Docket No. 21657.
03-31-1931
EDWARD H. GARCIN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Leonard Belford, Esq., for the petitioner. J. E. Mather, Esq., and J. A. Lyons, Esq., for the respondent.
Leonard Belford, Esq., for the petitioner.
J. E. Mather, Esq., and J. A. Lyons, Esq., for the respondent.
This is a proceeding for the redetermination of petitioner's liability, if any, as a transferee of the assets of the Asbestos & Rubber Works of America, Inc., hereinafter sometimes referred to as Asbestos & Rubber Works, for the unpaid income and profits taxes in the amount of $76,995.93 assessed against such company for the years 1918, 1919, and 1920, plus costs taxed by the District Court of the United States, Southern District of New York. The unpaid income and profits taxes of Asbestos & Rubber Works of America, Inc., were in the amount of $63,133.74 for the year 1918; $13,804.40 for the year 1919; and $57.79 for the year 1920. The respondent has determined that petitioner's liability is to the extent of $66,388.54. The following errors are assigned in the petition:
(1) That the petitioner is not liable as a transferee of the assets of the Asbestos & Rubber Works, Inc.;
(2) That assessment is barred by the statute of limitations; and
(3) That section 280 of the Revenue Act of 1926 is unconstitutional.
On January 5, 1920, petitioner entered into a contract with the United States Asbestos Company, a Pennsylvania corporation, for the sale to that company of 122 shares of common stock and 68 shares of preferred stock of the Asbestos & Rubber Works, this being all the issued and outstanding capital stock of the company. The contract provided in part as follows:
SECOND: That payment to the party of the first part may be made by the party of the second part for said stock in manner following, to wit:
(A) By paying to the party of the first part a sum equal to:
(1) The inventory value of the said merchandise, office furniture and fixtures, moulds, dies, catalogues, stationery, and brake lining cabinets on hand by the Asbestos & Rubber Works of America, Inc., at the close of business on December 31st, 1919.
(2) The amount of all outstanding and collectible accounts receivable of said Asbestos & Rubber Works of America, Inc., at the close of business on December 31st, 1919.
(3) One-half of the estimated net profits on all orders unfilled by the Asbestos & Rubber Works of America, Inc., at the close of business on December 31st, 1919.
in cash at the time of the delivery of the said capital stock as hereinafter provided; or
(B) At the option of the party of the second part, by said party of the second part at said time issuing and delivering, or causing to be issued and delivered, to the party of the first part, full paid and non-assessable preferred stock of the Asbestos & Rubber Works of America, Inc., at par, in an amount equal to the sum total of:
(1) The inventory value of the stock of merchandise, office furniture and fixtures, moulds, dies, catalogues, stationery and brake lining cabinets on hand by the Asbestos & Rubber Works of America, Inc., at the close of business on December 31st, 1919.
(2) One-half of the estimated net profits on all unfilled orders of the Asbestos & Rubber Works of America, Inc., at the close of business on December 31st, 1919; and
(3) An amount in cash equal to the amount of the outstanding and collectible accounts receivable of the said Asbestos & Rubber Works of America, Inc., at the close of business on December 31st, 1919.
The payment of principal and dividends on the preferred stock of said Asbestos & Rubber Works of America, Inc. if delivered to said party of the first part hereunder shall be guaranteed by said party of the second part in due form of law as hereinafter provided.
* * * * * * *
FIFTH: IT IS HEREBY UNDERSTOOD AND AGREED that the party of the first part hereto shall, and he hereby agrees to pay all State and Federal taxes and other debts and obligations of the Asbestos & Rubber Works of America, Inc., up to and including December 31st, 1919, including any readjustments or future settlements for prior years on taxes or other accounts, but it is also understood and agreed that the amount of any refund or moneys returned to the said Asbestos & Rubber Works of America, Inc., on account of any readjustment or future settlement for this or prior years on taxes, book or other accounts, shall be returned to the party of the first part hereto.
* * * * * * *
The contract further provided that the board of directors of the Asbestos & Rubber Works should elect in the place of the then officers, certain officers and directors named by the United States Asbestos Company; that the Asbestos & Rubber Works should sell and dispose of such products exclusively as the United States Asbestos Company was able to manufacture, upon whatever terms were mutually agreed upon between them; and that the United States Asbestos Company should, in accordance with such mutual agreement, deliver to the Asbestos & Rubber Works, or to its order, all goods which the Asbestos & Rubber Works were able to sell.
The above contract was made in good faith without intent to defraud creditors of the Asbestos & Rubber Works and the United States Asbestos Company deemed the consideration a fair one.
