B. B. Carter v. Ellis Campbell, Jr., District Director of Internal Revenue

285 F.2d 68, 4 Fed. R. Serv. 2d 1061, 6 A.F.T.R.2d (RIA) 6042, 1960 U.S. App. LEXIS 3118

• Court: Court of Appeals for the Fifth Circuit
• Decided: December 6, 1960
• Docket: 18302_1
• Status: Published

Opinions

CAMERON, Circuit Judge.

This appeal involves the fifty per cent civil fraud penalty in the amount of $11,-924.60 added to the taxpayer’s (appellant here, plaintiff below) federal income tax for the year 1946 and paid by him. The district court, after hearing the evidence, entered its judgment dismissing the complaint. The questions presented upon the appeal are: (1) whether this Court has jurisdiction of the appeal in view of the taxpayer’s failure, according to the contention of appellee, to file notice of appeal from the judgment by the district court (the facts related to this question will be set forth infra); and (2) whether the district court, having imposed upon the Government the burden of pioving fraud by clear and convincing evidence, correctly found and held upon the entire record that the taxpayer’s return was false and fraudulent with intent to evade tax, and that part of the deficiency was due to fraud with intent to evade tax, within the meaning of § 293(b) of the Internal Revenue Code of 1939.¹

Taxpayer’s 1946 income tax return showed a tax due of $2,852.29, which he paid. A subsequent audit of this return by the Internal Revenue Service revealed that the taxpayer had understated his net income for 1946 in the amount of $82,127.81, and the Commissioner determined that the understatement was at least partially the result of fraudulent concealment of income. The taxpayer paid an asserted deficiency of $23,849.21 and a civil fraud penalty of $11,924.60. He filed a claim for refund, which was denied, whereupon he brought this action.

At the first trial of the case before a judge other than the one sitting in the case which is now before us, the court found that the taxpayer was not entitled to a refund of the deficient taxes or the fraud penalty. The taxpayer appealed only from that part of the decision which upheld the fraud penalty. The existence of the deficiency itself is, therefore, judicially acknowledged. This Court reversed the judgment of the district court with respect to the fraud penalty, and ordered that the case be retried on that issue. Carter v. Campbell, 1959, 264 F.2d 930. Again, the district court has determined that the taxpayer was not entitled to a refund of the fraud penalty. Its written opinion, a portion of which is copied in the margin,² is reported in 179 F.Supp. 359-362.

The handling by appellant of these two checks convinced the trial court that, because they were handled in a way other than the usual way in banking and commercial practice and even in the practice of the taxpayer, fraud was to be imputed. It reasoned further that the course pursued by appellant in handling these two items showed that he was “thinking to a purpose something out ahead,” and that he was “thereby placing another link in a possible chain of concealment and making it more difficult for his accountant to include the income in his return even had he been instructed to look up such transactions.” [Emphasis added]; that the failure of taxpayer to follow the “ordinary course” by which he would have “had a record which he might have used not only in tax matters but which would also have served as a business record;” and that, thereby, “He obliterated the record by having the check applied directly against the bank loan without running it through his bank account.”

The conclusion of the court below from the taxpayer’s outlined actions was thus stated:

“We cannot read the mind and intent of a person but we may determine his intention from his acts and doings. Was the conduct of the taxpayer such as to show by the preponderance of all the facts and circumstances that he was seeking to conceal from the Government certain elements of his income in order to evade the tax thereon. We think the record is sufficient to show such an intent and that he was knowingly and willfully concealing his income.”

The Jurisdictional Question.

The “suggestion” by appellee — buttressed by extensive argument — that this Court is without jurisdiction, because there was not a timely filing of the notice of appeal should be dealt with at this point inasmuch as it lies at the threshold of the case. The contention is that appellant gave his notice of appeal on the assumption that the written opinion of the trial court was in fact its judgment; and he did not file an additional notice of appeal after the entry of the formal judgment whose form both parties approved. A brief additional statement of facts, relating to the jurisdiction question is necessary.

October 26, 1959, the court below filed with the clerk and served on the respective counsel its written opinion, which concluded with these words: ³

“We feel that the Government has discharged its burden to show these elements by clear and convincing evidence and therefore we hold that the fraud penalty was properly assessed and collected, and that the taxpayer is not entitled to a refund of the amount paid.” Nothing was there said about the preparation or entry of a judgment, and the clerk noted on his docket merely that the opinion had been filed and that notice had been given to the attorneys.

December 14, 1959, no judgment having been entered by the clerk or presented for entry by the attorneys for appellee, the appellant filed and served his notice of appeal to this Court “from the final judgment entered herein on the 26th day of October, 1959,” paying the clerk, at the same time, the filing fee required.

