Court Opinion

ID: 8594579
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:01:36.415134+00
Date Added: 2024-06-11T16:54:49.488510
License: Public Domain

Nichols, Judge,
dissenting:
Bespectfully, I feel obliged to dissent from Judge Skelton’s able and exhaustive opinion, and will try to state the reasons why, though briefly, without extended analysis. There is no need to state the facts, which the majority opinion does correctly.
I agree the Federal Tax Lien Act of 1966, P.L. 89-719, 80 'Stat. 1125, does not help this plaintiff, and I do not consider it further.
I see no .reason why a claimant may not put on the hat of a taxpayer, or reject it, as he chooses, in a situation such as we have here. He can make his choice according to his position. He may file a claim for refund and, if it is timely, he may recover lawful interest. Stuart v. Willis, 244 F. 2d 925 (9th Cir. 1957). If it is not timely, he may proceed down whatever other avenue to relief the law provides, sacrificing interest. The principal amount recovered would not necessarily be the same, since a claim for refund calls for a determination whether a person has overpaid his taxes, generally, and if so, in what 'amount. United States v. Memphis Cotton Oil Co., 288 U.S. 62 (1933), and see below.
*47The Internal Revenue Service determined administratively ■that the fund here involved belonged to Lieb, a bankrupt and delinquent taxpayer. Under the applicable part of the 1954 'Code, 26 U.S.C. § 6321 'and § 6331(a) they had to make such a determination to have a color of right to levy. I see no reason why a person making claim to the fund is not challenging a tax decision of the IRS like any other taxpayer. Simply as a matter of semantics it would seem no one has better right to call himself a taxpayer, than one whose property has been seized to pay a tax. A purely tortious seizure, not made under color of the Internal Revenue laws, would present a different case, with which I do not deal.
The dictum the court quotes from Stuart v. Chinese Chamber of Commerce, 168 F. 2d 709 (9th Cir. 1948), is really the strongest authority the majority view has. As the court says, there is a similar dictum in Kirkendall v. United States, 90 Ct. Cl. 606, 31 F. Supp. 766 (1940). It is in each case only dictum, however, because the owners of the property illegally seized had not filed timely claims for refund, and whatever remedy they had under the Internal Revenue laws was not before the court. The two District Court cases cited after Stuart contain nothing in conflict with my conclusions. Long v. Rasmussen, 281 F. 236 (D. Mont. 1922), and the cases following it, cited by the court, deal with the award of injunc-tive and other extraordinary relief to persons whose property is seized or distrained to satisfy the tax debt of another; remedies not allowed to “taxpayers” contesting taxes. They do not hold that such a person may not put on the hat handed him and proceed as a “taxpayer,” if he is willing to conform to the limitations and provisos of the Code, including application for refund.
The majority misreads Ray v. United States, 197 Ct. Cl. 1, 453 F. 2d 754 (1972). We did not hold that Colonel Ray had to proceed outside the Internal Revenue laws. He had, in fact, filed claims for refund within them, and received refunds, with interest, for open years. The source of his necessity to sue here was that for earlier years, the time to file refund claims had expired. As to open years, we considered he had an election. The best proof of this is that we cited and quoted from Prince v. United States, 127 Ct. Cl. 612, 119 F. Supp. *48421 (1954). That was a case almost identical with. Ray's, but for tbe fact tliai Prince's claims for refund bad been timely. We held that he was entitled to recover, with interest according to law. Thus it is clear that a person in Colonel Ray’s position, and Prince’s, as to years not barred, has an election to direct his claim against the IRS, with concomitant interest, or without interest against the agency that withheld a portion of his retirement pay to satisfy taxes not due. Besides the longer period of limitations, there was another advantage concomitant to the latter choice. Defendant argued that we could not simply award the funds withheld, because some of them may have been applied to satisfy other and still valid tax obligations. We answered that along the avenue Colonel Ray had chosen, we were not obligated to redetermine his taxes. Defendant would be relegated to its remedies under tax benefit rules. Clearly, the refund claims for the open years called on the IRS to redetermine Colonel Ray’s taxes, and presumably it did.
If Ray and Pri/ice enjoyed an election, why not plaintiff here? The real difference between the Ray and Prince cases, and the case 'at bar is that Ray and Prince were “taxpayers” not just as we all are, but in the more restricted sense that the funds in dispute had been withheld to pay taxes that, if anyone’s, were theirs, whereas, in this case we now know that in that limited sense, plaintiff here was not a “taxpayer”.
I stress “we now know”. Lieb, the “taxpayer” whose tax liability the IRS sought to enforce, was the sole signatory of the contract under which the equitable adjustment here involved came into being. Naturally the IRS thought Lieb, the “taxpayer” was owner of the fund. It took a trial and adjudication here to disabuse it of that notion. Our commissioner found, with our approval, that the owner of the fund was really a joint venture, of which Economy was a member. Antecedently considered, whether the suit was brought as by a “taxpayer” under the Internal Revenue 'Code or by a government contractor would have appeared most doubtful. There does not seem to be any reason in the nature of things why Congress should have intended to achieve a wholly different result depending on whether money has been withheld for taxes from a tax exempt person (Prince) or (as here) *49seized to collect taxes from one other than the owner. If, in either case, the IES can give the money back — as I am sure it could and would have, if satisfied Lieb was not the owner — it is reasonable to begin by asking the IES to do so, i.e., filing a claim for refund. The fine distinction drawn by the majority would have created practical difficulties at the working level, but for the statutory relief now available. Over the years, as in Kirhendall and in the Ray case, defendant has persisted in the defense that persons in the instant situations are “taxpayers”, therefore cannot recover absent claims for refund. I would now at last concede them the premise, even though I think the conclusion does not follow.
The literal language of the pertinent statutes does not help the court, the “taxpayer” — “non-taxpayer” dichotomy not being found therein. 26 U.S.C. § 6611 allows interest upon “any overpayment in respect of any internal revenue tax.” By 26 U.S.C. § 6401(c) “an amount paid as tax shall not be considered not to constitute an overpayment solely by reason of the fact that there was no tax liability in respect of which such amount was paid.” By 28 U.S.C. § 2411(a) a judgment for “any overpayment in respect of any internal-revenue tax” may include interest on the amount of the overpayment. We note that at one time the law expressly provided that courts could award interest for “any internal-revenue tax erroneously or illegally assessed or collected, or for any penalty collected without authority or any sum which was excessive or m any manner wrongfully collected, v/nder the internal-revenue lanesR [Emphasis supplied.] Eevenue Act of 1921, 42 Stat. 227, 316. If the disappearance of the emphasized language has any significance respecting the instant controversy, the parties no doubt would have so advised. It would appear the present § 6401 (c) was broadly written to provide an effective substitute accomplishing the same ends.
Finally, it is unavoidable that the decision today places us in conflict with the Ninth Circuit’s Stuart v. Willis, supra. This court makes the untenable suggestion that maybe the Ninth Circuit awarded interest only from the date of judgment. The plaintiff has furnished us a copy of the trial court’s findings of fact, conclusion of law, and judgment, unreported, but of unchallenged authenticity, certified by the clerk. The *50judgment, dated June 8, 1955, recites that it awards interest at 6% from November 6, 1951, apparently the date of the levy, as plaintiff had filed its claim for refund on December 26, 1951. The Ninth Circuit panel recites that the defendant Collector claims this award of interest was error (p. 927) and it affirms, discussing other issues but not this one.
Davis, Judge, joins in the foregoing dissenting opinion.