# Petition for a Writ of Certiorari — Mitchell v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386417_2155%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for a Writ of Certiorari - **Published:** January 1, 1954 - **Citation:** 347 U.S. 1012 ## Text supreme Court of the United States OCTOBER TERM, 1953. DAVID H. MITCHELL, PETITIONER, VS. UNITED STATES OF AMERICA. PETITION FOR A WRIT OF CERTIORARI TO THE „ INDEX 5 Opinions Below , Jurisdiction Questions Presented Statement (1) Relative to Failure of Net Worth Proof ee (2) Relative to Use of Petitioner’s Financial State- ments 6 (3) Relative to Petitioner’s Tax Payments Before Indictment Period . (4) Relative to Improper Argument and Instructions 9 Specifications of Error 11 Reasons for Granting the Writ 11 (1) Conflict of Decisions and Constitutional Ques- tion Respecting Burden of Producing Evidence in Net Worth Prosecutions 11 (2) Erroneous Admission into Evidence and Instruc- tion upon Petitioner’s Financial Statements 16 (3) Erroneous Admission into Evidence of Peti- tioner’s Prior Tax Payments 19 (4) Erroneous Application of Harmless Error Rule_ 21 (5) Conflict of Decisions and Erroneous Applica- tion of Plain Error Rule (6) Erroneous Instructions and Argument Conclusion oa FPN N WN 8 8 K 1 INDEX CrraTIONS Cases Barnes vs. U. S., (C. A. 8) 8 F. 2d 832, 834 28 Bell vs. U. S., (C. A. 4) 185 F. 2d 302 14 Bihn vs. U. S., 328 U. S. 633 8 21, 22 Bollenbach vs. U. S., 326 U. S. 607 21, 22, 23 Boyer vs. U. S., (C. A. D. C.) 132 F. 2d 1 Brown vs. Allen, 344 U. S. 443, 460 22 Bryan vs. U. S., (C. A. 5) 175 F. 2d 223, 227 12-13 Clawson vs. U. S., (C. A. 9) 198 F. 2d 792, 794 12 Cock vs. U. S., (C. A. 8) 14 F. 2d 833 27 De Mayo vs. U. S., (C. A. 8) 32 F. 2d 472, 475 28 Demetree vs. U. S., (C. A. 5) 207 F. 2d 892, 893-4 — 13 Echert vs. U. S., (C. A. 8) 188 F. 2d 336, 341 24 Eiseman vs. Penn. R. Co., (C. A. 3) 151 F. 2d 222 28 Eisner vs. Macomber, 252 U. S. 189, 214, 215 17 Finnegan vs. U. S., (C. A. 8) 204 F. 2d 1d —T 24 Hanson vs. U. S., (C. A. 8) 186 F. 2d 61 20 Kotteakos vs. U. S., 328 U. S. 750, 76516, 21, 22 Krulewitch vs. U. S., 336 U. S. 440, 456-8 14 Leeby vs. U. S., (C. A. 8) 192 F. 2d 331 20, 21, 24 Lurding vs. U. S., (C. A. 6) 179 F. 2d 419, 421 29 McNutt vs. U. S., (C. A. 8) 267 Fed. 670, 673 — 27 23 14 Meeks vs. U. S., (C. A. 9) 163 F. 2d 598, 602 Morissette vs. U. S., 342 U. S. 246, 275 Myers vs. U. S., (C. A. 8) 174 F. 2d 329, 339 24 Quercia vs. U. S., 289 U. S. 466 27 Remmer vs. U. S., (C. A. 9) 205 F. 2d 277, 287, 346 U. S. 884 11, 12, 16 Schuermann vs. U. S., (C. A. 8) 174 F. 2d 397, 399 _14, 15, 20 Shelton vs. U. S., (C. A. D. C.) 165 F. 2d 241, 244-5 — 16 State vs. Davies, 101 Ohio St. 487, 129 N. E. 590 —— 28 Strickland vs. U. S., (C. A. 5) 155 F. 2d 167 16 Terminiello vs. City of Chicago, 387 U. S. 1,5 16 INDEX Hl Tot vs. U. S., 319 U. S. 463, 469 13, 15, 16 U. P. R. Co. vs. Burnham Co., (C. A. 10) 124 F. 2d 500, 502 : 28 U. S. vs. Antonelli Fireworks Co., (C. A. 2) 155 F. 2d 631, 650 23 U. S. vs. Caserta, (C. A. 3) 199 F. 2d 908, 907 1 U. S. vs. Fenwick, (C. A. 7) 177 F. 2d 488, 490 13 U. S. vs. Kelinson, (C. A. 2) 205 F. 2d 600, 601 18 U. S. vs. Norton, (C. A. 2) 179 F. 2d 527 16 U. S. vs. Renee Ice Cream Co., (C. A. 3) 160 F. 2d 353 16 U. S. vs. Rubenstein, (C. A. 2) 151 F. 2d 915, 9212 — 23 13 22 13 26 28 U. S. vs. Smith, (C. A. 3) 206 F. 2d 905, 911 U. S. vs. Wicoff, (C. A. 7) 187 F. 2d 886, 811 U. S. vs. Williams, (C. A. 3) 208 F. 2d 437, 433 Viereck vs. U. S., 318 U. S. 236, 248 Wilson vs. U. S., 149 U. S. 60 Wolcher vs. U. S., (C. A. 9) 200 F. 2d 493, 497 — aC Books and Articles 42 Harvard Law Review 422, 425 28 Schwerdtfeger, “Federal Prosecution of Income Tax Cases,” 40 Ky. L. J. 400, 404, n. 10 17 2 Shepard’s Federal Reporter Citations, 2128; Supple- ment, January, 1954, 347 2 Thompson on Trials, Sec. 2417, pp. 1763-4 2 Wigmore on Evidence (3d Ea.), Sec. 664, pp. 781-2__ Statutes 18 U. S. C., Federal Rules of Criminal Procedure, Rule 52 (a) 3, 21, 24, 28, 26 18 U. S. C., Federal Rules of Criminal Procedure, Rule 52 (b) — 8, 24, 25, 26 26 U. S. C., Sec. 145 (b) 4 & N 23 U. S. C., Sec. 1254 2 No. IN THE supreme Court of the United States OCTOBER TERM, 1953. DAVID H. MITCHELL, PETITIONER, VS. UNITED STATES OF AMERICA. _ PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT. To THE HonoraBLe, THE CHIEF JUSTICE AND THE ASSOCIATE JUSTICES or THE Surah Court or THe Unrrep STATES: Petitioner David H. Mitchell, by his counsel, prays that a writ of certiorari issue to review the judgment of the United States Court of Appeals for the Eighth Circuit, _ affirming the judgment of the United States District Court _ for the Western District of Missouri. : OPINIONS BELOW. The District Court wrote no opinion. The opinion of the Court of Appeals (R. 122) is reported in 208 F. 2d 854. JURISDICTION. The judgment of the Court ot Appeals was entered January 6, 1954 (R. 129). An order denying a petition for rehearing was entered February 8, 1954 (R. 143). An order staying mandate was entered February 18, 1954 (R. 143). The jurisdiction of this Court is invoked under 28 U. S. C., Sec. 1254. QUESTIONS PRESENTED. (1) Is trial court authorized in income tax prosecu- tion, under Federal criminal law and constitutional guar- antees of Due Process, to permit an inference of unreported income to arise from Government’s evidence of increase in taxpayer's assets in excess of his reported income? (2) Does Government fail to make a Net Worth criminal case of unreported income when it offers no testi- mony relative