Court Opinion

ID: 4488660
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:01:25.624951+00
Date Added: 2024-06-11T14:54:08.733100
License: Public Domain

Love,
dissenting: I do not agree with the decision or the opinion in this case.
The only issue involved in this proceeding is whether or not the assessment and collection of the deficiency in tax asserted by the Commissioner is barred by the statute of limitations.
It is conceded that, in the absence of an agreement to extend the time in which such assessment and collection could legally be made, that limitation has interposed a bar. The Commissioner asserts that such an agreement, executed by himself and the taxpayer, was made, and the Commissioner relies on such agreement.' The petitioner pleads the statute of limitations and urges that it never executed nor authorized the execution of such agreement. The real question at issue, therefore, is whether or not the document in evidence and relied on by the respondent as an agreement by and between himself and the petitioner and admittedly signed by Geo. W. Jalonick, who was chairman of the petitioner’s board of directors, is an act of the corporation such as will bind it in the absence of any act of ratification.
In view of the fact that some people entertain a prejudice against a plea of limitation (and before proceeding further I wish to make it plain that I do not mean to intimate that any Member of the Board entertains any such prejudice), I wish to point out that in dealing with income-tax matter, Congress realized and recognized the fact that to leave the collection of such tax without a limitation statute, with the returns subject to be reopened and the tax liability redetermined for an indefinite time, would thrust business operations into chaos and work an intolerable hardship on the taxpayer. Congress enacted the statute of limitation as a bar to such procedure. It is a defense that is just as moral and legitimate a plea as a claim for depreciation on physical assets. Each and both claims are founded on statutory rights granted the taxpayer, and without a statute granting such right neither could be successfully claimed.
The plea of limitation is a purely legal defense, and no equity rules or presumptions may be invoked. It must stand or fall under the “ cold steel ” of the law. I assume that it is conceded that the governing head of a corporation is its board of directors, and that no contractual document is binding on the corporation unless authorized by the board of directors. I also assume that it is conceded that no officer of a corporation or other person, by his action, can bind a corporation without being duly authorized to so act by the board of directors. It may be argued that the board of directors *574may act in such a way as to lead reasonably prudent persons to assume authority granted to certain officers or individuals, and that under such circumstances the board of directors will not be permitted to deny such authority.
That situation involves the doctrine of estoppel, and estoppel must be especially pleaded, as such, and the necessary elements of the plea sustained by affirmative evidence. The courts, under those circumstances, do not hold that the act of the person involved was authorized, but simply hold that the board of directors knowingly acted in such a way as to mislead the complaining party to his injury and sustain the plea of estoppel.
Under general corporation law the chairman of the board of directors, as such, has authority to do nothing except to preside over meetings of the directors and sign the minutes of such meetings. Some courts have held that when a document is signed by the president of a corporation and has the corporate seal affixed and has been made public or delivered, in the absence of a timely repudiation of his authority on the part of the directors, it will be conclusively presumed that the president has been duly authorized thereunto. I know of no case where .a court has authorized such a presumption in regard to any officer other than the president.
In the instant case the document in question was not signed by the president of the corporation. It was signed by “ Geo. W. Jalo-nick, Chairman.”
Without quibbling over the technical feature that the document fails to disclose what Geo. W. Jalonick was chairman of, I may again point out that as chairman of the board of directors he had no authority, either actual or presumptive, to execute, on the part of the corporation, the document involved.
The Commissioner, when he received that document, was charged with notice that it had not been signed by the officer who according to custom as well as law is usually given authority to sign such documents, and was put upon inquiry to ascertain whether or not Geo. W. Jalonick had been so authorized. Had the Commissioner pursued such inquiry, he would have discovered in the minutes of the corporation the amendments to the by-laws adopted January 26, 1922, four years prior to the date of the so-called agreement, section 4 of which by-laws reads as follows:
The chairman of the board of directors and the president, acting together, shall exercise general supervision and control of the company. Both officers shall have authority to execute deeds, assignments, releases and other instruments in connection with the conduct of the business of the company.
By that section of the by-laws, it is specifically and expressly enacted .that the chairman and the president, acting together, shall *575exercise the management and control of the business of the corporation. Where joint authority is so granted and in the absence of a specific provision that each may act alone, it is fundamental that both must act together, and that the action of either, alone, is not binding. But in the prevailing opinion it is argued that the sentence in the by-laws which says that “Both officers shall have authority to execute deeds, assignments, releases and other instruments in connection with the conduct of the business of the company,” means that each should have authority to sign such instruments in connection with the conduct of the business of the company.
It may sometimes occur in informal conversation that the term “ both ” will be used where “ each ” is meant, but I can not believe that such loose language would be used by a group of business men in a document as formal as by-laws of a corporation are supposed to be.
It is further urged that there was no evidence that “ each ” was not meant where the word “ both ” was used.
The document was placed in evidence and the language of that document, as I construe the English of it, on its face clearly negatives the idea that “ each ” was meant where “ both ” is used, which made for petitioner a prima facie case on that point and shifted the burden of proof to the respondent to prove the contrary. Geo. W. Jalonick was on the stand as a witness and he was not interrogated in regard to that matter. Estoppel was not pleaded in this case and there is no element of estoppel in the evidence.
Believing as I do, that tax cases, like all other cases, should be decided according to the laws applicable thereto; and believing as I do that the law applicable to the case at bar demands a decision in favor of petitioner on its plea of limitation, I feel it my duty to dissent from the prevailing opinion and to record my reasons for such dissent.