Paschal v. Blieden, 12157.
| Decision Date | 29 April 1942 |
| Docket Number | No. 12157.,12157. |
| Parties | PASCHAL, Collector of Internal Revenue, v. BLIEDEN. |
| Court | U.S. Court of Appeals — Eighth Circuit |
COPYRIGHT MATERIAL OMITTED
Louise Foster, Sp. Asst. to the Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., J. Louis Monarch, Sp. Asst. to the Atty. Gen., and Samuel Rorex, U. S. Atty., and Gordon Frierson, Asst. U. S. Atty., both of Little Rock Ark., on the brief), for appellant.
D. D. Panich, of Little Rock, Ark. (Arthur L. Adams, of Jonesboro, Ark., on the brief), for appellee.
Before GARDNER, THOMAS, and RIDDICK, Circuit Judges.
S. R. Morgan was adjudged a bankrupt by the district court on February 11, 1935, and thereafter Ed Blieden, the appellee, qualified as trustee of the bankrupt estate. Morgan's business operations extended throughout the state of Arkansas and into parts of Kansas and Oklahoma. Some of his business was transacted in his own name and part of it through personally owned corporations. When he was adjudged bankrupt he surrendered to his trustee property operated in his own name but concealed his ownership of the corporations and continued to operate them until through legal proceedings the assets of such corporations were by proper court orders turned over to the trustee. Among the corporations so owned, and concealed and operated by Morgan after he was adjudicated bankrupt, and the only corporations involved in this proceeding, were the Osage Ice and Ice Cream Company of Osage, Kansas, the Pine Bluff Cold Storage Company of Pine Bluff, Arkansas, and the Independent Refrigerated Products Company of Stuttgart, Arkansas. The trustee obtained possession of the property of the Osage Company sometime after December 7, 1935, and of the properties of the Pine Bluff and Independent companies on July 9, 1936. See Adams v. Morgan, 142 Kan. 865, 52 P.2d 643.
For sometime prior to his bankruptcy Morgan either did not make, or made incomplete, federal tax returns. Acting under the authority of § 3176 of the Revised Statutes as amended by the Revenue Act of 1926, c. 27, 44 Stat., Part 2, p. 112, § 1103, 26 U.S.C.A.Int.Rev.Code, § 3612, the Collector of Internal Revenue made returns and amended returns for Morgan and for the corporations. The pertinent part of the statute under which the collector acted reads:
Based upon the information obtained by the collector, his deputies and revenue agents, and upon assessments made by the Commissioner, the collector, appellant, between April 16, 1935, and August 4, 1937, filed claims and amended claims for taxes assessed against Morgan and the three corporations named supra with the referee and the trustee, aggregating $11,270.46. On February 14, 1938, all these claims were consolidated in a verified claim and filed with the trustee. On August 26, 1937, the trustee filed exceptions to one of the original claims against the Independent Refrigerated Products Company for $34.51. We are informed in appellee's brief that these exceptions stand to the consolidated claim.
A hearing was had on the trustee's exceptions on October 10, 1939. The consolidated claim covered many items for income taxes, documentary stamp taxes, capital stock taxes, excess profits taxes, interest and penalties. By reason of abatements and credits the claim was reduced at the hearing to the sum of $5,532.97. This total includes:
Income tax for 1932 of Morgan
individually, $2,002.20
Interest, 258.32
Income tax for 1934 of Osage Ice
and Ice Cream Company, 365.91
Interest, 37.31
Income, capital stock and excess
profits taxes for 1935 and 1936
of Pine Bluff Cold Storage
Company, 2,089.60
Taxes of Independent Refrigerated
Products Company for 1934
1935 and 1936, 779.63
It was the claim of the collector that the trustee was liable directly for the taxes assessed against Morgan individually and as transferee for the taxes assessed against the corporations.
Subsequent to the hearing the referee entered an order "that said claims be and they are hereby disallowed and expunged from the record." This order was based upon the finding, stated in the order, "that there is insufficient evidence to justify the allowance of the claims in any amount and that they should be disallowed."
