Opinion
No. K-497.
June 4, 1934.
Raymond F. Garrity, of Washington, D.C. (Leon F. Cooper, of Washington, D.C., on the brief), for plaintiff.
John W. Hussey, of Washington, D.C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
Suit by the Wonder Bakeries Company, Incorporated, formerly Ward Brothers Company, Incorporated, successor to the Gary Baking Company, against the United States.
Judgment for defendant dismissing the petition.
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following amended special findings of fact:
1. Plaintiff is a corporation organized under the laws of the state of New York and is the successor of Ward Brothers Company, Inc., having succeeded said corporation December 19, 1927. Ward Brothers Company, Inc., succeeded the Gary Baking Company December 31, 1922. The Gary Baking Company purchased the assets of Gary Baking Company, Inc., an Indiana corporation, September 30, 1918. The Gary Baking Company never owned any of the capital stock of Gary Baking Company, Inc. The Gary Baking Company, during its corporate existence, was a subsidiary of Ward Ward, Inc., a corporation of New York. All stock of the Gary Baking Company was owned or controlled by W.B. Ward, its president, and G.G. Barber was its secretary-treasurer. He also occupied the same position with Ward Ward, Inc. Ward and Barber were also respectively president and secretary-treasurer of Ward Brothers Company, Inc. Neither W.B. Ward, G.G. Barber, nor Harry Call were ever officers, directors, or stockholders of Gary Baking Company, Inc., of Indiana.
2. Gary Baking Company, Inc., secured the issuance by the secretary of state of Indiana of a preliminary certificate for dissolution on December 20, 1920. The affidavit of Max Hirsch, president, and Robert E. Richardson, secretary, in support of their application for final certificate of dissolution of Gary Baking Company, was filed with the secretary of state of Indiana on February 17, 1921. Said affidavit stated that all claims of every nature had been satisfied and that the assets of the corporation had been fully distributed. The corporation was thereafter dissolved, but no trustee or trustees were appointed for the purpose of closing up its affairs.
3. In a supplemental corporation income-tax return for the period from January 1, 1917, to March 31, 1917, executed February 14, 1919, and filed with the collector of internal revenue on or about February 17, 1919, Gary Baking Company reported that it had been incorporated under the laws of the state of Indiana in the year 1913 and that "this business is now out of existence."
4. Gary Baking Company, Inc., filed its corporation income and profits tax returns for the six months' period beginning April 1, 1918, and ending September 30, 1918, on March 14, 1919. The returns disclosed a total tax due in the amount of $1,186.06, which amount was paid.
5. The last corporation income and profits tax return filed by Gary Baking Company was for the period ended September 30, 1918. An information return was filed by Gary Baking Company for the period October 1 to December 31, 1918. The office of the collector of internal revenue for the district of Indiana, at Indianapolis, has no record of any transactions with Gary Baking Company subsequent to September 30, 1918.
6. On December 20, 1920, a notice of dissolution was issued by the secretary of state of Indiana which certified that Gary Baking Company had complied with the provisions of section 1 of the act for the voluntary dissolution of private corporations and that said corporation "is now in process of dissolution." This notice was duly published. On February 17, 1921, he made a certificate that an instrument had been filed in his office by Gary Baking Company which stated that all debts and claims against said company had been fully settled and paid, and also a copy of the notice of dissolution hereinabove referred to.
7. On January 18, 1921, the deputy commissioner of internal revenue addressed a letter to "Gary Ba nking Company, Incorporated," at Gary, Ind., informing it that in order to protect the interest of the Government under the law, it would be necessary to audit every 1917 return and make assessment before March 1, 1921, of all additional taxes which might appear to be due, unless waivers were executed and filed by the taxpayer with the Bureau, and in that letter the Commissioner inclosed a form of waiver with the request that it be executed and returned to his office.
On February 1, 1921, Mr. Harry Call, now deceased, of the law firm of Greenley, Call Richardson, of Gary, Ind., counsel for the Gary Baking Company, Inc., addressed a letter to the Commissioner of Internal Revenue in response to his letter of January 18, 1921, which letter was in part as follows:
"In reply to yours of January 18th, addressed to `Gary Banking Company, Incorporated', 2168 West Tenth Avenue, Gary, Indiana, we enclose herewith executed waiver which you enclosed.