The minutes of a special meeting of the directors of the United States Asbestos Company, held on January 3, 1920, contained the following:
RESOLVED: That the President of this Company be and is hereby authorized to enter into an agreement with the Asbestos and Rubber Works of America, a New York Corporation, that, for and during the term of two years, as well as during any extension of said term, the said Asbestos and Rubber Works of America shall sell and dispose of such products exclusively as this Company may be able to manufacture and allocate to it, upon the terms and conditions set forth in said agreement, a copy of which was submitted to this meeting.
RESOLVED, That the President and Secretary of this Company be and they are hereby authorized to enter into an agreement with Edward H. Garcin for the purchase of the outstanding common stock of the Asbestos and Rubber Works of America, for the price and upon the terms set forth in the copy of the agreement submitted to this meeting; and, further, that thereupon this company shall, for the consideration hereinbefore mentioned, guarantee to the holder or holders thereof that the said Asbestos and Rubber Works of America will pay the principal of its preferred stock, together with the dividends thereon quarterly, the President and Secretary of this Company being hereby authorized to execute a proper form of guaranty upon the certificates of said stock, in the name and on behalf of this Company.
Pursuant thereto an agreement was made providing that the Asbestos & Rubber Works should be furnished with whatever products it would be able to sell for a period of two years.
The contract of January 5, 1920, was carried out, with some variation, under the alternative provisions of subsection B. The petitioner, prior to the time the parties met to transfer the common stock and conclude the transaction, collected the accounts receivable, and paid the accounts payable, retaining for himself the cash on hand and the excess of the receipts over disbursements. The parties to the contract calculated that the net amount which petitioner was to receive under subdivisions (1) and (2) paragraph (B) of the above contract aggregated $21,500 and preferred stock of the Asbestos & Rubber Works in that par value was caused to be issued to petitioner. Payment of such preferred stock was guaranteed by the United States Asbestos Company. This guarantee was discharged by the payment to petitioner, in February, 1922, of the sum of $21,500.
After the transfer the assets that remained were office furniture and fixtures, shelving, and some inventory of merchandise contained in the office of the company in New York, patterns, good will, trade-marks, and trade names, and quite a number of unfilled contracts which the Asbestos & Rubber Works had taken through the instrumentality of Garcin, running into very large figures. The Asbestos & Rubber Works continued in operation as a subsidiary of the United States Asbestos Company for more than a year. Due to business depression in that industry in 1921 and 1922, the United States Asbestos Company found it impossible to continue the operation of the Asbestos & Rubber Works and discontinued the business in 1922 or a little before that. Some of the contracts which the Asbestos & Rubber Works had at the time of the transaction in question were later canceled, and purchasers, particularly the Willys-Overland Company, one of the largest customers, held up deliveries, thereby necessitating cancellation of the contracts. Instead of continuing to show a profit, the Asbestos & Rubber Works showed a heavy deficit.
The following letter was written by H. E. Nichols, attorney for petitioner, to the respondent on August 18, 1923, enclosing a letter written by petitioner to Roswell S. Nichols: NEW YORK, August 18, 1923.
THE COMMISSIONER OF INTERNAL REVENUE,
Washington, D. C.
Dear Sir:
RE ASBESTOS & RUBBER WORKS OF AMERICA AND AFFILIATED CORPORATIONS.
With reference to the writer's conference with the auditors in charge of the above case had at Washington on August 16, 1923, we beg to submit the following additional information.
In connection with the item of $46,934.44 charged as a dividend to the taxpayer, Edward H. Garcin in 1920, we find that the federal field agent arrived at this amount in the following manner:
Assets of Asbestos & Rubber Works of America, transferred to E. H. Garcin on the sale of the company, December 31, 1919. Cash __________________________________________________________ $15,418.30 Trade accounts receivable _____________________________________ 45,054.10 Asbestos Fibre Mining Company Account _________________________ 7,339.16 Claim for refund, excise tax __________________________________ 3,684.60 Deposit, New York Edison Company ______________________________ 5.00 E. H. Garcin personal account _________________________________ 51,983.89 Notes receivable ______________________________________________ 9,298.65 _________ Total _______________________________________________________________ $132,783.70 Liabilities assumed by E. H. Garcin: Accounts payable, trade ________________________________________ 19,596.16 E. H. Garcin personal __________________________________________ 8,463.34 Federal income taxes prior years (agent's computation) _________ 23,909.63 Dividends payable ______________________________________________ 132.00 A. O. Sasse ____________________________________________________ 666.80 E. H. Garcin — Loan ____________________________________________ 33,081.33 _________ Total _______________________________________________________________ 85,849.26 ___________ 46,934.44
We also enclose a letter written by Mr. Garcin to us on January 15, 1923, wherein he goes into some detail as to why he believes the field agent's figures to be too high.
Bearing in mind that Mr. Garcin in stating the amount of assets and liabilities taken over by him, eliminates his personal and loan accounts with Asbestos & Rubber Works of America, it will be found that the figures of Mr. Garcin and those of the field agent are approximately the same.
