Milliken v. Gill

• Decision Date: 05 April 1954
• Docket Number: No. 6748.,6748.
• Citation: 211 F.2d 869
• Parties: MILLIKEN et al. v. GILL, Director of Internal Revenue et al.
• Court: U.S. Court of Appeals — Fourth Circuit

211 F.2d 869 (1954)

MILLIKEN et al. v. GILL, Director of Internal Revenue et al.

No. 6748.

United States Court of Appeals, Fourth Circuit.

Argued March 19, 1954.

Decided April 5, 1954.

Kenneth D. Thomas, Hickory, N. C., for appellants.

Frederick G. Rita, Sp. Asst. to the Atty. Gen. (H. Brian Holland, Asst. Atty. Gen., Ellis N. Slack, Sp. Asst. to the Atty. Gen., and Bryce R. Holt, U. S. Atty., Greensboro, N. C., on the brief), for appellees.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

PARKER, Chief Judge.

This is an appeal by Mitchell S. Milliken and his wife Dorothy Milliken from an order dissolving a temporary restraining order and dismissing a suit instituted to enjoin the sale of certain personal property levied upon to collect a jeopardy assessment of federal income taxes. The court held that the suit was one to restrain the collection of internal revenue taxes within the prohibition of 26 U.S.C. § 3653 and that there were no such special circumstances as would bring it within the doctrine laid down by this court in Shelton v. Gill, 4 Cir., 202 F.2d 503. We think that this was correct.

The facts as shown by the pleadings and affidavits filed with the District Court are that on June 11, 1952 a jeopardy assessment on account of a deficiency in income taxes was made against appellants amounting with penalties and interest to the sum of $82,625 and on June 16, 1952 the assessment was levied on property of the appellants. On August 4, 1952 the deficiency with penalties and interest was determined to be $105,216.55, and appellants on October 27, 1952 filed petitions for review of these assessments with the Tax Court of the United States, where the petitions are still pending.

Following the levy upon the property of appellants the Director of Internal Revenue permitted them to continue the operation of coin operated music and amusement machines, cigarette machines and penny scales from which the chief portion of their income was derived. For a period of about three months, agents of the Director, holding keys to the machines, collected therefrom a sum in excess of $3,300 which was applied on tax liability. Since September 26, 1952, appellants have been allowed to operate the business with a view of keeping it a going concern pending the final determination of tax liability in the Tax Court. The Director offered to accept from appellants bond in the sum of $60,000 for the release of personal property from the lien of the attachment pending action by the Tax Court, but appellants were unable to give this bond. On September 27, he agreed that he would submit to the Commissioner a proposal of appellants to pay $30,000 for release of a part of the property and did submit the proposal which was accepted in January 1953, but appellants were unable to comply, because in the meantime the State of North Carolina had perfected liens upon the property which rendered it impossible to secure a loan which had been promised them by a bank in connection with the proposal submitted.

On April 1, 1953, the Director seized under the levy of the jeopardy assessment certain used music and amusement coin operated machines, which were not in operation, having an estimated value of $1,700, and three automobiles, having an estimated value of $4,200, one or more of which belonged to Mrs. Milliken. The machines in operation and two trucks used in operating them were not seized. The Director was proceeding with the sale of the property seized when he was stopped by the restraining order issued herein. In dissolving the restraining order and dismissing the suit the judge below quotes the affidavit of the Director that the total value of the property proposed to be sold will not exceed $6,000, whereas the joint liability of appellants for the single year 1950, where no transferee liability is involved, exceeds $12,000, of which only $1,259.97 has been collected.

There are contentions on the part of appellants that they do not owe the tax or certainly so large an amount as has been assessed against them, and that the proceedings against them have been inspired by their enemies, and on the part of the Director that they owe the tax and have refused to cooperate with the tax agents in determining the correct amount of their liability. We need not go into these contentions, however, as we think that without regard to what the facts there may be, the action of the trial judge was correct.

It is expressly provided by statute that, with certain exceptions not here relevant "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court". 26 U.S.C. § 3653(a). There is the same prohibition on suit with respect to restraining the assessment or collection of "the liability, at law or in equity, of a transferee of property of a taxpayer". 26 U.S.C. § 3653(b). Subsection (a) of this section of the Internal Revenue Code is derived from R.S. § 3224, the underlying philosophy of which is set forth in, In re State Railroad Tax Cases, 92 U.S. 575, 613, 23 L.Ed. 663, where the Supreme Court said:

"The government of the United States has provided, both in the customs and in the internal revenue, a complete system of corrective justice in regard to all taxes imposed by the general government, which in both branches is founded upon the idea of appeals within the executive departments. If the party aggrieved does not obtain satisfaction in this mode, there are provisions for recovering the tax after it has been paid, by suit against the collecting officer. But there is no place in this system for an application to a court of justice until after the money is paid.

"That there might be no misunderstanding of the universality of this principle, it was expressly enacted, in 1867, that `no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.\' Rev. Stat. sect. 3224. And though this was intended to apply alone to taxes levied by the United States, it shows the sense of Congress of the evils to be feared if courts of justice could, in any case, interfere with the process of collecting the taxes on which the government depends for its continued existence. It is a wise policy. It is founded in the simple philosophy derived from the experience of ages, that the payment of taxes has to be enforced by summary and stringent means against a reluctant and often adverse sentiment; and to do this successfully, other instrumentalities and other modes of procedure are necessary, than those which belong to courts of justice."

The same philosophy has been applied with respect to suits to restrain the assessment or collection of transferee liability. In Phillips v. Commissioner of Internal Revenue, 283 U.S. 589, 595-596, 51 S.Ct. 608, 611, 75 L.Ed. 1289, the Supreme Court, in holding that, because of the statutory provision, no such suits could be maintained, said:

"The right of the United States to collect its internal revenue by summary administrative proceedings has long been settled. Where, as here, adequate opportunity is afforded for a later judicial determination of the legal rights, summary proceedings to secure prompt performance of pecuniary obligations to the government have been consistently sustained. Compare Cheatham v. United States, 92 U.S. 85, 88-89, 23 L.Ed. 561; Springer v. United States, 102 U.S. 586, 594, 26 L. Ed. 253; Hagar v. Reclamation District No. 108, 111 U.S. 701, 708-709, 4 S.Ct. 663, 28 L.Ed. 569. Property rights must yield provisionally to governmental need. Thus, while protection of life and liberty from

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