Updike v. United States

• Decision Date: 01 December 1925
• Docket Number: No. 6873.,6873.
• Citation: 8 F.2d 913
• Parties: UPDIKE et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Eighth Circuit

8 F.2d 913 (1925)

UPDIKE et al. v. UNITED STATES.^*

No. 6873.

Circuit Court of Appeals, Eighth Circuit.

December 1, 1925.

Francis A. Brogan, of Omaha, Neb., (Anan Raymond and Alfred G. Ellick, both of Omaha, Neb., on the brief), for appellants.

James C. Kinlser, U. S. Atty., of Omaha, Neb. (Ambrose C. Epperson, of Clay Center, Neb., and George A. Keyser and Andrew C. Scott, Asst. U. S. Attys., both of Omaha, Neb., on the brief), for the United States.

Before STONE and VAN VALKENBURGH, Circuit Judges, and WILLIAMS, District Judge.

VAN VALKENBURGH, Circuit Judge.

July 1, 1910, the Missouri Valley Elevator Company was duly organized as a corporation under the laws of the state of Nebraska, with a capital stock of $150,000. Its principal office and place of business was at Omaha, in said state. For the purpose of return, assessment, and computation of taxes due under the revenue laws of the United States, it had established a fiscal year beginning on July 31 and ending May 31. On August 1, 1917, it held a meeting of all its stockholders, at which time it was voted that a deed of conveyance of all its real estate, together with its elevator, should be made to the Updike Grain Company, and that by bill of sale all of its personal property should be delivered to said Updike Grain Company. It was further voted that the corporation should immediately be dissolved in accordance with laws of the state in such cases made and provided. The officers of the corporation were authorized and directed to execute the necessary certificate of dissolution. This certificate was duly filed in the office of the secretary of state of the state of Nebraska on August 2, 1917. The stockholders of said corporation at that time were the defendants Nelson B. Updike, Elmer A. Cope, Edward Updike, Otis M. Smith, Gorton Roth, and Robert B. Updike, who held the entire 1,500 shares of the capital stock. At the same time, or shortly thereafter, at any rate prior to October 4, 1917, all the money and property of said corporation, inuring from the transfer above stated and otherwise, was distributed to said stockholders in proportion to their holdings.

October 3, 1917, there was approved an act of Congress entitled "An act to provide revenue to defray war expenses and for other purposes" (Comp. St. 1918, § 6336j et seq.). It was provided therein that it should take effect on the day following its passage, to wit, October 4, 1917. This act, among other things, provided for certain increases in excess profits taxes over those provided in acts then in existence. These prior acts, with which we are more specifically concerned, are those of September 8, 1916 (Comp. St. § 6336a et seq.), and March 3, 1917 (39 Stat. 1000). It is conceded, or at least not disputed, that the dissolved corporation had paid all excess profits taxes due under these prior acts, including that part of its fiscal year between January 1 and May 31, 1917. The Act of October 3, 1917, provided that any amount theretofore paid on account of the tax imposed under the Act of March 3, 1917, should be credited toward the payment of the tax imposed by title 2 of the Act of October 3, 1917. Under the prior acts certain returns by the taxpayer were provided for, the same to be made at stated periods, and penalties were provided for failure to file and for the making of false returns. The Missouri Valley Elevator Company made all returns required under acts prior to that of October 3, 1917, including that part of the year 1917 ending May 31.

The Act of October 3, 1917, was made retrospective, to include all of the calendar year in which it was passed. By section 212 of title 2 of the act it was provided:

"That all administrative, special, and general provisions of law, including the laws in relation to the assessment, remission, collection, and refund of internal revenue taxes not heretofore specifically repealed, and not inconsistent with the provisions of this title are hereby extended and make applicable to all the provisions of this title and to the tax herein imposed, and all provisions of title 1 of such Act of September eighth, nineteen hundred and sixteen, as amended by this act, relating to returns and payment of the tax therein imposed, including penalties, are hereby made applicable to the tax imposed by this title." Comp. St. 1918, § 6336 3/8m.

