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92 C. Cla Opinion of the Court The reason for a strict compliance with the statute with respect to the charge-off of bad debts of banks is illustrated in the instant case. It is well recognized that bank examiners often require debts to be written off which would not ordinarily be considered or allowed as worthless in the case of other business establishments and that the bank examiner must proceed with the thought in mind of the greatest precaution and safety for the solvency of the bank. However, until the decision of Citizens Nat. Bank of Orange y. Commissioner, 74 Fed. (20) 604, decided January 8, 1935, and the acceptance of the principles therein laid down through the promulgation on April 3, 1936, of Treasury Decision 4633, the mere write-off of debts at the direction of a bank examiner was not considered a conclusive determination that the debts were worthless. By that decision and the Commissioner's subsequent regulations, it was recognized that there should be comity between two branches of the Government and that the Commissioner should not deny a deduction to a bank for a bad debt when at the same time the bank examiners were requiring that same bank to eliminate those debts from its asset accounts. Here the bank examiner was not requiring the assets to be eliminated immediately from the accounts of the plaintiff. On the contrary he was instructing the plaintiff to keep them as assets until a specific time. That the debts may not have been considered as entirely worthless is well illustrated by the descriptive term "nonbankable assets" appearing in the resolution of the Board of Directors of plaintiff of June 27, 1934, and by the further reference in the letter of the Comptroller of the Currency of March 13, 1935, where the Comptroller, in instructing plaintiff to make the chargeoff, stated that he assumed that during the period since the examination by the bank examiner and the time of his letter some cash collections had been made on some of the items. It would seem therefore that at least some of the items in question were merely of doubtful value rather than being entirely worthless and that a charge-off was not to be made until it actually took place in March 1935. In American Cigar Co. v. Commissioner, 66 Fed. (2d) 425, 427, certiorari denied 290 U. S. 699, the Circuit Court for the Second Circuit held:
Dissenting Opinion by Judge Whitaker In order to secure a deduction of a debt as worthless, a taxpayer must ascertain its worthlessness, charge it off on his books, and take his deduction all during the same
In view of the foregoing, we are of the opinion that the charge-off of the debts in question did not occur within the taxable year 1934 and that a deduction therefor cannot be allowed for that taxable year.
It follows that the petition must be dismissed. It is so ordered.
LITTLETON, Judge; and GREEN, Judge, concur.
WHITAKER, Judge, dissenting:
I am unable to agree with the majority opinion in this case. What the act requires to entitle a taxpayer to a deduction for a bad debt is (1) ascertainment of worthlessness, and (2) affirmative evidence in its books or records, if it kept any, that it had ascertained in the taxable year that the debts were worthless. The act does not require that the debt be charged off on the taxpayer's books of account; it merely requires that they "be charged off”.
Here we have a minute of the taxpayer's supreme governing body resolving that the debts "be charged off.” This minute appears in the taxpayer's permanent records. This is the highest evidence of the fact that the taxpayer had ascertained the debts to be worthless in the taxable year. It is evidence at least equally cogent with that of an account book entry. We have previously so held. First State Bank of Stafford, Kansas, v. United States, 67 C. Cls. 332. Cf. Cammack v. United States, 113 Fed. (2d) 547.
The fact that a charge-off was not made on the books of account is not evidence that the taxpayer had changed its mind about the worthlessness of the debts, since it failed to take this action only for the reason that the bank examiner had so directed. And he so directed not because he had changed his mind about the worthlessness of the debts but only because he thought it inadvisable for the bank's then condition to be reflected in its statement.
I think the plaintiff is entitled to recover.
92 C. Cls.
Opinion of the Court
MARTIN PRISAMENT v. THE UNITED STATES [No. 45044. Decided January 6, 1941]
On Plea to the Jurisdiction
Relief to persons erroneously convicted in Federal courts. It is held that the petition in the instant case, and the amendment thereto, fails to allege the matters required by the Act of May 24, 1938, which is an act to grant relief to persons erroneously convicted in the courts of the United States.
