Opinion
No. K-67.
February 17, 1930.
Suit by the Mascot Oil Company, Inc., against the United States.
Judgment of dismissal.
The court, in accordance with the stipulation of the parties filed herein, makes the following special findings of fact:
1. Plaintiff is a corporation, and in August, 1919, duly filed its corporation income and profits tax return for the calendar year 1918, showing a tax to be due thereon of $58,138.49, which amount was accordingly assessed, and $43,603.86 was paid during the year 1919, $330.22 thereof was credited November 16, 1925, from an overassessment for the year 1917, leaving an unpaid balance of $14,204.41, which amount was abated April 28, 1926.
2. In December, 1919, the plaintiff filed with the collector a claim in abatement for the year 1918 in the sum of $17,492.81, and during the month of July, 1920, the Commissioner of Internal Revenue assessed a further and additional tax against the plaintiff in the sum of $38,030.51, of which $4,334.38 was paid August 24, 1920, and $4,849.49 abated April 28, 1926, leaving an unpaid balance of $28,846.64.
3. In August, 1920, the plaintiff filed a claim in abatement for the sums of $8,664.29 and $33,696.13, covering the years 1917 and 1918, respectively.
4. In September, 1925, plaintiff deposited in escrow with the Farmers' Merchants' National Bank of Los Angeles the sum of $65,000 to insure payment of the tax finally determined to be due for the years 1917 and 1918. Not long thereafter the said bank acknowledged by letter the deposit of said sum, and stated that it was authorized by plaintiff to pay the collector of internal revenue up to this amount upon taxes found to be due from plaintiff for the years 1917 and 1918, upon demand.
5. About the same time that the deposit was made in the bank, as hereinabove recited, the plaintiff and the Commissioner signed an income and profits tax waiver, whereby the taxpayer waived "any period of limitation as to the time within which distraint or a proceeding in court may be begun for the collection of the tax" for the years 1917 and 1918, the same to remain in effect until December 31, 1926. In March, 1926, the plaintiff signed and forwarded to the Commissioner of Internal Revenue a "waiver of right to file a petition with the U.S. Board of Tax Appeals * * * under section 274(a) of the Revenue Act of 1926 (26 USCA § 1048)," and consented to the assessment and collection of a deficiency in tax for the year 1918 aggregating $29,177.06. A proviso was attached thereto that the waiver did not extend the statute of limitations for refund or assessment of the tax.
6. The claim in abatement filed in December, 1919, in the sum of $17,492.81, and also the claim in abatement filed in August, 1920, for $33,696.13 for the year 1918, were allowed for $19,053.70 and rejected for $32,135.24.
7. On May 28, 1926, the collector made demand on the plaintiff for the sum of $28,846.64 representing unpaid balance of taxes alleged to be due for the year 1918, which the plaintiff paid under protest on June 8, 1926; whereupon the collector withdrew all claim upon the deposit which had been made to guarantee payment for such tax.
8. On October 28, 1928, the plaintiff duly filed a claim for refund in the amount of $28,846.64, being the amount of additional taxes paid for the year 1918 as aforesaid. The ground of the claim for refund was that the taxes were collected after the expiration of the period of limitation. This claim for refund was rejected by the Commissioner.
Upon the foregoing special findings of fact, which are made part of the judgment herein, the court decides, as a conclusion of law, that plaintiff is not entitled to recover, and its petition is therefore dismissed.
Judgment is rendered against the plaintiff in favor of the United States for the cost of printing the record in this case; the amount thereof to be ascertained by the clerk and collected by him according to law.
Theodore B. Benson, of Washington, D.C., for plaintiff.
George H. Foster, of Washington, D.C., and Herman J. Galloway, Asst. Atty. Gen. (McClure Kelley, of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, WILLIAMS, LITTLETON, and GRAHAM, Judges.
This action is begun to recover taxes which had been paid after the period of limitations had run against their collection. Counsel for plaintiff supports its case by the same line of argument that was presented to this court in Oak Worsted Mills v. United States, No. J-180, decided December 2, 1929, 36 F.2d 529, and Gotham Can Co. v. United States, No. J-255, decided January 20, 1930, 37 F.2d 793, in both instances adversely to the plaintiffs therein. In the Oak Worsted Mills Case, supra, we held that sections 607 and 611 of the Act of 1928 (26 USCA §§ 2607, 2611) prevented a recovery. In the Gotham Can Co. Case, supra, we held that section 1106(a) of the Act of 1926 ( 26 USCA § 1249, note) was of no benefit to the plaintiff where the taxes in question had been collected prior to the time when the revenue bill of 1926 went into effect, unless it was shown that the taxes were overpaid. It was expressly stated, however, in that decision, that the court did not pass on the effect of the provision in the revenue bill of 1928 which repealed section 1106(a) of the Act of 1926 as of the date of its enactment. In the case at bar, it appears that the taxes in controversy were collected after the 1926 act went into force. The decision in the Gotham Can Co. Case is therefore not controlling herein. But we do not find it necessary to determine the question left open by the Gotham Can Co. Case, for the reason that the defendant sets up an entirely new and different defense from anything pleaded in the two cases cited above and insists that the facts shown in support of this defense are sufficient by themselves and alone to warrant a judgment in its favor. These facts will next be considered.
The evidence shows that the plaintiff had made a deposit in a bank as a guaranty of the payment of the taxes in controversy, by virtue of which the bank stated that it would pay the amount of such taxes upon final determination, and that thereafter, when such taxes were finally determined, the plaintiff paid the amount thereof and obtained a release of the deposit. The defendant contends that the principles laid down in the case of United States v. John Barth Co., 279 U.S. 370, 49 S. Ct. 366, 367, 73 L. Ed. 743, in any event prevent the plaintiff from recovering the fund in controversy. In that case the government brought a suit to enforce a bond given by the defendant and its surety for the payment of taxes, and the defense was made that the collection of the taxes was barred by the statute of limitations. The court said that neither the statute of limitations nor section 1106(a) of the Revenue Act of 1926 applied to an action upon a bond, and that the taxpayer was not relieved from his obligation arising out of that instrument. The court further said that "* * * the taxpayer was permitted by a bond temporarily to postpone the collection and to substitute for his tax liability his contract under the bond. The object of the bond was not only to prevent the immediate collection of the tax, but also to prevent the running of time against the government."
Judgment was accordingly rendered against the taxpayer. In the case at bar, while the stipulation of the parties does not specifically refer to the purpose of making the deposit in the bank, it could have been for no other purpose but to obtain time while consideration was being given to plaintiff's claim in abatement. This is further shown by the fact that plaintiff, at the same time the deposit was made, executed in conjunction with the Commissioner a waiver of the statute of limitation with reference to the collection of the tax in controversy. Whether this waiver was effective, we need not consider. By the subsequent payment of the tax, the plaintiff obtained a release of the deposit made in the bank. The original arrangement for the deposit as guaranty, and the subsequent release of the deposit on payment of the tax, constituted, as we think, consideration for the payment so made, and are sufficient to prevent the plaintiff from recovering. In our view, the plaintiff merely complied with the provisions of its contract in guaranteeing the payment of the taxes in controversy, and had no right or interest in the money after it had been so paid.
Without considering the other questions arising in the case, we hold that the plaintiff is not entitled to recover herein and it is ordered that its petition be dismissed.
BOOTH, Chief Justice, and WILLIAMS, LITTLETON, and GRAHAM, Judges, concur.