Source: https://supreme.justia.com/cases/federal/us/283/589/
Timestamp: 2019-04-20 09:01:33+00:00

Document:
1. Stockholders who have received the assets of a dissolved corporation may be compelled to discharge therefrom the unpaid federal taxes on the income and excess profits of the corporation. P. 283 U. S. 592.
2. Under the Revenue Act of 1926, § 280(a)(1), and Act of May 29, 1928, this liability of the transferee, "at law or in equity," may be enforced summarily in the same manner as that of any delinquent taxpayer, as well as by proceedings to enforce the tax lien or by actions at law or in equity. Id.
3. The rule that the United States may collect its internal revenue by summary administrative proceedings if adequate opportunity be afforded for a later determination of legal rights applies to taxes assessed against transferees of corporate property. P. 283 U. S. 593.
4. The procedure provided in § 280(a)(1) satisfies the requirements of due process because two alternative methods of eventual judicial review are available to the transferee: (a) he may contest his liability by bringing an action, either against the United States or the Collector, to recover the amount paid, or (b) he may avail himself of the provisions for immediate redetermination of the liability by the Board of Tax Appeals, and, if dissatisfied, may have a further review by the Circuit Court of Appeals, and possibly by this Court on certiorari. P. 283 U. S. 597.
5. The review by the Board of Tax Appeals and the Circuit Court of Appeals is not to be deemed constitutionally inadequate because the tax may be collected while the case is before that court unless a bond is filed, or because the Board's findings of fact are to be treated by that court as final if there is any evidence to support them. P. 283 U. S. 599.
6. The right of the taxpayer to stay payment pending immediate judicial review, by filing a bond, is a privilege granted by the sovereign as an act of grace. Id.
7. Save as there may be an exception for issues presenting claims of constitutional right, such administrative findings on issues of fact are accepted by the court as conclusive if the evidence was legally sufficient to sustain them and there was no irregularity in the proceedings. P. 283 U. S. 600.
8. The method of assessment and collection permitted by § 280(a)(1) was intended to apply, and is constitutionally applicable, where the transfer of assets occurred before the enactment of the Revenue Act, of 1926. P. 283 U. S. 601.
9. Assuming that the liability "at law and in equity" of the transferees of corporate assets to meet federal taxes incurred by their corporation may vary according to the laws of the States of incorporation, this does not make the tax provision invalid either as an unconstitutional delegation of federal taxing power to the States or as a departure from the requirement of geographical uniformity. P. 283 U. S. 602.
10. The time within which the summary proceeding to enforce liability for the tax of a corporation may be taken against a stockholder transferee of its assets is determined by the federal Act, and not by the state statute of limitations on suits against stockholders. P. 283 U. S. 602.
11. One who receives corporate assets upon dissolution of the corporation is severally liable, to the extent of the assets received, for the payment of income and excess profits taxes of the corporation. P. 283 U. S. 603.
12. In a summary proceeding under § 280, Revenue Act of 1926, to collect such taxes from one such transferee, the Government is not obliged to join other transferees and marshal the assets of the corporation so as to adjust the rights of the various stockholders. P. 283 U. S. 604.
CERTIORARI, 282 U.S. 828, to review a judgment affirming the action of the Board of Tax Appeals, 15 B.T.A. 1218, in sustaining certain deficiency tax assessments.
to any of the other transferees, and no suit or proceedings for collection was instituted against them. Upon petition by Phillips' executors for a redetermination, the Board of Tax Appeals held that the estate was liable for the full amount. 15 B.T.A. 1218. Its order was affirmed by the United States Circuit Court of Appeals for the Second Circuit. 42 F.2d 177. Because of conflict in the decisions of the lower courts, [Footnote 1] a writ of certiorari was granted. 282 U.S. 828.
