Opinion
No. 43130.
December 1, 1941.
Ellsworth C. Alvord, of Washington, D.C. (Floyd F. Toomey and Alvord Alvord, all of Washington, D.C., on the brief), for plaintiff.
J.W. Hussey, of Washington, D.C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D.C., on the brief), for defendant.
Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
Action by the Midpoint Realty Company, Inc., against the United States to recover an overpayment of income taxes for the year 1924. Judgment was entered, 30 F. Supp. 691, and thereafter a new trial was granted.
Judgment for the plaintiff.
This case having been heard by the Court of Claims, the court, upon the basis of the stipulation of facts entered into by the parties, the evidence adduced, and the report of a commissioner, makes the following special findings of fact:
1. The plaintiff is a corporation organized under the laws of the State of New York, with its principal office and place of business in that State. During the calendar year 1924 it was affiliated with and was a subsidiary of Salmon Realty Corporation (now known as the Woodside Improvement Company), a Delaware corporation.
2. On June 15, 1925 plaintiff filed a separate income tax return for the calendar year 1924 disclosing a total tax liability of $15,355.55, which was paid as follows:
On March 13, 1925 ............ $ 4,000.00 On June 15, 1925 ............. 3,677.78 On September 14, 1925 ........ 3,840.00 On December 10, 1925 ......... 3,837.77 __________ Total .................... 15,355.55
On the same date, a consolidated return for the calendar year 1924, disclosing a total tax liability of $86,519.80, was filed by Salmon Realty Corporation for itself and various affiliated corporations, not including the plaintiff. Said amount was paid on or before December 10, 1925.
3. On June 9, 1927 the Commissioner of Internal Revenue requested information relating to the question whether the Salmon Realty Corporation and various of its affiliated corporations, including the plaintiff, were "affiliated" within the meaning of section 240(c) of the Revenue Act of 1924, 26 U.S.C.A. Int.Rev. Acts, page 45.
4. Pursuant to that request, on July 29, 1927 the Salmon Realty Corporation, for itself and its affiliated corporations, including the plaintiff, filed with the Bureau of Internal Revenue a statement, sworn to by Albert T. Hunter, Secretary of the Salmon Realty Corporation, reading in part as follows:
"State of New York,
"County of New York, ss:
"Albert T. Hunter, being duly sworn, deposes and says:
"That he is Secretary of Salmon Realty Corporation; that he makes this affidavit as requested in and in reply to a letter addressed to the Salmon Realty Corporation, dated June 9, 1927, from the office of the Commissioner of Internal Revenue, Washington, D.C.
"I. At least ninety-five per cent (95%) of the voting capital stock of the following corporations was acquired on the dates set opposite their names:
"Midpoint Realty Co., Inc. — Prior to January 1, 1924.
"Bryant Park Building, Inc. — Prior to June 1, 1925.
"Hamilton Leasing Co., Inc. — Prior to June 1, 1925.
"As to Midpoint Realty Co., Inc., through a misunderstanding this return was not included in our consolidated income-tax return prior to the year 1925; but we are now preparing a revised statement to be filed for the years 1922, 1923, and 1924, showing proper adjustment for its inclusion.
* * * * * *
"(Signed) Albert T. Hunter.
"Sworn to before me this 29th day of July 1927.
"(Signed) R.M. Geiger."
5. Thereafter the Commissioner of Internal Revenue determined that the plaintiff was affiliated with Salmon Realty Corporation and its various other subsidiary corporations for the calendar year 1924, and proceeded to determine the tax liability of the group for that year in accordance with section 240 of the Revenue Act of 1924.
6. As a result of the foregoing, on July 19, 1929 the Commissioner of Internal Revenue transmitted a letter to the Salmon Realty Corporation and its affiliated corporations, including the plaintiff, setting forth his determination of the correct income-tax liability of said corporations for the calendar year 1924 on the basis of treating the plaintiff as a member of the affiliated group of which the Salmon Realty Corporation was the parent. There was forwarded with said letter a statement showing that the correct tax liability of the plaintiff for the calendar year 1924 was $6,139.93; that the tax previously assessed was $15,355.55; and that there was an overassessment of $9,215.62. With that letter there was transmitted Form 866, being "Agreement As to Final Determination of Tax Liability."
7. Upon receipt of the above-mentioned letter of July 19, 1929, the officers of the Salmon Realty Corporation and its affiliated corporations, including the plaintiff, examined the same and found that the aggregate overassessment of $28,908.51 agreed with their own figures, but the aggregate of the "Tax Previously Assessed" and the "Corrected Tax Liability" as found by the Commissioner differed from their figures. On August 8, 1929, a conference was held at the Bureau of Internal Revenue, at which these differences were discussed.
