author: SPARKS, Circuit Judge.

text:
    UNITED STATES v. TYRAKOWSKI.
    No. 4469.
    Circuit Court of Appeals, Seventh Circuit.
    May 27, 1931.

      George E. Q. Johnson, U. S. Atty., and Joseph A. Struett and Thomas Dodd Healy, Asst. U. S. Attys., all of Chicago, Ill.
    Charles Hudson and W. J. Doyle, both of Chicago, Ill., and Frank C. Wade, of Terre Haute, Ind., for appellee.
    Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.
   SPARKS, Circuit Judge.

Appellee, while in active service during the World War, was granted war risk term insurance in the amount of $10,000-, payable, in the event of death or total permanent disability occurring while the contract was in force, in monthly installments of $57.50. He was discharged from service July 14, 1919, and premiums were paid on the policy to and including July, 1919, but none were after-wards paid. The policy therefore lapsed, unless appellee became totally and permanently disabled on or before August 31,1919.

Appellee, filed the complaint in this action on January 2, 1929, in which he sought to recover on the policy for a total permanent disability which he alleges occurred to him on or prior to August 31,1919.

The government by its answer admitted the issuance and delivery of the policy and the payment of the premiums as above stated, but in effect denied the other allegations of the complaint. By written agreement of the parties, the cause was submitted to the court for trial without a jury.

At the close of appellee’s evidence, and also at the close of all the evidence, appellant filed a written motion for the court to find the issues for appellant on the ground that there was no substantial evidence to justify any other finding. The court overruled eaeh of such motions, and appellant separately excepted to such rulings, and thereupon the court rendered judgment for appellee. The only issue in controversy in the trial was whether or not appellee was totally and permanently disabled on or before August 31, 1919. The court, in rendering judgment, found that he was thus disabled on the date of his discharge, July 14,1919', to which finding and judgment of the court appellant excepted, and prosecutes this appeal.

In considering the subject of war risk insurance, all reasonable presumptions must be indulged in favor of the insured; but it must also be borne in mind that the basis of this action is a contract, and the parties’ rights are governed by its terms. If appellee is entitled to recover in this action, it must be on the theory that the government is liable to him on the contract, and the burden was upon him/ in the trial court, to prove by a preponderance of the evidence that he had brought himself within its terms. United States v. Le Duc (8th C. C. A., March 19, 1931) 48 F.(2d) 789. The District Court having found that appellee was totally and permanently disabled on or prior to August 31, 1919, the only question before us is whether or not there is any substantial evidence in the record which supports such finding.

Pursuant to section 13 of the War Risk Insurance Act (49 Stat. 399, as amended by Act May 20, 1918, § 1, 49 Stat. 555), the Treasury Department issued Treasury Decision Ho. 29, defining the term “permanent and total disability” as follows: “Any impairment of mind or body which renders it impossible for the disabled person to follow continuously any substantially gainful occupation shall be deemed, in Articles III and IV, to be total disability. Total disability shall be deemed to be permanent whenever it is founded upon conditions which render it reasonably certain that it will continue throughout the life of the person suffering from it.”

In United States v. Phillips (C. C. A.) 44 F.(2d) 689, 691, it was said: “The term 'total and permanent disability’ does not mean that the party must be unable to do anything whatever; must either lie abed or sit in a chair and be cared for by others. The test laid down in the cases is well stated in United States v. Sligh (C. C. A.) 31 F.(2d) 735, 736, as follows: 'The term “total and perma-' nent disability” obviously does not mean that there must be proof of absolute incapacity to do any work at all. It is enough if there is such impairment of capacity as to render it impossible for the disabled person to follow continuously any substantially gainful occupation.’ ”

In order for appellee to recover, it was not necessary for him to prove that such disability occurred while he was serving in the war, nor that it was occasioned by such services. It is sufficient if it occurred from any cause prior to lapse of his policy at midnight on August 31, 1919. On the other hand, the policy does not cover any total permanent disability which began after August 31, 1919, even though it was caused by his service in the war.

It appears from appellee’s testimony that he enlisted on July 26, 1918, and while in France he was kicked in the chest by a horse, and suffered continually from this, on several occasions spitting blood. He was given something to rub on the bruise, and continued his activities. He weighed 159 pounds when he enlisted. He was discharged June 14,1919, at which time his physical condition was poor, he was becoming weak, had pain in solar plexus, felt dizzy, and had a cough. He went home to his parents, but did no work because he could not, as he had a pain in his chest and was weak. The first doctor he consulted was Dr. Buchanan on July 28, 1919, who referred him to the Veterans Bureau, but he did not go there until in 1924. In the meantime he did light work in the city, but not continuously, because they laid him off,, and told him he was not able tov work, and he could not work because he was weak and had a pain in his chest. He next consulted a Dr. Keetlie in 1924, who referred him to the Veterans Bureau, and he went to one at Milwaukee, where he was advised to go home. He did so, and tried to work and help his folks, but could not, as he was sick, dizzy, and had a pain. He next attempted to call on a doctor, in 1927, at the Veterans Bureau, but was not examined. After calling there on two consecutive days, and not being able to see a doctor, he became disgusted and never returned.

Appellee worked at intervals from the date of his discharge until 1927. He worked at a mechanical laundry for about eight months, off and on — about three days a week for about four months — at $39 a month, but could not work continuously because he had a pain and became weak and dizzy. For the last three months he was kept on the pay roll but did not work. He worked for his brother-in-law in 1927 for about two weeks, taking care of his garage, but could not stand the work on account of the gas choking him. He also worked twice a week for three months for his father in a butcher shop, but was ordered by the board of health to stop working there. He has not attempted to work since February, 1939. He is not so strong now as he was when discharged from war service. He is weak, has dizzy spells, and pain in his chest. His normal weight is 154, but he now weighs 125 pounds.

On cross-examination appellee testified that he went to his parents on a farm in about 1922, and remained there until 1925, and tried to help them. He did not work all day every day, but tried to work whenever there was work for him to do. He helped with the threshing, and went out and loaded his own load and brought it in and pitched it to the machine. His family was engaged in killing cattle and selling them to the Chicago market. He helped them part of the time and tried to work off and on. After leaving the farm, he tried to get a position as street car conductor, but failed, and stayed at home and did odd jobs. He cut meat and tended shop for his brother, who was a butcher. He was employed in the Post Office Department from July 19,1927, to September 39,1927, but not full time — was there each working day but did not work every day. After leaving his brother-in-law’s garage, he could not recollect where he had worked. He started working in his father’s butcher shop after 1928, and worked for the laundry company in 1926 for a period of about seven months, at $39 a month. His occupations before he went into military service were butchering and farming, and those were most of his occupations practically continuously since he left the Army, except when he moved to Chicago. He did work on a farm in 1929. He had no scar on his chest, and never had, because the horse that kicked him was not shod.

Appellee introduced the report of his physical examination made by the United States Veterans Bureau on August 14, 1922, following his application for compensation, filed on August 8,1922, on account of broken ribs caused by the kick of a horse while in France. The subjective symptoms, but not the diagnosis, shows that he was short-winded, unable to take a deep breath, and had a pain in his left chest on stooping. The report further shows that he had not been sick since his discharge, that he had worked as farmer since July, 1929, and that he did not work from the date of his discharge until July, 1920, because he did not care to work. The examination showed negative for tuberculosis; healed bruise on left chest; distinct excess of peribronchial thickening; heart of drop type, normal in size, shape, and position. The diagnosis was ehronie mitral regurgitation, but well compensated. It was the opinion of the examiner that claimant was unable to resume his prewar occupation on account of his heart.

Appellee also introduced the report of his physical examination made by the United States Bureau on June 19, 1925. The subjective symptoms, but not the diagnosis, show shortness of breath, sleeplessness caused by pains in chest, occasional night sweats, poor appetite, expectoration of bloody sputum after working hard, and occasional cough. The examination shows no external evidence of trauma on chest, and no distortion of outline of ribs or sternum. The diagnosis was mitral insufficiency, very well compensated, and chronic bronchitis.

