Shults Bread Co. v. COMMISSIONER OF INTERNAL REVENUE
| Citation | 10 BTA 268 |
| Decision Date | 26 January 1928 |
| Docket Number | Docket No. 20652,20653. |
| Parties | SHULTS BREAD CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
William C. Sullivan, Esq., R. F. Garrity, Esq., and Leon F. Cooper, Esq., for the petitioner.
P. C. Alexander, Esq., and Arthur H. Murray, Esq., for the respondent.
These are proceedings for the redetermination of deficiencies in income and profits taxes as follows:
Calendar year 1918 ___________________________________ $280,642.19
Period during January 1, 1919, to February 28, 1919 __ 19,341.89
Fiscal year ended February 29, 1920 __________________ 71,954.64
Fiscal year ended February 28, 1921 __________________ 104,711.73
___________
Total ____________________________________________ 476,650.45
The Commissioner also found deficiencies for the years 1910 and 1911 in the respective amounts of $143.04 and $426.71, and over-assessments aggregating $22,833.23 for the years 1912 to 1917, inclusive.
Petitioner moved the Board to vacate an order extending the time for filing respondent's answer, and for judgment by reason of respondent's failure to answer the petition within the time set by the rules of the Board.
FINDINGS OF FACT.
The petitions herein were filed on October 18, 1926. Thereafter, and during the latter part of November or early part of December, 1926, one of counsel for petitioner called upon the attorney in the office of the General Counsel for the Bureau of Internal Revenue, Treasury Department, to whom the cases had been assigned and requested that the files relating to the petitioner's cases be referred to the so-called 60 Day Conference Division of the Income Tax Unit for a conference on one or more of the grounds alleged in the petitions as errors of the respondent. Petitioner's attorney was advised that the request made would be considered and if it could appropriately be complied with the cases would be sent to the Income Tax Unit for further consideration. Thereafter, on or about December 18, 1926, the aforementioned attorney in the office of the General Counsel prepared a memorandum for transmittal of the cases to the Income Tax Unit and at the same time prepared an application in each of the cases to be filed with this Board requesting an extension of 120 days' time, from December 18, 1926, to April 17, 1927, within which to answer or otherwise move in respect of the petitions. The applications for extension of time bear the name of A. W. Gregg, who was then General Counsel for the Bureau of Internal Revenue, his name having been signed thereto on December 18, 1926, by an attorney in the office designated for that purpose. The applications for extension of time were filed with the Board on December 20, 1926, and were granted by the Chairman thereof on December 22, 1926.
A copy of the application for extension of time in each case, bearing a stamp mark showing that the applications had been granted, was sent by the Board to counsel for petitioner by registered mail and received by one of the counsel on January 5, 1927.
On January 6, 1927, petitioner, by counsel, filed a written motion to vacate the Board's order of December 22, 1926, extending the time for filing respondent's answer and further moving for judgment on the ground of respondent having failed to answer the petitions within the time prescribed by the rules of practice of the Board.
The motions were set down for hearing and argued on February 17, 1927. After a partial hearing the cases were continued over to March 18, 1927, when the hearing was concluded. At the latter hearing counsel for respondent tendered his answers to the petitions.
That portion of the rules of practice of the Board which is here involved is the first sentence of Rule 14, reading as follows:
After service upon him of a copy of the petition, the Commissioner shall have 60 days within which to file an answer or 20 days within which to move in respect of the petition.
The Board's rules of practice were promulgated pursuant to the authority granted by section 907(a) of the Revenue Act of 1924, as amended by Title X of the Revenue Act of 1926, which reads:
Notice and an opportunity to be heard shall be given to the taxpayer and the Commissioner and a decision shall be made as quickly as practicable. Hearings before the Board and its divisions shall be open to the public and shall be stenographically reported. The Board is authorized to contract for the reporting of such hearings, and in such contract to fix the terms and conditions under which transcripts will be supplied by the contractor to the Board and to other persons and agencies. The proceedings of the Board and its divisions shall be conducted in accordance with such rules of practice and procedure (other than rules of evidence) as the Board may prescribe and in accordance with the rules of evidence applicable in courts of equity of the District of Columbia. The mailing by registered mail of any pleading, order, notice, or process in respect of proceedings before the Board shall be held sufficient service of such pleading, order, notice, or process.
