Kilgore v. United States

• Decision Date: 25 September 1972
• Docket Number: No. 71-2718.,71-2718.
• Citation: 467 F.2d 22
• Parties: Gordon W. KILGORE, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

467 F.2d 22 (1972)

Gordon W. KILGORE, Plaintiff-Appellee, v.UNITED STATES of America, Defendant-Appellant.

No. 71-2718.

United States Court of Appeals, Fifth Circuit.

September 25, 1972.

William J. Schloth, U. S. Atty., Macon, Ga., Jay R. Weil, Scott P. Crampton, Meyer Rothwacks, Daniel Rosenbaum, Attys., Dept. of Justice, Tax Div., Washington, D. C., Fred B. Ugast, Acting Asst. Atty. Gen., Bennet N. Hollander, Wesley J. Filer, Attys., Tax Div., Dept. of Justice, Washington, D. C., for defendant-appellant.

R. Lamar Moore, Moultrie, Ga., Hillard P. Burt, Albany, Ga., Moore & Chambliss, Moultrie, Ga., Burt, Burt & Rentz, Albany, Ga., for plaintiff-appellee.

Before THORNBERRY, COLEMAN and INGRAHAM, Circuit Judges.

INGRAHAM, Circuit Judge:

What is the measure of a man?In this life it is sometimes said to be that often illusory and chimeric creature called reputation.The instant case presents the use of reputation testimony in a tax refund suit, prosecuted in hope, and defended on grounds of taxpayer fraud.The narrow legal issue on appeal is whether the taxpayer's character witnesses could permissibly be cross examined concerning the community's awareness of taxpayer's plea of nolo contendere to a charge of criminal tax fraud.

The salient facts are undisputed and largely stipulated.In 1964 the Internal Revenue Service began an in depth audit of taxpayer Kilgore's affairs.A decision to seek criminal sanctions was made when a net worth survey of Kilgore revealed the following discrepancies in reported and actual taxable income:

Reported Taxable Income
                Taxable By Net Worth
                Year Income Computation
                1955      $    -0-           $12,151.91
                1956        1,122.31          12,916.71
                1957          823.91           7,854.36
                1958        1,045.50          10,867.09
                1959        1,508.81          24,385.61
                1960        1,333.83          29,661.39
                1962        2,365.17          31,190.02
                

The alleged unreported taxable income led not only to the filing of the indictment, but also to the assessment of taxes, fraud penalties and interest.The assessments broke down as follows:

Year Income Tax Fraud Penalty  Interest     Total  
                1955        $  3,524.24        $ 1,762.12        $ 2,679.02     $ 7,965.38
                1956           3,590.06          1,795.03          2,513.65       7,898.74
                1957           1,751.53            875.77          1,121.28       3,748.58
                1958           2,740.14          1,370.07          1,589.75       5,699.96
                1959           9,497.75          4,748.88          4,940.44      19,187.07
                1960          12,791.27          6,395.64          5,886.16      25,073.07
                1962          13,345.10          6,672.55          4,539.53      24,557.18
                             __________        __________        __________     __________
                             $49,240.09        $23,620.06        $23,269.90     $94,130.05
                

Kilgore paid the assessment and entered a plea of nolo contendere to the criminal tax fraud indictment.He filed a claim for refund of the assessment, and after a denial of that claim filed this suit to recover the entire assessment.His suit claimed (a) that he had not fraudulently understated his income for the years in question, and (b) that the three year statute of limitation provided by 26 U.S.C. § 6501 had expired, thereby foreclosing the Government's assessments.The Government answered asserting fraud under § 6501(c)(1).This proof was necessary even though Kilgore had stipulated that the amounts of income tax assessment for these years were correct.This result obtained because the six year limitation period of § 6501(e) had expired for taxable years 1955 through 1960.Cf.Taylor v. United States, 417 F.2d 991(5th Cir., 1969);Toledano v. C.I.R., 362 F.2d 243(5th Cir., 1966);Kreps v. C.I.R., 351 F.2d 1(2nd Cir., 1965).See also, Cardinal Life Ins. Co. v. United States, 425 F.2d 1328(5th Cir., 1970).

While Kilgore was partyplaintiff in the refund case and had the duty to go forward with the evidence, the Government, to avoid limitations, had the burden of producing some evidence of fraud.That evidence, however, had to be clear and convincing, the risk of nonpersuasion thereby clearly falling on the Government.Biggs v. C.I.R., 440 F.2d 1(6th Cir., 1970);Webb v. C.I.R., 394 F.2d 366(5th Cir., 1968);Henry v. C.I.R., 362 F.2d 640(5th Cir.1966);Merritt v. C.I.R., 301 F.2d 484(5th Cir., 1962).After stipulating the amounts of understatement and taxes owing, Kilgore, as the partyplaintiff, used his tactical advantage to present five character witnesses in an attempt to rebut the inferences of misconduct which arose from the repeated understatement of tax liability shown on the stipulation.The witnesses all had known Kilgore for several years.A representative examination proceeded along the following lines:

MR. HUDSON MALONE called as witness in behalf of Plaintiff, being duly sworn, testified on

DIRECT EXAMINATION

BY MR. BURT:

Q Will you state your name, please?

