Commissioners of the Sinking Fund of Louisville v. Buckner

• Decision Date: 01 December 1891
• Citation: 48 F. 533
• Parties: COMMISSIONERS OF THE SINKING FUND OF LOUISVILLE et al. v. BUCKNER et al.
• Court: United States Circuit Court, District of Kentucky

48 F. 533

COMMISSIONERS OF THE SINKING FUND OF LOUISVILLE et al. v. BUCKNER et al.

United States Circuit Court, D. Kentucky.

December 1, 1891

Albert S. Willis and F. T. Fox, for plaintiffs.

George W. Jolly, U.S. Atty., for defendants.

BARR J.

The plaintiffs sue the defendants, who are the executors and heirs of James F. Buckner, for various sums of money, which he, as collector of internal revenue for this district received before the 1st of May, 1872, and which they allege were taxes illegally assessed and collected of the Louisville & Nashville Railroad Company, under the authority of various acts of congress. The city of Louisville was at the time a large stockholder in said railroad company, and plaintiffs claim that the taxes which were assessed and collected of said company on the city's share of the gross earnings the undivided surplus, and the dividends (cash and stock) of said company were illegal and invalid. Neither the city of Louisville nor the commissioners of the sinking fund had made application to have said taxes refunded within the time or in the manner required by the acts of congress. Congress, by an act approved June 16, 1890, and entitled 'An act for the relief of the board of the commissioners of the sinking fund of the city of Louisville, Ky.,' enacted as follows:

'That the secretary of the treasury and the commissioner of internal revenue be, and they are hereby, authorized and required to audit and adjust the claim of the board of the sinking fund commissioners of the city of Louisville Kentucky, for internal revenue taxes on dividends on shares of stock owned by said board of said city of Louisville in the Louisville and Nashville Railroad Company, to the extent that such taxes were deducted from any dividends due and payable to said board, and to pass upon said claim, and render judgment thereon in the same manner, and with the same effect, as if said claim had been presented and prosecuted within the time limited and fixed by law.'

The plaintiffs presented their claim under this law, and the secretary of the treasury and commissioner of internal revenue allowed them $42,514.02, which has been paid by the United States. This sum was the taxes collected on the dividends, both cash and stock, which were declared by the railroad company and paid by the city of Louisville. They however, refused to allow any interest, or to refund the taxes which had been collected on the gross receipts, and the taxes on the undivided profits or surplus.

This suit is brought to recover interest on $9,494.72 from May 9, 1872, which sum is the amount of taxes he collected on dividends belonging to the city of Louisville, and which had been refunded to plaintiffs without interest; and the sum of $4,590.57, which is the city's share of the taxes alleged to have been received by said Buckner, as collector, from the railroad company, on its gross receipts, with interest from November 28, 1870; and $1,704.20, which is the taxes alleged to have been collected by him on the city's share of the undivided surplus or profits, with interest from November 10, 1871.

The defendants have demurred to the petition, and have alleged several grounds therefor. The first is that this court has no jurisdiction. The plaintiffs and defendants are citizens of the same state, but we think this is a cause arising under a law of the United States providing internal revenue, and is one of the class of cases of which the circuit court is given jurisdiction by the fourth subdivision of section 629, Rev. St. It is also a case arising under the laws of the United States, and is within the first clause of the act of March 3, 1887, which gives the circuit court jurisdiction of causes arising under the laws of the United States. 25 St.at Large, p. 434. This ground of demurrer is therefore overruled.

The second grounds is that the petition shows the plaintiffs' cause of action accrued more than two years before the commencement of this suit, and is therefore barred by section 3227, Rev. St. The bar of a statute of limitation may be raised by demurrer when there is no exception to the statute, and the petition shows the bar of the statute complete. Bank v. Lowery, 93 U.S. 72; Bank v. Carpenter, 101 U.S. 567; Rankin v. Turney, 2 Bush, 555; Chiles v. Drake, 2 Metc. (Ky.) 146.

