Garden City Feeder Co. v. Commissioner of Internal Rev.

• Court: U.S. Court of Appeals — Eighth Circuit
• Writing for the Court: GARDNER, SANBORN, and VAN VALKENBURGH, Circuit
• Citation: Garden City Feeder Co. v. Commissioner of Internal Rev., 75 F.2d 804 (8th Cir. 1935)
• Decision Date: 14 February 1935
• Docket Number: No. 9973.,9973.
• Parties: GARDEN CITY FEEDER CO. v. COMMISSIONER OF INTERNAL REVENUE.

75 F.2d 804 (1935)

GARDEN CITY FEEDER CO. v. COMMISSIONER OF INTERNAL REVENUE.

No. 9973.

Circuit Court of Appeals, Eighth Circuit.

February 14, 1935.

A. F. Schaetzle and H. M. Havner, both of Des Moines, Iowa, for petitioner.

John MacC. Hudson, Sp. Asst. to Atty. Gen. (Frank J. Wideman, Asst. Atty. Gen., and Sewall Key, Sp. Asst. to Atty. Gen., on the brief), for respondent.

Before GARDNER, SANBORN, and VAN VALKENBURGH, Circuit Judges.

GARDNER, Circuit Judge.

This case is before us on petition to review a decision of the Board of Tax Appeals. The taxpayer, petitioner here, appealed to the Board of Tax Appeals from a determination by the Commissioner of Internal Revenue of its income for the years 1918 to 1923, inclusive; the Commissioner having found deficiencies in taxes amounting in the aggregate, with penalties, to $61,381.95. The basis of the Commissioner's alleged errors is not here important.

The cause, being at issue, was set down for hearing before Board Member Hon. Sumner L. Trussell, sitting as Division No. 6 of the Board of Tax Appeals, at St. Paul, Minn., June 11, 1929. After two days taking testimony, the hearing was adjourned on motion of respondent, to allow respondent to investigate additional unreported income disclosed at the hearing, and to answer new matter raised by an amendment to the petition. Depositions were then taken by respondent at various places, and further hearing was set for September 28, 1931, at St. Paul, Minn., before the same Board member. This hearing continued for some eighteen days, a great deal of testimony being taken, all of which was reported by the official reporter and a transcript thereof later filed with the Board of Tax Appeals.

At the conclusion of the hearing on October 16, 1931, both parties rested. The hearing was closed and the matter taken under advisement, subject to the right of the parties to submit briefs within the time specified, and the right of the Commissioner to submit a computation of the amounts of additional deficiencies claimed; the Board member stating in that connection that: "The hearing is not completed until the briefs are filed and the amount of the addition which is now suggested may be included or may be filed with the Board at any time up to the time the briefs are filed."

The Board member before whom the hearing was held died October 22, 1931, prior to the filing of the completed transcript of the hearing, and prior to the filing of briefs. Thereafter, respondent, on November 30, 1931, through his counsel, filed with the Board a motion for rehearing and for the rejection and suppression of all evidence taken, excepting such as was taken in the form of depositions. The grounds of this motion we shall later refer to. The motion was resisted, and over the objection of petitioner was granted; it being ordered that the case be restored to the calendar for rehearing in due course, all the evidence theretofore taken, except depositions, being suppressed.

When the matter was again brought on for hearing, petitioner asked that the cause be ordered submitted on the record made at the previous hearing. This request was denied and petitioner declined to submit any new evidence, insisting that it was entitled to the benefit of the evidence already taken, and objecting to the introduction of any evidence other than that theretofore taken. These objections and motions interposed on behalf of the petitioner were all overruled and denied. The respondent offered and there was received evidence in support of his affirmative allegation of additional deficiencies in tax and in support of certain allegations of fraud. Thereafter, on April 10, 1932, the Board filed its findings, based solely on the evidence produced subsequent to the sustaining of respondent's motion to grant a rehearing and suppress the evidence theretofore taken and on the depositions theretofore taken, but finding that the allegations of fraud had been sustained, and assessing deficiencies and penalties aggregating $106,770.55.

