Jefferson Loan Co. v. Commissioner of Internal Rev.

• Decision Date: 18 November 1957
• Docket Number: No. 15664.,15664.
• Citation: 249 F.2d 364
• Parties: JEFFERSON LOAN COMPANY, Inc., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

249 F.2d 364 (1957)

JEFFERSON LOAN COMPANY, Inc., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 15664.

United States Court of Appeals Eighth Circuit.

November 18, 1957.

Forrest M. Hemker, St. Louis, Mo. (Edward L. Wiese, St. Louis, Mo., was with him on the brief), for petitioner.

Louise Foster, Atty., Dept. of Justice, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson and A. F. Prescott, Attys., Dept. of Justice, Washington, D. C., were with her on the brief), for respondent.

Before GARDNER, Chief Judge, and VOGEL and VAN OOSTERHOUT, Circuit Judges.

GARDNER, Chief Judge.

This matter is before us on petition of the taxpayer to review a decision of the Tax Court of the United States. On October 5, 1951, the Tax Court entered its decision, which so far as here pertinent reads as follows:

"Under written stipulation signed by counsel for the parties in the above-entitled proceeding and filed with the court on September 27, 1951, at St. Louis, Missouri, it is

"Ordered and Decided: That there are deficiencies in tax and penalties due from the petitioner as follows:

                                                  Deficiency         Penalty
                                                     Tax          50%        25%
                    Year ended Jan. 31, 1947
                  Income ....................... $   513.35      None        None
                  Personal Holding Co. Surtax ..  16,469.93   $ 8,234.97   $ 4,117.49
                     Year Ended Jan. 31, 1948
                  Income ....................... $  None         None        None
                  Personal Holding Co. Surtax ..  27,342.66   $13,671.33   $ 6,835.66"
                

On October 3, 1955, taxpayer filed its motion to withdraw stipulation and revise this decision dated October 5, 1951. In support of this motion it was alleged that it had paid the amounts of the deficiencies as determined by the Tax Court's decision; that thereafter taxpayer ascertained that in truth and in fact for the said taxable years 1947 and 1948, and for some three years thereafter, its business and affairs were under the active supervision and control of its president, Vernon F. Neubauer; that the tax returns for said years were signed by him, and a stipulation prepared and signed by counsel employed by him stipulated as to the amount alleged to be due; that during the taxable years 1947 to and including 1951, the stockholders relied upon said Vernon F. Neubauer to manage and direct its operations and affairs, and relied upon the audit reports prepared and signed by Marion F. Langenberg, an independent certified public accountant who was employed by said Vernon F. Neubauer; that the tax returns and the report of the auditor employed by Vernon F. Neubauer were false and fraudulently made for the purpose of showing that under the direction and management of said Vernon F. Neubauer, its president, the company was making profits, whereas in truth and in fact, as later shown by correct audits, taxpayer had no taxable income for the said years. The showing made by taxpayer on its said motion went into quite elaborate details, the effect of which was that the said Vernon F. Neubauer, president, had, presumably for the purpose of showing that the company under his management was making profit, fraudulently reported taxable income.

On October 3, 1955, the Tax Court granted taxpayer permission to file its motion and to withdraw its stipulation. Thereafter, and on November 21, 1955, the motion was heard and submitted, the respondent agreeing, for the purpose of the hearing on the motion, that the facts alleged were true, but asserted in defense that the Tax Court had no jurisdiction to set aside the decision of October 5, 1951, for the reason that same had become final under Section 1140, 26 U.S. C.A. On May 25, 1956, the Tax Court entered its decision on petitioner's motion, denying the motion and holding that the taxpayer was not entitled to relief because of its laches. The Tax Court declined to rule on the question of its jurisdiction.

In seeking reversal the taxpayer contends in effect, among other things, that (1) the Tax Court had power and jurisdiction to grant relief on its motion to review its decision of October 5, 1951; (2) the extrinsic, after-discovered fraud present in this case which prevented petitioner from in fact having a real hearing presents a case within the exception to the general rule that final judgments are ordinarily immune from attack; (3) exclusive jurisdiction to review decisions of the Tax Court is vested in the United States Court of Appeals and this court has power to vacate the fraud-infested decision of the Tax Court in this case and do justice between the parties.

The decision of the Tax Court of October 5, 1951, was entered on stipulation, the taxpayer agreeing to the amount of the deficiencies. The decision was not appealed from nor otherwise assailed until four years later when, on October 3, 1955, taxpayer interposed its motion to revise the decision. The Tax Court was of the view that the taxpayer had not acted promptly and that its delay amounted to laches. It, however, had before it the claim of the respondent that the decision entered October 5, 1951, had become final and could not be assailed by the proffered motion. All intendments are in favor of the validity of the decision attacked and if it is correct it should be sustained regardless of the grounds on which the Tax Court based its decision.

It is strenuously urged by the respondent that when a decision of the Tax Court becomes final the Tax Court lacks jurisdiction to entertain a motion to set the decision aside. Section 1142 of the Internal Revenue Code, 1939, 26 U.S.C.A., § 1142, fixes a time limitation after which a petition for review by a Court of Appeals may not be filed, and Section 1140 of the Internal Revenue Code, 1939, expressly indicates the time when a decision of the Tax Court shall become final, and as indicated by the Supreme Court in Commissioner v. Gooch Milling & Elevator Company, 320 U.S. 418, 64 S.Ct. 184, 88 L.Ed. 139, the...