United States v. Rayburn

• Decision Date: 25 June 1937
• Docket Number: No. 10811.,10811.
• Citation: 91 F.2d 162
• Parties: UNITED STATES v. RAYBURN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

91 F.2d 162 (1937)

UNITED STATES v. RAYBURN et al.

No. 10811.

Circuit Court of Appeals, Eighth Circuit.

June 25, 1937.

W. Croft Jennings, Sp. Asst. to Atty. Gen. (James W. Morris, Asst. Atty. Gen., Sewall Key and Norman D. Keller, Sp. Assts. to Atty. Gen., Edwin G. Moon, U. S. Atty., of Ottumwa, Iowa, and C. I. Level, Asst. U. S. Atty., of Denison, Iowa, on the brief), for appellant.

John E. Cross and Ross R. Mowry, both of Newton, Iowa (W. Keith Hamill, of Newton, Iowa, on the brief), for appellees.

Before STONE, SANBORN, and THOMAS, Circuit Judges.

STONE, Circuit Judge.

This is an action for refund of income taxes for the years 1929 and 1930. From a judgment for plaintiffs, the United States appeals.

Dismissal of Appeal.

Appellees urge a motion to dismiss this appeal on the ground that it was taken more than three months after the judgment.

The situation involved is that the court handed down a written opinion containing findings of facts and conclusions of law and ending as follows:

"The clerk will enter the following order:

"The above entitled cause having been duly tried on the 16th day of December, 1935, and submitted, the court finds for the plaintiffs and against the defendant in the sum of $22,361.03 with interest at six per cent per annum from September 15, 1932, until paid. Defendant's motion for judgment is overruled, to all of which the defendant excepts.

"Signed this 23 day of January 1936.

"Signed Chas. A. Dewey "United States District Judge."

The record contains no entry of the above judgment or other action than the filing of the above with the clerk on January 23, 1936. On January 30, 1936, a somewhat more formal form of judgment appears under the heading "Judgment Entry" with the statement "Filed in the U. S. District Court on January 30th, 1936." At the close of the judgment appears:

"As of January 23, 1936

"To all of the foregoing the defendant excepts.

"Chas. A. Dewey "United States District Judge."

The appeal was taken on April 27, 1936, less than three months after January 30 but more than three months after January 23. The questions are (1) whether the judgment filed January 23, 1936, but never made of record otherwise is the appealable judgment and (2) whether the recital in the later judgment "As of January 23, 1936," carries that judgment back, as a nunc pro tunc order, to January 23 for appealable time purposes.

(1) Proceedings for appeals in the federal courts are purely statutory. The statute governing here forbids appeals "unless application therefor be duly made within three months after the entry of such judgment" (28 U.S.C.A. § 230). (Italics added.) "Entry" of a judgment or order is a ministerial act of the clerk and usually means the setting out of the judgment in the proper record book of the court. Ex parte Morgan, 114 U.S. 174, 175, 5 S.Ct. 825, 29 L.Ed. 135; 34 C.J. § 175, pp. 44-46; § 183, p. 55; § 185, p. 57. In construing an earlier act governing time for appeals which contained the same requirement as to "entry of judgment," the Supreme Court construed "entry" to mean entry in "the order-book, or record of the court's proceedings." Polleys v. Black River Co., 113 U.S. 81, 84, 5 S.Ct. 369, 370, 28 L.Ed. 938. The rules of court in this District provide for "A law journal, in which shall be entered all orders, judgments, and proceedings of the court in law actions." This journal is "the order-book, or record of the court's proceedings" within the Polleys Case, supra, and it is entry therein which complies with the statutory requirement.¹

(2) Does the recital in the judgment of January 30 "As of January 23, 1936," affect the appealable date of this judgment entered on January 30? The length of the statutory period for appeal can neither be lengthened nor shortened by any action of the parties or of the court. This applies to nunc pro tunc orders which would have the effect of extending (Old Nick Williams Co. v. United States, 215 U.S. 541, 544, 30 S.Ct. 221, 54 L.Ed. 318; Garrison v. Cass County, 5 Wall. 823, 18 L.Ed. 491) or of shortening (Providence Rubber Co. v. Goodyear, 6 Wall. 153, 18 L.Ed. 762) such period. It is the date of "actual entry" which controls. Providence Rubber Co. v. Goodyear, 6 Wall. 153, 156, 18 L.Ed. 762.

