Helvering v. Ethel D. Co., 6038.

• Decision Date: 09 April 1934
• Docket Number: No. 6038.,6038.
• Citation: 63 App. DC 157,70 F.2d 761
• Parties: HELVERING, Commissioner of Internal Revenue, v. ETHEL D. CO.
• Court: U.S. Court of Appeals — District of Columbia Circuit

63 App. DC 157, 70 F.2d 761 (1934)

HELVERING, Commissioner of Internal Revenue, v. ETHEL D. CO.

No. 6038.

Court of Appeals of the District of Columbia.

Argued March 12, 1934.

Decided April 9, 1934.

Sewall Key, E. E. Angevine, E. Barrett Prettyman, Shelby S. Faulkner, F. R. Shearer, and Milford S. Zimmerman, all of Washington, D. C., for petitioner.

Robert A. Littleton, of Washington, D. C., and M. K. Wild, of Fresno, Cal., for respondent.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.

GRONER, Associate Justice.

Ethel D. Company is a corporation of California with its principal place of business in San Francisco. It filed in due time its income and profits tax return for the year 1919 in the office of the United States collector at San Francisco. The Commissioner of Internal Revenue determined a deficiency, and on September 26, 1927, duly mailed respondent a notice of the same. The statutory period of limitations expired on March 6, 1925. The Commissioner insists that, notwithstanding the period of limitations had run, the tax was assessable because an unlimited waiver had been executed by respondent April 1, 1925. Respondent did not deny the execution of such a waiver, but defended on the ground that in the same month in 1925, but subsequent to the April 1st waiver, and at the request of the Commissioner, it executed a second waiver which superseded the first, and in which it agreed that any additional tax to be assessed on account of its 1919 return should be assessed prior to December 31, 1925. After the deficiency assessment, respondent appealed to the Board of Tax Appeals. The Board found as a fact that the intention of the parties (respondent and Commissioner) in executing the second waiver was to substitute a definite period of limitation for an indefinite one, and consequently held the tax barred by the statute.

The Commissioner has filed a petition for review, and says that the Board erred in deciding that the unlimited waiver was abrogated by the filing of the limited waiver, and likewise erred in deciding that the Commissioner intended that the second waiver should be substituted for the first.

For the sake of clarification, we quote from the opinion of the Board as follows:

"The statute of limitations started to run on March 6, 1920, and under the provisions of section 250 (d) of the Revenue Act of 1918 (40 Stat. 1083) the respondent petitioner here had five years from that date to assess and collect any additional tax found to be due. The statutory period expired on March 6, 1925. Thereafter, on April 1, 1925, the petitioner respondent here filed an unlimited waiver of the statute of limitations, which, being prior to the passage of the Revenue Act of 1926 (44 Stat. 9) was effective to revive and extend the statute which had theretofore tolled. Stange v. U. S., 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed. 335; Wells Brothers Co. of Ill. et al. v. Com'r, 16 B. T. A. 79; Pittsburgh Union Stockyards Co. v. Com'r, 16 B. T. A. 139. An unlimited waiver extends the statutory period for a reasonable time, or until termination by either party upon reasonable notice. Wirt Franklin v. Com'r, 7 B. T. A. 636; Greylock Mills v. Lucas, Com'r, 9 B. T. A. 1281, affirmed (C. C. A.) 31 F.(2d) 655, certiorari denied 280 U. S. 566, 50 S. Ct. 25, 74 L. Ed. 619; William S. Doig, Inc., v. Com'r, 13 B. T. A. 256; Corn Products Refining Co. v. Com'r, 22 B. T. A. 605; and Herman Frost v. Com'r, 23 B. T. A. 411. The second waiver, which was requested immediately upon receipt of the first, fixed a definite date for the termination of the statutory period, and in our opinion was a reasonable and sufficient notice to effect a termination of the unlimited waiver as of that date. If the first waiver remained in effect after the execution of the second, the latter could have had no meaning. Since the respondent required the second waiver after his receipt of the first, it is clear that he must have intended that it should be substituted for the unlimited waiver, which we think was abrogated by the request for and the execution of the second waiver. The statute of limitations had run on September 26, 1927, and the respondent was barred from making any further determination with reference to petitioner's tax liability."

The point in the case is confined to the single issue whether the Board was correct in holding that the making and acceptance of the second waiver abrogated the first. The answer, as we think, depends upon the intention of the parties at the time of the event in question.

The Supreme Court has decided that a waiver is not a contract, and that the provision requiring the Commissioner's signature was inserted for purely administrative purposes and not to convert into a contract what is essentially a voluntary unilateral waiver of defense by a taxpayer. Stange v. U. S., 282 U. S. 270, 276, 51 S. Ct. 145, 75 L. Ed. 335. But notwithstanding this holding, it is perfectly obvious that, if a taxpayer executes a waiver and for some reason it is not satisfactory to the Commissioner, who thereafter requests and obtains a new and different waiver but concerning the same subject-matter, he would not later be heard to claim any rights under the first. A waiver is generally defined to be the surrender or relinquishment of an existing right. It is an agreement to forego some advantage which the party waiving might at his option have demanded, but, in order to be effective, there must be reasonable knowledge of all the facts and rights intended to be waived before they can be said to have been waived. Here, as we have seen, the Board has found that both the Commissioner and respondent intended that the second or limited waiver should supersede and take the place of the first or unlimited waiver, and, if the Board's finding in this respect can be sustained by any evidence, the point at issue is foreclosed against the government, for it is now well settled that findings of fact of the Board when supported by evidence are conclusive. Phillips v. Commissioner, 283 U. S. 589, 600, 51 S. Ct. 608, 75 L. Ed. 1289; Henderson Iron Works & Supply Co. v. Blair, 58 App. D. C. 114, 25 F.(2d) 538.

We proceed, therefore, to examine the record to determine if there is any evidence upon which to sustain the finding by the Board that the second waiver "was requested immediately upon receipt of the first" and was intended to be substituted for the first.

The evidence shows that the first waiver dated April 1, 1925, was received at the office of the collector...