#### JAMES O. NIXON v. THE UNITED STATES.

No. 12743

April 23, 1883.

A tax was assessed upon tlie claimant ou tlie gross receipts of a newsiiaper published by Mm for the quarter ending March 31,1867. He applied to the Commissioner of Internal Revenue for refund of the same under Rev. Stat., § 3220. His application was rejected. Subsequently he brought an action against the collector to whom the tax was paid, and recovered a judgment therefor with costs.

*449The collector did not pay the judgment, and the claimant applied to the-Commissioner for payment of the same out of the public treasury under Key. Stat., $ 3220.

The Commissioner made an allowance of the amount to the judgment creditor, which is not paid, and the claimant sues thereon.

Held:

I.An allowance by the Commissioner of Internal. Revenue under Rey.. Stat., $ 3220, can be impeached only for fraud or mistake. Exactly what are all the mistakes which are sufficient to impeach, such an allowance is not yet determined. But that it may be impeached for want of jurisdiction in the Commissioner to act upon the application therefor, and that it cannot be impeached for a mistake of judgment or discretion when the Commissioner acts within the scope of his authority, are settled.

II.The rejection of an application for-refund of a tax collected does not exhaust the Commissioner’s authority so that he is prevented from allowing the repayment of a judgment recovered against a collector in a suit brought to recover back the same tax.

III.The uniform practice of the Commissioner of Internal Revenue and the Secretary of the Treasury, in proper cases to make allowances of refund *to creditors*who recover judgments against collectors for taxes illegally assessed or collected, and not to require the collectors first to pay such judgments and i¡hsn apply themselves for refund, is reasonable and proper and ought to be upheld.

IV.A suit may be maintained in this court upon an allowance thus made to a judgment creditor, where the collector does not object thereto and sets up no claim himself.

This is an action upon an allowance made by the Commissioner of Internal Revenue under Revised Statutes, § 3220, for repayment of a judgment recovered by the claimant against a collector of internal revenue, for a tax illegally assessed or collected.

The following are the facts found by the court:

I. On the 14th day of May, 1867, the claimant’s agent made a return to the internal-revenue officers of the first collection district of Louisiana, showing that claimant as proprietor of The New Orleans Daily Crescent, a newspaper published at New Orleans, was indebted to the Government in the amount of $620.10 as tax on the gross receipts of that paper for the quarter ending March 31,1867; and the same was afterwards paid to James B. Steedman, collector of that district, without protest.

II. Subsequently claim was made for refund of these taxes by the claimant, but it was disallowed by the Commissioner of Internal Revenue April 25, 1871.

*450Thereupon, and in accordance with the provisions of Revised Statutes, §§ 3226, 3227, the claimant brought suit against said Steedman in the court of common pleas of Lucas County, Ohio, for the recovery of said tax therein alleged to have been erroneously or illegally assessed or collected. On the 28th of January, 1876, he recovered judgment against said Steedman for $880, debt or damage (being the amount of said tax with interest thereon), and $23.35 costs of suit, and the same remains un-reversed and in full force, and is unpaid.

III. No notice of said suit was given to the Secretary of the Treasury, the Solicitor of the Treasury, or the Attorney-General; but while the same was pending, and prior to September 13,1875, the counsel for claimant informed the Commissioner of Internal Revenue thereof, and of its nature and purpose.

IV. In July, 1876, the claimant filed with the Commissioner of Internal Revenue, in accordance with the regulations of the Department, his claim for repayment of the amount so recovered against said Steedman, the collector, under the provisions of Revised Statutes, § 3220.

The Commissiqner submitted the claim, with the evidence in its support, to the Secretary of the Treasury for his consideration and advisement, in compliance with the following regulation prescribed by the Secretary:

When the amount exceeds $250, the claim, with the evidence in its support, shall, before decision, be submitted to the Secretary for his consideration and advisement.

The Secretary of the Treasury, having considered the matter, addressed the following communication to the Commissioner:

Treasury Department, Office of the Secretary,

*Washington, D. O., June*29, 1878.

Hon. Green B. Eaum,

*Commissioner of Internal Revenue:*

Sir: Your letter of the 27th instant is received, in which you submit for my consideration and advisement the claim of J. O. Nixon for the payment of $1,034.64, being the amount of a judgment, with interest to July 1, 1878, rendered on the 28th day of January, 1876, in the court of common pleas of Lucas County, Ohio, in favor of the claimant in a suit brought by him against James B. Steedman, late collector of internal revenue for the first collection district of Louisiana.