We conclude that the appealable judgment here was the one entered January 30, 1936.² The motion to dismiss the appeal is denied.

The Merits.

Appellees are the surviving trustees of the "Iowa Realty Trust." They returned and paid taxes on the income received by them as trustees during the years 1929 and 1930 on the basis of deductions for distributions to beneficiaries — claiming that the liability and the rate of taxation properly applicable were those covering taxation of a trust. The Commissioner determined they were not taxable as a "trust" but as an "association." Protest payments were made in compliance with this ruling. This action is for refund of such payments. The trial court made findings of fact, stated conclusions of law, and gave judgment for plaintiffs.

The sole question presented here is whether this taxation should be on a trust or on an association. The court held, and there is no serious contention here to the contrary, that:

"The trust in this case so far as its form of organization is concerned has enough of the elements of a corporation to be classified as an association within the regulations of the Department."

The contest here concerns the "purpose" and the operations of the trust during these two years. Appellees contend the sole, or at least the main, purpose was to liquidate a large tract of land and not at all to engage in a business enterprise for profit and that any business engaged in was merely and purely incidental to the purpose of liquidation. Appellant contends (1) that one of the purposes of the trust was to hold the land "to await future opportunities" and, while so doing, business was carried on; and (2) even if the main purpose was liquidation and the business transacted was incidental to that purpose, yet the trust satisfied "all of the tests of doing business" because its actual operation under the trust was that "of a true business enterprise."

An outline of the facts (undisputed) pertinent to the issues here is as follows: In March, 1909, the Jasper County Realty Company was incorporated under the Iowa statutes for a term of twenty years. Its declared principal business was the purchasing, holding, owning, leasing, mortgaging, exchanging, and selling real estate and personal property. So far as this record shows, the only land acquired by this company was a block of approximately 12,460 acres in Pecos county, Tex. This land was flat with practically no vegetation except scrub mesquite and greasewood with a little grass. When this land was acquired, an irrigation project was in mind. In 1909 and 1910 about 800 acres were sold, but the irrigation project fell through and this land came back to the company. The only income of the company was 5 cents an acre for rental of grass land. The above situation continued until 1927. Early in that year an "oil flurry" arose in that vicinity and, during January and February, 1927, the company executed three ten-year oil leases, covering a total of 2,240 acres, on a bonus, rental, and royalty basis.³

In connection with these leases, a question was raised, by counsel for one of the oil companies, as to the title of the company to this land. It was suggested that, under the law of Texas, the company (a corporation) could not hold the land longer than fifteen years and that it had held it longer than that. The directors and stockholders held informal meetings and discussed this situation, and also the short period the company charter still had to run — expiration being March 12, 1929.

The result of these conferences was the creation of a trust, "so that we could hold this property in Texas as we were about to lose our land," and the conveyance of the land to the trustees. This result was worked out through a conveyance of the land to the stockholders as tenants in common in proportion to stock holdings, dissolution of the company, and the creation and conveyance of the land to the trustee.⁴

The trust agreement was incorporated in a warranty deed. The instrument conveyed the land to seven named trustees "for the uses and purposes and upon the terms and conditions hereinafter set out." It named the beneficiaries (the tenants in common making the conveyance) and stated the "fractional interests in the trust property and funds" of each. Provisions of the trust agreement which throw light upon the issues here are as follows:

"Said conveyance is upon the following trusts, viz.:

"1. In trust to sell and convey and convert the same into money and distribute the net proceeds thereof among the persons at the time of such conversion holding and owning beneficial interests therein; it being however expressly understood and agreed that the Trustees may, in their uncontrolled discretion, defer or postpone such conversion and distribution except that the same shall not be postponed beyond the end of twenty years from and after the death of the last survivor of the persons hereinbefore named as trustees.

"2. In trust, pending final conversion and distribution of the property, to manage and control the same, the Trustees having, for such purposes and for all purposes of sale, lease, and any and all arrangements, contracts and dispositions of the trust property, or any part thereof, all and as full discretionary powers and authority as they would have if they were themselves the sole and absolute beneficial owners thereof in fee simple.

"3. In trust to collect and receive all rents and income from the property, and annually or oftener at their convenience, to distribute such portion thereof as they may, in their discretion, determine to be fairly distributable net income, to and among the several cestuis que trustent, according to their...