to taxpayer’s receipts from gifts or inherit- ances during tax period involved, and offers evidence as to loans only from banks in which taxpayer kept deposits; or does the defendant have the burden of (3) in income tax prosecution by Net Worth method, is taxpayer's net worth, taken from his financial statements and based on inarket values $150,000 in excess of 7 : 3 missible to corroborate Government’s closing Net Worth Statement, based on cost? (4) Are the trial court’s instructions correct when it computes taxpayer’s income By comparing beginning net worth, based on cost, with ending net worth, based on market values $150,000 in excess of cost, and states that said purported income is evidence of willful tax evasion? (5) Are income tax payments for twelve years prior to indictment period admissible to construct beginning net worth or for any other purpose, when Government agent testifies they have no bearing on such net worth, and when they create suspicion of tax evasion long prior to in- dictment period? (6) Does Court of Appeals properly construe Rule 52(b) of Rules of Criminal Procedure when it establishes local rule of decision that failure of proof and errors in argument and instructions cannot be considered unless brought to the attention of the trial court; and, if so, what is the purpose and effect of Rule 52(b)? (7) Does Court of Appeals properly construe Rule 52(a) of Rules of Criminal Procedure, and the controlling decisions of this Court, when it establishes local rule of decision that conviction will not be reversed for errors at trial if Court of Appeals believes guilt was established N by “abundant competent proof”? iat AS Must record of trial convince appellate court that there was a miscarriage of justice and that defendant oS is innocent before it will reverse a conviction? ee Should conviction be reversed, despite defend- ant's failure to object at trial, when Government's closing Pe aes end erroneous statement that trial court had ruled that 4 evidence, favorable to defendant, was “not the facts and the truth”; and when trial court instructs that testimony that disputed payments were not made is legally “negative testimony” which is “weak testimony” as compared with positive testimony of payment, and refuses to give defend- ant’s requested instruction that negligence of third persons is a defense to criminal charge of income tax evasion? STATEMENT. Petitioner was convicted in the United States District Court for the Western District of Missouri on the first four counts (1945-1948), and acquitted as to the last two counts (1949-1950), of an indictment charging violations of Section 145 (b) of the Internal Revenue Code, 26 U.S. C., in which it was alleged that petitioner knowingly filed false and fraudulent income tax returns for the calendar years 1945 through 1950 (R. 1:4, 79-80, 86). He was sen- tenced to total imprisonment of four years, and fined in the sum of $20,000 (R. 80-82); and upon appeal the judg- ment was affirmed by the Court of Appeals for the Eighth Circuit (R. 129). Rehearing was denied February 8, 1954 (R. 143). Prosecution was based on two distinct theories: First the Net Worth method of establishing income in excess that reported in the tax returns; and Second proof of ific items of alleged income not reported (R. 5). The Government’s Net Worth conclusions appear in its Net Worth Statement (R. 9), which shows reported income during the four years for which petitioner was convicted averaging $32,000 per year, and, the Government contends, unreported income in almost the same amount. The spe- cific omissions claimed by the Government average about of $8,000 per year (R. 23-5, R. 124). and reported in- come, based on 10% of such receipts (R. 22-5). Receipt of the alleged $50 payments was sharply contested (R. 16- 21, 41-47); proof of the alleged 20% receipts in 1947 was, at best, in balance (R. 105-6, 115-6, 51); and the omitted rentals in 1945 were admitted and explained (R. 44). (1) Relative to Failure of Net Worth Proof. The Government’s Net Worth case as to 1949 and 1950 Was met, and defendant was proof of errors in tioner’s tax ret by it, omitted all proof inheritances during said period offered testimony of loans only from banks in which petitioner kept deposits and no proof as to loans from other sources (R. 15-16, 96, 102), and the Revenue Agents confessed complete inability to explain or identify the increases shown on Government’s Net Worth State. (2) Relative to Use of Petitioner’s Financial Statements. In offering the Government’s Net Worth proof, the Revenue Agent testified repeatedly that all assets listed in the Net Worth Statement were valued at cost, and that it would be a mistake to use market values in making such a computation (R. 8, 11, 26). In alleged corroboration of said proof, however, the Government was permitted to offer in evidence, over vigorous objection, figures as to petitioner’s net worth in March, 1949, and February and October, 1950, as listed by him in financial statements given to a bank in order to obtain loans, despite testimony that such statements are made upon present market value rather than cost, and despite the direction on the face of said statements that real estate be listed “at actual mar- ket value.” (R. 29-41, 11-14). Analysis of individual prop- erties listed in the October, 1950, financial statement (R. 37, 38), as compared with the Government’s Net Worth Statement for December 31, 1950 (R. 9), discloses that the former contains market values in excess of cost valuations in an amount exceeding $150,000. This appears as follows: Oil and Gas Wells $ 75,000.00 — 3 23,699.77 1801 Holmes 18,000.00 18,531.75 1109 Broadway (1111 Broadway) 12,000.00 — 3,650.00 1117 Broadway 15,000.00 — 10,431.70 1114-16 Wyandotte 75,000.00 43,692.25 1217 Wyandotte 60,000.00* 63,225.53 1513 Main (1523 Main) 7,500.00* — 6,500.00 711 West 12th St. 8,500.00 9,272.90 3732 Main 50,000.00 — 29,515.43 1617 Genessee 12,000. 