Opinion
No. L-151.
May 2, 1932.
Suit by the Colgate-Palmolive-Peet Company, successors to Peet Bros. Manufacturing Company, against the United States.
Petition dismissed.
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following special findings of fact:
1. Plaintiff, Colgate-Palmolive-Peet Company, is a corporation organized and existing under the laws of the state of Delaware, and is, through various reorganizations and mergers, successor to and vested with all the rights of the former Peet Bros. Manufacturing Company, a corporation organized under the laws of the state of Missouri on February 20, 1892, which dissolved and surrendered its charter on December 31, 1926.
2. On December 29, 1918, Peet Bros. Manufacturing Company filed with the collector of internal revenue for the district of Kansas, in accordance with the provisions of the Revenue Act of 1917, income and profits tax returns on forms 1031 and 1103 for the fiscal year ended September 30, 1918, from which it appeared that the income and excess profits taxes due thereon were $238,281.71.
3. Thereafter, on June 16, 1919, plaintiff filed with said collector a corporation income and profits tax return on form 1120 for the fiscal year ended September 30, 1918, from which it appeared that the income and profits tax due for that year was $494,431.79, which tax was assessed on collector's annual 1919 list, signed by the Commissioner of Internal Revenue on June 6, 1919. At the time of the filing of a tentative return $125,000 was paid, and plaintiff paid a portion of the balance of $369,431.79 as follows:
June 16, 1919 ........... $ 80,000.00 June 16, 1919 ........... 1,126.89 Sept. 15, 1919 .......... 103,063.45 Dec. 13, 1919 ........... 103,063.45 ___________ Total paid .......... $287,253.79
leaving an unpaid balance of $82,178. At the time of the filing of the completed return on form 1120, plaintiff had filed a claim for the abatement of this amount.
4. During the month of May, 1920, Peet Bros. Manufacturing Company's books of accounts and records for the fiscal years ended September 30, 1916 to 1919, inclusive, were examined by a revenue agent, and as a result of such examination an additional tax of $256,631.51, for the fiscal year ended September 30, 1918, was shown in the revenue agent's report, and submitted to the Commissioner of Internal Revenue for approval.
On being advised of the results of the examination of the books and records by the revenue agent, and upon receipt of the copy of the agent's report dated May 29, 1920, Peet Bros. Manufacturing Company employed Marwick, Mitchell Co., accountants and auditors, to investigate their records and ascertain the additional taxes, if any, claimed by the government to be payable by the company, and to prepare a statement of the facts to be presented at a hearing before the Commissioner of Internal Revenue at Washington. Peet Bros. Manufacturing Company wrote a letter to the Commissioner of Internal Revenue protesting the additional tax and requesting a hearing. This request was granted, and the taxpayer was advised by letter that the conference was set for September 15, 1920.
On September 15, 1920, the conference was held as arranged between authorized representatives of the taxpayer and the Commissioner of Internal Revenue. The representatives of the taxpayer, in support of their oral argument, submitted and filed the written report of Marwick, Mitchell Co., accountants and auditors. This report showed an overpayment by the taxpayer of $221,757.46. The report was made by plaintiff's accountants and auditors and was addressed to C.R. Rathbone, treasurer, Peet Bros. Manufacturing Company, and presented certain claims with reference to the computation of the tax. This report made no reference to a claim for refund, but merely set forth the manner in which it was claimed the correct computation of plaintiff's taxes should be made, and stated that "demand may be made at this time for final determination of the amortization allowance."
Subsequent to the conference, many letters passed between the representatives of the taxpayer and the Commissioner of Internal Revenue and his representatives in reference to plaintiff's claim. The government representatives in letters to the taxpayer frequently referred to "your claim" for losses sustained in the taxable year 1919, and the taxpayer's representatives, in letters to the Commissioner of Internal Revenue, referred to "our claim." No formal claim for refund of taxes had at that time been filed by the taxpayer, but in referring to the claim both the representatives of the taxpayer and the representatives of the Commissioner of Internal Revenue referred to the claim set up in the accountants' report that was filed with the Commissioner at the time of the conference on September 15, 1920.
