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 petition-
ers' 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 compu-
tations 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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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
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...)
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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 Real-
ty 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.
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).
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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
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...)
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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. Respon-
dent 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 appli-
cable in this Court to relieve a party from a final decision and
4
(...continued)
reasons: (1) mistake, inadvertence, surprise, or excusable
neglect; (2) newly discovered evidence which by due dili-
gence 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 appli-
cation; 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. * * *
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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 petition-
ers 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.