-103. The only issue on appeal is whether the Olga Company’s patents are invalid for alleged obviousness over the prior art under § 103, a question of law. See, e. g., Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966); Julie Research Laboratories, Inc. v. Guideline Instruments, Inc., 501 F.2d 1131, 1136 (2 Cir. 1974). This court holds that they are.

While peripheral references were made below and on appeal to other patents alleged to be obvious prior art for the Olga Company patents, Vanity Fair’s chief reliance was and is on the Maidenform garter-belt and panty-brief covered by Rosenthal Patent No. 2,763,-008. A comparison of this garment with Olga Company’s “301” brief reveals that in the latter, the panel, which in the Rosenthal design ran inside the torso-encircling member and down under the crotch, was shifted to the outside of the torso-encircling elastic body and attached to the waistband and part way down the girdle member in the front at the outer edges of the crotch piece and at the edge of the girdle member in the back. The length of the material providing vertical stretch was thus increased, and the panels were able to function independently of one another, lessening the tendency for such briefs to bind in the crotch and in the legs. This method of achieving vertical stretch maximization and independence of panel movement falls well within the capabilities of any person having ordinary skill in the art who gives serious thought to the root cause of the binding problems. See, e. g., Cuno Corp. v. Automatic Devices, 314 U.S. 84, 90, 62 S.Ct. 37, 86 L.Ed. 58 (1941); Formal Fashions, Inc. v. Braiman Bows, Inc., 369 F.2d 536, 538 (2 Cir. 1966); Warner Bros. v. American Lady Corset, 48 F.Supp. 417, 421-422 (S.D.N.Y.1942), aff’d 136 F.2d 93 (2 Cir. 1943). Olga Company’s “300” patent merely solved the tendency of the bottom edge of the torso-encircling member in the “301” brief to ride up in the front by attaching a piece of tricot to hold it down. The net result of these changes was an increase in stomach control through the use of a stronger elastic material without the corresponding decrease in comfort that had attended increased control in the past. Neither change made by Mrs. Erteszek, however, either singly or in combination, qualifies as the product of “inventive genius.” Cuno Corp. v. Automatic Devices Corp., supra, 314 U.S. at 91, 62 S.Ct. 37.

The troubling aspect of the case is that for well over twenty years no one prior to Mrs. Erteszek had been able to overcome the leg and crotch comfort problems which seemed endemic to this type of garment, thus casting some doubt on the obviousness of the solution. Secondary considerations such as commercial success, long felt but unsolved needs, and the failure of others may be utilized “to give light to the subject matter[’s] . . . obviousness or nonobviousness (Graham v. John Deere Co., supra, 383 U.S. at 17-18, 86 S.Ct. at 694), and an invention which appears obvious when viewed after the event may be found to be patentable when consideration is given to the problems in a particular industry or trade which the invention solved. See, e. g., Shaw v. E. B. & A. C. Whiting Co., 417 F.2d 1097 (2 Cir. 1969), cert. den. 397 U.S. 1076, 90 S.Ct. 1518, 25 L.Ed.2d 811 (1970); Application of Rothermel, 276 F.2d 393, 47 CCPA 866 (1960). Mrs. Erteszek’s solution of problems described by the district court as “basic”, distinguishes the instant controversy from such girdle cases as Warner Bros. v. American Lady Corset, supra, and Gossard v. J. C. Penney Co., 304 F.2d 515 (7 Cir. 1962). Likewise, the fact that these problems were structural or inherent in the type of garment in question, and the object of considerable creative effort, precludes facile reliance on Formal Fashions v. Braiman Bows, Inc., 369 F.2d 536 (2 Cir. 1966). It was these distinguishing features which led the court below to uphold the patents on the strength of United States v. Adams, 383 U.S. 39, 86 S.Ct. 708, 15 L.Ed.2d 572 (1966), and Shaw v. E. B. & A. C. Whiting Co., supra.

The district court’s reliance on Adams and Shaw is misplaced, however. In Adams the Supreme Court stated that “known disadvantages in old devices which would naturally discourage the search for new inventions may be taken into account in determining obviousness.” 383 U.S. at 52, 86 S.Ct. at 714. This principle was most recently applied in this Circuit in Shaw. Unlike Adams and Shaw, however, where the prior art, if taken at face value, would discourage one skilled in the art from utilizing the methods that led to the patentable invention (see, 383 U.S. at 51-52, 86 S.Ct. 708; 417 F.2d at 1104), in this case the 1956 Rosenthal patent far from discouraging such a solution suggests to one skilled in the art that the correction of prior crotch and leg discomfort problems lay in independently functioning panels placed on the outside rather than on the inside of the torso-encircling member.

Furthermore, while the Erteszek patents solved problems that were “basic” in the sense that they had persisted for a long time and thus seemed to be inherent in panty briefs, in the final analysis these patents represent style and comfort improvements rather than an innovative device for stomach control. Viewed in this light, the patented briefs have much in common with those designs which are “ ‘new and pleasing enough to catch the trade’,” but which do not reflect such exceptional talent beyond the skill of the ordinary designer as to merit a design patent. See G. B. Lewis Co. v. Gould Products, Inc., 436 F.2d 1176 (2 Cir. 1971), quoting from Neufeld-Furst & Co. v. Jay-Day Frocks, Inc., 112 F.2d 715, 716 (2 Cir. 1940).

This court therefore concludes that, while Mrs. Erteszek was an originator, she was not an inventor. Given the prior art and the availability of assorted stretching materials, a skilled undergarment designer could by some concentrated thinking and experimentation arrive at the same results. While such secondary considerations as commercial success and long felt but unsolved needs in the field constitute relevant evidence in a close case on the issue of obviousness, once it is established by prior art references that the difference between the patents in suit and the prior art is not substantial enough to be termed “invention”, the patent cannot be sustained. See Formal Fashions, Inc. v. Braiman Bows, Inc., supra, 369 F.2d at 539.

The judgment of the district court is reversed.

      . See Figure #3 in the district court opinion Vanity Fair Mills, Inc. v. Olga Company (Inc.), 369 F.Supp. 1233, 1235 (S.D.N.Y.1974).

      . 35 U.S.C. § 103 provides, in relevant part:
      “A patent may not be obtained if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.”

      . See Vanity Fair Mills, Inc. v. Olga Company (Inc.), 369 F.Supp. 1233, 1239, note 1 (S.D.N.Y.1974).