United States v. Kenner

• Decision Date: 04 January 1972
• Docket Number: No. 17555.,17555.
• Citation: 455 F.2d 1
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. William H. KENNER et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

455 F.2d 1 (1972)

UNITED STATES of America, Plaintiff-Appellee, v. William H. KENNER et al., Defendants-Appellants.

No. 17555.

United States Court of Appeals, Seventh Circuit.

January 4, 1972.

Charles A. Boyle, Chicago, Ill., for appellants.

James R. Thompson, U. S. Atty., Chicago, Ill., Fred B. Ugast, Acting Asst. Atty. Gen., Tax Div., Carolyn R. Just, Atty., U. S. Dept. of Justice, Washington, D. C., Thomas A. Foran, U. S. Atty., Chicago, Ill., for appellee; John Peter Lulinski, Michael B. Nash, and Richard A. Makarski, Asst. U. S. Attys., of counsel.

Before MAJOR, Senior Circuit Judge, and KILEY and CUMMINGS, Circuit Judges.

MAJOR, Senior Circuit Judge.

This appeal by William H. Kenner is from a judgment entered against him on January 8, 1969, in the amount of $596,361.45, for unpaid income taxes, penalties and accrued interest for the years 1945 to 1954, both inclusive. (Other defendants named in the caption are not involved in this appeal.) The judgment was an amendment to a consent order entered May 21, 1965, against Kenner and in favor of the United States, for deficiency in income taxes for the same years. The consent order was based upon findings of fact and an opinion by the Tax Court (20 C.C.H.Tax Ct.Mem. 185 (1961)), which was affirmed by this Court. Kenner et al. v. Commissioner of Internal Revenue, 318 F.2d 632, decided June 4, 1963.

After our affirmance, appellant filed with the Tax Court a 24-page petition alleging that the decision of the Tax Court resulted from numerous acts of fraud perpetrated by the Commissioner. From the Tax Court's order dismissing his petition appellant again appealed to this Court. While we held that the Tax Court had the power to inquire into the integrity of its decision where it was shown to have been the result of fraud, we also held, after reviewing the various acts of fraud alleged by appellant, that the allegations of his petition were not sufficient and affirmed the Tax Court's order of dismissal. Kenner et al. v. Commissioner of Internal Revenue, (CA-7) 387 F.2d 689, decided January 5, 1968, cert. den. 393 U.S. 841, 89 S.Ct. 121, 21 L.Ed.2d 112, rehearing denied 393 U.S. 971, 89 S.Ct. 390, 21 L.Ed.2d 386.

On May 24, 1969, appellant, acting pro se as he did in the District Court, filed here in support of his instant appeal his brief and appendix. On October 24, 1969, the government filed its brief to which appellant, still acting pro se, filed a reply brief on November 5, 1969. On April 1, 1970, Charles A. Boyle, an attorney, filed a supplemental brief on behalf of appellant and on October 29, 1971, the government filed its supplemental brief in reply thereto.

Appellant in his pro se brief makes a statement of alleged facts which cover the 20-year period in which he has been engaged in a running battle with the Commissioner. Few, if any, who have had any part in the assessment of tax deficiencies against him escape his charge of fraud. He asserts that the many attorneys whom he has employed "were so intimidated by the IRS that they, in truth and fact, actually joined league with the IRS" against him. He impugns the integrity of members of the Tax Court who rendered the decision against him and claims in effect that the District Court Judges who entered judgments against him, as well as members of this Court, have been the victims of fraud perpetrated by the IRS. The charges now made are substantially the same as those previously made and found without substance by the Tax Court and this Court. An additional charge made for the first time is that the attorneys who agreed to the consent order, entered May 21, 1965, did so without authority and that their action in that respect was fraudulent.

It is fortunate that during the pendency of the instant appeal appellant employed Boyle, who succeeded on brief and oral argument in making an understandable presentation out of an otherwise chaotic situation. Boyle agrees with the statement of facts as set forth in the government's brief, which we adopt:

"On May 23, 1962 a complaint was filed by the United States of America against the defendants seeking, inter alia, judgment for income taxes assessed against the defendant, William H. Kenner, for the years 1945 through 1954 in the amount of $378,624.45, plus interest as provided by law (Complaint, p. 2). On May 21, 1965 an agreed order was entered, being executed by counsel for the plaintiff and both counsel for the defendant, which stated in pertinent part:

`Judgment is entered in favor of the United States against William H. Kenner in the amount of $447,985.38, plus interest thereon as provided by law, for the tax years 1945, 1946, 1947, 1948, 1949, 1950, 1951, 1952, 1953 and 1954.\'

"On February 16, 1968, after sending notice to the defendant, the United States filed a petition seeking that the agreed order entered on May 21, 1965 be vacated and an amended order entered reflecting all of the tax liabilities of the defendant for the years 1945 through 1954 (Original Record, p. 47). From that point on a barrage of motions were filed by the defendant, acting pro se, alleging fraud and seeking to set aside the order, to investigate fraud practices on the court, a request for particulars, etc. On October 17, 1968 the United States filed a memorandum in support of its petition to amend the order entered on May 21, 1965 (Original Record, p. 73).

