334 F.

2d 212

Nannie V. COMPTON, Appellant,

v.
UNITED STATES of America, et al., Appellees.
No. 9116.

United States Court of Appeals Fourth Circuit.

Argued November 13, 1963.
Decided June 17, 1964.

Otto L. Tucker, Alexandria, Va., for appellant.

George F. Lynch, Atty., Dept. of Justice (Louis F. Oberdorfer, Asst. Atty.
Gen., Lee A. Jackson and David O. Walter, Attys., Dept. of Justice,
Claude V. Spratley, Jr., U. S. Atty., and MacDougal Rice, Asst. U. S.
Atty., on brief), for appellees.
Before HAYNSWORTH and BOREMAN, Circuit Judges, and
BARKSDALE, District Judge.
BOREMAN, Circuit Judge.

Plaintiff, Nannie V. Compton, brought this action seeking a refund of $194.19

alleged to have been illegally assessed and collected as federal taxes. She joined
with her claim for refund prayers for certain injunctive relief and for abatement
of the balance of a $75,167.39 assessment for taxes and penalties alleged to
have been unlawfully made. From the judgment of the District Court dismissing
the action on the merits she appeals.

The relevant facts are not in controversy. On October 21, 1957, members of the
Arlington County Police Department, armed with a search warrant, entered and
searched the premises of the plaintiff in Arlington, Virginia. 1 Indicia of
gambling or wagering operations, including adding machines, tapes, numbers
slips and a large amount of cash, were seized. Plaintiff and one Joseph A. Chase
were arrested and charged with violating Virginia's lottery laws. On November
7, 1957, plaintiff and Chase entered separate pleas of guilty in the County Court
of Arlington County, Virginia, to charges of operating a lottery and possessing

lottery slips. Plaintiff was given a suspended sentence of nine months and
placed on probation for a period of five years. Subsequently, Chase was
prosecuted on charges of failure to file federal gambling excise tax returns and
failure to purchase a wagering tax stamp as required by law. He was convicted
in the District Court but, on appeal on Government's motion, the judgment of
conviction was reversed and the cause remanded, the Government conceding
before this court that the warrant under which plaintiff's home was searched
and the property seized was invalid, and that the evidence upon which Chase
had been convicted was obtained in violation of the constitutional protection
against unreasonable search and seizure.2 That prosecution was subsequently
dismissed in the District Court on Government's motion.
3

Prior to the criminal proceedings mentioned above, agents of the Internal

Revenue Department, having learned from newspapers of the raid, were
permitted by the police to inspect the seized property. From information gained
through their inspection and from helpful and revealing discussions with the
Arlington police, the agents estimated the gross receipts of the lottery business.
On the basis of these estimates the District Director, pursuant to 26 U.S.C.A.
6862, made a joint jeopardy assessment of excise and occupational taxes owed
by plaintiff and Chase which, together with penalties and interest, totaled
$75,167.39.3 The assessment, covering periods in 1957, is set forth below.4 In
an effort to collect the assessment, the District Director filed liens against
property of the plaintiff, including her automobile and her home, and levied
upon a bank account in plaintiff's name. The balance in the bank account,
$194.19, was paid by the bank to the District Director and credited to the total
joint assessments against plaintiff and Chase.

In her complaint plaintiff alleged that at no time had she engaged in the State of
Virginia in any of the activities that would require her to file a return of
wagering taxes or to "apply for an occupational stamp to accept wagers." The
denial of these allegations in the Government's answer created a material issue
of fact. Before the District Court, plaintiff testified that she had never been
engaged in the business of accepting wagers or operating a lottery and
contended that, in any event, the assessment, being based upon illegally seized
evidence, was void. The District Court held that she had not sustained the
burden of showing that she was entitled to the relief requested and dismissed
her action on the merits. We think the decision of the District Court should be
affirmed.

