JW Carter Music Co. v. Bass

• Decision Date: 15 June 1927
• Docket Number: No. 833.,833.
• Citation: 20 F.2d 390
• Parties: J. W. CARTER MUSIC CO. v. BASS, Collector of Internal Revenue.
• Court: U.S. District Court — Southern District of Texas

20 F.2d 390 (1927)

J. W. CARTER MUSIC CO. v. BASS, Collector of Internal Revenue.

No. 833.

District Court, S. D. Texas, at Houston.

June 15, 1927.

Andrews, Streetman, Logue & Mobley, of Houston, Tex., for plaintiff.

H. M. Holden, U. S. Dist. Atty., and Howell Ward, Asst. U. S. Atty., both of Houston, Tex., for defendant.

HUTCHESON, District Judge.

This is a suit at law, brought under the authority of and in accordance with the statutes of the United States allowing such suit, and the principles of the common law controlling same, against J. W. Bass, collector of internal revenue, to recover from him personally for sums collected by him and paid to him as taxes in excess of amounts actually due by plaintiff.

That such a suit can be maintained, that it is personal, and that it is controlled by the common-law principles of a suit in assumpsit on the money counts, except as modified by statute, is well established by the authorities. Sage v. United States, 250 U. S. 37, 39 S. Ct. 415, 63 L. Ed. 828; Smietanka v. Indiana Steel Co., 257 U. S. 4, 42 S. Ct. 1, 66 L. Ed. 99; International Paper Co. v. Burrill (D. C.) 260 F. 664; New York Life Ins. Co. v. Anderson (C. C. A.) 263 F. 527; Holmes, Federal Taxes (6th Ed.) 1547. Of such suits Holmes, supra, says: "Suits against collectors are brought on the theory of money had and received. In such suits the plaintiff may recover only such money as he is in equity entitled to, and as defendant is not entitled to retain." In the Anderson Case, supra, it is said: "That a taxpayer's suit of this sort is essentially an action of assumpsit for money had and received has been too long settled to admit of doubt. * * * Any assumpsit of this kind is of an equitable nature and of comparatively modern growth."

The case made here is simply this, as established by plaintiff and admitted by defendant: Plaintiff paid defendant, for the year 1920, $4,950.34 more than was due for that year. This payment was made to defendant upon his assertion to plaintiff that that amount was due, and upon his demand for payment, and plaintiff would not have paid it, except for the claim and demand. From this statement it follows, nothing else appearing, that from the standpoint of natural justice and equity defendant has taken and is withholding from plaintiff without right $4,950.34 of plaintiff's money.

Upon what theory, then, does the defendant refuse payment, and does he contest it here? Simply this: That though the defendant recognizes the injustice of the situation, that the United States should keep money which had been wrongfully exacted from plaintiff through him, and has endeavored to assist the taxpayer to obtain a refund, he is prevented from making such refund, and required to defend this suit, by a ruling from Washington that, "while there is no doubt that the opinion works a hardship on the taxpayer," they are of the opinion that plaintiff is not entitled to recover because of the fact that, after plaintiff had, on December 5, 1922, paid the money for which it sues, it did on October 6, 1923, execute an agreement in writing, which agreement they say was executed under the authority of, in accordance with, and has the effect ascribed to it by section 1312 of the act of 1921 (Comp. St. § 6371 4/5gg) and section 1106b of the act of 1926 (44 Stat. 113), as follows:

"Sec. 1312. That if after a determination and assessment in any case the taxpayer has without protest paid in whole any tax or penalty, or accepted any abatement, credit, or refund based on such determination and assessment, and an agreement is made in writing between the taxpayer and the Commissioner, with the approval of the Secretary, that such determination and assessment shall be final and conclusive, then (except upon a showing of fraud or malfeasance or misrepresentation of fact materially affecting the determination or assessment thus made) (1) the case shall not be reopened or the determination and assessment modified by any officer, employee, or agent of the United States, and (2) no suit, action, or proceeding to annul, modify, or set aside such determination or assessment shall be entertained by any court of the United States."

The agreement is as follows:

"This agreement, made this 6th day of October, 1923, under and in pursuance of section 1312 of the Revenue Act of 1921, by and between J. W. Carter Music Company, a taxpayer having its principal place of business at Houston, Texas (hereinafter referred to as the taxpayer), and the Commissioner of Internal Revenue (hereinafter referred to as the Commissioner) with the approval of the Secretary of the Treasury:

"Whereas, between the 24th day of July, 1918, and the 24th day of February, 1923, there was assessed against the taxpayer the sum of twenty-seven thousand nine hundred sixty-four dollars and eighty-six cents ($27,964.86) as the amount of taxes due the United States of America from the taxpayer on account of corporation income and profits tax for 1917 to 1920, inclusive; and

"Whereas, the taxpayer pursuant to such assessment between the twenty-fourth day of July, 1918, and the twenty-fourth day of February, 1923, paid the sum of twenty-seven thousand nine hundred sixty-four dollars and eighty-six cents ($27,964.86) as taxes due the United States of America on account of said corporation income and profits tax for 1917 to 1920, inclusive; and

"Whereas, there has been a determination by the Commissioner that the sum of twenty thousand three hundred twenty-three dollars and ten cents ($20,323.10) is the correct amount for which the taxpayer was liable on account of said corporation income and profits tax for 1917 to 1920, inclusive; and

"Whereas, the Commissioner has made a credit based on such determination and such assessment of the sum of seven thousand six hundred forty-one dollars and seventy-six cents ($7,641.76) against taxes due from the taxpayer on account of corporation income and profits taxes for 1917 to 1920, inclusive, and the taxpayer has accepted such credit:

"Now this agreement witnesseth that the taxpayer and the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, hereby mutually agree that such determination of the sum of twenty thousand three hundred and twenty-three dollars and ten cents ($20,323.10) as the correct amount of taxes for which the taxpayer was liable on account of said corporation income and profits tax for 1917 to 1920, incorporated, and such assessment as reduced by the amount credited as aforesaid shall be final and conclusive.

"In testimony whereof the parties to these presents have hereunto set their hands and seals the day and year first above written. J. W. Carter Music Company, Taxpayer, by J. W. Carter, President. D. H. Blair, Commissioner. Signed, sealed and delivered in the presence of G. W. Garvin. Approved Oct. 8, 1923. A. W. Mellon, Secretary."

The facts under which this payment was made and the agreement executed are that an audit of plaintiff's returns, made in 1921 at a time when plaintiff had paid one installment of the taxes, showed plaintiff to be...