U.S. v. Anderson

• Citation: 584 F.2d 369
• Decision Date: 28 September 1978
• Docket Number: No. 76-1730,76-1730
• Parties: 78-2 USTC P 9731 UNITED STATES of America, Plaintiff-Appellee, v. Lowell G. ANDERSON, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 369

584 F.2d 369

78-2 USTC P 9731

UNITED STATES of America, Plaintiff-Appellee, v. Lowell G. ANDERSON, Defendant-Appellant.

No. 76-1730.

United States Court of Appeals, Tenth Circuit.

Sept. 28, 1978.

Lowell G. Anderson, pro se.

Robert A. Bernstein, Atty., Dept. of Justice, Washington, D. C. (Myron C. Baum, Acting Asst. Atty. Gen., Gilbert E. Andrews, William S. Estabrook and Mary L. Jennings, Attys., Dept. of Justice, Washington, D. C., James P. Castberg, U.S. Atty., Cheyenne, Wyo., of counsel, on brief), for plaintiff-appellee.

Before SETH, Chief Judge, and HOLLOWAY and BARRETT, Circuit Judges.

HOLLOWAY, Circuit Judge.

This action was brought for collection of a balance of 1967 income taxes allegedly due from defendant Anderson in the amount of $1,639.18, plus interest and penalties. The suit was brought pursuant to 26 U.S.C. § 7401, with jurisdiction being invoked under 28 U.S.C. §§ 1340 and 1345 and 26 U.S.C. § 7402. After trial to the court, findings and conclusions adverse to the defendant were filed and judgment was entered in favor of the Government for $2,407.01, plus interest, and foreclosure of a tax lien on the liability.

Defendant appeals, arguing for reversal on the grounds that: (1) the trial court erred in denying him a trial by jury which he claims as his right under the Seventh Amendment; (2) the court erred in denying his request that the amount sued for be defined other than in dollars, the value of federal reserve notes being uncertain; (3) the court erred in refusing to suppress evidence obtained by an IRS employee by unlawful coercion, threats and intimidation; and (4) the judgment is contrary to the evidence and particularly to proof submitted by an affidavit in support of a motion for a new trial.

The 1967 tax controversy arose mainly over an increase in gain which the IRS said should be recognized from defendant Anderson's sale of a glass business to a corporation. The IRS assessment asserted that there was a larger benefit to Mr. Anderson through assumption of his indebtedness by the corporation than he stated. The IRS also disagreed with Mr. Anderson on his basis in some equipment and a building sold to the corporation, among other things.

As noted, the trial court denied a demand for trial by jury and the case was tried to the court. In written findings and conclusions the trial court found the following: The case arose from an audit of defendant's 1967 federal income tax return submitted after he sold a glass business while he resided in Kansas. Defendant filed an IRS form 1040 return for 1967 reporting a tax due of $2,987.00. In May 1969 an audit was made of that return. A recomputation was made from business and personal records, resulting in a deficiency assessed in the amount of $2,842.93, plus $170.10 interest. (See Govt. Ex. 3).

The court found that subsequent payments reduced the liability to $2,867.37, which was the amount set forth in a federal tax lien filed on January 7, 1970. The defendant continued to make monthly payments on the deficiency until March 20, 1972. Those payments are reflected on Government Exhibit 3, a "Certificate of Assessments and Payments," showing a balance due of $1,639.18 as of June 5, 1975. The court found that defendant failed to make further payments and that, with interest, a total of $2,407.91 was due on January 19, 1976, with interest continuing to accrue.

The trial court further found that defendant had been reluctant to release his records to the IRS examiner, maintaining that defendant was threatened and told that if he would release his records that no criminal charges or investigation would ensue, which contention was denied by the IRS agent. The court found that the testimony was not sufficient to constitute a preponderance of evidence in support of this contention, that there was no ability to carry out the threat, that all proper procedures had been followed by the IRS agent, and that his computations had not been controverted by any evidence.

The court concluded as a matter of law that defendant was not threatened when he surrendered his records, that his rights of privacy were not violated, and that he was not coerced into filing the form 1040 or relinquishing his records for audit. The court further concluded that defendant was indebted on the tax liability, and judgment was entered for the Government and against defendant Anderson for $2,407.91, with interest accruing thereon, and for foreclosure of the Government's tax lien.

I

First, defendant Anderson claims error in the refusal of the trial court to grant his demand for a jury trial. The Government says that the trial court did not err because the demand was not made within the ten-day time limit provided by Rule 38(b), F.R.Civ.P., but does not address the merits of the jury-trial question.

