Tumulty v. District of Columbia

• Decision Date: 16 January 1939
• Docket Number: No. 7061.,7061.
• Citation: 102 F.2d 254,69 App. DC 390
• Parties: TUMULTY et al. v. DISTRICT OF COLUMBIA.
• Court: U.S. Court of Appeals — District of Columbia Circuit

69 App. DC 390, 102 F.2d 254 (1939)

TUMULTY et al. v. DISTRICT OF COLUMBIA.

No. 7061.

United States Court of Appeals for the District of Columbia.

Decided January 16, 1939.

COPYRIGHT MATERIAL OMITTED

Paul E. Lesh, Hugh H. Obear, and Edmund D. Campbell, all of Washington, D. C., for appellants.

Elwood Seal, Corp. Counsel, and Vernon E. West, Principal Asst. Corp. Counsel, and W. H. Wahly, Asst. Corp. Counsel, all of Washington, D. C., for appellee.

Before GRONER, Chief Justice, and MILLER and VINSON, Associate Justices.

VINSON, Associate Justice.

This is an appeal from an order of the District Court of the United States for the District of Columbia entered July 3, 1937, overruling exceptions of the appellants to, and confirming reports of the Auditor, as special master, which allowed the District of Columbia a preferred tax claim against the receivers of Wardman Real Estate Properties, Inc.

In the court below proceedings were had in two consolidated equity causes filed against Wardman Real Estate Properties, Inc. (hereinafter called the Company), for judicial foreclosure by sale of a mortgage in the form of a deed of trust, and to subject the unmortgaged assets of the Company to the claims of unsecured or general creditors. Julius I. Peyser and Joseph P. Tumulty were appointed receivers, and now hold approximately $200,000 in the receivership fund.

On April 19, 1933, the district court entered an order calling for the filing of claims against the Company and against any funds in the hands of the receivers. The causes were referred to the special master, with directions, as to contested claims, to take testimony thereon and report the testimony to the court, together with his findings of fact and conclusions of law.

On June 30, 1933, the District of Columbia filed a claim for $19,316.23 for personal property taxes and penalties for the fiscal years ending June 30, 1928, 1929, 1930, 1931, and 1932, inclusive, against personalty contained in particular premises owned by the Company. On September 20, 1933, an amended claim for taxes without penalties in the sum of $52,956.20 was filed by the District. The last and finally amended claim for $52,956.20 with penalties in the sum of $39,516.53 was filed on November 7, 1933. On receiving this third claim, the special master reported to the court that it should be granted for $52,956.20 and should be given priority over the claims of the other creditors. This report was excepted to by the receivers, by Washington Properties, Inc., and by the District of Columbia. The receivers excepted upon the following grounds: That the assessments of taxes were not made by the board of personal property tax appraisers of the District of Columbia; that the assessments were not made against the Company, but against specific properties or "locations"; that no assessment was made against the Company by the board until after September 21, 1933; that such assessment was not made "without delay" within the meaning of the statute and was therefore void; that the District of Columbia could not in November, 1933, assess personal property of the Company except for "the then current year"; that the purported assessments made in 1933 for the years 1928 to 1932, inclusive, were without warrant of law and void; and, that the board did not notify the Company of purported tax assessments against its property as required by law. Substantially these same exceptions to the special master's report were made by Washington Properties, Inc.

The basis of the District's exception was that the special master had omitted the claim for penalties for non-payment of taxes. On re-reference to the special master it was held that these penalties were valid claims, and the amount thereof, $39,516.53, was added to the $52,956.20 theretofore allowed, and given priority over other claims.

The record shows that the Company was incorporated under the laws of Maryland on June 22, 1928; that it acquired the several premises, Carlton Hotel, Wardman Park Hotel, 2700 Connecticut Avenue, Boulevard Apartments, Chastleton Hotel, Cathedral Mansions, Stoneleigh Court Apartments, and the personalty involved subsequent to July 1, 1928;¹ that it operated these properties from October 2, 1928 to July 15, 1929; that on July 15, 1929, it leased these properties to Wardman Realty and Construction Company, and that company held these properties under this lease until February 28, 1931; that Wardman Realty and Construction Company made a management contract with United Realties, Inc., under which United Realties, Inc. operated the properties until it assigned its management contract to Hotels Management and Securities Corporation; that the lessee of the Company had no financial interest in United Realties, Inc., or Hotels Management and Securities Corporation; and, that on March 7, 1931, the lease to Wardman Realty and Construction Company was terminated as of February 28, 1931, and the properties turned back to the Company, which operated the properties itself from March 1, 1931, until the receivers were appointed July 14, 1931.

