Commissioner of Internal Revenue v. Hind

• Decision Date: 13 October 1931
• Docket Number: No. 6239.,6239.
• Parties: COMMISSIONER OF INTERNAL REVENUE v. HIND.
• Court: U.S. Court of Appeals — Ninth Circuit

52 F.2d 1075 (1931)

COMMISSIONER OF INTERNAL REVENUE v. HIND.

No. 6239.

Circuit Court of Appeals, Ninth Circuit.

October 13, 1931.

G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, Norman D. Keller, and John H. McEvers, Sp. Assts. to Atty Gen. (C. M. Charest, Gen. Counsel, and Stanley Suydam, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for petitioner.

Herbert W. Clark and Leon de Fremery, both of San Francisco, Cal., for respondent.

Before WILBUR and SAWTELLE, Circuit Judges, and NETERER, District Judge.

SAWTELLE, Circuit Judge.

This is an appeal from an order entered by the Board of Tax Appeals November 13, 1929. 18 B. T. A. 96.

Hind, Rolph & Co. was a partnership doing business in San Francisco, Cal. On April 1, 1918, it filed its income tax return for 1917, and on July 20, 1918, the Commissioner of Internal Revenue assessed a tax thereon of $23,794.48. This tax was paid. In December, 1921, the Commissioner assessed an additional tax of $199,611.29, notice of which was given and payment demanded on January 14, 1922. Thereupon claim in abatement was filed.

On February 25, 1926, a waiver extending the time for collection to December 31, 1926, was executed for and on behalf of the taxpayer. It was received and filed in the collector's office, but was never signed by the Commissioner.

On June 11, 1926, the claim in abatement was rejected, and on August 9, 1926, appeal was taken to the Board of Tax Appeals.

On December 8, 1926, the taxpayer and the Commissioner executed an additional waiver providing that the tax of $199,611.29 "may be collected (together with such interest, penalties, or other additions as provided for by law) from said party of the first part by distraint or by a proceeding in court begun at any time prior to December 31, 1927."

It is conceded that the second waiver depended for its validity upon the validity of the waiver signed February 25, 1926, and this appeal hinges upon the question of law as to whether the first waiver was valid without the signature of the Commissioner.

Section 250 (d) of the Revenue Act of 1921, c. 136, 42 Stat. 227, 264, provides: "The amount of income, excess-profits, or war-profits taxes due under any return made under this Act for the taxable year 1921 or succeeding taxable years shall be determined and assessed by the Commissioner within four years after the return was filed, and the amount of any such taxes due under any return made under this Act for prior taxable years or under prior income, excess-profits, or war-profits tax Acts * * * shall be determined and assessed within five years after the return was filed, unless both the Commissioner and the taxpayer consent in writing to a later determination, assessment, and collection of the tax. * * *" (Italics our own.)

Interpretation of this statute leads us into an inquiry into the nature and the legal implications of a "waiver." Sedgwick, in his treatise on The Interpretation and Construction of Statutory and Constitutional Law (2d Ed.) p. 87, says: "* * * The party is held at liberty to waive statutory provisions, which, if insisted on, would enure to his benefit; and generally it is true that where no principle of public policy is violated, parties are at liberty to forego the protection of the law * * * `A party may always waive a right in his favor, created by statute, the same as any other.' Cases cited. * * * So, on the same principle, if statutory requisitions in regard to process are disregarded, which would render all subsequent proceedings fatally defective; still, if the party waive the objection, by appearing and contesting the suit on the merits, a valid judgment may be rendered. Cases cited. But the waiver can only be made by the party in interest."

The context in the above excerpt clearly indicates that "the party in interest" is the party enjoying "the protection of the law" which he is willing to waive.

Again, in Endlich's Interpretation of Statutes, p. 632, we find the following language: "Every one has a right to waive, and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual, in his private capacity citing cases, and which may be dispensed with without infringing on any public right or public policy. * * * Thus a person may agree to waive the benefit of the Statute of Limitations. * * *" (Cases cited.)

Both these eminent text-writers indicate the unilateral nature of a waiver. This view has also been repeatedly expressed by the Supreme Court, in connection with the precise type of waiver involved in the instant case.

In Florsheim Brothers Drygoods Co., Ltd., v. United States, 280 U. S. 453, 466, 467, 50 S. Ct. 215, 219, 74 L. Ed. 542, it is said:

"The waivers executed by the parties were not contracts binding the Commissioner not to make the assessments and collections after the periods specified. * * * The instruments were nothing more than what they were termed on their face — waivers; and that was all to which the Commissioner was authorized to consent.

"Stress is laid on the use of the words `agree' and `agreement' in the acts and regulations. But these are ordinary words having no technical significance. It is also urged that, unless a contract was intended, there is no reason why the consent of the Commissioner should have been required. But an otherwise plain meaning should not be distorted merely for the sake of finding a purpose for this administrative requirement. If a reason must be found, it exists in the general desirability of the requirement as an administrative matter. It serves to keep the Commissioner in closer touch with the matters which he is charged to administer. It avoids claims of improvident execution of waivers and unauthorized exactions by subordinates of the Department for the purpose of curing their own delinquencies. And it provides a formal procedure which is generally desirable for the Commissioner, collectors, and subordinates in the Department."

In an even more recent case, Stange v. United States, 282 U. S. 270, 276, 51 S. Ct. 145, 147, 75 L. Ed. 335, this doctrine is reenunciated: "As pointed out in Florsheim Bros., etc., v. United States, 280 U. S. 453, 466, 50 S. Ct. 215, 74 L. Ed. 542, a waiver is not a contract, and the provision requiring the commissioner's signature was inserted for purely administrative purposes and not to convert into a contract what is essentially a voluntary, unilateral waiver of a defense by a taxpayer."

Again, in Aiken v. Burnet, 282 U. S. 277, 281, 51 S. Ct. 148, 149, 75 L. Ed. 339, we find the following language: "Even after the Act of 1921, a so-called waiver was not a contract. The requirement in section 250 (d) of that act * * * was inserted to meet exigencies of administration, and not as a grant of authority to contract for waivers."

Finally, the "administrative" nature of the Commissioner's signature is once more adverted to in Burnet v. Railway Equipment Co., 282 U. S. 295, 298, 51 S. Ct. 137, 138, 75 L. Ed. 349: "As we said in Stange v. United States, decided this day, 282 U. S., p. 270, 51 S. Ct. 145, 75 L. Ed. 335, the...