Miller v. U.S.

Decision Date11 July 1974
Docket NumberNo. 911,D,911
Citation500 F.2d 1007
Parties74-2 USTC P 9581 Ned MILLER and Frances Miller, Plaintiffs-Appellants, v. The UNITED STATES of America, Defendant-Appellee. ocket 73-2756.
CourtU.S. Court of Appeals — Second Circuit

Leonard Feldman, New York City (Frederick & Goglio, Mineola, N.Y.), for plaintiffs-appellants.

Carolyn R. Just, Atty., Tax Div., Dept. of Justice (Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Bennet N. Hollander, Attys., Tax Div., Dept. of Justice, Washington, D.C., and Robert Morse, U.S. Atty., E.D.N.Y., of counsel), for defendant-appellee.

Before SMITH and TIMBERS, Circuit Judges, and TYLER, * District judge.

J. JOSEPH SMITH, Circuit Judge:

This is an appeal from an order of the United States District Court for the Eastern District of New York, Mark A. Constantino, Judge, dismissing taxpayers' refund action on the grounds that the statute of limitations had expired. 365 F.Supp. 383 (1973). Because we agree with the taxpayers that the Commissioner is precluded from pleading the statute of limitations because he inadvertently led them to believe that their filing deadline had been extended, we reverse.

The relevant facts are unusual, but not unique. Taxpayers are husband and wife who elected to pay a contested deficiency of almost $38,000 and then seek a refund from the Commissioner or the courts. Following a timely claim, the Service-- according to normal practice-- requested that the taxpayers waive a formal notice of disallowance. As the waiver form-- known in the trade as Form 2297-- clearly indicates, the effect of such an irrevocable waiver is to commence the two-year statute of limitations on refund actions. 1 26 U.S.C. 6532(a)(3).

Taxpayers apparently executed this form, for the Service's files contain a letter from taxpayers' attorneys dated November 7, 1966, which states:

In re: Ned and Frances Miller Claim for Refund-- Year 1957 Gentlemen: Enclosed herein please find Form 2297, waiver of statutory notification of claim disallowance, executed by the above named clients.

We must say 'apparently' because the Service has since misplaced the form. It is therefore forced to rely on the cover letter and consistent notations in its files to prove that the formal notice was waived.

Based on this circumstantial evidence the district court found that the waiver form had in fact been executed. While we recognize that the Commissioner has the burden of proving the affirmative defense of the statute of limitations, Fed.R.Civ.P. 8(c), and that here that burden is increased by his failure to produce the waiver form, we cannot say that the district court was 'clearly erroneous' in reasoning that the cover letter must have been accompanied by the form. 2 See, Daniel v. United States, 454 F.2d 1166, 1167 (6th Cir.), cert. denied, 409 U.S. 843, 93 S.Ct. 42, 34 L.Ed.2d 82 (1972); United States v. Ross, 368 F.2d 455, 457 (2d Cir. 1966).

Assuming then that the waiver was executed on or before November 7, 1966, the filing deadline for a timely claim would have been November 7, 1968. However the higher echelons in the Service apparently overlooked the cover letter and docket entries-- the form presumably having been misplaced-- for on May 20, 1968 the Service sent the taxpayers the very disallowance notice they had waived eighteen months before. That notice-- which was but a form letter-- was faithful to a different subsection of the statute of limitations in advising the taxpayers that they had two years from the date of the notice to file their refund action. 3 26 U.S.C. 6532(a)(1).

Thus the unnecessary disallowance notice apparently extended the filing deadline from November 7, 1968-- as calculated according to the waiver form-- to May 20, 1970. The taxpayers filed this action on June 20, 1969-- seven months after the original deadline, but eleven months before the new one.

The Commissioner, in arguing Under the Revenue Act of 1916, a compromise should be disregarded, stresses the general rule that a statute authorizing an action against the government must be strictly construed as a waiver of sovereign immunity. United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 85 L.Ed. 1058 (1941); Minnesota v. United States, 305 U.S. 382, 388, 59 S.Ct. 292, 83 L.Ed. 235 (1939); Hammond-Knowlton v. United States, 121 F.2d 192, 201-202 (2d Cir.), cert. denied, 314 U.S. 694, 62 S.Ct. 410, 86 L.Ed. 555 (1941). But see, Panella v. United States, 216 F.2d 622, 624 n. 3 (2d Cir. 1954) where then Judge Harlan noted that in the absence of specific congressional intent, the courts have vacillated between strict and liberal constructions of such statutes.

