Maddox v. Black, Raber-Kief & Associates

• Decision Date: 06 June 1962
• Docket Number: No. 17659.,17659.
• Parties: A. G. MADDOX, Acting Commissioner of Revenue and Taxation, Government of Guam, Appellant, v. BLACK, RABER-KIEF & ASSOCIATES, a Joint Venture, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

303 F.2d 910 (1962)

A. G. MADDOX, Acting Commissioner of Revenue and Taxation, Government of Guam, Appellant, v. BLACK, RABER-KIEF & ASSOCIATES, a Joint Venture, Appellee.

No. 17659.

United States Court of Appeals Ninth Circuit.

June 6, 1962.

Louis A. Otto, Jr., Atty. Gen., Harold W. Burnett, Deputy Atty. Gen., Richard D. Magee, Asst. Atty. Gen., Agana, Guam, and John H. Pigg, Portland, Or., for appellant.

Robertson, Castle & Anthony, and J. Garner Anthony, and Arthur B. Reinwald, Honolulu, Hawaii, and Arriola, Bohn & Gayle, Agana, Guam, for appellee.

Before BARNES, JERTBERG and MERRILL, Circuit Judges.

BARNES, Circuit Judge.

Appellee moves to dismiss the appeal in this cause on the ground no appeal has been taken from the final judgment entered below.

On June 9, 1961, an order was entered by the trial judge which read:

"Judgment for Petitioner. Counsel for Petitioner to prepare Findings of Fact, Conclusions of Law, and Judgment."

On June 19, 1961, appellant filed a motion for new trial and included a motion to vacate "the order for judgment * * on findings, * * * conclusions * * and judgment to be filed," made and entered on June 8, 1961 (sic).¹ Counsel for appellant asserts that reference was intended to the June 9th, 1961, order.

On June 22, 1961, Findings of Fact, Conclusions of Law and Judgment were signed and filed. No appeal was ever taken from this judgment.

On August 2, 1961, the motion for a new trial was denied.

On August 25, 1961, a notice of appeal was filed by appellant which was "from the judgment entered in this action in the 8th (sic) day of June 1961, respondent's motion for a new trial having been denied on the 2nd day of August 1961." This is the only notice of appeal given in this case.

If we assume the appeal from the order of June 8th, 1961, was actually an appeal from the order of June 9th, 1961, (to which the only motion for a new trial had been directed) it appears obvious that the order of June 9th, 1961 was not a final judgment.

The jurisdiction of this court is limited to appeals from final decisions of the District Court of Guam, as well as other districts (28 U.S.C. § 1291).

The order of June 9th, 1961 shows on its face it was not final. It required further acts before any judgment could come into existence. In order to be a final decision for purposes of appeal, the judgment must show on its face that it is a complete act of adjudication, clearly evidencing the intention of the judge that it is to be the final act of the case (with certain exceptions not here pertinent). United States v. F. & M. Schaefer Brewing Co., 1958, 356 U.S. 227, 232-235, 78 S.Ct. 674, 2 L.Ed.2d 721; Libby, McNeil & Libby v. Alaska Industrial Board, 9 Cir. 1954, 215 F.2d 781, (and see many cases cited therein at 782).

The judgment in the cause below having been entered on June 22, 1961, and no appeal having been taken therefrom, it is final, and not before us.

Under such circumstances, should this court (a) consider the appeal from a non-final order; (b) permit and consider an appeal from a final order from which no appeal has been taken; or (c) combine both the perfected appeal from a nonappealable order and the non-perfected appeal from an appealable judgment, and consider the appeal on its merits?

Were this question one of first impression, we might well dismiss the appeal as beyond our jurisdiction. This is what this court has done before. Hoiness v. United States, 9 Cir. 1947, 165 F.2d 504. There the libellant appealed within the prescribed time, and what he sought to have reviewed was plain, but he referred only to the second nonappealable order. The Supreme Court reversed this court's decision, holding the defect resulting from a failure to refer to the first order was of such a technical nature that it should be disregarded, in view of the policy expressed by the Congress in enacting 28 U.S.C. (1946 ed.) § 777, 28 U.S.C., Rule 73(a, b). Hoiness v. United States, 1948, 335 U.S. 297 at 300-301, 69 S.Ct. 70, 93 L.Ed. 16. And see United States v. Ellicott, 1911, 223 U.S. 524, 538-539, 32 S.Ct. 334, 56 L.Ed. 535; State Farm Mutual, etc. v. Palmer, 1956, 350 U.S. 944, 76 S.Ct. 321, 100 L.Ed. 823 (per curiam) reversing 9 Cir., 225 F.2d 876;² Railway Express Agency, Inc. v. Epperson, 1957, 240 F.2d 189, where the eighth circuit reversed its previous holdings (p. 192), relying on State Farm Mutual v. Palmer, supra; Nolan v. Bailey, 7 Cir. 1958, 254 F.2d 638; Wetherbee v. Elgin RR Co., 7 Cir. 1953, 204 F.2d 755, and cases cited p. 756; Sobel v. Diatz, 1951, 88 U.S.App.D.C. 329, 189 F.2d 26, and cases cited p. 27.

