Court Opinion

ID: 9442855
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:01:57.01977+00
Date Added: 2024-06-11T17:29:15.662629
License: Public Domain

HASTIE, Circuit Judge
(dissenting).
I dissent.
It was the theory of the prosecution, borne out by the government’s evidence, that Rutkin, by threats and show of force, compelled Reinfeld to pay him money, well knowing that nothing was due but couching his several menacing demands for various sums in terms of a general claim asserted in bad faith to some further distributive share on account of his one time interest in a certain business enterprise. The trial court instructed the jury that the fruits of such villainy would constitute taxable income. This court now approves that legal conclusion. However, I think disapproval is required by the reasoning of the Supreme Court in Commissioner of Internal Revenue v. Wilcox, 1946, 327 U.S. 404, 66 S.Ct. 546, 90 L.Ed. 752.
The Court reasoned in the Wilcox case and subsequently in United States v. Lewis, 1951, 340 U.S. 590, 592, 71 S.Ct. 522, that an embezzler is not required to report his misappropriation as taxable gain because he asserts no “bona fide legal or equitable claim” to it. The additional point is made in the Wilcox case that “a definite, unqualified obligation to repay or return” the wrongful acquisition prevents it from being taxable gain”. 327 U.S. at page 408, 66 S.Ct. at page 549. To me this reasoning seems equally applicable to ransom money paid a kidnapper or, in this case, to the take of the more sophisticated extortionist who makes a patently spurious claim while frightening his victim into paying what both know is not owed.
In none of these cases is money obtained or retained under a bona fide claim of right. In none of them does the wrongdoer acquire even defeasible title to the *442proceeds of his wrongdoing. It is true that the discovery of embezzlement is usually followed by an attempt by the lawful owner to recapture that which has been stolen while, in extortion, the fear which causes the owner to surrender possession often prevents him from attempting to reclaim his own. But these differences affect neither the owner’s title nor the wrongdoer’s bad faith.
Finally, it seems to me that Rutkin’s alleged claim of right to some additional compensation does not help the government’s case. Indeed, the contention of the prosecution and its proof that Rutkin was well aware that nothing was owed him leaves whatever Rutkin may have said about an unsatisfied obligation without significance.
It follows that the reasons assigned by the Supreme Court for placing embezzled funds outside the category of taxable gain-are equally forceful with reference to such extortion as the government alleged and undertook to prove here, and that the judgment should have been reversed.