It appears from the record in the case that the suit was an action for the recovery of $620.10, with interest, which sum was paid by the plaintiff to the defendant as tax due the Government, under the provisions of section 114 of the act of June 30, 1864 (13 Stat. L., 280), upon gross receipts from *451advertisements for the thr^e months ending March 31, 1866, the declaration heing that the average circulation of the paper published by the plaintiff ■didnot for said period average 2,000 copies, and that, therefore, the receipts were exempt from said tax, in accordance with the second proviso of said section. - '

Upon examination of the evidence submitted, I am of the opinion that the taxes in question were erroneously collected, and that the claim for the refunding of the amount should be allowed; but I would suggest that before making payment of the claim it might be expedient for your office to .ascertain whether the claimant is not indebted to the United States for -due on income.

In view of the large amount of gross receipts from advertisements returned by the claimant for taxation, and the peculiar circumstances under which the returns were made, it is reasonable to presume that the claimant had a taxable income, and as he made no taxable income returns, I think it probable that his liability to the Government.for failing to make such returns may be not only an offset to this claim, but a good defense in the ■suit which it appears has been brought by the claimant against late Collector Charles Smith, for the recovery of similar taxes, amounting to $691.08, .and likewise in any suit the claimant may have brought against late Collector *W.*P. Benton for the recovery of similar taxes paid by claimant to Benton, amounting to $3,777.15.

The papers in the case are herewith returned.

"Very respectfully,

John Shebman, *Secretary.*

Y. The Commissioner of Internal Bevenue having investigated the matters suggested to him by the Secretary of the Treasury in said letter, and having ascertained the facts in relation thereto, on the 28th of August, 1879, made the following allowance of repayment upon blank form No. 680, wliich is used in his office in common for all the different classes of cases of refund under Bevised Statutes, § 3220:

[Form No. 680.]

*schedule of*claims *for the refunding of taxes erroneously assessed and paid,,' which have lteen- examined and allowed.*



I hereby certify that-the foregoing claims for the refunding of taxes erroneously assessed and paid have been examined- and allowed.

H. C. Rogers,

*Acting*Commissioner.

Office Internal Revenue, *Aug. 28th,*1879.

*452
      *Comm’r of Int. Bov. in account with the United States, Cr'.*

By this amount for the refunding of taxes erroneously assessed and collected as per schédule No. 680 :

One claim, January, ’76. $1,092 55

Judgment, &c. $880 00

Interest. 189 20

- 1,069 20

Costs. 23 35

Total. $1,092 55^

VI. When judgments are recovered against collectors or deputy collectors of internal revenue for taxes collected by them, or against assessors, assistant assessors, collectors, deputy collectors or inspectors for damages in suits brought against them respectively by reason of anything done in the due performance of their official duty, it has been the uniform practice of the Commissioner (with the advice of the Secretary of the Treasury when the amount exceeds $250), when acting under the provisions which now form section 3220 of the Revised Statutes, from the first enactment of those provisions to the present day, in a proper case for repayment, to allow and repay the amount directly to the judgment creditor, and not to require the collector first to pay the judgment and then himself ask for repayment, and without awaiting for him to do so.

VII. The allowance of the Commissioner, upon which this action is brought, has not been paid, althoguk it has been presented through the accounting officers of the Treasury.

*Mr. Charles Chase*for the claimant:

Three leading cases settle the law of this case1 in favor of the claimant. *(Kaufman’s*Case, 11 C. Cls. R., 659, and 96 U. S. R., 567 ; *Beal lístate Savings Bank Case,*16 C. Cls. R., 335, and 104 U. S. R., 728; *Bunnegan’s Case,*17 C. Cls. R., 247.)

The Commissioner’s allowance can be impeached only for fraud or mistake. *“*Fraud will never be presumed,” and no error is proved.

The Commissioner acted within his jurisdiction, and this court cannot readjudicate matters specially committed to his discretion.

*453
      *Mr. F. H. Koioe*(with whom was *Mr. Thomas 8imons,*Assistant Attorney-G-eneral) for the defendants :

1. Section 3220 Revised Statutes delegates a threefold power to the Commissioner of Internal Reyónue. The Commissioner cannot in this case supplement the power conveyed to him by the second clause of the section with the power conveyed in the first clause. That power had been exhausted, so far as this case is concerned, by the action of Commissioner Pleasanton when he rejected the claim in 1871. (2 Opin., 8', 114; 6 ibid., 605; 15 ibid., 208; Opinion of Att’y-Gen., Feb. 16, 1881.)

