Fears v. United States

• Citation: 386 F. Supp. 1223
• Decision Date: 13 January 1975
• Docket Number: Civ. A. No. C74-858A.
• Parties: Asberry L. FEARS et al., Plaintiffs, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Northern District of Georgia

386 F. Supp. 1223

Asberry L. FEARS et al., Plaintiffs, v. UNITED STATES of America, Defendant.

Civ. A. No. C74-858A.

United States District Court, N. D. Georgia, Atlanta Division.

January 13, 1975.

Charles L. Weltner, Atlanta, Ga., for plaintiffs.

William D. Mallard, Jr., Asst. U. S. Atty., Atlanta, Ga., for defendant.

ORDER

JAMES C. HILL, District Judge.

This is an action instituted for the refund of certain taxes paid by plaintiffs in connection with their employment by the Seaboard Coast Line Railroad. It is alleged that, prior to January 31, 1974, all of the plaintiffs were employed by the railroad, and that they each paid the employee's taxes under the Railroad Retirement Tax Act, Int.Rev.Code of 1954, secs. 3201-3233. After that date plaintiffs were employed by the Pine Tree Corporation which is not subject to the provisions of the Railroad Retirement Tax Act, but, rather, is subject to the provisions of the Federal Insurance Contributions Act (FICA), Int.Rev.Code of 1954, secs. 3101-3126. Each of the plaintiffs was employed by the railroad for less than ten years, and thus, is not entitled to benefits under the Railroad Retirement Plan. Employees retiring or dying with less than ten years creditable railroad service must look to the Social Security System for benefits. 45 U.S.C. secs. 228b(a), 228e(l) (1), (7), and (8). The railroad employment at the time of retirement or death is credited to the employee's Social Security account in order to determine entitlement to benefits under Social Security. 45 U.S.C. sec. 228e(k)(1).

Plaintiffs' claim is based on the fact that the tax paid under the Railroad Retirement Act is higher than that paid under FICA. Since benefits will be paid to the plaintiffs under the Social Security System, they feel that they are entitled to a rebate of any taxes paid under the Railroad Retirement Act to the extent that they exceed the amount they would have paid had they been paying under FICA throughout their working years. Plaintiffs allege that benefits under Social Security are lower than benefits under the railroad system.

The case is now before the Court on the government's motion to dismiss as to two of the plaintiffs, and on the government's motion for summary judgment as to the rest. There appears to be no controversy as to any material issue of fact.

I. MOTION TO DISMISS.

The government moves to dismiss this case insofar as it is brought by plaintiffs Charlie Arline and Asberry L. Fears because these plaintiffs have not satisfied the jurisdictional prerequisites of filing a claim for refund as prescribed by Int.Rev.Code of 1954, secs. 6511(a) and 7422. Plaintiffs oppose this motion on the ground that there is no statutory or regulatory form for requesting a refund for the taxes in question. Therefore, they contend, these plaintiffs should not be held to any rigid formalism.

The Court agrees with plaintiffs that they should not be held to any rigid formalism, and that the main purpose of requiring a party to file a refund claim before allowing a suit for a refund, is to give the government fair notice of the existence of a claim and the identity of the claimant. The record, however, shows that the Internal Revenue Service received from plaintiffs' counsel on December 13, 1972, "A Claim for Refund of Taxes Excessively Collected" in the name of all of the present plaintiffs except Mr. Fears and Mr. Arline. The first indication that the government had of a claim by these two plaintiffs was after April 6, 1973, when it received power of attorney forms from them as well as the rest.

Assuming then, but not deciding, that these power of attorney forms were sufficient to be considered claims for refund, they were received more than two years after the date that the taxes were paid. Section 6511(a) requires the claim to be made within two years, therefore, any notice that the government had of the claims of these two plaintiffs was not timely.

Accordingly, the government's motion to dismiss as to plaintiffs Asberry L. Fears and Charlie Arline is GRANTED.

II. SUMMARY JUDGMENT.

(a) Fairness.

This is a case of first impressions where plaintiffs base their entire claim on the fact that the retirement tax they paid while employed by the railroad was substantially more than the FICA tax they now pay, and that the benefits they will receive under Social Security will be substantially less than they would have received under the Railroad Retirement Act. They candidly state that there is no decided case or other authority touching upon the relief they seek. However, they invoke as the ultimate controlling authority, the fundamental principal of fairness, and it is appealing, for it is the paramount duty of the Court to be fair. Plaintiffs say, in their brief, that: "Having paid for twice as much coverage as each plaintiff now would be entitled under Social Security, honesty and fair play require that the excess contribution be refunded . . .."