A letter from the United States Veterans Bureau at Milwaukee, bearing date of January 30, 1925, was introduced in evidence by appellee relative to his claim, filed on August 8,1922, for compensation for chest disability and broken arches, in which the writer states that a eareful examination of the Adjutant General’s office records does not show that ap-pellee was ever treated for any disease of such nature while in service, but that an examination of him on August 14, 1924, shows a healed bruise on left chest, valvular heart disease, and mitral regurgitation.

Dr. Buchanan, appellee’s physician, examined him on July 28, 1919. He heard the history of the case as related by appellee, and noted a depression on left side of chest and a bulge on the right side, also a sear which showed an injury. He examined appellee casually on May 28, 1939, the morning of the trial, and said he looked thinner and paler and not so good as in July, 1919. Based on this information, witness stated that it would then be injurious for appellee to work at indoor or hard work, and that such condition most likely existed since his first examination on July 28, 1919, although he did not really know.

Dr. Eales, appellee’s witness, testified that he examined appellee on May 25, 1939, and found a bulged sternum with a depression on the left side which looked like the result of an old injury; some rales; and one degree of temperature, which was the result of some lung condition, but no spots on the lungs. Such conditions, he testified, can be acquired by common cold or infected throat. He examined the throat only externally, and made no examination for tuberculosis; and he stated that he thought it impossible now for ap-pellee to do manual labor without injury.

Dr. Du Bois, another of appellee’s witnesses,' testified that he examined appellee on May 27, 1939, and he appeared thin, with sunken face, but that his general appearance was fairly good. His heart,showed organie valvular condition and regurgitation, but this condition could not result from traumatic causes, and witness was unable to tell how long such heart condition had existed. The witness found the lungs and abdomen negative, except tenderness and rigid rectal mus-cíes. He made no positive scientific diagnosis, due to lack of time. There was no scar on the sternum, and the depression, in his opinion, was congenital. His diagnosis was gastro duodenal ulcer, probably of long standing, but he did not say how long, and he could not state definitely whether such ulcer could result from traumatie causes, though he had never known of such a case. He testified that appellee could not now do physical labor on account of his heart and stomach.

Appellee’s witness James testified that he employed appellee in May, 1926, to work for Mechanics Laundry & Supply Company at $25 a week, and the employment continued until one or two weeks before Christmas of 1926; that appellee’s work was satisfactory while he was there, and he averaged working about three days a week, and that, when he worked, he did his work all right; that, if he had heavy work, he would be away two or 'three days afterward; that he had never looked well since witness knew him; that sometimes he worked two or three weeks at a time without laying off, but once he was off for six weeks; and that witness finally let him go on account of his absences.

Witness Tafel, a brother-in-law of appel-lee, was an automobile dealer. He testified that he employed appellee as a mechanic at $30 a week from 1927 to 1928, but docked him when he was not there. Appellee was away from two to three days a week, and complained of sickness and could not eat, and could not work at times on account of sickness.

Mrs. Tafel, a sister, testified that appellee was in good physical condition when he enlisted ; that she saw him the second day after his discharge, and his physical condition was poor and he had no appetite; that he had worked off and on since his discharge.

The only direct evidence on appellee’s condition on July 31,1919, is that of himself, his sister, and Dr. Buchanan. That of the two witnesses last named is almost negative in its effect. The only question presented to us is whether or not there was substantial evidence submitted to the effect that appellee was totally and permanently disabled on or before July 31, 1919. We think appellee’s testimony alone prevents us from answering this question in the negative, in view of the Treasury Department’s definition of total disability. It is true he has made conflicting statements in his testimony, in his discharge, and in his statements made at the times of his applications for compensation. Which, if any, axe true, is not within our province to decide. Those matters were questions of fact for the trial Court. lYom the date of his discharge, we find him making practically the same complaint as to pain and suffering, and the doctors are not entirely agreed as to his ailment. He testified positively that he was not able to work continuously, and for that reason he was unable to hold a position for any appreciable length of time. The fact that he worked at many different places and occupations in some degree supports this statement.

We do not wish to be understood as saying that the allegations of the complaint were proved by a preponderance of all the evidence, for that was a matter for the trial court to decide; but we do say that appellee’s testimony constituted substantial evidence of his total disability. The term “substantial evidence” is not used in the sense of reliability, but rather in contradistinction to the term “scintilla of evidence.” His evidence cannot be disregarded, although it is not such as to inspire complete confidence. Practically all the evidence' except his own deals with his condition at a much later date than August 31, 1919. It was competent as bearing on the matter of permanency, and must be considered as substantial. It is true the doctors were not perfectly agreed in their diagnoses, but the combined diagnoses show that, at the time of the trial, appellee was suffering from valvular heart trouble, chronic bronchitis, and duodenal ulcer, and that he was unable to follow continuously any substantially gainful occupation. Of course, they do not attempt to say that these diseases, or any of them, were present on August 31, 1919, nor do they say that they were or could be caused by the kick of a horse in the abdomen — indeed, one of his own physicians said such a blow could not cause the heart trouble, and he had never heard of a duodenal ulcer being caused in that manner. But, regardless of the doctors’ testimony, appellee says that he was suffering on the trial date in the same manner, but in a greater degree, as he was on August 31, 1919. He does not attempt to classify his disease by name, and it is not necessary for him to do so. Neither is it necessary for him to.trace its cause. He says that he thinks it was caused by the kick, of course, and the evidence hardly supports this statement; but, regardless of this contradiction, his testimony shows that he was suffering from something at the time of his discharge, regardless of its name or cause, and there is evidence tending to show that the disability was total and permanent, and we are compelled to hold that such evidence amounted to more than a scintilla and was substantial, regardless of what our views may be as to its weight and reliability.

While realizing that the evidence is not as convincing as we might wish or as we might require if we were the trier of the facts instead of a reviewer of the trier’s facts, yet we cannot say under this record that there is no substantial evidence to show that insured was so disabled prior to August 31, 1919, that he could not follow continuously any gainful occupation. That is the test. United States v. Phillips (C. C. A.) 44 F.(2d) 689; United States v. Eliasson (C. C. A.) 20 F.(2d) 821; United States v. Cox (C. C. A.) 24 F.(2d) 944; United States v. Sligh (C. C. A.) 31 F.(2d) 735; United States v. Schweppe (C. C. A.) 38 F.(2d) 595.

Where a ease is tried by the court without a jury, its findings upon questions of fact are conclusive. It matters not how convincing the argument is that upon the evidence the findings should have been different. Stanley v. Supervisors of Albany County, 121 U. S. 535, 7 S. Ct. 1234, 30 L. Ed. 1000; Dooley v. Pease, 180 U. S. 126, 21 S. Ct. 329, 45 L. Ed. 457.

A review for lack of substantial evidence to support the findings and judgment must be preceded by motion for judgment on that ground. Fed. Intermediate Credit Bank of Omaha v. L’Herisson (C. C. A.) 33 F.(2d) 841. Such a motion was made in this case.

Appellant contends that the court erred in permitting Dr. Buchanan, to testify as to whether or not appellee, on May 28, 1930, was able to follow continuously a substantial, gainful occupation without injuring his health, on the theory that he was asked to base his answer, not only on his examinations, but also upon the history of the case and subjective symptoms. It was the first examination by Dr. Buchanan on July 28, 1919, at which the history of the ease was given. That examination was not made for the purpose of testifying as an expert, but rather as the treatment of a patient, and in such event the declarations of the patient are admissible. Greinke v. Chicago City Ry. Co., 234 Ill. 564, 85 N. E. 327.

Judgment affirmed.


source: Caselaw Access Project

author: FOSTER, Circuit Judge.

license: Public Domain

text:
    ABRAHAM et al. v. WICHITA PETROLEUM CO. et al.
    No. 5971.
    Circuit Court of Appeals, Fifth Circuit.
    June 12, 1931.
    Rehearing Denied July 20, 1931.
    T. R. Boone and J. A. Lantz, both of Wichita Falls, Tex. (J. R. Wilson, of Wichita Falls, Tex., on the brief), for appellants.
    Conard E. Cooper, of Tulsa, OH., and Tarlton Morrow and Geo. L. Kelly, both of Wichita Falls, Tex., for appellees.
    Before FOSTER, Circuit Judge, and HUTCHESON and SIBLEY, District Judges.
   FOSTER, Circuit Judge.

