Source: https://www.legalcrystal.com/case/93857/graham-vs-du-pont
Timestamp: 2018-03-22 02:39:37
Document Index: 699732316

Matched Legal Cases: ['§ 3224', '§ 252', '§ 3224', '§ 252', '§ 3226', '§ 252', '§ 252', '§ 3224', '§ 3224']

Graham Vs Du Pont - Citation 93857 - Court Judgment | LegalCrystal
Graham Vs. Du Pont - Court Judgment
LegalCrystal Citation legalcrystal.com/93857
Case Number 262 U.S. 234
.....as amended by revenue act of march 4, 1923, c. 276, 42 stat. 1504, to pay the tax assessed, bring suit to recover it back, and, in such suit, to raise questions as to the value of the stock and the amount of resulting tax, and also as to whether the assessment was barred by statutory time limitation. p. 262 u. s. 258 . 284 f. 1017 reversed. this is a proceeding by certiorari to review the action of the circuit court of appeals of the third circuit in affirming on appeal a temporary injunction granted by the district court of delaware restraining the then collector of internal revenue for the district of delaware from levying a distraint against the property of the complainant, alfred i. dupont, to collect the sum of $1,576,015.06 assessed against him by the commissioner.....
Graham v. Du Pont - 262 U.S. 234 (1923)
U.S. Supreme Court Graham v. Du Pont, 262 U.S. 234 (1923)
1. Under § 3224, Rev.Stats., federal taxing officers who, in the course of general jurisdiction over the subject matter, have made an assessment and claim that it is valid cannot be enjoined from collecting the tax upon the ground that the assessment is illegal. P. 262 U. S. 254 .
2. One who would contest the validity of a federal tax upon the ground that the assessment and the right to distrain were barred by a statutory time limitation should pay the tax and sue to recover it, and not seek relief by a suit to enjoin the Collector from distraining for the tax. P. 262 U. S. 255 .
3. Under § 252 of the Revenue Act of 1918, reenacted in the Revenue Act of 1921, a taxpayer whose return of income was due March 15, 1916, and against whom an additional assessment was made December 31, 1919, could pay the amount of the assessment, make his claim therefor, and, if that were rejected, have at least until March 15, 1921, within which to sue to recover back the payment. P. 262 U. S. 256 .
4. A taxpayer cannot, by delaying payment of an assessment until his right to sue to recover it back is barred by limitations, make a case so extraordinary and entirely exceptional as to render Rev.Stats., § 3224, inapplicable to his suit to enjoin collection by distraint. P. 262 U. S. 256 . Lipke v. Lederer, 259 U. S. 557 ; Hill v. Wallace, id., 259 U. S. 44 , and other cases distinguished.
of such assessment as void, because not made within the statutory time limit therefor and because made on a dividend of corporate shares which were not income (involving a question afterward determined adversely in United States v. Phellis, 257 U. S. 156 ) held entitled under § 252 of Revenue Act 1921, and § 3226, Rev.Stats., as amended by Revenue Act of March 4, 1923, c. 276, 42 Stat. 1504, to pay the tax assessed, bring suit to recover it back, and, in such suit, to raise questions as to the value of the stock and the amount of resulting tax, and also as to whether the assessment was barred by statutory time limitation. P. 262 U. S. 258 .
In a reorganization of a Dupont Powder Company of New Jersey and the organization of a new Dupont Powder Company of Delaware to take over many of the assets of the old company, the complainant, in the year 1915, received 75,534 shares of the common stock of the Delaware company of the par value of $100 each. The transaction was the subject of consideration by this Court in United States v. Phellis, 257 U. S. 156 , where it was determined that shares in the Delaware company received by stockholders of the New Jersey company, as the complainant received his at the rate of two in the Delaware company in exchange for one in the New Jersey company, was a separation of past accumulation of profits from the capital of the New Jersey company and a distribution to the stockholders, and thus constituted taxable income under the Income Tax Law of 1913.
Section 3224, Revised Statutes, provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court." In Cheatham v. United States, 92 U. S. 85 , 92 U. S. 88 ; State Railroad Tax Cases,
92 U. S. 575 , 92 U. S. 613 , and in Snyder v. Marks, 109 U. S. 189 , 109 U. S. 193 , it was said that the system prescribed by the United States in regard to both customs duties and internal revenue taxes of stringent measures, not judicial, to collect them, with appeals to specified tribunals and suits to recover back moneys illegally exacted, was a system of corrective justice intended to be complete, and enacted under the right belonging to the government to prescribe the conditions on which it would subject itself to the judgment of the courts in the collection of its revenues. In the exercise of that right, it declares by paragraph 3224 that its officers shall not be enjoined from collecting a tax claimed to have been unjustly assessed when those officers, in the course of general jurisdiction over the subject matter in question, have made the assessment and claim that it is valid. This view has been approved in Shelton v. Platt, 139 U. S. 591 , in Pittsburg Ry. v. Board of Public Works, 172 U. S. 32 , in Pacific Whaling Co. v. United States, 187 U. S. 447 , 187 U. S. 451 -452, in Dodge v. Osborn, 240 U. S. 118 , 240 U. S. 121 , and in Bailey v. George, 259 U. S. 16 .
The return was due March 15, 1916. The assessment was made December 31, 1919. The complainant might then have paid the tax, and would have had two years in which to make his claim, and, if rejected, to sue to recover it back if, as he now submits, § 252 limited his right to pay and sue to recover. Under such a construction and application of § 252, suit must have been brought on or before March 15, 1921. This is what Phellis did ( United States v. Phellis, 257 U. S. 156 ), and there was no question raised as to his right to bring the suit in the Court of Claims to recover back the tax paid by him, if it had proved to be illegally assessed and collected. Certainly complainant could not, by delaying his payment until his right to sue to recover it back expired, make a case so extraordinary and entirely exceptional as to render § 3224, Rev.Stats., inapplicable.
The cases complainant's counsel rely on do not apply. The cases of Lipke v. Lederer, 259 U. S. 557 , and Regal Drug Corp. v. Wardell, 260 U. S. 386 , were not cases of enjoining taxes at all. They were illegal penalties in the nature of punishment for a criminal offense. Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429 , and Brushaber v. Union Pacific R. Co., 240 U. S. 1 , were suits by stockholders against corporations to restrain the corporations from paying taxes alleged to be unconstitutional. Hill v. Wallace, 259 U. S. 44 , was in part a suit like the foregoing. It was a bill filed by members of the Chicago Board of Trade to prevent the governing board from applying to the Secretary of Agriculture to have the Board of Trade designated as a "contract market" under the Future Trading Act (42 Stat. 187), on the ground that the act was unconstitutional and its operation would impair the value of the board to its members. Without such designation, no member could have sold grain for future delivery without paying a prohibitive tax, and if he sold without paying the tax, he was subjected to heavy criminal penalties. To pay such a tax on each of the many thousands of transactions on the board, and to sue to recover them back, would have been utterly impracticable. It would have blocked the entire future grain business of the country, and would have seriously injured not only the members of the board, but also the producing and consuming public. This phase of the situation was so clear that the government in effect consented to the temporary injunction. See Hill v. Wallace, 257 U. S. 310 , 257 U.S. 615. Under these extraordinary and most exceptional circumstances, it was held that § 3224 was not applicable to prevent an injunction against collection of such a prohibitive tax imposed for the purpose of regulating the future grain
business with all the unnecessary and disastrous consequences its enforcement would entail if the act was unconstitutional. Hill v. Wallace should, in fact be classed with Lipke v. Lederer, 259 U. S. 557 , as a penalty in the form of a tax. Certainly we have no such case here.