United States v. Waite

• Decision Date: 30 May 1929
• Docket Number: No. 8425-8427.,8425-8427.
• Parties: UNITED STATES v. WAITE et al. CROOKS, Collector of Internal Revenue, v. WAITE et al. SAME v. HIBBARD.
• Court: U.S. Court of Appeals — Eighth Circuit

33 F.2d 567 (1929)

UNITED STATES v. WAITE et al.

CROOKS, Collector of Internal Revenue, v. WAITE et al.

SAME v. HIBBARD.^*

Nos. 8425-8427.

Circuit Court of Appeals, Eighth Circuit.

May 30, 1929.

Ottamar Hamele, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C., (Roscoe C. Patterson, U. S. Atty., and Harry L. Thomas, Asst. U. S. Atty., both of Kansas City, Mo., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., on the brief), for appellants.

Allen McReynolds and J. H. Flanigan, both of Carthage, Mo., and F. M. Petree, for appellees Waite and others.

Frank Petree, of Oregon, Mo., for appellee Hibbard.

Paul R. Stinson, of Kansas City, Mo. (I. P. Ryland, Arthur Mag, and Roy B. Thomson, all of Kansas City, Mo., Thomas Johnston McGuire, of Omaha, Neb., Allen McReynolds, of Carthage, Mo., and Frank Petree, of Oregon, Mo., on the brief), for Ella C. Loose, amicus curiæ.

Before VAN VALKENBURGH and COTTERAL, Circuit Judges, and SCOTT, District Judge.

SCOTT, District Judge.

The three foregoing entitled cases were argued and submitted together. They involve identical questions. Nos. 8425 and 8426, grow out of an estate tax assessed and paid on the estate of Alfred H. Rogers, deceased, under the Revenue Act of 1918 (40 Stat. 1057). The reason for two cases is that certain payments of the tax assessed were paid to George F. Crutchley, collector of internal revenue for the Western district of Missouri, who before subsequent payments were made died. Recovery for excess of such payments is attempted in case No. 8425, brought in the court below against the United States. Subsequent payments were made to Noah Crooks, collector of internal revenue for said district, and recovery of alleged excess payments to him is attempted in case No. 8426, brought in the court below against said Crooks, as collector. Case No. 8427 grows out of certain alleged excess payments of estate tax assessed and paid on the estate of Charles D. Zook, deceased, under the Revenue Act of 1918. The material allegations of the petitions in the three cases are substantially the same, mutatis mutandis. We shall, therefore, state them without repetition.

Taking the petition in case No. 8425 as an illustration, plaintiffs in their petition allege in substance: That they are the duly qualified executors of the estate of Alfred H. Rogers, deceased, who died March 6, 1920, leaving surviving him as heirs his widow, Katherine C. Rogers, a son, Harrison C. Rogers, and a daughter, Le Claire Rogers Estes. That Alfred H. Rogers died testate, but that within the time required by the statutes of Missouri, and on July 30, 1920, Katherine C. Rogers, widow, filed in the probate court of Jasper county, Missouri, a rejection of said will, by the terms of which she refused to accept the provisions thereof and elected to take under the statutes of said state, and reserved to herself in the estate of the decedent her marital rights, to wit, a child's part in lieu of the provisions made by said will. (Then follow certain allegations relative to the widow's rights under state statutes, and certain proceedings in the state courts over state inheritance tax assessments, and the result of such proceedings, all of which we do not deem of importance here, being argumentative only). That pursuant to the terms of the Revenue Act of 1918, on the 22d day of January, 1921, plaintiffs filed with the collector of internal revenue for the Western district of Missouri, a return on form 23A by which they showed that A. H. Rogers was possessed at the time of his death of an estate of $892,389.97, on which there was due a tax of $42,891.20, which said tax within the time required by statute was by the plaintiffs paid to the collector of internal revenue for said district. That subsequently an examiner, representing the Treasury Department, examined said estate, and on the 11th day of April, 1923, the deputy commissioner of Internal Revenue, notified plaintiffs of an additional tax liability of $25,549.28, based upon an increase of valuation. That subsequently, and within the time required by statute and provided by the rules of the Treasury Department, they filed pleas sic in abatement directed to the question of the valuation of the property, and claiming an exemption of that part of the tax which was assessed against the marital rights of Katherine C. Rogers, and that the tax assessed was excessive and illegal. That said plea sic in abatement, based upon the contention that the interest of Katherine C. Rogers was not subject to tax and the tax was illegal, was overruled by the department on the 26th day of December, 1923, and the plea sic in abatement based on the original valuation was overruled in part and allowed in part on the 24th day of November, 1923, and that plaintiffs were required to pay an additional sum of $23,665.11. That said additional tax was on the 25th day of February, 1924, paid. That on the ____ day of September, 1924, and within the time allowed by statute, plaintiffs filed a claim for refund with the Treasury Department asserting that the collection of tax by the department was illegal and erroneous, and claiming a refund of $34,759.80 on account of payment of taxes upon that part of the estate of A. H. Rogers which under the laws of the state of Missouri belonged to Katherine C. Rogers. That subsequently, on the 4th day of December, 1924, said claim for refund was rejected. That plaintiffs paid to George F. Crutchley, collector, etc., a total sum of $42,891.20. That they paid to Noah Crooks, collector, etc., the sum of $24,755.75, making a total tax payment of $67,546.95, the amount being assessed by the Internal Revenue Department against said estate. (The above alleged payment to Noah Crooks, collector, is the payment for which recovery is asked in case No. 8426.)