This suit was originally brought by appellants in a state court against six corporations, including the Wichita Petroleum Company and the National Petroleum & Refining Company, and was removed to the District Court. Later on, the Turman Oil Company, having acquired certain rights from the Wichita Petroleum Company pendente lite, was made a party defendant. By dismissal and a consent judgment, four of the original defendants passed out of the ease, while it was pending in the state court, leaving the final decision between appellants, Earl Abraham and the Petroleum Development Company, and appellees, the Wichita Petroleum Company, the Turman Oil Company, and the National Petroleum and Refining Company.-

The pleadings are voluminous, taking up about 129 pages of the printed record, but the issues may be briefly stated.

, In 1868 a tract of land in Wichita county, known as survey No. 820 and containing 960 acres, was patented to the heirs of Lewis Powell by the state of Texas. By two deeds, dated respectively July 15, 1889, and December 1, 1900, T. P. Roberts acquired part of this tract from Herm Specht. The deeds described the land by metes and bounds and respectively purported to convey 348 and 160 acres, a total of 508 acres. The patent and deeds to Roberts referred to the south bank of Red river as the northern boundary. In 1918 oil was discovered in the vicinity, at Burkbumett. In December, 1918, one Sam Sparks made a mineral filing and obtained a permit from the state of Texas to prospect for oil between the northern line-of the Lewis Powell survey and the south bank of Red river. In February, 1919, Roberts had made and filed of record a plat of his property, designating it as the T. P. Roberts subdivision of the northern 514 acres of the Lewis Powell survey No. 820. The plat divided the .property into eight blocks, running between parallel lines due north and south, and numbered from 1 to 8, with varying acreage. The northern boundary shown on the plat is a straight line, running at an angle of approximately 65 degrees, connecting the eastern and western boundaries. This plat did not show the river nor mention it as the northern boundary, did npt show the starting points of the boundaries nor give any data by which it could be located on the ground. After filing the plat of record, Roberts entered into an oil and gas lease, on November 19, 1919, with the Petroleum Development Company for the northern 20 acres of block No. 8. According to the plat, block No. 8 contained 123.7 acres. This lease was acquired by Abraham before the institution of the suit. There was left between the northern boundary of Roberts’ subdivision, as shown by the plat, and the south bank of Red river, a strip approximately 100 feet wide. Roberts, in connection with others, executed oil leases to this strip and they were acquired by the Wichita Petroleum Company, the National Petroleum & Refining Company, and the General Oil Company. The rights of Sparks were also acquired by the General Oil Company, and subsequently the National Petroleum & Refining Company acquired the rights of the General Oil Company. By virtue of these leases three oil wells, which may be designated as Nos. 169, 170, and 172, were drilled and developed on the strip. The strip was part of the disputed territory involved in the boundary suit between Oklahoma and Texas, filed in the Supreme Court of the United States in 1920. See 252 U. S. 372, 40 S. Ct. 353, 64 L. Ed. 619; 253 U. S. 465, 40 S. Ct. 580, 64 L. Ed. 1015; 40 S. Ct. 582; 256 U. S. 70, 41 S. Ct. 420, 65 L. Ed. 831; 256 U. S. 602, 41 S. Ct. 539, 65 L. Ed. 1115. In that ease a receiver was appointed and all parties claiming any interest in the lands or wells thereon were allowed to intervene. Appellees or their officers or agents intervened and appellants did not. Eventually, the possession of the wells was turned over to appellees by the federal receiver. Appellants delayed some eight years after the notorious possession of ap-pellees before filing suit. In the meantime Roberts had died and was not available as a witness on the trial. These facts are apparently undisputed.

Appellants’ cause of action is based on the assumption that its title to the 20 acres of land out of block No. 8 extended to the Red river as its northern boundary. Their petition alleged trespass by appellees and the conversion of the oil taken from the wells. The prayer was for a judgment for possession of the land and for damages for the oil extracted. The fixing of these damages, under the allegations of the petition, would necessarily involve an accounting.

Appellees pleaded not guilty to the trespass, set up title in themselves, and alleged that the claim of appellants constituted a cloud upon their title. They also set up es-toppel, based principally on the proceedings in the Supreme Court and delay in filing suit, and pleaded the statute of limitations of three years. Their prayer was for removal of the cloud upon their title and a judgment quieting them in their possession.

The ease is somewhat complicated. Notwithstanding the equitable action for accounting shown, it was brought at law, equitable defenses were raised by the answers, and the defendants prayed for equitable relief. It appears, however, that on motion of the defendants, to which plaintiffs did not object, the case was transferred to the equity side, and it was also stipulated that the jury be waived and any questions of law arising should be determined by the judge. In this situation we think we may consider the ease on the record, without regard to technical errors and defects therein appearing not affecting the rights of the parties. Section 269, Judicial Code (28 USCA § 391). It is unnecessary to consider the assignments of error in detail.

The case presents purely a question of fact. There were no motions for judgment on either side; the court declined to make special findings of facts and entered a judgment equivalent to a general verdict. The court heard the witnesses in open court and, as appears by a memorandum opinion in the record, reached the conclusion that appellants had failed to establish that their lines ran to the river as the northern boundary of the land and that they had in fact received all they bought and paid for. He therefore dismissed the suit as to plaintiffs. He also held against defendants'on their cross-action and declined to enter a judgment quieting their title. As to this appellees are not complaining as they have not taken a cross appeal.

There was considerable conflict in the testimony and it would be useless to review it extensively. While the patent and the deeds to Roberts’ property mention the river, three surveyors who testified were unable to agree in fixing the northern comers of either the patent, deeds, or plat. However, all of them agreed that the comers were considerably south of the river bank. Based on a clear preponderance of the evidence, there is no doubt that the northern boundary of the subdivision plat neither conforms to the river nor the northern line of the patent. From a preponderance of the evidence, the presumption is very strong that while Roberts considered the river to be his northern boundary, he deliberately excluded it in making the plat and that he had no intention of conveying to appellants any more than 20 acres as shown by the plat. If appellants had leased the whole of block No. 8, their contention would be stronger; but as the block contained over 123 acres, it was very easy to carve out the northern 20 acres without the necessity of extending it to the river.

We think the conclusion reached by the District Court is supported by a clear preponderance of the evidence before him, and that the judgment appealed from must be affirmed.


author: SIMONS, District Judge.

text:
    UNITED STATES v. SCOTT.
    No. 5775.
    Circuit Court of Appeals, Sixth Circuit.
    June 9, 1931.
    David Hanover, of Memphis, Tenn. (Lindsay B. Phillips, of Memphis, Tenn., James T. Brady and Bayless L. Guffy, both of Washington, D. C., and J. M. Nixon, of Nashville, Tenn., on the brief), for the United States.
    Geo. J. Coleman, of Memphis, Tenn., for appellee.
    Before DENISON and HICKS, Circuit Judges, and SIMONS, District Judge.
   SIMONS, District Judge.

Suit upon an insurance contract issued under the War Risk Insurance Act. From judgment for plaintiff upon verdict, defendant appealed.

Appellee entered the army May 12,1917, was commissioned second lieutenant on August 16th of the same year, and discharged as first lieutenant November 30,1918, by reason of demobilization. While in the military service of the United States, he was granted a contract of war risk term insurance in the sum of $10,000, payable to him in monthly installments of $57.50 in the event he became permanently and totally disabled while the contract was in force. No premiums were paid on the contract subsequent to plaintiff’s ■discharge, and, allowing for the days of grace for payment of premiums, the contract expired at midnight on January 1,1919, unless the plaintiff became permanently and totally disabled before that time. Petition alleges that, at the time of discharge, or immediately thereafter, the assured was permanently and totally disabled; that while serving in the army he contracted dementia praecox.

