Erie Railroad Company v. United States

Decision Date04 December 1957
Docket NumberNo. Cong. 3-56.,Cong. 3-56.
Citation156 F. Supp. 908,140 Ct. Cl. 398
PartiesERIE RAILROAD COMPANY and Atlantic Mutual Insurance Company v. UNITED STATES.
CourtU.S. Claims Court

Harry Everett Pendleton, Washington, D. C., for plaintiffs.

Benjamin H. Pester, Washington, D. C., with whom was Asst. Atty. Gen. Charles K. Rice, for defendant. James P. Garland, Washington, D. C., was on the briefs.

WHITAKER, Judge.

This case has been referred to us by the House of Representatives under 28 U.S.C. § 1492 and 2509, pursuant to the House Resolutions set out in findings 3 and 4, for such findings of fact and conclusions thereon as shall be sufficient to inform the Congress of the nature and character of the demand as a claim, legal or equitable, against the United States, and the amount, if any, legally or equitably due from the United States to the plaintiffs.

Section 1492 authorizes us to render judgment on a claim so referred if we have jurisdiction of the claim under other acts of Congress. We would, of course, have jurisdiction of a claim such as plaintiffs' present claim, except for the fact that the statute of limitations within which claims against the United States must be presented in this court has long since run. It is not within our power, therefore, to render judgment on the claim, but, of course, the running of the statute is not a bar to the allowance of the claim by Congress. However, we know of no special circumstances in this case which would justify Congress in doing so. The facts respecting plaintiffs' delay in presenting their claim follow.

On June 16, 1945, the National Distillers Products Corporation withdrew from bond 8,080.90 wine gallons of alcohol, equivalent to 15,353.60 proof gallons, and shipped them from Peoria, Illinois, consigned to New England Distillers, Inc., at Clinton, Massachusetts. In transit the liquors were destroyed in a railroad wreck.

The National Distillers Products Corporation filed a claim with the Erie Railroad Company in the total amount of $147,730.62, covering the value of the alcohol lost in the sum of $9,135.39, the internal revenue tax that had been paid thereon of $138,182.40, and the prepaid freight of $412.83. Subsequently, on December 20, 1945, the National Distillers Products Corporation filed with the District Director of Internal Revenue a claim for refund of the taxes paid on the liquors lost. This claim was denied by the Commissioner of Internal Revenue on January 16, 1946, on the ground that there was no provision of law authorizing the refund of internal revenue taxes which had been properly paid on distilled spirits, and that the taxes in question had been properly paid. Following this, the Erie Railroad Company on March 6, 1946, paid the National Distillers Products Corporation the full amount of its claim of $147,730.62.

Notwithstanding rejection of the claim for refund of the taxes paid on January 16, 1946, no further effort was made by anyone to recover them until the introduction in the House of Representatives of H. R. 5918 on April 27, 1955. Presumably, this was because the parties did not believe that their claim had sufficient validity to justify any further effort to secure its allowance.

On April 3, 1950, this court decided the case of Stephano Bros. v. United States, 89 F.Supp. 693, 116 Ct.Cl. 503, in which we held that a shipper of tobacco was entitled to recover the value of stamps affixed to a shipment of cigarettes which had been destroyed in a railroad wreck. This was followed by our decision in Philip Morris & Co. to Use of Great Am. Ins. Co. v. United States, 100 F.Supp. 820, 120 Ct.Cl. 703, decided November 6, 1951, in which we reaffirmed our previous holding. These decisions apparently encouraged plaintiffs to make a further effort to recover the tax paid on this alcohol. At any rate, in their briefs they rely largely on these cases in support of their claim.

But, even if it could be said that our decision in Stephano Bros. v. United States, supra, recognized a right to recover excise taxes on tobacco not previously recognized, and if this decision could be applied to plaintiffs' claim, as they seek to do, nevertheless, it appears that they waited much longer than the statutory period before filing their petition in this court. While the statute of limitations applicable to most claims against the United States is six years, the statute applicable to the recovery of internal revenue taxes is two years. Section 3772 of the Internal Revenue Code of 1939; 26 U.S.C. 1952 ed. sec. 3772. The time for filing suit for the recovery of these taxes, therefore, expired some eight years before the suit was filed in this court, and four years after our decision in Stephano Bros. v. United States, supra.

Whether so long a delay in presenting any claim which plaintiffs may have should be waived by Congress, even if plaintiffs have a valid claim, is of course a matter for Congress to determine.

