Edwards v. United States, 19827

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation321 F.2d 324
Docket Number19828.,No. 19827,19827
PartiesAlbert EDWARDS, Appellant, v. UNITED STATES of America, Appellee. S. Frank EDWARDS, Appellant, v. UNITED STATES of America, Appellee.
Decision Date18 July 1963

Dick Lee, Sarasota, Fla., for appellant.

Arnold D. Levine, Asst. U. S. Atty., Joe H. Mount, Edith House, U. S. Atty., Thomas J. Hanlon, III, Sp. Asst. to U. S. Atty., S. D. of Florida, Tampa, Fla., for appellee.

Before RIVES, CAMERON and HAYS,* Circuit Judges.

HAYS, Circuit Judge.

Defendants appeal from judgments of conviction in the United States District Court for the Southern District of Florida, Joseph P. Lieb, J., and a jury, for "willful" failure to pay the special federal tax on persons engaged in the business of accepting wagers. 26 U.S.C. §§ 4401, 4411, 4412, 7203. It is conceded that defendants did not pay the tax. There was no proof, however, that defendants were aware of the federal tax and "willfully" refused to pay it. We hold that such proof was indispensable, and accordingly reverse both convictions and direct that the informations be dismissed.

It is unnecessary to review the evidence. Suffice it to say that there was ample proof from which the jury could conclude that defendants were engaged in the gambling business.

Appellants were convicted under § 7203 of the Code (26 U.S.C. § 7203) which section provides:

"Any person required under this title to pay any estimated tax or tax * * * who willfully fails to pay such estimated tax or tax * * * shall, in addition to other penalties provided by law, be guilty of a misdemeanor * * *." (emphasis supplied).

The government argues that ignorance of the law is no excuse and that evidence that defendants engaged in gambling as a business, together with the concession that they did not pay the required tax, is sufficient to support a conviction.

But this court has long held that, where the statutory definition of the crime of failure to pay a tax includes the element of willfulness, "a specific wrongful intent, that is, actual knowledge of the existence of obligation and a wrongful intent to evade it, is of the essence." Hargrove v. United States, 67 F.2d 820, 90 A.L.R. 1276 (5th Cir. 1933).

In Yarborough v. United States, 230 F.2d 56, 61 (4th Cir.), cert. denied, 351 U.S. 969, 76 S.Ct. 1034, 100 L.Ed. 1487 (1956), the Court of Appeals for the Fourth Circuit, citing the Hargrove case and United States v. Murdock, infra, said:

"Ignorance of the law is no defense to crime, except that, where wilfulness is an element of the crime, ignorance of a duty imposed by law may negative wilfulness in failure to perform the duty."

In United States v. Murdock, 290 U.S. 389, 54 S.Ct. 223, 78 L.Ed. 381 (1933) the defendant was convicted of a misdemeanor1 under the predecessor statute to 26 U.S.C. § 7203 for refusal to answer certain questions put by revenue agents. Defendant maintained that his refusal to answer was based upon fear of prosecution under state law. The Court, reversing the conviction in reliance upon Felton v. United States, 96 U.S. 699, 24 L.Ed. 875 (1877) found error in the charge regarding the element of willfulness:

"Congress did not intend that a person, by reason of a bona fide misunderstanding as to his liability for the tax, as to his duty to make a return, or as to the adequacy of the records he maintained, should become a criminal by his mere failure to measure up to the prescribed standard of conduct. And the requirement that the omission in these instances, must be willful, to be criminal, is persuasive that the same element is essential to the offense of failing to supply information.
* * * * * * "The respondent\'s refusal to answer was intentional and without legal justification, but the jury might nevertheless find that it was not prompted by bad faith or evil intent, which the statute makes an element of the offense."

290 U.S. at 396-98, 54 S.Ct. at 226.

Subsequent cases involving failure to report or pay taxes have closely followed the rule in Murdock. See, e. g., Barrett v. United States, 296 F.2d 309 (5th Cir. 1961); United States v. Palmero, 259 F.2d 872 (3d Cir. 1958) ("mere laxity, careless disregard of the duty imposed by law, or even gross negligence, unattended by `evil motive' are not probative of `willfulness'"); United States v. Cirillo, 251 F.2d 638 (3d Cir. 1957), cert. denied, 356 U.S. 949, 78 S.Ct. 914, 2 L.Ed. 2d 843 (1958) ("`willfulness' requires knowledge of the legal obligation"); Ripperger v. United States, 248 F.2d 944 (4th Cir. 1957), cert. denied, 355 U.S. 940, 78 S.Ct. 428, 2 L.Ed.2d 421 (1958); United States v. Litman, 246 F.2d 206 (3d Cir.), cert. denied, 355 U.S. 869, 78 S.Ct. 118, 2 L.Ed.2d 75 (1957) (the omission must be "advertent" and motivated by "bad purpose"); Yarborough v. United States, 230 F.2d 56 (4th Cir.), cert. denied, 351 U.S. 969, 76 S.Ct. 1034, 100 L.Ed. 1487 (1956); Pappas v. United States, 216 F.2d 515 (10th Cir. 1954); 10 Mertens, Law of Federal Income Taxation § 55A.09 (1958).

