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