263 F.2d 827 (3rd Cir. 1959), 12713, Eisenberg v. Smith

Docket Nº:12713, 12714.
Citation:263 F.2d 827
Party Name:Morris EISENBERG and Fannie Eisenberg, Appellants, v. Francis R. SMITH, Collector of Internal Revenue. Herman SCHAEFFER and Rose Schaeffer, Appellants, v. Francis R. SMITH, Collector of Internal Revenue.
Case Date:February 13, 1959
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

Page 827

263 F.2d 827 (3rd Cir. 1959)

Morris EISENBERG and Fannie Eisenberg, Appellants,


Francis R. SMITH, Collector of Internal Revenue.

Herman SCHAEFFER and Rose Schaeffer, Appellants,


Francis R. SMITH, Collector of Internal Revenue.

Nos. 12713, 12714.

United States Court of Appeals, Third Circuit.

February 13, 1959

Argued Jan. 6, 1959.

Page 828

Seymour I. Toll, Joseph S. Lord, 3d, Philadelphia, Pa. (Richter, Lord & Levy, Philadelphia, Pa., on the brief), for appellants.

Louise Foster, Washington, D.C. (Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, A. F. Prescott, Attys. Dept. of Justice, Washington, D.C., Harold K. Wood, U.S. Atty., Philadelphia, Pa., on the brief), for appellee.

Before BIGGS, Chief Judge, and GOODRICH and STALEY, Circuit Judges.

GOODRICH, Circuit Judge.

These are suits by the taxpayers, Eisenberg and Schaeffer, to recover on what they claim to be incorrect exactions of income tax for the years 1945 to 1949, inclusive. 1 Plaintiffs have paid their tax and now seek to get it back. They lost in the lower court. The focal legal controversy is whether they were improperly taxed as the sole partners in a concern called Bailey's Furniture Company instead of bearing their fractional proportion of what is claimed as being a partnership made up of nine partners. 2 There are three principal issues in the case.

I. Are the Plaintiffs Properly in Court?

The Government raises a number of questions concerning whether the plaintiffs have standing in this Court to pursue their appeal. It is pointed out that instead of the appeal being taken from the judgments of the district court bearing date November 18, 1957, they are appealing from an order denying alternative motions for judgment notwithstanding the verdict or for a new trial. As to the first the Government says that the new trial is a matter within the discretion of the trial court and is not reviewable on appeal. But on an appeal

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properly taken this Court has a limited review to determine whether the trial court abused its discretion, even where, as in this case, a new trial was sought on the ground that the verdict was against the weight of the evidence. See John E. Smith's Sons Co. v. Lattimer Foundry & Machine Co., 3 Cir., 1956, 239 F.2d 815, 816; Hill v. Pennsylvania Greyhound Lines, Inc., 3 Cir., 19498 174 F.2d 171, 172. 6 Moore, Federal Practice P59.08(5), p. 3820 (2d ed. 1953).

The Government next says that the plaintiffs are not entitled to consideration of their motion for judgment notwithstanding the verdict, because they made no motion for a directed verdict at the conclusion of the presentation of all the evidence. F.R.C.iv.P. 50(b), 28 U.S.C., provides that '* * * a party who has moved for a directed verdict may move to have the verdict and any judgment entered thereon set aside and to have judgment entered in accordance with his motion for a directed verdict * * *.' Rule 50(a) states that 'A motion for a directed verdict shall state the specific grounds therefor.' These plaintiffs, in the first of their requested points for charge to the jury, did ask for the following: 'On the basis of the evidence and the applicable law, you are directed to find a verdict for the Plaintiffs.' 3

This request, thrown in along with a considerable list of points for charge, is not, we think, a compliance with the rule as stated in section 50(a) and quoted above. It certainly gives the trial judge no hint of what the position of the party making the motion is, except that he wants the lawsuit decided in his favor. The purpose of the rule requiring the stating of grounds is, of course, to let the trial judge and opposing counsel see what the problem is so that the decision will be the best that can be had. 5 Moore, Federal Practice P50.04, p. 2321 (2d ed. 1951). Virginia-Carolina Tie & Wood Co., Inc. v. Dunbar, 4 Cir., 1939, 106 F.2d 383, 385; Ryan Distributing Corp. v. Caley, 3 Cir., 1945, 147 F.2d 138, 140.