"The `Gary Baking Company' has been out of business since 1918, and an entire new company, without any of the original stockholders or officers, and with an entire new corporation, incorporated as `The Gary Baking Company', owns and has been operating this plant since October 1st, 1918.
"The seal of the old `Gary Baking Company' has been lost, and in executing this waiver we could only have the former president of the company execute same, and the writer attested the signature as a notary public."
8. On January 31, 1923, an "income and profits tax waiver" was filed consenting to assessment and collection of income and excess profits taxes due under any return made by or on behalf of Gary Baking Company of Indiana for the year 1918 for a period of 1 year after the expiration of the statutory period of limitations. The waiver was signed "Gary Baking Company of Indiana, W.B. Ward, president, and G.G. Barber, secretary," and by the Commissioner of Internal Revenue.
9. On January 18, 1924, an income and excess profits tax waiver was filed consenting to the assessment and collection of taxes due under any return made by or on behalf of Gary Baking Company for 1918, within one year after the expiration of the statutory period as extended by any previous waivers on file in the bureau. This waiver was signed "Gary Baking Company, W.B. Ward, president, G.G. Barber, secretary-treasurer," and by the Commissioner.
10. On February 14, 1924, the Commissioner of Internal Revenue directed a deficiency letter to "Gary Baking Company, Inc.," proposing a deficiency for the period ended September 30, 1918, in the amount of $33,403.38. On page 3 of said letter, schedule 7, there is outlined the profit derived from the sale of the assets of "Gary Baking Company" on September 30, 1918, by reason of which part of the deficiency was assessed.
11. On March 8, 1924, an income and profits tax waiver was filed consenting to assessment and collection of income and profits taxes due under any return made by or on behalf of Gary Baking Company of Indiana for the years 1917 and 1918, for a period of one year after the expiration of the statutory period as extended by any waivers on file with the Bureau of Internal Revenue. This waiver was signed "Gary Baking Company, Inc., of Indiana, by G.G. Barber," and by the Commissioner of Internal Revenue.
12. On the March 10, 1924, assessment list the Commissioner of Internal Revenue made an additional jeopardy assessment against Gary Baking Company, Inc., in the amount of $33,403.38.
On March 14, 1924, the collector of internal revenue at Indianapolis addressed a ten-day notice and demand for payment of the additional assessment to Gary Baking Company, Inc.
13. On March 24, 1924, an income and profits tax waiver was filed consenting to assessment and collection of income and profits taxes due under any return made by or on behalf of Gary Baking Company, Inc., for the years 1917-1918 within a period of 1 year after the expiration of the statutory period of limitations as extended by any previous waivers. This waiver was signed "Gary Baking Company, Inc. (formerly a corporate and whose corporate existence has been closed), by Harry Call, former agent and attorney," and by the Commissioner of Internal Revenue.
14. Under date of March 24, 1924, a claim in abatement, covering the full amount of the additional tax referred to in Finding 12 herein, was filed with the collector of internal revenue at Indianapolis, signed, "Gary Baking Company, Inc. (corporate existence closed), by Harry Call, former agent and attorney." A brief in support of the claim for abatement was filed August 8, 1924.
Upon receipt of a claim in abatement it was the common practice of the collector of internal revenue to hold up the collection of the additional assessment. The collector of internal revenue acted in accordance with this practice in this case and actually held up the collection of the additional assessment and forwarded the said claim to the Commissioner of Internal Revenue in due course. The collector made no further endeavor to collect the amount covered by the claim in this case until it had been finally adjusted by the Commissioner.
15. On April 19, 1924, a power of attorney to represent Gary Baking Company, Inc., in its tax matters for 1918 was given to R.E. Glessner, F.J. Neuland, William A. Owen, R.J. Gannon, and R.F. Garrity. The power of attorney was signed, "Gary Baking Company, Inc., now Max Hirsch, an Individual," and was signed by Max Hirsch.