Regulation No. 11, promulgated by the Bureau of War Risk Insurance March 9, 1918, by, virtue of the authority conferred by section 13 of the War Risk Insurance Act (40 Stat. 399), defines “total disability” as “any impairment of mind or body which renders it impossible for the disabled person to 'follow continuously any substantially gainful occupation.” By the same regulation total disability is “deemed to be permanent, whenever it is founded upon conditions which render it reasonably certain that it will continue throughout the life of the person suffering from it.”

Proof was presented that at the time the plaintiff went into the Army in 1917 his physical and mental condition was good. He had been a student at Vanderbilt University, and a star football player. Upon his discharge from the Army on November 30,1918, changes were noted by those with whom he came in contact. He was nervous and not interested in anything. He would not answer questions coherently, and walked around ■without saying anything. At one time he became so hysterical that his mother called upon the cashier of the local bank for help. Dr. Lackey, who saw, him a week or ten days : after his return from the army, observed that he was not like his former self, that he did not want to talk to anybody, and would stand for a long time on the street and make faces and gestures; that he noticed him once out in the yard drilling, and concluded that he could not have pursued a gainful occupation. Two other physicians observed nervous symptoms of dementia praecox, which they recognized almost immediately after his discharge. One of them, Dr. Sanford, testified that he was nervous, his mouth twitched around to one side, and that his nervousness and facial expressions and characteristics were those of an insane person, and that it was his belief that Scott was insane at the time he saw him when he came back from the Army. Some time after his discharge Scott took a notion that he wanted to go to Alaska. He stayed in Alaska for several months, and then re- , turned on money furnished to him by his father; that he was no better, and probably worse, when he returned home. Some time thereafter he was taken by Dr. Sanford to Mayo Bros. Clinic at Rochester, Minn., for examination. The conclusion there reached was that he had dementia prteeox, and that it was incurable. Later Scott was admitted to the United States Veterans’ Hospital at Little Rock, Ark., and it is conceded by the defendant that from April 28, 1923, he has been permanently and totally disabled.

The only evidence produced by the defendant, in answer, was to the effect that the plaintiff had worked from January 1, 1920, to September 7, 1920, as a clerk at the United States Marine Hospital in New Orleans at a salary of $95 per month; that thereafter, from September 22, 1920, to June, 1921, he had been a student at Tulane University, New Orleans, and had obtained satisfactory grades in all subjects except mathematics.

The regulations defining permanent and total disability have been frequently construed by the courts. It has been held that ability to continuously follow a substantially gainful occupation implies ability to compete with men of sound mind and average attainments under the usual conditions of life, United States v. Cox (C. C. A.) 24 F.(2d) 944; that the words “total and permanent” as applied to disability do not necessarily imply an incapacity to do any work at all, United States v. Eliasson (C. C. A.) 20 F.(2d) 821; Angelle v. United States (C. C. A.) 31 F.(2d) 245; United States v. Acker (C. C. A.) 35 F.(2d) 646; that, while the burden is on the plaintiff to prove total permanent disability, and that such disability arose during the life of the policy, mere inability on his part to prove the exact time when the disability occurred, if it began during the life of the policy, is not fatal, La Marche v. United States (C. C. A.) 28 F.(2d) 828. It cannot be said that as a matter of law employment of a man of appellee’s training for nine months in a minor clerkship is conclusive proof that he is able to follow continuously a substantially gainful occupation.

It is urged that the court below erred in refusing to sustain a motion for a directed verdict, for the reason that there was no material substantial evidence to support the findings of the jury, and reliance is placed upon the ease of United States v. Cole, 45 F.(2d) 339, decided by this court November 7, 1930. The Cole Case was reversed because of deficiency in proof of the determinative features of the ease which might be supplied upon another trial. There was no such failure of proof in the case at bar. The fact issue was properly submitted to the jury, and there was substantial evidence to sustain its verdict.

Tbe remaining assignments of error are without merit. This court will not determine the weight of evidence nor the credibility of witnesses. The failure to give an instruction to the effect that there was no evidence that the plaintiff was.permanently and totally disabled within the definition of the regulation herein quoted would be error only if the court was in error for failure to direct a verdict in favor of the defendant. If the court was right in refusing to direct the verdict, it was right in refusing to give the instruction. We think the evidence of total and permanent disability within the life of the policy was substantial, and the judgment is affirmed.


author: MOORMAN, Circuit Judge.

text:
    LONG v. COMMISSIONER OF INTERNAL REVENUE.
    No. 5684.
    Circuit Court of Appeals, Sixth Circuit.
    June 10, 1931.
    Elwood Hamilton, of Louisville, Ky. (Woodward, Hamilton & Hobson, of Louisville, Ky., on the brief), for petitioner.
    Helen R. Carloss, of Washington, D. C. (G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, C. M. Charest, and Allin H. Pierce, all of Washington, D. C., on the brief), for respondent.
    Before MOORMAN, HICKS, and HICKENLOOPER, Circuit Judges.
   MOORMAN, Circuit Judge.

This case involves income and profit taxes of the Star Warehouse Company, a dissolved corporation, which were asserted against the petitioner, a former stockholder and a distributee of corporate assets. The questions presented on the record are: (1) Whether section 289 of the Revenue Act of 192-6 (26 USCA § 1969), under which the liability was asserted, is constitutional; and (2) whether for the taxable period, November 7,1919, to October 39,1929, the corporation was entitled to classification as a personal service corporation within the meaning of section 299 of the Revenue Act of 1918 (49 Stat. 1958). The first of these questions has been settled adversely to petitioner’s contentions by the decision of the Supreme Court in Phillips v. Commissioner, 51 S. Ct. 698, 75 L. Ed. -; the other requires a consideration of the proofs.

The Star Warehouse Company was incorporated in November, 1919, with a capital stock of $69,999, divided into 699 shares of the par value of $199 each. This entire capital was paid in and was used to purchase and equip a warehouse in Shelby county, Ky. The business of the company was selling tobacco for the raisers thereof on a commission basis. The stockholders were farmers and merchants residing in Shelby and adjoining counties. The selling season began in December and concluded about the middle of March. Sales were conducted in season as often as they were justified by the quantity of tobacco on the warehouse floors, usually twice a week. After the tobacco was brought to the warehouse and unloaded by. the owner, it was sorted, separated into grades, and sold at auction by the company. In order to do this, the company was required to employ a large force of men, including expert graders and auctioneers. Buyers were required to mate settlement and remove their tobacco by the end of the day, but, upon completion of a sale, the company, without waiting for the buyer to pay, issued its check to the seller for the sales price, ■deducting therefrom its commission of 80 cents per hundred pounds. This practice of paying the seller before the buyer paid, with pay rolls and other expenses, required considerable capital and necessitated the borrowing by the company of $30,000 from banks during the period here involved. Sales for that period were approximately $1,500,000, and commissions which the company earned amounted to $30,378.54. The fair rental value of the warehouse was $8,-000 a year.

From the foregoing facts the Board of Tax Appeals concluded that capital was a material income-producing factor in the business of .the company. We do not deem it necessary to determine whether it was or was not, but pass the question and examine the ease from the standpoint of the activities of the stockholders with respect to income. On this latter question other relevant facts are: There were nineteen original stockholders. ' Of this number eight held 480 shares of stock, each holding about 60 shares. Four of the eight were officers of the company; none of them'devoted his whole time to its business. Petitioner was secretary and treasurer in charge of the books with an assistant. His principal business, however, was farming. Other stockholders having a smaller number of shares of the stock were farmers or farmers and merchants combined. All the stockholders solicited business for the company from their neighbors. What time they spent in doing so does not appear, but it is admitted that even during the tobacco seasons each of them carried on his regular business. It further appears that the company employed from ten to twenty warehouse laborers, depending on the volume of business, an office force consisting of three calculators, a bookkeeper, and the petitioner; that the tobacco was graded by expert graders, twenty-five in number, who were employed by the company; and that the auctioneers were also employed by the company.

