Commissioner of Internal Revenue v. Bryson

• Decision Date: 26 August 1935
• Docket Number: No. 7519.,7519.
• Citation: 79 F.2d 397
• Parties: COMMISSIONER OF INTERNAL REVENUE v. BRYSON. BRYSON v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Ninth Circuit

79 F.2d 397 (1935)

COMMISSIONER OF INTERNAL REVENUE v. BRYSON.

BRYSON v. COMMISSIONER OF INTERNAL REVENUE.

No. 7519.

Circuit Court of Appeals, Ninth Circuit.

August 26, 1935.

Frank J. Wideman, Asst. Atty. Gen., and Sewall Key, L. W. Post, and M. H. Eustace, Sp. Assts. to Atty. Gen., for the Commissioner.

Before WILBUR, GARRECHT, and DENMAN, Circuit Judges.

GARRECHT, Circuit Judge.

Brought to this court on petition for review of a final decision and order of redetermination of the United States Board of Tax Appeals, this proceeding involves alleged deficiencies in income and profits taxes for the years 1917 and 1918, amounting to $2,863.42 and $5,741.89, respectively. The Board found that the alleged taxpayer, the respondent herein, was not liable for any deficiency of the Bryson-Robison Corporation for 1917 and 1918, but that he was liable as transferee of the assets of the corporation for its deficiency for 1919, in the amount of $2,273.54, with interest.

The Commissioner has filed a petition for review of the Board's decision, as to the years 1917 and 1918. The respondent filed a petition attacking that portion of the Board's decision which found him liable for the deficiency for the year 1919. No brief has been filed or personal appearance made in this court in behalf of the respondent, and we assume that his petition "for cross-appeal" and review has been abandoned.

Prior to entering its final decision and order of redetermination, the Board at different stages of the present controversy filed an "opinion," a "memorandum opinion and order," a "memorandum opinion," and an "order." Only the first of these has been reported. 22 B. T. A. 395.

As found by the Board, the facts are substantially as follows:

In 1916 the Bryson-Robison Corporation was organized under the laws of the state of Washington. Its stock was divided equally between the respondent and Lester L. Robison. Robison was president of the corporation and the respondent was secretary and treasurer. No formal corporate meetings were held and no regular set of books or accounts was kept. The corporation engaged in business until June 4, 1919, when the respondent purchased Robison's stock and interest for $70,000, took possession of the corporation's entire assets, and operated the business thereafter as an individual.

On May 14, 1930, the Secretary of State of the State of Washington promulgated the following certificate:

"I, J. Grant Hinkle, Secretary of State of the State of Washington, and custodian of the Seal of said State, do hereby certify that I have carefully examined the records of this office and find that the `Bryson-Robison Corporation', a domestic corporation of Walla Walla, Washington, filed a copy of its articles of incorporation in this office on the 13th day of October, 1916.

"I further certify that the above mentioned corporation was stricken from the records of this office July 1, 1921, and was further `Stricken from the Records and dissolved' July 1, 1924, under the provisions of Chapter 144, Laws of Washington of 1923, for failure to pay the annual license fees and accruing penalties, the last license fee paid being for the fiscal year ending June 30, 1919.

"And I further certify that the above mentioned corporation has had no legal existence since stricken July 1, 1921, pursuant to Chapter 140, laws of 1907."

The corporation filed its income tax return for 1917 on March 30, 1918, and its return for 1918 on June 16, 1919.

On February 12, 1923, the respondent executed a purported waiver agreeing to an extension of time to one year after date for the assessment of 1917 income taxes against the corporation.

On January 2, 1924, he executed what purported to be an unlimited waiver in respect of 1917 and 1918 income taxes of the corporation.

The text of that waiver was as follows:

"In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921, Bryson-Robison Corp., of Walla Walla, Washington, and the Commissioner of Internal Revenue, hereby consent to a determination, assessment and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of the said Corporation for the years 1917 and 1918 under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act entitled `An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes', approved August 5, 1909, irrespective of any period of limitations.

"Signed Elmer D. Bryson "Former Secretary of the Bryson-Robison Corp. "Taxpayer "Signed D. H. Blair, c "Commissioner."