In addition to what has been said above, we must also notice Rule 73 dealing with 'Appeal to a Court of Appeals.' That rule provides as follows:

'(a) When and How Taken. * * *

'A party may appeal from a judgment by filing with the district court a notice of appeal. * * *

'(b) Notice of Appeal. The notice of appeal shall specify the parties taking the appeal; shall designate the judgment or part thereof appealed from; and shall name the court to which the appeal is taken. * * *'

As already pointed out this appeal was not from the judgment. 4 How can we say that Rule 73 is complied with?

All this leaves the plaintiffs in rather unhappy procedural position. We should prefer not to have the case rest on this ground alone, however. The rules of civil procedure are designed to assist civil business in an ordinary fashion but surely should not be so literally interpreted as to prevent a fair result in a meritorious case. We pass, therefore, to the other parts of the case which deal with the merits.

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II. Are Plaintiffs Entitled to a Judgment Notwithstanding Verdict or to a New Trial?

The taxpayers cite to us the case of Brady v. Southern Ry. Co., 1943, 320 U.S. 476, 479-480, 64 S.Ct. 232, 234, 88 L.Ed. 239, in which the Court, through Mr. Justice Reed, Points out that when the evidence is such that 'without weighing the credibility of the witnesses there can be but one reasonable conclusion as to the verdict, ' it is the trial court's business to see that that conclusion is reached. We have no doubt of this rule. Ryan Distributing Corp. v. Caley, 3 Cir., 1945, 147 F.2d 138, 140. 5 Moore, Federal Practice P50.02(1) (2d ed. 1951). Neither does any other informed lawyer. But acceptance of this general proposition is a long way from saying that it applies to this case.

The appellants properly law great stress on the decision in Commissioner v. Culbertson, 1949, 337 U.S. 733, 69 S.Ct. 1210, 93 L.Ed. 1659. They take a passage from the discussion by the Chief Justice which sets out the test for determining whether a family partnership exists. The paragraph they quoted and relied on reads as follows:

'The question is not whether the services or capital contributed by a partner are of sufficient importance to meet some objective standard supposedly established by the Tower case (Commissioner v. Tower, 327 U.S. 280, 66 S.Ct. 532, 90 L.Ed. 670), but whether, considering all the facts-- the agreement, the conduct of the parties in execution of its provisions, their statements, the testimony of disinterested persons, the relationship of the parties, their respective abilities and capital contributions, the actual control of income and the purposes for which it is used, and any other facts throwing light on their true intent-- the parties in good faith and acting with a business purpose intended to join together in the present conduct of the enterprise.' 337 U.S. at page 742, 69 S.Ct. at page 1214.

Taxpayers then proceed to argue that the undisputed evidence, consisting of documents and stipulated facts, is sufficient to make out an indisputable case for the conclusion that these taxpayers did establish a family partnership consisting of Morris Eisenberg, Herman Schaeffer and seven family trusts. The argument is a perfectly legitimate argument to make. But the conclusion is wrong.

This case was very skillfully handled by the trial judge as he presented it to the jury. He must have had the Culbertson decision on the bench in front of him or else very recently read it with great thoroughness. Several times he stated to the jury the problem which it had to decide: 'whether there really was a partnership existing between these two partners and the seven trusts * * *.' 'Did these parties * * * in good faith and acting with a business purpose intend to join together in the present conduct of this enterprise?' 'You have to take the whole record together, all the evidence in the case, and try to determine what the intention honestly was.' 5 In his opinion denying the motions for judgment or for a new trial the judge correctly points out what the Culbertson decision did. It 'definitely discarded the use of objective tests in family partnership cases.' That, we think, is right. 6 The test now is a subjective one, as the judge gave it to the jury. It compels the trier of the fact in each case to ascertain the...

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