0 0 5,596.69 3501-09 Troost (Jewell Bidg.—R. 15) 62,557.35** — 59,661.35 3114 Karnes 9,200.00** — 3,446.71 405 East Armour (Richelieu Apt.— R. 15) 70,540.53** — 46,412.91 Total $475,297.88 $323,636.99 *Listed by appellant at “cost” Net value, after deducting mortgage to conform with Govern- ment values based on net equities (R. 15), The trial judge instructed the jury that petitioner’s income could his 1945 begin- ning net worth (based on cost) with his 195) ending net worth as contained in said market-value financial state- ments, and proceeded to compute said purported income as being approximately $60,000 a year leged income, based on unrealized judge compared with appellant’s ing less than $40, no controversy about and that said comparison pro- vides a (basis to determine whether * * there was eva- sion, an attempt * * * wilfully made, to defeat and evade a portion of his tax” (R. 70-72). (3) Relative to Petitioner's Tax Payments Before Indictment Period. Over objection, the trial court admitted in evidence a record of petitioner’s income tax payments from 1933 through 1950, the payments before 1945 being admitted on the theory that they were used to construct the beginning net worth (R. 6). In ruling on the objection, the judge volunteered that, “the jury will be instructed, of course, to disregard it save only as it may relate to the net worth statement in the beginning of the period” (R. 7). The Revenue Agent subsequently testified that taxes paid prior to 1945 would have no bearing upon the Government's Net Worth Statement (R. 25). The prior tax evidence was that petitioner had paid no income taxes prior to 1940; that taxes were paid for 1940 in the amount of $57.59; for 1941, in the amount of $429.02; and that two, three, and four thousand dollars were paid for 1942, 1943, and 1944, respectively (R. 6-7). After said testimony, the Government’s next witness testified that prior to 1942 the petitioner had acquired the following properties: 1941 Packard automobile, costing $1,300 (R. 11); 1941 Willys automobile, costing $600 (R. 11); Holly- wood Buffet, for which he paid $2,000 in 1939 (R. 14-15); real estate at 3708 Flora, for which he paid $1,000 in 1940 (R. 15); Buckhorn Bar, for which he paid $4,000 during “the thirties” (R. 14); real estate at 15th and Belmont, for which he paid $4,100 in 1927 (R. 15); residence at 3114 Karnes, purchased for $4,500 in 1941, partly by loan and mortgage (R. 15); and Richelieu Apartments, pur- chaser for $71,525.26 in 1941, partly by loan and mort- gage (R. 18). e 9 (4) Relative to Improper Argument and Instructions. witnesses Ruby McIntosh and John David McIntosh, tavern operators (R. 16, 18), Mrs. McIntosh testified that she paid $50 only intermittently, and the Government was “minimum rent” (R. 18, 20); and further stated that they did not report any $50 payments as deductions on their tax returns (R. 18, 20). Petitioner did not testify at the ee “There was evidence on the part of the lessees dat the $50.00 per month (sic) was paid * * *, There 10 was evidence on the part of some of the witnesses that they did not observe it was paid. That kind of tes- timony is what the courts would call negative testi- mony, and it is testimony that is not strong. It was weak testimony as compared with the positive testi- mony of witnesses who said the $50.00 per month (sic) was paid” (R. 73). Relative to appellant’s failure to testify, there was the following comment in Government's closing arguments: “Not one single solitary witness denied it (the al- leged $50 payments which petitioner’s wife denied were paid in her presence)” (R. 61). “I felt sorry for Mrs. Mitchell when she was on the stand the other day * * * here is a lawsuit where a man tries to save his own bacon by hiding behind the skirts of his own dear, little wife” (R. 62). In commenting on testimony by petitioner’s wife that she had negligently omitted to include certain rents in the tax returns (R. 44), and testimony as to mistakes of book- keepers and accountants (R. 47-55), the Government’s closing argument stated: “They can't * come into court and say * * * ‘The bookkeeper came in and put it on. My wife came in and put it on. It is her fault not mine. You can’t escape in that way. If you could there would be no man ever prosecuted for tax evasion” (R. 65). The Court refused (R. 65) petitioner’s request for an instruction to correct the above-stated erroneous rule— that negligence of third persons would be no defense to a tax evasion prosecution—and instructed the jury gen- erally (R. 70) on the issue of willfulness, without refer- ring to the specific situation where, as here, the books, (R. 44, 43, 46, 48-51). f : 11 SPECIFICATIONS OF ERROR. The Court of Appeals erred: (1) In sanctioning submission to jury of Govern- ment’s Net Worth case. (2) In sanctioning admission into evidence of peti- tioner's financial statements, and instructions thereon. (3) In sanctioning admission into evidence of record of petitioner's income tax payments for twelve years prior (5) In disregarding errors at trial, on theory com- petent proof was sufficient to sustain conviction, (6) In sustaining conviction despite errors in in- structions and argument. (7) In affirming the judgment of the trial court. . > 54 12 the period in question with a statement similarly prepared for the beginning of said period, and treating the net worth increase, so computed, as income. In the Remmer case, as stated by the Court of Appeals, the Government failed to prove the amount of cash in a safe deposit box t the beginning of the period, and thereby failed to ex- ude prior accumulated assets as a non-income source of the apparent net worth increase. 