Daube v. United States, L-106.

• Decision Date: 05 July 1932
• Docket Number: No. L-106.,L-106.
• Citation: 59 F.2d 842
• Parties: DAUBE v. UNITED STATES.
• Court: U.S. Claims Court

59 F.2d 842 (1932)

DAUBE v. UNITED STATES.

No. L-106.

Court of Claims.

July 5, 1932.

John E. Hughes, of Chicago, Ill. (William Cogger, of Washington, D. C., on the brief), for plaintiff.

G. Aaron Youngquist and Charles B. Rugg, Asst. Attys. Gen. (Lisle A. Smith and E. E. Angevine, both of Washington, D. C., on the brief), for the United States.

Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.

GREEN, Judge.

The Commissioner of Internal Revenue, having found that plaintiff had overpaid his individual income tax for the years 1916, 1917, 1918, 1919, and 1920, credited the amount of such overpayments upon a deficiency in taxes of Westheimer & Daube, a firm of which the plaintiff was a member. There is no dispute as to the overpayment, the deficiency in the tax of the partnership, or the credits made by the Commissioner thereon, but plaintiff, claiming that the action of the Commissioner in making these credits was illegal, brings suit to recover the amount of the overpayments and credits. Since the filing of the petition, the plaintiff has abandoned his claim for the credits made from overpayments on the taxes of 1916, 1917, and 1920. The issue now is with reference to the credits made out of overpayments for 1918 and 1919.

With reference to the credits made of overpayments of the taxes for these two years, the contention for plaintiff is that the credits were made after the expiration of the period of the statute of limitations for the collection of taxes for the years on which these two overpayments were made. It is contended on behalf of the defendant that the credits were made before the expiration of the statutory limitations, and that in any event the plaintiff is not entitled to recover for the reason that no application for a refund was filed within the time prescribed by law.

On the question of the statute of limitations, the cases of Florsheim Bros. Co. v. United States, 280 U. S. 453, 50 S.Ct. 215, 74 L. Ed. 542, and Northwestern Barb Wire Co. v. United States, 42 F.(2d) 579, 70 Ct. Cl. 329, are cited on behalf of defendant to show that section 278 (d) of the 1926 act (26 USCA § 1061 and note) permitted the collection of the partnership tax at any time within six years from the time of the additional assessment against the partnership, which was on March 29, 1924. But in those cases it appeared that the statute of limitations had not expired when the act of 1926 went into effect.

In the case at bar, the parties agree that the period of limitation for the collection of the partnership taxes for 1917 was extended by the so-called "unlimited" waiver which the partnership had filed to April 1, 1924, when it expired. Thus the period of limitation ended prior to the enactment of the 1924 act, which in subdivision (d) of section 278 (26 USCA § 1061 note) authorized the collection to be made within six years from the assessment of the tax. But in subdivision (e) of the same section, there was a provision that the section should not authorize the collection of a tax if at the time of the enactment of the act such assessment was barred by the statutory period of limitations properly applicable thereto. We are of the opinion that neither the Revenue Act of 1924 nor that of 1926 is of any help to defendant's case. See Russell v. United States, 278 U. S. 181, 49 S. Ct. 121, 73 L. Ed. 255.

The defendant contends that both of the claims of the plaintiff now at issue are barred by reason of the fact that no claim for refund as to either of them was filed until more than four years after the payment of the sum which is sought to be recovered. Plaintiff does not concede this to be the fact as to the claim for refund of the taxes of 1918, but argues that if it be a fact it is immaterial for the reason, as plaintiff claims, that one basis of the suit is the rendition of an account stated on which a suit may be commenced within the time of the rendition of the account notwithstanding the provisions with reference to the filing of claims for refund. In support of this position the plaintiff cites the case of Bonwit Teller & Co. v. United States, 283 U. S. 258, 51 S. Ct. 395, 75 L. Ed. 1018.

The facts in the case present a very unusual situation and are quite different from those in the Bonwit Teller Case, supra, where only one taxpayer was involved. It appears that on November 10, 1923, the Commissioner mailed to the plaintiff a "statement" which showed that he had found that additional taxes were due from plaintiff for the years 1916, 1917, and 1920, and that for the years 1918 and 1919 there had been an overassessment, in each case specifying the amount, and that there was altogether a net overassessment of $13,502.90.