On this appeal plaintiff fails, in her brief, to discuss or argue the refusal of the
District Court to grant the injunctive relief requested and to abate the
outstanding assessment. We are convinced, however, that in the circumstances

here the court was without jurisdiction to grant such relief.5

6

The specific errors of which plaintiff does complain on this appeal are not
altogether clear from her brief and oral argument. In her brief she states the
questions involved as follows:

"1. Whether the record of the proceeding below shows the Appellant to have
been engaged in a partnership or other arrangement to justify the assessment of
Federal Excise Taxes to Appellant jointly with another so as to bring it in the
ambit of the Due Process Clause of the Fifth Amendment to the Constitution of
the United States?

"2. Whether the District Court committed reversible error in not permitting
Appellant to retain counsel of her own choice?

"3. Whether evidence seized by either State or Federal officers, in violation of

the Constitution of the United States, is inadmissible in Federal tax
proceedings?"

10

We shall consider these questions as they relate to the suit for refund which, in
our view, was properly before the District Court.6

11

We turn first to plaintiff's contention that illegally seized evidence is

inadmissible in federal tax proceedings. Plaintiff makes this argument as an
abstract proposition of law without in any manner demonstrating that
unlawfully obtained evidence was introduced in the District Court. In fact, no
physical or tangible evidence obtained as a result of the illegal search was
introduced by the Government. The only evidence introduced by the
Government which could possibly be deemed a product of the unlawful search
was offered for the purpose of impeachment only and, for reasons hereinafter
stated, we think the evidence was properly admitted for that purpose.
Obviously the thrust of plaintiff's argument here, as in the court below, is that
the assessment itself is invalid because it was based on illegally obtained
evidence. Apparently she seeks to press that issue by broadly insisting that
illegally obtained evidence is inadmissible in a civil proceeding. At trial,
plaintiff introduced the testimony of three agents of the Internal Revenue
Department to show the manner in which the assessment was made. From their
testimony, it is clear that the assessment was based almost entirely upon the
fruits of the illegal search7 but that fact is not decisive of the issues here. The
difficulty with plaintiff's position is that she apparently misconceives the
burden of proof imposed upon her and which she must sustain in order to

establish her claim of entitlement to a refund.

12

It is a well established principle that in every case, whether in a proceeding in

the Tax Court to contest a deficiency assessment or in a District Court in a suit
for refund, the assessment of the Commissioner is presumed to be correct.8 To
be sure, this presumption is not evidence in itself and may be rebutted by
competent evidence. It operates merely to place upon the opposing party the
burden of going forward with the evidence. However, to prevail in an action for
refund, the taxpayer must not only overcome this presumption but must assume
and discharge the added burden of demonstrating the correct amount of the tax
due or that he owes no tax at all. See Helvering v. Taylor, 293 U.S. 507, 55
S.Ct. 287, 79 L.Ed. 623 (1935); Commissioner of Int. Rev. v. R. J. Reynolds
Tobacco Co., 260 F.2d 9, 14 (4 Cir. 1958); Clinton Cotton Mills v.
Commissioner of Internal Revenue, 78 F.2d 292 (4 Cir. 1935); 9 Mertens,
Federal Income Taxation, 50.65 (Zimmet Rev. 1958).

13

An action for refund of taxes paid is in the nature of an action of assumpsit for
money had and received and the plaintiff's right to recover must be measured
by equitable standards.9 Here, taxpayer's entire liability is at issue and if, under
any state of facts, the Government is entitled to the money claimed, she cannot
prevail. Consequently, it is not enough merely to show that the assessment was
invalid or that the Commissioner erred; the plaintiff must go further and
produce evidence from which another and proper determination can be made.10
The extent of the taxpayer's burden in a refund action was aptly stated by Judge
Learned Hand in Taylor v. Commissioner, 70 F.2d 619, 620 (2 Cir. 1934), aff'd
sub. nom. 293 U.S. 507, 55 S.Ct. 287, 79 L.Ed. 623 (1935):

14

"* * * If the burden of proof goes so far as to demand not only that the taxpayer
show that the deficiency assessed against him is wrong, but what is the proper
deficiency, or that there should be none at all, the decision was right, even
though we know that the tax is too high. In an action to recover taxes
unlawfully collected the burden does go so far. * * * But the reason for this is
obvious; a plaintiff, seeking an affirmative judgment measured in dollars, must
prove how much is due. His claim is for money paid and he must show that
every dollar he recovers is unjustly withheld. So it is not enough merely to
prove that the tax as a whole was unlawful; some of the dollars he paid may
nevertheless have been due. * * *"

15

To put it another way, the ultimate question in a suit for refund is not whether
the Government was wrong, but whether the plaintiff can establish that taxes
were in fact overpaid. The plaintiff, to prevail, must establish the exact amount
which she is entitled to recover.

