Case Name: Milton L. Howser, assignee of Horace Boughton, v. The United States
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1877-12
Citations: 13 Ct. Cl. 284
Docket Number: 
Parties: Milton L. Howser, assignee of Horace Boughton, v. The United States.
Judges: 
Reporter: United States Court of Claims Reports
Volume: 13
Pages: 284–292

Head Matter:
BOUG-HTON’S CASE.
Milton L. Howser, assignee of Horace Boughton, v. The United States.
On the Proofs.
The right of the claimant lo judgment teas in effect determined on demurrer. (12 0. Cls. 11., 330.) Subsequently Ids assignee in bankruptcy is substituted as elaim-ant, and the defendants set up a counter-claim for a larger amount, but seek to use it only as a set-off to the claimant’s demand.
I. The decision on demurrer (12 C. Cls. R., 330) reaffirmed.
II. Tlie Government may set up a tax Iby way of counter-claim in an action where tlie claimant deposited money with a collector of internal revenue .for a special purpose and the latter improperly applied it to the payment of a disputed tax, although the collector himself may have had no right to make that application of the claimant’s money held in pledge by him.
III! Where an assignee in bankruptcy is claimant and the defendants set up a' counter-claim for a larger amount than the claimant is entitled to have judgment for, but do not desire that the validity of the counterclaim be finally determined in this court for the purpose of ascertaining' the amount due to be proved in bankruptcy, judgment will be entered allowing the claim, but setting it off against a like amount of the defendants’ counter-claim.
The Reporters’ statement of tbe case:
Tbe following facts were found by tbe court:
I. Horace Bougbton was United States assessor of internal revenue for tbe fourth district of Texas from May 29, 1866, to July 31, 1869.
II. At tbe spring term of tbe United States district court for tbe western district, A. D. 1870, said Bougbton was indicted upon three indictments: one for defrauding tbe revenue; one ^for bribery; and one for conspiracy with Thomas Browning, C. M. Hite, Webster Flannigan, and others, to defraud tbe revenue ; and said indictments were duly transferred and entered in tbe circuit court of tbe United States for tbe western district of Texas.
III. On tbe 15th of November, 1870, said Bougbton made an application to tbe Commissioner of Internal Revenue, requesting that a compromise be granted in accordance with tbe provisions of tbe internal-revenue law in such cases, and that be be released from further prosecution on said indictments upon tbe payment of $1,250, which sum be deposited with tbe collector of Internal Revenue, to await tbe decision of tbe Commissioner, and took tbe following receipt therefor:
“Received, Tyler, Texas, Nov. 15th, 1870, of Horace Bougb-ton, tbe sum of twelve hundred & fifty dollars ($1,250) on deposit, subject to tbe order of tbe Secretary of tbe Treasury or Commissioner of Internal Revenue. Said amount is tbe sum alluded to in said Bougbton’s application to tbe Com. of Int. for compromise, bearing even date herewith.
“S. D. WOOD,
" Collector Int. Rev. áth Dist. Texas.”
IY. Oil the 3d of February, A. D. 1871, said proposition for compromise was rejected by the Commissioner of Internal Revenue, wlio thereupon directed the district attorney to proceed in the case as though no offer had been made.
Y. On the 19th of November, 1870, EL C. Hunt, then assessor of internal revenue for the fourth district of Texas, made an assessment against said Boughton, Thomas Browning, 0. M. Hite, and Webster Flanagan, and returned the same to the collector of said district upon a tax-list, of which the following is a copy, and said Boughton stands charged therewith on the books of the internal-revenue officers to the amount of $8,000, as in said list appears:
YI. On tbe 9th. of January, 1871, said S. D. Wood, collector of internal revenue for said district, applied said $1,250, so deposited with him, toward payment of said tax of $8,000 assessed against said Boughton and others, accounted for the same in his report for that month, and paid the money into the Treasury of the United States, without the consent of said Boughton.
YII. On the 18th of November, 1872, all of said indictments were dismissed on motion of the district attorney.