December 23, 1959, fifty-eight days after the trial judge had signed the opinion, the appellee presented to the court a judgment, bearing the approval of appellant’s attorney as to form, in which it was “Ordered, that the defendant have judgment dismissing the complaint with costs to be assessed against the plaintiff.” Within the sixty day period allowed for appeal and subsequent to the entry of this order of December 23rd, the following actions were taken:

January 8, 1960, appellant’s attorney served on appellee’s attorney an application for an extension of fifty days for filing and docketing the record on appeal in this Court, and, on January 13th, the court below signed and entered an order so providing.

February 12, 1960, appellant procured an order to be signed by the court below providing that the original exhibits in the trial before it be transmitted to this Court.

February 17, 1960, this Court acting through the Chief Judge, upon a motion and affidavit filed by appellant,⁴ entered an order granting leave to the appellant to prosecute his appeal to this Court upon the original record.

On the assumption that appellant’s notice of appeal filed December 14, 1959 was a nullity and that the time for appeal began to run only when the formal judgment was entered December 23rd, we think that the actions taken within sixty days from December 23rd are sufficient to constitute timely notice of appeal. In Des Isles v. Evans, 5 Cir., 1955, 225 F.2d 235, 236, we held that appellant’s application for authority to appeal in forma pawperis was sufficient to constitute notice of appeal under Rule 73(a), F.R.Civ.P., 28 U.S.C.A., stating:

“The rules have for their primary purpose the securing of speedy and inexpensive justice in a uniform and well ordered manner; they were not adopted to set traps and pitfalls by way of technicalities for unwary litigants * * * Therefore, substantial compliance with the rule is sufficient, and appellant’s petition for leave to appeal in forma pawperis adequately met the requirements of Rule 73(a).

“The motion to dismiss the appeal is overruled.”

We followed that case in Roth v. Bird, 5 Cir., 1956, 239 F.2d 257, 259, holding again that the petition for leave to appeal in forma pauperis adequately met the requirements of this rule. In Tillman v. United States, 5 Cir., 1959, 268 F.2d 422, 423, the appellant gave his notice of appeal after the expiration of the time provided under the Federal Rules of Criminal Procedure, 18 U.S.C.A.; but we extended the protection of the above holding to him and ruled that his application within the time limit for leave to appeal in forma pawperis rescued him from forfeiture of his right to appeal. In that decision, we referred tó a number of additional authorities, including our ease of O’Neal v. United States, 5 Cir., 1959, 264 F.2d 809, and the authorities collected in the majority and dissenting opinions.

In United States v. Stromberg, 5 Cir., 1955, 227 F.2d 903, 904-905, we declined to follow the strict rule obtaining in some circuits, but held that technical irregularity would not destroy the right to appeal where the parties had proceeded on the assumption that the appeal had been taken properly, saying: “This Circuit is committed to the more liberal rule that, where it is obvious that the overriding intent was effectively to appeal, we are justified in treating the appeal as from the final judgment.” [Citing cases.]

In our opinion, appellant’s application to this Court for leave to proceed upon the original record and our order granting such leave constitute adequate notice of appeal. Especially is this so when, as here, they are supplemented by the order of the court below, rendered upon notice, extending the time for filing and docketing the record on appeal; and by the further order of the court below that the original exhibits before that court be transmitted to us in connection with the appeal.⁵ Even, therefore, if the notice of appeal filed December 14, 1959 be ignored entirely, the foregoing actions taken within the time limit for appeals and subsequent to the entry of final judgment constitute substantial compliance with the rules. And having noticed the point suggested and urged by the appellee, we hold that the case is properly before us.⁶

1 . See 26 U.S.C.A. § 293.

The statement of questions presented, as well as of the facts generally, is taken largely from appellee’s brief.

2 . “In this trial the Government’s case of fraud centers around two admittedly unreported items of income which took the form of checks from the Santa ITe Grain Company to the taxpayer total-ling $20,752.69. In June of 1946 the taxpayer agreed to purchase a tract of land for $6,400. To obtain the money to purchase the tract the taxpayer sold to the Santa He Grain Company all of his wheat which was left in the company’s elevator at that time. At the taxpayer’s request the grain company paid $7,612.00 therefor in the form of two consecutively numbered checks, both of which were issued on the same day. One check was in the amount of $1,212. and was deposited in the taxpayer’s bank account in the customary manner; the second check was in the amount of $6,-400, the exact amount of the purchase price of the land, but was not deposited. This latter check was used to purchase a cashier’s check from the bank which was in turn used to pay the purchase price of the land.