additional obstacles are encountered if it is applied to transfers made before the enactment of § 280(a)(1); that the specific liability here sought to be enforced is governed by the law of Pennsylvania and barred by its statute of limitations, and that in no event can the stockholder be held liable for more than his pro rata share of the unpaid corporate tax.
is that such liability (except where a lien had attached before the transfer) is dependent upon questions of law and fact which have heretofore been adjudicated by courts; that to confer upon the Commissioner power to determine these questions in the first instance offends against the principle of the separation of the powers, and that the inherent denial of due process is not saved by the provisions for deferred review in a suit to recover taxes paid, or, in the alternative, for an immediate appeal to the Board of Tax Appeals with the right to review its determination in the courts, because there are limitations and conditions in either method of judicial review.
for the alleged invasion of property right if the exaction is made under color of their offices by revenue officers charged with the general authority to assess and collect the revenue. [Footnote 6] Snyder v. Marks, 109 U. S. 189; Dodge v. Osborn, 241 U. S. 118; Graham v. du Pont, 262 U. S. 234. This prohibition of injunctive relief is applicable in the case of summary proceedings against a transferee. Act of May 29, 1928, c. 852, § 604, 45 Stat. 791, 873. Proceedings more summary in character than that provided in 280, and involving less directly the obligation of the taxpayer, were sustained in Murray's Lessee v. Hoboken Land & Improvement Co., 18 How. 272. It is urged that the decision in the Murray case was based upon the peculiar relationship of a collector of revenue to his government. The underlying principle in that case was not such relation, but the need of the government promptly to secure its revenues.
and collection meanwhile may be stayed by giving a bond to secure payment. Act of February 26, 1926, c. 27, § 1001, 44 Stat. 9, 10; Act of May 29, 1928, c. 852, § 603, 45 Stat. 791, 873. There may be a further review by this Court on certiorari. These provisions amply protect the transferee against improper administrative action. Compare Hurwitz v. North, 271 U. S. 40.
The alternative judicial review provided is adequate in both cases.
Third. It is contended that § 280(a)(1) is invalid because the liability at law or in equity of a transferee is dependent upon the law of the State of incorporation, and that, thus, the section improperly delegates the federal taxing power to the state legislatures; and, further, that the tax liability of the transferee, as thus assessed and collected, violates the constitutional requirement of uniformity because differences in state laws may affect such liability. The extent and incidence of federal taxes not infrequently are affected by differences in state laws; but such variations do not infringe the constitutional prohibitions against delegation of the taxing power or the requirement of geographical uniformity. Florida v. Mellon, 273 U. S. 12, 273 U. S. 17; Crooks v. Harrelson, 282 U. S. 55; Poe v. Seaborn, 282 U. S. 101, 282 U. S. 117. Compare Head Money Cases, 112 U. S. 580, 112 U. S. 594; Clark Distilling Co. v. Western Maryland Ry. Co., 242 U. S. 311, 242 U. S. 327. We have, therefore, no occasion to decide whether the right of the United States to follow transferred assets is limited by any state laws.
unless Congress provides that it shall be. United States v. Nashville, Chattanooga & St. Louis Ry. Co., 118 U. S. 120; Chesapeake & Delaware Canal Co. v. United States, 250 U. S. 123, 250 U. S. 125; E. I. du Pont de Nemours & Co. v. Davis, 264 U. S. 456, 264 U. S. 462. The detailed limitation periods specified in § 280 evidence the intention that they alone shall be applicable to the proceedings therein authorized.
