Bertelsen & Petersen Engineering Co. v. United States, 2668.

• Decision Date: 02 August 1932
• Docket Number: No. 2668.,2668.
• Parties: BERTELSEN & PETERSEN ENGINEERING CO. v. UNITED STATES.
• Court: U.S. Court of Appeals — First Circuit

60 F.2d 745 (1932)

BERTELSEN & PETERSEN ENGINEERING CO. v. UNITED STATES.

No. 2668.

Circuit Court of Appeals, First Circuit.

August 2, 1932.

John W. Lowrance, of Boston, Mass. (Joseph Wiggin and Lispenard B. Phister, both of Boston, Mass., on the brief), for appellant.

Henry C. Clark, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (Frederick H. Tarr, U. S. Atty., and J. Duke Smith, Sp. Asst. U. S. Atty., both of Boston, Mass., and C. M. Charest, General Counsel, Bureau of Internal Revenue, and Herbert S. Fessenden, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief), for the United States.

Before BINGHAM, WILSON, and MORTON, Circuit Judges.

MORTON, Circuit Judge.

This is an action to recover $34,555.68 with interest, constituting part of an admitted overpayment by the plaintiff on its income taxes for 1917. The plaintiff's total overpayment for that year amounted to $91,570.34. For the next year, 1918, the government assessed on the plaintiff an additional tax in the amount now sued for, and collected it by applying a credit from the overpayment of the preceding year. The plaintiff objected to this, on the ground that the additional assessment was barred by the statute of limitations. It was admittedly made after the expiration of the statutory period; but the government contended that the time had been so extended by waivers given by the plaintiff as to include the date, July, 1926, on which the additional assessment was made. The plaintiff denied that the waivers given had that effect. The District Judge resolved this question of fact and law against the plaintiff. An incidental, though not unimportant, question of interest was also involved which the District Judge decided in favor of the government.

The plaintiff's return of its 1918 income tax was filed on June 16, 1919. The five-year period within which additional assessments for that year could be made expired on June 16, 1924. The taxpayer signed four waivers purporting to extend this period. The first waiver was dated January 8, 1924; it said: "This waiver is in effect for one year from the date it is signed by the taxpayer," i. e. it extended the time to January 8, 1925. It covered only the 1918 tax. The second waiver was dated February 23, 1924; it extended the time for "one year after the expiration of the statutory period of limitation, or the statutory period of limitation as extended by any waivers already on file with the Bureau." It covered not only the year 1918, but also the year 1917. By tacking it to the preceding waiver, it carried the time within which an additional assessment for 1918 could be made up to January 8, 1926. The third waiver was dated February 27, 1924; it was "for the years 1918 (1917 extended)." It covered the period "for one year from the date it is signed by the taxpayer," i. e., to February 27, 1925. On the face of the papers it effected nothing; it is obviously inconsistent with the preceding waiver. The fourth and last waiver was dated October 30, 1924. It covered only the year 1918, and extended the time "one year after the expiration of the statutory period of limitation, * * * or the statutory period of limitation as extended by section 277 (b) of the Revenue Act of 1924 (26 USCA § 1057 note) or by any waivers already on file with the Bureau."

By tacking the last waiver to the second waiver, and tacking the second to the first, the time was extended to January, 1927. It will be observed that the first three waivers were given within a period of less than two months in January and February, 1924, — two of them within the space of four days — and that these two were inconsistent, the later being of no effect if the earlier be taken according to its terms.

In this situation the plaintiff offered to show by extrinsic evidence that the second waiver was sent in order that the year 1917, which was not mentioned in the first waiver, might also be covered; that this second waiver was not on the usual form, and the third waiver was made out on the standard form, and was intended to correct the informality in the second and to be in substitution for it; that the last waiver was given on the assumption that the second had been so displaced. This evidence was excluded by the District Judge, and the petitioner excepted.

We are of opinion that the evidence should have been received. The basic purpose of judicial proceedings is to discover the true facts, and, having done so, to give judgment as is right upon them. Arbitrary rules of law should not be pressed beyond what necessity requires. The parole evidence rule, as applied to contracts, rests on estoppel; i. e., that a party having put his agreement with the other party into writing will not be heard to vary or contradict the written instrument. Central Coal & Coke Co. v. Good (C. C. A.) 120 F. 793, 798, cited with approval in Miller v. Robertson, 266 U. S. 243 at page 255, 45 S. Ct. 73, 69 L. Ed. 265. A waiver — which has been defined as "the intentional relinquishment of a known right" (McGrath v. Quinn, 218 Mass. 29, 105 N. E. 555, 556) — is not a contract (Stange v. United States, 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed. 335), and it is doubtful how far the parole evidence rule applies to such writings. Olmstead v. Mansir, 10 Allen (Mass.) 424. Even as to contracts, the rule has never been so rigidly applied as to prevent showing the real nature of the transaction (Brick v. Brick, 98 U. S. 514, 25 L. Ed. 256; Mobile & Montgomery Ry. v. Jurey, 111 U. S. 584, 591, 4 S. Ct. 566, 28 L. Ed. 527); nor, as between inconsistent instruments, which one the parties intended should be effective. In Payson v. Lamson, 134 Mass. 593, 45 Am. Rep. 348, a mortgage was conditioned on the payment of certain notes with 6 per cent. interest; the notes were drawn without interest. It was held that the plaintiff might show that, by the understanding of the parties, the notes were to carry interest as stated in the mortgage.

In the opinion the court said: "Where two papers are executed at the same time, relating to the same...