Fraser v. Nauts

• Decision Date: 12 September 1925
• Docket Number: No. 3013.,3013.
• Citation: 8 F.2d 106
• Parties: FRASER v. NAUTS, Collector of Internal Revenue.
• Court: U.S. District Court — Northern District of Ohio

8 F.2d 106 (1925)

FRASER v. NAUTS, Collector of Internal Revenue.

No. 3013.

District Court, N. D. Ohio, W. D.

September 12, 1925.

Fraser, Hiett & Wall and Marshall, Melhorn, Marlar & Martin, all of Toledo, Ohio, for plaintiff.

D. L. Sears, Asst. U. S. Atty., of Toledo, Ohio, and Mr. Ward, Dept. of Internal Revenue, for defendant.

KILLITS, District Judge.

As the government, in this case, to succeed in its defense, must impeach, as in mala fides, a written contract between the plaintiff's testator and the Willys-Overland Company, it is illuminating to advert, at the outset of this memorandum, to the established principle respecting the quantum of proof requisite to such an undertaking; i. e., that the necessary proof, far from a mere preponderance, must be clear and convincing.

As the case is pleaded and presented, if the contract is sustainable with the application of this principle, relief such as is asked by the plaintiff must be afforded.

With intent of the parties to the contract, then, under scrutiny, it becomes important, as elements of interpretation of such intent, to consider the respective situations of these contracting parties at the time of execution.

The date is October 6, 1919, a time when, as the proof shows and as is well known, the transportation system of the country was under great demoralization resulting from war conditions, to the serious embarrassment of manufacturers using large quantities of raw materials, not produced in the vicinity of their operations. Lumber, as a bulky commodity, was definitely a raw material difficult of ready and quantitative procurement. The Willys-Overland Company was a very large consumer of hardwood lumber, under circumstances which made it willing, at times, to pay even exorbitant prices for quick delivery; and it was, at the date in question, in need of such commodity to a very large amount. In addition, the current business of this manufacturer made highly desirable an immediate enlargement of its storage and shipping facilities.

The decedent, plaintiff's testator, Hubbard, had been for a long time a dealer in hardwood lumber. He had in his yards a very large amount of this merchandise, in an assortment of quality and dimensions which was adaptable to the Willys-Overland Company's use. Besides, he enjoyed a long lease of a yard whose facilities met substantially the company's storage and shipping needs.

Hubbard had been negotiating with the Willys-Overland Company for a sale of his business, and had fixed his aggregate price at $525,000, which the company was preparing its mind to accept. At this juncture he was stricken with what was feared to be a mortal disease. In the hospital, with surgeons in the hall, impatient to commence a necessarily immediate and hazardous operation, Hubbard, himself believing that death was imminent, had but time to place the conclusion of negotiations in the hands of his counsel as his attorneys in fact, clothing them with plenary powers respecting the present matter.

Naturally, an effort was made by Hubbard's representatives to minimize, as far as possible, the burden of federal taxation. It is the opinion of this court that, while such an idea moving to what was done by way of apportioning the elements of sale to the Willys-Overland Company should be considered as one of the factors of possible mala fides, yet it is relatively unimportant unless otherwise pretty definite impeaching proof is found. A device to avoid the burden of revenue acts may be resorted to, if effectuated by legal means (United States v. Isham, 17 Wall. 496, 21 L. Ed. 728); wherefore, after all, the inquiry is not as to the object, but of the legal sufficiency of such means. In this inquiry enters, in behalf of plaintiff's position, the...