Nonjoinder cannot affect or diminish the several liability of the stockholder or transferee sued. Compare Benton v. American National Bank, 276 Fed. 368. [Footnote 17] The individual several liability of Phillips may be fully enforced by the United States in the present proceeding. Whatever the petitioners' right to contribution may be against other stockholders who have also received shares of the distributed assets, the Government is not required, in collecting its revenue, to marshal the assets of a dissolved corporation so as to adjust the rights of the various stockholders. There is nothing in § 280 to indicate that Congress intended to limit the procedure in this way. And any such requirement would seriously impair the efficiency of the summary method provided.
that Phillips' liability for the tax is limited to a pro rata share of the assets finally distributed, that is, to one quarter of the unpaid deficiency. But the plain import of the findings is that there was a single distribution which took several months to complete, and there is no question that the entire assets were thereby distributed. Moreover, such argument, urged for the first time here, comes too late. For while the burden was on the Commissioner to prove before the Board that Phillips was liable as a transferee, the facts in the case at bar were stipulated, and it was agreed that the date of complete liquidation was September 27, 1919, by which time petitioners' decedent had received his full share of the distributed assets. Since it was stipulated that the final transfers of assets were without consideration; that they completely exhausted the corporate assets; that the balance of the deficiencies, assessed against the corporation, remains unpaid, and that the distributive dividend received by Phillips was in excess of the remaining tax liability, the burden resting upon the Commissioner was sustained.
Compare Owensboro Ditcher & Grader Co. v. Lewis, 18 F.2d 798; Mid-Continent Petroleum Corp. v. Alexander, 35 F.2d 43; Rotzahn v. Tyroler, 36 F.2d 208. See also Felland v. Wilkinson, 33 F.2d 961; Cappellini v. Commissioner, 14 B.T.A. 1269.
Such proceedings to obtain payment of corporate income and profits taxes from stockholders or other transferees have been frequently brought. See United States v. McHatton, 266 Fed. 602; Updike v. United States, 8 F.2d 913, certiorari denied, 271 U. S. 661; United States v. Capps Mfg. Co., 9 F.2d 79, affirmed, 15 F.2d 528; United States v. Fairall, 16 F.2d 328; United States v. Klausner, 25 F.2d 608; United States v. Armstrong, 26 F.2d 227; United States v. Garbutt, 27 F.2d 1000, modified, 35 F.2d 924; United States v. Pann, 23 F.2d 714, affirmed, 44 F.2d 321. Compare United States v. Boss & Peake Automobile Co., 285 Fed. 410, affirmed, 290 Fed. 167; Dreyfuss Dry Goods Co. v. Lines, 18 F.2d 611, reversed, 24 F.2d 29; United States v. Snook, 24 F.2d 844, reversed sub. nom. Austin v. United States, 28 F.2d 677; United States v. Updike, 25 F.2d 746, affirmed, 32 F.2d 1, 281 U. S. 489; People's Industrial Life Ins. Co. v. United States, 29 F.2d 650.
Where the transferee took property subject to the tax lien of the United States, the lien could be enforced by summary proceeding. Rev.Stat. §§ 3185-3205; Mansfield v. Excelsior Rfg. Co., 135 U. S. 326, 135 U. S. 336; Blacklock v. United States, 208 U. S. 75, 208 U. S. 87. Or by an action in equity. Rev.Stat. 3207. Compare 26 U.S.C. §§ 115, 136; Heyward v. United States, 2 F.2d 467; In re Glover-McConnell Co., 9 F.2d 683, 686. See also United States v. Capital City Dairy Co., 252 Fed. 900, 904; United States v. Haar, 27 F.2d 250, 251, certiorari denied, 278 U.S. 634.
"The liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax . . . imposed . . . by any prior income, excess-profits, or war profits tax Act"
"be assessed, collected, and paid in the same manner . . . as a deficiency in a tax imposed by this title (including the provisions in case of a delinquency in payment after notice and demand, the provisions authorizing distraint and proceedings in court for collection, and the provisions prohibiting claims and suits for refunds)."
44 Stat. 61. This remedy is in addition to proceedings to enforce the tax lien or actions at law and in equity. Act of February 26, 1926, c. 27, § 1122(b), 44 Stat. 9, 121; Act of May 29, 1928, c. 852, § 617(b), 45 Stat. 791, 877. Compare United States v. Greenfield Tap & Die Corp., 27 F.2d 933; United States v. Updike, 25 F.2d 746, 747, affirmed, 32 F.2d 1, 4, 281 U. S. 489.