"On January 8, 1969 the District Court entered an order and judgment which vacated the agreed order entered on May 21, 1965 and entered therein judgment in favor of the plaintiff, United States, and against the defendant, William H. Kenner, for deficiency income taxes, statutory additions, and interest to the date judgment was entered for the years 1947 through 1954 inclusive, in the amount of $596,361.45. The District Court vacated the agreed order and entered the order and judgment because it found that the consent judgment was vague and uncertain and had to be amended because neither the plaintiff nor the defendant could determine the amount of interest or the date which interest on the assessments ran (Original Record, p. 83). Defendant has appealed from this order and judgment entered on January 8, 1969."

The contested issues as stated by Boyle are:

"1. Did the attorneys representing defendant-appellant have authority to bind him to the `agreed order\'?

"2. Did the Government violate Rule 60(a) Federal Rules of Civil Procedure by vacating and amending the `agreed order\'?"

The agreed order of May 21, 1965 was for deficiencies in appellant's taxes as found by the Tax Court and, on appellant's appeal, affirmed by this Court. The order was consented to by Warren L. Schmidt and James Slager as attorneys for appellant and by the United States Attorney on behalf of the government. These attorneys continued to represent appellant until August 12, 1966, when the Court, at their request, permitted their withdrawal.

Surely appellant was aware that the judgment was entered against him for tax deficiencies with the consent of his then attorneys. Yet, for a period of fifteen months, so far as is ascertainable from the record, he did not discharge them; neither did he attack the order by appeal or otherwise. Moreover, no question was raised as to their lack of authority until after February 15, 1968, when the government filed its petition to amend the agreed order. In support of his motion to dismiss the government's petition to amend the order, appellant filed a series of affidavits in which he again reviewed the fraud which he alleged had been perpetrated on him over a period covering some twenty years.

Thus, appellant, relying upon the alleged lack of authority of his attorneys in entering into the agreed order, seeks to challenge the assessments relating to his tax liabilities for the years 1945 through 1954. Such liability, as noted, had been determined by the Tax Court, whose decision was affirmed by this Court. Kenner et al. v. Commissioner of Internal Revenue, 318 F.2d 632. Moreover, after our affirmance of the Tax Court's decision determining his tax liability, appellant sought to invalidate the Tax Court's decision by alleging it was the result of fraud, which in the main consisted of the same allegation of fraud which he now employs to invalidate the consent order. The Tax Court rejected appellant's effort in this respect and, on appellant's appeal, this Court affirmed the Tax Court on the basis that the fraudulent allegations were without substance. Kenner et al. v. Commissioner of Internal Revenue, (CA-7) 387 F.2d 689, cert. den. 393 U.S. 841, 89 S.Ct. 121, 21 L.Ed.2d 112.

In our judgment, and we so hold, appellant's tax liability as embodied in the consent order was previously determined by the Tax Court and this Court, and under the principle of res adjudicata the order is not now subject to attack. See Partmar Corp. et al. v. Paramount Pictures Theatres Corp. et al., 347 U.S. 89, 91, 74 S.Ct. 414, 98 L.Ed. 532, and Stoll v. Gottlieb, 305 U.S. 165, 170, 59 S.Ct. 134, 83 L.Ed. 104. We also hold that the issue of fraud now sought to be invoked by appellant was litigated and decided adversely to him and is governed by the same principle.

Our attention is called to the recent decision of the Ninth Circuit, Toscano v. Commissioner of Internal Revenue, 441 F.2d 930, where the Court was presented with the issue as to whether the Tax Court, after its decision had become final under 26 U.S.C. Sec. 7481, had jurisdiction to grant leave to the taxpayer to file a motion to vacate its decision on the ground of fraud on that Court. The Court reviewed at length the cases bearing on the issue, concluded by a divided Court that the Tax Court had such jurisdiction and vacated its decision, with directions that it hold an evidentiary hearing on the fraud charge. This Court in Kenner v. Commissioner of Internal Revenue, 387 F.2d 689, recognized that the Tax Court had such jurisdiction but affirmed its decision of dismissal of...