The opinion
KALODNER, Circuit Judge
(dissenting).
The ■ plain import of the majority’s position is that it construes Commissioner v. Wilcox 1 to have been overruled by Rutkin v. United States, 2 although it paid lip service to Wilcox in attempting to distinguish its factual situation from that in the instant cases.
First, as to whether Rutkin overruled Wilcox:
I don’t believe it did. Nor do I believe that the majority has the right to assume that it did. Like John Alden, the Supreme Court of the United States can and should speak for itself. Wilcox held in the plainest terms that embezzled money does not constitute taxable income to the embezzler. Until the Supreme Court tells us otherwise, we are required to follow 'Wilcox in embezzlement cases. It hasn’t told us anything different since Wilcox. It is true that in Rutkin it distinguished between embezzled money and extorted money and held the latter to be taxable income. That circumstance is no reason why an inferior court should assume that Wilcox was overruled. Had the Supreme Court intended in Rutkin to overrule Wilcox it could, and undoubtedly would have said so. But the fact is that it did riot and while it limited Wilcox “to its facts” it reiterated its holding in that case that *253 “There embezzled funds were held not to constitute taxable income to the embezzler under § 22(a).” 3
On the score as to whether Rutkin overruled Wilcox, it is significant that in Alison v. United States 4 decided more than eight months after Rutkin 5 the Supreme Court cited Wilcox in support of its statement that “One whose funds have been embezzled may pursue the wrongdoer and recover his property * * (Emphasis supplied.) 6
Second. Is the factual situation in the instant cases distinguishable in its critical aspects from that in Wilcox?
The majority determined that there were these distinguishing factors:
(1) “ * * * whereas Wilcox was merely a salaried employee, the Kanns (G. H. and W. L.) controlled PCS and GSA”; (2) in the taxable years concerned the Kann family owned 90% of the stock in PCS; (3) the two Kanns “directly owned in excess of 20% of PCS stock”; (4) “Unlike the situation in Wilcox, where the taxpayer would not have received the proceeds except for his conversion, the Kanns were to a large extent taking their own money”; (5) in Wilcox the embezzling taxpayer was prosecuted by his employer, convicted and jailed, while the Kanns were never prosecuted by PCS or GSA and were never indicted or convicted; (6) in Wilcox the embezzler’s victim “did not forgive or condone him” while here there was no adequate proof on this score; and (7) in Wilcox the embezzler was unable to make restitution while the Kanns were able to do so.
In my opinion the asserted distinguishing factors are distinctions without a difference.
In Wilcox the embezzling bookkeeper was an employee. Here the two Kanns were just as much employees of PCS and GSA albeit they held top executive positions and received very substantial salaries. 7 The record shows that G. H. Kann owned 19% of the stock of PCS and W. L. Kann 6%. 8 Their direction of the affairs of PCS and GSA was by virtue of their employment and their service as directors, 9 and not because of their stock ownership. The statement that “The Kanns were to a large extent *254 taking their own money is entirely without basis. Between the two of them they only had. a 25% stock interest in PCS. They had no interest at all in GSA. 10 The view expressed by the majority that the Kanns “ * * * were never indicted or convicted of the alleged embezzlement * * * nor does it appear that * * * anyone * * * ever urged prosecution” and accordingly “ * * * there is not * * * any external evidence of that crime (embezzlement)” suggests the startling concept that in order to constitute a crime there must exist the ingredients of prosecution, indictment and conviction. The same is true with respect to the majority’s statement that in Wilcox the embezzler’s victim did not condone his misconduct or forgive him. Also, utterly irrelevant to the issue as to whether the Kanns embezzled the money, was the question as to whether or not they could repay it.
The Tax Court disclosed an amazing dexterity in judicial legerdemain in determining these cases. It ignored the plain and unmistakable meaning of the word embezzlement and the essential elements of the crime of embezzlement. It ignored a stipulated record which demonstrated beyond any possible doubt that the two Kanns, in a most shameful abuse of the confidence reposed in them as executives and directors of their corporate employers, by means of crooked manipulation and financial juggling looted their employers of approximately $750,000. 11 The fact that they perpetrated their embezzlement on members of their own family group did not affect the legal significance of their conduct, but merely aggravated the enormity of their crime.
The Tax Court further ignored the stipulated facts that following discovery of the embezzlement late in 1942 by the PCS auditor, the latter, with the concurrence of the Kanns noted upon the books of PCS their indebtedness to PCS in the amount of the embezzled funds, and that the Kanns later made restitution to PCS of $251,000 and to GSA of $45,000, and, in addition executed a note to PCS covering their embezzlement and assigned all their stock in PCS as collateral for their obligation.
Not only did the Tax Court ignore the stipulated facts establishing the embezzlements but it also ignored the uncontradicted sworn testimony of both the Kanns at the hearing that they had “stolen” the embezzled funds and had done so “without any claim of right.” 12
It did so despite the fact that Mr. Dickinson, government counsel, had stated at the Tax Court hearing that he was not challenging the credibility of the Kanns or any of the witnesses testifying as to their embezzlement. 13
*255 In my opinion the Tax Court committed reversible error when it (1) failed to find as a fact that the Kanns had, without any bona fide claim of right, fraudulently taken and converted to their own use money belonging to PCS and GSA and (2) when it failed to find as a matter of law that the Kanns’ conduct constituted embezzlement and that under the Wilcox decision the moneys which they had embezzled were not taxable income.