Accompanying the waiver of January 2, 1924, was a letter addressed to the Commissioner, signed by the present respondent's attorney. The text of that letter follows:

"Elmer D. Bryson has handed me your office letter of the 19th inst. addressed to Bryson-Robison Corporation, in his care, advising that it will be necessary for this corporation within twenty days from the date of your letter to advise you of its acquiescence in the determination of net income and invested capital as found by the Revenue Agent's report dated October 22, 1923, in order that you may further consider an application for computation of tax under the provisions of Section 210, Revenue Act 1917 and Sections 327-8, Revenue Act 1918.

"You have already been informed that this corporation has been entirely out of business since July, 1919, and since that date has not owned or possessed any property of any character and the corporation has long since been stricken from the corporate rolls of this state, where it was incorporated. It has not functioned in any manner since that date, and being stricken from the corporate rolls naturally the former officers of the corporation cannot legally presume to act for it since it no longer exists.

"During the life of the corporation Elmer D. Bryson was secretary of the corporation, but will not presume to assume sic to act in that capacity after all of these years since its dissolution. The only way he could make a report would be that as that sic of an individual, who was formerly secretary of a corporation which has been defunct for a period of over four and one half years, and during which period it has neither functioned nor owned any property. * * *

"Your office letter above referred to is being by him referred to Cosper Accounting Company, who has been looking after this matter and it will probably give your letter such further attention and reply as it deems proper and necessary. We deemed it proper that this status be called to your attention, as no former officer will assume any authority not vested in him.

"Yours very truly "Herbert C. Bryson."

Deficiencies were assessed against the taxpayer corporation on March 21, 1924, for 1917, and on September 1, 1925, for 1918. The sixty-day letters to the respondent herein and to Robison as transferees were mailed November 3, 1926. The net value of the assets transferred to Bryson exceeded the amount of the deficiencies.

The Board held that the waivers were not sufficient to extend the periods of assessment and collection of the 1917 and 1918 taxes against the transferor corporation, and that, since such assessment and collection were barred prior to the passage of the Revenue Act of 1926 (44 Stat. 9), assessment and collection of the liability of the respondent herein, as transferee, were also barred.

The Commissioner concedes that without any waiver, the statute of limitations would have run against the 1917 taxes on March 30, 1923, and against 1918 taxes on June 16, 1924, in each case five years after the filing of the respective return. As the Commissioner points out, since it is settled that a waiver is effective when executed after the running of the statute, it is necessary to consider only whether the waiver of January 2, 1924, was sufficient to extend the periods for assessment against the corporation for 1917 and 1918 taxes, so as to make timely the assessments of March, 1924, and September, 1925.

The Commissioner's argument is threefold: First, that the waiver was clearly sufficient to extend the periods of assessment against the corporation; second, that if the waiver could not bind the corporation, it at least bound the respondent herein, individually; and, third, that in any event, "apart from technical considerations," "in view of the fact that the extensions of time for assessment were necessitated by the respondent's claim for special assessment," etc., the respondent is estopped from denying the validity of the waivers.

Under the first proposition, it first becomes necessary to inquire whether the corporation was in existence at the time when the waiver of January 2, 1924, was executed. If the corporation was a legal entity at that time, it next must be determined whether the waiver was sufficient to bind the company.

There is no need to labor the point as to whether the corporation was in existence on January 2, 1924; for the Commissioner not only concedes but insists that this was so. In any event, the jurisprudence of the state of Washington establishes the proposition beyond a doubt.

By coincidence, the name of the corporation involved in the case of Haynes v. Central Business Property Co., 140 Wash. 596, 600, 601, 249 P. 1057, 1058, was stricken from the records of the Secretary of State on the same day as that on which the corporation here involved was stricken from the rolls; that is to say, July 1, 1921. The parallelism is important, since the date was prior to the enactment of chapter 144, p. 462, Session Laws of Washington 1923, section 5 of which reads in part as follows: "Every corporation whose name has been, or shall hereafter be, stricken from the records of the office of the Secretary of State in pursuance of law for failure to pay its annual license fee for two years, is hereby authorized and...