United States v. Updike

• Decision Date: 13 April 1928
• Docket Number: No. 853.,853.
• Citation: 25 F.2d 746
• Parties: UNITED STATES v. UPDIKE et al.
• Court: U.S. District Court — Panama Canal Zone

25 F.2d 746 (1928)

UNITED STATES v. UPDIKE et al.

No. 853.

District Court, D. Nebraska, Omaha Division.

April 13, 1928.

James C. Kinsler, U. S. Atty., of Omaha, Neb.

A. G. Ellick (of Brogan, Ellick & Raymond), of Omaha, Neb., for defendants Updike and others.

MUNGER, District Judge.

In this suit the United States seeks to enforce against the transferees of the corporate assets of the Updike Grain Company, a corporation which dissolved August 28, 1917, the amount of a tax for a portion of the calendar year of 1917 which was assessed against the corporation under the provisions of the Revenue Act of October 3, 1917 (Comp. St. § 6336aa et seq.). The approved fiscal year of the Updike Grain Company began August 1, 1916, and ended on July 31, 1917. The essential facts in this case, as to dissolution of this corporation in advance of the enactment of the Revenue Act of October 3, 1917, and as to a return made by the defendant under the revenue acts then in force, are quite similar to the facts in the case of United States v. Updike (D. C.) 1 F.(2d) 550, on appeal (C. C. A.) 8 F.(2d) 913, relating to the Missouri Valley Elevator Company. In this case the Commissioner of Internal Revenue, in January, 1920, made an assessment against the Updike Elevator Company of a tax under the Revenue Act of October 3, 1917, for the period involved, under the retroactive provisions of that act. The purpose of the suit is to recover the amount of the tax assessed against the defendant from the transferees of the corporate assets.

The defendants challenge the jurisdiction of the court to determine this case, because of the provisions of section 274 and section 280 of the Revenue Act of 1926 (26 USCA §§ 1048, 1069). The portions of the sections involved are as follows:

"Sec. 280. (a) The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject to the same provisions and limitations as in the case of a deficiency in a tax imposed by this title (including the provisions in case of delinquency in payment after notice and demand, the provisions authorizing distraint and proceedings in court for collection, and the provisions prohibiting claims and suits for refunds):

"(1) The liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed upon the taxpayer by this title or by any prior income, excess profits, or war profits tax act."

"Sec. 274. (a) If in the case of any taxpayer, the Commissioner determines that there is a deficiency in respect of the tax imposed by this title, the Commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. Within 60 days after such notice is mailed (not counting Sunday as the sixtieth day), the taxpayer may file a petition with the Board of Tax Appeals for a redetermination of the deficiency. Except as otherwise provided in subdivision (d) or (f) of this section or in section 279, 282, or 1001, no assessment of a deficiency in respect of the tax imposed by this title and no distraint or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 60-day period, nor, if a petition has been filed with the board, until the decision of the board has become final."

It does not appear that a notice was given to the defendants as provided in the latter section, and for that reason the defendants claim that this suit cannot now be maintained. If the effect upon this suit claimed by the defendants for the provisions of these statutes could be sustained if these provisions stood alone, a later portion in the same Revenue Act of 1926 found in section 1122 (b) of that act (26 USCA § 1257(b), must also be considered. That portion of the statute reads as follows:

"The District Courts of the United States at the instance of the United States are hereby invested with such jurisdiction to make and issue, both in actions at law and suits in equity, writs and orders of injunction, and of ne exeat republica, orders appointing receivers, and such other orders and process, and to render such judgments and decrees, granting in proper cases both legal and equitable relief together, as may be necessary or appropriate for the enforcement of the provisions of this act. The remedies hereby provided are in addition to and not exclusive of any and all other remedies of the United States in such courts or otherwise to enforce such provisions."

There appears to be a conflict between the two portions of the Revenue Act of 1926 which have been cited, and, in case of such repugnancy, the latter portion of the statute in the order of arrangement will control. United States v. Jackson (C. C. A.) 143 F. 783, 787; In re Richards (C. C. A.) 96 F. 935, 939. The objections to jurisdiction are not well taken.

The...