Opinion ID: 8097
Heading Depth: 1
Heading Rank: 3

Heading: the robinsons' cross-appeal

Text: A. THE ALLOCATION OF THE SETTLEMENT PROCEEDS 12 The Robinsons contend that the Tax Court erred in reallocating the settlement proceeds among the various types of damages that they suffered. They argue that the Tax Court failed to give proper regard to the state court trial judge's allocation of ninety-five percent of the settlement proceeds to mental anguish and five percent to lost profits. 13 Although the Tax Court is not bound by a state court's allocation of settlement proceeds, it must give proper regard to allocations made by state courts when such allocations are entered by the court in a bona fide adversary proceeding. 6 In the case at bar, however, the Tax Court found that the allocation was not entered in a bona fide adversary proceeding. Further, it found that the state trial court simply rubber stamped a judgment drafted by the Robinsons' attorneys. Therefore, the Tax Court did not consider itself bound by the state court's allocation, and reallocated the settlement proceeds. 14 The Tax Court's findings that the allocation was not entered into in an adversary proceeding and that the judgment was simply rubber stamped by the state court are findings of fact, which this Court will only disturb upon a finding of clear error. 7 We hold that the trial court did not err in its factual findings. The testimony of the attorneys who represented the Robinsons in their suit against the bank supports the Tax Court's finding that the bank allowed the Robinsons to allocate the settlement proceeds in any manner they wished. 8 This testimony alone supports a finding that the Robinsons and the bank were not adversarial in the allocation of the settlement proceeds. The circumstances surrounding the state court judge's entry of judgment also support the trial court's findings. The parties presented the final judgment to the trial judge at his home in the evening. The meeting at the judge's home lasted no longer than one hour, and neither the final judgment nor the settlement agreement were discussed in detail during that meeting. Therefore, the Tax Court did not err in failing to give proper regard to the state court judgment's allocation of settlement proceeds. 15 The Tax Court also did not err in its allocation of the proceeds. Its allocation was based upon the jury verdict, the best indication of the worth of the Robinsons' claims. We therefore affirm the Tax Court's reallocation. B. REFUSAL TO SUBPOENA THE STATE COURT JUDGE 16 The Robinsons contend that the Tax Court erred in refusing to allow them to subpoena the state court judge to testify as to his understanding and knowledge of the final judgment and what went into its determination. The Robinsons served a subpoena on the state court judge, who in turn moved to quash the subpoena on the ground that the taxpayers sought to question him regarding the mental processes employed by him in entering the Final Judgment. The Tax Court quashed the subpoena. We review the Tax Court's quashing of a subpoena for abuse of discretion. 9 17 A judge may not be asked to testify about his mental processes in reaching a judicial opinion. 10 The sole reason that the Robinsons attempted to subpoena the state court judge was to show that he considered the merits of the allocation contained in the Final Judgment rather than simply rubber stamping a judgment drafted by the Robinsons. There is no way that the trial judge could be asked about such matters without inquiring into his mental processes. In fact, the whole purpose of the subpoena was to delve into the judge's mental processes. Therefore, we hold that the Tax Court did not err in quashing the subpoena. C. REFUSAL TO REOPEN THE RECORD 18 The Robinsons contend that the Tax Court erred in refusing to reopen the record to allow them to present evidence of deductions that offset the discharge-of-indebtedness income. When the evidence revealed that the Robinsons received a release of a $691,971 judgment that the bank held against Taxpayers, the Tax Court allowed the Commissioner to amend its pleading to assert the additional discharge-of-indebtedness income. The Robinsons then moved that the record be left open for additional submissions on the issue. The Tax Court denied the motion, and later denied a motion made by the Robinsons to reopen the record for submission of evidence of offsetting deductions. 19 The Tax Court's denial of a motion to reopen the record for admission of additional evidence is not subject to review except upon a demonstration of extraordinary circumstances which reveal a clear abuse of discretion. 11 Further, such motions should be denied where the evidence to be presented was available at trial, or could have been obtained with reasonable diligence. 12 20 We hold that the Tax Court did not err in denying the motion to reopen because, through the exercise of reasonable diligence, the Robinsons could have obtained the evidence of offsetting deductions. The Robinsons were made aware--through both the Commissioner's interrogatories propounded to them during discovery and through the evidence obtained during the depositions of the attorneys that represented the Robinsons in the state court litigation--that discharge-of-indebtedness income was an issue in the case. Therefore, they should have obtained evidence of offsetting deductions before the close of trial.