The motion to dismiss is denied. We now reach the merits.

This then is an appeal from an order for judgment of the district court entered June 9, 1961, and a final judgment pursuant to said order entered June 22, 1961. Jurisdiction in this court rests in Title 28 United States Code §§ 1291 and 1294.

Appellee, in the court below, challenged a tax assessment of $85,058.88 under the Business Privilege Tax upon the gross income received by appellee from a Military Housing Contract with the United States. Appellee formed eleven Delaware corporations to act as mortgagor builders. The Housing Contract (Exhibit 4) dated September 9, 1958, was executed by appellee, the United States through the Air Force, and the eleven corporations. Each of the eleven housing corporations received at least one area of the project. The stock in each such corporation was deposited in escrow for subsequent delivery to the Air Force upon completion of construction.

Each corporation mortgaged its lease to the Seattle First National Bank which advanced funds for construction. Such advances by the bank, in the total sum of $1,296,876.44, were for certain necessary items such as architects' fees, inspection fees, bank fees and interest during construction, bond and risk insurance, FHA fees and insurance, lease rental, recording fees and organization expense. Such funds were never paid directly to appellee and appellee was never entitled to receive them. Under Exhibit 4, the Housing Contract, the appellee had a right to receive only ninety per cent of the contract price for the construction in each area, until the area building was accepted by the Air Force, and the mortgage for that area then assigned to a permanent financier. Such assignments to permanent lendors were made at different times and faced a differing money market, i. e., they were sold at discounts from five to nine per cent of the mortgaged amounts dependent upon the going rate paid for the use of money. For the eleven areas these discounts totaled $1,674,302.88. Appellee never received this money representing the discount, nor did it have the right to receive it. In addition to this large sum, $51,574.74 was retained in escrow by the Air Force to cover a disputed item for top soil on the on-site contract and $1,430 on a disputed item for top soil on the off-site contract. The total amount which appellee had the right to receive during the period in question was $18,209,170.62. (See Transcript, pp. 140-141, Exhibit 3.)

Section 19540.05 of the Government Code of Guam provided for a tax rate of two percent measured against the gross income of any contractor. Prior to the execution of this Housing Contract there was added to the Government Code of Guam Section 19545.1 which read as follows:

"Military Housing. (a) In computing `Gross Income\' subject to the tax under this subchaper deductions from total receipts shall be allowed a contractor who is an eligible bidder having a contract with a mortgagor and the United States of America pursuant to Title VIII, `Military Housing Insurance\', of the National Housing Act, as amended (12 U.S.C. § 1748 et seq.) to the extent receipts of such contract equal in amount expenditures by the contractor for direct labor and materials." (Emphasis added.)

What constitutes "direct labor and materials" then became the problem. Appellee deducted what it determined was direct labor and materials. The Tax Commissioner asserted that certain items were not direct labor and materials, such as the project manager's salary, field office expense, purchasing and warehousing expense, engineering expense, testing expense, hauling costs, construction forms, equipment and tools and a portion of the subcontract expense. Appellant conceded at oral argument that no duplication of deductions was claimed by appellee, and that "appellee's books of accounts were regularly kept in accordance with the accrual method of accounting." The Commissioner of Taxation admitted that all expenses claimed were for work performed on or materials supplied directly and solely to the housing project (Tr. 242-253). He insisted, however, that "direct labor" meant only that work performed physically on the construction site, and that "direct materials" meant only that material that became a permanent part of the completed structure. Thus, as an example, the expense of the lumber used to create the forms which held the concrete in place until it set — not being permanent — was not a part of the direct materials' cost.

On March 31, 1960, the Tax Commissioner levied an assessment of $88,985.27 as additional Business Privilege taxes against appellee for the period December 1958 to June 1959. Appellee appealed this assessment to the Guam Tax Appeal Board which sustained appellee as...