On May 15, 1924, a power of attorney to be used in conjunction with the one referred to above was given to Harry Call. This power was signed on behalf of Gary Baking Company, Inc., "Max Hirsch, former president Gary Baking Company, Inc., now dissolved, and sole owner of the stock of said corporation at the time of dissolution." This power specifically ratified the prior acts of Harry Call in behalf of Gary Baking Company and especially ratified the preparation and filing of the claim in abatement referred to in finding 14 herein.
16. On February 10, 1925, an income and profits tax waiver was filed extending the time for making assessment of income and profits taxes of Gary Baking Company, Inc., for 1918 until December 31, 1925. This waiver was signed, "Gary Baking Company, Inc., by Max Hirsch, president," and by the Commissioner of Internal Revenue.
17. On March 19, 1926, the Commissioner of Internal Revenue having considered the claim in abatement filed March 24, 1924, determined an overassessment in favor of "Gary Baking Company, Inc.," in the amount of $21,710.49 and allowed the claim in abatement for that amount on Schedule IT-17988. Certificate of overassessment No. 719013 was thereafter mailed to Gary Baking Company.
On March 22, 1926, the amount of $11,692.89, representing the rejected portion of the claim in abatement, was paid to the collector of internal revenue at Indianapolis by Ward Brothers Company, Inc., under protest. At the same time Ward Brothers Company, Inc., paid interest on said amount in the sum of $643.11.
18. On April 28, 1926, Ward Brothers Company, Inc., as successor to Gary Baking Company, filed a claim for refund of the taxes and interest paid by it in satisfaction of the unabated portion of the additional assessment against "Gary Baking Company, Inc.," on March 22, 1928, the total amount claimed being $12,336. This claim for refund alleged in substance that the tax had been improperly computed and that when properly computed it would appear that no such tax had ever been due. By letter dated July 11, 1927, the Commissioner of Internal Revenue allowed the claim for refund to the extent of $6,629.59 and rejected it as to the balance, $5,706.41.
19. On August 15, 1927, Ward Brothers Company, Inc., filed a second claim for refund of the taxes and interest paid by it in satisfaction of the unabated portion of the additional assessment against "Gary Baking Company, Inc." This claim was for the amount of $5,706.41, which represented the rejected portion of the claim for refund referred to in finding 18 herein. The grounds of this claim were that the tax and interest sought to be refunded were collected after the expiration of the applicable statute of limitations. This refund claim was rejected in full December 2, 1927.
20. Letters, notices, and communications mailed to "Gary Baking Company, Inc.," Gary, Ind., by the office of the Commissioner of Internal Revenue and the office of the collector of Internal revenue, at Indianapolis, from September 30, 1918, to July 11, 1927, were regularly accepted by plaintiff's predecessor companies which were located at the same address and were very often acknowledged by them.
21. On December 6, 1932, Ward Bros. Co., Inc., of Buffalo, N Y, executed a power of attorney appointing R.F. Garrity and/or F.J. Neuland and/or R.E. Glessner and/or E.W. Wallick its attorneys to represent it before the Income Tax Unit, Bureau of Internal Revenue, of the Treasury Department of the United States, in all matters pertaining to its returns for years 1917 to 1921, inc., giving full power and authority to act in its stead in these matters. Said power of attorney was recorded in the Income Tax Unit February 14, 1923.
22. The evidence as a whole shows that at the time of the sale of the property of Gary Baking Company, both the seller and the purchaser, and the parties acting for them, respectively, must have known that whatever taxes were due from this corporation, including taxes on the profits of the sale, had not been assessed or paid at the time of the sale. Max Hirsch, who owned all the common stock of Gary Baking Company, acted for that company in making the sale to the Gary Baking Company referred to in finding 1, and Ward and Barber acted for the Gary Baking Company in the transaction. Hirsch received between $50,000 and $60,000 in notes that were afterwards paid as a part of the consideration for the sale and the preferred stock was taken up. The Gary Baking Company acquired all of the assets of Gary Baking Company but did not acquire any of the capital stock. Ward Brothers Company, Inc., succeeded the Gary Baking Company and acquired all of its assets.
