Ferrando v. United States, 15256
| Decision Date | 07 June 1957 |
| Docket Number | No. 15256,15257.,15256 |
| Citation | 245 F.2d 582 |
| Parties | Marguerite FERRANDO and Fred Ferrando, co-executors of the Last Will and Testament of Mario Ferrando, deceased; Edward Ferrari and George Ferrari, co-executors of the Last Will and Testament of Luigi Ferrari, deceased, Appellants, v. UNITED STATES of America, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
COPYRIGHT MATERIAL OMITTED
Henry W. Howard, San Francisco, Cal., for appellants.
Charles K. Rice, Asst. Atty. Gen., Robert N. Anderson, Marvin W. Weinstein, David O. Walter, Attys., Dept. of Justice, Washington, D. C., Lloyd H. Burke, U. S. Atty., Lynn J. Gillard, Asst. U. S. Atty., San Francisco, Cal., for appellee.
Before POPE, LEMMON and HAMLEY, Circuit Judges.
A former newsboy who sold papers at the very corner where stands the building in which this Court sits in San Francisco, and who is now one of the appellants in the instant case —
A handwritten check with a false typewritten date —
An admittedly defective Federal estate tax return filed "just under the wire" before its due date —
These are some of the highlights disclosed by the record in these two appeals.
These are appeals from final judgments, entered on June 22, 1956, holding that the appellants, plaintiffs below, take nothing by their complaints, which sought the recovery of penalties collected by the appellee in connection with Federal estate taxes pursuant to the provisions of 26 U.S.C.A. § 3612(d) (1), 1940 Edition, infra.
Notices of appeal were filed on July 17, 1956.
The appellants Marguerite Ferrando, hereinafter Mrs. Ferrando and Fred Ferrando, hereinafter Fred, are the surviving spouse and the son, respectively, of Mario Ferrando, who died in San Francisco, California, on April 20, 1947.
Within a few days after the death of Mario Ferrando, the appellants employed Lloyd J. Cosgrove as their attorney. Mr. Cosgrove had represented the decedent in legal matters and had drawn the latter's last will and testament.
On February 13, 1948, these two appellants were appointed coexecutors of the last will and testament of Mario Ferrando.
The federal estate tax return in the instant case was required to have been filed not later than July 20, 1948, or "within 15 months after the date of death". Section 821(b) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 821 (b), 1940 Edition; Code of Federal Regulations, Title 26, § 81.63, 1949 Edition. Actually, these appellants did not file their return until on or about February 8, 1949, or more than six months after the "due date".
On or about February 15, 1949, Mr. Cosgrove asked Fred to make out a check in payment of the estate tax, saying that he would arrange to have it picked up. An interesting check was prepared. In Fred's handwriting, the stub showed that it was written on February 17, 1949. The check was for $14,525.69, with the Collector of Internal Revenue as the payee, and was signed "F. Ferrando". The entire check was in Fred's handwriting — except the date, which was typewritten, and read "July 15, 1948", or exactly five days before the due date of the Ferrando estate tax, supra.
Fred testified that he did not insert the clearly false date; that he made out the check at Mr. Cosgrove's request; that he did not remember whether Mr. Cosgrove asked him to leave the date blank, or why he did not insert the date when he drew the check; and that the date on the stub would indicate when the check was actually drawn.
Fred further stated on the stand that he first became aware of the fact that the spurious date had been inserted in the check at the "first trial", meaning "the criminal trial involving Mr. Cosgrove". See Cosgrove and Doyle v. United States, 9 Cir., 1955, 224 F.2d 146.
Finally, Fred testified that he didn't recall whether he left the date blank because he "merely failed to put the date in", or because he "deliberately left it out", or because Mr. Cosgrove told him to leave it out. He had "no recollection about it whatsoever". Fred added, however, that it was not his practice to omit the dates from checks.
In any event, the estate tax return itself was prepared by Prior and McClellan, a firm of certified public accountants whom Mr. Cosgrove employed in the late fall of 1948.