These cases, however, deal with the substantive nature of the authorization, and here there is no doubt that the taxpayers' refund action is authorized. 26 U.S.C. 7422. Nor is this case controlled by United States v. Michel, 282 U.S. 656, 658-660, 51 S.Ct. 284, 75 L.Ed. 598 (1931), where the Court held that the statute of limitations on tax actions must similarly be narrowly construed. See also, Gallion v. United States, 389 F.2d 522, 523-524 (5th Cir. 1968) (citing numerous cases involving strict application of the statute); Wallace v. United States, 142 F.2d 240, 242-243 (2d Cir.), cert. denied, 323 U.S. 712, 65 S.Ct. 37, 89 L.Ed. 573 (1944) (reluctantly following this 'niggardly rule'). Here the problem is not that there is one ambiguous statute that must be construed, but rather that there are two unambiguous subsections that appear to be equally controlling. That is, if we focus on the fact that the waiver was executed, 6532(a)(3) clearly requires that the taxpayers' action be dismissed. But if we focus on the equally undeniable fact that the Commissioner sent the taxpayers a formal disallowance notice, the more general rule of 6532(a)(1) applies and their action is timely.

The point, of course, is that these two subsections were intended to be mutually exclusive: And in the normal course of events, they are, as disallowance notices are not issued where a waiver has been excuted. But here-- through an oversight in the Commissioner's office-- both events occurred, and hence the problem remains as to which subsection applies.

Both the Commissioner and the court below rely on 6532(a)(4) and its attendant regulation, 301.6532-1(d), in arguing that the earlier date should control: 4

Any consideration, reconsideration, or other action with respect to a claim after the mailing . . . of a notice of disallowance or after the execution of a waiver . . . shall not extend the period for bringing suit . . ..

Again we must disagree. Rather it seems clear that this regulation-- in keeping with 6532 as a whole-- merely nullifies any informal reconsideration after a formal disallowance notice or waiver. Here there was no such reconsideration, but rather two equally formal events. Cf. Beardsley v. United States, 126 F.Supp. 775, 776-777 (D.Conn.1954).

Nor do we find any merit in the Commissioner's reliance on the line of cases holding that a taxpayer cannot extend the statute by filing successive claims. See Stratmore v. United States, 463 F.2d 1195, 1196-1197 (3d Cir. 1972); Einson-Freeman Co. v. Corwin, 112 F.2d 683, 684 (2d Cir.), cert. denied, 311 U.S. 693, 61 S.Ct. 75, 85 L.Ed. 449 (1940); Fajardo Sugar Growers Ass'n v. United States, 161 F.Supp. 912, 916 (S.D.N.Y.1958), aff'd per curiam, 264 F.2d 671 (2d Cir. 1959). Here, of course, it was not the taxpayers' unilateral filing of a second claim, but rather the Commissioner's error in sending the unnecessary disallowance notice that arguably extended the critical deadline.

Finally, we are faced with the somewhat more troublesome question of whether in any event such inadvertence can estop the government. Here we are not unmindful of the line of cases-- declining in force, but nevertheless still with us-- holding that the government is not estopped by an unauthorized act of one of its agents. Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 383-385, 68 S.Ct. 1, 92 L.Ed. 10 (1947); Wilber National Bank v. United States, 294 U.S. 120, 123-124, 55 S.Ct. 362, 79 L.Ed. 798 (1935); Yuma Water Ass'n v. Schlecht, 262 U.S. 138, 144, 43 S.Ct. 498, 67 L.Ed. 909 (1923); Utah Power & Light Co. v. United States, 243 U.S. 389, 408-409, 37 S.Ct. 387, 61 L.Ed. 791 (1917); Posey v. United States, 449 F.2d 228, 233-234 (5th Cir. 1971); Bornstein v. United States, 345 F.2d 558, 562-563, 170 Ct.Cl. 576 (1965); Walsonavich v. United States, 335 F.2d 96, 101 (3d Cir. 1964); Goldstein v. United States, 227 F.2d 1, 4 (8th Cir. 1955); United States v. Globe Indemnity Co., 94 F.2d 576, 578 (2d Cir.), cert. denied, 304 U.S. 575, 58 S.Ct. 1047, 82 L.Ed. 1538 (1938).

But while the issuance of the disallowance notice was obviously erroneous, we cannot say that it was 'unauthorized' or even that it was contrary to congressional intent. Rather we believe that the alternative subsections of 6532 demonstrate a flexible approach. As another court has held in a case where the Service similarly issued a disallowance notice after a waiver had been executed:

A judge must be careful not to hold the government estopped to set up the defense of limitations in situations where there is any suggestion of collusion, or in a way...

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