Toledo Rys. & Light Co. v. McMaken

• Decision Date: 28 November 1936
• Docket Number: 2361.,No. 2360,2360
• Citation: 17 F. Supp. 338
• Parties: TOLEDO RYS. & LIGHT CO. v. McMAKEN, Collector of Internal Revenue (two cases).
• Court: U.S. District Court — Northern District of Ohio

17 F. Supp. 338

TOLEDO RYS. & LIGHT CO. v. McMAKEN, Collector of Internal Revenue (two cases).

Nos. 2360, 2361.

District Court, N. D. Ohio, W. D.

October 31, 1936.

Supplemental Opinion November 28, 1936.

Welles, Kelsey & Cobourn, of Toledo, Ohio, for plaintiff.

W. B. Waldo, Sp. Asst. to Atty. Gen., and Gerald P. Openlander, Asst. U. S. Atty., of Toledo, Ohio, amici curiæ.

KILLITS, District Judge.

Petitions in these cases were filed on the same day, October 16, 1912, to recover of the defendant the sums of $3,066.82 and $2,248.52, respectively, excise taxes upon net income of the plaintiff, alleged to have been unlawfully demanded, and paid under protest by the plaintiff, and attempted to be assessed and collected under the Act of August 5, 1909 (36 Stat. 11). The actions were begun within the pertinent limitations of the applicable statute, section 3226, R.S., 26 U.S.C.A. § 156 (see 26 U.S. C.A. §§ 1672-1673 note), but the day does not appear exactly when, in either case, the limitation of the statute actually commenced to operate. They followed the rejection, in each case respectively, by the Commissioner of Internal Revenue of the plaintiff's demand for refund. It can be said with certainty that the statute of limitations in each case was effective to bar action much prior to the 1st of July, 1916. Appearing through the district attorney, under the provisions of R.S. § 771 (28 U.S.C.A. § 485), the defendant McMaken answered, raising an issue on the merits in each case, on April 22, 1913.

After several settings for trial the cases were reached July 1, 1918. Then the plaintiff moved, in each case, to substitute for defendant, McMaken, who vacated his office in 1914, his successor, Collector Niles. The language in each motion was as follows: "Now comes The Toledo Railways and Light Company, plaintiff in the above entitled action, and moves the court for an order substituting for the defendant, his successor in office, Frank B. Niles, as collector of internal revenue as defendant herein."

These motions, not being resisted, identical orders of substitution, drawn and presented by plaintiff's counsel, were entered. They read as follows:

"This first day of July, 1918, came on for hearing upon the motion of the plaintiff for an order substituting for the defendant herein his successor in office, Frank B. Niles, as defendant herein and the court being fully advised in the premises,

"It is ordered that said motion be and is hereby granted and Frank B. Niles, as collector of internal revenue, is hereby substituted for William V. McMaken as collector of internal revenue as defendant herein."

Defendant Niles appearing with the then district attorney as his counsel, pursuant to the provisions of section 771, R.S., 28 U.S.C.A. § 485, and a jury being waived, trial was immediately had and the causes submitted, subject to briefing, which proceeded very leisurely.

No action was taken thereafter until September 4, 1919, when Niles, through the district attorney, moved a dismissal of each cause, for the reasons, among others, that "* * *

"2. For the reason that the substitution of the defendant, Frank B. Niles, for that of Collector William V. McMaken, by order of this court made July 1st, 1918, upon the motion of the plaintiff herein for the reason that it is the contention of the defendant that the substitution for the original plaintiff in these actions is a bar as against any judgment which might be entered herein against the substituted defendant or the original defendant herein.

"3. For the reason that the substitution of a new sole defendant works the complete and voluntary dismissal of the action against the former Collector and a new suit on the same causes of action cannot be brought against the original defendant, as the statute of limitations has run in his favor. * * *"

Again there was leisurely briefing. March 23, 1922, the motions to dismiss were granted in a memorandum, citing Patton v. Brady, 184 U.S. 608, 22 S.Ct. 493, 46 L.Ed. 713; Roberts v. Lowe (D.C.) 236 F. 604, 605; Sage v. U. S., 250 U.S. 33, 39 S.Ct. 415, 63 L.Ed. 828; and Smietanka v. Indiana Steel Company, 257 U.S. 1, 42 S.Ct. 1, 66 L.Ed. 99. Following a discussion of these authorities we said: "It follows that a substitution of Collector Niles for the original defendant, who was his predecessor in office, was without the law. As that action was demanded by the plaintiff, and as, by it, McMaken has been dismissed, there is here what amounts to a voluntary dismissal of the cause of action itself."

