United States v. Motsinger

• Decision Date: 10 November 1941
• Docket Number: No. 4811.,4811.
• Citation: 123 F.2d 585
• Parties: UNITED STATES v. MOTSINGER.
• Court: U.S. Court of Appeals — Fourth Circuit

123 F.2d 585 (1941)

UNITED STATES v. MOTSINGER.

No. 4811.

Circuit Court of Appeals, Fourth Circuit.

November 10, 1941.

Ellis N. Slack, Sp. Asst. to the Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., J. Louis Monarch, Helen R. Carloss, and S. Dee Hanson, Sp. Assts. to the Atty. Gen., and Carlisle W. Higgins, U.S. Atty., of Greensboro, N.C., on the brief), for appellant.

Winfield Blackwell, Jr., and R. C. Vaughn, both of Winston-Salem, N. C. (John S. Graham and Vaughn & Graham, all of Winston-Salem, N. C., on the brief), for appellee.

Before PARKER and SOPER, Circuit Judges and CHESNUT, District Judge.

PARKER, Circuit Judge.

This is an appeal from a judgment dismissing, on the ground that it was barred by limitations, an action instituted by the United States under sections 3466 and 3467 of the Revised Statutes, 31 U.S.C.A. §§ 191, 192. The action was against a fiduciary to whom assets of a taxpayer had been transferred in trust and who had distributed them without paying the tax assessed against the taxpayer. It appears from the complaint that the tax was assessed against the taxpayer on April 27, 1934, and that action was commenced against the fiduciary May 2, 1940, more than six years later. The facts are thus stated in detail in paragraphs IV and V of the complaint:

"IV. That on March 15, 1930, one W. G. Patterson, a resident of Birmingham, Alabama, filed his federal income tax return for the calendar year 1929. After an audit of such return and an examination of the books of said W. G. Patterson, the Commissioner of Internal Revenue mailed to the said W. G. Patterson, on October 23, 1931, a notice of deficiency in income taxes for the year 1929 in the amount of $16,712.92. Thereafter, on December 21, 1931, said W. G. Patterson took an appeal from said proposed deficiency to the United States Board of Tax Appeals. Thereafter, pursuant to a stipulation entered into by the said W. G. Patterson and the Commissioner of Internal Revenue, in an open hearing before the Board of Tax Appeals on March 19, 1934, said Board of Tax Appeals, by formal order entered April 9, 1934, found a deficiency of taxes against W. G. Patterson in the amount of $11,827.27 for the taxable year 1929. This deficiency, plus $2,921.01 deficiency interest, a total of $14,748.28 was duly and regularly assessed against the said W. G. Patterson by the Commissioner of Internal Revenue on the April 27, 1934 list, No. 4, page O, line 4. No part of the said $14,748.28 has been paid and the entire amount thereof together with lawful interest thereon, is wholly due and unpaid.

"V. That at all times mentioned herein said W. G. Patterson was and now is insolvent. That by instrument dated November 1, 1930, thereafter modified by instrument dated November 19, 1931, the said W. G. Patterson, not having sufficient property to pay all his debts, including the debt due to the United States for income taxes for the calendar year 1929, made a voluntary assignment of his property to Keehn W. Barry, John Andrews and the defendant M. E. Motsinger as trustees. Said trustees, including M. E. Motsinger, the defendant herein, on or about January 2, 1935, liquidated the property of W. G. Patterson so assigned to them and received therefor a sum of money in excess of $75,000 which said sum in excess of $75,000 said trustees distributed to the general creditors of the said W. G. Patterson and failed and refused to recognize the priority accorded to the United States by sections 3466 and 3467 of the Revised Statutes of the United States."¹

Sections 3466 and 3467 of the Revised Statutes, 31 U.S.C.A. §§ 191 and 192, are as follows:

"Section 3466 191. Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.

"Section 3467 192. Every executor, administrator, or assignee, or other person, who pays, in whole or in part, any debt due by the person or estate for whom or for which he acts before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate to the extent of such payments for the debts so due to the United States, or for so much thereof as may remain due and unpaid." 48 Stat. 760.