The term “personal service corporation” means, among other things, according to the statute, a corporation whose income is to be ascribed primarily to the activities of the principal owners or stockholders who are themselves regularly engaged in the active conduct of its affairs. It is, of course, not necessary that the principal owners devote their entire time to the business of the company, but the income must nevertheless “be ascribed primarily” to their activities. In insisting that this test is met by the proofs in the present case, the petitioner asserts that the only services which the company rendered its patrons, besides those rendered by the stockholders, were such as are ordinarily rendered by laborers and nonexpert clerical employees. No evidence was offered to support this contention and we cannot accept it as established. Nor can we agree that the skill of the graders was not a material factor -in producing income, for naturally the farmer who had tobacco to sell would select the warehouse where it could be sold at the highest prices, and quite as naturally, too, a buyer who knew that the tobacco had been carefully inspected and graded would bid without making allowance for errors or mistakes as he would not do if the graders were not competent. It is probably true that to begin with sellers brought their tobáceo to the warehouse through the solicitation of stockholders, but it is unreasonable to suppose that they would have continued to do so unless the grading and selling were satisfactory.

Counsel for petitioners rely upon Shipley School v. McCaughn (C. C. A.) 34 F.(2d) 281, and New Orleans Shipwright Co., Ltd., v. Commissioner (C. C. A.) 27 F.(2d) 214. We think these cases inapplicable. In the first the two principals owned the entire capital stock and gave their entire time to the school, and in the other the business was procured by virtue of the relationship of the owners to the ship lines, the employees being clerks or manual laborers requiring no expert skill. To be “regularly engaged in the active conduct of its [the company’s] affairs” means something more, it seems to us, than merely asking one’s neighbors, as occasion arises or as one’s regular business permits, to patronize the company, leaving it to others to perform the services upon which the success of the business must ultimately depend. Skillful grading and selling were the most important work done in connection with the warehouse company’s business, and in our opinion the services o£ the graders and auctioneers, expert in character,* were a material factor in obtaining business for the company and producing its income. In this particular the ease is similar to the Blair Case, where it was held that the teachers employed by the college were such a necessary, factor in the institution as to preclude the ascription of the income primarily to the activities of the owners. See, also, Hubbard-Ragsdale Co. v. Dean (D. C.) 15 F.(2d) 410; Id. (6 C. C. A.) 15 F.(2d) 1013; Prey Bros. Live Stock Commission Co. v. Commissioner, supra.

The order is affirmed.

       In support of this ruling, the Commissioner cites, among other eases, Met. Business College v. Blair (C. C. A.) 24 F.(2d) 176; Prey Bros. Live Stock Commission Co. v. Commissioner (C. C. A.) 36 F.(2d) 326; Medaris Co. v. Commissioner, 38 F.(2d) 812 (6 C. C. A.); and Franciscus Realty Co. v. Commissioner (C. C. A.) 39 F.(2d) 583. In opposing it, petitioner relies, among other authorities, upon Strayer’s Business College v. Commissioner (C. C. A.) 35 F.(2d) 426.


text:
    COMMISSIONER OF INTERNAL REVENUE v. BRIER HILL COLLIERIES. BRIER HILL COLLIERIES v. COMMISSIONER OF INTERNAL REVENUE.
    Nos. 5634, 5651.
    Circuit Court of Appeals, Sixth Circuit.
    June 9, 1931.
    Andrew D. Sharpe, of Washington, D, C. (G. A. Youngquist, Atty. Gen., and Se-wall Key, C. M. Charest, and Prank M. Thompson, all of Washington, D. C., on the brief), for Commissioner of Internal Revenue.
    Prank P. Nesbit, of Washington, D. C., for Brier Hill Collieries.
    Sidney P. Simpson, of New York City, amicus curias.
    Before MOORMAN, HICKS, and HlCKENLOOPER, Circuit Judges.
   MOORMAN, Circuit Judge.

These cases involve income and profit taxes of the Brier Hill Collieries, which owns and operates coal mines in Overton county, Tenn. In No. 5634 the Commissioner seeks a review of the decision of the .Board of Tax Appeals allowing capital depletion at the rate of 10 cents per ton of coal mined. No.. 5651 is an appeal by the taxpayer from the decision of the Board (1) excluding from ini vested capital a part of the property paid in; to the taxpayer in exchange for its capital stock, and (2) holding that amounts expended for steel rails, mine cars, switches, and' trolley wires for the mines were,- not deductible as operating expenses.

In case 5634, the Commissioner allowed depletion for the years 1918 to 1923, inclusive, at the rate of 3.1 cents per ton of coal mined. The Board of Tax Appeals concluded “from all the evidence submitted” that the rate should be 10 cents per ton of coal' mined; The Commissioner contends that this coneliri sion of the Board is not supported by the evidence. Both parties agree that the capital value is to be determined as of March 1, 1913. The main witness as to value' as of that date was C. D. Clark, an engineer of wide experience in appraising values of coal properties, who testified that some of the properties in the section where this property was situated were leased in 1913 for more than 10 cents per ton royalty and others in 1920 for 20 cents a ton and higher. ..The acreage here in question had been partially developed on March 1, 1913; spur tracks had been built; and'the coal was above tile average in value. Clark thought that the property could hav.e been leased .at that time, upon a royalty basis of 15 cents or 20 cents a ton. Other evidence fixed as nearly as possible the tonnage then in the property, as well as the probable length of time that it would require, under normal operations, to exhaust it.

It is of course true that the probable rental rate as of March 1, 1913, is not the measure of the depletion rate for subsequent years, since, even if the mines had been leased, the value of the coal in place would have to be arrived at by reducing the royalties to be received to their worth as of thó basic date. Reineke v. Spalding, 280 U. S. 227, 50 S. Ct. 96, 74 L. Ed. 385. Lacking evidence of saleable value, the royalty rates at which the property could have been leased afford perhaps the most dependable basis for determining capital value. There is notliing-in the record to indicate that the rates testified to by Clark were too high, and the Commissioner does not attack the decision of the Board upon the ground that there was error in reducing them to their value as of March 1,1913. Whether the Board used them as the basis of its decision does not appear, but, in the absence of a showing that they were incorrect, the Board was justified in discounting them to the basic date and determining the value accordingly. Assuming that it did so, we find no reason for disturbing its finding.

Case No. 5651 involves taxes for 1918, 1919, and 1920. For each of. those years the Commissioner and Board disallowed an item of $50,319.93 claimed by the taxpayer as a part of its invested capital. The claim was based on the following facts: The taxpayer was organized in 1904, and in October of that year issued its capital stock in exchange for the assets of the Crawford Coal & Iron Company, assuming its debts and liabilities. The assets of the Crawford Company consisted of coal and timber lands and also certain personal property used at its mines. The personal property, as carried on the books of the Crawford Company, exceeded the liabilities of that company by more than $50,000. In taking over the property, the taxpayer credited this excess to capital on its books. The Board disallowed it as a capital item. We reach a different conclusion. The Board has frequently held that the balance sheets of predecessor and successor corporations are evidence of asset values. Fidelity Storage & Warehouse Co., 2 B. T. A. 371; Munising Motor Co., 1 B. T. A. 286; Northeastern Oil & Gas Co., 5 B. T. A. 332. Not only did the books of the Crawford Company show these values, but the same items at the same values were transferred to the books of the taxpayer upon the taking over of the properties. Nothing appears in the evidence from which it is to be inferred that the books of either company did not show, as they purported to do, the true value of the assets. In this situation we think the Board should have accepted the book values. Newton v. Consolidated Gas Co., 258 U. S. 165, 42 S. Ct. 264, 66 L. Ed. 538. Kings County Lighting Co. v. Nixon (D. C.) 268 F. 143.

The other question presented in case 5651 relates to expenditures for steel rails, mine cars, switches, and trolley wires to be used in operating the mines. These expenditures were deducted from gross income by the taxpayer as expenses incurred in operating the mines. The Commissioner and the Board of Tax Appeals held that they were capital investments.