In Third Nat. Bank & Trust Co. v. White, 58 F.(2d) 411, 412 (D.C.Mass.), a somewhat similar situation was before the court, resulting in an order granting a motion to dismiss as in the instant case. The decision and its cited authorities emphasize the point, equally applicable to the question here, that the substitution in that case effected "the commencement of a new and independent proceeding to enforce" the liability attempted to be established in plaintiff's actions (Davis v. L. L. Cohen & Co., 268 U.S. 638, 642, 45 S.Ct. 633, 69 L.Ed. 1129). Such "new and independent proceeding," however, could have no standing because when, July 1, 1918, Niles was brought in, at the instance of plaintiff, the applicable statute of limitations, section 3226, 26 U.S.C.A. § 151 (see 26 U.S.C.A. §§ 1672-1673 note), had barred it for approximately three years.

Through oversight our finding for dismissal was not reduced to a formal order. This situation is argued to us in support of a theory that there was no operative final dismissal. With this we have no sympathy.

What erected a situation which required no other formal action by the court than a dismissal followed by a judgment against the plaintiff for costs was the clear result of proceedings had by the voluntary conduct of the plaintiff. Although this conduct inevitably destroyed its right to recover, however meritorious, nevertheless the plaintiff, acting upon its own volition, invited it.

So clear is this that no invasion of any right of plaintiff would follow should we now direct a nunc pro tunc order of dismissal, with judgment for costs, as indicated in the preceding paragraph, effective as of March 23, 1922; Mitchell v. Overman, 103 U.S. 62, 65, 26 L.Ed. 369; Cuebas y Arredondo v. Cuebas y Arredondo, 223 U. S. 376, 390, 32 S.Ct. 277, 56 L.Ed. 476. To do so may seem paradoxical, considering that we adhere to the view that each of said causes was finally, although informally, dismissed over fourteen years ago, such action seems both reasonable and provident, however, when it is noted, as will be shown hereafter, that the plaintiff is insisting now that each of said actions yet depends undisposed. If that position has any support, such a clarifying order is called for; if, as we think, the position is untenable, to enter it works no prejudice to plaintiff.

Twelve days (April 3, 1922) after the memorandum to support an order of dismissal of these causes was filed, a verified motion, identical in each case, carrying this language: "Now comes The Toledo Edison Company, plaintiff under its former name The Toledo Railways and Light Company and represents to the Court that in filing its motion herein asking that Frank B. Niles, the successor in office of William V. McMaken, the original defendant, as Collector of Internal Revenue, be substituted for said William V. McMaken as defendant herein, plaintiff did not intend to voluntarily dismiss this action as to said William V. McMaken, or to discontinue the prosecution of this cause of action, but on the contrary intended to continue to press the prosecution of the cause of action set forth in its petition herein, and plaintiff now moves the court for an order vacating and setting aside the order heretofore entered herein substituting Frank B. Niles as defendant herein for the original defendant, William V. McMaken and reinstating said William V. McMaken of record as the defendant herein," McMaken, without consulting his statutory counsel, the district attorney, indorsed on these motions his consent "to the granting of the foregoing motion to vacate the order substituting Frank B. Niles as defendant herein and to reinstate him as party defendant in said case."

Five years were allowed to pass during which the court's attention to the alleged causes was not invited, nor were any filings made, when, April 18, 1927, McMaken having died and letters of administration on his "estate" having been taken out in proceedings which showed that the estate had no substantial assets available to meet any judgment against it, the following identical "entry of appearance" and motion was filed: "Now comes Georgie D. McMaken, as the duly appointed and qualified administratrix of the estate of William V. McMaken, deceased, and hereby waives the issuance and service of process, enters her appearance as defendant herein, and joins in the consent of William V. McMaken, the original defendant herein, to the granting of the Motion of the plaintiff, heretofore filed herein, to vacate the order substituting Frank B. Niles, as defendant herein, and to reinstate William V. McMaken as party defendant herein."

It seems advisable to scrutinize the curious motion, second above quoted, in the light of the record already made. It is the foundation upon which are builded all of the many efforts made afterward to retrieve mistakes of fatal consequence. The question it raises is: Did the motion of July 1, 1918, state exactly, and without omissions or reservations, what was meant it should accomplish? Its language is clear and unequivocal —superficially it was designed to do exactly what, and nothing more, it did do, i. e., to place Collector Niles in the precise attitude as defendant which the pleader had provided for his predecessor, McMaken, to the permanent exclusion, thereafter, of the latter. We can see clearly from the subsequent record that that was then the state of mind of coun...