“The second item omitted from income was a $14,352.69 check which was from the Santa Fe Grain Company for the sale of wheat. This check was never deposited in the taxpayer’s bank account, as was customary, but was instead credited directly against an outstanding loan from the bank. These two unreported grain sales almost equalled in amount the income from reported sales during that year of $23,820.95.”

3 . 179 F.Supp. 362.

4 . The motion contains this language:

“Appellant, B. B. Carter, by his attorney, Wentworth T. Durant, moves the Court for an order permitting him to prosecute his appeal from the judgment entered herein upon the original record in such case and for leave to file typewritten briefs herein, and asks the Court to waive its requirements under Rule 23, [28 U.S.C.A.] relating to the printing of the record. * * * ”

The affidavit showed that appellant was unable to pay the costs of printing the record and briefs and unless he should be permitted to prosecute the appeal upon the original record and typewritten briefs, “such appellant will be unable to proceed with this appeal * * * ”

It is not conceivable that these documents did not advise all concerned, this Court, its clerk, the judge and clerk of the court below and counsel for the Government, that appellant desired and intended to appeal from the judgment dismissing his complaint, or that anybody was misled, or that any possible injustice was done. The actions taken within the sixty day period made appellant’s intention clearly articulate.

5 . In addition, a member of this Court entered a further order extending the time for filing the record on appeal, and both the appellant and appellee filed their des- ' ignations of the record on appeal. Appellee’s designation served and filed April 4, 3960, contained these words: “the defendant-appellee * * * in addition to those portions of the record designated by the plaintiff-appellant for inclusion in the record on appeal * * *, designates for inclusion in such record on appeal the following portions of record and proceedings in this action * * ’

6 . While we base our holding on the foregoing considerations, we think appellant’s argument is valid upon his contention that, under the facts of this case, the notice of appeal filed by him December 14, 1959 was adequate to satisfy the requirements of F.R.Civ.P. The “opinion” of the trial court concluded with a categorical decision of the only question before it: “ * * * the fraud penalty was properly assessed and collected, and that the taxpayer is not entitled to a refund of the amount paid.” No provision was there made for judgment to be entered according to the opinion, such as was done in the cases upon which appellee relies. Everything which the case involved was decided in the written opinion except the award of .costs and this item is covered by Rule 54(d), F.R.Civ. , P., “costs shall be allowed as of course to the prevailing party unless the court otherwise directs * *

Under the language of the opinion signed by the trial judge, under Rule 58, F.R.Civ.P., the clerk was obligated forthwith to enter a judgment, with the proviso that the entry should not be delayed for the taxing of costs. If something more than the opinion was contemplated here, the clerk was delinquent in the performance of the purely ministerial act required of him by Rule 58, and the rights of the parties ought not to be affected thereby unless Rule 79 is to be considered as a sort of “sacred cow.”

We think the clerk was warranted in assuming that the signed opinion was adequate to constitute a judgment and that this was probably his attitude. Certainly the appellant was in no way delinquent. The appellee waited until a few days before the time for appeal from the formal document filed by the court on October 26th would expire before presenting a judgment to be entered. We are struck by the force of appellant’s argument that it would be inherently unjust to permit appellee to profit by such inexcusable delay.

Every act taken by the court below, by this Court and by both litigants indicated clearly that everyone thought that proper appeal had been taken from the judgment that appellant was not entitled to recover any part of what he sued for. Under all of the circumstances revealed by this record, it seems to us that it would be a complete betrayal of the spirit and letter of the rules to deny appellant his right of appeal. Cf., besides the rules above cited, 6 Moore’s Federal Practice, pp. 3502-3504, including the quotation from the report of the Rules Committee; United States v. F. & M. Schaefer Brewing Co., 1958, 356 U.S. 227, 78 S.Ct. 674, 2 L.Ed.2d 721; Dickinson v. Petroleum Conversion Corp., 1949, 338 U.S. 507, 70 S.Ct. 322, 94 L.Ed. 299, including the dissenting opinion; Erstling v. Southern Bell Telephone & Telegraph Co., 5 Cir., 1958, 255 F.2d 93; Scott v. Gearner, 5 Cir., 1952, 197 F.2d 93, 94; Crump v. Hill, 5 Cir., 1939, 104 F. 2d 36; Kanatser v. Crysler Corp., 10 Cir., 1952, 199 F.2d 610, certiorari denied 344 U.S. 921, 73 S.Ct. 388, 97 L.Ed. 710.