United States v. Beckman
Decision Date | 16 June 1939 |
Docket Number | No. 6851.,6851. |
Parties | UNITED STATES v. BECKMAN, Secretary of Banking of Pennsylvania. |
Court | U.S. Court of Appeals — Third Circuit |
James W. Morris, Asst. Atty. Gen., and Sewall Key, Norman D. Keller, and Arthur A. Armstrong, Sp. Assts. to Atty. Gen., J. Cullen Ganey, U. S. Atty., of Bethlehem, Pa., and Thomas J. Curtin, Asst. U. S. Atty., of Philadelphia, Pa., for the United States.
Harry C. Liebman, of Philadelphia, Pa., for appellee.
Before MARIS and CLARK, Circuit Judges, and KALODNER, District Judge.
This case was tried in the court below under a misunderstanding. Not unnaturally, what we deem to be error occurred. Counsel for the taxpayer-appellee very fairly concedes and accounts for this misapprehension of the learned trial judge in the following language in his brief:
. Appellee's brief, pp. 17, 18.
The confusion arises from the somewhat misleading similarity between two cognate provisions of the Revenue Act of 1928, § 23 (j), 26 U.S.C.A. § 23 (j) note, p. 130. Both cover the general subject of deductions for so-called bad debts. We can best describe their respective operation in the words of our judicial brethren of the Sixth Circuit: Commissioner of Internal Revenue v. Liberty Bank & Trust Co., 6 Cir., 59 F. 2d 320, 321, 322.
The opinion of the learned district judge, under the misapprehension we and counsel have spoken of, discusses the question of ascertainment throughout, saying inter alia: "The provision of the law is that a bad debt, let us keep reminded, may be deducted only when the loss has been both ascertained and charged off within the taxable year." Record, p. 37. Nevertheless, the actual issue is preserved by an appropriate conclusion of law. It reads as follows: "That the action of the Commissioner of Internal Revenue in allowing only a deduction to petitioner for a partial loss of $20,000.00 on the indebtedness of the First National Bank of Bradford to it, and disallowing the remainder of the claimed deduction in connection with the partial loss on said indebtedness was plainly arbitrary and unreasonable." Record, pp. 41, 42. And is validated by the learned district judge's "all found as requested", Record, p. 39.
We observe that this conclusion is anachronistically framed in the phraseology of the 1932 Act, 26 U.S.C.A. § 23 (k). It contemplates the discretionary allowance of a deduction. But the controlling language of the 1928 Act, above cited, comprehends only the discretionary allowance of a charge-off, Stranahan v. Commissioner, 6 Cir., 42 F.2d 729, certiorari denied 283 U.S. 822, 51 S.Ct. 346, 75 L.Ed. 1437; Commissioner v. Liberty Bank & Trust Co., above cited.
The narrow instance of this case is no place for an elaborate philosophical or legal discussion of the process of decision, whether that process be judicial, administrative, or personal. Suffice it to say that the exercise of judgment is the exclusion of its antonym, whimsy. Hartrampf's Vocabularies, p. 113. In the words of the Supreme Court quoted by the recently issued (1938) American Jurisprudence, Vol. 14, p. 279: "When invoked as a guide to judicial action it means a sound discretion, that is to say, a discretion exercised not arbitrarily or wilfully, but with regard to what is right and equitable under the circumstances and the law, and directed by the reason and conscience of the judge to a just result." Langnes v. Green, 282 U.S. 531, 541, 51 S.Ct. 243, 75 L.Ed. 520. See, as to judges, Langnes v. Green, above cited, Ex parte United States, 242 U. S. 27, 37 S.Ct. 72, 61 L.Ed. 129, L.R.A. 1917E, 1178, Ann.Cas.1917B, 355, and as to administrative officers generally, Dickinson, Administrative Justice and Supremacy of the Law 192; Black, The "Jurisdictional Fact" Theory and Administrative Finality, 22 Cornell Law Quarterly 349, 515; Cooper, Administrative Justice and the Role of Discretion, 47 Yale Law Journal 577.
Many cases have considered the principle in its application to our particular administrative official, the Federal tax assessor. The earlier ones are collected in two interesting articles entitled, Finality of Determinations of the Commissioner of Internal Revenue, 28 Columbia Law Review 563; 30 Columbia Law Review 147. They point to the language of the variously worded statutory provisions — "in the opinion of the Commissioner"; "in the discretion of the Commissioner"; "with the approval of the Commissioner"; "full power to determine"; and finally, approximating the words here, "to the satisfaction of the Commissioner", pp. 565 and 162 respectively of the articles above cited. The learned author, Mr. Roswell Magill, in his second article sums up our problem in this wise:
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