United States v. Temple, 21822

• Decision Date: 07 January 1966
• Docket Number: No. 21822,21823.,21822
• Citation: 355 F.2d 67
• Parties: UNITED STATES of America, Appellant, v. Fred D. TEMPLE, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

355 F.2d 67 (1966)

UNITED STATES of America, Appellant, v. Fred D. TEMPLE, Appellee.

Nos. 21822, 21823.

United States Court of Appeals Fifth Circuit.

January 7, 1966.

Thomas Stapleton, Atty., Dept. of Justice, Louis F. Oberdorfer, Asst. Atty. Gen., John B. Jones, Jr., Acting Asst. Atty. Gen., Lee A. Jackson, Harry Baum, and Donald A. Williamson, Attys., Dept. of Justice, Washington, D. C., Robert E. Hauberg, U. S. Atty., Jackson, Miss., for appellant.

J. C. Floyd, J. L. Prichard, Meridian, Miss., for appellee Floyd, Cameron, Deen & Prichard, Meridian, Miss., of counsel.

Before WISDOM and COLEMAN, Circuit Judges, and DAWKINS, District Judge.

COLEMAN, Circuit Judge:

In this appeal we are concerned with a controversy between the Government and the Taxpayer as to whether the profits from certain real estate transactions were taxable as capital gains or as ordinary income derived from the sale of property held primarily for sale to customers in the ordinary course of business. After full hearing, the District Court found and held that the aforesaid profits should be treated as capital gains.

The Government seeks to overturn that judgment on the ground that it "lacks a reasonable basis in the facts of record, is contrary to the whole purport of the capital gains provisions, and results from the application of an erroneous legal standard to the evidence". Stating it another way, the Government further contends that whether the District Court's ultimate findings be deemed a determination of fact, or of law, or of mixed law and fact, or ultimate fact springing from undisputed evidentiary facts, it is clear that the determination is not supported by the facts nor the law, and should, therefore, be reversed.

Upon a careful consideration of the entire record, and after hearing argument of counsel, we cannot confidently agree with these contentions.

About the best that can be said of these capital gains controversies is that each case must be decided on its own peculiar facts. Thompson v. Commissioner of Internal Revenue, 5 Cir., 322 F.2d 122. There is not much dispute, if any, about the facts. The real issue is that the Government disagrees with the inferences and conclusions which the trial court drew from the facts. The record reveals about seventeen facts or factual inferences in support of the findings below. There are about ten facts or factual inferences which could have supported a finding for the Government. Thus we see a situation in which the Court below could have decided either way without being clearly in error.

In this state of the record we find no legal justification for reversal and the judgment is

Affirmed.

WISDOM, Circuit Judge (dissenting):

I respectfully dissent. With deference to my brothers' judgment in the matter, I consider the decision below egregiously erroneous. I would hold that, within the meaning of Section 117(a) (1) (A) of the 1939 Code and Section 1221 of the 1954 Code, the taxpayer was in the business of subdividing real estate and holding the lots for sale to customers.

I suggest that the Court's "excessive deference to triers of fact" has led it into error.¹ As the Court observed, "The real issue is that the Government disagrees with the inferences and conclusions which the trial court drew from the facts". In similar circumstances, we have said:

"The burden of showing that a finding of fact is clearly erroneous is lighter, much lighter, when we consider logical inferences drawn from undisputed facts or from documents, though the `clearly erroneous\' rule is still applicable. * * * Insofar, however, as the so-called `ultimate fact\' is simply the result reached by processes of legal reasoning from, or the interpretation of the legal significance of, the evidentiary facts, it is `subject to review free of the restraining impact of the so-called "clearly erroneous" rule.\' * * * As succinctly stated by Professor Moore, `Findings of fact that are induced by an erroneous view of the law are not binding. Nor are findings that combine both fact and law, when there is error as to the law.\'" Galena Oaks Corporation v. Scofield, 1954, 5 Cir., 218 F.2d 217, 219 (citations omitted.)

Fred D. Temple, the taxpayer was engaged in the roofing and supply business. January 21, 1950 he paid $300 for an option to buy, for $30,000, thirty-two acres of undeveloped property within the city limits of Meridian, Mississippi. The property was part of the campus of a defunct college. Temple exercised his option and took title April 29, 1950.

Temple testified that he bought the land as an investment for his old age; that he had no wish to subdivide. The district court found that Temple had indeed bought the land for investment purposes and that he did not deviate from this intention; that he subdivided the property only because March 29, 1950, the city of Meridian adopted an ordinance requiring subdividers to put in streets and to make certain improvements as prerequisites to securing city approval of a subdivision plan. Temple testified that he did not learn of the ordinance until July. In his deposition, however, the taxpayer said that he found out about the ordinance in talking with the city manager. This was before he exercised his option. July 10 Temple appeared before the Council and, according to the minutes of the City Council, "requested them to consider his application for the re-subdivision as filed prior to March 27, 1950, the date on which an ordinance was passed requiring certain regulations in regards to subdivision". Eventually Temple succeeded in negotiating a compromise with the city for less than full compliance with the ordinance.

The undisputed facts show that within fifteen days after acquiring the option, Temple employed an architect to draw a plan for the subdivision of the property. At about the same time, he consulted with the city manager as to the availability of streets for the tract. He also employed an engineer who prepared a...