205 F. 2d 277, 287. In the instant case, there was no evidence offered relative to gifts ces tax Ge t failed to exclude those sources oc non-income iIncrene 5, Wit! Would ac- count for the indicated net worth increas kewise, bor- Owed money as a source Woe nor exc) Med. as the Wern- 2 In this case, as in the Rémmer case, petitioner con- tends that the Government must prove unreported income by excluding non-income items, such as prior accumula- tions, gifts, inheritances, loans, etc. It is likewise neces- sary to exclude market valuations and to use cost values in making calculations, so as to exclude unrealized market value increases in computing the net worth increase which is considered to be income. See Point Two, infra. Many authorities rule that the Government cannot make a show- ing of increase in assets, and then throw upon a taxpayer in a criminal prosecution the burden of producing evidence that the increases are not income. “* * * The prosecution has the burden of estab- lishing any money received as being true income.” Clawson v. U. S., (C. A. 9) 198 F. 2d 792, 794. “* * * the case should not have been auhbenitted to the jury since it did not exclude the hypothesis that a “In using this net worth test to determine dis- ayer’s return of U.S. v. Caserta, (C. A. 3) 199 F. 2d 905, 907. Demetree v. U. S., (C. A. 5) 207 F. 2d 892, 893-4. U. S. v. Fenwick, (C. A. 7) 177 F. 2d 488. U. S. v. Smith, (C. A. 3) 206 F. 2d 905, 911. . culat on the withdrawn from —— ? mption of nnocence ids ne. ir 7 matter and thus req the issue to be the Jury. Bryan v. U. S., supra; U. & v. F. Kaskins the burden on a defendant to disprove the same, is 14 even more patently intolerable. Krulewitch v. U. S., 336 U. S. 440, 456-8; Morissette v. U. S., 342 U. S. 246, 275. In Net Worth prosecutions, there exists a contrary line of authority, recently criticized by Chief Judge Hutcheson when he stated that some courts have been “more con- cerned with easing the difficulties attending the proof of guilt by (the Net Worth) method than with preserving un- impaired the constitutional rights of a defendant * * *” Demetree v. U. S., supra, 894. While that opinion refrains from citing criticized decisions of other courts, the adverse comment clearly applies to the controlling decision in the Eighth Circuit, where the Court permitted the jury to convict a taxpayer although stating, “The evidence of the government does not exclude the possibility that the de- fendant had some substantial accumulation of capital (at the beginning of the tax period, or that he acquired dur- ing the period) a large amount of capital out of which he made the loans, investments and expenditures which the government contends reflect income.” Schuermann v. U. S., (C. A. 8) 174 F. 2d 397, 399. In other words, no proof was made that the increases were income. While the Court attempted to rationalize the decision by stating the untenable proposition that proof of increased assets “will | justify a conclusion that a taxpayer had income which he © deliberately failed to include in his return,” the burden 5 of the Court's remarks shows that the inference is pri- marily a rule of convenience to aid the prosecution. I. e. sg 399. The most extensively-considered authority contrary to the Bryan-Fenwick decisions, supra, is Bell v. U. S., (C. A. 4) 185 F. 2d 302; but even in that case there was proof, contrary to the situation here, that the defendant had not received gifts or inheritances during the tax period. I. e. 307. : sigs , The Court may note that, while this question was presented to the Court of Appeals (R. 119), that Court held it was disabled from considering the same because it had not been presented to the trial court (R. 127). This was proper relief, being bound by the decision of the Court of Appeals in the Schuermann case, supra. It would have been worse than useless to request relief at the trial level, since ‘Petitioner would have been urging the trial judge to commit error, under the rule presently controlling him. Moreover, ‘At is settled that a failure of proof should be corrected by 16 there can be no plainer or more substantial error than a failure of proof. U. S. v. Norton, (C. A. 2) 179 F. 2d 527; U. S. v. Renee Ice Cream Co., (C. A. 3) 160 F. 2d 353; Strick- land v. U. S., (C. A. 5) 155 F. 2d 167. See Point Five, infra. The case was submitted to the jury on two theories, one of which was not made: and the judgment must be reversed, because on such a record the Court cannot know but what petitioner’s conviction rested on the case not made. Termi- niello v. City of Chicago, 337 U. S. 1, 5; Shelton v. U. S., (C. A. P. C.) 165 F. 2d 241, 244-5; see Kotteakos v. L. S., 328 U. S. 750, 765; Point Four, infra. This raust be par- ticularly true where, as here, the failure of proof affected the principal theory. As noted in the Statement, page 4, the alternative (specific omissions) theory involved rela- tively small amounts of money. Having granted certiorari in the