YIII. On the 3d day of April, 1876, said Boughton was duly adjudged a bankrupt, and on the 22d day of February, 1877, Milton L. Howser was appointed his assignee, and on the 10th of April, 1878, was substituted as claimant in this case in place of said Boughton.
(And upon the defendants’ request the court found the following fact:)
IX. The three indictments referred to in the second finding severally charged the offenses therein named as having been committed by said Boughton while he was asséssor of internal revenue for the fourth district of Texas and while acting as such.
Mr. Enoch Totten for the claimant:
The Secretary of the Treasury and the Commissioner of Internal Bevenue are authorized by law to compromise all violations of the revenue law. (15 Stat. L., 166.)
The $1,250 was deposited with an offer and for the purposes of a compromise only. The offer of a compromise having been rejected, the plaintiff is entitled to recover the money deposited. (MeSeilly v. Richardson, 4 Cow., 607; Phelps v. BostwieJc, 22 N. Y., 242; Olajlin v. Godfrey, 21 Pick., 6 ; Sail v. Marston, 17 Mass., 575; Sehlesinger v. United States, 1 C. Cls. E., 16; Kelsey v. United States, C. Cls. B., 374.)
Mr. John S. Blair (with whom was the Assistant Attorney-General) for the defendants:
The plaintiff has offered no evidence to show that the assessment was illegal, that it has ever been set aside by competent authority, or has ever been paid. Our right to recover for taxes under a counter-claim and cross-demand has been decided in tbe case of Roman & Oliver (11 O. Cls. R., 7G1), recently affirmed bj’ tbe Supreme Court.
It is to be noticed in tbe case of Clinlcenbeard v. The United States (21 Wall., G5), while tbe Supreme Court concedes to Clink-■enboard tbe right, to show that the tax was illegally assessed, it does not question tbe prima-faeie case made out by tbe United States. Here tbe plaintiff, if be wishes to escape tbe tax, must show the illegality of tbe assessment; as be did not do so by appealing to tbe Commissioner of Internal Revenue, it stands presumably correct. For an instance .of tbe force given to these quasi-judicial acts of excutive officers, see Murray's Lessee v. ITobolcen Land Company (18 Howard, 272).

Opinion:
Richardson, J.,
delivered tbe opinion of tbe court:
When this case was before us at a former term, it was submitted upon a demurrer to tbe defendant's plea, and tbe admitted facts were these:
. Three indictments against Horace Boughton, who was then tbe claimant, bad been found for bribery, conspiracy, and fraud in connection with internal-revenue matters, and were pending in tbe United States circuit court in Texas when, on tbe 15th of November, 1870, Boughton made a written application to tbe Commissioner of Internal Revenue for a compromise of those cases and other claims against him upon tbe payment by him of $1,250, and at tbe same time made a deposit of that amount of money with tbe collector of internal revenue of tbe fourth district of Texas, subject to the order of tbe Secretary of tbe Treasury or Commissioner, to await tbe decision of tbe latter officer upon bis proposition. On tbe 19th of November, 1870, a tax on distilled spirits to tbe amount of $8,000, including penalty, was returned to said collector for collection, as assessed against said Boughton and others, by tbe assessor of that district. On tbe 9th of January, 1871, tbe collector applied said $1,250 in part payment of said tax, reported tbe same in bis account, and paid tbe money into tbe United States Treasury, where it was beyond tbe reach of anybody to refund without an appropriation by Congress or a judgment of this court. On tbe 3d of February next following, tbe offer of compromise was rejected by tbe Commissioner in writing, and the'district attorney was ordered to proceed with tbe trial of tbe indictments. Subsequently, on tbe IStb of November, 1872, all tbe indictments were dismissed on motion of tbe district attorney, without any direction from tbe Commissioner, so far as it appeared by the record. There was no plea of set-off or counter-claim filed by tbe defendants.
Upon these facts, thus presented, and tbe case submitted on •that one narrow ground of defense, a claim of right, on tbe part 'of tbe collector, to apply tbe deposit money toward payment of tbe tax — an .object wholly different from that for which it was specially intrusted to him — to make such an application of tbe money before tbe proposition for a compromise bad been acted upon, and to retain tbe same after that proposition bad been rejected, we held that tbe collector bad no such authority, and that, resting upon that defense alone, tbe defendants could not retain tbe money, and tbe demurrer was sustained. (Boughton v. United States, 12 C. Cls. R., 330.)
