United States v. John James Badger, Capital Tracing, Inc., Real Party in Interest

930 F.2d 754 67 A.F.T.R.2d 91 -853, 91-1 USTC P 50,198 UNITED STATES of America, Plaintiff-Appellant, v. John James BADGER, Defendant-Appellee, Capital Tracing, Inc., Real Party in Interest, Appellee. No. 89-50251. United States Court of Appeals, Ninth Circuit. Argued and Submitted June 7, 1990. Decided April 16, 1991. Charles Bricken, Tax Div., U.S. Dept. of Justice, Washington, D.C., for plaintiff-appellant. Leslie T. Jones, Jr., Gallagher & Kennedy, Phoenix, Ariz., for defendant-appellee and real party in interest appellee. Appeal from the United States District Court for the Central District of California. Before ALARCON, BRUNETTI and O'SCANNLAIN, Circuit Judges. BRUNETTI, Circuit Judge: 1 Appellee John James Badger ("Badger") was indicted on criminal charges and ordered to post a $100,000.00 bail bond. The bond was posted by third parties. After Badger was convicted, the IRS attempted to levy on the bond for unpaid taxes owed by Badger. The district court ordered the IRS to show cause why the bond should not be exonerated and paid over to those who had posted it. After a hearing, the district court concluded that allowing the IRS to levy on bail bonds would impermissibly…

Appellee John James Badger (“Badger”) was indicted on criminal charges and ordered to post a $100,000.00 bail bond. The bond was posted by third parties. After Badger was convicted, the IRS attempted to levy on the bond for unpaid taxes owed by Badger. The district court ordered the IRS to show cause why the bond should not be exonerated and paid over to those who had posted it. After a hearing, the district court concluded that allowing the IRS to levy on bail bonds would impermissibly interfere with the integrity of the judicial *755 branch and ordered the bond exonerated. We reverse and remand.

FACTS

The facts of this case are, for the most part, undisputed. Badger was indicted on six fraud-related offenses and was ordered to post a $100,000.00 cash bond. On July 29, 1985, Capital Tracing, Inc., (“Capital”) posted the $100,000.00 bond with approximately $73,000 of its own funds and approximately $27,000 loaned to Badger by other people or entities for the purpose of posting bond.

Capital is a publicly held corporation. In 1985, Badger owned 34,000 shares of Capital, which then had approximately 10,310,-000 shares outstanding.

On August 22, 1985, the IRS served a notice of…

dissenting:

Because of the chilling effect of the majority’s decision on the integrity of the judicial bail system, I must dissent.

The district court was faced with the choice, upon exoneration of the bond, of releasing bail proceeds (1) to their owner, the entity (admittedly not the defendant) which actually posted the bond with its own funds (including loan proceeds), or (2) to a creditor of the defendant, with absolutely no enforceable interest in the funds, which happens to be the Internal Revenue *758 Service (IRS). The majority concludes that the exonerated bail simply should be paid to the IRS, which filed a levy upon the bond, thereby making new law for the circuit. I disagree. I would remand for the purpose of holding a hearing to determine whether the collateral delivered to the court by a third party includes any “property ... belonging to [the taxpayer]” under 26 U.S.C. § 6331 .

Supervision of the bail system lies within the inherent power of the court to call an accused to stand trial. See United States v. Smith, 444 F.2d 61, 62 (8th Cir.1971) (per curiam), cert. denied, 405 U.S. 977 , 92 S.Ct. 1205 , 31 L.Ed.2d 253 (1972). The courts clearly have a deep interest…