The defendant's demand for jury trial was filed November 11, 1975. It did not specify particular issues which the defendant wished tried by a jury, ¹ and thus had the effect of demanding trial by jury of all issues so triable. See Rule 38(c). The demand was denied by the trial court by an order entered on November 14, 1975, which stated that (I R. 19):

It appearing to the Court that the defendant is not entitled to a jury trial under the facts set forth in the complaint filed herein, NOW, THEREFORE, IT IS

ORDERED that the defendant's Demand for Jury Trial be, and the same is hereby, denied.

Thus the trial court did not deny the demand as untimely but instead did so on the merits of the demand by examining the facts set forth in the complaint. When the defendant renewed his jury demand by an objection just before the trial began, the court again rejected the demand as lacking in merit. The court stated that this was not the type of tax case in which a taxpayer is entitled to a jury trial. ²

We feel that the trial judge was correct in considering the demand for jury trial on its merits and in not rejecting it as untimely. Rule 38(b) provides in part that:

. . . Any party may demand a trial by jury of any issue triable of right by a jury by serving upon the other parties a demand therefor in writing at any time after the commencement of the action and not later than 10 days after the service of the last pleading directed to such issue. Such demand may be indorsed upon a pleading of the party.

In this case the Government's complaint alleged that an assessment of federal income tax, interest and penalties for the calendar year 1967 against defendant Anderson in the amount of $1,639.18 had been made, that defendant had failed and refused to pay the assessment, and prayed for judgment therefor, costs and "such other and further relief as (the court) deems just and proper." (I R. 1-2).

The defendant filed a timely answer denying liability, including therein a counterclaim. The counterclaim alleged coercion, threats and intimidation by a delegate of the Secretary of the Treasury, as discussed earlier. The counterclaim also alleged that the defendant had paid an excess amount of tax of approximately $2,800 for the years 1965, 1966 and 1967 and that he had demanded a refund from the IRS on a claim form 843. Judgment was demanded against the Government, or the individuals responsible therefor, for the amount of $2,800 and for $150,000 of punitive damages in connection with averments of deprivation of constitutional rights. (I R. 5-6).

The Government did not reply to the counterclaim or any part of it but instead moved to dismiss the counterclaim "on the grounds of lack of jurisdiction and failure to state a claim upon which relief can be granted." (I R. 8). The supporting brief argued sovereign immunity and that the claim for refund was lacking in necessary allegations that the claim had been denied or not acted on for more than six months.

This motion to dismiss the counterclaim was filed on September 19, 1975. While it was pending, on November 11, 1975, the demand for jury trial was filed. On November 13 the court entered an order dismissing the counterclaim, ³ and then on November 14, the trial judge entered his order denying the demand for jury trial.

The Government contends that the defendant's answer and counterclaim were the "final pleadings" so that the demand was untimely. We do not agree. At the time the demand for trial by jury was filed by Mr. Anderson, his counterclaim was still pending. That counterclaim seeking a refund of income tax, among other things, included the issue of liability for 1967 income tax the same issue raised by the Government's complaint. That issue thus remained in the pleading stage and there had not been a "last pleading directed to such issue" ⁴ so as to cause the 10-day time limit of Rule 38(b) to run against making a demand for jury trial. In such circumstances where the issue of 1967 tax liability continued as an issue, with no "last pleading" having been filed thereto at the time the demand for jury trial was made, the demand was timely. Tights, Inc. v. Stanley, 441 F.2d 336, 344 n. 21 (4th Cir.), cert. denied, 404 U.S. 852, 92 S.Ct. 90, 30 L.Ed.2d 91; Monolith Portland Midwest Co. v. RFC, 240 F.2d 444, 448 (9th Cir.), cert. denied, 354 U.S. 921, 77 S.Ct. 1379, 1 L.Ed.2d 1435; Miller v. Poretsky, 409 F.Supp. 837, 840 n. 4 (D.D.C.); Binger v. Unger, 7 F.R.D. 121, 122 (S.D.N.Y.). ⁵ We are satisfied the demand for a jury trial was timely and turn to the merits of the jury-trial question.

II

The question is whether trial by jury may be had as a matter of right in an action brought by the Government for collection or recovery of taxes under 26 U.S.C. § 7401. As noted, the complaint alleged that an assessment of federal income tax due for 1967 by defendant Anderson had been made, that he failed and refused to pay the assessment, and judgment was sought against him for the amount assessed, for costs and "other and further relief as (the court) deems just and proper . . ." (I R. 1-2).

We are persuaded by the scholarly opinion of...