On January 26, 1924, the Commissioner signed an assessment list for the district of Oklahoma upon which appeared the additional assessments hereinabove referred to, and on January 31, 1924, the Commissioner signed a "schedule of overassessments," which schedule showed an overassessment of taxes in favor of plaintiff for the year 1918 of $22,151.88 and for the year 1919 of $2,628.26. This schedule was sent to the collector with instructions to examine the accounts of the taxpayer and apply the overpayment as a credit against any taxes due, entering the same on the schedule, which the collector did, and, after signing the schedule, returned it to the Commissioner of Internal Revenue. It then showed that $11,277.24 of the overpayment of 1918 taxes was credited against additional assessments of 1916, 1917, and 1920 taxes. At the same time, the collector made out a schedule of refunds and credits dated February 27, 1924, which he forwarded to the Commissioner along with the schedule of overassessments. This schedule listed as refundable $10,874.64 out of the taxes paid for 1918, and $2,628.26 out of the taxes paid for 1919. The Commissioner signed an approval of this schedule and an authorization of the payment thereof on March 29, 1924, notwithstanding the fact that he had on file an agreement and directions of plaintiff to apply certain of his overpayments to the additional assessment against the partnership which he had previously informed plaintiff and the partnership would be made. On the same day (March 29, 1924) the Commissioner made an additional assessment of taxes in the sum of $53,012.47 for 1917 against the partnership.

The authorization of the payment of the overassessment signed by the Commissioner was clearly made by oversight, but a check for $13,502.90, the amount of the overassessment, was issued pursuant thereto on April 23, 1924, and forwarded to the collector for delivery to the plaintiff. The collector, however, returned the check without delivering it. It is not material to this branch of the case, but it is evident this was done because the collector knew that about February 23, 1924, plaintiff and the other members of the partnership of Westheimer & Daube had individually signed and mailed to the Commissioner an instrument which constituted an agreement between themselves with reference to the disposition of overassessments to which they might be individually entitled, and further authorized and requested the Commissioner, "* * * to apply and credit the amount refundable to each and all of the individual members of said partnership for 1918 against the additional tax assessed against said partnership for the year 1917 and this agreement to be taken and accepted as full and complete authority therefor."

In a prior paragraph of this agreement it recited that: "* * * The said partnership of Westheimer & Daube has been assessed an additional excess-profits tax of $53,012.47 as shown by Commissioner's letter dated February 11, 1924."

After the return of the check, the Commissioner wrote again to the collector giving him instructions as to the distribution of the amounts of the overassessment, and accordingly, on August 7, 1924, the collector applied the sum of $10,874.64, the balance of the overassessment for 1918, and also the sum of $2,628.26, overassessed for 1919, upon the taxes outstanding against the partnership for the year 1917.

All this seems to have been perfectly satisfactory to the plaintiff until long afterwards. A few days before the 6-year limitation on suits had expired for bringing suits against the government, this action was commenced, apparently on an afterthought that there was a chance to recover back the amount so paid on the ground that the application had been made after the expiration of the period of limitations.

We think the plaintiff has misapprehended the principles of law applicable to the overpayment of 1918 as we consider those principles to be. It is still contended on the part of the plaintiff that defendant had no right to apply the amount of any overassessment against plaintiff upon the partnership taxes after the period of limitation had expired, and there is much discussion as to the effect of the provisions of the revenue act with reference to the application of "credits" upon a tax when the period of limitation for its collection has expired. As we view these provisions they were only intended to control when the "credit" was made upon other taxes of the same party whose taxes for a particular year were overpaid and have no application when an overpayment by one taxpayer is "credited" upon the taxes of another. The law applicable to this part of the case is no different than it would be if the plaintiff had directed the amount of any refund coming to him to be applied on the taxes of John Jones or some other taxpayer. True, the plaintiff was a member of the partnership against which an additional assessment had been made, and these taxes could be enforced against him by proper proceedings, but they had not been assessed against him. They were assessed against another taxpayer, and money used to pay them pursuant to the joint agreement went to the benefit of his partners as well as himself. When one...