An order has been entered amending two of the findings in the case. We do not think this amendment affects the final result of the action, but as the matter now omitted was referred to in the original opinion, we have thought it best that another opinion should be rendered and the former opinion withdrawn.
This is a suit to recover taxes assessed against Gary Baking Company alleged to have been unlawfully exacted from Ward Brothers Company, Inc., a corporation to which the plaintiff succeeded, and the basis of the suit is that the taxes in question were collected after the period of limitation had expired.
In considering the case it will be necessary to keep in mind that another concern is involved entitled the Gary Baking Company which is a different corporation, the stock of which was owned by W.B. Ward, its president. This last-named corporation which was a subsidiary of Ward Ward, Inc., on September 30, 1918, bought all the assets of Gary Baking Company. The negotiations of the sale were had between Max Hirsch, president of Gary Baking Company, who owned all the common stock thereof, and W.B. Ward, president, and G.G. Barber, secretary-treasurer, of the Gary Baking Company. The Gary Baking Company acquired all the assets of Gary Baking Company. Ward Brothers Company, Inc., of which Ward and Barber were also respectively president and secretary-treasurer, acquired the assets of the Gary Baking Company and succeeded thereto. The name of Ward Brothers Company, Inc., was changed to Wonder Bakeries Company which brings this suit as successor.
In 1919, Gary Baking Company filed a corporation income-tax return for the period beginning April 1, 1918, and ending September 30, 1918, the date of the sale. This return disclosed a total tax in the amount of $1,186.06 which was paid. This is the last return filed by Gary Baking Company. Some time prior to December 20, 1920, proceedings were commenced for the voluntary dissolution of Gary Baking Company. These dissolution proceedings were carried to completion on February 17, 1921, in manner and form as required by the Indiana statute. Shortly prior thereto and on January 18, 1921, the Commissioner addressed a letter to Gary Ba nking Company, Inc., at Gary, Ind., with reference to the audit of 1917 taxes and "all additional taxes which may appear to be due unless waivers are executed and filed." This notice was answered by Harry Call, counsel for Gary Baking Company, Inc., inclosing a waiver and stating that Gary Baking Company had been out of business since 1918 and that "an entire new corporation, incorporated as `The Gary Baking Company,' owns and has been operating this plant since October 1, 1918." The letter inclosing the waiver stated that it was signed by the president of Gary Baking Company. Following the receipt of this letter, the Commissioner of Internal Revenue on March 10, 1924, and within the statutory period of limitation, made an additional jeopardy assessment against Gary Baking Company, Inc., in the amount of $33,403.38 based on the profit which had been made in the sale to the Gary Baking Company. A few days after the collector sent to Gary Baking Company a ten-day notice and demand for payment of the additional assessment made against it. In addition to this waiver inclosed in the letter, three other waivers had been filed before the jeopardy assessment was made. The first, on January 31, 1923, consented to assessment and collection of income and excess-profits taxes due under any return made by or on behalf of Gary Baking Company of Indiana for the year 1918 for the period of one year after the expiration of the statutory period of limitations. This waiver was signed, "Gary Baking Company of Indiana, W.B. Ward, president, and G.G. Barber, secretary," also by the Commissioner. On January 18, 1924, a second income and excess-profits tax waiver was filed consenting to the assessment and collection of taxes due under any return made by or on behalf of Gary Baking Company for 1918 for a period of one year after the expiration of the extension by any previous waivers. This was signed in the same manner as the first. March 8, 1924, a third waiver was filed with the same provisions, but it was signed, "Gary Baking Company, Inc., of Indiana, by G.G. Barber," and by the Commissioner. Neither Ward nor Barber were or had been officers of Gary Baking Company nor did they have any stock therein. Two other waivers were filed later, as set out in findings 13 and 16; also on March 24, 1924, a claim in abatement was filed on behalf of Gary Baking Company, and later a brief in support of the claim in abatement was filed. On March 19, 1926, the Commissioner having considered the claim in abatement, determined an overassessment in the amount of $21,710.49, and a certificate thereof was mailed to Gary Baking Company. On March 22, 1926, Ward Brothers Company paid the rejected portion of the claim in abatement in the sum of $11,692.89 together with interest in the sum of $643.11, and shortly after filed a claim for refund of the amount paid on the ground that the tax had been improperly computed. The Commissioner of Internal Revenue allowed the claim for refund to the extent of over half the amount claimed and rejected it as to the balance. On August 15, 1927, Ward Brothers Company filed a second claim for refund of taxes and interest paid in satisfaction of the unabated portion of the assessment against Gary Baking Company. The grounds of this claim were that the tax and interest sought to be refunded were collected after the expiration of the applicable statute of limitations. This refund claim was rejected December 2, 1927, and the plaintiff bases its action on this refund claim and its rejection.
