George Moore Ice Cream Co v. Rose

• Decision Date: 08 May 1933
• Docket Number: No. 675,675
• Citation: 289 U.S. 373,53 S.Ct. 620,77 L.Ed. 1265
• Parties: GEORGE MOORE ICE CREAM CO., Inc., v. ROSE, Collector of Internal Revenue
• Court: U.S. Supreme Court

289 U.S. 373

53 S.Ct. 620

77 L.Ed. 1265

GEORGE MOORE ICE CREAM CO., Inc.,

v ROSE, Collector of Internal Revenue.

No. 675.

Argued April 19, 20, 1933.

Decided May 8, 1933.

Mr. J. C. Murphy, of Atlanta, Ga., for petitioner.

The Attorney General and Mr. Paul D. Miller, of Washington, D.C. for respondent.

[Argument of Counsel from page 374 intentionally omitted] Mr. Justice CARDOZO delivered the opinion of the Court.

The petitioner, a corporation, brought suit against the respondent, a collector of internal revenue, to recover income and profits taxes alleged to have been wrongfully collected. A demurrer by the collector was sustained in the District Court upon two grounds: First, that the payment of the taxes had been made without protest; and, second, that the original claim for refund filed with the Commissioner was defective, and that amendment came too late. The Circuit Court of Appeals upheld the decision upon the second ground without passing on the first. 61 F.(2d) 605. The case is here on certiorari. 289 U.S. 714, 53 S.Ct. 522, 77 L.Ed. -.

On April 1, 1918, the petitioner filed its return for the year 1917, disclaiming any tax liability. The Commissioner of Internal Revenue, auditing the return, found a tax liability in the sum of $6,871.18, and assessed a tax accordingly. The respondent, after notice of the assessment, made demand upon the taxpayer, giving notice that there would be distraint and sale unless payment was made within ten days. On November 5, 1923, the taxpayer yielded to the demand, moved by the desire to avoid the seizure of its property, but without protest to the collector that the tax was illegal, either wholly or in part. Four years later, on November 5, 1927, if filed a claim for refund with the Commissioner, and on November 13, 1928, an amended claim, amplifying and making more specific the statements of the first one. The claims were rejected by the Commissioner, though a revenue agent had reported that a refund was due in the sum of $4,551.01. The petitioner alleges that the payment was excessive to that extent, and sues the collector for the moneys overpaid.

1. At common law, and for many years under the federal statutes, protest at the time of payment was a condition precedent to the recovery of a tax. Elliott v Swartwout, 10 Pet. 137, 153, 9 L.Ed. 373; Curtis's Adm'x v. Fiedler, 2 Black, 461, 17 L.Ed. 273; Chesebrough v. United States, 192 U.S. 253, 24 S.Ct. 262, 48 L.Ed. 432; United States v. N.Y. & Cuba Mail S.S. Co., 200 U.S. 488, 26 S.Ct. 327, 50 L.Ed. 569. The rule persisted till 1924, when it was abolished by the Revenue Act of that year, with a proviso that pending suits should be unaffected by the change. Revenue Act of 1924, c. 234, 43 Stat. 253, 343, § 1014, amending R.S. § 3226;¹ 26 U.S.C. § 156 (26 USCA § 156). This suit was not begun till March, 1931, and is thus outside of the proviso. Even so, the payment to be recovered was made in 1923, when protest was still necessary. The petitioner contends that the new rule applies to all suits begun after the adoption of the amendment. The government contends that the old rule survives if the payment was before the amendment, though the suit was begun afterwards.

We think the intention of the Congress was to remove the requirement of protest in any suit thereafter brought, irrespective of the date of the underlying payment.²

The tokens of intention are within the statute and outside of it.

Of the tokens within the statute, the saving clause, (b) of section 1014 (26 USCA § 156 note), is entitled to a leading place. 'This section shall not affect any proceeding in court instituted prior to the enactment of this Act.' The implication is that any proceeding not covered by the exception is to be subject to the rule. Moses v. United States (C.C.A.) 61 F.(2d) 791, 794. Cf. Brown v. Maryland, 12 Wheat. 419, 438, 6 L.Ed. 678. But there are other tokens, and tokens still within the statute, that point the same way. The phraselogy of the section in all its parts imports a regulation of procedure. No suit 'shall be maintained' until a claim for refund or credit has been filed with the Commissioner. If such a claim has been filed, suit may be 'maintained,' though there was neither protest nor duress. Even pending actions would commonly be covered by such words. 'To maintain a suit is to uphold, continue on foot and keep from collapse a suit already begun.' Smallwood v. Gallardo, 275 U.S. 56, 61, 48 S.Ct. 23, 72 L.Ed. 152. If suits already begun are taken out by an exception, to 'maintain' can mean no less than to prosecute with effect, without reference to the date of the transaction at the root. The Collector v. Hubbard, 12 Wall. 1, 14, 20 L.Ed. 272. In saying this we speak of the inference to be drawn when the balance is not shifted by countervailing weights. None can be discovered here. There could be no denial by any one that transactions antedating the statute would be subject to the rule that the suit is not maintainable without the filing of a claim. The inference is cogent that the same transactions are covered when it is said in the same sentence that the suit may be maintained without evidence or averment of protest or duress. There is a unity of verbal structure that is a symptom of an inner unity, a unity of plan and function. The field of operation is not shifted between the clauses of a sentence.

