Harvey v. Early

• Decision Date: 10 July 1946
• Docket Number: No. 144.,144.
• Citation: 66 F. Supp. 761
• Parties: HARVEY v. EARLY, Collector of Internal Revenue, et al.
• Court: U.S. District Court — Western District of Virginia

66 F. Supp. 761

HARVEY v. EARLY, Collector of Internal Revenue, et al.

No. 144.

District Court, W. D. Virginia, at Lynchburg.

July 10, 1946.

W. Kinckle Allen, of Amherst, Va., and L. Grafton Tucker, of Lovingston, Va., for plaintiff.

Howard C. Gilmer, Jr., Acting U. S. Atty., of Pulaski, Va., and Douglas W. McGregor, Asst. Atty. Gen., and Fred J. Neuland, Sp. Asst. to the Atty. Gen., for defendants.

BARKSDALE, District Judge.

When this action was called for trial on June 27, 1946, after both sides had announced themselves ready, plaintiff's counsel stated to the court that they thought the undisputed facts set out in the complaint and answer entitled plaintiff to the relief sought, and that they therefore did not desire to introduce evidence. In response to inquiry by the court, plaintiff's counsel advised that they desired that the action be considered by the court as on a motion for a judgment on the pleadings, and defendants' counsel stated that they would waive notice of such a motion and would agree that the court treat this action as being heard upon plaintiff's motion for judgment upon the pleadings. Thereupon, argument was heard, both upon the main issues, and upon the motion of defendant, Nunan, Commissioner of Internal Revenue, upon his special appearance, that the complaint be dismissed as to him.

Although the court is not required by Rule 52, Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, to find the facts and state its conclusions of law where an action is disposed of on a motion for judgment on the pleadings, I will briefly state the facts and my conclusions thereon:

THE FACTS.

The plaintiff filed income tax returns for the years 1941, 1942 and 1943, and paid the taxes disclosed to be due by these returns. Thereafter, on February 5, 1945, the Commissioner of Internal Revenue, through his duly authorized agent, made jeopardy assessments pursuant to Section 273(a) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 273(a), against the plaintiff, including penalty assessments in the amount of 50 percentum under Section 293(b), the total deficiencies and penalties aggregating $8,169.22. No previous notice of this assessment was given to the plaintiff, but he was later notified, on the forms customarily used, of these deficiency assessments, and by distraint, the aggregate sum of $6,826.83 of plaintiff's money was collected by the defendant, Early, Collector. The principal balance of $1,342.39 has not at this time been collected by the Collector, nor has it been voluntarily paid by the plaintiff.

CONCLUSIONS.

Plaintiff, by his counsel, makes the principal contentions that defendants' actions were not in compliance with the statutes, that the Commissioner's action in making the jeopardy assessments was arbitrary and not justified by the facts, that the statutes are unconstitutional insofar as they provide for the taking of his property without due process of law, and that therefore the court, by mandatory injunction, should require the Collector to return his money collected by distraint, and that the Collector should be enjoined from making or attempting to make any further collections, and that the assessments be held null and void.

As to the plaintiff's contention that the defendants did not comply with the statutes, without reciting the facts in detail, I am satisfied that the statutes were sufficiently complied with and that there is no merit in this contention of the plaintiff.

As to plaintiff's contention that the defendants acted arbitrarily in making a jeopardy assessment against him, I do not find this contention to be well founded. The statute, Section 273(a), provides that: "If the Commissioner believes that the assessment or collection of a deficiency will be jeopardized by delay, he shall immediately assess such deficiency (together with all interest, additional amounts, or additions to the tax provided for by law) and notice and demand shall be made by the collector for the payment thereof."

The records of this Court, of which I take judicial notice, disclose that on June 4, 1945, two separate indictments were returned in this court against the plaintiff, one charging that, between May 23, 1943, and March 27, 1945, the plaintiff received a large quantity of molasses, a substance of the character used in the manufacture of distilled spirits, and wilfully failed to render a return showing the names and addresses to whom the disposition of the molasses was made, contrary to law, and that in March and April, 1944, the plaintiff transferred counterfeit sugar ration stamps and counterfeit gasoline ration stamps, contrary to law. The records further show that on June 5, 1945, the plaintiff herein pleaded guilty to both indictments and was sentenced to a term of imprisonment. By the recital of these facts, I do not mean to even intimate that the plaintiff's conviction of these offenses in any way deprived him of any of his constitutional rights. However, the fact that the plaintiff was, by his own admission, at and preceding the time the Commissioner made the jeopardy assessments on February 5, 1945, engaged in illegal business enterprises, fully justifies the conclusion of the Commissioner that the "collection of a deficiency will be jeopardized by delay, * * *", and therefore the Commissioner's action was not arbitrary.