"makes the procedure for the collection of the amount of the liability of transferees conform to the procedure for the collection of taxes . . . for procedural purposes the transferee is treated as a taxpayer would be treated."
"Section 280 of the 1926 Act has proved a very effective and necessary method of stopping tax evasion through the various favorite methods recognized by everyone prior to the 1926 Act. The enforcement of the liability through court process had been ineffective, and the amount of revenue lost through mala fide transfers or through corporate distribution of assets was admittedly large."
Cheatham v. United States, 92 U. S. 85, 92 U. S. 89; State Railroad Tax Cases, 92 U. S. 575, 92 U. S. 615; Springer v. United States, 102 U. S. 586, 102 U. S. 593; Dodge v. Osborn, 240 U. S. 118, 240 U. S. 120; Graham v. du Pont, 262 U. S. 234, 262 U. S. 255. The earliest federal excise tax acts contained provisions for suit, or levy by distraint and sale. E.g., Act of March 3, 1791, c. 15, § 23, 1 Stat. 199, 204; Act of December 21, 1814, c. 15, § 5, 3 Stat. 152, 154; Act of January 9, 1815, c. 21, § 26, 3 Stat. 164, 173; Act of January 18, 1815, c. 22, § 5, 3 Stat. 180, 182; id. c. 23, § 9, 3 Stat. 186, 188. Similarly, a tax lien on lands and chattels was early introduced. Act of July 22, 1813, c. 16, § 19, 3 Stat. 22, 30; Act of January 9, 1815, c. 21, § 24, 3 Stat. 164, 172. Compare Act of March 3, 1815, c. 100, §§ 12-15, 3 Stat. 239, 241.
For the ancient English practise of summary seizure of the property of a debtor of a Crown debtor, by means of an immediate extent in the second degree, see West, The Law and Practice of Extents, cc. 1 3, 24; Chitty, Laws of the Prerogative of the Crown, pp. 261, 303-07; Price, Laws and Course of the Exchequer, c. XIV; Robertson, Civil Proceedings By and Against the Crown, c. III, pp. 203-04, 206-07. As to the adoption of the writ in this country, see Hackett v. Amsden, 56 Vt. 201, 206-07. Compare McMillen v. Anderson, 95 U. S. 41.
Rev.Stat. § 3224. There is no substantial relaxation of this principle in the provision that, while an appeal is pending before the Board of Tax Appeals, no proceeding by distraint may be taken, and, notwithstanding Rev.Stat. § 3224, such proceeding may be enjoined. Act of February 26, 1926, c. 27, § 274(a), 44 Stat. 9, 55; Act of May 29, 1928, c. 852, § 272(a), 45 Stat. 791, 852; Peerless Woolen Mills v. Rose, 28 F.2d 661. For even in such case, if the Commissioner believes the assessment or collection of the tax will be endangered by delay, he may make an immediate jeopardy assessment and collect by distraint unless the taxpayer files a bond. Act of February 26, 1926, c. 27, § 279, 44 Stat. 9, 59; Act of May 29, 1928, c. 852, § 273, 45 Stat. 791, 854; Salikoff v. McCaughn, 24 F.2d 434. Compare Burnet v. Chicago Ry. Equip. Co., 282 U. S. 295, 282 U. S. 303. The paramount right of the United States to require immediate payment, or surety therefor, is not diminished.
The same rule is applied to eminent domain proceedings by a State. Sweet v. Rechel, 159 U. S. 380; Backus v. Fort Street Union Depot Co., 169 U. S. 557; Williams v. Parker, 188 U. S. 491; Bragg v. Weaver, 251 U. S. 57, 251 U. S. 62; Hays v. Port of Seattle, 251 U. S. 233, 251 U. S. 238; Joslin Mfg. Co. v. Providence, 262 U. S. 668, 262 U. S. 677.