In cases like this one, there can be no doubt of this, as the action is really a statutory remedy, and an indirect action against the United States, although nominally against a collector for the recovery of taxes illegally collected by him. The appeal of the commissioner of internal revenue to refund taxes illegally assessed and collected, and then a suit within the time provided by the statute, is a condition precedent. The supreme court, in discussing this subject, lays down this rule:

'An allowance by the commissioner in this class of cases is not the simple passing of an ordinary claim by an ordinary accounting officer, but a statement of accounts by one having authority for that purpose, under an act of congress. Until an appeal is taken to the commissioner, no suit whatever can be maintained to recover back taxes illegally assessed or erroneously paid. If on the appeal the claim is rejected, an action lies against the collector, (Rev. St. Sec. 3226,) and through him, on establishing the error or illegality a recovery can be had. If the claim is allowed, and payment for any cause refused, suit may be brought in the court of claims. This, as it seems to us, is the logical result of the legislation of congress upon the subject. ' U.S. v. Bank, 104 U.S. 734.

An action like this one is not a common-law action for money had and received, but is a remedy given and regulated by statute. See sections 989, 3220, 3226-3228, 3689, Rev. St., and Cheatam v. U.S., 92 U.S. 85; James v. Hicks, 110 U.S. 272, 4 S.Ct. 6; Arnson v. Murphy, 109 U.S. 238, 3 S.Ct. 184, 115 U.S. 584, 6 S.Ct. 185; Savings Inst. v. Blair, 116 U.S. 200, 6 S.Ct. 353.

The ingenious argument in the able brief of the counsel for the plaintiff, to prove that the limitation of the statute as to the time of bringing suit does not apply, is not convincing, because, as we have seen, the remedy they are pressing is a statutory one, given by congress, by which the United States is being sued indirectly through a suit against a collector of the internal revenue. This remedy is given only when the statute is followed, and when the suit is brought within the time designated in the statute, and there is no exception in this act in favor of even a state of this Union, much less a city. The statutory remedy must be pursued as granted by congress, else there is no right of action. But if this action was a common-law one, for money had and received, we think the bar of the statute of limitation would apply to the plaintiffs' action, if nothing else appeared. Assuming that the holding of stock in the Louisville & Nashville Railroad Company by the city of Louisville is not merely a private property right, but is a public right, and is the exercise of governmental powers pertaining to sovereignty, the maxim, nullum tempus occurit regi, is not applicable. This maxim is applied only to the sovereign or government that has enacted the limitation act. If foreign nations, subjects or citizens thereof, or municipalities deriving their power from a country other than that which has the act of limitation, seek the tribunals of the latter country, they are not entitled to apply this maxim, and will not be excepted from the limitation, unless the act of limitation exceeds them in terms. The states of this Union, as between each other, or as between them and the United States, are not excepted from acts of limitation as to bringing suits, by the application of this maxim.

The plaintiffs' claims, as set out in the petition, are barred by the statute, unless the act of June 16, 1890, has prevented the bar. If this action was one against the defendants individually for money had and received for their use, the act of June, 1890, would not, we think, prevent the running of the limitation. But we have seen that it is, in effect, a statutory action against the United States, indirectly to adjudicate and ascertain the amount due plaintiff. In this view, I am of the opinion the bar of the statute is lifted as to the claim covered by this act. It may be urged that the bar of the statute as to the time of presenting the appeal, under section 3226, is all that is lifted by this act; but the act should be liberally construed and applied to section 3227, as well as section 3226.

This act requires the claim of the board of sinking fund commissioners of the city of Louisville to be audited and adjusted; and the inquiry is, what is that claim? The act itself answers the inquiry, and describes it as being 'for internal revenue taxes on dividends on shares of stock owned by said board for said city of Louisville in the Louisville & Nashville Railroad Company, to the extent that such taxes were deducted from any dividends due and payable to said board. ' Thus, to come within the description plaintiffs' claim must be for taxes on dividends on shares of stock owned by plaintiff, and which were deducted from said dividends. The taxes paid by the Louisville & Nashville Railroad Company on its gross receipts, under section 103 of the act of June 30, 1864, are not, by any possible construction of this law, a tax on dividends owned by plaintiff, and from which the tax was deducted. The tax was upon all of the receipts of the railroad company, without regard to their source or use, and is in no sense a tax on a dividend on stock owned by plaintiffs. 'Dividend' is defined by Webster thus: 'A sum divided; a division; a part or share made by division; the...