Upon petition for review the court entered an order adopting the findings of fact and declarations of law made by the referee and approving and confirming the order disallowing and expunging the claims. From this order the collector appeals. In the referee's certificate to the court accompanying his copy of the record for review the referee included detailed findings of fact and conclusions of law.
From the findings and order and the assignment of errors two questions emerge for determination on this appeal. They are:
1. Did the collector sustain the burden of properly proving the claims for taxes in the hearing before the referee?
2. Is the trustee liable as a transferee under § 311 of the Revenue Acts of 1934 and 1936, 26 U.S.C.A.Int.Rev.Code, § 311, for taxes which had accrued against the Morgan corporations prior to the time that the trustee took them over pursuant to the orders of the courts, or on any basis?
At the hearing before the referee upon the trustee's exceptions to the claims the collector, through one Severson, a revenue agent, introduced photostatic copies of the assessment lists of the Commissioner of Internal Revenue upon which the claims are based. It is stipulated that these assessments "were official and in regular form, and had been made by the Commissioner of Internal Revenue, and were for the amounts stated by the said witness Severson." The certificate of the Commissioner on each assessment list reads:
"I hereby certify that I have made inquiries, determinations and assessments of taxes, penalties, etc., of the above classification specified in these lists, and find that the amounts of taxes, penalties, etc., stated as corrected and as specified in the supplementary pages of this list made by me are due from the individuals, firms, and corporations opposite whose names such amounts are placed, and that the amount chargeable to the collector is as above."
Severson testified that the determinations and assessments were based upon inquiries made by deputy collectors and revenue agents. Such inquiries included examination of books of account of the taxpayers, interviews and consultations with Morgan and others and testimony taken in court in other proceedings involving the Morgan estate. At the conclusion of Severson's testimony the appellant rested.
The important contentions of the parties relate to the question of burden of proof. The collector contends that the verified claims and the certified assessment lists make a prima facie case for the claimant, and that the burden of proof rests upon the taxpayer, or his trustee in bankruptcy, to show the incorrectness of the claim. The appellee contends, and the referee and court held, that the appellant cannot rely upon the verified claim and the assessment to establish a prima facie case; that he must go further and show the consideration for the claim; that he must show as to an income tax from what operation the income was derived or from what source it was received; and that the amendment of the claims destroyed their prima facie effect.
That the referee and the trustee misconceived the law controlling the burden of proof is clear. Section 3612(c) of the statute, supra, provides that the assessment lists of the Commissioner "shall be prima facie good and sufficient for all legal purposes." In Western Express Co. v. United States, 8 Cir., 141 F. 28, 30, this court said that the assessment of a tax by the revenue officers is presumptively correct, "and their action stands as prima facie correct until this presumption, by countervailing proof, is met and overthrown by the party assessed." In Willcuts v. Minnesota Tribune Co., 8 Cir., 103 F.2d 947, 951, it was said, See, also, Public Opinion Pub. Co. v. Jensen, 8 Cir., 76 F.2d 494; United States v. Bernstein, 8 Cir., 16 F.2d 233; In re Lang Body Co., 6 Cir., 92 F.2d 338; Fiori v. Rothensies, 3 Cir., 99 F.2d 922; United States v. Rindskopf, 105 U.S. 418, 26 L.Ed. 1131; Welch v. Helvering, 290 U.S. 111, 54 S.Ct. 8, 78 L.Ed. 212. As to the prima facie effect of a verified claim in bankruptcy generally, see Whitney v. Dresser, 200 U.S. 532, 534, 535, 26 S.Ct. 316, 50 L.Ed. 584. The referee's holding that to establish a claim in bankruptcy for taxes the government must prove consideration for the taxes is confusing. The tax assessment is consideration for the claim; and when an admittedly regular assessment list is offered in evidence, the burden of proof to establish a prima facie case is satisfied. The burden then rests upon the objecting taxpayer to show the...
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