16

With the foregoing principles in mind, we turn our attention to the

circumstances of the case at hand. Here, plaintiff endeavored to prove that no
tax was due by testifying that she had not engaged in the numbers business
during the period in question, or at any time. In response to a question by the
Government on cross-examination as to whether she had pleaded guilty to
charges of maintaining a lottery, she testified: "I did not plead guilty. My
attorney pleaded me guilty." The Government then sought to impeach her
testimony by introducing in evidence a certified copy of the record of the
County Court of Arlington County showing that plaintiff had pleaded guilty to
charges of operating a lottery and possessing lottery slips. Also for the sole
purpose of impeachment, the Government directed questions to the plaintiff
concerning her knowledge of the property taken from her home; plaintiff
denied any knowledge thereof. The District Court refused to credit plaintiff's
testimony and held that she had not sustained her burden of proof. Without
directly contesting this determination, plaintiff simply argues abstractly, as we
have shown before, that unconstitutionally seized evidence is inadmissible in a
federal tax proceeding. The Supreme Court has never directly passed upon this
question11 and we do not think it necessary for this court to do so here. We
reiterate that no physical evidence obtained as a result of the illegal search was
introduced at trial. The questions propounded by the Government with respect
to plaintiff's knowledge of the property seized, as well as the record of the
guilty plea in the Arlington County Court,12 were directed only at impeaching
plaintiff's testimony.13 Without reaching the broader question, we hold that for
such purpose this evidence was admissible. In Walder v. United States, 347
U.S. 62, 74 S.Ct. 354, 98 L.Ed. 503 (1954), the Supreme Court held that
evidence of a previous narcotics violation which had been illegally obtained
could be used to impeach the defendant's testimony in a prosecution for
subsequent illicit transactions in narcotics. There the Court stated:

17

"It is one thing to say that the Government cannot make an affirmative use of
evidence unlawfully obtained. It is quite another to say that the defendant can
turn the illegal method by which evidence in the Government's possession was
obtained to his own advantage, and provide himself with a shield against
contradiction of his untruths. Such an extension of the Weeks doctrine would be
a perversion of the Fourth Amendment." Id. at 65 of 347 U.S., at 356 of 74
S.Ct.

18

This pronouncement by the Supreme Court in a criminal case is a fortiori

applicable in the instant case. Here the Government did not use the evidence
affirmatively to establish a case. The Government was the defendant and it was
merely resisting plaintiff's claim. By alleging in her complaint that she was not
engaged in accepting wagers, she recognized that this question would materially

affect her right to a refund of taxes paid. Her allegations were denied. The
burden was on the plaintiff to prove that she was not engaged in accepting
wagers during the period in question and the above evidence, offered only to
impeach her testimony, was proper. Also, in view of our conclusions with
respect to plaintiff's burden of proof, we need not decide whether the
assessment was vitiated by the manner in which it was achieved. Even
assuming that the assessment was thereby rendered invalid, plaintiff could not
recover without a further showing that she did not in fact owe all or some part
of the amount collected. Her attempt to do so failed when the District Court
rejected her testimony that she had not been engaged in the numbers business
during the period in question. Her proof clearly fell short of meeting her
obligation to show that she, in fact, owed no tax and that the money collected
by the Government was unjustly withheld.
19

Two cases, United States v. Harris, 216 F.2d 690 (5 Cir. 1954), and Roybark v.
United States, 218 F.2d 164 (9 Cir. 1954), illustrate the proper application of
the burden of proof rule. In Harris, the plaintiff was an automobile dealer
against whom the Commissioner had made a deficiency assessment based upon
his disallowance of claimed deductions for purchase prices of automobiles in
excess of the legal ceiling. The plaintiff paid the assessment and brought suit in
the District Court for refund. In its answer the Government admitted that the
original assessment was erroneously based on the theory, subsequently
discredited, that amounts paid in excess of lawful ceiling prices could not be
deducted, but denied generally that the overceiling prices had actually been
paid. The District Court granted summary judgment for the plaintiff and the
Government appealed. The Court of Appeals for the Fifth Circuit reversed,
emphasizing that in an action for refund the burden is on the taxpayer to
establish that the tax he paid was not in fact due. Thus, even though the
assessment was based on an erroneous conclusion of law, the plaintiff was
required to prove that above legal ceiling prices had actually been paid and that
plaintiff did not owe the money which had been paid to the Government.