8. The Commissioner of Internal Revenue adopted plaintiff's figures and on September 9, 1929, transmitted a letter to Salmon Realty Corporation and its various affiliated corporations, including the plaintiff, setting forth his determination of the tax liability of the affiliated group for the calendar year 1924. There was forwarded with said letter a revised statement showing that the correct tax liability of the plaintiff for the calendar year 1924 was $6,139.93; that the tax previously assessed was $15,355.55; and that there was an overassessment of $9,215.62. Said statement concluded as follows: "Certificates of Overassessment for the amounts shown above will be issued through the office of the Collector of Internal Revenue for your district, and will be applied by that official in accordance with the provisions of Section 284(a) of the Revenue Act of 1926 [26 U.S.C.A. Int.Rev. Acts, page 220]."
Said letter enclosed a new form of "Agreement as to Final Determination of Tax Liability" (Form 866).
9. Salmon Realty Corporation and its various affiliated corporations, including the plaintiff, duly executed and transmitted to the Commissioner of Internal Revenue by letter dated October 11, 1929 said form of "Agreement as to Final Determination of Tax Liability" (Form 866). Said letter read as follows: "We return herewith duly signed, as requested in your letter of September 9, 1929 (Symbols IT: AR — D, Law), Form 866 — CR, being agreement as to a determination of tax liability for this company and its subsidiary and affiliated companies for the years 1923, 1924, and 1925 in an aggregate amount of $271,031.94, with the understanding, however, that this agreement is not to be in any way effective unless and until approved by the Secretary or Under Secretary in accordance with the provisions of Section 606 of the Revenue Act of 1928 [26 U.S.C.A. Int.Rev. Acts, page 458] and also with the understanding that refund or credit will be made of the overassessments in the aggregate amount of $28,908.51, as set forth in the schedule accompanying the Department's letter IT:AR:D Law, of September 9, 1929."
This particular form was not approved by the Secretary of Treasury by reason of the fact that it was determined by the Commissioner that a different form should be used.
10. Thereafter, by letter dated September 11, 1931, the Commissioner of Internal Revenue advised Salmon Realty Corporation, and its various affiliated corporations, that the refund of certain of the overassessments set forth in said letter of September 9, 1929, including the amount of $9,215.62 overpaid by the plaintiff, was barred by the statute of limitations.
11. On June 5, 1933, a new Form 866 was mailed to the plaintiff based in part upon the determination of the Commissioner of Internal Revenue set forth in his said letter of September 9, 1929, that there was an overassessment of income taxes paid by the plaintiff for the calendar year 1924 in the amount of $9,215.62. Said form was duly executed by Salmon Realty Corporation and its affiliated corporations, including the plaintiff, Midpoint Realty Company, Inc., and was transmitted by a duly authorized agent of said corporations to the Commissioner of Internal Revenue by letter dated August 1, 1933.
12. On November 22, 1933, the Secretary of the Treasury approved the form of "Agreement as to Final Determination of Tax Liability" (Form 866) transmitted with said letter of August 1, 1933, approval thereof appearing on schedule 7037. Thereafter, the Disbursing Officer of the Treasury prepared a check drawn on the Treasury of the United States in payment of the full amount of $9,215.62 overpaid by the plaintiff Midpoint Realty Company, Inc., for the year 1924, as set forth in the Commissioner's letter of September 9, 1929, together with interest thereon as provided by law.
13. On receipt of said check for approval the Comptroller General disallowed $5,377.85 of the principal amount set forth in said letter of September 9, 1929, as an overpayment by the plaintiff for the year 1924, on the theory that a timely claim for refund had not been filed with respect to that part of said overpayment.
14. On February 9, 1934, the sum of $3,837.77, with interest thereon to January 23, 1934, was refunded to the plaintiff. Likewise, on February 9, 1934, the Commissioner of Internal Revenue mailed to the plaintiff, Midpoint Realty Company, Inc., a Certificate of Overassessment (No. 2286066; Schedule IT:51921), setting forth that the overassessment of the plaintiff for the calendar year 1924 was in the amount of $9,215.62, but that of such amount only $3,837.77 was refundable, refund of the remainder being asserted to be barred by the statute of limitations. No part of the balance of $5,377.85 has been refunded or credited to the plaintiff.