Subsequent to the conference of September 15, 1920, the Commissioner of Internal Revenue, by authorized representatives, made several field examinations of the records of Peet Bros. Manufacturing Company. On November 24, 1922, E.H. Batson, Deputy Commissioner, by registered letter, advised the taxpayer of the results of the field examinations, and that a reaudit showed an overassessment of $342,154.47 for the fiscal year 1918.
5. Thereafter, and on December 20, 1922, Peet Bros. Manufacturing Company protested the determination announced in the letter dated November 24th and filed a further sworn report prepared by Marwick, Mitchell Co., auditors, and its duly authorized attorneys, containing the following statement: "On behalf of the taxpayer, we have investigated the proposed additional assessment and now claim that instead of being liable for additional taxes, the company is entitled to a refund of $108,591.24, as shown in the following summary of the amended computation of the taxes for the several years under review."
6. On March 15, 1924, the Commissioner of Internal Revenue approved a schedule of overassessments on form 7805, embracing, among other overassessments, an overassessment in favor of Peet Bros. Manufacturing Company in the amount of $428,195.89 for the fiscal year ended September 30, 1918.
The collector of internal revenue complied with the directions appearing on said schedule, and on March 28, 1924, signed and returned said schedule together with a schedule of refunds and credits on form 7805-A, known and designated as schedule IT:R-9687. Of the overassessment of $428,185.89, $320,459.71 was shown as abated, $1,281.17 was credited to a portion of the original income and profits tax due for the fiscal year ended September 30, 1921, and the balance of $106,455.01 was shown to be refundable by the collector.
On April 24, 1924, the Commissioner of Internal Revenue approved the action of the collector and authorized the disbursing clerk of the Treasury Department to issue checks for the amounts found by him to be refundable to the several taxpayers whose names appeared on the said schedule of refunds and credits.
On May 15, 1924, the certificate of overassessment in the amount of $428,185.89, and Treasury check issued May 12, 1924, for the amount found to be refundable, $106,455.01, were mailed to the plaintiff by the said collector.
7. Subsequent to the allowance of the overassessment for the fiscal year ended September 30, 1918, the Commissioner of Internal Revenue computed, allowed, and paid interest as follows:
--------------------------------------------- | | Interest allowed | | | |-------------------| | | Amount | | | | | refunded | From — | To — | Interest | |-------------|---------|---------|-----------| | $106,455.01 | 6-20-23 | 3-15-24 | $4,678.19 | ---------------------------------------------
No interest was allowed on the portion of the overassessment for the fiscal year ended September 30, 1918, credited to the original tax for the fiscal year 1921. Subsequently, on November 17, 1924, a notice of interest allowance, together with a Treasury check for the amount referred to above, $4,678.19, was mailed to the plaintiff.
By letter dated January 17, 1925, Peet Bros. Manufacturing Company requested the Commissioner of Internal Revenue to compute, allow, and pay interest in addition to the amount previously computed, allowed, and paid.
Again, in a letter dated June 12, 1925, Peet Bros. Manufacturing Company, by its then attorneys, requested the Commissioner to compute, allow, and pay interest in addition to the amount previously computed, allowed, and paid.
By letter dated June 29, 1925, the Commissioner of Internal Revenue notified plaintiff of his refusal to compute, allow, and pay interest in addition to the amount previously computed, allowed, and paid.
By letter dated April 17, 1926, signed by plaintiff's attorneys, Peet Bros. Manufacturing Company transmitted a "claim and demand for further interest on refund of taxes illegally and erroneously collected for the year 1918."
8. Subsequently the Commissioner of Internal Revenue allowed and refunded additional interest on the principal amount of the refund from March 15, 1924, the date to which the interest had theretofore been allowed, to April 24, 1924, when the schedule of refunds and credits was signed and approved by him. This additional interest in the amount of $689.77 was paid to plaintiff on June 30, 1926.
By letter dated July 14, 1926, a further request was made by the plaintiff for interest in addition to the amounts previously computed, allowed, and paid, which request was denied by the Commissioner of Internal Revenue on July 27, 1926.
Henry J. Richardson, of Washington, D.C., for plaintiff.
John A. Rees, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, WHALEY, WILLIAMS, and LITTLETON, Judges.
