Felland v. Wilkinson
| Decision Date | 22 November 1928 |
| Docket Number | No. 80-G.,80-G. |
| Parties | FELLAND v. WILKINSON, Collector of Internal Revenue for the District of Wisconsin. |
| Court | U.S. District Court — Western District of Wisconsin |
Erling K. Loverud and Alvin M. Loverud, both of Stoughton, Wis., for plaintiff.
Stanley M. Ryan, U. S. Dist. Atty., of Janesville, Wis., and Harold E. Hanson, Asst. U. S. Dist. Atty., of Madison, Wis. (C. M. Charest, General Counsel Bureau of Internal Revenue, of Washington, D. C., and Donald V. Hunter, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for defendant.
LUSE, District Judge (after stating the facts as above).
The bill discloses that prior to its dissolution the Stoughton Lumber Association was careful to have its 1919 business examined by a field man of the Internal Revenue Department to determine the amount of income tax for which the association might be liable, apparently with a view to avoiding the very difficulty which now presents itself, and that fact naturally enlists the sympathy of a court of equity but is deemed insufficient to constitute one of those exceptional cases which would make section 3224, Rev. St. (26 USCA § 154), inapplicable to a tax case, or section 604 of the Internal Revenue Act of 1928 (26 USCA § 2604) inapplicable to this case if valid and otherwise applicable. Complainant apparently has real estate which is unincumbered save for the lien of the claim here involved, and the court is unable to perceive why complainant could not, without difficulty, make a loan on the security of such real estate notwithstanding the existence of such lien if money so raised was applied to the extinguishment of the lien. Section 604 of the Revenue Act of 1928 is quite manifestly a companion section to section 3224, Rev. St., and no doubt if the former section is valid and otherwise applicable, it limits the equitable jurisdiction of courts to enjoin the collection of a liability at law or in equity of a transferee of the assets of a taxpayer as effectively as the latter section did in the case of a tax. Section 3224, Rev. St., has been applied in all its rigor in numerous cases, some of which are cited and reviewed in Graham v. Du Pont, 262 U. S. 234, 254, 43 S. Ct. 567, 67 L. Ed. 965. Only extraordinary and exceptional circumstances make inapplicable the provisions of section 3224, Rev. St. Bailey v. George, 259 U. S. 16, 42 S. Ct. 419, 66 L. Ed. 816; Dodge v. Osborn, 240 U. S. 118, 36 S. Ct. 275, 60 L. Ed. 557; Hill v. Wallace, 257 U. S. 310, 42 S. Ct. 168, 66 L. Ed. 253.
Section 604 of the Revenue Act of 1928 (26 USCA § 2604) provides, so far as material, that: "No suit shall be maintained in any court for the purpose of restraining the assessment or collection of (1) the amount of the liability, at law or in equity, of a transferee of property of a taxpayer in respect of any income, war-profits, excess-profits, or estate tax. * * *"
Manifestly the foregoing section is applicable by its terms to this suit notwithstanding it was passed after action was commenced. Smallwood et al. v. Gallardo, 275 U. S. 56, 48 S. Ct. 23, 72 L. Ed. 152.
Complainant strongly urges the reasoning and conclusions of Judge Dawson in Owensboro Ditcher & Grader Co. v. Lucas (D. C.) 18 F.(2d) 798, in support of his contention. The cogent reasoning of Judge Dawson leading to his conclusion that section 280 of the Act of 1926 (26 USCA § 1069), in so far as it assigns to administrative officers the power to determine the liability of a transferee of a taxpayer, is invalid as a grant of judicial power, seems well-nigh inescapable. However, assuming such invalidity, we have to deal in the instant case with section 604 of the act of 1928, and there is no escaping the conclusion that it was intended by Congress to apply to just such cases as we now have before us. It is well settled that section 3224, Rev. St., applied so as to prevent injunctions issuing to restrain the collection of a tax, even though the law imposing such tax was unconstitutional. Bailey v. George, 259 U. S. 16, 42...
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