Woodruff v. Trost

• Decision Date: 13 March 1946
• Docket Number: 31145.
• Parties: WOODRUFF v. TROST.
• Court: Georgia Court of Appeals

37 S.E.2d 425

73 Ga.App. 608

WOODRUFF v. TROST.

No. 31145.

Court of Appeals of Georgia, Division No. 2.

March 13, 1946

Rehearing Denied March 26, 1946.

Syllabus by the Court.

1. The verdict on count one of the petition was not authorized by the evidence.

2. The verdict on count two was authorized by the evidence and was not excessive as a matter of law.

3. The verdict for the plaintiff on count 3 was authorized under the evidence.

4. Alleged errors which will not likely occur on another trial are not passed on.

5. Grounds 12, 13 and 24 being incomplete are not passed on.

6. There is no merit in the other grounds of the motion for new trial.

7. The court did not err in refusing the grant of a nonsuit.

Henry E. Trost sued J. W. Woodruff in three counts; in count one he sought to recover in quantum meruit for the value of services rendered in resisting deficiency assessments against Woodruff for Federal income taxes for the year 1932 and previous years; in count two he sought to recover in quantum meruit for the value of services rendered in locating and recovering corporate stocks and accrued dividends; in count three he sought to recover the alleged agreed price for services in preparing certain income tax returns. In the first count it was alleged that the plaintiff was employed about February 23, 1935, and after performing services under the contract of employment until about July 30, 1937, he was discharged and prevented from completing his undertaking. The defendant denied the allegations and pleaded that he employed the plaintiff at $25 per day and tendered $850 he admitted owing on that basis. The jury returned a verdict for $15,000 on the first count, $5,000 on the second, and $750 on the third. Woodruff filed a motion for a new trial. Pending the motion the judge who tried the case died and was succeeded by one of Woodruff's counsel. The case was, therefore, referred to the Honorable C. W. Worrill of the adjoining circuit, who granted a new trial on all counts. This judgment was reversed for technical reasons. Trost v. Woodruff, 70 Ga.App 219, 27 S.E.2d 884. The case was again considered by Judge Worrill and a new trial denied. Woodruff excepted to the refusal of a new trial and also to the overruling of two motions for a nonsuit. Upon the death of the defendant in error his executrix was made a party in his stead.

Powell Goldstein, Frazer & Murphy, of Atlanta, Swift, Pease, Davidson, Swinson & Chapman, of Columbus, and Weekes & Candler, of Decatur, for plaintiff in error.

Foley & Chappell, Forrest L. Champion, and Samuel Edward Kelly, Jr., all of Columbus, and J. F. Terry, of Cuthbert, for defendant in error.

FELTON Judge.

1. The evidence in this case covers about 300 pages. To quote it at length would confuse the reader rather than enlighten. As deduced from the pleading and the evidence of the plaintiff a recovery was sought by him on the first count on the theory that the value of the services rendered as a whole was the value of the work done by the plaintiff plus other sums to be determined by how much money the plaintiff's services saved or helped save the defendant. In paragraph 8 of the plaintiff's petition he alleges: 'The United States relieved defendant entirely of the additional income tax assessment for the year 1931 in the sum of $96,939.66 but defendant, without waiting for an adjudication on tax assessment for the year 1932 in the sum of $57,667.53 entered into a compromise settlement and adjustment of the same with the United States Government, the amount of such settlement and compromise being unknown to the plaintiff, but the same was advantageous to defendant because of plaintiff's services aforesaid.'