The claims of the District consisted of bills for taxes on personal property situated in the above described premises. No returns listing the property were made. The valuation was entered upon the field assessor's book by an inspector or assessor. The entries in the field book were reviewed by the board of personal tax appraisers, who by this review adopted the entries as assessments. Notice of assessments were addressed and mailed to the particular locations. Tax bills were sent to these locations. Later, assessments of some of these several properties were made against United Realties, Inc., or United Realty Company, and notice was given to it of assessment, and tax bills were mailed to it, but no proceedings were instituted to collect the tax. The record is not clear as to the assessment of the personalty contained in these several premises for each of the years involved. The personalty in the Carlton Hotel was assessed in the name of the Carlton Hotel and Carlton Hotel, Inc.; that in the Wardman Park Hotel was assessed variously, 2660 Woodley Road, Wardman Park Hotel, Wardman Park Hotel, Inc., and United Realty Inc.; that in 2700 Connecticut Avenue was assessed "Apartment House, 2700 Connecticut Avenue, N.W." and United Realties, Inc.; and that in Cathedral Mansions, 3000 Connecticut Avenue and 3100 Connecticut Avenue. The personal property in the Stoneleigh Court Apartments was assessed against Stoneleigh Court Apartments, Sheridan Pary Corporation, United Realty Company and Hotels Management and Securities Company. In the years, 1928, 1929, and 1930, all of this property was assessed against the particular premises in which it was located. In 1931 and 1932, an assessment was made against United Realties, Inc., for some of this property, the rest remaining assessed against the premises in which it was located. The record is not clear as to which was not assessed against this corporation. The special master found, and it is admitted by the District that for none of the years involved was there any assessment of the property made against the Company in any manner until after September 20, 1933, or that any notice of any purported assessment was ever given to the Company, affording it opportunity to be heard before the board of personal tax appeals. Subsequent to September 20, 1933, acting on advice from the office of the Corporation Counsel, the tax records were changed by naming the Company as owner of the personal property involved which constituted the assessment placed thereon by the District. This was the first time that the District had ever attempted to make assessments for personal property tax in a year subsequent to the year for which tax liability was claimed. This attempt is explained and justified by the order of the Corporation Counsel to make the change.

The District Court on July 3, 1937, ratified and confirmed these reports of the special master and overruled exceptions filed thereto by appellants. Whereupon this appeal, which relates solely to the claim of the District of Columbia for personal property taxes against the Company, was taken.

Under the taxing statute of the District of Columbia,² personal property taxes are assessed against "every person, association, corporation, firm or company hereinafter referred to as person liable to taxation", as of July 1st of each year. A printed blank schedule is available in the month of July and every person liable for personal property taxes is required to prepare and file a schedule of the personal property owned on that date, together with his address. Thereupon the board of personal tax appraisers, or any one of its members, shall assess the property at its fair cash value and the amount thus ascertained is entered upon the books for taxation for that fiscal year. If any person shall fail to make return of the required schedule in July, the board of personal tax appraisers shall "without delay, from the best information they can procure, make an assessment against such person * * * to which they shall add twenty percent thereof." (Italics supplied). If a return has been filed and the board is not satisfied as to its correctness, it may reject the return and assess the property in such amount as may to them seem just. Notice of the rejection of the sworn return shall be given to the party interested by leaving the same at his street address, whereupon there is a right of appeal from the appraiser's action to the board of personal tax appeals within 15 days.³ This is the only power under the statute for the reassessment of personal property, except for particular personal property referred to in a later section.⁴

If property subject to taxes shall have been omitted from assessment the board of personal tax appraisers shall immediately proceed to assess the same for the then current year, giving notice in writing to the "persons or...