The question with which we are confronted is whether the rule fixing the time for the Commissioner to answer is mandatory and binding on litigants and the Board or whether strict compliance with the rule may be waived by the Board in its discretion.
Both parties, in their arguments, take as a premise the operation and effect of rules of court and set out at great length the varying interpretations that courts have placed upon rules of practice and procedure. The petitioner of course takes the position that rules of court are binding upon both the court and parties litigant, while the respondent argues that there is a discretion vested in courts to suspend particular cases from the operation of the rules. Both of the parties have failed to point out whether the same lines of reasoning applied to the construction of rules of court are applicable in construing the rules of this Board. If the same reasoning applies it must be on the postulate that the Board is a court. The Board in many respects occupies a unique position in the governmental scheme. It is clearly denominated by Congress as "an independent agency in the executive branch of the Government." Its functions, however, are at least quasi judicial, Goldsmith v. United States Board of Tax Appeals, 4 Fed. (2d) 422; 270 U. S. 117, and it has "appellate powers which are judicial in character," Blair v. Oesterlein Machine Co., 275 U. S. 220. It has no administrative duties. Its proceedings are required by statute to be conducted "in accordance with the rules of evidence applicable in courts of equity in the District of Columbia." From it, despite its being an executive body, appeals may be taken directly to the Federal courts. These considerations serve to show the anomalous character of the Board and in our opinion decisions of the judiciary as to their rules can not be taken bodily and set down as conclusive upon us.
The parties have urged upon us many decisions of the courts interpreting their rules, which decisions we have carefully examined to determine whether there is anything in the attitude of the judiciary toward their rules of practice which may be of aid in interpreting ours. It must be conceded that the decisions in the State and Federal courts covering the question of the power of courts to waive strict compliance with their rules are not uniform, but from a careful consideration of the many cases cited by the parties and as a result of our own research we find the weight of authority to be among both State and Federal courts that a court has the inherent power to suspend a rule of its own making.
In Poultney v. City of La Fayette, 12 Pet. 472, the defendants applied for an extension of time to the next term of the Circuit Court for preparing their defense. Complainants moved that the case be put on the rule docket of the court, which motion was denied. Complainants then sought a writ of mandamus to compel the placing of the case on the rule docket in order that they might proceed according to chancery practice. It was held by Chief Justice Taney that —
The rules of chancery practice, mentioned in the motion of the complainants, must, of course, mean the rules prescribed by this court for the government of the courts of equity of the United States, under the act of Congress of May 8th, 1792, ch. 137, § 2, which are undoubtedly obligatory on the circuit courts. But if the order had been made, pursuant to the motion, and the case transferred to the rules, under the direction of the clerk, the time asked for by the defendant would, in effect, have been refused; and under the 6th rule of practice prescribed for the circuit courts, the complainants would have been entitled to proceed on their bill as confessed, if the defendants did not appear and file their answer within three months after the day of appearance limited to these rules. We think the court did right in refusing this motion. Every court of equity possesses the power to mould its rules in relation to the time and manner of appearing and answering, so as to prevent the rule from working injustice; and it is not only in the power of the court, but it is its duty, to exercise a sound discretion upon this subject, and to enlarge the time, whenever it shall appear that the purposes of justice require it. (Italics ours.)
In the case of Wallace v. Clark (Cir. Ct., Dist. Mass., 1847), 29 Fed. Cas. No. 17098, defendant failed to file a plea in abatement within the time prescribed by a rule of court and exception was made to the Court's jurisdiction. The rule involved read:
All pleas in abatement and to jurisdiction shall be filed in court within two days after the entry of the action and not afterwards.
It was held:
It...
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