Newman v. Schiff

• Decision Date: 27 November 1985
• Docket Number: Nos. 84-1856,84-1976,s. 84-1856
• Citation: 778 F.2d 460
• Parties: John A. NEWMAN, Appellant, v. Irwin SCHIFF, Appellee. John A. NEWMAN, Appellee, v. Irwin SCHIFF, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 460

778 F.2d 460

54 USLW 2306

John A. NEWMAN, Appellant, v. Irwin SCHIFF, Appellee.

John A. NEWMAN, Appellee, v. Irwin SCHIFF, Appellant.

Nos. 84-1856, 84-1976.

United States Court of Appeals Eighth Circuit.

Submitted March 11, 1985.

Decided Nov. 27, 1985.

John A. Newman, St. Louis, Mo., for appellant.

Benson A. Snaider, New Haven, Conn., for appellee.

Before HEANEY, Circuit Judge, BRIGHT, Senior Circuit Judge, and ARNOLD, Circuit Judge.

BRIGHT, Senior Circuit Judge.

John A. Newman, an attorney practicing law in St. Louis, Missouri, brought this action against Irwin Schiff of Hamden, Connecticut, alleging breach of contract. Newman claimed that Schiff had made a public offer of reward to anyone who could cite any section of the Internal Revenue Code that says an individual is required to file an income tax return. Newman asserted that he accepted Schiff's offer, and that Schiff breached the contract by failing to pay him the reward. The district court ¹ ruled in favor of Schiff by finding that Newman's acceptance was not timely, and Newman appeals. We affirm the judgment of the district court.

I. BACKGROUND.

Irwin Schiff is a self-styled "tax rebel", who has made a career and substantial profits out of his tax protest activities. ² Schiff's basic contention is that the federal income tax is a voluntary tax which no one is required to pay. ³ Schiff has prepared various books and materials espousing his point of view, including The Tax Rebel's Guide to the Constitution and Declaration of Independence, The Freedom Kit ("For those wanting the original work that ignited the tax rebellion * * * "), The Biggest Con: How the Government is Fleecing You, and How Anyone Can Stop Paying Income Taxes ("The amazing new best seller that exposes the fraud and deception by which the IRS extracts income taxes from uninformed Americans ... and shows you how you can PUT A STOP TO IT-NOW!"). He has promoted his books by appearing on over five hundred radio and television programs, including Larry King's national radio talk show, Tom Snyder's "Tomorrow" show, and "The David Susskind Show," and by giving lectures in over sixty cities. Schiff claims that his activities have caused over 100,000 people to no longer file or pay income taxes.

On February 7, 1983, Irwin Schiff appeared live on CBS News Nightwatch (Nightwatch), a nighttime television program with a viewer participation format. Schiff was interviewed by host Karen Stone from approximately 3:00 a.m. to 4:00 a.m. Eastern Time. The words "Nightwatch Phone-In" and the telephone number (212) 955-9555 were flashed on the screen periodically during Schiff's appearance. In addition, Ms. Stone repeated the telephone number and encouraged viewers to call and speak directly with Schiff on the air.

During the course of the Nightwatch program, Schiff repeated his long-standing position that, "there is nothing in the Internal Revenue Code which I have here, which says anybody is legally required to pay the tax." Following a discussion of his rationale for that conclusion, Schiff stated: "If anybody calls this show--I have the Code--and cites any section of this Code that says an individual is required to file a tax return, I will pay them $100,000."

Newman did not see Schiff's live appearance on Nightwatch. He did, however, see a two-minute taped segment of the original Nightwatch interview that was rebroadcast several hours later on the CBS Morning News. The CBS Morning News rebroadcast included Schiff's reward proposal. ⁴

Newman felt certain that Schiff's statements regarding the Internal Revenue Code were incorrect. Upon arriving at work that day, he researched the issue and located several sections of the Code that to his satisfaction demonstrated the mandatory nature of the federal income tax system. The next day Newman telephoned CBS Morning News and cited the following provisions of the Internal Revenue Code as authority for his position that individuals are required to pay federal income tax: 26 U.S.C. Secs. 1, 6012, 6151, 6153, 7201, 7202 and 7203. Newman placed his call to (212) 975-4321, the number given him by the long distance operator for CBS in New York. He then reduced this conversation to writing and sent it to the CBS Morning News. ⁵ Newman's letter stated that it represented "performance of the consideration requested by Mr. Schiff in exchange for his promise to pay $100,000."

