Davis v. United States

• Decision Date: 13 October 1955
• Docket Number: No. 12275.,12275.
• Citation: 226 F.2d 331
• Parties: Poncet DAVIS, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

226 F.2d 331 (1955)

Poncet DAVIS, Appellant, v. UNITED STATES of America, Appellee.

No. 12275.

United States Court of Appeals Sixth Circuit.

October 13, 1955.

Edmund D. Doyle, Columbus, Ohio, and Llewellyn A. Luce, Washington, D. C. (Charles A. Poellnitz, Florence, Ala., Marc J. Wolpaw, Cleveland, Ohio, James C. Herndon, Akron, Ohio, on the brief), for appellant.

Eben H. Cockley, Asst. U. S. Atty., Cleveland, Ohio (Sumner Canary, U. S. Atty., Cleveland, Ohio, on the brief), for appellee.

Before McALLISTER, MILLER and STEWART, Circuit Judges.

McALLISTER, Circuit Judge.

This is an appeal from a conviction on a charge of willfully attempting to defeat and evade payment of income tax.

Appellant, Poncet Davis, a resident of Akron, Ohio, during the tax years of 1945 through 1948, was president, treasurer, and sole stockholder of the Robbins Tire & Rubber Company, Inc., an Alabama corporation, which was engaged in manufacturing and selling rubber products to individuals and corporations throughout the United States. Its plant was located at Muscle Shoals, Alabama, while the office of the company, consisting of a three-room suite, was located in the Mayflower Hotel at Akron, where the corporate books and records were kept and where appellant conducted the business of the corporation. Apart from appellant Davis, who completely dominated and controlled the affairs of the company, the office staff at Akron consisted of appellant's personal secretary — who was also secretary of the corporation — and the bookkeeper, office manager, and two employees who did typing and bookkeeping.

The way in which the business of the corporation was carried on was as follows: In Alabama, the company prepared invoices covering purchase orders and sent duplicate invoices, with a remittance statement consisting of a list of checks that had been received, to the Akron office. The checks representing purchases of merchandise which were received in Alabama were likewise forwarded to Akron and were there received by the employee who was appellant's secretary as well as the corporation secretary. Appellant then would instruct her to turn over to him the checks from six large companies purchasing from appellant's corporation. In order to have the checks of these companies sent directly from such purchasers to the Akron office, appellant sent letters enclosing bills of lading to them, and requesting such companies to forward the checks in payment of the merchandise directly to the Akron office. The letters sent to these companies stated: "Please send us here your check covering the above shipment as soon as you receive it," and were signed by appellant as president. Although the corporation secretary testified that duplicates of these letters were kept in the files, none of the letters, checks, or bills of lading was ever submitted to the special agents of the Bureau of Internal Revenue when they were conducting their examination of the corporate records by appellant or anyone in the office. They were all obtained from the purchasers.

Large numbers of checks received by appellant from the above companies were cashed at banks in Akron by the secretary and also, at various times, by the two employees who did typing and bookkeeping; and they testified that they cashed these checks pursuant to appellant's instructions and turned over the cash to him, and on some occasions, placed the cash in the safe in his office. At the bank, when the cash was withdrawn on the checks, it was placed in big envelopes, or when a large check — as high as $23,000 — was cashed, it was wrapped up in a brown paper package to be carried back to appellant. On several occasions, the vice president of the bank called appellant and informed him that it was not customary banking procedure to hand out so much currency at one time and to cash such checks. Great quantities of the cash received by appellant were used by him to purchase banker's checks payable to him and to the corporation; and these checks were used by appellant to purchase stock in his own name, or afterward converted into cash by him. None of the checks from the six large purchasing companies was entered in the books or records of appellant's corporation, nor did the corporate records reflect any sales of merchandise to these companies during the tax years in question. None of the banker's checks purchased for cash by appellant and made payable to the corporation was ever reflected on the corporate books, nor were any of them deposited in the company's bank account. Furthermore, proceeds from the customers of appellant's corporation were deposited to the personal bank accounts of appellant and his wife by appellant's secretary. It appears also that during the tax years in question, appellant made a gift to his wife of $100,000 in cash, although at that time he had less than $1,200 in his bank account. All checks received from customers other than the six large companies above mentioned were reflected on the corporate books and records, but from the latter, there was no trace of the large cash receipts.

Internal Revenue agents testified on the trial that from the above mentioned transactions, appellant had unreported taxable income during the taxable years of $857,252.08, on which a tax of $729,000 was due.

The district court charged the jury that the income in question was received, in the first instance, by the corporation, of which appellant was president, treasurer, and sole stockholder; that money received by a corporation was not income to an individual unless the corporation funds were in some way transferred or diverted to the individual, and became property over which he exercised dominion and control and treated as his own, to the exclusion of any interest therein by the corporation; and if they found that appellant, as the sole owner of the corporation, diverted funds of that corporation to himself personally and exercised control over them and treated them as his own, that would constitute taxable income that he was required by law to include in his income tax return.

On the subject of taxable income, the district court instructed the jury that income received from any source constitutes taxable income when its recipient has such control over it that, as a practical matter, he derives readily realizable economic value from it, and that this occurs when cash is received by an individual in a manner which allows him freedom to dispose of it or use it at will. The trial court further instructed the jury on the subject of false and fraudulent failure to report taxable income and willful attempt to evade payment of taxes payable. The jury returned a verdict finding appellant guilty; and he appeals.

On review, appellant contends that the evidence did not support the conviction and that the trial court erred in refusing to instruct the jury as requested by appellant, in excluding proffered evidence, and in rulings upon the burden of proof.

At the outset, it should be emphasized that this is not a case where the government relies merely on the finding of large amounts of cash and property in the possession of an individual. Here, not only are the large amounts of cash and property found, but it is also ascertained when they were received,...