Hammond-Knowlton v. United States

Decision Date24 June 1941
Docket NumberNo. 302.,302.
Citation121 F.2d 192
CourtU.S. Court of Appeals — Second Circuit

Eugene D. Alexander, of New York City, and Edward K. Nicholson, of Bridgeport, Conn., for plaintiff-appellee.

Samuel O. Clark, Jr., Asst. Atty Gen., Sewall Key and Samuel H. Levy, Sp. Assts. to Atty. Gen., and Robert P. Butler, U. S. Atty., and Valentine J. Sacco, Asst. U. S. Atty., both of Hartford, Conn., for defendant-appellant.

Before SWAN, CHASE, and FRANK, Circuit Judges.

FRANK, Circuit Judge.

This is an appeal from a judgment of the District Court holding that appellee was entitled to recover for the overpayment of taxes. The facts are set out in our opinion on a prior appeal, Hammond-Knowlton v. Hartford Connecticut Trust Co., 2 Cir., 89 F.2d 175 certiorari denied 302 U.S. 707, 58 S.Ct. 27, 82 L.Ed. 546, and need be only briefly restated here. Charles C. Knowlton died October 12, 1924. Appellee, his administratrix, filed a federal estate tax return the following year, showing a tax of $79,686.06, against which she claimed a credit of 25% (which was the maximum allowable) for estimated state inheritance taxes. She paid the difference on or before October 10, 1925. The Commissioner of Internal Revenue made a final audit of the estate, and reported on October 21, 1926, an increase in the value of certain securities. Since the rate of tax was reduced by section 322(a) of the Revenue Act of 1926, 26 U.S.C.A. Int.Rev. Acts, page 261, however, the tax was determined as $609.04 less than the amount paid. The amount of $59,155.51 thus shown to be due, was before deduction of a credit for state inheritance taxes. On April 12, 1927, the estate paid to the State of Connecticut the sum of $73,372.21, the amount certified by the probate judge as due for state inheritance taxes. On October 16, 1931, taxpayer filed with the Commissioner a document labelled "Supplemental data on audit of return — Evidence for credit and refund", claiming a refund for the payment of state taxes. The Commissioner treated this as a claim for refund, and rejected it because not filed within four years after payment of the tax sought to be recovered. In 1933 the taxpayer sued the Collector of Internal Revenue in the District Court and won. On the prior appeal, without finally passing on the timeliness of the refund claim, in an opinion by Judge Manton, we sustained the contention (not made in the District Court and first made in this court1, after the statute of limitations had barred any new suit against the United States) that suit against the Collector could not be maintained because the alleged overpayment resulted from the action of the Commissioner in disallowing a credit claimed by the taxpayer, rather than from the wrongful collection of the tax by the Collector. We reversed the District Court on that issue, and remanded the case for a new trial. The District Court, thereupon, in 1938, permitted appellee to amend her complaint, nunc pro tunc, to substitute the United States as defendant in place of the executor of the Collector, and to reduce her original claim of $15,397.92 to $10,000, the jurisdictional limit of the District Court under the Tucker Act, 28 U.S.C.A. § 41(20), although, at the date of the filing of the amendment, the statute of limitations barred the bringing of an original suit against the United States. The District Court then found that a claim for refund had been filed within the four-year limit imposed by sections 3226 and 3228 of the Revised Statutes, 26 U.S.C.A. Int.Rev. Code, §§ 3313, 3772 (on the ground that that period began when the final payment of state inheritance taxes was made on October 16, 1930), and that taxpayer, being entitled to a credit which the Commissioner had wrongfully disallowed, should recover. On this second appeal, the United States questions the order allowing the amendment, after the running of the statute of limitations, of appellee's complaint so as to substitute it as defendant in place of the Collector, and the claim to $10,000. Appellant also reducing asserts that the claim for refund was filed too late. These are the only issues in the case; there appears to be no doubt that, aside from these obstacles, taxpayer is entitled to a refund. We first consider appellant's contention that the District Court erred in permitting appellee's amendment to be filed in 1938.

Appellee, when she began her suit in 1933, was not unreasonable in believing that on the basis of Moore Ice Cream Co. v. Rose, 289 U.S. 373, 53 S.Ct. 620, 77 L. Ed. 1265, 1932, she could, without amendment, maintain her action against the Collector, for, on the same basis, on similar facts, the Court of Appeals for the Fourth Circuit later reached that same conclusion in United States v. Piedmont Mfg. Co., 89 F.2d 296, 298, 1937.2 But the subsequent decision, in 1938, in Lowe Bros. v. United States, 304 U.S. 302, 305, 58 S. Ct. 896, 82 L.Ed. 1362 (which inferentially overruled the Piedmont case) makes it clear that our decision on the prior appeal was correct, i.e., that appellee could not have recovered against the Collector. The question, then, is whether the amendment, substituting the United States as defendant, "related back" so as to prevent the running of the statute of limitations.

