Colorado Milling & Elevator Co. v. Howbert

• Decision Date: 14 May 1932
• Docket Number: No. 575.,575.
• Citation: 57 F.2d 769
• Parties: COLORADO MILLING & ELEVATOR CO. v. HOWBERT, Collector of Internal Revenue.
• Court: U.S. Court of Appeals — Tenth Circuit

57 F.2d 769 (1932)

COLORADO MILLING & ELEVATOR CO. v. HOWBERT, Collector of Internal Revenue.

No. 575.

Circuit Court of Appeals, Tenth Circuit.

March 28, 1932.

Rehearing Denied May 14, 1932.

James L. Goree, of Denver, Colo. (William V. Hodges and D. Edgar Wilson, both of Denver, Colo., on the brief), for appellant.

Ralph L. Carr, U. S. Atty., of Denver, Colo. (Ivor O. Wingren, Asst. U. S. Atty., of Denver, Colo., on the brief), for appellee.

Before LEWIS and COTTERAL, Circuit Judges, and KENNAMER, District Judge.

KENNAMER, District Judge.

This is an appeal from a judgment dismissing an action brought against the collector of internal revenue by the Colorado Milling & Elevator Company to recover $15,196.87, with interest from March 8, 1923, representing an amount paid as interest on unpaid income and excess profits taxes for the fiscal year ending June 30, 1917, which were erroneously assessed against appellant.

This case was not tried on its merits, but demurrers were sustained to the original complaint and the amendment thereafter filed thereto. Appellant filed a second amended complaint, which the collector of internal revenue moved to strike from the files. The motion to strike was sustained; appellant declined to plead further and the action was dismissed.

Appellant's second amended complaint contained two causes of action. The first cause of action alleged that subsequent to September 11, 1919, additional income and excess profits taxes, amounting to $465,974.35, were assessed against appellant for the fiscal year ending June 30, 1917. Appellant, within the time allowed by law, filed claim for abatement of the entire amount of the additional assessments. The Bureau of Internal Revenue then reduced such additional taxes to $299,199.83 and the appellee demanded that appellant pay the same, together with $78,564.70 interest thereon. Appellant paid the taxes, amounting to $299,199.83, and made a written offer to pay appellee interest upon the true amount of such additional taxes for the year in question as might be due from appellant, at the rate of one-half of one per cent. per month from the date the same became due until March 8, 1923, when it was paid. The offer was set out in the complaint in full. It tenders $50,103.42 in settlement of the interest, stating that the amount so offered in compromise represents a sum computed at one-half of one per cent. per month upon the amount of the additional taxes then thought to be due. The offer in compromise and the tender were duly accepted by the Commissioner of Internal Revenue, by and with the consent of the Secretary of the Treasury.

Thereafter, appellant filed a claim for refund of $91,175.25 of the taxes, and a refund of a proportionate part of the interest payment, which claim was allowed in part, and a refund of $90,750.29 of the principal amount was allowed and paid to appellant. The claim for refund was disallowed in so far as it sought to recover the proportionate part of the interest payment amounting to $15,196.87. The offer in compromise which was included in the second amended complaint, is set out in the margin.¹

The second cause of action of the second amended complaint sets forth the facts alleged in the first cause of action, except that it does not mention the offer in compromise, but alleges that appellant paid as interest on additional taxes assessed, the sum of $50,103.42, whereas the lawful interest charge upon the additional taxes, as the same was finally determined, was $34,906.55, and that by reason thereof the appellee became indebted to appellant in the sum of $15,196.87, for which appellant prayed judgment.

The second amended complaint was stricken from the file upon the motion of the appellee upon the ground that it was identical with the original complaint as amended on file in the cause.

The question for determination is whether the second amended complaint of appellant set forth facts sufficient to constitute a cause of action in its behalf against the collector of internal revenue.

If a cause of action pleaded is merely a repetition of another cause of action set up in the same complaint, it may be stricken on motion. Proper v. John Bene & Sons, Inc. (D. C.) 295 F. 729. However, the court should proceed with extreme caution in striking a pleading.

In the instant case the motion to strike must be treated as a demurrer, in conformity with the practice of the state courts, as the motion to strike was sustained because the second amended complaint was identical with the original complaint as amended, to which a demurrer was sustained for the assigned reason that it did not state facts sufficient to constitute a cause of action.

The allegations in appellant's second amended complaint are, for the purpose of testing the pleading on demurrer, taken as true, Graig v. Gage (D. C.) 25 F.(2d) 326; Goldsmith v. Standard Chemical Co. (C. C. A.) 23 F.(2d) 313; Lyons v. Reinecke (C. C. A.) 10 F.(2d) 3; United States v. Skinner & Eddy Corporation (D. C.) 5 F.(2d) 708, as well as facts that may be inferred therefrom by reasonable and fair intendment, Moore v. East Tenn. Telephone Co. (C. C. A.) 142 F. 965.

The second amended complaint of appellant recites the assessment of additional income and excess profits taxes, the computation of interest thereon, the compromise of the interest, and the subsequent refund of $90,750.29 of the principal amount, which constituted an overassessment. The offer in compromise very plainly discloses the intention of the parties, and shows that, as expressly stated in the offer, the amount of interest offered in compromise represented a sum computed at the rate of one-half of one per cent. per month. The offer in compromise further discloses that the interest at the rate of one-half of one per cent. per month was computed upon the sum of $299,199.83. There can be no doubt as to the intention of the parties in making the offer in compromise; and there can likewise be no question but that the offer was computed upon the theory and proposition that the sum of $299,199.83 was the correct amount of taxes due by appellant. It may reasonably be inferred from the allegations of the second amended complaint that the additional assessment was made by the collector of internal revenue in good faith, and in the honest belief that the additional assessment represented the true and correct amount of income and excess profits taxes owed by appellant. It may likewise be inferred that the taxpayer believed in good faith that the assessment of the additional income taxes was due by it, and...