Section 234 (a) of the Revenue Act of 1918 (40 Stat. 1077) permits the deduction of ordinary and necessary expenses paid or incurred during the taxable year in carrying on the taxpayer’s trade or business. It also makes allowance for exhaustion, wear, and tear of property used in the business, including obsolescence; and in the case of mines allows deductions for depletion or depreciation of improvements according to the peculiar conditions in each ease, based upon cost, including cost of development not otherwise deducted. Section 215 (b), 40 Stat. 1069, provides generally that no deduction shall be allowed for “any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate.” Treasury Regulations 45, article 222, issued in 1920-, states that “all expenditures for plant and equipment shall be charged to .capital account recoverable through depreciation, while the mine is in the development stage,” and thereafter “the cost of major items of plant and equipment shall be capitalized, but the cost of minor items of equipment and plant, necessary to maintain the normal output and the cost of replacement may be charged to current expense of operation.”

The Board found that the mines reached their maximum capacity in August, 1918, and thereafter it was necessary to make the expenditures here in question in order to maintain normal output. Although it found that the expenditures did not increase the productive capacity of the mines, it concluded that they were capital investments because they were made for equipment and improvements that would continue to be used beyond the taxable periods. It was also thought by the Board that, as the equipment enabled the taxpayer to produce coal more economically, it necessarily increased the value of the property. The taxpayer contends that, as the sole purpose of the expenditures was “to maintain the normal output,” they must be regarded as current expenses, that they are to be so regarded, too, according to the correct interpretation of Article 222 of Regulations 45 of the Treasury Department, and that Congress, by re-enacting the applicable provisions of the act of 1918 without change while those regulations were in effect, has given the force and effect of law to such construction.

So far as the Treasury Regulations are concerned, the question is whether the expenditures were for “major items of plant and equipment” or “minor items” necessary to máintain normal output. We are not convinced that the Department, either in practice or by its regulations, had so construed the act of 1918 as to give color of congressional interpretation to the later enactments. As, however, the statute does not, and necessarily could not, define capital investments and operating expenses with sufficient particularity to make certain, in every ease, whether an expenditure belongs to the one class or the "other, it sometimes happens, as in this case, that the law is difficult of application. Were the case before us without exact precedent, we would hesitate to say that expenditures for equipment having a useful life of many years and enabling the owner to operate more economically were not capital investments; but it has been held in two cases substantially identical with this one — United States v. Roden Coal Co., 39 F.(2d) 425 (5 C. C. A.) and Marsh Fork Coal Co. v. Lucas, 42 F.(2d) 83 (4 C. C. A.) —that such expenditures are operating expenses. So far as we are advised, the question has not been decided differently by any other court, and, not having a settled conviction of error in the two decisions referred to, we conceive it to be our duty to follow them and reverse the decision of the Board on this point.

It follows that the order of the Board in case No. 5634 is affirmed, but the order in case No. 5651 is reversed, and the cause remanded for proceedings consistent herewith.


author: WILBUR, Circuit Judge.

text:
    DUNN v. UNITED STATES.
    No. 6329.
    Circuit Court of Appeals, Ninth Circuit.
    June 8, 1931.
    Rehearing Denied July 22, 1931.
    Eugene S. Selvage, of°Eureka, Cal., and Clifford A. Russell, of Sacramento, Cal., for appellant.
    Geo. J. Hatfield, U. S. Atty., and H. A. Yan Der Zee, Asst. U. S. Atty., both of San Francisco, Cal., for the United States.
    Before WILBUR, and SAWTELLE, Circuit Judges, and NETERER, District Judge.
   WILBUR, Circuit Judge.

Appellant was tried on an indictment containing three counts. He was acquitted upon the second, and third counts and convicted upon the first count. Appellant contends that the verdicts are inconsistent and seeks a reversal upon that ground. The liquor involved in the three counts is the same, five drinks of whisky and one drink of beer. It is charged in the third count that this liquor was unlawfully sold on the 26th day of June, 1930. In the second count it is charged that this liquor was unlawfully possessed op the 4th day of July, and in the first count that the appellant maintained a common nuisance on the 4th day of July, 1930, at 301 Second street, Eureka, Humboldt county, Cal., in keeping for sale at said place the liquor described in the second and third counts.

Upon the trial appellant testified, and his counsel stipulated, that he was the owner of the place above described. It appears from the evidence that this place was fitted up with a bar in a rear room and another in a ■ cigar store in á front room. The rear room wás hsed as a pool room and was fitted up for the sale of drinks. Appellant testified that the bar in the rear room was equipped with whisky glasses in which he dispensed “bitters.” Two prohibition officers testified they entered the premises with two unknown men, called for and paid for drinks which were served over the bar without any apparent attempt at secrecy. The prohibition officers identified the appellant as the person who sold them the drinks at the time and place in question. If the case had been submitted to the jury upon this evidence alone, the question of the inconsistency of the verdict would present a somewhat different aspect than that presented by the record before us. The appellant took the stand on his ..own behalf and produced witnesses who testified to the effect that on the 26th day of June the appellant was not in the premises at the. time and place of sale, but was returning from a ranch about two hours distant, arriving there after the time of the alleged sale. In addition to this evidence, the government’s witnesses were cross-examined with a view of ■.creating a doubt as to the accuracy of their testimony concerning the identity of the person who sold the liquor to them at the time and place in question. The evidence, however, on all counts, related solely to a transaction on the 26th day of June, and there is no evidence of any sale or possession on the 4th of July. It is pointed out in the briefs, as it has been in a number of our decisions, that there is a conflict in the decisions ,of our Circuit Courts of Appeal upon the question of inconsistent verdicts.

The matter has been presented to this court in a number of cases in which this court has found it unnecessary to determine which line of authority it would adopt. This court has been able so far in cases presented to it to steer a middle course. Lambert v. U. S. (C. C. A.) 26 F.(2d) 773; Hesse v. U. S. (C. C. A.) 28 F.(2d) 770; U. S. v. Anderson (C. C. A.) 31 F.(2d) 436, 437; Pankratz Lumber Co. v. U. S. (C. C. A.) 50 F.(2d) 174, decided May 25, 1931. In U. S. v. Anderson, supra, the decision was delivered by District Judge Bean. In that ease it was held that where the verdicts were not legally inconsistent the verdict of guilty would not be reversed if it were supported by the evidence notwithstanding the fact that the acquittal upon some of the counts charging overt acts as separate offenses was difficult to reconcile with the verdict of the jury, stating in that connection: “It may be difficult, in view of the rule that the act of one conspirator in furtherance of the object of the conspiracy is the act of all, to understand the reasoning of the jury in convicting Anderson on the conspiracy charge, and not the substantive offenses; but it is not for us to speculate on that question. It is enough that the verdict on the conspiracy charge is supported by the evidence and responds to the issue.”

Our more recent opinion, delivered by Judge ÜSTeterer, is to the same effect; that is, that where the offense is separate and distinct and supported by the evidence, the fact of the acquittal of other defendants through whom the defendant corporation was acting, did not require the reversal of the conviction of the corporation, although the corporation acted through the defendants who were acquitted.

In the ease at bar there is no legal inconsistency between an acquittal upon the charges of sale and possession and the conviction upon a charge of nuisance. The inconsistency, if any, arises from the fact that the evidence on behalf of the government with reference to the three offenses is identical, , and it is illogical for a jury to accept the testimony of these witnesses on one count and reject them on the other two. But this apparent inconsistency is largely dispelled by a consideration of the evidence offered by the defense. This evidence was calculated to, and no doubt did, raise a reasonable doubt in the minds of the jury as to whether or not the defendant personally sold the liquor to the government agents at the time and place in question. In view of the fact that the jury was instructed that the appellant might act through agents and employees and was instructed in effect that if he so acted through an agent or employee in possession or sale of liquor he was guilty as a principal of the illegal sale and illegal possession, the effect of the verdict is that the jury had a reasonable doubt as to whether or not the person who sold the liquor at the time and place in question was acting as the agent for and under the authority of the appellant. The evidence showed that appellant had several employees, including his brother, operating his plaee of business. The verdict of the jury on the first count shows that they are satisfied beyond a reasonable doubt that the premises were kept and maintained and liquor was there possessed for purposes of illegal sale, and while they are not able to say beyond a reasonable doubt that the actual sale was made by an authorized agent of the appellant, they were convinced that the appellant kept the liquor there for the purpose of, sale. As pointed out in U. S. v. Anderson, supra, it is not the province of this court to try to determine the basis for the verdict of the jury. Under our system of law the jury is the sole judge of the facts and the credibility of witnesses and their verdicts are not to be overturned because they seem illogical.