Regarding the tardy filing of the return, Mr. Cosgrove testified that he telephoned to Paul Doyle, the Chief Office Deputy Collector of Internal Revenue at San Francisco, that he would be unable to file the return on time because of the "pressure of business in the office". Mr. Cosgrove's testimony continued:
This conversation, according to Mr. Cosgrove, occurred "Prior to the date that the Federal estate tax return was to be filed."
Fred testified that his first knowledge that the return was filed late and that there was a probability that penalties would be imposed was "The day that the Internal Revenue man called me".
Mrs. Ferrando is an Italian woman who came to this country from Montevideo, Uruguay, in 1900, and arrived in San Francisco at the age "of ten or eleven". Her formal education did not extend beyond the eighth grade of grammar school in San Francisco. She testified that she signed papers and otherwise discharged her duties as executrix of the estate by doing "Anything Mr. Cosgrove told her to do".
Fred's situation, however, was far different from that of his mother. In their brief, the appellants tell us merely that "From an early age he worked in his father's concrete contracting business and carried it on after his father's death"; and that he "grew up in the Mission District in San Francisco and did not himself complete high school."
The appellants' picture of Fred's participation in the affairs of his father's business even during the father's lifetime is not an adequate one.
On cross-examination, Fred testified that he had been in the concrete business with the elder Ferrando for fifteen years; that he was his father's partner, and "handled everything". This, according to Fred's testimony, included "estimating", "bidding on jobs", "ordering * * * materials", "payment of bills", and, generally, "running the office". As they would say on Fred's Mission Street, "he ran the works".
In his testimony, however, Fred was careful to exclude "making the tax returns" from his multifarious duties as his father's managing partner. He swore that he left the making of the tax returns to his "accountant".
The appellants Edward and George Ferrari, brothers, hereinafter Edward and George, are the sons of Luigi Ferrari who died in San Francisco on August 2, 1946. The father's last will and testament was admitted to probate on August 30, 1946, and on the same day the appellants were appointed co-executors of the will.
They employed Mr. Cosgrove as counsel for the estate. George testified that the attorney "told us he would handle the estate and then he would tell us from time to time what to give him and we would bring sic down to him, like deeds and insurance papers and leases on the property and anything we can find of any value to the estate." From time to time Mr. Cosgrove requested various documents connected with the estate.
The Federal estate tax return of the Ferrari estate became due on November 2, 1947, or, as we have seen, fifteen months after the father's death. The time was duly extended in writing according to Treasury Department Regulation 105 until December 2, 1947.
Mr. Cosgrove told the Ferrari brothers that the tax would amount to about $100,000, that if it was not paid on the due date it would bear interest of six per cent.
Prior to the expiration of the thirty days' extension, the appellants signed a Federal estate tax return, which was admittedly incomplete and inaccurate. The return itself indicated that it was signed on October 31, 1947, or two days before the original due date. Mr. Cosgrove left this defective return at the office of the Internal Revenue Bureau, in care of Mr. Doyle.
At about that time Mr. Cosgrove engaged the services of Prior & McClellan, who prepared another return. That second document was reviewed by another attorney, who prepared a third draft.
But the end of the labyrinth of returns was not yet. Perhaps the testimony of Mr. Cosgrove can be the Ariadne's thread that will guide us out of the maze:
This "four-star final" estate tax return was filed on April 22, 1949 — a mere sixteen months and twenty days late, and nearly three years after the death of Luigi Ferrari.
Edward testified that he did not know Doyle, and had no contact with any member of the staff of the Internal Revenue Bureau during the administration of the estate. George said that he first became aware of the fact that federal estate tax was due fifteen months after his father's death, "Some time in 1948", when his next door neighbor told him.
As we shall see in a moment, mere reliance upon an attorney to handle the technical details of the administration of an estate does not excuse the regularly appointed executors for such inattention regarding simple and fundamental matters of which even an untutored layman should be aware.
And neither George nor Edward was untutored.
Like Fred Ferrando, the...
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