It is asserted that these latter provisions, added by the Revenue Act of 1928, could not render valid an assessment void under § 280 of the 1926 Act. But as the objection relates only to the remedy and the hearing before the Board was not held until November, 1928, that is, after the 1928 Act was in effect, any alleged defect was cured.
"to a jury . . . is not to be found in the Seventh Amendment . . . , but merely arises by implication from the provisions of § 3226, Revised Statutes, which has reference to a suit at law."
Wickwire v. Reinecke, 275 U. S. 101, 275 U. S. 105.
See Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 277 U. S. 562, Note 7; Russell v. United States, 278 U. S. 181, 278 U. S. 186-87; Old Colony Trust Co. v. Commissioner, 279 U. S. 716, 279 U. S. 721.
Compare Davis v. Massachusetts, 167 U. S. 43, 167 U. S. 48; Gundling v. Chicago, 177 U. S. 183, 177 U. S. 187; Fischer v. St. Louis, 194 U. S. 361, 194 U. S. 371.
By November 1, 1930, 644 petitions for review under the Revenue Act of 1926 had been decided by the various circuit court of appeals, and 671 petitions were pending. See statement of the Chairman of the Board of Tax Appeals in Hearing Before the Subcommittee of House Committee on Appropriations, 71st Cong., 3d Sess., January 7, 1931, pp 19, 26.
Compare Lonsdale v. Commissioner, 32 F.2d 537; Hoosier Casualty Co. v. Commissioner, 32 F.2d 940; Jacobs v. Commissioner, 34 F.2d 233; O'Meara v. Commissioner, 34 F.2d 390; Insurance & Title Guarantee Co. v. Commissioner, 36 F.2d 842; Penney & Long, Inc. v. Commissioner, 39 F.2d 849; Barde Steel Products Corp. v. Commissioner, 40 F.2d 412.
"the period of limitation for assessment against the taxpayer expired before the enactment of this Act, but assessment against the taxpayer was made within such period,"
the Commissioner should have six years in which to make an assessment against the transferee, provided he could do so within one year after the enactment of the 1926 Act. Moreover, in all cases, an additional period of one year after the expiration of the period for assessing the taxpayer, was given. Compare H.R.Rep. No. 356, 69th Cong., 1st Sess., February 22, 1926, p. 44. Subdivision (c) provides that, in the case of corporations which had been dissolved, the period for assessment of the transferee was to be the same as if such "termination of existence had not occurred." These provisions clearly contemplated a dissolution and transfer of assets prior to the passage of the Act. Compare United States v. Updike, 281 U. S. 489, 281 U. S. 494. In the case at bar, two assessments against the corporate taxpayer had been made prior to 1926.
Compare Equity Rules 25, 39, 42; Watson v. National Life & Trust Co., 162 Fed. 7.
Benton v. American National Bank, 276 Fed. 368; McWilliams v. Excelsior Coal Co., 298 Fed. 884. Compare United States v. Boss & Peake Automobile Co., 285 Fed. 410, affirmed, 290 Fed. 167; Capps Mfg. Co. v. United States, 15 F.2d 528; Pann v. United States, 44 F.2d 321. See also Adams v. Perryman & Co., 202 Ala. 469, 80 So. 853; Singer v. Hutchinson, 183 Ill. 606, 620, 56 N.E. 388; Kimbrough v. Davies, 104 Miss. 722, 61 So. 697; Bartlett v. Drew, 57 N.Y. 587.
It was conceded below that, if the other stockholders are insolvent, or absent from the jurisdiction, or cannot be ascertained, they need not be joined. Compare 75 U. S. Gibson, 8 Wall. 498, 75 U. S. 506; Second National Bank of Erie v. Georger, 246 Fed. 517, 520; United States v. Armstrong, 26 F.2d 227, 233.

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