After a careful study of the evidence we have concluded that there is not sufficient evidence to support the jury's finding either on the theory that the actual work done was worth a particular amount, or that the results obtained were worth a particular amount or that both combined were worth a particular amount. The evidence does not show how many days the plaintiff worked nor the amount of work performed. Neither does it show how the plaintiff's work affected the final outcome of the income tax case. While the plaintiff was employed by the defendant on other work and for which he has been paid, it was discovered that the defendant had failed to report in his Federal income tax return the sale of 6,000 shares of Coca-Cola stock in 1931 and 4,000 shares in 1932, which fact was immediately brought to the attention of the tax authorities. These omissions and the transfer to Mr. Woodruff of 800 shares of the stock of a corporation in which he owned practically all of the stock necessitated a reworking of the records of Woodruff for the years in question. The plaintiff testified that about March 16, 1935, Mr. Woodruff employed him to do this reworking of the records on the basis of 'accounting work' and not on the basis of $5 per hour as he had been employed during the period from February 23 to March 16, 1935. Plaintiff began work under this agreement about March 16, 1935, according to his testimony. The government was examining Woodruff's 1932 income tax returns at this time under a routine check-up as the statute of limitations had not run against this year nor had the question of fraud arisen which would have permitted an investigation of the returns for that year or any previous year had fraud been charged by the government against Woodruff. The return for 1931 was, of course, barred by the statute of limitations unless the government asserted fraud. Since there had been a failure to report the sale of the 4,000 shares on the 1932 return and the identical failure to return the sale of 6,000 shares in 1931, it was Mr. Trost's opinion that Mr. Woodruff should get the government to settle 1932 by Woodruff's paying the deficiency for 1932 caused by the failure to report the sale of the 4,000 shares as income for 1932 and thereby eliminate the question of fraud for 1932, thereby placing the government in the position that having failed to assert fraud for 1932, it could scarcely assert fraud for 1931 where the taxpayer had, in making his return, done exactly the same thing; and thus having eliminated the question of fraud, the only basis upon which the government could re-open and investigate returns for years barred by the statute of limitations, all years prior to 1932, would be forever closed to the government. The government received a letter from Mr. Woodruff agreeing to pay $27,000 additional tax for 1932. This consent on the part of Woodruff was later refused and all efforts to settle for 1932 without a re-examination of 1931 were in vain. In the interim Mr. Trost had discovered the case of Koshland v. Helvering, Commissioner, 298 U.S. 441, 56 S.Ct. 767, 80 L.Ed. 1268, 105 A.L.R. 756, which he thought relieved Mr. Woodruff of all the extra assessment for 1932 and Mr. Woodruff withdrew his consent to pay the $27,000 assessment for 1932. It was Trost's opinion that if 1932 was settled and 1931 not re-examined the government would be precluded from examining previous years in which Trost stated there was much income unreported. As we have said, his effort to work out this method of procedure availed nothing. As a consequence a 90-day letter was issued by the government which in effect made an extra assessment for 1931 of $64,626.44, principal and $32,313.22, penalty, and for 1932, $38,445.02, principal, and $19,222.51, penalty, plus interest as provided by law. This was consented to by Woodruff, the plaintiff, and Woodruff's attorney. Woodruff then discharged his Washington, D. C., attorney and the plaintiff and employed a law firm in Atlanta to handle the case.

The case was settled on the basis that there was no tax due for 1931. The 1932 tax was settled for an additional payment of $30,000 tax due, $1,500, representing a 5% negligence penalty, and interest on the $30,000 tax from the date due totalling approximately $41,000. The evidence showed that Mr. Woodruff's 1931 return showed a loss of $200,000. According to the method of reporting sales of stock made by Mr. Trost if the sale of the 6,000 shares in 1931 was added there still would have been a loss shown for the year. There is no evidence that he identified any of the 6,000 shares which were not reported in 1931, or the 4,000 shares not reported in 1932. Nor did his opinion that the Koshland decision would wipe out the 1932 assessment prevail. It was shown by the witness Kane, a member of the law firm which finally adjusted the case, that he (Kane) identified 1,900 shares sold in 1931 as a result of which there was a loss on these sales when the computation as made for that transaction by Trost showed a profit of about $190,000. It is not shown whether this correction had any effect on the finding that no tax was due for 1931. There is no evidence showing that Mr. Trost did anything material to effect a reduction of the taxes assessed such as to authorize any such verdict as that rendered, other than his accounting work for which he was paid by Mr. Woodruff. He was entitled to remuneration for his work, but this remuneration cannot be based on the...