U.S. v. McGaughey
| Decision Date | 25 January 1993 |
| Docket Number | No. 91-2864,91-2864 |
| Citation | 977 F.2d 1067 |
| Parties | -5877, 93-1 USTC P 50,010, 24 Fed.R.Serv.3d 601, 36 Fed. R. Evid. Serv. 1366 UNITED STATES of America, Plaintiff-Appellee, v. Guy E. McGAUGHEY, Jr., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Robert L. Simpkins, Asst. U.S. Atty., Crim. Div., Fairview Heights, Ill., Gary R. Allen, Murray S. Horwitz (argued), Jonathan S. Cohen, Peter Sklarew, Charles M. Greene, Dept. of Justice, Tax Div., Appellate Section, Washington, D.C., for plaintiff-appellee.
Richard A. Green, Feirich, Schoen, Mager & Green, Carbondale, Ill., William J. Harte (argued), Chicago, Ill., for defendant-appellant.
Before CUDAHY and MANION, Circuit Judges, and GIBSON, Senior Circuit Judge. 1
Guy McGaughey, Jr. appeals the district court's grant of summary judgment in favor of the government in its suit on a tax-related debt. We affirm.
On December 25, 1972, the Secretary of the Treasury assessed McGaughey approximately $600,000 for tax deficiencies. This assessment was based on a Tax Court decision rendered on August 21, 1972. 2 At some time not specified in the record, Internal Revenue Agent Madge Garwood was assigned the task of collecting this deficiency.
McGaughey submitted an offer of compromise based on "doubt of liability." This offer was submitted, as required by IRS regulations, on Form 656. Form 656 contains, inter alia, a clause indicating the taxpayer agrees to suspend the statute of limitations for collecting tax deficiencies during the time in which the offer is being considered, and, if the offer is ultimately rejected, for one year after the rejection. This offer was ultimately rejected because Treasury Regulations forbid the acceptance of an offer of compromise based on doubt of liability when the issue of liability has previously been determined by the Tax Court. McGaughey then filed a series of offers of compromise based on "doubt as to collectibility;" the last offer was submitted in October 1982. All of these offers were submitted on Forms 656, and all of these offers were rejected.
In December 1987, the government filed a complaint in district court seeking a judgment in the amount of the deficiency plus interest. 3 Both parties filed motions for summary judgment. The Form 656 used to submit McGaughey's initial offer of compromise was not offered to support either party's motion because it no longer existed; in accordance with IRS procedures, all Forms 656 are destroyed eight years after they are rejected. In support of his motion, McGaughey submitted an affidavit contending Garwood induced him to make an offer of compromise based on doubt as to liability by telling him that she did not think he owed the money and that an offer of $10,000 was likely to be accepted. He also averred that he did not recall filling out a Form 656.
In support of its motion, the government presented secondary evidence to prove the prior existence of the Form 656 and the execution of the waiver of the statute of limitations. If the Form 656, including the waiver, was filled out properly, it was then sent to a Service Center; if it was not, the form was returned to the taxpayer without being considered and without further processing. McGaughey's offer of compromise, which was filed with the Louisville District Director, would have been sent to the Memphis Service Center. There, information would be entered into a computer and a Form 2515 prepared. Form 2515 is a control card that contains the name of the taxpayer, the time periods involved, the type of tax, the amount and terms of the offer, and other data pertaining to the offer of compromise. After the Form 2515 was prepared, a transcript of the taxpayer's account, including tax returns, was ordered, and the entire file would be returned to the District Director. Upon its return to Louisville, the Form 656 would be examined for completeness and accuracy. If the Form was complete and accurate, it would be forwarded for further consideration. Once a decision was made to either accept or reject the offer, the file would be sent back to the Memphis Service Center, where computer entries reflecting that decision would be made.
