United States v. Helvering

• Decision Date: 18 May 1936
• Docket Number: No. 6618.,6618.
• Citation: 85 F.2d 230,66 App. DC 64
• Parties: UNITED STATES ex rel. GIRARD TRUST CO. v. HELVERING.
• Court: U.S. Court of Appeals — District of Columbia Circuit

66 App. DC 64, 85 F.2d 230 (1936)

UNITED STATES ex rel. GIRARD TRUST CO. v. HELVERING.^*

No. 6618.

United States Court of Appeals for the District of Columbia.

Argued April 8, 9, 1936.

Decided May 18, 1936.

H. C. Kilpatrick, of Washington, D. C., for appellant.

Frank J. Wideman, Asst. Atty. Gen., and Sewall Key, Robert H. Jackson, Norman D. Keller, and Thomas G. Carney, all of Washington, D. C., for appellee.

Before MARTIN, Chief Justice, and VAN ORSDEL, GRONER, and STEPHENS, Associate Justices.

GRONER, Associate Justice.

John A. Brown, Jr., a citizen and resident of Pennsylvania, died testate in 1919. In his will he directed appellant, whom we shall call Girard, to take over his residuary estate in trust, collect the income, and, after payment of certain expenses, to distribute the net to the extent of $200,000 annually to his widow, Harriet E. Brown. The widow elected, in compliance with the laws of Pennsylvania, to accept the income in lieu of her statutory share of the estate. Girard in the performance of the trust distributed to the widow the entire net income of the estate (which did not exceed $200,000 annually) for the years 1924 to 1930, inclusive; and, in computing the net taxable income of the estate for each of those years, it deducted the amount so distributed. Section 219(a) (2), Revenue Act of 1924, and corresponding sections of subsequent acts, 26 U.S.C.A. § 161(a) (2) and note. The widow reported the amounts received by her as taxable income for the years 1924 to 1927, inclusive. She did not report as income the amounts received in 1928 and thereafter.

Between 1926 and 1928 three Circuit Courts of Appeals¹ held that income received by a widow, who had accepted such income in lieu of dower or statutory rights, was not taxable. "These cases held that by relinquishment of her rights, she came to occupy the position of the purchaser of an annuity." Helvering v. Butterworth, 290 U.S. 365, 369, 54 S.Ct. 221, 222, 78 L.Ed. 365. The widow, relying on those decisions, filed claims² with the Commissioner for refund of taxes which she had paid on the income distributed to her by Girard during the calendar years 1924 to 1927, inclusive. The Commissioner, also relying on the decisions, assessed³ deficiencies — involving the same income distributed to the widow — against Girard for the years 1924 and 1925, on the ground that in computing the taxable net income of the trust the deduction by Girard of the amounts of income currently distributed to the widow had been improperly taken. (We assume the selection only of the years 1924-1925, was because of the approaching bar of the statute of limitations.) On appeal by Girard the Board sustained the Commissioner. The Commissioner, thereupon, September 17, 1931, paid the refund claimed by the widow, in an aggregate sum of approximately $78,000. However, in December following, Girard filed a petition for review of the decision of the Board as to it, but in lieu of bond paid the assessment against it with interest, in an aggregate amount of sixty-four thousand odd dollars. In April, 1933, the Court of Appeals in the Third Circuit⁴ reversed the decision of the Board and held that the income payable to the widow was not taxable to Girard, and that the latter as trustee was authorized to deduct, as it had, the amount distributed to the widow, in making its return. Thereafter the Board, pursuant to the mandate of the court, entered its order July 7, 1934, finding that there were no deficiencies due from Girard for 1924 and 1925, but overpayments for such years in the aggregate amount of its 1932 cash payment made, as we have seen, in lieu of bond, plus a further and later payment of around $4,000 for the year 1928.

In December, 1933, the Supreme Court decided Helvering v. Butterworth, 290 U.S. 365, 54 S.Ct. 221, 78 L.Ed. 365, settling the conflict in the Circuits and holding that such income as is here involved was taxable against the widow. The result of this was to invalidate the refund made by the Commissioner to the widow. But the statute of limitations had, in September, 1933, run against recovery from the widow. In this state of the case, the Commissioner declined to refund to Girard the taxes erroneously collected from it; and the purpose of this suit is to require the Commissioner to make repayment in compliance with the decision of the Board, which long ago became final.