Remmer case, supra, where a similar question exists, and with the plain failure of proof in the instant case how before the Court, peti- tioner respectfully submits that the time is ripe for a solution to the conflict between the appellate courts on the burden of proof in Net Worth prosecutions, wherein _ conviction now depends upon the accident of residence; ‘ and further submits that the principles of the Tot case, supra, be applied to all criminal cases, without special ad- vantages being granted to the prosecution of income taRx charges. i (2) Erroneous Admission into Evidence ang Instructien~., 8 Petitioner presents herewith a strikingly erroneous misuse of purported evidence, preventing a fair trial, and method. As previously noted, Net Worth calculations of income require that the Net Worth statements so tised be 17 Net Worth prosecutions. Schwerdtfeger, “Federal Prosecu- tions of Income Tax Cases,” 40 Ky. L. J. 400, 404, n. 10. “Enrichment through increase in value of capital invest- ments is not income in any proper meaning of the term.” Eisner v. Macomber, 252 U. S. 189, 214-15. Notwithstanding the settled basic requirement of val {tion at cost in a prosecution of this charscter, the Geren. ment supported its Net Worth theory with evidence which directly conflicted with the cost premise, and the trial judge departed therefrom by attempting to calculate petitioner’s income by comparing Government's beginning’ net any manner transferred—and into convicting peti for failing to report as income such increases which not income. values over cost, as contained in petitioner’s financial state- ment of October, 1950, two months before the end of the six year period involved in this trial. The same tabulation was presented below (R. 121) and is unchallenged; but the opinion of the Court of Appeals erroneously stated, (R. 126). Likewise, although petitioner twice ob- ‘to comparison of a Government's cost-value Net 18 Worth Statement with petitioner’s financial statements, based on market values, the trial judge overruled the ob- jections, and calculated purported income by means of such erroneous comparison (R. 12-14, 30, 72). The objections made to the evidence fully preserved petitioner’s right to challenge the instructions. U. S. v. Kelinson, (C. A. 2) 205 F. 2d 600, 601. Only this Court can prevent petitioner’s viction, arrived at by the flagrantly erroneous method treating $150,000 in market value increases as unreported income. The error here complained of was expressly conveyed to the jury in the trial judge’s instruction, wherein he de- ducted the (cost).net. worth at the beginning of the period from the (market value) net worth at the end of the period, computed petitioner’s income as being approxi- mately $60,000 a year (R. 72), compared same with peti- tioner’s reported income averaging some $35,000 a year (R. 71-72), emphasized that these calculations were based on petitioner’s own financial statements concerning which “there is no controversy,” and specifically urged the jury to consider said facts on the question of willful evasion (R. 72). It should be further noted that the $150,000 increase in market values over cost, ascertainable from said financial statements, fully explains the unreported increase of $25,000 a year, as computed above, and marks the difference be- tween evidence supporting the Government’s case and evi- dence supporting petitioner. See further calculation in petition for rehearing (R. 133). The highly prejudicial error herein discussed cannot be passed over with the slighting comment that the same “could not be prejudicial” (R. 126) because there was suf- ficient proof, other than that here challenged, to present a question for the jury. Point Four, infra. Judgment 0 be reversed, to preserve petitioner’s right to a fair trial, and 19 to prevent further misuse of market value financial state- ments in Net Worth computations of income. 1 Erroneous Admission into Evidence of Petitioner's Petitioner presents herewith erroneously-admitted evi- dence creating improper suspicion of tax evasion in years long prior to the period for which petitioner was indicted, preventing a fair trial, and likely to recur in prosecutions of this nature. Over objection, testimony was admitted in - evidence that petitioner paid io income taxes for the years 1933-1939, that he paid only $57.59 for 1940 and $429.02 for 1941, and that he paid more substantial taxes, amounting ta two, three and four thousand dollars for 1942, 1943, and 1944, respectively (R. 6-7). Immediately after this testi- mony, there was testimony that prior to 1942 petitioner had acquired two automobiles, including a Packard; two taverns, costing $6,000; miscellaneous real estate costing $9,600; and a $70,000 apartment building, purchased in May, 1941, partly by loan and mortgage (R. 11, 14, 15). No comment need be made to establish the prejudicial nature in an income tax prosecution of such evidence, show- ing large acquisitions of property by a defendant who paid little or no taxes. The legal impropriety of such prejudicial matter relating to years long prior to the indictment period is well settled. Wolcher v. U. S., (C. A. 9) 200 F. 2d 493, 497; Boyer v. U. S., (C. A. D. C.) 132 F. 2d 12, 13. The Government's purported justification for offering said prior tax payments in evidence was that they could be used to construct the beginning net worth (R. 6). Sub- sequently, the Government's Revenue Agent disavowed and disapproved the above justification, when he testified __ that taxes paid