The case of Rosenthal v. U. S. (C. C. A.) 276 F. 714, opinion by Judge Ross, is cited by the appellant in support of his contention. This decision was explained by the author thereof in a subsequent decision by this court involving an indictment containing two counts, one charging unlawful possession of liquor, and the second charging the maintenance of a common nuisance by selling liquor in a designated place of business. In the latter case it is held that the record failed to show that the two alleged offenses related to the same transaction. The decision is criticized in an opinion by Judge Amidon, sitting in the Circuit Court of Appeals of the Eighth Circuit, Collins v. U. S., 7 F.(2d) 615, 616. It is also cited in the same circuit in Morris v. U. S. (C. C. A.) 7 F.(2d) 785. In Carrignan v. U. S. (C. C. A.) 290 F. 189, 190, in an opinion by Judge Evan A. Evans, the Rosenthal Case was cited and distinguished from the case involving an unlawful sale of liquor and the maintenance of a public nuisance on the ground that the latter were separate and distinct offenses, holding that an acquittal of the unlawful sale was not inconsistent with a conviction of maintaining a nuisance. Referring to Rosenthal v. U. S., supra, it is said: “In that ease [Rosenthal v. U. S.] the defendant was charged with having purchased and received stolen property, with knowledge that it was stolen, and also charged by another count with having the same property in his possession, with like knowledge, the evidence showing that the two counts related to the same transaction. The second offense charged was but a part of the first offense, and separate convictions for the two alleged offenses could not have been sustained. It was therefore held that a verdict of not guilty on the first count necessarily relieved defendant from liability on the second count.”

It is sufficient for 'the purposes of this case to say that the decision in Rosenthal v. U. S., as explained later by its author in Bal-dini v. U. S. (C. C. A.) 286 F. 133, in so far as it is inconsistent with the views we have expressed, is modified by our subsequent decisions hereinbefore cited.

The fact that the appellant interposed an alibi and thus raised a clear distinction as to the evidence to support the charges in the three counts of the indictment, together with his admitted ownership of the plaee in which it was charged that the common nuisance was maintained and the inferences with relation thereto resulting from the readiness with which intoxicating liquor was produced and sold in such place upon the request of four strangers, sufficiently differentiated the evidence as to the separate counts as to require an affirmance even under the rule most favorable to defendants as to inconsistent verdicts.

The appellant excepted to portions of the closing-argument of the district attorney and assigned the making of said argument as misconduct. The argument excepted to was to the effect that inasmuch as the defendant had testified that his son and a boy friend, two ranch hands, and two neighbors knew of his visit to his ranch on the day of the alleged sale of liquor by the appellant, that “any one of these would have established the fact that he was out there.” The exception was on the ground that it was not incumbent on the defendant to produce any witnesses and that the witnesses were available to the United States attorney’s office if they desired to call them. The court, upon motion of the defendant, instructed the jury to “eliminate those remarks.” A similar exception was made to the argument of the district attorney that the appellant had not “produced the man with the missing tooth.” The court instructed the jury that the position of the appellant was correct, that it was not incumbent upon the defendant to prove his innoeenee, but it was incumbent upon the government to prove the defendant guilty beyond a reasonable doubt. They were thereupon instructed to disregard the remarks made by the district attorney “with reference to the inability or failure of the defendant to produce a witness here with a missing tooth, or to produce any other witness.” In view of the instruction of the trial court in response to the appellant’s motion and in view of the verdict of the jury upon the two counts charging the appellant with having made the sale and having possessed the liquor, it is evident that the appellant was not harmed by the statement of the district attorney.

We do not wish to be understood as deciding whether or not the comment of the district attorney upon the failure to produce the witnesses referred to was erroneous. The question is one of some difficulty [Graves v. U. S., 150 U. S. 118, 14 S. Ct. 40, 37 L. Ed. 1021; Rostello v. U. S. (C. C. A.) 36 F.(2d) 899; citing 16 Cor. Jur., § 1023; 10 R. C. L., § 886], and the action of the trial court in granting the motion of the appellant was a wise disposition of the matter.

A more serious breach of propriety on the part of the district attorney is the following statement: “Now, the alibi is proved by one of the most contemptible methods that I have ever observed in a court.” It is difficult to understand from the record the basis of the statement of the district attorney as to the “contemptible methods” used in establishing an alibi unless the term is used in the sense of “pitifully inadequate.” However, the elaboration of the argument of the district attorney and the ground of objection thereto was directed wholly to the failure of the defendant to call corroborating witnesses who were available to him, and, as we pointed out, the error, if any, in that regard was cured by the action of the trial judge. We may add here that being unable to see any justification for the use of the word “contemptible” or any basis in the record for such a claim, counsel were requested upon the argument to enlighten the court upon that subject, and in response to the question of the court it appears that the statement of the district attorney was predicated upon an answer elicited from one of the appellant’s witnesses upon cross-examination by the district attorney himself and not by the accused. It is sufficient, however, to say that the «natter was not effectively called to the attention of the court, and that the court instructed the jury to disregard “these remarks.”

Judgment affirmed.


text:
    GRIFFITHS v. COMMISSIONER OF INTERNAL REVENUE.
    No. 4440.
    Circuit Court of Appeals, Seventh Circuit.
    June 12, 1931.

      Paysoff Tinkoff, of Chicago, HI., for petitioner.
    G. A. Youngquist, Asst. Atty. Gen., and A. G. Divet and Sewall Key, Sp. Assts. to Atty. Gen. (C, M. Charest, Gen. Counsel, Bureau of Internal Revenue and Robert L. Williams, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent.
    Before EVANS and SPARKS, Circuit Judges, and WILKERSON, District Judge.
   SPARKS, Circuit Judge.

Petitioner attacks the Board’s determination upon the following grounds: First, the evidence does not sustain the findings, either 'with respect to the amount of income received in 1919 by petitioner by virtue of such bond premiums, or with respect to the existence of fraud on the part of petitioner in making his return; second, the findings actually made do not sustain the ultimate conclusion; and, third, the statute of limitations had run against any assessment.

Respondent has filed a motion to dismiss the appeal on the ground that the petition for review of the Board’s order of redetermination was received and lodged with the -Board on September 30, 1929, which was one day after the expiration of six months from the date of the order of redetermination, and hence was beyond the time granted by statute in which a petition for review may be filed. Sections 1001, 1005 (a), Revenue Act of 1926> e. 27, 44 Stat. 9 (26 USCA §§ 1224, 1228 (a).

It is petitioner’s contention, however, that since his petition for a rehearing filed on July 8, 1929, was not denied until September 20,1929, his time for filing a petition for review was thereby extended for six months from the last-named date. It is conceded by respondent that in the federal courts the filing of a motion to reopen or vacate a judgment or decision stops the running of the time for appeal, and that it'begins to run anew from the time the motion is disposed of. Morse v. United States, 270 U. S. 151, 46 S. Ct. 241, 70 L. Ed. 518. Respondent insists, however, that this well-established practice is not sufficient to override the plain Words of the statutes, which provide that the appeal must be taken within six months after the decision is rendered, and that the decision shall become final upon the expiration of the time allowed for filing a petition for review, if no such petition has been duly filed within such time.

With respondent’s contention we are unable to agree, and we see no reason why the general and uniform rule should not be applied to these statutes in the same manner as applied to other similar statutes. In Morse v. United States, supra, the statute under discussion provides that all appeals from the Court of Claims shall be taken within -ninety days after judgment is rendered; and if a .motion for a new trial or a petition for a rehearing was duly and seasonably filed it suspends the running of the statute, and the time within which the proceeding must be initiated begins from the date of the denial of either the.motion or petition.