The government’s contention that despite the fact that the Kanns “surreptitiously procured for their own use funds from family owned corporations” 14 the funds so taken were not embezzled is, to say the least, ingenious. “Surreptitiously procured” is undoubtedly more euphonious and less grating on the embezzler’s ear; but embezzlement, called by any other name, is still embezzlement.
The view which I have expressed makes it unnecessary to discuss the issues as to (1) whether Stella H. Kann filed a joint income tax return with her husband W. L. Kann for the years 1937 and 1938 and (2) whether, for either of such years, she is liable for a fraud penalty. I should like to note, however, that I am of the opinion that the returns were not joint 15 and even if they were that there is no liability on the part of Mrs. Kann for a fraud penalty since the government failed to discharge its affirmative burden of proof with respect to any fraudulent intent on her part to evade tax.
For the reasons stated I would reverse the decisions of the Tax Court.
. 1946, 327 U.S. 404 , 66 S.Ct. 546 , 90 L. Ed. 752 .
. 1952, 343 U.S. 130, 138 , 72 S.Ct. 571, 576 , 96 L.Ed. 833 .
. 26 U.S.C. § 22 (a).
. 1952, 344 U.S. 167, 170 , 73 S.Ct. 191, 192 .
. Rutkin v. United States was decided March 24, 1952; Alison v. United States was decided December 8, 1952.
. The rationale of the Wilcox case was that tho embezzler “received the money without any semblance of a iona fide claim of right” and was consequently “at all times under an unqualified duty and obligation to repay the money to his employer”; that “all right, title and interest in the money rested with the employer” and the embezzler “thus received no taxable income from the embezzlement.” [ 327 U.S. 404 , 66 S.Ct. 549 ] (Emphasis supplied.)
The rationale of the Rutkin decision was that the money which was extorted was given to him by its owner “in a manner which allows the recipient freedom to dispose of it at will”.
. G. H. Kann was President and General Manager of PCS and President of G.S.A. Salaries paid to him during the years 1936-1941 were:
PCS GSA
1936 $21,700 $12,000
1937 19,200 12,000
1938 24,000 12,000
1939 24,000 12,000
1940 24,000 12,000
1941 24,000 12,000
W. D. Kann was Secretary and Treasurer and Assistant General Manager of PCS and Vice-President of GSA. Salaries paid to him during the years 1986-1941 were:
PCS GSA
1936 $14,500 $9,000
1937 12,000 9,000
1938 15,000 9,000
1939 15,000 9,000
1940 15,000 9,000
1941 13,500 9,000
. The record discloses that there were 25 members of the Kann family who owned stock in PCS. The family group owned 90% of PC'S.
. POS had three directors in the years 1936-1939; G. H. Kann, W. D. Kann and Bertha P. Kann, their aged mother. It had five directors in 1940 and 1941; the three Kanns, T. W. Pangborn and A. Leo Weil, Jr.
. All of the stock of GSA was owned by PCS.
. $675,000 from PCS and $75,000 from GSA.
. Following is an excerpt of the cross examination of G. H. Kann by Mr. Dickinson, counsel for the Commissioner:
“Q. Now, as I understand your position in your petition, the allegations of facts in the petition, and the testimony you have given on direct examination, your position is that you appropriated the funds of Pittsburgh Crushed Steel Company and Globe Steel Abrasive Company to your own use without any claim of right to it; is that right? A. That is correct.
“Q. In other words, your position is that you stole this money from the corporation? A. We obtained the money in a surreptitious maimer and took the money without any right.
“Q. You stole it? A. That is correct.” (emphasis supplied)
Following is an excerpt of the cross examination of W. D. Kann, by Mr. Dickinson, counsel for the Commissioner:
“Q. Now, as I understand your position, both in your petition and in the testimony you have given on direct, it is that in tiie years 1936 to 1941 you appropriated the funds of both these companies, Pittsburgh Crushed Steel Company and Globe Steel Abrasive Company, to your own use, you and your brother, without any claim of right to those moneys, is that right? A. Yes, sir.” (emphasis supplied)
. “Mr. Dickinson: I will say this: that in so far as any of Mr Cleary’s witness *255 es have testified with respect to the manner in which these falsifications with respect to the Pittsburgh Crushed Steel Company and Globe Steel Abrasive Company were done, I do not attack their credibility, and I will state that for the record.”
* * * * * *
“Mr. Cleary (counsel for Kanns): In view of Mr. Dickinson’s statement that in his attack on the credibility he is not attacking the statements made by the Messrs. Kann respecting the manner in which the records were kept in their working out of these falsifications, I do not think that I shall need the testimony of Mr. Casey.”
. In its brief the government stated:
“During the taxable years 1936 through 1941, the taxpayers, who were the principal officers of family-owned corporations, who managed and conducted the affairs of the corporations, and who, by proxies and other arrangements, had voting control, surreptitiously withdrew large sums of money from the corporations for their own use and benefit.”
. Cf. McCord v. Granger, 3 Cir., 1952, 201 F.2d 103 .