United States Pipe & Foundry Company v. Patterson

• Decision Date: 02 March 1962
• Docket Number: Civ. A. No. 8902.
• Citation: 203 F. Supp. 335
• Court: U.S. District Court — Northern District of Alabama
• Parties: UNITED STATES PIPE & FOUNDRY COMPANY, Plaintiff, v. George D. PATTERSON, District Director of Internal Revenue, et al., Defendants.

203 F. Supp. 335

UNITED STATES PIPE & FOUNDRY COMPANY, Plaintiff, v. George D. PATTERSON, District Director of Internal Revenue, et al., Defendants.

Civ. A. No. 8902.

United States District Court N. D. Alabama, S. D.

March 2, 1962.

Wm. Bew White, Jr., and Edward M. Selfe, White, Bradley, Arant, All & Rose, Birmingham, Ala., and Joseph B. Brennan, Sutherland, Asbill & Brennan, Atlanta, Ga., for plaintiff.

Macon L. Weaver, U. S. Atty., and Malcolm L. Tanner, Asst. U. S. Atty., Birmingham, Ala., and Charles Mehaffy, John F. Murray and Thomas A. Frazier, Jr., Dept. of Justice, Washington, D. C., for defendant.

LYNNE, Chief Judge.

Upon consideration of the pleadings, the stipulations, the evidence adduced upon trial, and the briefs of the parties, the Court makes the following Findings of Fact and Conclusions of Law:

FINDINGS OF FACT

Jurisdiction; Parties; Assessment and Collection of Taxes; Claims for Refund

1.

Plaintiff, United States Pipe & Foundry Company, is a New Jersey corporation having its principal office in Birmingham, Alabama.

2.

On October 31, 1952, Sloss-Sheffield Steel and Iron Company (hereinafter referred to as "Sloss"), a New Jersey corporation, was duly merged into plaintiff by appropriate corporate proceedings taken in accordance with the laws of the State of New Jersey. Plaintiff, by operation of law, succeeded to all rights and became subject to all liabilities of Sloss as a consequence of such statutory merger. Until such merger, Sloss had its principal office in Birmingham, Alabama.

3.

Defendant George D. Patterson has been District Director of Internal Revenue for the District of Alabama since November 20, 1952. Defendants Mortimer Jordan and William E. Davis were Collectors of Internal Revenue for the District of Alabama from January 1, 1948, to November 8, 1948, and from April 1, 1949, to November 19, 1952, respectively. Arthur Sartain was Acting Collector of Internal Revenue for the District of Alabama from November 9, 1948, to March 31, 1949. Arthur Sartain died on February 10, 1954, in Jefferson County, Alabama, and no executor or administrator of his estate was appointed. All the assets of his estate have been distributed to defendants Mrs. Arthur Sartain, his widow, or to Alfred N. Sartain, his son. All defendants are residents of Jefferson County, Alabama, within the Southern Division of the Northern District of Alabama.

4.

The plaintiff and its predecessor Sloss during the years 1947 through 1957 maintained their respective books of account and reported their respective incomes for federal income and excess profits tax purposes on the accrual basis, and on the basis of a taxable year ending on December 31 of each year, except for the taxable year of Sloss ending on October 31, 1952.

5.

Within the time provided by law, Sloss filed with the Collector or District Director of Internal Revenue for the District of Alabama its Federal income and excess profits tax returns for the years 1947 through 1951 and for the taxable year, January 1, 1952, to December 31, 1952, and plaintiff filed such returns for the years 1952 through 1957 with the District Director of Internal Revenue; each duly paid the amounts shown as due thereon within the time provided by law to the then Collector or District Director of Internal Revenue in Birmingham. The amounts so paid and the dates of payment are set forth in Paragraphs 3 and 4 of the stipulation signed by the parties on November 29, 1961, and such paragraphs are incorporated herein by reference and made a part hereof.

6.

The Commissioner of Internal Revenue (hereinafter referred to as the "Commissioner") caused to be examined Sloss' income and excess profits tax returns for the years 1947 through 1951 and for the taxable year January 1, 1952, to October 31, 1952, and plaintiff's income and excess profits tax returns for the years 1952 to 1957 inclusive. The results of such examinations were set forth in various Revenue Agents' reports which recommended overassessments and deficiencies of income and excess profits tax for the various years. Plaintiff paid the deficiencies recommended by these reports, together with interest thereon, and received refunds or credits of the overassessments recommended by such reports, together with interest thereon, each on the dates and in the amounts set forth in Paragraph 6 of the stipulation signed by the parties hereto on November 29, 1961; such paragraph is incorporated herein by reference and made a part hereof.

7.