Laying aside for the time being the technical aspect of the question, and having regard only to the ultimate facts, the case is this: Mrs. Brown owes the United States a large amount of money for taxes. The statute of limitations has intervened, and the government cannot collect. On the other hand, her trustee, Girard, has paid to the United States a large amount of money for taxes for which it was not liable and which the Board has determined it is entitled to recover. The money, however, which it mistakenly paid belonged to Mrs. Brown and, if recovered, will be payable to her; so that if we shall order the lower court to issue the writ, the result will be to require the United States to pay over money which — while technically that of Girard — actually would go to Mrs. Brown. Obviously this is inequitable and ought not to be done unless required as a matter of law. In saying this much, we are not influenced by the fact that the government is itself a party or that the subject we are dealing with is taxation. The result to be reached should be wholly uninfluenced by those facts. When the United States is properly a party in a litigation in its own courts, it occupies no different or better position than the humblest citizen. Overreaching on its part should be no more condoned than if practiced by an individual. We have said as much before. O'Laughlin v. Helvering, 65 App.D.C. 135, 81 F.(2d) 269. Impelled by these considerations, we proceed to a discussion of the case as made.

First. We are told by counsel for Girard that the Commissioner's duty to refund the overpayments is mandatory. It is said that under section 1001 (c, d) of the Revenue Act of 1926, as amended by section 603 of the Revenue Act of 1928 (26 U.S. C.A. §§ 644, 645), when the taxpayer loses his case before the Board and appeals to the court, he may either file a bond to stay collection or pay the amount claimed with the assurance that it will be returned to him if his appeal is successful — without the necessity of following the technical procedure of filing a claim as in the case of an ordinary taxpayer; in short, that payment under these circumstances is in the nature of a cash deposit in lieu of a surety bond. This is, we think, a correct statement of the law. Girard, having elected to pay rather than give a bond and having won its case in the Court of Appeals, was entitled when the decision of that court became final — assuming that no other taxes were claimed and shown to be due — to a refund of the amount paid. This we said in McCarl v. U. S. ex rel. Leland, 59 App. D.C. 362, 42 F.(2d) 346.

Undoubtedly, as we think, the decision of the court and the finding of the Board made mandatory the duty of the Commissioner to make the refund. Blair v. United States, 55 App.D.C. 359, 6 F.(2d) 484; James v. United States (Ct.Cl.) 38 F.(2d) 140. We are, therefore, compelled to reject the proposition of the Commissioner that the statute authorizing refunds, under the circumstances we have mentioned, involves the exercise of judgment and discretion.

Second. We likewise find ourselves in disagreement with the Commissioner on the point that Girard has an adequate remedy at law. The suggestion that it could, by action in the Court of Claims or the District Court, enforce payment of its claim against the United States, is without force. It has a judgment or the equivalent of a judgment in the order of the Board of Tax Appeals — now final — and nothing it could obtain from either the Court of Claims or a District Court would be any more adequate or specific. The statute imposes on the Commissioner the duty of making payment in accordance with the final determination of the Board; and if, as we think, this duty is mandatory, the writ here prayed for is an appropriate remedy. See Houston v. Ormes, 252 U.S. 469, 472, 40 S.Ct. 369, 64 L.Ed. 667; U. S. ex rel. Cole v. Helvering, 64 App.D.C. 35, 73 F.(2d) 852; McCarl v. U. S. ex rel. Leland, 59 App.D.C. 362, 42 F.(2d) 346; Lucas v. U. S. ex rel. Blackstone Mfg. Co., 59 App.D.C. 389, 45 F.(2d) 291. And if it can be shown that it ought to issue, it is of no consequence that another remedy in another tribunal might produce the same result. Knox County v. Aspinwall, 24 How. 376, 385, 16 L.Ed. 735; Blair v. United States, supra.

Third. This brings us to consider the only remaining ground of defense, which is that Girard, in equity and good conscience, is not entitled to the writ of mandamus. In support of this position, the Commissioner says that Girard and the widow are the same parties in interest and should be treated, in a petition addressed to the conscience of the court, precisely as though the claim of the government against the widow was in fact a claim against Girard. In reaching the conclusion we have reached, we shall assume, as Girard insists, that ordinarily a final decision of the Board of Tax...