2. The power sought to be exercised in this case by the Commissioner is that delegated by the second clause of section 3220, to wit: “To repay to any collector or deputy collector the full amount of such sums of money as may be recovered against him in any court for any internal taxes collected by Mm, with the costs and expenses of suit.” This court has settled that such an allowance as the one described in this case is conclusive if the officers have jurisdiction and their decision is free from fraud or mistake. *(Dunnegan’s Case,*17 C. Cls. R., 257.)

There is no fraud alleged in this case. But it is submitted that the-Commissioner’s allowance is void for mistake in this, that it was made in favor of the plaintiff in the judgment, and not the defendant.

3. Another objection arises upon the question of the jurisdiction of the Commissioner of 'Internal Revenue. Section 3220 provides that “ The Commissioner of Internal Revenue, subject to regulations prescribed by the Secretary of the Treasury, is authorized, &c.”

The regulations provide that “ When the amount exceeds $250 the claim, with the evidence in its support, shall, before decision, be submitted to the Secretary for his consideration and advisement.”

This claim was for more than $250. But it appears from the claimant’s own petition, as well as from the record, that the Secretary did not advise the payment of this claim, but, on the contrary, refused to permit its payment.

*454OPINION.

Richardson, J.,

delivered tbe opinion of the court:

This is an action upon the allowance by the Commissioner of Internal Eevenue under the provisions of section 3220 of the Eevised Statutes, which, so far is material in this case, is as follows :

> Sec. 3220. Tbe Commissioner of Internal Eevenue, subject to regulations prescribed by tbe Secretary of the Treasury, is authorized, on appeal to-him made, to remit, refund, and pay back all taxes erroneosuly or illegally assessed or collected, all penalties collected without authority, and all taxes that appear to be unjustly assessed or excessive in amount, or in any manner wrongfully collected.

> Also to.repay to any collector or deputy collector, the full amount of such sums of money as may be recovered against him in any court for any internal taxes collected by him, with the cost and expenses of suit.

> Also all damages and costs recovered against any assessor, assistant assessor, collector, deputy collector, or inspector in any suit brought against him by reason of anything done in the due performance of his official duty r *Provided *** *

It has been repeatedly held, in the language of the Supreme Court, that such an allowance is “ equivalent to an account stated between private parties, which is good until impeached for fraud or mistake,” and is an adjudication by the Commissioner upon which the Government’s “ liability is complete until in some appropriate form it is impeached.” *(Kaufman's Case,*11 C. Cls. R., 659; affirmed on appeal, 96 U. S. R., 567; *Bank of Greencastle Case,*15 C. Cls. R., 225; *Real Estate Savings Bank Case,*16 C. Cls., R., 335; affirmed on appeal, 104 U. S. R., 728; *Barrett & Co’s., Case,*16 C. Cls. R., 515; affirmed on appeal, 104 U. S. R., 728; *Dunnegan’s Case,*17 C. Cls. R., 247.)

Exactly what are all the kinds of mistakes which are sufficient to impeach such an allowance has not been determined. It is clear, however, that a mistake of jurisdiction made by the Commissioner would avoid his final decision, and it is equally clear that a mistake of judgment or discretion, while acting within the scope of his jurisdiction, cannot be set up and inquired into to impeach the conclusion to which he arrives. The rule laid down by the Supreme Court in *Wilcox*v. *Jackson*(13 Pet., 511), in relation to a similar question, seems to cover the ground on that point.

“ The principle upon this subject is concisely and accurately *455stated by this court in the case of *Elliott et al.*v. *Peirsol et al.*(1 Pet., 340), in these words: ‘Where a court has jurisdiction it has a right to decide every question which occurs in the cause; and whether its decision be correct or otherwise, its judgment, until reversed, is regarded as binding in every other court. But if it acts without authority its judgments and orders are regarded as nullities. They are not voidable, but simply void.”’

On the part of the defendants it is urged that because the claimant, before suit brought, had appealed to the Commissioner for refund of this very tax, for the recovery of which his judgment was subsequently obtained, and the Commissioner had rejected his claim, therefore the Commissioner’s power was exhausted, and he had no further authority in the matter, however it might arise, and could not allow payment of a judgment for the recovery of the amount of such tax. This position is untenable for two reasons :

*First.*An appeal to the Commissioner for refund was a condition precedent to the claimant’s right to bring suit at all, as provided in Bevised Statutes, as follows:

> Sec. 2236. No suit shall be maintained, in any court for the recovery of an internal tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority, or of any sums alleged to have been excessive or in any manner wrongfully collected, until appeal shall have been duly'made to the Commissioner of Internal Revenue, according to the provisions of law in that regard, and the regulations of the Secretary of the Treasury, established in pursuance thereof, and a decision of the Commissioner has been had therein: *Provided,*That if such decision is delayed more than six months from the date of such appeal, then the said suit may be brought, without first having a decision of the Commissioner, at any time within the period limited in the next section.