A Hudson Malone.

Q Are you better known as Judge Malone?

A Well, I was Judge of the Juvenile Court for 24 years.

Q And when did you discontinue being Judge?

A Last August.

Q What is your occupation at this time?

A I\'m Executive Director of the Housing Authority of Albany, Georgia.

Q And how long have you been so engaged?

A Nearly 31 years.

Q Do you know Gordon Kilgore?

A Yes sir.

Q And how long have you known him?

A 25 or 30 years.

Q In what capacity have you known him, what dealings have you had with him?

Q Well, I knew him first as a member of our Sunday School class and then in \'49 and \'50 he was President of the largest class in South Georgia, over 200 members.He was elected President.

Q Does your organization do business with him?

A Yes, we do.

Q What kind of business is that?

A We have bought large quantities of floor tile from him.

Q Do you know — do you have knowledge of his general character in this area?

A It\'s excellent.

Q From that character, would you believe him under oath?

A Yes sir.

The Government, after the jury had been removed, proffered a proposed line of cross-examination:

BY MR. WEIL:

Q Judge, how long have you known Mr. Kilgore?

A Approximately 25 years.

Q On what do you base your opinion on his reputation?

A Well, he\'s been a regular attendant at Sunday School; he\'s called on in the mornings in the last I\'ve noticed several times he\'s asked to give the morning prayer; he\'s a regular attendant at church as far as I know; and I have done business with him, which has been very satisfactory.He\'s impressed me as not only being a good business man but very ethical.He refused to sell me for many years on the grounds that I was not a contractor nor an agent and he was protecting his people.When we could buy in truckload lots, he bid on our tile and he was low bidder.His billings were correct; his discount was shown as he bid and we have paid all but a few thousand dollars.We\'ve bought, I reckon, $15,000 worth of tile from him in the last six months.

Q Sir, would your opinion be changed if you knew that he was fined $5,000 for criminal income tax evasion?

A Well, I believe I\'m on the stand to tell about his reputation.

Q My question is, would your opinion of him change or be affected by the fact that Mr. Kilgore was fined $5,000 for criminal income tax evasion?

A I would still say he\'s a fine christian gentleman and of fine character and of good reputation in the community.

Kilgore's attorney objected to this line of cross-examination on the grounds that a party's plea of nolo contendere is not an admission of guilt in any other case, and is not admissible for cross-examination of the party's character witnesses.The district court ruled:

THE COURT: Well, it\'s the Court\'s view that to allow counsel for the Defendant to ask the witnesses questions such as just been asked, to allow that question to be asked in the presence of the jury would simply get before the jury the fact that Mr. Kilgore at some time past did enter a plea of nollo contendere in a criminal tax fraud case.As I see it, that\'s the only purpose of the question, to get that before the jury.And since it is not the design and intent of the law that a plea of nollo contendere shall be used against a man in any other proceeding, the Court will sustain the objection to the question as propounded, with regard to whether the witness, whether his opinion with regard to the Defendant(Plaintiff) would be modified if he knew that the Plaintiff in this case has heretofore entered a plea of nollo contendere in a criminal tax fraud case.So, I will sustainthe Plaintiff\'s objection to the question.

Now, so we won\'t have to go through this each time a character witness is put on the stand, just let the record indicate that with regard to each witness who is put on the stand that you would have asked this question and I would have made this ruling, so we won\'t have to exclude the jury any further.

Now, bring the jury back, Mr. Marshal.

The jury eventually returned a verdict for Kilgore and the Government asserts the denial of the proffered cross-examination as reversible error mandating a new trial.

In analyzing the claim of error there is an initial question to be considered— whether plaintiff's character evidence was admissible at all in this civil action.The proposed federal rules of evidence have not yet been adopted.We are, therefore, left with the tri-part test of admissibility under Federal Rules of Civil Procedure, 43(a).

(a)Form and Admissibility.In all trials the testimony of witnesses shall be taken orally in open court, unless otherwise provided by these rules.All evidence shall be admitted which is admissible under the statutes of the United States, or under the rules of evidence heretofore applied in the courts of the United States on the hearing of suits in equity, or under the rules of evidence applied in the courts of general jurisdiction of the state in which the United States court is held.In any case, the statute or rule

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