If we turn to extrinsic tokens of intention, and view the statute in the light of its history and aims, the signposts are the same. The requirement of protest as it stood before the statute was not limited to suits against a collector of internal revenue or other public officer. It extended and was often applied to suits against the government itself. Even in suits against the collector, the United States almost always the genuine defendant; the liability of the nominal defendant being formal rather than substantial. In this situation the government was unjustly enriched at the expense of the taxpayer when it held on to moneys that had been illegally collected, whether with protest or without. So at least the lawmakers believed, and gave expression to that belief, not only in the statute, but in Congressional reports. Senate Report, No. 398, 68th Congress, First Session, pp. 44, 45; ³ House Report, No. 179, 68th Con- gress, First Session, pp. 33, 34. The amendment was designed to right an ancient wrong. It did not draw a distinction between suits against the body politic and suits against a public officer who was to be paid out of the public purse. It put them in a single class, and made them subject to a common rule. A high-minded government renounced an advantage that was felt to be ignoble, and set up a new standard of equity and conscience. There was no thought to discriminate between payments made and those to come. A fine sense of honor had brought the statute into being. We are to read it in a kindred spirit. United States v. Emery, 237 U.S. 28, 32, 35 S.Ct. 499, 59 L.Ed. 825.

The argument is made that power was lacking, though intention be assumed. Defect of power is not suggested where the claim for restitution is against the government itself. The case assumes another aspect, we are told, when the suit is against an officer who is to be personally charged. Until 1924, a collector was not liable to a taxpayer for a tax illegally collected unless protest gave him notice that he was a party to a wrong. The government suggests that there is an infraction of the Fifth Amendment, a denial of due process, if liability is cast upon him after the event. There is a subsidiary point that at least the doubt is so great as to canalize construction along the course of safety. United States v. La Franca, 282 U.S. 568, 574, 51 S.Ct. 278, 75 L.Ed. 551; United States v. Jin Fuey Moy, 241 U.S. 394, 401, 36 S.Ct. 658, 659, 60 L.Ed. 1061. 'A statute must be construed, if fairly possible, so as to avoid not only the conclusion that it is unconstitutional, but also grave doubts upon that score.' United States v. Jin Fuey Moy, supra. But avoidance of a difficulty will not be pressed to the point of disingenuous evasion. Here the intention of the Congress is revealed too distinctly to permit us to ignore it because of mere misgivings as to power. The problem must be faced and answered.

As applied to this respondent in the circumstances of his official action stated in the record, the statute is constitutional, though its effect is to broaden liability both for the past and for the future. As the law stood before later statutes, the taxpayer's protest was notice to a collector that suit was about to follow, and was warning not to pay into the Treasury the moneys collected. Elliott v. Swartwout, supra; Smietanka v. Indiana Steel Co., 257 U.S. 1, 4, 42 S.Ct. 1, 66 L.Ed. 99. Statutes first enacted in 1839 (Act of March 3, 1839, c. 82, § 2, 5 Stat. 348) and progressively broadened (R.S. § 3210, 26 U.S.C. § 140 (26 USCA § 140)), made it the duty of collectors to pay the money over to the government, whether there had been protest or no protest. At first this was thought to have relieved them of personal liability (Cary v. Curtis, 3 How. 236, 11 L.Ed. 576; Smietanka v. Indiana Steel Co., supra), but later acts of Congress established a different rule, though maintaining the duty to make remittance to the Treasury. (Philadelphia v. The Collector, 5 Wall. 720, 731, 18 L.Ed. 614; Curtis's Adm'x v. Fiedler, 2 Black, 461, 479, 17 L.Ed. 273; The Collector v. Hubbard, supra; Arnson v. Murphy, 109 U.S. 238, 241, 3 S.Ct. 184, 27 L.Ed. 920; 5 Stat. 727; 12 Stat. 434, 725, 729; 12 Stat. 741, § 12; 13 Stat. 239; 14 Stat. 329, § 8). Along with the duty there went a pledge of indemnity by the government itself, a pledge not absolute, it is true, but subject to a condition. 12 Stat. 741, § 12; United States v. Sherman, 98 U.S. 565, 25 L.Ed. 235; Philadelphia v. The Collector, supra, page 733 of 5 Wall., 18 L.Ed. 614; Smietanka v. Indiana Steel...