There was also a motion or plea to dismiss tbe action on tbe ground that it was a revenue case, and so not within tbe jurisdiction of this court, according to tbe opinion of tbe Supreme Court iuMchol's Case (7 Wall., 70). This motion was overruled, and then, as in several other cases, we expressed our views of tbe meaning, extent, and application of tbe rule laid down by tbe learned judge in that case, which seems to have since been concurred in by the Supreme Court in their recent determination of Kaufman's Case, affirming the judgment of this court therein. (Kaufman's Case, 11 C. Cls. R., 659, affirmed 96 U. S. R., 567; Boughton's Case, 12 id., 330; Campbell's Case, 12 id., 470.)
The facts now proved are precisely the same as they were before, so far as they extended; but since the former decision the aspect of the case has materially changed by the introduction of additional facts and a different form of presentation of the defense.
On the 29th of December, 1877, after the demurrer had been sustained, the defendants filed a plea setting up said tax of $8,000, assessed against said Boughton, as a set-off and counterclaim, under the provisions of Revised Statutes, § 2059, 1061, and demanding judgment thereon in favor of the United States.
On the 11th of April, 1878, Milton S. Howser appeared by his counsel, and having shown that said Boughton had been adjudged a bankrupt, and that he (Howser) had been appointed assignee of the estate, was, on motion, admitted as the claimant to prosecute this action in place of said Boughton.
The tax is proved by theprima-faeie evidence of the tax-list and records of the Internal-Revenue Bureau, and no defense to its correctness or validity is set up (Clinkenbeard v. United States, 21 Wall., 65); and, taken separately, there is no defense to the respective claims of either party.
The only questions which arise are upon the right of set-off and the form of judgment to be entered.
In case of the insolvency or bankruptcy of a debtor to the Government, the United States are entitled to priority of payment out of his assets, not only- by the bankrupt law (Rev. Stat., § 5101), but also by more, general provisions of much earlier enactment (now Rev. Stat., § 3166; Lewis v. United States, 92 Wall., 618), and it would seem to be a circuitous and useless proceeding to give judgment for payment by defendants of money which would be required to be immediately refunded to them. But it is not necessary to determine whether or not this court would have power to enforce that right of priority of payment without further statute provisions, because it is clear that by Revised Statutes, § 1061, when a counter-claim is set up here in any case, the court is required to hear and determine such claim or demand both for and against the Government and claimant, and to render judgment on its findings upon the whole case.
Horace Boughton, the original claimant, against whom the counter-claim Avas filed, and who alone is personally responsible therefor, has disappeared from the case as a litigating party, and no judgment can now be entered against him.
It does not appear that either party desired that the validity of the defendant's counter-claim should be finally determined in this court for the purpose of ascertaining the amount due to be proved in bankruptcy. (Rev. Stat,, § 5106.) It seems, to have been set up solely to prevent the claimant from recoAmring judgment upon his claim, and to that extent we have no difficulty in alloAving it and entering judgment accordingly.
The judgment of the -court is that the plaintiff's claim be allowed to the amount of $1,250, to be set off against a like amount of the defendant's counter-claim, which to that extent is allowed, and the claimant Avill take nothing by his petition; and such judgment will be entered, unless the defendants, on or before tbe 29tb iustaut, move for a special judgment against tlie bankrupt estate in tbe bands of tbe assignee, in wbicb case judgment will be suspended until tbe motion is beard and determined.
On tbe 29tli of April tbe following entry was made of record:
Tbe court, upon due consideration of tbe premises, finds in favor of tbe claimant for tbe amount of $1,250, to be set off against a like amount of tbe defendant's counter-claim of $8,000 wbicb is found in favor of defendants; and tbe court does order, adjudge, and decree that tbe said claimant bave and recover nothing upon tbe petition; and tbe defendants not having moved for any judgment for the balance of said counter-claim, as they were specially permitted to do, no judgment is entered therefor.