prior to 1945 would have no bearing upon the Government’s Net Worth Statement (R. 25). On the 7 20 present record, no justification has been offered, nor can be offered, for the admission of this highly prejudicial matter. In reviewing this objection (R. 127), the Court of Appeals demonstrated the recurring nature of this type of alleged proof in Net Worth prosecutions, by relying on three recent decisions in the Eighth Circuit, alone. Leeby v. U. S., 192 F. 2d 331; Hanson v. U. S., 186 F. 2d 61; Schuer- mann v. U. S., 174 F. 2d 397. Petitioner does not argue with the holding in the Hanson case, supra, where defend ant's failure to pay taxes in prior years was admitted in rebuttal to his contention that he had accumulated ex- tensive assets prior to the tax period involved. I. c. 66. In the instant case, the occasion for such rebuttal never arose, case, supra, is not in point, because we was no prejudice from the introduction of the prior tax returns, there being no testimony of accumulated assets during said period. I. e. 399. In Leeby v. U. S., supra, the evidence of nontaxable returns (I. e. 333) was admissible to rebut the disputed evidence by defendant that he had accumulated substan- tial assets during said years (I. c. 332); and petitioner need not argue with the result of that case. The Court there stated in dictum that the prior returns would have some bearing on defendant’s intent (I. c. 334), but this dictum is inconsistent with the trial court’s instructions in that case which were favorably quoted, to the effect that the defendant’s prior returns are presumed to be in compliance with the law, and that there is no charge of evasion dur- ing said years. I. c. 333. The question of fraudulent intent cannot sustain the introduction of such evidence in the instant case, since there is a break of four years between the last year for which returns are suspiciously ‘small and 21 the first year of the indictment. This break is too long to support use of said evidence on the question of intent, even assuming that prior returns are sometimes admissible on said theory. Wolcher v. U. S., supra, Boyer v. U. S., supra. One statement in the Leeby case, supra, should be considered. That is the statement, quoted in the present opinion (R. 127), that, “In estimating defendant’s income * * * on the net worth basis, the witness considered the question of his income or want of income prior to 1944 and we think the testimony was admissible for that pur- pose * .“ J. e. 333. This vague statement finds no sup- port in the Court’s reasoning, and appears to be a conclu- Lion on a question of accounting, induced by the opinion E the Government’s expert witness,” or by counsel’s | interpretation thereof. In the present case, this erroneous statement is clearly answered by the Government’s wit- ~ ness who testified that the prior tax payments: had no bearing on beginning net worth (R. 25). The Court’s erroneous statement in the Leeby case, supra, should be corrected on the basis of the present record, so that the Government will not have a meaningless pretext for intro- ducing prejudicial evidence into all Net Worth prosecu- tions. For this reason, judgment should be reversed. (4) Erroneous Application of Harmless Error Rule. Rule 52(a), Federal Rules of Criminal Procedure, 18 U. S. C. (1946), provides that, Any error, defect, irregu- larity or variance which does not affect substantial rights shall be disregarded.” The leading authorities interpret- ing and applying this “harmless error” rule likewise date from 1946. Bollenbach v. U. S., 326 U. S. 607; Bihn v. U. S., 328 U. S. 633; Kotteakos v. U. S., 328 U. S. 750. This Court recently stated the harmless error rule in the following 22 cautious language: “Where it is made to appear affirma- tively * * * that the alleged error could not affect the re- sult, such errors may be disregarded even in the review of criminal trials.” Brown v. Allen, 344 U. S. 443, 460. The Court of Appeals for the Eighth Circuit, however, has made sweeping use of the harmless error rule in the in- stant case, in violation of the above authorities, and of petitioner’s right to a fair, substantially unprejudiced trial. The most that can be said for the Government’s side of this case is that “the scales were quite evenly bal- anced”; certainly fair analysis would not reveal an “open and shut” case. Bihn v. U. S., supra, 638. See Statement, pages 4-6 herein. The acquittal as to two years (R. 80) in- dicates the jury was in some doubt. U. S. v. Wicoff, (C. A. 7) 187 F. 2d 886, 891. Since petitioner is not relying on mere formalities or technicalities, the burden of estab- lishing an overwhelming case such as would override the errors is upon the Government. Kotteakos, supra, 760. This Court has clearly advised the courts of appeal that the Government cannot escape reversals for substantial errors by claiming that there was proof, apart from the errors, which would support a conviction. Bollenbach, supra, 614; Kotteakos, supra, 765. “Nor is it enough for us to conclude that guilt may be deduced from the whole record. Such a course would lead to serious intrusions on the his- toric functions of the jury under our system of govern- ment.” Bihn v. U. S., supra, 638-9. “From presuming too often all errors to be ‘prejudicial,’ the judicial pendulum need not swing to presuming all errors to be ‘harmless’ if only the appellate court is left without doubt that one who claims its corrective process is, after all, guilty * * * it is not to be supposed that Congress intended