E. M. Piper, Appellant, v. United States of America, Appellee.united States of America, Appellant, v. E. M. Piper, Appellee, 392 F.2d 462 (5th Cir. 1968)

An action was brought under 28 U.S.C. §§ 1340 and 1345¹  by the United States against E. M. Piper, taxpayer, in the United States District Court for the Northern District of Texas to reduce tax liens to judgment and for collection of federal taxes, manufacturer's excise taxes, due for the third and fourth quarters of 1958 and for all quarters of 1959. Before trial the Government's motion for partial summary judgment with respect to the tax due for the fourth quarter of 1959 was granted. After a trial on taxpayer's liability for taxes due in the other periods covered by the complaint, final judgment, which incorporated by reference the partial summary judgment, was rendered for the Government as to all of the excise taxes which had been assessed, but taxpayer was awarded a partial offset based on equitable recoupment. Both parties appeal and by stipulation of counsel the appeals have been consolidated. We affirm.

In 1964 taxpayer was convicted of wilfully and knowingly failing to file a manufacturer's excise tax return for the fourth quarter of 1959 and for wilfully failing to pay the manufacturer's excise tax as an importer of automobiles for this quarter in violation of 26 U.S.C. § 7203.²  In the instant case the Government sought to reduce to judgment the amount of the assessment of tax liability in the criminal proceeding as well as the assessments for the last two quarters of 1958 and the first three quarters of 1959.

The Government moved for partial summary judgment with respect to the tax due for the fourth quarter of 1959 on the ground that taxpayer was collaterally estopped by his criminal conviction from contesting the amount due for this period. Such motion was supported by an affidavit of the District Director of Internal Revenue which set forth, inter alia, the type of tax assessed, the taxable periods involved, and the amounts of tax, penalties and interest due, and by the judgment of conviction in the criminal case.

In response to this motion taxpayer filed an unverified pleading signed by counsel for appellant denying that he had been the importer of the automobiles involved in the assessment. In addition, he asserted that since the jury was not required to ascertain the precise amount of the excise taxes required to be reported in order to convict him of violating § 7203, there was no basis for his being collaterally estopped from litigating the amount due in the civil action. The trial court entered partial summary judgment finding that taxpayer was collaterally estopped to challenge the amount due for the fourth quarter of 1959.

At the trial which followed, taxpayer's defense to the assessments for the third and fourth quarters of 1958 and for the first, second and third quarters of 1959 was that he was not the importer of the automobiles and thus was not liable for the excise tax. Taxpayer also urged that he should be entitled to equitable recoupment to the extent that he could have deducted from his income taxes for those years the excise taxes whch he might be found to owe.

The jury found that taxpayer was the importer of the automobiles involved and final judgment, incorporating by reference the partial summary judgment, was rendered for the Government as to all of the excise taxes which had been assessed but taxpayer was granted a setoff based on equitable recoupment.

Taxpayer appeals from that portion of the final judgment which incorporated the partial summary judgment in the Government's favor. The Government appeals from that portion of the judgment granting taxpayer's claim for equitable recoupment. However, the Government has abandoned its attack on the trial court's grant of a setoff based on equitable recoupment. The Government now only seeks, in case we reverse and remand the partial summary judgment, to have the amount of the setoff reversed and remanded for such redetermination as might be necessary. In light of our decision to affirm this case, it is not necessary for us to discuss this issue.

The court below granted the Government's motion for partial summary judgment on the basis that taxpayer was collaterally estopped by his criminal conviction to challenge the amount of tax due for the fourth quarter of 1959. Taxpayer contends that collateral estoppel does not apply because a decision as to the correctness of the Government's assessment was not necessary to convict him of the § 7203 violation. See Moore v. United States, 360 F.2d 353 (4 Cir. 1965). The Government concedes that since the amount of tax due is not an essential element of the § 7203 offense, collateral estoppel is not applicable to this issue. We agree. However, we affirm the judgment of the district court on the basis that the Government's motion and taxpayer's response showed that there was no triable issue of fact with respect to the fourth quarter of 1959. Rule 56(e) and (f) F.R.Civ.P.³  Appellant made no effort to present an affidavit explaining his failure to controvert the affidavit filed by the Government.

The Government supported its motion for partial summary judgment with an affidavit from the District Director which set out with particularity the taxes, penalties and interest due. Such affidavit is detailed and sets out the Government's claim with specificity. In his answer taxpayer did not attempt to contradict the amounts shown in the Director's affidavit, but simply asserted that the matter was not foreclosed from litigation by the earlier criminal conviction. Such response, at most, only demonstrates a hope that evidence contradictory to the Government's claim can be produced. An unverified pleading denying the factual statements contained in an affidavit filed in support of summary judgment is not sufficient to controvert the affidavit. The response is certainly not sufficient to show the existence of a triable issue of fact as to the amount due. Beaufort Concrete Co. v. Atlantic States Constr. Co., 352 F.2d 460 (5 Cir. 1965); Gauck v. Meleski, 346 F.2d 433, 436 (5 Cir. 1965); Wilkinson v. Powell, 149 F.2d 335 (5 Cir. 1945).