It is urged: (1) That the Board of Tax Appeals erred in ordering a complete trial de novo after full and complete hearing on all issues had been had and the case closed for taking of any further testimony on respondent's own motion; (2) that the Board erred in suppressing and rejecting the entire record made, and in failing to consider the testimony offered and introduced at the so-called first trial, and in overruling petitioner's motion to consider its testimony so taken.

Apparently, the Board of Tax Appeals considered that it was granting a new trial, as in its opinion it says, "This case has been twice tried." In this court, the question of the authority of the Board so to do has been elaborately briefed, but we are of the view that that question is not before us. Before a new trial or a rehearing can be granted, there must have been a trial. At common law a new trial was a retrial in the same court on an issue or issues of fact after a verdict by a jury, and a new trial recognizes a complete trial which for sufficient reason has been set aside, so that the issues may be relitigated. Hine v. Myrick, 60 Minn. 518, 62 N. W. 1125; Dodge v. Bell, 37 Minn. 382, 34 N. W. 739; Gott v. Judge of Superior Court, 42 Mich. 625, 4 N. W. 529; Star Bottling Co. v. Louisiana Purchase Exposition Co., 240 Mo. 634, 144 S. W. 776; Gunn v. Union R. Co., 23 R. I. 289, 49 A. 999; Zaleski v. Clark, 45 Conn. 397; Mobile Light, etc., Co. v. Hansen, 135 Ala. 284, 33 So. 664; First Christian Church of Medford v. Robb, 69 Or. 283, 138 P. 856; Texas, etc., R. Co. v. Smith, 91 Ark. 362, 121 S. W. 282; Stern v. Wabash R. Co., 52 Misc. 12, 101 N. Y. S. 181.

It is proper to grant a new trial or a rehearing only after a trial and decision by a court or a jury or by a referee has been had. Here there had been no decision and no order, and the only thing that had occurred was the taking of testimony. The Board member announced before closing the hearing that: "I will take the position in reference to that that the hearing is not completed until the briefs are filed and the amount of the addition which is now suggested may be included or may be filed with the Board at any time up to the time the briefs are filed." But regardless of this statement, it is manifest that there was not a completed trial of the issues in this matter until a decision had been filed.

A definite characterization of the functions of the Board, if possible, is not essential to the determination of this case. It is an executive or administrative Board, exercising powers judicial in character, and is a fact-finding body with the duty of considering such competent and substantial evidence as may properly be brought before it. Sioux City Stock Yards Co. v. Commissioner of Internal Revenue (C. C. A. 8) 59 F.(2d) 944; Planters Operating Co. v. Commissioner of Internal Revenue (C. C. A. 8) 55 F.(2d) 583; Commissioner of Internal Revenue v. Liberty Bank & Trust Co. (C. C. A. 6) 59 F.(2d) 320.

Some eighteen days were occupied with the taking of testimony in this matter before a member of the Board at a cost to the petitioner, exclusive of attorney fees, of $4,500. This hearing was held pursuant to order of the Board and in due course was participated in by all the parties without objection of any kind or character, and at the close of the hearing, on the suggestion of counsel for the Commissioner, the case was closed so far as the taking of testimony was concerned. With reference to the testimony taken at that hearing, it is stipulated, among other things, that: "At said hearings both parties appeared and offered competent and material evidence, both oral and by deposition, and documentary evidence bearing upon the question of the March 1, 1913, value of patents owned by the petitioner, and used in its business." Also, that both parties offered competent and material evidence, both oral and documentary, "bearing upon the question of the correct inventories of the petitioner to be used in computing its taxable net income." Also, that, "At either the first or the adjourned hearing both parties offered competent and material evidence, both oral and documentary, bearing upon all other issues in the case."

The said hearings held at St. Paul were reported by the shorthand reporter, an employee of the Board, and a transcript made and filed in accordance with the rules of the Board on the 18th of November, 1931. It appears that at the conclusion of these hearings at St. Paul both parties rested.

We think it important to bear in mind that the Board apparently was of the view that in the state of the record, it was proper to grant a new trial or a rehearing, and that having so done it was proper to require that all the testimony be retaken. As we have already observed, the granting of respondent's...