Summarizing the evidence to bring out the salient portions thereof, we find that Gary Baking Company sold all of its property in September, 1918, that it had made no return of the profits on such sale, that a tax was subsequently assessed in due time on account of these profits but that in the meantime proceedings for the dissolution of the corporation had been carried to completion, that after this dissolution and the assessment of the additional tax numerous waivers were filed covering the period in which the tax was collected, that when the first three waivers were filed, as we shall see later, the Government could have collected the tax without regard to them, that a plea in abatement was also filed which was sustained in part and the unabated portion was paid by Ward Brothers Company without any demand being made upon them for its payment, that subsequently Ward Brothers Company filed a claim for refund which was granted in part and then a second claim for refund on the ground that the tax was collected after the period of limitations had expired. This is the sole and only ground stated in the second claim for refund upon which this action is begun. The defendant contends that the period of limitations was extended by reason of the waivers, the plea of abatement, and other proceedings which we have set forth, and that in any event Ward Brothers Company was estopped from claiming a further refund of the amount which it paid. It is contended on behalf of plaintiff that none of the waivers or the plea in abatement had any effect in the way of extending the period for collection of the tax for the reason that they were all filed after the corporation called Gary Baking Company had been dissolved and at a time when no person had any authority to act for it.
It should be noted here that in order to carry out the dissolution proceedings Gary Baking Company filed a certificate stating that all claims against it had been settled and paid. This was contrary to the fact but we do not need to consider whether it rendered the dissolution proceedings invalid as there are other reasons why plaintiff cannot recover.
The fundamental error in plaintiff's position, as we see it, is that it assumes that the hands of the Government were paralyzed by the dissolution of the corporation. The Government could not of course collect taxes from a defunct corporation, but it lost thereby none of its rights to assess taxes which had been due from the corporation and to proceed by appropriate methods with the collection thereof from persons who, by reason of transactions with the corporation, held property against which the tax could be enforced or were liable for the tax for other reasons. The legal death of the corporation no more prevented such action than would the physical death of an individual prevent the Government from assessing taxes against him and collecting them from his administrators who held the property which he had formerly possessed. See Phillips v. Commissioner, 283 U.S. 589, 51 S. Ct. 608, 75 L. Ed. 1289, and Penna.-Dixie Cement Corp. v. United States, 57 F.2d 909, 74 Ct. Cl. 651. Cf. Brady v. Anderson (C.C.A.) 240 F. 665; United States v. Armstrong (C.C.A.) 26 F.2d 227, and Updike v. United States (C.C.A.) 8 F.2d 913 (certiorari denied). The fact that the Commissioner was notified that the corporation ceased to do any business is immaterial. After the dissolution of the corporation its property became a trust fund for the benefit of creditors and those sustaining a like position under the law, and if that property has been distributed to stockholders it still remains impressed with the trust in favor of the Government for the amount of taxes which may subsequently be assessed. Cf. Updike v. United States, supra, citing numerous cases including United States v. McHatton (D.C.) 266 F. 602; United States v. Boss Peake Automobile Co. et al. (D.C.) 285 F. 410, affirmed (C.C.A.) 290 F. 167, and Hutton v. Commissioner (C.C.A.) 59 F.2d 66.