Section 13, pt. 2, title 1 of the Act of September 8, 1916 (39 Stat. 771; Comp. St. § 6336m), makes specific provision for such returns. In section 1001 of its administrative provisions the Act of October 3, 1917, provided as follows:

"That all administrative, special, or stamp provisions of law, including the law relating to the assessment of taxes, so far as applicable, are hereby extended to and made a part of this act, and every person, corporation, partnership, or association liable to any tax imposed by this Act, or for the collection thereof, shall keep such records and render, under oath, such statements and returns, and shall comply with such regulations as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may from time to time prescribe." Comp. St. 1918, § 6348a.

And section 1004 thereof is in the following language:

"That whoever fails to make any return required by this act or the regulations made under authority thereof within the time prescribed or who makes any false or fraudulent return, and whoever evades or attempts to evade any tax imposed by this act or fails to collect or truly to account for and pay over any such tax, shall be subject to a penalty of not more than $1,000, or to imprisonment for not more than one year, or both, at the discretion of the court, and in addition thereto a penalty of double the tax evaded, or not collected, or accounted for and paid over, to be assessed and collected in the same manner as taxes are assessed and collected, in any case in which the punishment is not otherwise specifically provided." Comp. St. 1918, § 5896b.

These last two sections quoted are supplemented by section 1005, which provides as follows:

"That the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, is hereby authorized to make all needful rules and regulations for the enforcement of the provisions of this act." Comp. St. 1918, § 6349b.

Pursuant to the authority thus conferred the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, made and promulgated article 61 of regulations 33 of the United States Treasury Department as follows:

"Corporation Dissolved Prior to October 4, 1917. — A corporation which was dissolved in 1917, prior to passage of the War Revenue Act of October 3, 1917, is subject to tax under the Act of September 8, 1916, as amended, and also to the war income tax and the war excess profits tax imposed by the Act of October 3, 1917. Brady et al. v. Anderson, 240 F. 665, 153 C. C. A. 463. A corporation so situated will make a return on revised form 1031, covering the period in 1917 during which it was in business prior to its dissolution. If it shall have previously made a return covering this period, and shall have paid any excess profits tax under the Act of March 3, 1917, it shall be entitled to credit for the amount of such tax so paid against any excess profits tax assessable against it under title 2 of the Act of October 3, 1917."

This form 1031 was duly furnished to the Missouri Valley Elevator Company, and was returned in blank to the collector of internal revenue for the district of Nebraska, with a letter from the secretary of said corporation advising of the dissolution, which said letter was tantamount to a denial of any liability of the corporation for excess profits taxes under the Act of October 3, 1917, and to a refusal, therefore, to make any return under said act.

The Revenue Department thereupon made a computation of the excess profits tax due from said corporation for that part of the year 1917 ending May 31, during which period the corporation was engaged in business prior to its dissolution, fixing the amount at $34,561.92, for the recovery of which it brought suit in the District Court for the District of Nebraska against the stockholders, appellants herein. That court found in favor of the United States, and by its decree found the amount due the government, including interest, from March 15, 1918, to be the sum of $50,380.35. It accordingly adjudged that "each and every one of the above-named defendants is hereby ordered and directed to pay to complainant the above-mentioned sum of money sufficient to satisfy this decree, or so much thereof and to the extent that each has received the assets of Missouri Valley Elevator Company prior to the dissolution thereof." From this decree and judgment this appeal is taken.

The contentions of appellants are: First, that the Act of October 3, 1917, was not applicable to corporations not in existence at the time of the passage of the act; second, that that act created no liability for taxation upon the part of stockholders who had received a distribution of the assets of a corporation prior to the act, which corporation had been dissolved prior to the passage of the act; third, that, if it sought so to do, its provisions are in violation of the Constitution of the United States; fourth, that the Act of October 3, 1917, required the filing of no other returns by the dissolved corporation than those which were filed by it in the year 1917 under the provisions of the Act of September 8, 1916; fifth, that such returns were those contemplated by section 250d of the act of 1921 (Comp. St. Ann. Supp. 1923, § 6336 1/8tt), and that under that section this suit by the government is barred.

It is also urged that the court erred in rendering a joint judgment against all of the defendants. That part of section 250 of the Act of November 23, 1921, upon which appellants rely as barring this action by limitation reads as...