Source: http://www.ecases.us/case/scotus/c101450/old-colony-trust-co-v-commissioner
Timestamp: 2019-12-11 03:15:07
Document Index: 395291799

Matched Legal Cases: ['§ 283', '§ 1001', 'art 2', '§ 900', '§ 1005', '§ 283', '§ 284', '§ 283', '§ 24', '§ 1310', '§ 41']

Old Colony Trust Co. v. Commissioner, United States Supreme Court, Supreme Court, Federal Courts, COURT CASE
OLD COLONY TRUST COMPANY ET AL.
Argued January 10, 11, 1929. Reargued April 15, 1929. Decided June 3, 1929. CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT.
*717 *718 Mr. Arthur A. Ballantine, with whom Mr. George E. Cleary was on the brief, for Old Colony Trust Company.
No. 130 comes here by certificate from the Circuit Court of Appeals for the First Circuit. The action in that court was begun by a petition to review a decision of the United *719 States Board of Tax Appeals. The petitioners are the executors of the will of William M. Wood, deceased. On June 27, 1925, before Mr. Wood's death, the Commissioner of Internal Revenue notified him by registered mail of the determination of a deficiency in income tax against him for the years 1919 and 1920, under the Revenue Act of 1918. The deficiency was revised by the Commissioner August 18, 1925. An appeal was taken to the Board of Tax Appeals, which was filed October 27, 1925. A hearing before the Board, April 11, 1927, resulted in a decision November 12, 1927. The Board approved the action of the Commissioner and found a deficiency in the federal income tax return of Mr. Wood for the year 1919 of $708,781.93, and for the year 1920 of $350,837.14. The petition for review was perfected December 23, 1927, pursuant to the Revenue Act of 1926, § 283(b), and §§ 1001 to 1005, c. 27, 44 Stat., Part 2, 9, 65, 109, and Rule 38 of the First Circuit Court of Appeals.
"Voted: That this company pay any and all income taxes, State and Federal, that may hereafter become due and payable upon the salaries of all the officers of the company, including the president, William M. Wood; the comptroller, Parry C. Wiggin; the auditor, George R. Lawton; and the following members of the staff, to wit: Frank H. Carpenter, Edwin L. Heath, Samuel R. Haines, *720 and William M. Lasbury, to the end that said persons and officers shall receive their salaries or other compensation in full without deduction on account of income taxes, State or Federal, which taxes are to be paid out of the treasury of this corporation."
Taxes for 1918 paid in 1919 ........... $681,169.88
Taxes for 1919 paid in 1920 ...........  351,179.27
The first point presented to us is that of the jurisdiction of this Court to answer the question of law certified. It *721 requires us to examine the original statute providing for the Board of Tax Appeals under the Revenue Act of 1924, and the amending Act of 1926.
Section 274 (b) provided that if the Board determined there was a deficiency, the amount so determined should be assessed and paid upon notice and demand from the collector. No part of the amount determined as a deficiency by the Commissioner but disallowed as a deficiency by the Board, could be assessed, but the Commissioner was at liberty, notwithstanding the decision of the Board against him, to bring a suit in a proper court against the taxpayer to collect the alleged deficiency.
On the other hand, by § 900 (g) it was provided that in any suit brought by the Commissioner, or by the taxpayer *722 to recover any amounts paid in pursuance of a decision of the Board, the findings of the Board were prima facie evidence of the facts.
It is suggested that the proceedings before the Circuit Courts of Appeals or the District Court of Appeals on a petition to review are not and can not be judicial, for they involve "no case or controversy," and without this a Circuit Court of Appeals, which is a constitutional court (Ex parte Bakelite Corporation, ante, p. 438) is incapable of exercising its judicial function. This view of the nature of the proceedings we can not sustain.
The case is analogous to the suits which are lodged in the Circuit Courts of Appeals upon petition or finding of an executive or administrative tribunal. It is not important whether such a proceeding was originally begun by an administrative or executive determination, if when it comes to the court, whether legislative or constitutional, it calls for the exercise of only the judicial power of the court upon which jurisdiction has been conferred by law. *723 The jurisdiction in this cause is quite like that of Circuit Courts of Appeals in review of orders of the Federal Trade Commission. Federal Trade Commission v. Eastman, 274 U.S. 623; Silver Co. v. Federal Trade Commission, 292 Fed. 752. There are other instances of a like kind which can be cited. United States v. Ritchie, 17 How. 525, 534; Interstate Commerce Commission v. Brimson, 154 U.S. 447, 469; Stephens v. Cherokee Nation, 174 U.S. 445, 447. See also Fong Yue Ting v. United States, 149 U.S. 698, 714.