Taxpayer primarily opposed the Government's motion on the ground that he was not an importer of the automobiles on which the excise taxes were alleged to be due. The Government contends that a finding that taxpayer was an importer was necessary to his criminal conviction and is therefore not open to litigation in the present action. Taxpayer was found guilty of wilfully failing to file the tax return and to pay the excise tax on imported automobiles. Under 26 U.S.C. § 4061(a) it is provided that " [t]here is hereby imposed upon the following articles * * * [automobile chassis and bodies] sold by the * * * importer a tax equivalent to the specified percent of the price for which so sold * * *" Thus it was necessary in order to convict taxpayer for failure to pay the tax imposed by the above quoted section, to find that he was in fact an importer. Therefore taxpayer was precluded by collateral estoppel from relitigating that issue in the instant case. Tomlinson v. Lefkowitz, 334 F.2d 262 (5 Cir. 1964), cert. den. 379 U.S. 962, 85 S. Ct. 650, 13 L. Ed. 2d 556 (1965).

Finding no triable issue of material fact and that the Government was entitled to judgment as a matter of law, we hold that the district court committed no error in granting the Government's motion for a partial summary judgment.

Judgment affirmed.

GODBOLD, Circuit Judge (concurring in part and dissenting in part).

I have to dissent from that part of the opinion that relates to partial summary judgment.

My brother judges create in summary judgment practice the same trap for the unwary pleader that existed at common law for the party who joined issue on an immaterial plea and then lost his case on the false issue thereby created although the issue was erroneously in the case.

Mr. Piper can now understand how it was that Mr. Barney was not able to recover for his mule that was worth less than $50.¹  But how this approach gets incorporated into Rule 56 is somewhat harder to understand. It can safely be said that it is not the sort of thing the rule makers had in mind. "Summary judgment procedure is not a catch penny contrivance to take unwary litigants into its toils and deprive them of a trial." Hutcheson, J. in Whitaker v. Coleman, 115 F.2d 305, 307 (5th Cir. 1940). Judge Goldberg has expressed a parallel philosophy in atomic age language. "Summary judgment is a lethal weapon and courts must be mindful of its aims and targets and beware of overkill in its use." Brunswick Corporation v. Vineburg, 370 F.2d 605 (5th Cir. 1967).

Let us see how Piper lost not a mule worth less than $50 but a judgment for $89,672.59 plus penalties and interest. The government moved for partial summary judgment for excise taxes for the fourth quarter of 1959 on the sole and specific ground that the defendant was estopped from asserting any defense with regard to this quarter by virtue of a prior criminal conviction of failure to file excise tax returns for the quarter.²  Exhibit A thereto was the affidavit of a Director of Internal Revenue setting out that an assessment had been made for excise taxes for the fourth quarter of 1959, plus penalties, and giving appropriate dates, amounts and like data.³  Appellant's counsel filed a written "opposition" to the motion directed principally to the government's collateral estoppel theory and attaching a memorandum brief. The document was not sworn to, which is hardly surprising since the issue was one of law. But, in what now proves to be a catastrophic error, counsel included in the unsworn oposition one paragraph in which he disputed the correctness of the amount of the liability for the quarter in question, saying he did not import all the automobiles on which the calculation was based and owed taxes only on those which he did import.⁴ 

The court adopted the government's theory and granted partial summary judgment on the ground the criminal conviction conclusively established the debt and that collateral estoppel operated to bar the defendant from asserting any defense to the allegations concerning the assessment.⁵ 

Before this court the government acknowledges that both it and the trial court were in error in application of collateral estoppel insofar as the amount of tax and penalty are concerned. With this belated confession of error my brother judges agree.

Before rendering summary judgment the district court must determine that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law, Fed. R. Civ. P. 56(c). The district court determined that as a matter of law the government was entitled to a judgment and that the amount thereof also was established as a matter of law. The court did not establish, as a factual matter, issues of material facts. It never reached questions of fact as such, but conclusively ascertained the facts by a threshold determination of law. Based on its erroneous conclusion of law the trial judge barred the appellant from asserting "any defense with regard to the allegations in this cause concerning the assessment." The appellant is now faulted for not interposing sworn factual defenses when the trial court said no defenses would be countenanced.

The government's error, compounded by the trial court, is rewarded in this court by leaving the appellant flopping where he was shot — on the ground.

I suspect that what is sauce for Piper's goose would not be sauce for the government's gander. If in this same case there had been cross-motions for summary judgment, the appellant's opposition had been sworn, but the notary had failed to sign the affidavit of the Director of Internal Revenue, I doubt this court would have reversed and rendered with direction to enter partial summary judgment for appellant.

" [I]f the appellate court becomes convinced that the appellant, although acting in good faith, has somehow or other failed to raise at the trial level a genuine factual issue that is, nevertheless, present in the case it should make such a disposition of the appeal as will permit him to do so." 6 Moore, Federal Practice ¶ 56.27 [1], at 2975 (2d ed. 1966); see also Kennedy v. Silas Mason Co., 334 U.S. 249, 256, 68 S. Ct. 1031, 92 L. Ed. 1347 (1948); Houghton Mifflin Co. v. Stackpole Sons, Inc., 113 F.2d 627 (2d Cir. 1940).

"Technical rulings have no place in this [summary judgment] procedure." Judge Hutcheson in Whitaker v. Coleman, supra.

The majority's second point is that the criminal conviction did estop the appellant from showing he was not an importer of automobiles, since that was a fact necessary to his conviction. With that I do not disagree, but it is wholly irrelevant. The appellant did not deny being an importer; he insisted only that he had been assessed for some cars that he had not imported, while acknowledging that he owed tax on others that he had imported. See footnote 4, supra.

The result of this case is neither laudable for the sovereign, which albeit unintentionally did lead the trial court into error, nor in keeping with either language or purpose of the federal rules.