15. Henry B. Fernald represented the Salmon Realty Corporation and its affiliated corporations before the Bureau of Internal Revenue in connection with the determination of the tax liabilities of the affiliated group for 1923, 1924, and 1925. Shortly after July 19, 1929, he was furnished with a copy of the letter of July 19, 1929, addressed to the Salmon Realty Corporation. Upon examining this letter he found that the amount of $199,391.97, stated in the "Agreement as to final determination of tax liability" as the corrected total tax liability, failed to include the correct tax liability of any of the subsidiary corporations of the Salmon Realty Corporation for the year 1925, although it included the corrected tax liability of the parent corporation (Salmon Realty Corporation) for that year. Fernald then prepared, as the authorized representative of the corporation, a schedule consisting of six pages. It showed "Total tax liability" of $271,031.94, exclusive of interest. It also showed "Allocation of Correct Tax" to each corporation for each of the years 1923, 1924, and 1925, and the amounts "not included in Department Agreement" for 1925. On August 8, 1929, Fernald presented a copy of this schedule to Messrs. Mansell and Whitney, of the Audit Review Division, Bureau of Internal Revenue, at which time Fernald explained to Mansell and Whitney the appropriate revisions which, in his opinion, should be made with respect to the Bureau's letter of July 19, 1929. Fernald was advised by the representatives of the Bureau that they would consider the schedule and that a revised letter would be forthcoming. Also at the conference of August 8, 1929, Fernald personally returned unexecuted the Department's proposed closing agreement to Messrs. Mansell and Whitney, the Bureau conferees. Following this the Commissioner wrote plaintiff on September 9, 1929, approving plaintiff's computation.
Plaintiff's petition in this case was based in part on the theory that within six years prior to the time it brought its suit it and the Commissioner of Internal Revenue had agreed on the balance due it, and that the Commissioner had impliedly promised to pay the amount agreed to be due. In our opinion in this case delivered on January 8, 1940, 30 F. Supp. 691, 90 Ct.Cl. 335, we held that there had been an account stated, but not on the date alleged in the petition, to wit, September 9, 1929, but on an earlier date, August 8, 1929, and that there had been an implied promise to pay that part of the amount admitted to be due which was not barred by the statute of limitations. Inasmuch as plaintiff alleged that there had been an account stated on September 9, 1929, which was just less than six years prior to the time of the filing of the petition, and since neither party contended that the account had been stated on an earlier date, the defendant did not rely upon the statute of limitations as a defense. But when our opinion was delivered holding that the account had been stated on August 8, 1929, the defendant filed a motion for a new trial raising this defense. We granted the motion and dismissed the petition.
Whereupon the plaintiff filed a motion for a new trial asserting that we were in error in holding that the account had been stated on August 8, 1929, and that if given an opportunity to do so, it could offer further proof to demonstrate this fact. We granted plaintiff's motion and referred the case to a commissioner to take proof, among other things, as to what happened at the conference between plaintiff and the Commissioner's representatives on August 8, 1929. That proof has been taken, and the commissioner reports that on said date plaintiff's representative filed with the Bureau of Internal Revenue schedules setting forth what it believed was the correct computation of its tax liability, which showed an overpayment by the plaintiff of $9,215.62 for the year in question. Upon the filing of this computation the Commissioner of Internal Revenue's representative advised plaintiff that they would consider the schedules filed and that a revised letter would be forthcoming.
The commissioner of this court finds that on that date, August 8, 1929, there was no agreement as to plaintiff's correct tax liability. The evidence supports this finding. Plaintiff was not advised that the defendant accepted its computation of its tax liability until receipt of the Commissioner's letter of September 9, 1929. Not until that date, we are now convinced, was there an agreement between the parties as to the amount due plaintiff. The petition in this case was filed within six years thereafter.
The statute of limitations had run against the refund of the two payments made by the plaintiff on March 13, 1925, and on June 15, 1925, but it had not run as to the payment made on September 14, 1925. There was no implied promise on the part of the Commissioner to refund the payments against which the statute had run, but there was an implied promise on his part to refund the payment made on September 14, 1925, amounting to $3,840. The statute commanded him to immediately refund any overpayment found to be due. Sec. 281(a) of the Revenue Act of 1924, 43 Stat. 253, 301 and sec. 284(a) of the Revenue Act of 1926, 44 Stat. 9, 66, 26 U.S.C.A. Int.Rev. Acts, pages 62, 220. Having agreed with plaintiff that there was an overpayment and the statute commanding him to immediately refund it, an implied promise to do so necessarily arose.
The case of United States v. A.S. Kreider Co., 313 U.S. 443, 61 S.Ct. 1007, 85 L.Ed. 1447, is not in point, since the court held in that case that there was no account stated, because the facts negatived the allegation that there was an implied promise to pay. Here the facts support the allegation that there was an implied promise to pay, and plaintiff having sued on this implied contract within six years, it is entitled to recover.
Judgment will be rendered in favor of plaintiff and against the defendant for the sum of $3,840, with interest as provided by law. It is so ordered.