The fact that the Government's claim for taxes on the profit made by the sale had not become definitely fixed would not prevent the Government from following the assets which had been transferred or from eventually, by proper proceedings, holding the stockholders or other parties who had acquired the assets with knowledge that the tax had not been paid. Cf. Pierce v. United States, 255 U.S. 398, 403, 41 S. Ct. 365, 65 L. Ed. 697. It is certain that a liability arose on the part of Hirsch without regard to the waivers and continued in force until the statute of limitations had run, and we are clear that it continued afterwards by reason of the waivers. He had signed the first waiver as president of Gary Baking Company and the last one which was filed February 10, 1925, and the circumstances of the case show that he must have known of the others being filed. Hirsch also approved all of the acts of Call in behalf of Gary Baking Company and especially ratified the preparation and filing of the plea in abatement.
There is a conflict in the decisions as to whether an officer and stockholder of a dissolved corporation can file a waiver for it under any circumstances. We do not think a corporation can defeat federal taxes by dissolving under a state law, and we think also that such a party can file a waiver that would be binding against himself if no further.
In any event, Hirsch, having received benefits from this action, is estopped from claiming that the waivers were invalid. This principle applies to all of the waivers and the claim in abatement. All these proceedings were linked together, the waivers expressly by their terms. The main purpose was the same throughout, namely, to get the tax adjusted and reduced. The fact that some of the waivers filed by Hirsch or sanctioned by him were filed after the expiration of the statutory period of limitations did not affect their validity. The tax having been assessed in time and a claim in abatement having been filed delaying the collection of the tax, the statute of limitations no longer applied.
Having determined the liability of Hirsch, we come next to the ultimate question of whether the plaintiff can recover back the amount which was paid on the tax by Ward Brothers Company. Ward Brothers Company, Inc., made its claim for refund as successor of Gary Baking Company and, by reason of having succeeded the Gary Baking Company and having with notice acquired the property of Gary Baking Company, the same liability for taxes existed against it.
When we consider the waivers filed by Ward and Barber it is found that these individuals acted in a double role. They filed waivers stating that they were respectively president and secretary of Gary Baking Company, which they were not. In fact, they occupied these positions with reference to the Gary Baking Company and Ward Brothers Company, and all stock of the Gary Baking Company was owned or controlled by Ward. It is now claimed that they represented no one and bound no one in filing these waivers. The waivers filed or ratified by Hirsch and all of the circumstances of the case show that he must have known of the action of Ward and Barber in filing the waivers, and their purpose is so plain that we think he must have fully understood it. The acts of Ward Brothers Company subsequent to the allowance of the claim in abatement showed that it, through its officers, knew of what Hirsch had done, and that its officers, while purporting to act for Gary Baking Company, were at the same time acting for and in behalf of their own company. In this connection it should be noted that the communications of the Commissioner and collector addressed to Gary Baking Company were received by the Gary Baking Company and presumably by its successor. Counsel for defendant insist that having received the benefit of the proceedings for the adjustment and reduction of the tax and having applied for and been granted a refund after it paid the tax, Ward Brothers Company is now estopped from disputing the validity of the waivers filed by Ward and Barber which were accepted by the Commissioner and postponed the enforcement of the tax. Cf. Helvering, Commissioner, v. Newport Company, decided March 5, 1934, 291 U.S. ___, 54 S. Ct. 480, 78 L. Ed. ___, in which a waiver executed and filed by the defendant in the name of its predecessor corporation after the tax was barred by limitation was held sufficient to justify the assessment of tax against the defendant after the period of limitation had expired. We think this contention is well founded and that a company which these parties represented cannot now be heard to complain that collection of the tax was barred. But for several reasons, it is not necessary to rest the case upon this conclusion alone.