It would be an unreasonable construction to give to these provisions of the statutes, that the proceedings which Congress requires to be had *before*suit can be brought shall be held to be a bar to the relief affoi'ded -by other provisions to officers and creditors *after*judgment recovered in such suits; in other words, that a compliance with the condition precedent to bringing suit shall operate to defeat the enforcement against the United States of the judgment recovered therein. We cannot adopt such a construction. '

*Sceond.*This allowance is for the repayment of ajudgment *456recovered against a collector of taxes under the latter clauses, (before the proviso) of section 3220 of the Revised Statutes, and not for the refund of taxes erroneously or illegally assessed or collected under the first clause of the section. So the action of the Commissioner was not in both cases upon the same subject-matter, as his last decision was founded upon a case different from that involved in his first decision.

Another objection is that certain public officers, the Secretary of the Treasury, the Solicitor of the Treasury, and the Attorney-General, were not notified of the pendency of the claimant’s suit before judgment. This objection is futile, since neither section 3220 of the Revised Statutes nor any other law requires such notice as a condition precedent to the Commissioner’s action. It does appear, however, by the findings that the Commissioner was notified and was informed of the nature and purpose of the suit. This was a matter wholly for the consideration of that officer. He would not have been bound to make the allowance if all the public officers mentioned had been notified, and had appeared and defended the suit; and, on the other hand, if he saw fit in the exercise of that sound discretion to which Congress has intrusted the power, he might allow the repayment of the amount of the judgment, without previous notice of the pendence of the suit to himself or to any other officer of the Government.

It is further objected on the part of the defendants that the Commissioner of Internal Revenue has no authority under section 3220 of the Revised Statutes to allow the repayment of the amount of a judgment directly to the judgment creditor, and that he can make an allowance thereunder only to the collector or other officer himself, after he has paid the judgment recovered against him. That might perhaps be so if the business of the Commissioner were required to be conducted with all the strict and technical formalities applicable to actions at law, or were in fact generally so conducted. But the findings show, what perhaps might be judicially taken notice of, upon suggestion of counsel, as the course of public business, that it has been the uniform practice of the Commissioner and the Secretary of the Treasury, from the first enactment of the refunding statute to the present time, to make allowance in such cases to the judgment creditor, and not to require the collector, or other judgment debtor, first to pay the same out of *457his owii money, and then himself, to ap.ply for repayment from the public treasury.

The practice is a useful, reasonable, and proper one and ought to be upheld. It would be impracticable, and often impossible, for a collector or other officer to obtain money sufficient to pay such judgments against him, and it would be of no use except to meet a mere technicality. He might be subjected to great hardship, loss, and even bankruptcy if such judgments were required to be enforced against his property before he could obtain the beneficent relief accorded to him by statute. We so held in *Dunnegan's Case*(17 C. Cls. R., 247).

Unless there were some reasons known to the Commissioner why an officer should be made to pay the judgment himself, it would be a mere idle circuity, not favored in law, to require the money, which the Commissioner intended to refund, to pass to the judgment creditor through the hands of the officer. *Cir-cuitos est evitandus.*That there were no such reasons in this case is shown by the fact tliiit tlie Commissioner made the allowance to the judgment creditor. His unimpeached decision in that matter ought to be conclusive.

Besides it is by no means a perversion of the meaning of the language of the statute to hold that payment to the judgment creditor in such case is practically and in legal effect payment to the judgment debtor, since it relieves the latter from his liability, and.is therefore'to his use and for his benefit. At the same time it effectuates payment to the very person to whom the money is actually due and ultimately payable, and thus secures the accomplishment of the object of the statute, and prevents the remedy of the judgment debtor from being lost or destroyed through the inaction or pecuniary inability of the defendants’ revenue officers to do an act which does not affect the merits of the case as against the United States,' *Benedicta est expositio guando res redimitur a destructione.*'■

It must not be overlooked that this is not a proceeding to compel the Commissioner to make an allowance to the judgment creditor, but is a suit upon such an allowance already made by that officer, after he has taken all the facts into consideration, and, so far as it appears or may be inferred, without objection on the part of the judgment debtor and without any claim to the money having been set up by him for his own use.

The judgment of the court is that the claimant recover the sum of $1,092.55.