T.C. Memo. 1997-527

UNITED STATES TAX COURT

ANTHONY F. CUTAIA AND SUSAN D. CUTAIA, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 10742-95. Filed November 24, 1997. 

Richard J. Rothman, Jeffrey H. Pasternak, and Gilbert T. 

Perlman, for petitioners.

Drita Tonuzi, Henry S. Schneiderman, and Roland Barral, for 

respondent.

MEMORANDUM OPINION

CHIECHI, Judge: This case is before the Court on petitioners' motion for leave to file motion to vacate decision and enter

revised decision (petitioners' motion). Respondent filed an

objection to the granting of petitioners' motion and an affidavit

setting forth facts in support of that objection (respondent's

objection). We shall deny petitioners' motion.
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Background

On March 16, 1995, respondent issued a notice of deficiency

(notice) to petitioners that determined a deficiency in, and

additions to, their Federal income tax for each of the years

1978, 1981, 1982, and 1983 (years at issue). On June 19, 1995,

petitioners timely filed a petition. This case was calendared

for trial at the Court's trial session in New York, New York,

that began on June 17, 1996. On that date, a stipulation of

settlement (stipulation of settlement) executed by the respective

counsel for petitioners and respondent was filed in this case,

and 30 days, until July 17, 1996, were requested, and granted by

the Court, within which to submit stipulated decision documents. 

The stipulation of settlement stated, inter alia: "THE PARTIES

AGREE TO THIS STIPULATION OF SETTLEMENT WHICH RESOLVES ALL OF THE

ISSUES IN THIS CASE."

On July 9, 1996, respondent provided petitioners with computations reflecting the stipulation of settlement. On July 30,

1996, the Court issued an order in which it directed the parties

to submit stipulated decision documents to the Court or otherwise

file appropriate motions with the Court on or before August 15,

1996. On August 15, 1996, respondent filed a motion for entry of

decision in this case (respondent's motion for entry of decision)

to which the Court ordered petitioners to respond by September 5,

1996. On September 3, 1996, the Court received stipulated deci-
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1 Consequently, the Court denied respondent's motion for entry

of decision as moot.

2 All section references are to the Internal Revenue Code in

(continued...)

sion documents that were executed by the respective counsel for

petitioners and respondent.1 On September 4, 1996, the Court 

entered a decision in this case pursuant to the agreement of the

parties.

After the decision in this case was entered for the years at

issue, petitioners and respondent signed on September 6 and

October 17, 1996, respectively, a closing agreement with respect

to petitioners' taxable years 1979 and 1980 (closing agreement). 

The closing agreement set forth the agreement of petitioners and

respondent (1)(a) that petitioners have a Federal income tax

liability for their taxable year 1979 in the amount of $1,855,

which was assessed and paid in full, and (b) that there is no

deficiency in Federal income tax due from, or overpayment due to,

petitioners for that year; and (2)(a) that petitioners have a

Federal income liability for their taxable year 1980 in the

amount of $92,744 and (b) that there is an overpayment in Federal

income tax due them for that year in the amount of $141,335.

Discussion

The Court's decision in this case was entered on September

4, 1996. No notice of appeal or timely motion to vacate or

revise the decision was filed in this case, see sec. 74832 and
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2(...continued)

effect at relevant times. Unless otherwise indicated, all Rule

references are to the Tax Court Rules of Practice and Procedure. 

3 The Court of Appeals for the Fifth Circuit has indicated that

in extraordinary circumstances this Court has the power in its

discretion to vacate and correct a final decision where it is

based on a mutual mistake of fact. See La Floridienne J.

Buttgenbach & Co. v. Commissioner, 63 F.2d 630 (5th Cir. 1933). 

But see Harbold v. Commissioner, 51 F.3d 618, 621-622 (6th Cir.

1995).

Rule 162, and the decision herein became final on December 3,

1996. See sec. 7481(a)(1); Fed. R. App. P. 13(a). 

Petitioners' motion was filed on August 29, 1997, almost a

year after the Court entered the decision in this case. Once a

decision becomes final, the Court may vacate it only in narrowly

circumscribed situations, such as where the decision was obtained

through fraud on the Court, see Abatti v. Commissioner, 859 F.2d

115, 118 (9th Cir. 1988), affg. 86 T.C. 1319 (1986); Senate Realty Corp. v. Commissioner, 511 F.2d 929, 931 n.1 (2d Cir. 1975),

or where the decision is void or a legal nullity for lack of this

Court's jurisdiction over either the subject matter or the party,

see Billingsley v. Commissioner, 868 F.2d 1081, 1084-1085 (9th

Cir. 1989); Abeles v. Commissioner, 90 T.C. 103, 105-106 (1988).3

The Court of Appeals for the Ninth Circuit has defined the

phrase "fraud on the court" to be "'an unconscionable plan or

scheme which is designed to improperly influence the court in its

decision.'" Toscano v. Commissioner, 441 F.2d 930, 934 (9th Cir.