The provisions of the Revenue Act of 1926 with reference to proceedings against transferees were retroactive. We have already shown that the case of Phillips v. Commissioner, supra, held that stockholders of a dissolved corporation who had received the property of it were subject to this provision. The case last cited and the case of Pierce v. United States, supra, hold that the assets of a dissolved corporation constitute a trust fund for the benefit of its creditors. It is further held in these cases that this fund may be followed in the hands of stockholders. We think that where the corporation has been dissolved and the trust fund doctrine is applied, it would enable the creditors to follow the assets of the corporation or the proceeds thereof not only when stockholders have received them but also in the hands of parties other than stockholders who acquired the property with knowledge of the claims of the Government against it. See Updike v. United States, cited above. Unquestionably Ward and Barber had full knowledge with reference to all the details of the transactions which we have considered and knew at the time Ward Brothers Company acquired the property, which had originally belonged to Gary Baking Company, that the taxes had not been paid. It filed the first claim for refund as successor to Gary Baking Company. We are of the opinion that at the time Ward Brothers Company paid the tax which is now sought to be recovered, a liability existed against it which could have been enforced under the provisions against transferees and also independently thereof under the trust fund doctrine. Even if we treat the collection of the tax as barred, there was a consideration for the payment of the tax by Ward Brothers Company which would prevent that company from recovering back the payment which it had voluntarily made. Cf. David Daube v. United States, 59 F.2d 842, 1 F. Supp. 771, 75 Ct. Cl. 633, 640, 641, in which the plaintiff directed the application of money belonging to him in the form of an overpayment to be applied on the taxes of the partnership of which he was a member and the application was made after the statute of limitations had run as to the collection of the partnership tax.
If, however, the position which we have taken as to the liability of Ward Brothers Company is not well taken there still remains a conclusive reason why the plaintiff cannot recover in this case. We have already shown that the tax was assessed in time and not collected after the period of limitations as extended by valid waivers. It has hereinabove been noted that the sole and only ground of the refund claim upon which suit was brought is that the statute of limitations had expired when the tax was paid. Plaintiff made no claim that the tax was paid by mistake or that Ward Brothers Company had paid a tax for which no liability in any event existed against it. No other ground than the bar of the statute was remotely suggested by the claim, and if we are correct in what has been said above it is clear that plaintiff cannot recover herein.
Counsel for plaintiff urge that this case is controlled by the decision made by this court in the case of A.J. Bates Co. v. United States, 3 F. Supp. 245, 77 Ct. Cl. 611. But the two cases are altogether different. In the Bates Case the suit was brought by the stockholders who were entitled to the property of the dissolved corporation and the respective counsel in the case had agreed, and the court stated in the opinion, that the single issue in the case was whether the tax involved was "barred by the statute of limitations at the time the assessment was made." In the case now before the court there is no such question, it being an undisputed fact that the assessment was made before the bar of the statute had run. It is true that in the Bates Case the question arose as to whether the period of limitations had not been extended by a waiver, but no question of estoppel was raised or even suggested on the submission of the case and all of the circumstances were quite different from those existing in the case at bar. The Bates Case, therefore, cannot be regarded as an authority supporting plaintiff's position.
Counsel cite the case of Neuland v. Bowers (D.C.) 38 F.2d 842, 844, as holding that the claim in abatement filed in this case did not come within the provisions of section 611 of the Revenue Act of 1928 ( 26 US CA § 2611). The question that arose in the Neuland Case was quite different from that in the case at bar. In the Neuland Case there were no waivers extending the period of limitations — a fact which is most important here, as we have held that by reason thereof the tax was still owing when the claim in abatement was filed. Nor was there any claim of an estoppel which we have also found to exist in the case at bar. In the Neuland Case the tax was not demanded until after the expiration of the period of limitations and the taxpayer then filed a plea in abatement. The decision was based on the theory that nothing was due when the claim in abatement was filed and the court said that the application of section 611 [ 26 USCA § 2611] depended "upon a stay of the right to make collection." Counsel for defendant contend that this holding is not in accordance with the intent and expressed purpose of section 611 and with the views of the Supreme Court as expressed in the case of Graham Foster v. Goodcell, 282 U.S. 409, 51 S. Ct. 186, 75 L. Ed. 415. This contention of defendant was approved by this court in Vanderlip v. United States, 6 F. Supp. 965, decided May 7, 1934. Moreover, the Neuland Case is so different in its facts as to make it not applicable.
Our attention has been called to opinions of the Board of Tax Appeals holding waivers invalid which were executed after the dissolution of a corporation. We note that one of its decisions on this point has been overruled by an appellate court. In any event these decisions are not controlling here as they were rendered in cases in which the question of estoppel did not arise.
It follows that plaintiff's petition must be dismissed, and it is so ordered.