United States v. Rennolds

• Decision Date: 13 August 1928
• Citation: 27 F.2d 902
• Parties: UNITED STATES v. RENNOLDS et al.
• Court: U.S. District Court — Southern District of New York

27 F.2d 902 (1928)

UNITED STATES v. RENNOLDS et al.

District Court, S. D. New York.

August 13, 1928.

Charles H. Tuttle, U. S. Atty., and Ernest Lappano, Asst. U. S. Atty., both of New York City.

Stephen A. McIntire, of New York City, for defendant Rennolds.

Frederick W. Hamberg, of New York City, for defendant Nat. Surety Co.

LINDLEY, District Judge.

This is a suit upon a bond given April 14, 1922, by defendant Rennolds, as taxpayer and principal, and National Surety Company, as surety, in the sum of $1,800, reciting that principal "has been assessed a tax by the Commissioner in the principal sum of $1,500," and "has filed his claim for abatement" thereof, and conditioned as follows: "If the said claim in abatement shall be denied in whole or in part by the Bureau of Internal Revenue, and, upon notice and demand of said collector, the said principal pays to said collector the said tax, or such amount thereof as may be found due, then this obligation to be null and void; otherwise, to be and remain in full force." The tax assessed was $2,162.20 for income, and was shown and reported in the return of principal filed March 31, 1918, and assessed thereon. The taxpayer on August 15, 1919, paid $646.20, and filed claim for abatement of the remainder. In April, 1922, before said claim for abatement had been determined, while the collector was proceeding to collect the tax with interest and penalties, the bond was given in order to suspend the collection proceedings. November 8, 1923, the Commissioner rejected the claim for abatement, and the collector again demanded of the taxpayer the tax, interest, and penalties. The latter having failed to pay on October 18, 1926, demand was made upon the surety upon the bond, and, no payment being made, this suit was begun March 10, 1927, to collect the amount of the penalty.

Subsequent to the suspension of collection proceedings by the collector and the giving of the bond, the statute of limitations of five years ran against the tax, and in 1926 Congress provided that "the bar of the statute of limitations against the United States in respect of any internal revenue tax shall not only operate to bar the remedy, but shall extinguish the liability. * * *" Revenue Act 1926, § 1106 (a), 26 USCA § 1249 (a). Defendant insists that this legislation creates a bar to the action, in that it nullifies the tax and the bond.

The liability of the surety must be construed upon the instrument executed by it. The tax was found due, the claim for abatement was denied, and the taxpayer failed to pay what he owed the government. These facts show breach of the condition of the bond. There is no part of such condition necessary to attachment of liability nonexistent. True it is that the...