Mid-Continent Petroleum Corporation v. Alexander

• Decision Date: 15 June 1929
• Docket Number: No. 1039.,1039.
• Citation: 35 F.2d 43
• Court: U.S. District Court — Western District of Oklahoma
• Parties: MID-CONTINENT PETROLEUM CORPORATION v. ALEXANDER.

35 F.2d 43 (1929)

MID-CONTINENT PETROLEUM CORPORATION v. ALEXANDER.

No. 1039.

District Court, W. D. Oklahoma.

June 15, 1929.

J. C. Denton, R. H. Wills, J. H. Crocker, I. L. Lockewitz and H. M. Gray, all of Tulsa, Okl., for plaintiff.

Roy St. Lewis, United States District Attorney of Oklahoma City, Okl., for defendant.

VAUGHT, District Judge.

In this action the plaintiff prays that a temporary injunction issue against the defendant, individually and as Collector of Internal Revenue for the United States for the District of Oklahoma, enjoining and restraining the issuing and levying of distraint warrants against the plaintiff and its property and enjoining and restraining defendant from selling or attempting to sell plaintiff's property or any part thereof.

The bill alleges that the defendant, Alexander, is Collector of Internal Revenue for the United States for the District of Oklahoma; that the plaintiff, the Mid-Continent Petroleum Corporation is the legal successor of Cosden & Co., a Delaware corporation, the name Cosden & Co. having been duly and regularly changed to that of Mid-Continent Petroleum Corporation; that Cosden Oil & Gas Company is a corporation of the state of Oklahoma duly incorporated prior to the first of January 1922, and now in existence and doing business; that said Cosden Oil & Gas Company is a subsidiary of the Mid-Continent Petroleum Corporation, formerly Cosden & Co.; that said Cosden & Co., during the year 1922 and at all times thereafter owned all, or practically all, of the stock of said Cosden Oil & Gas Company and still owns the same under the name of this plaintiff, Mid-Continent Petroleum Corporation; that the Burbank Oil Company was a Maryland corporation incorporated under the laws of Maryland; and that on or about the 16th day of December, 1922, one J. S. Cosden was the owner of all of the stock of said Burbank Oil Company; that after the 10th of January, 1924, the Burbank Oil Company filed its corporation income tax return for the fiscal year beginning October 1, 1922, and ending September 30, 1923, on United States Internal Revenue form 1120-a; that in said return among other things the said Burbank Oil Company reported first "profit from sale of real estate, stocks, bonds and other capital assets" the sum of $252,816.03; that in said return the said Burbank Oil Company computed the tax for which it was liable for the aforesaid taxable period at the sum of $35,085.33 of which amount said Burbank Oil Company has paid the sum of $17,542.67; and that the transaction in connection with the above referred to $252,816.03 is substantially as follows:

That on or about the 16th day of December, 1922, the Burbank Oil Company transferred all of its properties, consisting of certain leases, leasehold estates, equipment, and so forth to the Cosden Oil & Gas Company for 35,170 shares of the stock of Cosden & Co.; that at the time of the aforesaid transaction J. S. Cosden was the owner of the stock of the Burbank Oil Company, and, with the knowledge, consent, and at the direction of the said Burbank Oil Company, the aforesaid 36,170 shares of stock of Cosden & Co., were turned over and delivered to the said J. S. Cosden; that thereafter and prior to the 30th day of September, 1923, J. S. Cosden sold and disposed of the aforesaid 36,170 shares of stock; that immediately thereafter the Burbank Oil Company was legally dissolved; that the aforesaid J. S. Cosden in his individual federal tax return for the year 1923 reported a liability and paid a tax the exact amount thereof being unknown to plaintiff, upon the profit or profits realized by him from the sale of the aforesaid 36,170 shares of stock.

The plaintiff further states that the report and return of the Burbank Oil Company of the above-mentioned $252,816.03 in its above-mentioned and described return for the fiscal year beginning October 1, 1922 and ending September 30, 1923, as "profit from sale of real estate, stocks, bonds and other capital assets" was and is erroneous; that said Burbank Oil Company was not legally liable for any tax upon the aforesaid $252,816.03; that said Burbank Oil Company was not legally liable for any tax in connection with the above-mentioned and described transfer of its properties to the Cosden Oil & Gas Company; that the said Burbank Oil Company was not legally liable for any tax in connection with the above-mentioned and described 36,170 shares of stock of Cosden & Co., and that, in so far as the aforesaid tax return of the Burbank Oil Company for the fiscal year beginning October 1, 1922, and ending September 30, 1923 includes a tax upon the aforesaid $252,816.03, the same is and was erroneous; that the amount of tax or taxes for which the Burbank Oil Company was legally liable for the fiscal year beginning October 1, 1922, and ending September 30, 1923, is and was the sum of $3,483.22, which amount the said Burbank Oil Company has paid, and in addition thereto has paid the sum of $14,059.34 for taxes for said year, which it was not legally liable to pay and which was illegally, wrongfully, and erroneously assessed against it. All the foregoing allegations are upon information and belief.

The plaintiff further states that some time after the 15th of January, 1929, the United States Commissioner of Internal Revenue arbitrarily, wrongfully, and illegally determined that the plaintiff was liable in law or in equity as transferee of the Burbank Oil Company for the sum of $22,676.78, being the above-mentioned and described deficiency of $17,542.67 of income tax of the Burbank Oil Company for the year 1923, which is claimed by said Commissioner that said Burbank Oil Company owes, together with interest thereon to March 16, 1929, in the sum of $5,134.11, making a total of $22,676.78, and that some time after the 15th day of January, 1929, the said United States Commissioner of Internal Revenue arbitrarily, wrongfully, and illegally assessed against or imposed upon or undertook to assess against or impose upon the said plaintiff the aforesaid liability in the sum of $22,676.78; that prior to the aforesaid alleged determination and assessment of liability of or against said plaintiff said plaintiff received notice of the intention of the aforesaid Commissioner of Internal Revenue to make the same, and that said plaintiff failed to avail itself of the privilege of a hearing in connection therewith before the United States Board of Tax Appeals, and that the time for a hearing before said Board of Tax Appeals has long since expired; that the aforesaid determination and assessment of liability of and against the plaintiff has been entered in the office of the defendant as Collector of Internal Revenue for the United States for the District of Oklahoma, and the payment of the amount of the aforesaid alleged liability and assessment of $22,676.78 has been demanded of the plaintiff by the United States Commissioner of Internal Revenue and by the defendant, A. C. Alexander, purporting to act as Collector of Internal Revenue for the United States for the District of Oklahoma; and that the said United States Commissioner of Internal Revenue has issued and turned over to the defendant, A. C. Alexander, as such Collector as aforesaid, a distraining warrant or warrants for the collection from said plaintiff of the aforesaid liability and assessment of $22,676.78; and that said defendant, A. C. Alexander, as such Collector aforesaid, is threatening to, and, unless enjoined and restrained, will under and by virtue of the aforesaid distraint warrant or warrants, levy upon plaintiff's property and sell it in satisfaction of the aforesaid liability and assessment.

The bill further alleges that in determining the above-mentioned and described liability, and in assessing the same against the said plaintiff, the United States Commissioner of Internal Revenue purported to act and did, in fact, act solely and exclusively under and by virtue of section 280 of the United States Revenue Act of 1926 (26 USCA ß 1069), which is and was the first and only law authorizing or attempting to authorize the United States Commissioner of Internal Revenue to determine, assess, and collect a liability at law or in equity of a...