CBS responded to Newman's letter on March 3, 1983, informing him that a copy of it had been forwarded to Schiff at Freedom Press. On April 13, 1983, after not hearing from Schiff for over a month, Newman wrote to him at Freedom Press. Newman repeated the portion of his previous letter which discussed Internal Revenue Code provisions that stand for the mandatory nature of the federal tax system. He then reiterated his claim for the $100,000 reward.

On April 20, 1983, Schiff wrote to Newman and stated that: "[y]our letter to Mr. O'Regan at CBS Morning News was forwarded to me. I did make an offer on the February 7, 1983 news (which was actually part of an interview conducted earlier in the week)." Schiff said, however, that Newman had not properly accepted his offer for both substantive and procedural reasons. ⁶

Newman then sued Schiff in federal district court for breach of contract. The district court decided that: (1) Schiff intended for his offer to remain open only until the conclusion of the live Nightwatch broadcast; (2) the rebroadcast on CBS Morning News did not renew or extend Schiff's offer; and therefore (3) Newman's acceptance of the offer was untimely. The district court went on to state that Schiff's argument that there is no requirement for individuals to file a tax return is "blatant nonsense."

Newman moved for additional findings of fact and an amendment of judgment. The district court did not alter its judgment, but did make additional conclusions. The district court decided that Schiff ratified the CBS Morning News rebroadcast of his original Nightwatch offer by failing to object after learning of the rebroadcast, by accepting the benefits of the added publicity, and expressly by his letter dated April 20, 1983. The district court said that the ratification constituted a renewal of Schiff's original offer. Nevertheless, it decided that Newman's failure to respond on the morning of the rebroadcast meant that his acceptance was still untimely. This appeal followed.

II. DISCUSSION.

Newman contends that the district court applied the wrong standard in judging the timeliness of his response to the rebroadcast. We do not reach the issue of timeliness, however, because we conclude that the district court erred by ruling that Schiff renewed his Nightwatch offer through ratifying the CBS Morning News rebroadcast. Consequently, we affirm the judgment of the district court on grounds that Newman did not accept Schiff's initial and only offer that had been made on the Nightwatch program.

A. The Requirement of Mutual Assent.

It is a basic legal principle that mutual assent is necessary for the formation of a contract. A significant doctrinal struggle in the development of contract law revolved around whether it was a party's actual or apparent assent that was necessary. This was a struggle between subjective and objective theorists. The subjectivists looked to actual assent. ⁷ Both parties had to actually assent to an agreement for there to be a contract. External acts were merely necessary evidence to prove or disprove the requisite state of mind. The familiar cliche was that a contract required a "meeting of the minds" ⁸ of the parties. 1 S. Williston, Williston on Contracts Sec. 22, at 48 (3d ed. 1957). The objectivists, on the other hand, looked to apparent assent. The expression of mutual assent, and not the assent itself, was the essential element in the formation of a contract. As the court in Woburn National Bank v. Woods, 77 N.H. 172, 89 A. 491 (1914), said:

A contract involves what is called a meeting of the minds of the parties. But this does not mean that they must have arrived at a common mental state touching the matter in hand. The standard by which their conduct is judged and their rights are limited is not internal, but external. * * * [T]he question is: What did the party say and do? "The making of a contract does not depend upon the state of the parties' minds; it depends on their overt acts."

Id. at 175, 89 A. at 492.

The Missouri Court of Appeals ⁹ issued a classic decision that illustrates the objective theory of assent. ¹⁰ Embry v. Hargadine-McKittrick Dry Goods Co., 127 Mo.App 383, 105 S.W. 777 (1907). The case concerned an alleged oral employment contract. Embry was an employee of the Hargadine-McKittrick Dry Goods Company under a written contract to expire December 15, 1903. Embry contended that on December 23, 1903 he spoke with Mr. McKittrick, the company's president, and was re-employed for one year. Approximately two months later Embry was discharged. He sued for breach of contract. The dispute centered on the meaning of the December 23rd conversation between Embry and McKittrick. The trial court required the jury, in order to decide there was a contract, "not only to find the conversation occurred as [Embry] swore, but that both parties intended by such conversation to contract with each other * * *." Id. at 387, 105 S.W. at 778. Embry challenged this instruction and the court of appeals reversed. It said that insofar as "intention is an influential element, it is only such intention as the words or acts of the parties indicate * * *." Id. at 388, 105 S.W. at 778. Therefore, the court of appeals ruled that the trial "court erred in making the formation of a contract depend on a finding that both parties intended to make one." Id. at 392, 105 S.W. at 780. It held that "though McKittrick may not have intended to employ Embry * * * if what McKittrick said would have been taken by a reasonable man to be an employment, and...