This is a suit to recover $23,949.07 alleged to be due as additional interest upon a refund paid to plaintiff of income and profits taxes collected for the fiscal year ending September 30, 1918. The defendant sets up two defenses: First that all the interest due the plaintiff under the law has been paid; second (in a supplemental brief), that the action is barred by the statute of limitations. Under the first defense the case turns entirely upon the question of whether a certain auditors' report upon plaintiff's taxes for said year, which was presented to the Commissioner of Internal Revenue by the taxpayer on September 15, 1920, is to be treated as an informal claim for refund and interest allowed from six months after the date of filing such claim; or whether, on the other hand, no claim for refund, either formal or informal, was filed until December 20, 1922, when, through a further report of said auditors, it was stated to the Commissioner that the taxpayer was entitled to a refund. The Commissioner held that no refund claim was filed until the date last-named above, and, following the applicable provisions of the Revenue Act of 1921, allowed interest beginning with a date six months after the claim under his decision had been filed. The plaintiff claims that interest should have been allowed after six months from September 15, 1920.
We are of the opinion that the Commissioner was right. The first report made by the auditors and which, as recited above, was presented to the Commissioner of Internal Revenue was evidently made for the purpose of showing how the tax should be computed. It is true that this report showed that the taxpayer had largely overpaid its taxes, and that it was presented to the Commissioner for the purpose of correcting what the taxpayer claimed to be an error. But it was not addressed to the Commissioner. It was addressed to the taxpayer and presented to the taxpayer for such use as the taxpayer might see fit. It did not purport to be a claim for refund, and made no mention of such a claim. Moreover, as we have found, the Commissioner never recognized it as a claim for refund. He may have made use of this report in preparing the certificate of overassessment together with the second report filed, as shown above, December 20, 1922, in which there was a claim that plaintiff was entitled to a refund. But conceding that the Commissioner made such use of the first report, this fact would not make it a claim for a refund. Nor does the fact that reference was made thereafter in the correspondence between the parties to the first report as "our claim" by the taxpayer and "your claim" by the Commissioner make it a claim for a refund. The report did set out a "claim," but it was a claim for certain deductions and allowances to be made in the computation of the tax, and the word "claim" was evidently used in that sense. The claim for refund was first made in the second report, and interest was allowed and paid from six months after the date of its presentation. There is therefore nothing more due the plaintiff.
Plaintiff seems to rely on the case of McKenney v. United States, 49 F.2d 667, 670, 72 Ct.Cl. 195. In that case it appears that the Commissioner had allowed a refund, and that the only basis for the allowance thereof was a certain document which the plaintiff in the case contended amounted to an informal claim for refund. Under the facts and circumstances presented to the court, the plaintiff's contention was sustained, but we think the decision has no application to the case at bar. In that case the action of the Commissioner of Internal Revenue was held in effect to recognize the document or instrument as a claim for refund and this constituted an important feature of the case. The court held with reference to this document that "his [the Commissioner's] only authority for allowing and paying the refund was the claim filed by the partnership." In the instant case the Commissioner did not make his decision approving a schedule of overassessment with reference to the taxes in controversy from which resulted the refund subsequently paid to plaintiff, and upon which additional interest is now sought to be recovered, until after the second report making a claim for refund had been filed. In fact he never recognized the first auditors' report as a claim for refund.
It is argued that the second auditors' report, which was duly sworn to by authorized attorneys and included all the requirements for a claim for refund, should be considered as an amendment to the first report made by the auditors which is referred to in argument as an informal claim for a refund, but the original statement of the auditors possessed none of the requirements for a refund either formal or informal. While it was filed in the Commissioner's office, it was not even addressed to the Commissioner or the defendant, and it was not sworn to. As we have shown above, there was nothing about it that was in the nature of a claim for refund, and, therefore, the second auditors' statement which did contain the claim for refund cannot be considered as an amendment thereof.
