Charles A. Zahn Co. v. United States

• Citation: 6 F. Supp. 317
• Decision Date: 02 April 1934
• Docket Number: L-118,No. K-188,M-71.,K-188
• Parties: CHARLES A. ZAHN CO. v. UNITED STATES. ZAHN et al. v. SAME (two cases).
• Court: U.S. Claims Court

6 F. Supp. 317

CHARLES A. ZAHN CO. v. UNITED STATES.

ZAHN et al. v. SAME (two cases).

Nos. K-188, L-118, M-71.

Court of Claims.

April 2, 1934.

Vincent J. Hefferman, of Chicago, Ill. (Edward Clifford and H. H. Shinnick, both of Washington, D. C., on the brief), for plaintiffs.

Joseph H. Sheppard, 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.

WILLIAMS, Judge.

These cases were consolidated by the court on March 1, 1932, for the purpose of trial. The facts applicable to the three cases have been stipulated by the parties as set forth in the findings. The controversy relates to an overpayment by the Charles A. Zahn Company, an Illinois corporation, of its income and profits taxes for the year 1920 which, to the extent of $32,081.68, was credited by the Commissioner of Internal Revenue against taxes due from the same company for the year 1919, after the expiration of the statutory period in which taxes for the year 1919 were legally collectible.

The petition in No. K-188 is filed in the name of the Charles A. Zahn Company. In Nos. L-118 and M-71, the petitions are filed in the names of Charles J. Zahn and Ernst Bartel, acting for and on behalf of all parties interested in the collection and distribution of the assets of the Charles A. Zahn Company, dissolved, and certain persons acting in their own individual rights as stockholders of the Charles A. Zahn Company as of the date of its dissolution.

No. K-188

The Charles A. Zahn Company was dissolved under the laws of the state of Illinois, on March 30, 1921. Section 14 of the Corporation Act of Illinois (chapter 32, § 14 of the 1925 Smith-Hurd Revised Statutes) provides that: "All corporations organized under the laws of this State, whose powers may have expired by limitation or otherwise, shall continue their corporate capacity for two years for the purpose only of collecting debts due such corporation and selling and conveying the property and effects thereof. Such corporations shall use their respective names for such purposes and shall be capable of prosecuting and defending all suits at law or in equity." Section 79 of the same act (Smith-Hurd Rev. St. 1925, c. 32, § 79) provides that: "The dissolution, for any cause whatever, of any corporation, shall not take away or impair any remedy given against such corporations, its officers, or stockholders, for any liabilities incurred previous to its dissolution, if suit therefor is brought and service of process had within two years after such dissolution."

Two years after the dissolution of the corporation, or on March 30, 1923, the Charles A. Zahn Company ceased to exist, and became incapable of transacting any business whatever in its corporate capacity. A. J. Bates Co. v. United States (Ct. Cl.) 3 F. Supp. 245. This suit filed more than six years thereafter, on May 10, 1929, cannot be maintained.

Nos. L-118 and M-71

The petitions in these cases were filed on April 7, 1930, and February 18, 1931, respectively, seven and eight years after the Charles A. Zahn Company had ceased to exist for any purpose whatever and had become incapable of either instituting or defending suits in its corporate capacity. The defendant makes the point that, under the decision in the Bates Case, supra, the same situation obtains in respect to the plaintiffs' right to maintain these suits as that of the Charles A. Zahn Company in No. K-188. Since this contention, if meritorious, is material to the decision only in the event the plaintiffs are otherwise entitled to recover, and we do not think they are, we prefer to dispose of the cases upon the merits.

The Charles A. Zahn Company filed its tax return for the year 1919 on March 3, 1920. The statutory period for the collection of the taxes assessed thereon expired on March 3, 1925. The credit of $32,081.68 of the overpayment for 1920 against the outstanding assessment for 1919 was made on May 14, 1925, the date on which the Commissioner signed the schedule of refunds and credits. Girard Trust Co. v. United States, 270 U. S. 163, 46 S. Ct. 229, 70 L. Ed. 524; United States v. Swift & Co., 282 U. S. 468, 51 S. Ct. 202, 75 L. Ed. 464. The statutory period in which the 1919 tax could be collected had expired when the credit was made. If the credit was made by the Commissioner of his own motion without the taxpayer's approval or with an approval falling short of inducement and request, it was void as an erroneous credit under section 609 of the Revenue Act of 1928, 45 Stat. 791, 875 (26 US CA § 2609). R. H. Stearns Co. v. United States, 54 S. Ct. 325, 78 L. Ed. ___, decided by the Supreme Court on January 8, 1934.

The facts disclosed by the findings justify the conclusion that the credit was made with the taxpayer's approval and in accordance with its request. The 1919 return showed a tax liability of $34,718.64. No part of the tax shown to be due on the return was paid by the company at the time the return was filed, or subsequently. A claim for credit for the entire amount of the tax against an asserted overpayment for a like amount for the year 1918 accompanied the return. Subsequently, on June 21, 1922, and before the Commissioner had completed his audit of the company's 1918 return, the company filed amended returns for the years 1919 and 1920. The amended return for 19...