United States v. Piedmont Mfg. Co., 4125.

• Decision Date: 06 April 1937
• Docket Number: No. 4125.,4125.
• Citation: 89 F.2d 296
• Parties: UNITED STATES v. PIEDMONT MFG. CO.
• Court: U.S. Court of Appeals — Fourth Circuit

89 F.2d 296 (1937)

UNITED STATES v. PIEDMONT MFG. CO.

No. 4125.

Circuit Court of Appeals, Fourth Circuit.

April 6, 1937.

E. E. Angevine, Atty., Tax Division, Department of Justice, of Washington, D. C. (Robert H. Jackson, Asst. Atty. Gen., Sewall Key, Norman D. Keller, and J. Louis Monarch, Sp. Assts. to Atty. Gen., Charles C. Wyche, U. S. Atty., and E. P. Riley, Asst. U. S. Atty., both of Greenville, S. C., on the brief), for appellant.

James A. Lowrey, Jr., and Wallace Miller, both of Macon, Ga., for appellee.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

SOPER, Circuit Judge.

The declaration in this suit by the Piedmont Manufacturing Company for the recovery from the United States of overpaid taxes was in two counts. In the first count the taxpayer claimed $5,484 for the year 1917, $43,977.86 for the year 1918, and $24,015.17 for the year 1920, or $73,447.03 in all on account of errors alleged to have been made by the Commissioner of Internal Revenue in the adjustment of the taxpayer's income and invested capital for the years mentioned. Claims for the refund of these amounts had been filed in due time by the taxpayer. In the second count the taxpayer made claim for $5,824.03 for the year 1917, $43,330.98 for the year 1918, and $10,796.75 for the year 1920, or $59,951.76 in all, based upon section 284 (c) of the Revenue Act of 1926, 44 Stat. 9, 66, which provides that under certain circumstances hereinafter discussed overpaid taxes may be recovered without filing a claim therefor, notwithstanding the period of limitation for filing claims has expired.

The District Court adjudged that the taxpayer should recover $63,544.57 principal and $44,627.96 interest to date of judgment under the first count, and $56,621.71 principal and $44,610 interest under the second count; but that, as both counts sought recovery for the same over-assessments on different theories, the taxpayer should collect only the larger sum. Under a stipulation of counsel the case had been referred to the Bureau of Internal Revenue for investigation on its merits, and the Bureau had found that the taxpayer had made overpayments under the theory of the first count of $4,463.82 for the year 1917, $41,361.74 for the year 1918, and $17,719.01 for the year 1920, or $63,544.57 in all, and overpayments in the same amounts for 1917 and 1918, respectively, and in the amount of $10,796.15 for the year 1920, or $56,621.71 in all under the theory of the second count. It thus appears that the court based its judgment upon the findings of the Bureau. But the United States, nevertheless, contends that the judgment should be reversed because the court was without jurisdiction to entertain the suit.

Section 24 (20) of the Judicial Code, 28 U.S.C.A. § 41 (20), entitled "Suits against United States," gives the District Courts of the United States original jurisdiction concurrent with the Court of Claims of all claims not exceeding $10,000 founded upon the Constitution of the United States or any act of Congress, and of any suit commenced after the Revenue Act of 1921 (42 Stat. 227) for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, even if the claim exceeds $10,000 if the Collector by whom such tax was collected is dead or is not in office at the time of the commencement of the suit. The Collectors of Internal Revenue to whom the overpayment was made in this case were either dead or out of office when the suit was brought; but substantial parts of the sum sued for as overpayments were paid by credits from over-assessments for the years 1919 and 1921. The Commissioner of Internal Revenue had allowed credits of $78,758.43 for 1919 and $10,656.34 for 1921, or $89,414.77 in all; and of this total $13,734.79 was added to the cash sum of $52,417.45 to pay an additional assessment of $66,152.24 for 1918, and the balance of the credit was used in paying an additional assessment of $75,679.98 for the year 1920. The United States admits that generally a payment by credit is a payment for the purposes of suit; but contends that this is not true of a suit against a Collector to recover an overpayment of taxes although he was in office when the credit was given. It is said that a payment of taxes by credit is not a payment to the Collector at all but merely a bookkeeping entry, so far as he is concerned, which he makes in a ministerial capacity at the behest of his superior officer, and hence it cannot be recovered in a personal suit against the Collector; and, further, that under the provision of section 24 (20) of the Judicial Code, 28 U.S.C.A. § 41 (20), permitting suit in the District Court against the United States for any amount when the Collector is dead or out of office, the United States is merely substituted for the Collector and no suit will lie against the United States that would not also lie against the Collector. In other words, the contention is that an option is given by the statute to a taxpayer who has made an overpayment of taxes to a Collector no longer in office either to sue the Collector or to sue the United States, and if he chooses the latter, he must make out a case of wrongful collection by the former. Hence it is concluded that all payments by credit must be ignored in the present action and recovery must be limited to the sums overpaid in cash. For authorities in support of this line of reasoning Routzahn v. Reeves Bros. Co. (C.C.A.) 59 F.(2d) 915, Untermyer v. Bowers (D.C.) 7 F.Supp. 347, and Moses v. United States (C.C.A.) 61 F.(2d) 791, are cited.

We are concerned here only with the overpayment for the year 1920, because the amounts erroneously collected for the years 1917 and 1918, that is, $4,463.82 and $41,361.74, respectively, were paid in cash. There was no application of any credit for the year 1917, and while a credit of $13,734.79 was used for the year 1918 in order to make up the sum overpaid for that year, the additional sum of $52,417.45 for that year was paid to the collector in cash. This cash sum exceeds the amount allowed in the judgment of the court for the year 1918, and hence the taxpayer has no need to rely on the amount paid by credit for that year. However, the whole amount allowed in the judgment for the year 1920, $17,719.01, was paid by credit, and hence the point made by the United States must be considered on its merits.

We are of the opinion that the entire amount of the overpayment, together with the overpayment by credit for the year 1920, was properly included in the judgment of the District Court. It is true that, technically considered, a suit against a Collector of Internal Revenue for overpaid taxes is a personal action and is distinguishable from a suit against the United States. Sage v. United States, 250 U.S. 33, 39 S.Ct. 415, 63 L.Ed. 828; Smietanka v. Indiana Steel Co., 257 U. S. 1, 42 S.Ct. 1, 66 L.Ed. 99; Union Trust Co. v. Wardell, 258 U.S. 537, 42 S.Ct. 393, 66 L.Ed. 753. But in reality a Collector is suable in such an action, not because he is a trespasser or a wrongdoer, but because he represents the United States, at whose behest the collection has been made, to which the money has been turned over, and by which any judgment against the Collector will be satisfied unless, in the opinion of the District Court, the Collector acted without probable cause. An overpayment in cash cannot be realistically distinguished from an overpayment by credit in determining the liability of a Collector. No such distinction was made in Graham v. Goodcell, 282 U.S. 409, 51 S.Ct. 186, 75 L.Ed. 415, in which a group of cases brought in the Court of Claims against the United States, or in the District Court against the Collector, to recover overpayments of taxes, was considered and it was said (282 U.S. 409, at page 424, 51 S.Ct. 186, 192, 75 L.Ed. 415) that: "the application of a credit against an assessment at a time when collection was barred must be regarded as an erroneous collection." The reason is apparent. All taxes assessed by the Commissioner are collected and receipted for by the Collector. 26 U.S. C.A. §§ 1531, 1532, 1541 (a), 1754-1755, and 1549. All moneys received therefor are paid by him into the Treasury of the United...