Justia Federal District Court Opinions

In this appeal, the Government finds itself in the awkward position of having to complain of evidence admitted into trial on its own suggestion. Finding as we do that any such error was harmless and that an apparent error in the charge turns out not to be so in fact, we affirm the judgment of the Court below in favor of Taxpayer.

Taxpayer Thrash operated an "Electric Box Score Game," a mechanical wagering device not unlike roulette in the nature of the gambling risk involved.1 The game had been purchased pursuant to a promotional letter sent to Taxpayer by the manufacturer of the device. The promotional letter referred to and quoted from a private ruling letter issued by the Commissioner of Internal Revenue to attorneys for the manufacturer, in which the Commissioner concluded that the device in question, if operated in the specified manner, would fall within a statutory exclusion from the definition of a taxable lottery.2

The only question before the Trial Court was whether or not Taxpayer operated the game in the manner necessary to qualify for the statutory exclusion. At the pretrial conference the Government had stipulated to the admissibility of the promotional letter and the pretrial order stated it "is received in evidence." But at trial, without seeking leave to amend or withdraw the stipulation, the Government objected to introduction of the letter, on grounds that it was irrelevant to the fact determinations then at hand.3 When the Trial Court indicated that he was going to overrule the Government's objection and admit the promotional letter, the Government requested that "to minimize prejudicial error" the private ruling letter be admitted instead of the promotional letter. The Trial Court granted this request.

Although the record indicates strongly to us that the Government agreed to the introduction and use of the advisory memorandum,⁴ it now asserts that introduction of the private ruling constituted reversible error. Arguing on authority of the well-established rule that a taxpayer may not rely on private rulings not addressed to him,⁵ the Government urges that admission of the letter prejudicially allowed the jury to consider the Taxpayer's good faith, rather than deciding the case on the fact questions properly before them. Further, it is asserted, admission of the letter improperly influenced the jury that the Commissioner had taken a prior position on this issue inconsistent with the instant case.

We need not decide whether the Government preserved the point or whether the Government really complains of the admissibility of the wrong document since the private ruling letter was admitted instead of the promotional letter solely at the Government's suggestion. For we are of the view that it was all harmless if — and the if is a very big one — it was error at all.

Oddly enough the jury already knew of it since Section B of the ruling (see note 1, supra) was set out verbatim in Taxpayer's amended complaint. More important, all it did was to describe the operations which had to take place to come within the exemptions. And as the Court told⁶ and retold the jury four or five times, that was what they had to decide, step by step.

Although we disclaim resting this decision on the untimely, unannounced, presumptuous indifference to the pretrial stipulation and order that the promotional letter "is admitted," we are entitled to weigh excusability in the light of the situation suddenly and improperly pressed on the Judge.⁷

Thus we conclude that any error in the admission of the revenue ruling was harmless, particularly in view of the fact that the situation was thrust upon the Judge suddenly and unexpectedly by the Government's improper disregard of the pretrial order.

The second issue raised by the Government is that the Trial Court's charge to the jury improperly placed the burden of proof on the Government on its counterclaim.

Taxpayer had paid a small part of the Commissioner's assessment and brought suit against the District Director for refund. The United States intervened and cross-claimed for the remainder of the deficiency. In charging the jury, the Trial Court properly instructed that Taxpayer had the burden of proving each element of his case with a preponderance of the evidence and unless the jury found that he had, Taxpayer should not be allowed to recover. On the Government's cross-action the Trial Court ostensibly, but not actually, placed the burden improperly on the Government.⁸

We say ostensibly because, first, there is much doubt that what was said was anything more than a juridical slip of the tongue,⁹ and second, in the charge as a whole the Court stated time and again what the jury had specifically to determine and what the effect was on Taxpayer and Government.

Actually, what the Judge did was to use the marvelous device of a general charge with special interrogatories under F.R.Civ.P. 49(a).¹⁰ Ironically, as in the case of the revenue ruling, it was the Government which by formal requested charges — all of which were given — sought submission by specific questions covering each of the three conjunctive elements of the exemption.¹¹

Not only were the decisive fact issues pinpointed, but the Court, giving full use to the flexibility of the Rule 49(a) device, gave specific instructions on the answers open to the jury, their effect as "Yes" or "No" as well as controlling principles.¹² In all of these, his earlier positive instructions on Taxpayer's burden of proof were in effect repeated and repeated.¹³ The only way Taxpayer could win was by convincing the jury by a preponderance of the evidence to answer all questions "Yes." And with the interrogatories constructed as they were (see note 11, supra), calling for dependent answers, the Government never had any burden either of proof or persuasion for contingent dependent answers. The failure to find "Yes" automatically called for a "NO" and on that the Government automatically prevailed. At no time did the Court ever speak in terms of the Government having the burden to convince the jury to a "No" answer to the questions. All was tied to Taxpayer affirmatively establishing all "Yes" answers.

The only complication is that the Judge gave the jury two forms of a general verdict, one for Taxpayer, one for the Government. These were wholly unnecessary and in any event the instructions were clear that the form of the general verdict depended on the answers to the interrogatories. Having found all "Yes" and having been properly instructed as to the requirements to reach such successive answers, the form of general verdict followed automatically. That in one reference to the form for rendering a verdict for the Government the Court spoke in terms of the Government's burden of proof cannot be turned into harmful error where the jury answered the questions precisely and then filled out the general verdict forms consistent with those answers and the Judge's binding instructions.

Thus, what might have been an impossible problem of deciphering the actions of the jury from the enigma-wrapped-in-a-mystery of a single general verdict plus the law's strange fiction that the jury heeds the Judge only when he commits a verbal error, became a simple matter of applying plain statutory language to facts specifically found on evidence that no one can challenge. That speaks well again for 49(a).

The upshot is that the Government's contentions are both without merit. Unlike Taxpayer's patrons who committed their economic fate to the whims of chance, we hold that Taxpayer did not risk imposition of the lottery tax by operating his Wheel of Fortune — or at least, the jury so found. That finding having been fairly, properly and conclusively ascertained, the case ends right there.

Affirmed.