1971) (quoting England v. Doyle, 281 F.2d 304, 309 (9th Cir.
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4 Fed. R. Civ. P. 60(b) provides in pertinent part:

On motion and upon such terms as are just, the court may

relieve a party or a party's legal representative from a

final judgment, order, or proceeding for the following

(continued...)

1960)); see Abatti v. Commissioner, supra. The Court of Appeals

for the Second Circuit has adopted the following definition of

the phrase "fraud on the court" that is set forth in 7 Moore,

Moore's Federal Practice, par. 60.33, at 515 (2d ed. 1974): 

"Fraud on the court" should, we believe, embrace only

that species of fraud which does or attempts to, defile

the court itself, or is a fraud perpetrated by officers

of the court so that the judicial machinery can not

perform in the usual manner its impartial task of

adjudging cases * * *.

See Senate Realty Corp. v. Commissioner, supra at 931; Kupferman

v. Consolidated Research & Manufacturing Corp., 459 F.2d 1072,

1078 (2d Cir. 1972); see also Abatti v. Commissioner, 86 T.C.

1319, 1325 (1986), affd. 859 F.2d 115 (9th Cir. 1988).

In order to prove fraud on the Court, petitioners have the

burden of establishing that "an intentional plan of deception

designed to improperly influence the Court in its decision has

had such an effect on the Court." Abatti v. Commissioner, supra

at 1325; see Drobny v. Commissioner, 113 F.3d 670, 677-678 (7th

Cir. 1997), affg. T.C. Memo. 1995-209, and cases cited therein.

Petitioners argue that this Court has the power to vacate

the decision in this case under Rule 162 or rule 60(b) of the

Federal Rules of Civil Procedure.4 Although petitioners' motion
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4(...continued)

reasons: (1) mistake, inadvertence, surprise, or excusable

neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a

new trial under Rule 59(b); (3) fraud (whether heretofore

denominated intrinsic or extrinsic), misrepresentation, or

other misconduct of an adverse party; (4) the judgment is

void; (5) the judgment has been satisfied, released, or

discharged, or a prior judgment upon which it is based has

been reversed or otherwise vacated, or it is no longer

equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the

operation of the judgment. The motion shall be made within

a reasonable time, and for reasons (1), (2), and (3) not

more than one year after the judgment, order, or proceeding

was entered or taken. * * *

cites some cases involving application of the phrase "fraud on

the court", petitioners do not contend in that motion that the

decision in this case was obtained through fraud on the Court. 

Instead, petitioners contend that they should be granted leave to

file a motion to vacate and revise the decision in this case

because, subsequent to entry of that decision, they discovered

evidence which they claim respondent wrongfully withheld and

which they assert shows that they are entitled to interest

deductions for their taxable years 1981, 1982, and 1983. Respondent argues that petitioners have not established that this Court

should exercise its discretion under Rule 162 to grant them leave

to file a motion to vacate and revise the decision in this case. 

Respondent further argues that not all of the reasons specified

in rule 60(b) of the Federal Rules of Civil Procedure are applicable in this Court to relieve a party from a final decision and
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that, even if they were, petitioners have not shown that they are

entitled to the relief that they seek under that rule. We agree

with respondent.

Based on our review of the entire record before us, we find

that petitioners have failed to show that the decision entered in

this case is the result of fraud on the Court or any other

situation that warrants our exercise of our discretion under Rule

162 to grant petitioners' motion.

We also reject petitioners' argument relating to rule 60(b)

of the Federal Rules of Civil Procedure. Assuming arguendo that

all of the reasons specified in that rule were criteria that this

Court may apply in deciding whether petitioners' motion should be

granted, on the record before us, petitioners have failed to

establish that they are entitled to relief under rule 60(b) of

the Federal Rules of Civil Procedure. In this connection, the

record does not establish as facts petitioners' contentions that

they did not have information with respect to certain claimed

interest expense deductions for their taxable years 1981, 1982,

and 1983 until March 1997, when respondent provided petitioners

with final interest calculations, or that they could not have

discovered such information prior to that time. Nor does the

record show that petitioners could not have included as part of

the stipulation of settlement with respondent provisions relating

to whether they are entitled to interest expense deductions for

those taxable years. 
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Based on the entire record before us, we find that petitioners have failed to persuade us that we should grant them leave to

file a motion to vacate the decision and enter a revised decision

in this case. 

To reflect the foregoing, 

An order will be issued 

denying petitioners' motion 

for leave to file motion to 

vacate decision and enter

revised decision.