Pennsylvania Cement Co. v. Bradley Contracting Co.

• Decision Date: 07 July 1920
• Citation: 274 F. 1003
• Parties: PENNSYLVANIA CEMENT CO. v. BRADLEY CONTRACTING CO.
• Court: U.S. District Court — Southern District of New York

274 F. 1003

PENNSYLVANIA CEMENT CO. v. BRADLEY CONTRACTING CO.

United States District Court, S.D. New York.

July 7, 1920

[Copyrighted Material Omitted]

Hughes Rounds, Schurman & Dwight, of New York City, for Penn Cement co.

Thomas Henry Keogh, of New York City, for Frank, James, and William Bradley.

Thomas Henry Keogh, Frederick L. C. Keating, and Thomas F. Conway all of New York City, for Bradley Contracting Co.

Frederick L. C. Keating, of New York City, pro se.

Leo Oppenheimer, S. H. Kaufman, and Richard E. Dwight, all of New York City, for receivers.

Charles D. Newton, Atty. Gen., for the State of New York.

John F. Collins, Asst. Corp. Counsel, of New York City, John P. O'Brien, Corp. Counsel, of Brooklyn, William P. Burr, Corp. Counsel, of New York City, and Joseph A. Storer, Asst. Corp. Counsel, for city of New York.

Francis G. Caffey, U.S. Atty., of New York City, for Commissioner and Collector of Internal Revenue.

C. J. Vert, of Plattsburg, N.Y., for First Nat. Bank of Plattsburg.

Olcott, Bonynge, McManus & Ernst, Irvine L. Ernst, Guthrie B. Plante, Selden Bacon, and Saul Myers, all of New York City, for Irving Nat. Bank.

Olcott, Bonynge, McManus & Ernst, Irving L. Ernst, and George C. De Lacy, all of New York City, for Irving Trust Co.

Olcott, Bonynge, McManus & Ernst and Irving L. Ernst, all of New York City, for American Surety Co.

Shearman & Sterling, of New York City, for Standard Gaslight Co. of City of New York and New Amsterdam Gas Co.

William W. Corlett, of New York City, for American Bridge Co.

House, Grossman & Vorhaus, of New York City, for Louis J. Levy and High Grade Holding Corporation.

Seligsberg, Lewis & Strouse and Irving L. Ernst, all of New York City, for Djorup & McArdle.

Katz & Sommerich, of New York City, for Lena Keller.

Thomas E. O'Brien, of New York City, for Thomas W. Conway.

Wm. P. Maloney, of New York City, pro se.

Arthur M. Lee, for Fannie Schlesinger.

Oscar Englander, of New York City, for Francis Hunter.

Timothy A. Leary and Henry T. Beekman, both of New York City, for Henry T. Beekman.

Pressinger & Newcombe, of New York City, for Robert W. Haff Realty Corporation.

Leonard Klaber, of New York City, for Thomas Hassett.

Albert L. Phillips, of New York City, for Clarke Bros.

Saul S. Myers, of New York City, for National Surety Co. and Farson Bros., Inc.

Frank Brevillier, for Milton Schnaier.

Samuel Riker, Jr., of New York City, for estate of Lavinia A Burden.

Ernst, Fox & Cane, of New York City, for Matilda Hoykendorf.

Blandy, Mooney & Shipman, of New York City, for Grand Delancey Co.

Max Sheinart, of New York City, for James S. and Daniel L. Reardon.

HOUGH, Circuit Judge (after stating the facts as above).

Perhaps the shortest way of stating the problem before the court is this: What reason is presented forbidding the present declaration of a dividend? I think no reason exists except the attitude of the United States, which has presented no claim and refuses to declare its intentions (if any it has) in the premises.

The relations of receivers, executors and other similar fiduciaries toward income taxes levied under the Constitution as affected by recent amendments is not a subject as yet much mooted in the courts.

One must regard first the taxing statute itself, and, second, any general legislation directed against or personally affecting the fiduciaries.

As to the statute itself, it must be admitted that in one sense the United States has no present claim-- i.e., no presently provable claim--against these receivers, if the proceeds of the judgment against the city of New York are to be regarded as income of 1920. This necessarily follows from the fact that an income tax is not upon any specific sum of money, but is a personal tax, measured by sums of money received (or possibly accrued) to the person taxed during a certain period-- i.e., the calendar year-- and the year 1920 is not expired.

Analogies are often misleading, yet I cannot but think the analogy of bankruptcy instructive. In bankruptcy it is clear law that a claim not due is not provable, and that a discharge is valid only against provable debts. Therefore, without having recourse to any of the statutes giving preference or priority to the United States, there is no claim presently existing on the part of the taxing power. It is therefore difficult for me to see how this court can at present consider the validity of a claim that does not legally exist.

The statute directed against fiduciaries to insure their preservation of the rights of the United States date back to the eighteenth century, and have been interpreted in numerous cases, none of which presents facts similar to the present. See Gould and Tucker's Notes to sections 3466, 3467, U.S. Rev. Stat., and notes in Comp. Stat. Secs. 6372, 6373.

My inference from these statutes and the decisions under them is that, while receivers are not mentioned by name or title they are within the purview of the act. It is of course possible to read these statutes so narrowly as to say that they speak always of 'debts due to the United States,' and that, therefore, if a fund be distributed when there is no debt actually due to the United States, the custodian of the fund cannot be held to a personal liability when the debt subsequently arises. But I cannot so read the statutes. There has been a great deal of judicial juggling with such words as 'due' and 'payable,' and in a certain inchoate sense an income tax is due as soon as there is an income; but the tax is 'solvendum in futuro,' and it becomes payable only when the solution or assessment is accomplished. A fiduciary who hastened distribution before the due date of a tax,...