The contention of the government is that no statute of limitations is applicable to actions instituted under these sections; that the period of limitations provided by section 311(b) (3) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 311(b) (3), applies only to the collection of a liability assessed against a fiduciary under section 311(a) (2); that section 311 provides merely an alternative remedy for the collection of taxes from transferees and fiduciaries; and that the limitations therein provided have application only to such alternative remedy and not to suits instituted under 3466 and 3467.

The government is correct, we think, in contending that the remedy provided by I. R. C. § 311 for collection of taxes from transferees and fiduciaries is alternative and not exclusive. Phillips v. Com'r, 283 U.S. 589, 51 S.Ct. 608, 75 L. Ed. 1289; Leighton v. United States 289 U.S. 506, 53 S.Ct. 719, 77 L.Ed. 1350; Rosenberg v. McLaughlin, 9 Cir., 66 F.2d 271, cert den Rosenberg v. Lewis, 290 U.S. 696, 54 S.Ct. 132, 78 L.Ed. 599. And it may be assumed that the limitation therein provided has application to such alternative remedy, and not to the old remedy under R. S. §§ 3466 and 3467. See opinion of Judge McDermott in United States v. Updike, 8 Cir., 32 F.2d 1, 4, 5. It by no means follows, however, that there is no statute of limitations applicable to a suit under these sections for the collection of a tax from a fiduciary. I.R.C. sec. 276(c), 26 U.S.C.A. Int.Rev.Code, § 276(c), provides: "Where the assessment of any income tax imposed by this chapter has been made within the period of limitation properly applicable thereto, such tax may be collected by distraint or by a proceeding in court, but only if begun (1) within six years after the assessment of the tax, or (2) prior to the expiration of any period for collection agreed upon in writing by the Commissioner and the taxpayer before the expiration of such six-year period. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon."

There can be no question, we think, but that a suit under 3467 to hold a fiduciary liable in his own person and estate for a tax due the United States is a "proceeding in court" to collect the tax and that it may be maintained only if commenced "within six years after the assessment of the tax", as provided in the section just quoted, I.R.C. § 276(c). Directly in point is the decision of the Supreme Court in United States v. Updike 281 U.S. 489, 50 S.Ct. 367, 368, 74 L.Ed. 984. That was a suit in court to collect from stockholders of a corporation, to whom its assets had been distributed, income taxes assessed against the corporation. The six-year statute of limitations provided by section 278 of the Revenue Act of 1926, 26 U.S.C.A. Int.Rev.Acts, page 209, now section 276 of the Internal Revenue Code, was pleaded in bar of the action. The court held it applicable saying: "It seems plain enough, without stopping to cite authority, that the present suit, though not against the corporation but against its transferees to subject assets in their hands to the payment of the tax, is in every real sense a proceeding in court to collect a tax. The tax imposed upon the corporation is the basis of the liability, whether sought to be enforced directly against the corporation or by suit against its transferees. The aim in the one case, as in the other, is to enforce a tax liability; and the effect of the language above quoted from section 280 is to read into that section, and make applicable to the transferee equally with the original taxpayer, the provision of section 278(d) in relation to the period of limitation for the collection of a tax. Indeed, when used to connote payment of a tax, it puts no undue strain upon the word `taxpayer' to bring within its meaning that person whose property, being impressed with a trust to that end, is subjected to the burden. Certainly it would be hard to convince such a person that he had not paid a tax." (Italics supplied).

In point, also, is the decision in United States v. First Huntington National Bank, D.C., 34 F.Supp. 578, 581, affirmed by this court on the opinion of the court below, 117 F.2d 376. That was a suit under section 3467 of the Revised Statutes to collect an estate tax from a fiduciary that had disbursed assets without payment of the tax assessed against the estate. Suit was brought within six years of the assessment against the estate but not within the time allowed by the statute for making an assessment against the fiduciary under the alternative remedy of summary assessment provided by the statute. The government's contention that the six-year statute was the one applicable and that it ran from the assessment against the estate was sustained. The court said:

"Prior to the Revenue Act of 1926, there were no statutory provisions governing the manner of collection of personal liability of a fiduciary under R.S. § 3467, or the liability, at law or in equity, of transferees of property of a decedent, or of transferees with respect to income taxes. Such liability was collected by suit, which often proved difficult and expensive. ...