1932 BTA LEXIS 1331 | B.T.A. | 1932
Lead Opinion
OPINION.
The Commissioner mailed two deficiency notices, each addressed to G. Bryan Pitts and Gladys T. Pitts. The one notified them of the determination of income tax, penalty and interest amounting to $1,578,600.82, for the taxable years 1926,1927, and 1928,
We are concerned for the time being in these proceedings with the motion of the F. H. Smith Company for leave to intervene, which is opposed by the petitioners and the respondent. The motion, based upon allegations of an intervening petition lodged with the Board, sets forth the following grounds:
1. The intervenor has an interest in the controversy contrary to the interests of the petitioners and the respondent.
2. The intervenor’s interest will not he protected unless this intervention is allowed.
3. The intervening petition offers no new issue, and the proceedings will be simplified by the evidence which only the intervenor can be expected to adduce.
4. The Board can not completely administer justice under the facts of the ease unless this motion is. granted.
5. The Board will not he able to determine the correct tax liability of the petitioners without the facts to be presented by the intervenor.
6. Multiplicity of proceedings will be avoided by the intervention.
7 Matters are involved in this proceeding which affect the tax liability of the intervenor in other proceedings recently filed and now pending before the Board.
8. Unless this intervention is granted irreparable loss and damage will result to the intervenor by a settlement between respondent and petitioners, which is now being negotiated.
The proposed intervening petition contains allegations that the F. H. Smith Company is a Delaware corporation, with its principal office at Wilmington; it has a direct interest in the subject matter in controversy contrary to the interests of the petitioners and the respondent, which will not be protected unless intervention is granted; the corporation was completely reorganized in September, 1931, but for some years prior to that date G. Bryan Pitts dominated and controlled it; between February, 1918, and January 18, 1930, G. Bryan Pitts was a director and officer of the corporation and embezzled from it large sums of money in excess of $2,000,000, and converted to his own use other property of the corporation consisting of stocks, bonds, other securities, and other personal property having a total value in excess of $1,000,000; the corporation did not discover these embezzlements or conversions until December, 1930; since reorganization the present officers of the company , have been, endeavoring to learn the true facts regarding Pitts’ manipulations of its funds; Pitts acquired various kinds of property with the money and property thus obtained, and transferred possession and apparent title to some of the property to his wife, Gladys T. Pitts, details of which transfers are unknown to the corporation; during
We permitted intervention in Central Union Trust Co. et al., Executors, 18 B. T. A. 300. The executors filed a petition contesting a deficiency in estate tax on the ground, among others, that the value of a claim against Emlen P. Frame had been erroneously determined by the Commissioner. Frame had agreed to pay any Federal estate tax resulting from the inclusion of this claim in the decedent’s gross estate. The executors suggested that Frame be heard. He was permitted to intervene upon a showing that he had an interest in the estate, had agreed to pay the tax, and was under the necessity of showing, contrary to the interests of the executors, that the claim had no value. In Louisiana Naval Stores, Inc., 18 B. T. A. 533, L. H. Williams was permitted to show that at the time the original petition, purporting to be that of the petitioner, was filed by D. J. Gay as president, the corporation had been dissolved and Williams was the duly authorized and qualified liquidator and the only person authorized to act on behalf of the corporation. The F. H. Smith Company has not agreed to pay the tax in this case nor could the tax be legally collected from any property belonging to or embezzled from the F. H. Smith Company or which had been wrongfully converted to the use of G. Bryan Pitts. Our affirmance of the Commissioner’s determination in this proceeding will take no property from the F. H. Smith Company nor affect its rights in any direct way, whereas our affirmance of the Commissioner’s determination would have directly affected Frame. Furthermore, the executors favored Frame’s intervention, whereas the petitioners here oppose the intervention of F. H. Smith Company. Cf. Leaver v. K. & L. Box & Lumber Co., 6 Fed. (2d) 666. Williams alleged and proved that he alone represented the petitioner, a situation which finds no parallel in this case. Obviously our decisions in those cases are no authority for permitting intervention in this case, except as they may indicate that the Board believes that it has power to permit intervention in some cases.