Plaintiffs then plead: that the following provision of the Revenue Act of 1918 (40 Stat. 1097): "Sec. 402. That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated. * * * (b) To the extent of any interest therein of the surviving spouse, existing at the time of the decedent's death as dower, curtesy, or by virtue of a statute creating an estate in lieu of dower or curtesy," should not be construed to authorize or require the inclusion as part of the gross estate of said decedent subject to said estate tax, the interest in the property above described belonging to and vesting in Katherine C. Rogers as aforesaid. That in so far as said provision has been so construed by the taxing authorities, and said authorities have assumed to require the said interest as surviving wife of the decedent to be included as part of the said gross estate, said act of Congress and the provisions thereof aforesaid, as well as the construction and application thereof by the taxing authorities, were and are in conflict with the following provisions of the Constitution of the United States, to wit, that part of section 2, article 1, providing as follows: "Representatives and direct taxes shall be apportioned among the several states which may be included within this Union, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, and excluding Indians not taxed, three-fifths of all other persons. The actual enumeration shall be made within three years after the first meeting of the Congress of the United States, and within every subsequent term of ten years, in such manner as they shall by law direct," and that part of section 9, article 1, as follows, to wit: "No capitation or other direct tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."

That the imposition of the said federal estate tax upon the interest of Katherine C. Rogers in said property was in substance and effect, a direct tax upon said property not laid, imposed or apportioned in accordance with the foregoing provisions of the Constitution of the United States, but in violation thereof, and was not and is not a tax or excise upon property derived by Katherine C. Rogers from the said decedent through descent, transfer, inheritance, devise or gift. That the material rights of Katherine C. Rogers in the property of Alfred H. Rogers, deceased, were of the value of $396,880.28, and that, deducting that amount from the total value of said estate, the amount of legal tax due would be $32,787.15. That the collection of $34,759.80 additional was erroneous and without warrant of law. That of that sum $25,441.50 was paid by plaintiff to Noah Crooks, collector, etc., and that suit has been instituted against Noah Crooks (No. 8426) to recover said excessive collection, and that said sum $8,131.40 was paid to George F. Crutchley, collector, etc. That George F. Crutchley has departed this life, and as in such case made and provided this suit is instituted against the United States of America for the purpose of recovering said excess and erroneous tax. A prayer then follows for judgment for $8,131.40.

In cases Nos. 8426 and 8427 the prayers are for the respective amounts of the alleged excess. In No. 8427, the amount involved is $15,377.99, alleged to have been erroneously assessed upon the interest of Emma D. Zook, widow, in the estate of Charles D. Zook.

To the respective petitions in these cases the defendants demurred upon the ground that the petitions failed to state facts sufficient to constitute causes of action. These demurrers were all overruled and the defendants elected to stand upon the demurrers. In each case judgment was entered against the defendants for the respective sums prayed for, and exceptions duly preserved. From the judgments so entered the United States and Noah Crooks, collector of internal revenue for the...