Ney v. United States

• Decision Date: 27 May 1940
• Citation: 33 F. Supp. 554
• Court: U.S. District Court — Western District of Virginia
• Parties: NEY et al. v. UNITED STATES.

33 F. Supp. 554

NEY et al. v. UNITED STATES.

District Court, W. D. Virginia, at Harrisonburg.

May 27, 1940.

Hamilton Haas, of Harrisonburg, for plaintiffs.

Frank S. Tavenner, Jr., U. S. Atty., of Woodstock, for defendant.

PAUL, District Judge.

This action is one for the refund of taxes paid by the plaintiff under the provisions of the Agricultural Adjustment Act of 1933, 7 U.S.C.A. § 601 et seq., which subsequent to the payment of the taxes was held unconstitutional. The particular tax involved is what is commonly referred to as the floor stock tax imposed upon merchants and assessed upon goods of cotton content held by them for sale on August 1, 1933, the effective date of the Agricultural Adjustment Act. The amount involved is $681.11.

Following the holding of the unconstitutionality of the Agricultural Adjustment Act, provision was made by Act of Congress for a refund of the taxes collected thereunder, with the provision that no refund should be granted unless the claimant established that he himself had borne the burden of the tax and had not been relieved thereof and had not shifted the burden directly or indirectly to some other person. The plaintiffs here are proprietors of a retail department store and, as applied to this particular case, the burden imposed upon them in order to recover the tax paid was to show that they had absorbed the amount of the tax and had not passed it on to customers and purchasers of their store by an increase of prices or otherwise.

The statute, Section 903 of the Revenue Act of 1936, 49 Statutes at Large, page 1747, 7 U.S.C.A. § 645, provides in part that, "No refund shall be made or allowed of any amount paid by or collected from any person as tax under the Agricultural Adjustment Act this chapter unless, after the enactment of this Act June 22, 1936, and prior to July 1, 1937, a claim for refund has been filed by such person in accordance with regulations prescribed by the Commissioner with the approval of the Secretary. All evidence relied upon in support of such claim shall be clearly set forth under oath."

The plaintiffs made due application for the refund of the tax paid and submitted to the commissioner affidavits of various persons connected with their business, each of which affidavits contained a statement that to the knowledge of the affiant no increase in prices had been made in the store upon any articles of merchandise subject to the tax and that the burden of the tax had not been shifted to the consumer in any way. The claim was rejected apparently for the reason that the commissioner did not consider that the evidence was sufficient and, in fact, he requested the claimant to establish these facts by their records. This supporting evidence was not furnished, although it may be said that the reasons why it was not do not indicate any disinclination on the part of the plaintiffs to furnish all of the evidence they could; but was due to other causes which, in the opinion of the court, have little or no bearing on the merits of the claim.

Following the final rejection of the claim for refund, this action was instituted to recover the amount of the tax paid. The defendant submitted its motion to dismiss the action on the ground that the allegations of the complaint showed that the court was without jurisdiction to maintain the action, and this contention has its basis as follows:

It will be noted that the statute previously quoted relating to refunds provides that when the claim for refund is filed before the commissioner, "all evidence relied upon in support of such claim shall be clearly set forth under oath".

It is contended that this last-quoted provision intended to require that on any claim for refund, the claimant must set forth under oath all of the evidence upon which he relied. Emphasis is placed on the word "all", it being contended that a plaintiff must submit all of the evidence which was available to him or which he could in any way produce to support his claim; that the submission of all such evidence before the commissioner was a condition precedent to the allowance of any claim for refund; that this being an essential condition to the perfection or adequacy of any claim for refund, no suit can be maintained in court unless the complaint alleges as an essential part of its right of action that it did present to the commissioner all available evidence bearing on its right to refund. It is further contended that in this action in court, the plaintiff is limited in its production of evidence to the same evidence that was previously submitted to the commissioner. The plaintiffs not having alleged that they had submitted all of the evidence at their command to the commissioner, it is contended that the complaint is subject to a motion to dismiss because of its failure to allege essential facts. The court took under consideration the motion to dismiss and directed that the trial of the case proceed. In the course of the trial, the defendant made timely objection to all evidence submitted by the plaintiffs except the evidence which had previously been submitted to the commissioner. These objections, the court also took under advisement.

I am of opinion that the motion to dismiss is not well taken. It is contended by the plaintiffs that the provision of the statute is not intended to require that in making application for a refund before the Commissioner of Internal Revenue the plaintiff, in order to have his claim considered, must submit all of the evidence which is in any way available to him or which he may be able to produce by diligent search, but means...