In order for the plaintiff to successfully contend that the further collection of the taxes assessed against him should be enjoined, that the money already collected should be returned, and the assessments declared null and void, he must overcome the heavy burden imposed by Section 3653 of the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, § 3653, as follows: "* * * no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.", and Section 3772(a) thereof, which provides: "No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected until a claim for refund or credit has been duly filed with the Commissioner, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof."

Plaintiff contends that the statute permitting the deficiency assessments, without prior notice to him, with an opportunity to contest the assessments, is unconstitutional under the "Due Process" clause of the Constitution. It seems to me that this contention is fully answered by the following quotation from Phillips v. Commissioner, 283 U.S. 589, at page 595, 51 S.Ct. 608, 611, 75 L.Ed. 1289 et seq.:

"The right of the United States to collect its internal revenue by summary administrative proceedings has long been settled. Where, as here, adequate opportunity is afforded for a later judicial determination of the legal rights, summary proceedings to secure prompt performance of pecuniary obligations to the government have been consistently sustained. Compare Cheatham v. United States, 92 U.S. 85, 88, 89, 23 L.Ed. 561; Springer v. United States, 102 U.S. 586, 594, 26 L.Ed. 253; Hagar v. Reclamation District No. 108, 111 U.S. 701, 708, 709, 4 S.Ct. 663, 28 L.Ed. 569. Property rights must yield provisionally to governmental need. Thus, while protection of life and liberty from administrative action alleged to be illegal, may be obtained promptly by the writ of habeas corpus, United States v. Woo Jan, 245 U.S. 552, 38 S.Ct. 207, 62 L.Ed. 466. Ng Fung Ho v. White, 259 U.S. 276, 42 S.Ct. 492, 66 L.Ed. 938, the statutory prohibition of any `suit for the purpose of restraining the assessment or collection of any tax' postpones redress for the alleged invasion of property rights if the exaction is made under color of their offices by revenue officers charged with the general authority to assess and collect the revenue. Snyder v. Marks, 109 U.S. 189, 3 S.Ct. 157, 27 L.Ed. 901; Dodge v. Osborn, 240 U.S. 118, 36 S.Ct. 275, 60 L.Ed. 557; Graham v. Du Pont, 262 U.S. 234, 43 S.Ct. 567, 67 L.Ed. 965. This prohibition of injunctive relief is applicable in the case of summary proceedings against a transferee. Act of May 29, 1928, c. 852, Sec. 604, 45 Stat. 791, 873 26 U.S.C.A.Int. Rev. Acts, page 458. Proceedings more summary in character than that provided in Section 280, and involving less directly the obligation of the taxpayer, were sustained in Murray's Lessee v. Hoboken Land & Improvement Co., 18 How. 272, 15 L.Ed. 372. It is urged that the decision in the Murray Case was based upon the peculiar relationship of a collector of internal revenue to his government. The underlying principle in that case was not such relation, but the need of the government promptly to secure its revenues.

"Where only property rights are involved, mere postponement of the judicial enquiry is not a denial of due process, if the opportunity given for the ultimate judicial determination of the liability is adequate. Springer v. United States, 102 U.S. 586, 593, 26 L.Ed. 253; Scottish Union & National Ins. Co. v. Bowland, 196 U.S. 611, 631, 25 S.Ct. 345, 49 L.Ed. 619. Delay in the judicial determination of property rights is not uncommon where it is essential that governmental needs be immediately satisfied. For the protection of public health, a state may order the summary destruction of property by administrative authorities without antecedent notice or hearing. Compare North American Cold Storage Co. v. Chicago, 211 U.S. 306, 29 S.Ct. 101, 53 L.Ed. 195, 15 Ann.Cas. 276; Hutchinson v. Valdosta, 227 U.S. 303, 33 S.Ct. 290, 57 L.Ed. 520; Adams v. Milwaukee, 228 U.S. 572, 584, 33 S.Ct. 610, 57 L.Ed. 471. Because of the public necessity, the property of citizens may be summarily seized in war-time. Central Union Trust Co. v. Garvan, ...