Nor do we think the opinion in Bonwit Teller Co. v. United States, 283 U.S. 258, 51 S. Ct. 395, 75 L. Ed. 1018, sustains plaintiff's contention. In that case, also, the Commissioner held that a communication from the taxpayer constituted an informal claim for refund, and the court said, in substance, that such a ruling in favor of the taxpayer was entitled to much weight. The facts in that case and the law applicable thereto made it necessary for the taxpayer to file a waiver before it could commence suit, and the Supreme Court called attention to this fact, but this has no application to the time within which plaintiff in the case at bar was required to begin its action.
We are also of the opinion that the second defense must be sustained.
All questions relative to the interest to which plaintiff is entitled are controlled by section 1324(a) of the Revenue Act of 1921 ( 42 Stat. 316). The portion of this section upon which the question next to be considered turns reads as follows: "Sec. 1324. (a) That upon the allowance of a claim for the refund of or credit for internal revenue taxes paid, interest shall be allowed and paid * * * from six months after the date of filing of such claim for refund or credit."
It will be observed that under this provision interest is not paid, except upon the allowance of a claim for refund, and, when the refund is allowed, then interest is paid from six months after the date of filing such claim for refund or credit. Both parties agree that a claim for refund was allowed. We think it clear under the statute that, whenever the claim for refund was allowed, the statute of limitations began to run. The findings show that on March 15, 1924, the Commissioner of Internal Revenue approved a schedule of overassessments in favor of the plaintiff, which was on March 28, 1924, signed and returned to the Commissioner by the collector of internal revenue with a schedule of refunds and credits showing a balance of $106,455.01 refundable. On April 24 the Commissioner authorized the clerk of the Treasury Department to issue a check for the amount so found to be refundable, and on May 15, 1924, the certificate of overassessment and a Treasury check dated May 12, 1924, for the amount found to be refundable, $106,455.01, were mailed to the plaintiff.
It should be kept in mind that plaintiff's case is based upon the provisions of the 1921 act, and under this statute an action to recover interest can only be maintained upon "the allowance of a claim" for a refund or credit. There is therefore no basis for plaintiff's suit unless a claim for a refund was allowed. Counsel for plaintiff concede that a claim was allowed, a concession which must be made if the suit is to be maintained. It is contended on behalf of the defendant that the claim was allowed on April 24, 1924, when the Commissioner of Internal Revenue signed the schedule of overassessments, approved the collector's action pursuant to directions appearing thereon, and authorized the disbursing clerk of the Treasury to issue a warrant for the amount so determined to be refundable. We think this position is sound, and that plaintiff's cause of action arose when the refund was allowed. This suit was not commenced until April 28, 1930. Not being commenced within six years from the time the cause of action accrued, the plaintiff's right to recover is barred under the general statute of limitations.
Counsel for plaintiff refer in their printed brief to two letters which it is said the Commissioner wrote the plaintiff. Based upon the statements contained in one of them, it is contended that the certification of overpayment made on April 24, 1924, did not in fact relate to any claim, and that the claim was not in fact allowed until the certificate of overassessment and check in payment of the refund were delivered to plaintiff on May 16, 1924. The contents of these letters are not referred to in the findings made by the Commissioner of this court which were accepted by the plaintiff, and the letters do not appear to have been introduced in evidence. In any event, we think the Commissioner's action on April 24, 1924, as shown by the findings and set out above, amounted to an allowance of the claim which had been previously made. In United States v. Magnolia Petroleum Company, 276 U.S. 160, 48 S. Ct. 236, 237, 72 L. Ed. 509, the Supreme Court said: "The date of `allowance' was October 11, 1923, when the Commissioner approved the refunds. Girard Trust Co. v. United States, 270 U.S. 163, 169, 46 S. Ct. 229, 70 L. Ed. 524. Under section 1324(a), `upon the allowance' of the refunds, respondent became entitled to interest according to the rule then in force. Cf. Blair v. Birkenstock, 271 U.S. 348, 350, 46 S. Ct. 506, 70 L. Ed. 983. Computation and payment were all that remained to be done."
It is true that plaintiff had no knowledge of this allowance until nearly a month later, but the period of the statute of limitations cannot be adjusted to meet every small variation in the circumstances to which it applies. In this case, after receiving the check for refund and being fully advised in the matter, the plaintiff had five years and eleven months in which to bring suit.
For the reasons above stated, the petition of the plaintiff must be dismissed, and it is so ordered.