But, as we will more fully point out in a discussion of the claim on the merits, we do not think plaintiffs' claim can possibly be brought within our decisions in the Stephano Bros. and Philip Morris cases, supra.

Second. We are further of opinion that the National Distillers Products Corporation is not entitled to recover the taxes paid on this liquor, notwithstanding its destruction. Of course if the National Distillers Products Corporation is not entitled to recover them, the plaintiffs are not entitled to recover, because the only claim they could have is derived from the claim of National Distillers Products Corporation.

Section 2800 of the Internal Revenue Code of 1939 levies a tax on all distilled spirits "produced in or imported into the United States" at a certain rate, "to be paid by the distiller or importer when withdrawn from bond." Subsection (c) of section 2800 provides, "the tax shall attach to the distilled spirits * * as soon as this substance is in existence as such." Hence, the tax is one on the production of distilled spirits, and not a consumer's tax as plaintiffs insist. This is clearly recognized by the decisions of the Supreme Court in Thompson v. United States, 142 U.S. 471, 12 S.Ct. 299, 35 L.Ed. 1084; United States v. One Ford Coupe, 272 U.S. 321, 47 S.Ct. 154, 71 L. Ed. 279; and United States v. Rizzo, 297 U.S. 530, 56 S.Ct. 580, 80 L.Ed. 844, as well as by other cases.

Therefore, at the moment the production of distilled spirits is complete, liability for the tax accrues. However, if spirits are distilled in bond, and kept in a bonded warehouse for a time, the tax is not payable until they are withdrawn from bond, but at that time the tax must be paid.

Therefore, when the National Distillers Products Corporation withdrew this alcohol from bond, everything had occurred to fix liability for the tax. The amount of that liability had been determined, and the time for payment of the tax had arrived. The tax was paid and the transaction was closed. Anything that happened to the liquor thereafter had no effect on the amount of taxes owing to the Government on account of the production of these liquors.

Although the tax is on the production of the distilled spirits and accrues when production is complete, still, the law makes certain allowances for loss of the liquor after production and while it remains in bond. An allowance is made for leakage or evaporation, or if the liquor is otherwise lost while on the premises of a registered distiller and before deposit in an internal revenue bonded warehouse, or if lost while being transferred between buildings constituting a bonded warehouse, or while being transferred by a common carrier from a distillery to a bonded warehouse, or between bonded warehouses, or if the spirits are withdrawn for use in the fortification of sweet wines, and are lost while stored in bonded winery premises, or if they are lost by theft, or if they are voluntarily destroyed by the distillers because unfit for beverage purposes. In all such cases the Commissioner of Internal Revenue is authorized to abate the tax on the liquor so lost, that is to say, the liability for the tax is extinguished. And, if taxes have been inadvertently paid on spirits so lost, subsection (c) of section 2901, as amended by the Act of April 8, 1942, permits the refund of them. But this, by its terms, refers only to taxes which may have been paid subsequent to the loss or destruction of the liquor in the manner set out above. It has no application to a loss of liquor after payment of the tax.

When the spirits have once been withdrawn from the warehouse, and the tax has been paid, no provision is made in the law for loss or destruction of them thereafter. The...

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5 cases
  • Aetna Casualty and Surety Co. v. Sherwood Distilling Co.
    • United States
    • U.S. District Court — District of Maryland
    • 5 Julio 1967
    ...thereunder as indirect production taxes. In this view we are supported by the recent Court of Claims opinion in Erie R. R. v. United States, 1957, 156 F.Supp. 908, 140 Ct.Cl. 398. See also Thompson v. United States, 1891, 142 U.S. 471, 12 S.Ct. 299, 35 L.Ed. 1084." II A surety on a distille......
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    ...142 U.S. 471 (1892); Schenley Distillers, Inc. v. United States, 255 F.2d 334, 336 (3d Cir. 1958); Erie Railroad v. United States, 140 Ct. Cl. 398, 401 (1957); Robert Williams & Co. v. State Tax Commission of Missouri, 498 S.W. 2d 527, 528-529 (Mo. 1973); Dade County v. Atlantic Liquor Co.,......
  • Aetna Insurance Company v. United States
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    • U.S. Claims Court
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    ...by the courts as not allowing refund after the tax has been paid and the alcohol withdrawn from bond, see Erie Railroad Company v. United States, Ct.Cl., 156 F.Supp. 908. Cf. Stitzel-Weller Distillery, Inc. v. United States, D.C., 82 F.Supp. 50, affirmed, 6 Cir., 180 F.2d 357. Apparently in......
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