Midwest Haulers v. Brady

Decision Date02 June 1942
Docket NumberNo. 9033.,9033.
Citation128 F.2d 496
PartiesMIDWEST HAULERS, Inc., et al. v. BRADY, Acting Collector of Internal Revenue.
CourtU.S. Court of Appeals — Sixth Circuit

Wilbur E. Benoy, of Columbus, Ohio (Russell G. Saxby, of Columbus, Ohio, and William E. Orthwein, of Toledo, Ohio, on the brief), for appellants.

Harry Marselli, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., J. Louis Monarch and Frederic G. Rita, Sp. Assts. to Atty. Gen., Francis B. Kavanagh, of Cleveland, Ohio, and John Paul Manton, of Toledo, Ohio, on the brief), for appellee.

Before HICKS, HAMILTON, and McALLISTER, Circuit Judges.

HAMILTON, Circuit Judge.

Appellant brought this action to enjoin the collection of additional taxes assessed against it under Titles VIII and IX of the Social Security Act, 42 U.S.C.A. § 1001 et seq. and § 1101 et seq., § 1400 et seq. and § 1600 et seq., Title 26 U.S.C.A., Internal Revenue Code as amended, asserting the illegality of the additional taxes and that the collection of them would cause it irreparable injury and would destroy its business and that it was without an adequate remedy at law. From a decree dismissing its complaint, it has appealed.

The complaint was filed November 28, 1940, and on December 4, 1940, appellant, Otto L. Hankison, was, by an order of the Common Pleas Court of Lucas County, Ohio, appointed receiver for the property and assets of appellant, the Midwest Haulers, Inc., and was authorized by the order of the court to continue the business of the corporation and was further authorized to prosecute all suits as might, in the receiver's judgment be necessary for the protection of the trust vested in him. On the date of his appointment, the receiver was made a party plaintiff to this action in the lower court.

Appellant, the Midwest Haulers, Inc., was organized as a corporation under the laws of Ohio and at the time of the institution of this action and prior thereto, was engaged in the business of transporting under lawful permits and in interstate commerce, merchandise and other commodities by motor trucks.

The Universal Car Loading and Distributing Company, a corporation not a party to these proceedings, was and now is engaged in the business of maintaining freight terminals in several states of the Union, and in connection therewith, it consolidates freight from various shippers and causes it to be transported between its terminals. For the purpose of transportation, the Universal employs the service of trucking companies. The appellant had a contract with the Universal to transport freight between its terminals by the use of sealed semi-trailers and performed this contract by employing owners of trucks and trailers who operated their trucks under appellant's common carrier certificate and permits. Appellant paid for the use of such trucks and trailers tariffs, the rates of which were stated in written schedules made a part of the contract between appellant and the owners of the equipment. Appellant employed none of the drivers or helpers of any of the trucks in question and the trucks were to be kept in repair by their owners. The routes they were to travel and the time of their departure from terminals were under the control of appellant.

Appellant duly and timely filed with the appellee Collector of Internal Revenue, or his predecessor in office, returns showing excise taxes due and paid. These returns included all taxes of appellant "with respect to having individuals in its employ" excluding the owners of the trucks and their employees.

Appellee, or his predecessor in office, pursuant to the power conferred on him under § 3612 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 3612, revised each of the returns of appellant and included therein all sums paid by appellant to its alleged contract carriers and their employees and assessed the additional taxes in question measured by such payments and made demand on appellant which was refused. The additional taxes demanded are $103,897.24, exclusive of interest or penalties and in this action appellant seeks to enjoin the collection of these taxes, interest and penalties.

Appellee moved to dismiss appellant's petition and was sustained by the trial court in view of Section 3653 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 3653, which provides that "* * * no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court."

Appellant concedes that the statute applies to all assessments and collections of Internal Revenue taxes made or attempted to be made under color of office by Internal Revenue officers charged with general jurisdiction over the assessment and collection of such taxes, but it argues that notwithstanding the statute, courts have the power to restrain the assessment or collection of taxes where the remedy of the taxpayer at law to recover a tax illegally assessed or collected, is inadequate, or where there exists extraordinary and exceptional cirsumstances which bring the case within some settled field of equitable jurisdiction or where the exaction sought to be restrained is not within the definition of a tax. The question thus simmers down to whether appellant has stated a case not covered by the Statute.

Appellant alleges in its petition, which for the purposes of this case, must be taken as true, that it has no funds with which to pay the greater portion of the taxes in question and that to permit their collection at this time by a sale of its assets would completely destroy its business.

Appellant also alleges that its tariff rates must be submitted and approved by the Public Utilities Commission and that it in good faith believes that none of the payments to its alleged contract carriers are a lawful measure for the taxes which appellee now seeks to collect and that, acting on this belief, it did not include any sums in its rate schedules for the payment of such taxes, and that it is now without the right of recoupment from any of its contract carriers, and that the time within which it may shift any part of the tax or collect any of it from its contract carriers...

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36 cases
  • Communist Party, USA v. Moysey
    • United States
    • U.S. District Court — Southern District of New York
    • May 23, 1956
    ...Company of Florida, 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422; Raffaele v. Granger, 3 Cir., 1952, 196 F.2d 620; Midwest Haulers, Inc., v. Brady, 6 Cir., 1942, 128 F.2d 496; John M. Hirst & Co. v. Gentsch, 6 Cir., 1943, 133 F.2d 247; Mitsukiyo Yoshimura v. Alsup, 9 Cir., 1948, 167 F.2d 104; A......
  • Pizzarello v. United States
    • United States
    • U.S. Court of Appeals — Second Circuit
    • March 18, 1969
    ...to a taxpayer through forced sale of his business, if proven, has been held to be grounds for equitable relief. Midwest Haulers v. Brady, 128 F.2d 496 (6th Cir. 1942). However no hearing has been held below on what economic damage Pizzarello may suffer if collection is not enjoined. Althoug......
  • Quinn v. Hook
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • June 30, 1964
    ...which deals with a case where the Tax Court has already decided in favor of the Government. Compare, e. g., Midwest Haulers, Inc. v. Brady, 128 F.2d 496 (6th Cir. 1942); Hill v. Wallace, 259 U.S. 44, 62, 42 S.Ct. 453, 66 L.Ed. 822 5 Other exceptions are not here relevant. 6 The Act had prev......
  • Martin v. Andrews
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • November 15, 1956
    ...Regents, representing an instrumentality of the state, had no adequate remedy by way of a refund suit or otherwise. In Midwest Haulers, Inc. v. Brady, 6 Cir., 128 F.2d 496, and Hirst & Co. v. Gentsch, 6 Cir., 133 F.2d 247, it was alleged that a refund suit would have provided an inadequate ......
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