It is not necessary that the proceeding to be judicial should be one entirely de novo; it is enough that, before the judgment which must be final has been invoked as an exercise of judicial power, it shall have certain necessary features. What these are has been often declared by this Court. Perhaps the most comprehensive definitions of them are set forth in Muskrat v. United States, 219 U.S. 346, 356, where this Court entered into the inquiry what was the exercise of judicial power as conferred by the Constitution. There was cited there a definition by Mr. Justice Field, in Re Pacific Railway Commission, 32 Fed. 241, 255, which has been generally accepted as accurate. He said:
"The judicial article of the Constitution mentions cases and controversies. The term `controversies,' if distinguishable at all from `cases,' is so in that it is less comprehensive than the latter; and includes only suits of a civil nature. Chisholm v. Georgia, 2 Dall. 431, 432; 1 Tuch. Bl. Comm. App. 420, 421. By cases and controversies are intended the claims of litigants brought before the courts for determination by such regular proceedings as are established by law or custom for the protection or enforcement of rights, or the prevention, redress, or punishment of wrongs. Whenever the claim of a party under the Constitution, laws or treaties of the United *724 States takes such a form that the judicial power is capable of acting upon it, then it has become a case. The term implies the existence of present or possible adverse parties whose contentions are submitted to the court for adjudication."
In the case we have here, there are adverse parties. The United States or its authorized official asserts its right to the payment by a taxpayer of a tax due from him to the Government, and the taxpayer is resisting that payment or is seeking to recover what he has already paid as taxes when by law they were not properly due. That makes a case or controversy, and the proper disposition of it is the exercise of judicial power. The courts are either the Circuit Court of Appeals or the District of Columbia Court of Appeals. The subject matter of the controversy is the amount of the tax claimed to be due or *725 refundable and its validity, and the judgment to be rendered is a judicial judgment.
It is next suggested that there is no adequate finality provided in respect to the action of these courts. In the first place, it is not necessary, in order to constitute a judicial judgment that there should be both a determination of the rights of the litigants and also power to issue formal execution to carry the judgment into effect, in the way that judgments for money or for the possession of land usually are enforced. A judgment is sometimes regarded as properly enforceable through the executive departments instead of through an award of execution by this Court, where the effect of the judgment is to establish the duty of the department to enforce it. La Abra Silver Mining Co. v. United States, 175 U.S. 423, 457, 461. The case of Fidelity National Bank & Trust Co. v. Swope, 274 U.S. 123, 132, shows clearly that there are instances where the award of execution is not an indispensable element of a constitutional case or controversy. In that decision there are collected familiar examples of judicial proceedings resulting in a final adjudication of the rights of litigants without it.
By the first, the decision of the Board of Tax Appeals rendered after the passage of the Act of 1926 may be reviewed by the Circuit Court of Appeals or the District Court of Appeals if a petition for such review is filed *726 either by the Commissioner or the taxpayer within six months after the decision is rendered. The courts are to adopt rules for the filing of the petition, the preparation of the record, and the conduct of the proceedings upon such review. The review is not to operate as a stay of assessment or collection of any portion of the amount of the deficiency determined by the Board, unless a petition for review is filed by the taxpayer, and unless the taxpayer has filed a bond which when enforced will operate finally to settle the rights of the parties as found by the courts.
By § 1005, the decision of the Board is to become final in respect to all the numerous instances which in the course of the review may naturally end further litigation. In the provisions of these sections, the legislation prescribes minute details for the enforcement of the judgments that are the result of these petitions for review in the several courts vested with jurisdiction over them. *727 The complete purpose of Congress to provide a final adjudication in such proceedings, binding all the parties, is manifest and demonstrates the unsoundness of the objection.
We have before us, however, for actual inquiry a case different from one just considered in the regular course of a petition for review of a decision of the Board, begun and decided all after the enactment of the Act of 1926. It is one in which the appeal to the Board of Tax Appeals had been taken, but the appeal had not been decided by the Board before the passage of the Act of 1926. That presents what involves a troublesome exception or duplication in the procedure. This occurs because of the last excepting clause of § 283 (b) of the amending Act of 1926, which is as follows:
The provisions of § 284 (d) are those which deny to the taxpayer the power to bring any suit for the recovery of the tax after he has adopted the procedure of appealing to the Board of Tax Appeals or to the Circuit Court of Appeals.