In addition to affidavits describing this process, the government presented copies of the Form 2515 for McGaughey's offer of compromise, which indicate that the statute of limitations was waived and that the waiver had been accepted. The government also introduced copies of memos indicating the file was transferred between Louisville and Memphis. Based on the documents presented to it, the district court concluded McGaughey had filled out a Form 656, that the waiver of the statute of limitations had been executed by both McGaughey and a representative of the IRS, and that the series of offers McGaughey subsequently filed had extended the statute of limitations to the point that the instant suit was not time-barred. Thus, the district court granted the government's motion for summary judgment and denied McGaughey's.
Approximately fifteen days after judgment was entered, McGaughey's stepson found a copy of what appears to be the Form 656 McGaughey used to submit his offer of compromise based on doubt as to liability. The document was signed by both McGaughey and Garwood, but the clauses purporting to suspend the statute of limitations had been crossed out. McGaughey presented this newly found document as an additional ground in his already-pending motion to amend or alter the judgment.
The government responded by filing an affidavit in which Garwood acknowledged her signature on the document McGaughey's stepson had found, but contended that she would never have signed a Form 656 containing a waiver clause that had been crossed out. She further stated that if she had signed such a Form 656, it would have been returned to her immediately as it would have contained an improperly executed waiver clause. The district court declined to consider the new evidence, stating that McGaughey had not demonstrated due diligence in locating the document. McGaughey appeals.
The key to this case depends upon the existence and validity of the waiver contained in the first offer of compromise. If the first offer contained a valid waiver, the statute of limitations was further extended by the subsequent offers and the government's lawsuit is not timebarred. If, on the other hand, the waiver in the initial offer was nonexistent or invalid, there would be nothing for the subsequent waivers to extend. The burden of proving the existence and validity of the waiver lies with the government. United States v. Borchardt, 470 F.2d 257, 261 (7th Cir.1972). We review the court's grant of summary judgment de novo, and affirm if, after granting the non-moving party all reasonable inferences from the supporting documents, there is no genuine issue of material fact. Continental Corp. v. Aetna Casualty & Sur. Co., 892 F.2d 540, 543 (7th Cir.1989). With these principles in mind, we examine McGaughey's challenges to the district court's grant of summary judgment.
The contents of McGaughey's initial offer are the focus of this dispute, and the optimal proof of the contents is the original document. Fed.R.Evid. 1002. However, "[t]he original is not required, and other evidence of the contents of a writing ... is admissible if [a]ll originals are lost or have been destroyed, unless the proponent lost or destroyed them in bad faith...." Fed.R.Evid. 1004.
Of course, before secondary evidence may be used, it must be demonstrated that the original has actually been destroyed. Unless someone testifies that he or she personally destroyed or witnessed the destruction of a document, such proof will ordinarily be circumstantial. In this case, the district court received affidavits describing the IRS' procedures requiring the destruction of Forms 656 after a specified period of time. The court also received an affidavit from Garwood, who indicated that her search for the document was futile and that she had been informed the document was destroyed. Based on this information, the district court found that the original had been destroyed.
McGaughey contends there was inadequate proof that a thorough search for the original was conducted. Rule 1004 does not contain an independent requirement that a search be conducted; rather, the concept of a diligent search is an avenue by which the larger issue of the document's destruction may be proved. See Harrington v. United States, 504 F.2d 1306, 1313-14 (1st Cir.1974) (); 5 Weinstein's Evidence p 1004(1) at 1004-18 (1983) () (quotation omitted); McCormick on Evidence, § 237 at 715 (3d ed. 1984) ("Loss or destruction may sometimes be provable by direct evidence but more often the only available evidence will be circumstantial, usually taking the form that appropriate search for the document has been made without discovering it."). These uncontradicted affidavits and documents amply demonstrated the original Form 656 was destroyed.
The secondary evidence offered by the government to prove that McGaughey and Garwood executed the waiver contained in the Form 656 included a detailed description of the procedures involved in processing an offer of compromise and the control cards and memoranda associated with this offer. These materials identified the steps of the process McGaughey's offer underwent, and further indicated that the offer could not have reached those steps in the process if his...
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