John J. Casale, Inc. v. Pedrick

• Decision Date: 24 June 1947
• Citation: 72 F. Supp. 848
• Parties: JOHN J. CASALE, Inc., v. PEDRICK.
• Court: U.S. District Court — Southern District of New York

72 F. Supp. 848

JOHN J. CASALE, Inc., v. PEDRICK.

District Court, S. D. New York.

June 24, 1947.

Charles E. Cotterill, of New York City, for plaintiff.

John F. X. McGohey and Jay Slonim, both of New York City, for defendant.

BONDY, District Judge.

Plaintiff brought this suit in equity to enjoin defendant from assessing against it tax penalties for failure to comply with the provisions of Section 620(a) of the Revenue Act of 1942, 26 U.S.C.A.Int.Rev. Code, § 3475.

This section imposes a tax equal to three per cent. of the amount paid to a person engaged in the business of transporting property for hire by motor vehicle on the person making such payment, to be collected by the person receiving such payment, who is required to register with the collector and monthly to make a return and pay the taxes so collected to the collector.

Under 26 U.S.C.A. Internal Revenue Code, § 1718(c), any person who wilfully fails to pay, collect or truthfully account for and pay over the tax on the transportation of property, is liable in addition to other penalties to a penalty of the amount of the tax, not paid, collected or accounted for and paid over, to be assessed and collected in the same manner as taxes are assessed and collected.

At the close of plaintiff's case defendant moved to dismiss the complaint and rested. The facts are not in dispute. The issue presented by the record is whether or not plaintiff is engaged in the business of transporting property for hire by motor vehicle.

Plaintiff is engaged in the business of leasing trucks for carriage of freight, most of them without drivers. As to these there is no claim that they are used by plaintiff in the business of transporting property for hire. Such a claim, however, is made as to about twelve and one-half per cent. of its very large number of trucks which are leased by plaintiff with drivers supplied by it. Over all its trucks it exercises a control which it deems necessary in order to safeguard them against improper use.

Irrespective of whether or not plaintiff is engaged under any of these circumstances in the business of transporting property for hire, the complaint must be dismissed for lack of jurisdiction.

Section 267 of the Judicial Code, 28 U. S.C.A. § 384, provides: "Suits in equity shall not be sustained in any court of the United States in any case where a plain, adequate, and complete remedy may be had at law." 26 U.S.C.A. Internal Revenue Code, § 3653(a) provides that, with certain exceptions not applicable here, "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court."

It is well established that a suit will not lie to restrain the collection of a tax on the ground of its illegality because such a suit would interfere with the collection of revenues essential for the maintenance of the government. However, "in cases where complainant shows that in addition to the illegality of an exaction in the guise of a tax there exist special and extraordinary circumstances sufficient to bring the case within some acknowledged head of equity jurisprudence, a suit may be maintained to enjoin the collector." Miller v. Standard Nut Margarine Co., 284 U.S. 498, 509, 52 S.Ct. 260, 263, 76 L.Ed. 422. See Concentrate Mfg. Corporation v. Higgins, 2 Cir., 90 F.2d 439, 441, certiorari denied 302 U.S. 714, 58 S.Ct. 33, 82 L.Ed. 551.

Neither the complaint nor the record discloses any special or extraordinary circumstances to justify resort to equity. Plaintiff could have demanded of the users of its trucks with drivers the payment of the tax, and could have reported any refusal to comply with the demand to the collector for direct assessments against the users. Treasury Regulations 113, Section 143.55. It was not under any obligation to enforce by legal process the collection of the taxes. In any case the law affords plaintiff an opportunity for a judicial review of the legality of the administrative act of the Commissioner in assessing the tax, by the payment of the tax or any tax penalty assessed for noncollection thereof, and by instituting an action to recover the same after denial of its claim for refund. 26 U.S.C.A.Int.Rev.Code, §§ 3770(a) (1), 3471(a), 3313, 3772(a) (2); California v. Latimer, 305 U.S. 255, 261, 59 S.Ct. 166, 83 L.Ed. 159.

Substantially every contention plaintiff has made in order to sustain its action for an injunction was considered in Reams v. Vrooman-Fehn Printing Co., 6 Cir., 140 F.2d 237. As the court stated, the Social Security Act, 26 U.S.C.A.Int.Rev.Code, § 1401, therein involved required the employer of the taxpayer to collect the tax of the employee by deducting the amount from his wages when paid and provided that the employer should be liable for the payment to the collector of taxes so withheld. The plaintiff did not collect taxes from its alleged employees to be paid by it to the government. The Commissioner thereupon assessed under 26 U.S.C.A. Internal Revenue Code, § 2707(a), applicable to the Social Security Act, which section is identical with Internal Revenue Code Section 1718(c), supra, under which penalties were assessed herein, penalties of the amount of the tax not collected or paid. Plaintiff therein sought to enjoin the collection of such assessments urging the existence of extraordinary and unusual circumstances. The court denied such relief for lack of jurisdiction.

Section 1718(c), supra, expressly provides that penalties for failure to collect the tax are to be assessed and collected in the same manner as taxes are assessed and collected.

Any person required to pay to the collector a tax on the transportation of property is a taxpayer and this is so though he must first collect such tax from another taxpayer. Cf. Reams v. Vrooman-Fehn Printing Co., supra, 6 Cir., 140 F.2d at page...