to substitute — the belief of appellate judges in the guilt df an accused, however justifiably engendered by the dead record, for : ascertainment of guilt by a jury under appropriate judicial guidance, however cumbersome that process may be.” Bollenbach v. U. S., supra, 615. See Meeks v. L. S., (C. A. 9) 163 F. 2d 598, 602. . Despite the above guiding rules, the Court of Appeals departed completely from said standards in ruling that the improper admission and use of appellant's financial state- ments (Point Two, supra) “could not be prejudicial” be- cause “there was abundant competent proof aside from these questioned exhibits” to support the conviction (R. 126). In addition, the Court confused the bare minimum of evidence sufficient to prevent a directed verdict with stein, 151 F. 2d 915, 921-2, and U. S. v. Antonelli Fireworks Co., 155 F. 2d 631, 650, was forgotten by the Court when it seized upon petitioner’s quite proper failure under the circumstances to move for a directed verdict as an element in finding the errors at trial to be harmless (R. 126-7). The errors complained of, and their substantiality, are discussed at length under petitioner’s Points One, Two, | Three, and Six, and will not be repeated under this topic. Petitioner concludes that the errors are substantial, preju- dicial, and destructive of his right to a fair trial, that the harmless error rule cannot properly give appellate courts pause in reversing this conviction, and that the clear mis- construction of Rule 52(a) by the Court below should be corrected by this Court. 24 (5) Conflict of Decisions and Erroneous Application of Plain Error Rule. Rule 52(b), Federal Rules of Criminal Procedure, 18 U. S. C. (1946), provides that, Plain errors or defects af- fecting substantial rights may be noticed although they were not brought to the attention of the Court.” Despite this controlling rule of procedure, the Court of Appeals for the Eighth Circuit has ruled that it cannot consider the sufficiency of the evidence to sustain the conviction unless raised below (R. 127); and, likewise, that errone- ous instructions and arguments to the jury will not be con- sidered unless “objections were made or exceptions saved” in the trial court (R. 128). These rulings are now the set- tled law of said Circuit under recently decided cases: Leeby v. U. S., supra; Finnegan v. U. S., 204 F. 2d 108; Myres v. U. S., 174 F. 2d 329, 339. Except for incidental quotation in a case involving Rule 52(a) (Echert v. U. S., 188 F. 2d 336, 341), Rule 82 (b), permitting plain error to be noticed and corrected, | | not raised below, ‘has not even been honored by citation by the Court of Appeals for the Eighth Circuit. 2 Shepard's Federal Reporter Citation 2128; Supplement, January, 1954, 347, tabulating citations of Rule 52(b) by this Court and the other Federal Courts, reveals that since its adop- tion in 1946, the Rule has been cited in fifty decisions. This Court and all courts of appeal except those for the Fourth, Sixth, and Eighth Circuits, have applied the Rule. It is apparent that, if the Rule gives appellate courts a measure of discretion, the courts of appeal have been using widely varying standards of discretion, and that the latter courts (C. A. 4, C. A. 6 and C. A. 8) have been applying standards which effectively abolish the Rule. Petitioner Urges this Court to use this case as an appropriate method in his petition for rehearing, petitioner cited decisions to join harmoniously with this Court and the other eight circuits, In the instant case, the Court of Appeals for the Eighth Circuit gave its initial express consideration to Rule 52(b); and adopted a limitation from the Fourth Circuit (which has never cited the Rule) which effectively destroys the “We exercise the power to notice plain error not assigned (eie) only where necessary to prevent a miscarriage of justice * * (R. 129). In paraphrasing Rule 52(b), said Court likewise added the qualification that the error, to be considered though not presented to the trial court, must be “plain error affecting substantial rights and re- sulting in a miscarriage of justice” (R. 129), the words italicized by us not being contained in the Rule. Thus, unless convinced of an appellant’s innocence—an unusual situation, surely, after indictment, trial and conviction by a jury—the Court of Appeals for the Eighth Circuit will refuse to consider the error. The area of discretion is thereby severely limited in a manner which mocks the Rule. lied upon, and in refusing to consider the nature of said errors, the Eighth Circuit failed to note that the only issue under Rule 52(b)—distinguishing it from Rule 52(a)—is “plain” errors; i. e., whether such errors are clear, or too obscure for the trial court to understand and recognize, without being told. Rule 52 (a), (b), 18 U. S. C. Where the error is plain,“ the trial court's responsibilities for fair conduct of the trial do not cease merely because objection is heard. The situation is not uncommon when “the trial judge should have stopped counsel’s discourse without waiting for an objection.” Viereck v. U. S., 318 U. S. 236, 248. The issue under Rule 52(b) is whether the errors com- plained of are “plain”; this requires consideration of the nature of the specific errors urged upon the appellate court. In direct opposition to the practice indicated by the Rule, the Court below refused to look at the cited points of error in argument and instructions, and directed its attention toward all matters in the Record except the errors cited (R. 128-129). Then, acting as a jury and concluding that guilt “was established beyond a reasonable doubt by sub- stantial competent evidence” (R. 129), the Court brushed aside eight of the eleven issues presented in petitioner’s brief (Points I(b), Ne), I. IV(b), IV(c), V(a), V(b), V(c)—R. 119-120). The seriousness and substantiality oi the erroneous instructions on petitioner’s financial statements, and the failure of proof as to the Net Worth method have already been indicated (Points One, Two, supra). The other matters are briefly stated under Point Six, infra. For the procedural error of the Court of Appeals in refusing to consider the nature of the cited errors, and because of the plainness and substantiality of those errors, as discussed elsewhere, the judgment should be reversed. 