20

Roybark v. United States, supra, involved facts almost identical to those in

Harris. The Court of Appeals for the Ninth Circuit similarly held that, although
the tax had been assessed under an erroneous view of the law, the plaintiffs had
the burden, which they had not met, of establishing facts from which a proper
determination could be made.

21

The contention advanced in plaintiff's brief, i. e., that the record does not show
that she was engaged in a partnership with Chase, requires no discussion
beyond the statement that 26 U.S. C.A. 4401 makes "[e]ach person who is
engaged in the business of accepting wagers" liable for the tax. The assessment

was made against plaintiff and Chase, jointly and severally, and plaintiff is
personally and individually liable for such taxes as are due and owing.
22

Finally, plaintiff has argued that the failure of the District Court to grant a
continuance to permit her to substitute counsel constituted a denial of due
process. Soon after this action was commenced in the District Court, plaintiff
wrote to the attorneys then representing her that she did not desire their services
in connection with the instant case. Thereafter, on September 12, 1962, one of
plaintiff's counsel of record, Carl J. Batter, Sr., filed in the District Court a
motion, termed a "Motion Regarding Status of Counsel," by which he sought
leave to withdraw as counsel for plaintiff and permission to continue in the
cause independently to protect his attorney's lien. Mr. Batter assigned as the
reason for his motion the letter from plaintiff indicating that his services were
no longer desired. The motion was brought to the court's attention on
September 26, 1962, and denied on the ground that plaintiff had not been given
notice of a hearing thereon, but without prejudice to renewing the motion upon
appropriate notice to plaintiff of a hearing date. Plaintiff did nothing further
regarding a change of counsel until the date of trial (January 14, 1963) when
she addressed the court and asked if she "could have a chance to get new
counsel in this case," stating that she was unable to pay the fees charged by
present counsel. The court treated her request as a motion for continuance and
denied it as coming too late. This ruling was made the basis for a motion for a
new trial which was also denied. We do not believe that in this respect error
was committed.

23

It is well settled that the decision to grant or refuse a continuance to permit a

change of counsel rests in the sound discretion of the trial court.14 It is shown
by the record that plaintiff was represented by other counsel in the person of
one Johnson several months prior to trial. Yet, no formal appearance was at any
time entered by him in this proceeding. Plaintiff acknowledged before the
District Court that she had known at least one week prior to trial that Johnson
no longer represented her. It appears that plaintiff had ample opportunity prior
to the trial date to procure other counsel if she so desired. The only prejudice
assigned by plaintiff is the failure of counsel to explain the plea of guilty
entered in the Arlington County Court. However, plaintiff herself sufficiently
explained the plea if her testimony had been credited. From an examination of
the record, there is no reason to believe that a different result would have been
achieved had plaintiff been represented by other counsel. In the circumstances
here we think there was no abuse of discretion and the refusal of the
continuance was proper.15

24

For the reasons stated above, the decision of the District Court is

25

Affirmed.

Notes:
1

Premises at 1800 South Cleveland Street, Arlington, Virginia, were titled in the
name of the plaintiff but the District Court found that Joseph A. Chase had
contracted for the erection of the house. Plaintiff made her home on the
premises and Chase maintained a room there in which he kept clothing and
other belongings. In addition, Chase had access to other parts of the house and
kept a safe in the den