In the case of Smith v. Gale, 144 U. S. 509, we find the following in regard to intervention and the interest necessary to authorize intervention :
* * * In Horn v. Volcano Water Co., 13 California, 62, 69, the Supreme Court of California bad occasion to construe a similar provision of the code*316 of that State, and held, speaking through Mr. Justice Field, now a member oí this court, that “ the interest mentioned in the statute which entitles a person to intervene in a suit between other parties must be in the matter in litigation, and oí such a direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment. ... To authorize an intervention, therefore, the interest must be that created by a claim to the demand or some part thereof in suit, or lien upon the property, or some part thereof, in suit, or a claim to or lien upon the property, or some part thereof, which is the subject of litigation.” In Lewis v. Harwood, 28 Minnesota 428, the cases from Louisiana and California were cited with approval. In that case the persons who sought to intervene held attachments upon some property subsequent to those of the plaintiff in the suit. The suit was upon certain promissory notes executed to the plaintiff by the defendants, and the intervenors claimed that the notes were without consideration and fraudulent; that the plaintiff’s attachments were fraudulent; and that the suit and attachments were in execution of a collusive scheme between the plaintiff and defendant to defraud the intervenors, who were ■ lyona fide creditors of the defendant. It was held that the complaint of the intervenors did not disclose such an interest in the subject matter of the suit as to entitle thorn to intervene, and that the plaintiff’s motion to dismiss the same should be granted. The decision was put upon the ground that when the judgment was entered against the defendants, the whole subject matter of the suit was disposed of, and that the writ of attachment was a part of the remedy and had nothing to do with the cause of action. “ If property is seized by virtue of the writ to which another has a better right, the vindication of such right involves another and independent judicial inquiry.”
The intervention must be not only to protect the direct and immediate interest of the intervenor in a suit, but she is bound to make that interest appear by proper allegations in her petition. Coffey v. Greenfield, 62 California, 602.
The real interest of F. H. Smith Company is to see that its property is not taken to satisfy the petitioners’ tax liability. But this property is not the subject of the litigation before the Board and is not within our exclusive control. Cf. Foster Federal Practice, Sixth Edition, vol. 2, § 258g. Billings v. Aspen M. & S. Co., 51 Fed. 338. We have no jurisdiction over this or any other property. We determine the deficiencies, if any. Collection is another matter, with which we have nothing whatever to do. Our decision can not even remotely or indirectly affect the rights of F. H. Smith Company in specific property. It will give the Government no right to collect the deficiencies from the property of the F. H. Smith Company. Counsel confess their inability to state how the F. H. Smith Company will be adversely affected by our decision. If we should hold that there is no deficiency, the Government might then be required to release the seized property, and one claim adverse to that of the F. H. Smith Company would be dissolved. But such an interest is too indirect to justify intervention. Another result of our decision, not suggested by F. H. Smith Company, might be that the Government would take property legally owned by the petitioners which would otherwise be
The third ground urged needs no discussion, and we fail to see where intervention will avoid multiplicity of proceedings over which we have jurisdiction. The seventh ground is not supported by any explanation, argument or allegation of fact. But in support of the fourth, fifth and eighth grounds, the F. H. Smith Company argues very strenuously that the purpose of each proceeding before the Board is to determine the true and correct liability of each petitioner for any deficiencies asserted by the Commissioner, and this purpose can only be accomplished in this proceeding through intervention. The above statement of the purpose of the Board needs certain qualifications. Our decision in each case must depend upon the evidence and upon our interpretation of the principles of law which wo feel apply in the light of the evidence. But we do not necessarily know all of the facts material in each case. We usually know only such facts as the proper parties to the proceedings have succeeded in proving. We have of course no desire to prevent the disclosure of the facts in any proceeding. But rules of evidence and other principles of law are deemed sufficient safeguards in this connection, and if we follow those principles to the best of our ability, we will have done our duty regardless of whether or not our decision results
Taking as broad a view of the situation as the law will permit, we are satisfied that F. H. Smith Company should not be permitted to intervene under the circumstances which have been brought to our attention. Therefore, we have denied the motion.
Reviewed by the Board.