27 (8) Erroneous Instructions and Argument. Relative to the sharply disputed evidence as to peti- tioner’s alleged receipt of payments of $50 a week from taverns, in addition to reported income of a percentage of gross receipts (R. 16-21, 41, 47), and to Government’s cross-examination of the tavern operators on the claimed theory of “surprise” (R. 16, 19), the Government’s clos- ing argument erroneously and prejudicially contained the following: “Here were this Mr. and Mrs. McIntosh * * *, They * * * started to lie to you, and started to tell you they didn’t pay this $50.00 * * *. The Court let us cross examine on the theory they were unwilling and weren't telling the facts and the truth” (R. 64-65). The argument as to the theory on which the trial court allowed cross ex- amination attributed to the trial judge the position of in- vading the province of the jury. McNutt v. U. S., (C. A. 8) 267 Fed. 670, 673. Such an emphatic conclusive state- ment, if made by the judge, would be reversible error even though he also stated that the jury is the ultimate trier of the facts. Quercia v. U. S., 289 U. S. 466; Cook v. U. S., (C. A. 8) 14 F. 2d 833. The jury was justified from these comments, acquiesced in by the trial judge, to conclude that during the course of the trial a final decision had been made by the judge that “the facts and the truth” were that said payments had been made. ; Supporting the above erroneous and prejudicial con- cept, the trial judge instructed that Mrs. Mitchell’s testi- mony that such payments were not made in her presence, and that she was always present when profits were divided between petitioner and the operators (R. 41-47) “is what the courts would call negative testimony, and it is testimony that is not strong. It was weak testimony as compared with the positive testimony of witnesses who said the $50.00 per month (sic) was paid” (R. 73). This 28 instruction on “negative testimony,” without precedent in any reported Federal criminal trial, was clearly erroneous. — State v. Davies, 101 Ohio St. 487, 129 N. E. 590. Even in a civil case, the instruction was improper, on the facts herein. 42 Harvard Law Review 422, 425; 2 Wigmore on Evidence (3rd Ed.), Sec. 664, pages 781-2; U. P. R. Co. v. Burnham, (C. A. 10) 124 F. 2d 500, 502; Eiseman v. Penn. R. Co., (C. A. 3) 151 F. 2d 222. Under no circumstances should instructions on negative evidence, as artificially light-weight testimony, be permitted in criminal trials in Federal Courts. 2 Thompson on Trials, Sec. 2417, pp. 1763-4. In view of the testimony by Mrs. Mitchell that the alleged $50 payments were not made in her presence, the Government’s argument that, Not one single solitary wit- ness denied it” (R. 61) must be taken as a reference to the possibility that payments were made to petitioner se- cretly, out of his wife’s presence. As such, and since peti- tioner did not testify, it was an illegal reference to his failure to testify. Barnes v. U. S., (C. A. 8) 8 F. 2d 832, 834. Another such illegal reference is contained in the argument that, by having his wife testify, petitioner was “hiding behind the skirts of his own, dear little wife” (R. 62). This is reversible error. Wilson v. U. S., 149 U. S. 60; DeMayo v. U. S., (C. A. 8) 32 F. 2d 472, 475. In commenting upon testimony by petitioner's wife that she had negligently omitted to include certain rents in the tax returns (R. 44), and testimony as to mistakes of bookkeepers and accountants (R. 47-55), the Govern- ment’s closing argument stated: “They can’t * * * come into court and aa The bookkeeper came in and put it on. My wife came in and put it on. It is her fault not mine.’ pcan’t escape in that way. If you could there be no man ever prosecuted for tax evasion” (R. 65). "hie argument makes petitioner criminally liable for the ) negligence of his agents, and was clearly erroneous. — Lurding v. U. S., (C. A. 6) 179 F. 2d 419, 421. A consid. erable portion of defendant n evidence concerned itself with the fact that petitioner did not personally control or have knowledge of his bookkeeping and tax-reporting system (R. 43, 46, 48-51). In view of said testimony, and the aforesaid improper argument, it was reversible error for the trial court to reject petitioner’s suggested instruction (R. 65), correcting said argument and informing the jury of the law applicable to said defense. Lurding v. U. S., supra, CONCLUSION. For the foregoing reasons, it is respectfully submitted that this petition for writ of certiorari should be granted. PNAs ROSENBERG, Howarp F. Sacns, Hartow B. Ka, Trat W. Seay, Attorneys for Petitioner. Monxtockx, Hosxins & Kine, Of Counsel. March, 1954. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386417_2155%3A1. Public record. Not legal advice.