Petitioner has filed a motion in this court to strike from 'the reeord on review what purports to be an income and profits tax waiver of the time prescribed by law for making.any assessment of the amount of taxes due for the year 1919. It .also purports to'.have -been signed by 'petitioner on November 3, 1925, and to have been approved on November 14, 1925', by tbe Commissioner of Internal Revenue. Tbe motion to strike is upon tbe ground that the paper is pot identified as an exhibit, that it is not shown by the record to have been introduced in evidence at the hearing before the Board, and that its incorporation in the printed record was without authority.

A perusal of the record shows that such a paper was never offered in evidence and was never mentioned in the entire proceedings. It is not certified in any manner by the clerk of the Board as being a part of, or in any manner connected with, the record in the cause; yet it is set forth on page 80 of the transcript, between Respondent’s Exhibits D and E, with no identification whatever, and no explanation as to its presence. Respondent contends that it should be considered as a part of Exhibit E (which is petitioner’s income tax return for the year 1919) for the reason that the sixty-day letter which was mailed to petitioner was offered and introduced in evidence as a part of respondent’s Exhibit E, and that according to the custom of respondent, concerning which the record is silent, the waiver in ordinary course would have been attached to the sixty-day letter; and, hence, he insists that we should consider the waiver as a part of Exhibit E.

The record pertaining to the introduction of Exhibit E is as follows: “Counsel for respondent introduced into evidence as Respondent’s Exhibit ‘E,’ the taxpayer’s return for the year 1919, with the 60-Day letter attached. A photostatie copy of this Exhibit ‘E’ is hereto attached and made a part hereof by reference.” It is not claimed that a taxpayer’s waiver is any part of the sixty-day letter, and for this court to conclude that they were attached when introduced, all as a part of Exhibit E, would be going much further than the evidence warrants or the rules of evidence permit. There is no general statement in the record with relation to respondent’s evidence under which the waiver can be considered as offered or introduced, such as the words “the following, or the foregoing, evidence was introduced.” It is true that the clerk certifies that “the foregoing contains the substance of all the evidence given on the hearing of this proceeding * * •*■ ”; but the exhibits and the waiver follow this certificate, and there is no reference whatever preceding the certificate which relates to the waiver. We think there was no intention on the part of respondent to introduce the waiver, for in discussing in his brief the necessity of pleading the statute of limitations "or raising it at the hearing before the Board, which was not done, he says, “If the issue of the statute had been raised, respondent would have been in a position to meet it by showing that waivers had been furnished.” There are no facts presented to us upon which wé can rightfully base a ruling to the effeet that the waiver is a legitimate part of this record, and the motion to strike it from the record is sustained.

The statutes involved in this petition for review are: Revenue Act of 1918, e. 18, 40 Stat. 1057, §§ 210, 211 (a), 250 (b), (d); Revenue Act of 1926, c. 27, 44 Stat. 9, §§ 274 (e), 277 (a) (3), (b), 278 (a), 1001 (a), (c), 1005 (a), 1106 (a), 26 USCA §§ 1048 c, 1057 (a) (3) (b), 1058, 1224 (a) (c), 1228 (a), 1249 note; Revenue Act of 1928, c. 852, 45 Stat. 791, § 612.

Section 250 (d) of the Act of 1918 (40 Stat. 1083) is as. follows: “Except in the ease of false or fraudulent returns with intent to evade the tax, thé amount of tax due under any return shall be determined and assessed by the Commissioner within five years after the return was due or was made, and no suit or proceeding for the collection of any tax shall be begun after the expiration of five years after the date when the return was due or was made. In the ease of such false or fraudulent returns, the amount of tax due may be determined at any time after the return is filed, and the tax may be collected at any time after it becomes due.”

Section 1106 (a) of the Act of 1926 is as follows: “The bar of the statute of limitations against the United States in respect of ..any internal-revenue tax shall not only operate to bar the remedy but shall extinguish the liability; * * *”

' [4,5] In the instant case petitioner’s return for the year 1919 was made March 15, 1920, and the order of determination against him for a deficiency tax for the year 1919 was made by the Commissioner of Internal Revenue May 18, 1926, whieh was more than five years after the return was made. It follows, therefore, that respondent is barred from maintaining this proceeding unless petitioner was guilty of fraud in making his return. Not only was the remedy barred, but the liability was extinguished. United States v. John Barth Co. et al. (C. C. A.) 27 F.(2d) 782, 784. It is true that section 1106 (a), supra, was repealed by section 612 of the Revenue Act of 1928, which attempted to give effeet to the repeal as of February 26, 1926, but in United States v. John Barth Co., supra, Judge Evans, speaking for the court, said, “it was not within the power of Congress to enact legislation to recreate the liability thus extinguished.”

Respondent contends, however, that petitioner is precluded from raising the question of the statute of limitations in this court because he did not raise it before the Board. But, as stated by Judge Evans in the ease last cited, we are dealing with statutes which not only limit the time in which the action can be brought, but also extinguish the cause of action. In such a ease there need be no special plea, because it is perfectly obvious that there is no cause of action. People, etc., v. Herr, 81 Ill. 125; 37 Corpus Juris, par. 722, p. 1217 and eases cited.

The remaining question before us is whether petitioner was guilty of fraud with intent to evade the tax in making his return on March 15, 192.0; and the burden of proving such fraud was upon respondent. Fraud is never presumed but must be determined from clear and convincing evidence, considering all the facts and circumstances of the case, and the presumption of Commissioner’s correctness does not extend to his determination that fraud existed. J. B. Jemison v. Commissioner of Internal Revenue (C. C. A.) 45 F.(2d) 4.

The uncontradicted evidence shows that petitioner took no part in the preparation of his returns. He was a very old man, and while we may well presume from the evidence that he was, considering his age and ailments, quite ah active force in the welfare and general management of the company’s affairs, yet he had no knowledge of the bookkeeping department, which was attended to by one employed for that purpose, to whom petitioner intrusted the preparation of his income tax returns, with the assistance of petitioner’s attorney. There was no evidence of intentional concealment of facts upon the part of petitioner, and the return shows, aside from the tax sought to be recovered in this proceeding, that he had erroneously charged himself with several thousand dollars more than was owing by him. Of course this was not intentional on his part, but it is a circumstance which ought to be considered in his favor. That he was negligent in relying upon his bookkeeper we think there can he no doubt, especially in view of the bookkeeper’s contradictory testimony; but there is no evidence of willful negligence, and whatever negligence there was in this respect would not of itself constitute fraud on petitioner’s part.

We agree with respondent that the evidence is not 'sufficient to warrant a finding that an agreement was made in 1916 by petitioner and his associates with relation to paying themselves for acting as surety on the bonds. The bookkeeper’s first testimony undoubtedly would not support such a finding; and while he changed it entirely on the second day of the trial, it was under such circumstances and in such a manner as to warrant the court in not believing him, and to warrant the conclusion that he was not a very reliable bookkeeper. If, as respondent contends and' as we believe, the agreement to pay petitioner and his associates for the bonds was made in 1919 at about the time the entire credit for them was given, we think this would constitute less evidence of fraudulent concealment than if the agreement had been made in 1916 and kept off the books until 1919. To hold that petitioner was guilty of fraud in making his return under the circumstances set forth would not in our judgment be consistent with the Board’s previous rulings in the following cases: Schultze v. Commissioner, 18 B. T. A. 444; Pottash Bros. v. Commissioner, 12 B. T. A. 190; Scheer v. Commissioner, 11 B. T. A. 836; Mackay v. Commissioner, 11 B. T. A. 569; Griffith v. Commissioner, 11 B. T. A. 565; Klise v. Commissioner, 10 B. T. A. 1234; J. Heninger v. Commissioner, 9 B. T. A. 1318; Appeal of Gutterman Strauss Co., 2 B. T. A. 433; and also the following decisions: Jones v. Simpson, 116 U. S. 609, 6 S. Ct. 538, 29 L. Ed. 742; Maryland Casualty Co. v. Palmetto Coal Co., 40 F.(2d) 374.

We think that petitioner was not guilty of fraud in making his return. However, we are of the opinion that the ends of justice require that the cause be retried in order that both parties may offer such evidence as they may see fit to present upon the issue of waiver of the statute of limitations.

The order of the Board of Tax Appeals is reversed, and the cause is remanded for further proceedings consistent with this opinion.