By this last exception in § 283 (b), there seems still open to the taxpayers who have filed a petition under the *728 law of 1924 and have not had a decision by the Board before the enactment of the law of 1926, the right to pay the tax and sue for a refund in the proper District Court (Par. 20 of § 24 of the Judicial Code, as amended by § 1310 (c), c. 136, 42 Stat. 311, U.S. Code, Title 28, § 41). Emery v. United States, 27 F. (2d) 992, and Old Colony R.R. v. United States, 27 F. (2d) 994, hold that the petitioner still retains this earlier remedy.
Second. The jurisdiction here is based upon the certificate of a question of law. That is whether the payment by the employer of the income taxes assessed against the employee constitutes additional returnable taxable income to such employee. The certification of such a question by the Circuit Court of Appeals is an invocation *729 of the appellate jurisdiction of this Court and therefore within the Constitution.
This result is sustained by many decisions. Providence & Worcester R.R. Co., 5 B.T.A. 1186; Houston Belt & Terminal Ry. Co. v. Commissioner, 6 B.T.A. 1364; West End Street Railway Co. v. Malley, 246 Fed. 625; Rennselaer & S.R. Co. v. Irwin, 249 Fed. 726; Northern R. *730 Co. of New Jersey v. Lowe, 250 Fed. 856; Houston Belt & Terminal Ry. Co. v. United States, 250 Fed. 1; Blalock v. Georgia Ry. & Electric Co., 246 Fed. 387; Hamilton v. Kentucky & Indiana Terminal R.R. 289 Fed. 20; American Telegraph & Cable Co. v. United States, 61 Ct. Cl. 326; United States v. Western Union Telegraph Co., 19 Fed. (2d) 157; Estate of Levalley, 191 Wis. 356; Estate of Irwin, 196 Cal. 366.
Nor can it be argued that the payment of the tax in No. 130 was a gift. The payment for services, even though entirely voluntary, was nevertheless compensation within the statute. This is shown by the case of Noel v. Parrott, 15 F. (2d) 669. There it was resolved that a gratuitous appropriation equal in amount to $3 per share on the outstanding stock of the company be set aside out of the assets for distribution to certain officers and employees of the company and that the executive committee be authorized to make such distribution as they deemed wise and proper. The executive committee gave $35,000 to be paid to the plaintiff taxpayer. The court said, p. 672:
It is next argued against the payment of this tax that if these payments by the employer constitute income to the employee, the employer will be called upon to pay the tax imposed upon this additional income, and that the payment of the additional tax will create further income which will in turn be subject to tax, with the result that there would be a tax upon a tax. This it is urged is the result of the Government's theory, when carried to its *731 logical conclusion, and results in an absurdity which Congress could not have contemplated.
In the first place, no attempt has been made by the Treasury to collect further taxes, upon the theory that the payment of the additional taxes creates further income, and the question of a tax upon a tax was not before the Circuit Court of Appeals and has not been certified to this Court. We can settle questions of that sort when an attempt to impose a tax upon a tax is undertaken, but not now. United States v. Sullivan, 274 U.S. 259, 264; Yazoo & Mississippi Valley R.R. v. Jackson Vinegar Co., 226 U.S. 217, 219. It is not, therefore, necessary to answer the argument based upon an algebraic formula to reach the amount of taxes due. The question in this case is, "Did the payment by the employer of the income taxes assessable against the employee constitute additional taxable income to such employee?" The answer must be "Yes."
The Board of Tax Appeals belongs to the executive department of the Government and performs administrative functions  the assessment of taxes. The statute attempts to grant a broad appeal to the courts and directs them to reconsider the Board's action  to do or to say what it should have done. This enjoins the use of executive power, not judicial. The duty thus imposed upon the courts is wholly different from that which arises upon the filing of a petition to annul or enforce the action of the Interstate Commerce Commission or the Federal Trade Commission.
Citation Numbers： 279 U.S. 716, 49 S. Ct. 499, 73 L. Ed. 918, 1929 U.S. LEXIS 66
Old Mission Portland Cement Co. v. Helvering , 293 U.S. 289 ( 1934 )
Raybestos-Manhattan Co. v. United States , 296 U.S. 60 ( 1935 )
United States v. Hendler , 303 U.S. 564 ( 1938 )