Perhaps, therefore, it would not be improper to explore in some depth the correct application of the Court's unquestioned duty to be fair in our system. Plaintiffs' premise appears to be that the Court should decide just what it is that fairness requires of the citizens of our country and see to it that each is treated according to such a decision. At first blush it is an appealing approach. But when subjected to just cursory analysis, the premise is found dangerously lacking in understanding of the fundamental structure of our constitutional system.

There are three branches of the federal government. Each is, of course, enjoined to be fair in the discharge of the powers and responsibilities entrusted to it. Individual occupants of positions within the separate branches occasionally utter unofficial denunciations of what they feel to be grossly unfair actions of another branch. However, the affairs of the nation require that each branch act upon the assumption that the other has acquainted itself with all pertinent arguments touching upon fairness and that its final acts have resolved them satisfactorily. We assume the fairness of the end product of the deliberations of each other branch while searching for fairness in our own sphere.

Thus, the judiciary must, if the system is to survive, accept the acts of the legislative branch as being unassailably fair, while being under a sacred duty to apply those acts fairly to litigants.

Thus, when probed only superficially, it is apparent that plaintiffs' invocation of "fairness" as authority for this action is drastically circumscribed by our constitutional system. It is bed-rock fundamental theory that the Court must be fair in the application of the law; the Court must accept the Congressional determination that the law has been fairly enacted.¹

The legislative branch enacts the tax laws. The sympathy of this Court goes out to those who must exercise that power. In no area of government is there heard more protests of unfairness than in the area of taxation. All who are taxed are vexed; those who see themselves as paying for more than they receive denounce the "unfairness" of that result.

Our graduated income tax exacts a greater percentage of the earnings of some than others. Fairness has been cited in many ably presented attacks upon that system.² Alcoholic beverages are taxed at rates exceeding those, if any, applied to other beverages. Gasoline is taxed at rates different from those imposed upon other forms of energy. All citizens are taxed for the support of schools whether they be parents of school age children or not. Indeed, the tax imposed under the Social Security Act has often been called unfair. Those whose earnings result in taxation at the maximum level pay, over their productive years, many times more than the cost of a commercial annuity exceeding Social Security benefits. Some earners pay far less than the actuarial value of the benefits received.

Congress has enacted these laws. Congress, not the Courts, bears the responsibility for establishing the rules of taxation, and as long as Congress has acted within its constitutional powers, the Courts cannot use broad powers to frustrate specific statutory language. Supreme Investment Corporation v. United States, 468 F.2d 370 (5th Cir. 1972).

(b) Due Process.

Plaintiffs have neither alleged nor argued in their brief opposing the government's motion that the taxes in question violate any constitutional rights afforded the plaintiffs. The Court, though, feels that it is necessary to discuss this aspect. It is necessary, on a motion for summary judgment, to construe the plaintiffs' complaint most favorably towards the plaintiffs and to deny summary judgment if the undisputed facts do not negate any right of recovery that might be included in the complaint. Paler v. Columbia Broadcasting System, 368 U.S. 767 (1944); Palmer v. Chamberlain, 191 F.2d 532 (5th Cir. 1951).

Congress does not have an unlimited right to tax the citizenry. A federal statute passed under the taxing power may be so arbitrary and capricious as to cause it to fall before the due process of law clause of the Fifth Amendment. Heiner v. Donnan, 285 U.S. 312, 326, 52 S.Ct. 358, 76 L.Ed. 772 (1932); Neild v. District of Columbia, 71 U.S.App.D.C. 306, 110 F.2d 247 (1940). As the Court of Claims stated in Lionberger v. United States, 371 F.2d 831, 837, 178 Ct.Cl. 151 (1967):

"Unconstitutionality of a tax measure derives neither from unequal imposition nor from unequal incidence, but rather from that special instance where the act is `so arbitrary as to compel the conclusion that it does not involve an exertion of the taxing power, but constitutes, in substance and effect, the direct exertion of a different and forbidden power, as, for example, the confiscation of property.' Magnono Co. v. Hamilton, 292 U.S. 40, 44, 54 S.Ct. 599, 601, 78 L.Ed. 1109 (1934)."

It is no constitutional defense to a tax that the taxpayer is not directly benefited from the...