The warrant under which the premises were searched stated as the material
facts constituting probable cause "Personal observation of premises and
information from sources thought by the Police Department to be reliable." The
Government, in the criminal proceeding against Chase, originally took the
position that although the warrant failed to show probable cause, the evidence
was nevertheless admissible because it had been seized by state officers. After
the decision of Elkins v. United States, 364 U.S. 206, 80 S.Ct. 1437, 4 L.Ed.2d
1669 (1960), the Government altered its position and moved for dismissal.
Subsequently, the Supreme Court of Appeals of Virginia in a forfeiture
proceeding, Tri-Pharmacy, Incorporated v. United States, 203 Va. 723, 127
S.E.2d 89 (1962), held that the search warrant was valid and the search and
seizure were proper. However, the District Court in the present action found
that the property was illegally seized by the Arlington County Police
Department and the Government does not contest that determination here

The excise tax on wagers is imposed by Int.Rev.Code of 1954 4401, 26

U.S.C.A. 4401 (1958). An occupational tax of $50 per year is imposed by
Int.Rev.Code of 1954 4411, 26 U.S.C.A. 4411 (1958), on any person who
is liable for the tax under section 4401

March 1957
May 1957
Sept. 1957
Dec. 1957
Occupational tax 1957

Tax
$14,476.64
14,476.64
14,476.64
9,651.10
50.00
__________
$53,131.02

Penalty
$ 7,238.32
7,238.32
7,238.32

Interest
$154.18
81.79
9.41

75.00
__________
$21,789.96

1.03
_______
$246.41

Total
$21,869.14
21,796.75
21,724.37
9,651.10
126.03
__________
$75,167.39

With certain exceptions not relevant here, 26 U.S.C.A 7421(a) provides that
"no suit for the purpose of restraining the assessment or collection of any tax
shall be maintained in any court." As construed in Enochs v. Williams Packing

Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), this statute clearly
prohibits the granting of injunctive relief in a case such as this. The prayer for
abatement was in the nature of a request for an injunction or a declaratory
judgment, see Etheridge v. United States, 112 U.S.App. D.C. 151, 300 F.2d 906
(1962), and likewise could not have been granted. 28 U.S.C.A. 2201
expressly excepts cases involving federal taxes from the grant of jurisdiction
for declaratory judgments
6

Although generally payment of the total assessment is a prerequisite to suing

for a refund, the Supreme Court in Flora v. United States, 362 U.S. 145, 171 n.
37, 175 n. 38, 80 S.Ct. 630, 644, 646, 4 L.Ed. 2d 623 (1960), indicated that the
full payment rule has no application to suits for refund ofexcise taxes, which
may be divisible into a tax on each transaction or event and with respect to
which the Tax Court has no jurisdiction. Lower federal court cases decided
subsequent to the Flora decision have uniformly held that payment of the
complete assessment is not a prerequisite to the maintenance in a District Court
of a suit for refund. Tysdale v. United States, 191 F.Supp. 442 (D.Minn.1961);
O'Neil v. United States, 60-1 CCH U.S. Tax Cas. 76,568 (E.D. N.Y. April 15,
1960); see Steele v. United States, 280 F.2d 89 (8 Cir. 1960); Sherwood v.
Scanlon, 207 F.Supp. 686 (E.D. N.Y.1962) (dicta); Lassoff v. Gray, 207
F.Supp. 843 (W.D.Ky.1962) (dicta). See also Jones v. Fox, 162 F.Supp. 449
(D.Md. 1957) (supplemental opinion filed 1958), decided before the Flora case.

For example, Agent Hudner testified as follows:

"Q. The gross receipts, which you calculated, were based on the evidence held
by the Arlington Police Department?
"A. Yes, sir.
"Q. Were there any other evidence used by you?
"A. No, sir."

See e. g., Helvering v. Taylor, 293 U.S. 507, 55 S.Ct. 287, 79 L.Ed. 623 (1935);
Veino v. Fahs, 257 F.2d 364 (5 Cir. 1958). See generally 9 Mertens, Federal
Income Taxation 50.71 (Zimmet Rev.1958)

E. g., Stone v. White, 301 U.S. 532, 57 S.Ct. 851, 81 L.Ed. 1265 (1937); Lewis
v. Reynolds, 284 U.S. 281, 52 S.Ct. 145, 76 L.Ed. 293 (1932); United States v.
Pfister, 205 F.2d 538 (8 Cir. 1953); Western Maryland Ry. Co. v. United
States, 131 F.Supp. 873 (D.Md.1955), aff'd per curiam, 227 F.2d 576 (4 Cir.