Mr. George C. Norton for plaintiff. Shackelford & Shackelford were on the briefs.
Mr. Robert E. Mitchell, with whom was Mr. Assistant Attorney General Francis M. Shea, for the defendant.
The facts sufficiently appear from the opinion of the
GREEN, Judge, delivered the opinion of the court:
The petition in this case shows that it is a suit filed under the act of May 24, 1938, 52 Stat. 438; sections 729 to 732, inclusive, Title 18, U. S. Code (Sup. V), which is an Act to grant relief to persons erroneously convicted in the courts of the United States. The petition may be summarized by stating that it alleges that the plaintiff and another party were tried June 9, 1937, in the United States District Court of the Middle District of Georgia, on the charge of robbing a bank and that although they were in New York City on the date of the robbery and offered proof of the fact the jury found them guilty and they were sentenced to imprisonment in the penitentiary; that a motion for a new trial was overruled by the court and their plea denied, and that as a consequence the plaintiff was confined in a Federal prison until his innocence was established by the apprehension of the guilty parties, whereupon the plaintiff was granted a full pardon by the President of the United States, the pardon reciting that the plaintiff was innocent of the offense for which he was held.
A copy of the pardon granted is attached to the petition and reads as follows:
Opinion of the Court
FRANKLIN D. ROOSEVELT
Whereas Martin Prisament was convicted in the
Whereas the said Martin Prisament was transferred to the United States Penitentiary at Lewisburg, Pennsylvania; and
Whereas it has been made to appear to me that the said Martin Prisament is innocent of the offense for which he is now being held:
Now, therefore, be it known, that I, Franklin D. Roosevelt, President of the United States of America, in consideration of the premises, divers other good and sufficient reasons me thereunto moving, do hereby grant unto the said Martin Prisament a full and unconditional pardon.
In testimony whereof I have hereunto signed my name and caused the seal of the Department of Justice to be affixed.
Done at the City of Washington this Twelfth day of
FRANKLIN D. ROOSEVELT.
Attorney General. The motion to dismiss the action is on the ground that the petition shows that the court has no jurisdiction of the cause presented. More specifically in argument counsel for defendant contend that the petition and amendment thereto failed to allege the matters required by the statute in order to enable a person who has been wrongfully convicted to recover damages.
92 C. Cls. Opinion of the Court It is quite clear that this contention must be sustained. The act of May 24, 1938, upon which the plaintiff relies, states in the first section thereof certain general provisions, compliance with which is necessary in order that a person who has been convicted of a crime against the United States of which he is innocent may, “subject to the limitations and conditions hereinafter stated,
maintain suit against the United States in the Court of Claims for damages sustained by him as a result of such conviction and imprisonment,” and further recites as follows:
Seo. 2. The only evidence admissible on the issue of innocence of the plaintiff shall be a certificate of the court in which such person was adjudged not guilty or a pardon or certified copy of a pardon, and such certificate of the court, pardon, or certified copy of a pardon shall contain recitals or findings that
(a) Claimant did not commit any of the acts with which he was charged; or
(b) that his conduct in connection with such charge did not constitute a crime or offense against the United States or any State, Territory, or possession of the United States or the District of Columbia, in which the offense or acts are alleged to have been committed; and
(c) that he has not, either intentionally, or by willful misconduct, or negligence, contributed to bring about his arrest or conviction.
Sec. 3. No pardon or certified copy of a pardon shall be filed with the Court of Claims unless it contains recitals that the pardon was granted after applicant had exhausted all recourse to the courts and further that the time for any court to exercise its
jurisdiction had expired. The right of action is by the express language of the first section made subject to the limitations and conditions stated in sections 2 and 3. It will be seen that under the statute the only evidence admissible to show the innocence of the plaintiff is a pardon which contains certain recitals. It is evident that the pardon of plaintiff does not state the matters required by the statute to make it admissible in evidence. We need not determine whether the statement in the pardon that “the said Martin Prisament is innocent of the offense for which he is now being held” is a sufficient