Plaintiff has filed claims for refund for each year here involved on each ground on which it seeks to recover taxes and interest paid with respect to such year. The parties have stipulated that all such claims for refund were timely filed, except that defendants contend that claims filed by plaintiff during the year 1958 as to the years 1947 through 1953 (including Sloss' taxable year beginning January 1, 1952, and ending October 31, 1952) were timely only as to any tax and interest paid within two years before the date of filing of such claims for refund. (See Paragraph 71, infra.) The parties have also stipulated that this action was begun as to each year within two years after any denial of claims for refund filed with respect to such year and that it was begun as to each year more than six months after filing the claims for refund setting forth the grounds on which plaintiff seeks to recover for that year.

Nature of Business

8.

Prior to its merger with plaintiff at the end of October, 1952, Sloss was engaged in the following business activities:

(a) It operated four underground coal mines, called Bessie, Flat Top, Lewisburg, and Kimberly, together with a coal washer at each mine. All were located in Jefferson County. Most of the coal mined was used by Sloss in the production of coke. The Lewisburg mine was closed in March 1951 and the Kimberly mine was closed in April 1952; no coal has been extracted by Sloss or plaintiff from these mines since these dates.

(b) It operated two underground red iron ore (hematite) mines, called Sloss and Ruffner, in Jefferson County. Sloss used the red iron ore from these mines in its blast furnaces.

(c) It operated various open pit mines from which it extracted brown iron ore (limonite) in the vicinity of Russellville, Alabama. It owned or leased additional open pit mines in this area and in the Tait's Gap area which were operated by miners under written agreements. Sloss used the brown iron ore which it mined, as well as most of such ore mined by miners under written agreements on its land, in its blast furnaces.

(d) It owned a dolomite quarry in the city of Birmingham from which miners under written agreements quarried dolomite which Sloss used as a flux stone in its blast furnaces.

(e) It operated a coke plant in the city of Birmingham at which it produced furnace and foundry coke, coke breeze, and coke by-products. Until 1951, the coke plant had 120 slot-type, by-product coke ovens; in 1951, the number was increased to 150. It sold all the foundry coke and a small amount of the furnace coke produced; the rest of the furnace coke was used in its blast furnaces. Some of the coke breeze was burned for steam and the rest was sold. It sold the coke by-products produced, including coal tar, ammonium sulfate, benzene, toluene, xylene, napthalene, and oven gas (part of which was sold and part of which was burned as fuel at the coke plant).

(f) It operated four blast furnaces in the city of Birmingham, two of which were located at its "City Furnace Plant" and two of which were located at its "North Birmingham Plant." It produced pig iron in these furnaces and, at North Birmingham, it also produced ferromanganese until July 31, 1950, when the ferromanganese business was abandoned. It sold all the pig iron and ferromanganese produced. Of the slag produced (both bank run and granulated), it sold a portion and used the rest either in a ready-mix concrete business it conducted or in a rock wool insulation plant which it operated. It produced over 30 grades of merchant pig iron, including every commercial grade used in this country.

(g) It operated a railroad, called the Mary Lee, which ran from the coal washers at Flat Top and Lewisburg to its coke plant in Birmingham.

(h) It owned land on which contractors cut timber which Sloss used in its business.

9.

During the years here involved, plaintiff was engaged in the following business activities:

(a) It operated plants at Birmingham and Bessemer, Alabama, Chattanooga, Tennessee, Burlington, New Jersey, and since 1951, Decoto, California. It manufactured cast iron pipe at all of these plants except Chattanooga, where it manufactured cast iron fittings. It also operated a commercial foundry at the Bessemer plant and manufactured steel tubes, rolls, and similar products at the Burlington plant.

(b) After its merger with Sloss at the end of October 1952, plaintiff continued all the business activities set forth in Paragraph 8, supra, which Sloss conducted at the time of the merger. In 1953, the Ruffner red iron ore mine was closed. In 1956, the number of coke ovens was increased from 150 to 180. Plaintiff continued to sell foundry coke and pig iron, but also used substantial quantities of such foundry coke and pig iron at its own plants listed in subparagraph (a), supra

Coal

10.

(a) On its tax returns for the years 1948 through 1953, Sloss and the plaintiff used the following representative market prices per ton of coal which it mined:

                      Year         Market Price
                      1948            $6.206964
                      1949             6.287972
                      1950             6.309761
                      1951             6.25000
                      1952             6.11
                      1953             6.201
                

On its return for 1947, Sloss claimed an estimated depletion deduction of $600,000 for its coal and iron ore; the return did not contain any computation of depletion. However, the claim for refund for the year 1947 filed in 1955 shows a...