If the suit were between private persons, it might well be regarded as having originally been brought against a defendant, sued in the wrong capacity, so as not to preclude an amendment, rectifying that error, filed after the statute had run. Missouri, Kansas & Texas R. Co. v. Wulf, 226 U.S. 570, 33 S.Ct. 135, 57 L.Ed. 355, Ann.Cas. 1914B, 134. On that analogy, were this a case of first impression, we would incline to hold that appellee's amendment effectually related back.

We are, however, here confronted with two barriers to such a conclusion: First, in the suit as originally begun, service was not formally had upon the United States, as defendant. Second, the amount for which plaintiff originally sued was in excess of the amount of $10,000, for which suit can be maintained against the United States in the federal District Court. In dealing with cases involving either of these factors, the decisions of the Supreme Court have, at times, been ungenerous to the citizen; in such cases the attitude is that the United States, as sovereign, being immune from suit, except with its consent, the courts must insist that, when it gives such consent, attaching conditions thereto, it is fatal not to comply literally with those conditions. True, the Supreme Court indicated strongly in Moore Ice Cream Co. v. Rose, 289 U.S. 373, 53 S.Ct. 620, 77 L.Ed. 1265, 1933, that such strictness was to be relaxed. But the lower courts have been admonished not to enlarge too widely upon the implications of that case.3 We, therefore, conclude, reluctantly, that, if appellee is to be successful, it must be by direction of the Supreme Court and not by ours. Because the matter is of general importance and not entirely free of doubt, we feel it appropriate to set forth in some detail the bases of our conclusion:

As above noted, the first obstacle to appellee's success is the fact that her suit, as originally begun, was not against the United States but against the Collector. The government asserts the doctrine that such a suit is "personal" to the Collector, and is not against the United States. The historic purpose of that doctrine, devised by the courts, was to do justice to taxpayers who, at one time, could not directly sue the government to recover wrongful exactions by its officers. A review of that doctrine's history is instructive:

Early in American jurisprudence, cases arose where a citizen sued an officer of the State or of the United States, alleging that the defendant, acting pursuant to an unconstitutional statute, had invaded or threatened to invade the citizen's individual legal rights, as, for instance, through seizure, by a distress warrant, of his personal property to collect a tax, or by the taking of his land, or the like. On the facts, it appeared that the government would benefit from the officer's conduct; therefore, had the defendant been the officer of a private corporation, the suit could have been brought against it as the real party in interest. There was the rub; the government could not be sued without its consent, and it had withheld its consent.4 At first blush, that absence of consent seemed to be an impassable barrier to any such action. That obstacle, however, was easily and frequently surmounted by a doctrine plainly devised to avoid injustice to the citizen: The Supreme Court repeatedly held that, if the government officer's conduct, regarding him as a private citizen, would constitute an invasion of the citizen's individual legal rights, then the action would be considered as one brought against the defendant not as an officer but as a private person; if, then, he could show that he was acting in accordance with a valid statute, the suit was at an end because it was a suit against a non-consenting government and must fail; but, if he could not prove that he was acting pursuant to a valid statute, then it was held that he had no defense and must answer personally for his misconduct as an individual, notwithstanding that the government was, in fact, the real party in interest. See e.g. Cunningham v. Macon & Brunswick R. Co., 109 U.S. 446, 456, 3 S. Ct. 292, 27 L.Ed. 992; Poindexter v. Greenhow, 114 U.S. 270, 287, 5 S.Ct. 903, 962, 29 L.Ed. 185; United States v. Lee, 106 U.S. 196, 1 S.Ct. 240, 27 L.Ed. 171; In re Ayers, 123 U.S. 443, 500, 8 S.Ct. 164, 31 L.Ed. 216; Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714, 13 L.R.A.,N.S., 932, 14 Ann.Cas. 764; Hopkins v. Clemson Agricultural College, 221 U.S. 636, 644, 31 S.Ct. 654, 55 L.Ed. 890, 35 L.R.A.,N.S., 243; Philadelphia Co. v. Stimson, 223 U.S. 605, 620, 32 S.Ct. 340, 56 L.Ed. 570, 1912; Ex parte La Prade, 289 U.S. 444, 455, 53 S.Ct. 682, ...

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