While the cases we have cited were concerned with taxes other than the gambling tax, we can conceive of no reason why the same rule should not apply to failure to comply with the gambling tax provisions. The legislative history of the gambling tax reveals no intention to impose a stricter standard in gambling cases than in other tax cases. See H. Rep. 586, 82d Cong., 1st Sess. (1951), reproduced 2 U.S.Code Cong. & Admin. Serv. 1781, at 1837-44 (1951); S.Rep. 781, 82d Cong., 1st Sess. (1951), reproduced 2 U.S.Code Cong. & Admin. Serv. 1969, at 2089-96 (1951).

United States v. Simon, 241 F.2d 308 (7th Cir. 1957) involved failure to pay the gambling tax. The court in construing § 7203 quoted extensively from a number of gambling tax cases which required a showing of knowledge of the statute violated, and then held:

"Defendant had knowledge of the law and intentionally refused to comply. There is no proof that such refusal was in good faith."

241 F.2d at 312.2

We conclude that since the government wholly failed to prove an essential element of the crimes charged, the convictions must be reversed and the informations dismissed.3

Reversed and informations dismissed.

CAMERON, Circuit Judge (Specially Concurring).

I concur fully in the able opinion of Judge Hays and would add the following comments.

It cannot be mentioned too often that prosecutions such as these which we are reviewing are prosecutions for the violation of federal taxing laws, not for the violation of gambling laws. And, "in construing the statutes we would not be justified in resorting to collateral motives or effects a congressional desire to suppress wagering which, standing apart from the federal taxing power, might place the constitutionality of the statute in doubt." United States v. Calamaro, 1957, 354 U.S. 351, 358, 77 S.Ct. 1138, 1143, 1 L.Ed.2d 1394. In short, whether one gambles or not is of no concern to the federal government, except insofar as the taxing power alone is involved.

Judge Rives suggests in his dissent that to require affirmative proof that the defendants are aware of the taxing requirements will make convictions exceedingly rare. Besides the fact that we do not hold here that positive, affirmative proof is required, if that be the result, so be it. Such a possibility does not warrant, in my opinion, the suggestion in the dissent that we take judicial notice of the fact that all persons engaged in the gambling business are aware of the requirements. In dealing with this serious business of taking citizens' liberties, we are not privileged to assume that the "tax is so well known as to be one of the most frequent subjects of conversation among professional gamblers." The fact is that I doubt exceedingly if it is true that all "professional" gamblers know of the tax. Nor does such a possibility warrant a holding that defendants affirmatively establish ignorance of the requirements. To do so would certainly put the burden of proving innocence on the defendants, a result which is clearly unconstitutional. Moreover, taking judicial notice of defendants' knowledge would in effect be to convert the crime charged to imprisonment for debt to the government, rather than for evasion of tax liabilities.

As Judge Rives states in his dissent, the issue of the correctness of the charge including in part: "* * * The presumption is that every person knows what the law forbids and what the law requires to be done * * *" is not before us. But necessarily before us is the old adage so often propounded in criminal cases: "Ignorance of the laws is no excuse."

This case is really not an exception to that general rule. Ignorance of the criminality of evading taxes is no excuse, if one wilfully evades the tax, thus committing the crime. One must know, however, of the positive requirements of the federal law that one must register and pay the tax before he can wilfully evade it. It may be that this is the difference between sins of commission and sins of omission. It is a part of our legal heritage, however, that courts of law traditionally mete out punishment for sins of commission. Judgments on sins of omission are usually reserved for a Higher Court sitting at a later Day.

RIVES, Circuit Judge (dissenting).

As the Court says, "there was ample proof from which the jury could conclude that defendants were engaged in the gambling business." Neither of them had registered for or paid the tax as required by 26 U.S.C.A. § 4411 and § 4412. The Court holds, however, that, as a matter of law, there was insufficient evidence to prove that the defendants' failure to register for and pay the tax was "willful" in the sense of the statute making such failure a misdemeanor, 26 U.S.C.A. § 7203. As I understand the opinion, the Court in effect holds that the Government must affirmatively prove as a part of its case "that defendants were aware of the federal tax," that they knew of the duty imposed by law.


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