1955), cert. denied, 351 U.S. 907, 76 S.Ct. 696, 100 L.Ed. 1443 (1956)
10

Helvering v. Taylor, supra note 8; United States v. Pfister, supra note 9; United
States v. Harris, 216 F.2d 690 (5 Cir. 1954); 10 Mertens op. cit. supra note 8,
58A. 35. But cf. United States v. Hover, 268 F.2d 657 (9 Cir. 1959)

11

The Supreme Court has not squarely decided whether illegally obtained
evidence may be admitted in a civil proceeding. However, in Silverthorne
Lumber Co. v. United States, 251 U.S. 385, 40 S.Ct. 182, 183, 64 L.Ed. 319
(1920), a criminal action, Justice Holmes, speaking for the Court, stated: "The
essence of a provision forbidding the acquisition of evidence in a certain way is
that not merely evidence so acquired shall not be used before the Court but that
it shall not be used at all." Id. at 392. Several lower federal court cases have
interpreted this language as prohibiting the use of illegally obtained evidence in
civil as well as criminal cases. See, e. g., United States v. Physic, 175 F.2d 338
(2 Cir. 1949); Rogers v. United States, 97 F.2d 691 (1 Cir. 1938); Lassoff v.
Gray, 207 F.Supp. 843 (W.D.Ky. 1962); Tovar v. Jarecki, 83 F.Supp. 47
(N.D.Ill.1948), rev'd on other grounds, 173 F.2d 449 (7 Cir. 1949). In addition,
other cases have applied the prohibition against the use of illegally obtained
evidence in forfeiture proceedings which, although essentially civil in nature,
have some attributes of a criminal action. See, e. g., United States v. One 1963
Cadillac Hardtop, 220 F.Supp. 841 (E.D.Wis. 1963); United States v. $4,171.00
In United States Currency, 200 F.Supp. 28 (N.D.Ill.1961). On the other hand,
other federal courts have indicated that the exclusionary rule has no application
in civil cases. See Martin v. United States, 277 F.2d 785 (5 Cir. 1960); United
States v. One 1956 Ford Tudor Sedan, 253 F.2d 725 (4 Cir. 1958); United
States v. One 1953 Oldsmobile Sedan, 132 F.Supp. 14 (W.D.Ark.1955). In
United States v. One 1956 Ford Tudor Sedan, supra, 253 F.2d at 727, Judge
Haynsworth, speaking for this court, stated:
"We deem it unnecessary to extend, beyond the suppression of evidence in the
criminal jurisdiction, the overlordship of the conduct of federal law
enforcement officers."

12

The plaintiff contended below that the guilty plea entered in the Arlington
County Court as well as the questions propounded by Government counsel
were fruits of the illegal search which should have been stricken from the
record. In our view of the case, it is not necessary to decide whether such
evidence was the product of the illegal search and we may assume for purposes
of decision that it was

13

At page 185 of the transcript the following colloquy appears:

"THE COURT: * * * I understand Government Exhibit No. 2 which is the

record of the plea of guilty in Arlington County was not introduced for the
purpose of proving that in fact she was guilty or that there was anything to do
with it. It was only produced in response to her answer that the plea she made
was not a guilty plea and was put in to test her credibility. Is that right?
"MR. LOMBARDO: That is true your Honor.
"THE COURT: It was not put in for any other purpose.
"MR. LOMBARDO: It was put in to impeach her testimony.
"THE COURT: And that only?
"MR. LOMBARDO: Yes, your Honor.
"THE COURT: Is that what you understand it was in for only?
"MR. BATTER, JR.: Yes."
14

See, e. g., Robertson v. Malone, 190 F.2d 756 (5 Cir. 1951); Miller v. Grier S.
Johnson, Inc., 191 Va. 768, 62 S.E.2d 870 (1951). See generally Annot. 48 A.L.
R.2d 1155

15

See Crono v. United States, 59 F.2d 339 (9 Cir. 1932); Annot. 66 A.L.R.2d 298