The writer, however, desires particularly to direct attention to the fact that Mr. Garcin's statement that he should be taxed on $26,888.54 income on this transaction is based in part on the fact that he paid out $9,000 federal tax.
It will be noted that the field agent estimates the federal tax due to be $23,909.63, at which figure the liabilities assumed, as estimated by Mr. Garcin, would be increased $14,909.63.
Thus, taking the field agent's estimate of the tax liability of Asbestos & Rubber Works of America to be correct, the amount upon which Mr. Garcin is taxable as a result of this transaction would be $11,978.91 rather than $46,934.44 as recommended by the field agent.
If the information furnished herewith is not sufficient for your purposes, we shall be glad to give you any additional information which is in our possession. Very truly yours, Enc. (Signed) HERMAN E. NICHOLS. HEN:EH January 5, 1923. Mr. ROSWELL S. NICHOLS, 141 Broadway, New York City.
DEAR MR. NICHOLS: In re the matter of the sale of Asbestos & Rubber Works, December 30, 1919, I received $22,500.00 in preferred stock, and I took over the Book Accounts due and assumed the indebtedness and paid off same.
The indebtedness amounted to $20,394.96 and I collected $73,283.50 net and paid out also $9,000, Federal tax making a total of $43,888.54 received.
Therefore, I received in all $22,500.00 of preferred stock, $43,888.54 in cash, making a total of $66,388.54.
The total stock paid for in cash and issued since the organization of the Company in 1906 was as follows:
E. H. Garcin, 50 shares ____________________________ paid cash ____ $5,000.00 R. Gaertner, 50 shares _____________________________ " " ____ 5,000.00 R. Gruber, 25 shares _______________________________ " " ____ 2,500.00 __________ $12,500.00
Later I purchased the 75 shares of Gruber and Gaertner, paying cash for same.
Theo. Hogan, 1 share ______________________________ paid cash ____ 100.00 A. Eheral, 40 shares ______________________________ " " ____ 4,000.00 J. H. Scudder, 150 shares _________________________ " " ____ 15,000.00 G. E. Richards, 1 share ___________________________ " " ____ 100.00 R. B. Libby, 1 share ______________________________ " " ____ 100.00 I. S. Craft, 1 share ______________________________ " " ____ 100.00 Wm. Ivy, 1 share __________________________________ " " ____ 100.00 __________ $19,500.00
During 1911-1913 I purchased these shares paying cash for them.
Henry Hamburger, 75 shares, paid in cash $7,500.00. In 1915 I purchased Mr. Hamburger's shares paying cash for same, making my shareholdings cost $39,500.00.
The only stockholders of the Company were then Mrs. A. Baldwin, 51 shares for which she paid cash, $5,100.00 and myself. The difference between the cost of my shares, $39,500.00 and the amount received for them was only $26,888.54 and that is the amount on which I should be taxed and not on $46,934.44 as Haskins & Sells have it. Truly yours, (Signed) E. H. GARCIN. EHG/RJ
The $22,500 mentioned in the letter included $1,000 of preferred stock owned by Mrs. Garcin, that is, it stood on the books in the name of Mrs. Garcin and she was paid for it.
The purchasers were assured by petitioner verbally that taxes for prior years had been fully settled and paid, and that to the best of his knowledge there could be no additional Federal tax against the Asbestos & Rubber Works except possibly for the year 1919, for which year the tax had not been settled at that time.
The records of the Asbestos & Rubber Works were for the most part retained in New York in an office where that company carried on business and continued to carry on business after the purchase from petitioner, and in adjoining rooms petitioner had offices and carried on or was closing out his other business interests. The few books which were transferred from New York to Lancaster, where the United States Asbestos Company had its office, were subsequently taken back to New York in 1920 or 1921 when an investigation of all of the books and records of the Asbestos & Rubber Works and petitioner's personal accounts was being made. At the time of the hearing before the Board a search was made for them in both Lancaster and New York, but they could not be found.
On March 24, 1919, the Asbestos & Rubber Works filed with the Collector of the proper district a tentative return and estimate on Form 1031-T, signed "E. H. Garcin, President, Alfred Stark, Secretary." Thereafter, on June 20, 1919, the Asbestos & Rubber Works caused to be filed with the Collector of the proper district a return for the year 1918 on Form 1120, which return is not signed or verified by any person, but is the return upon which the additional tax for the year 1918 involved in this proceeding has been assessed by the respondent. The return of the Asbestos & Rubber Works for the year 1920 was filed with the Collector of the proper district on March 15, 1921. A tentative return for the calendar year 1919 was filed by the Asbestos & Rubber Works with the Collector of Internal Revenue on March 15, 1920. A final return for the calendar year 1919 was filed by the company on May 15, 1920.
On February 19, 1924, the respondent assessed deficiencies in tax against the Asbestos & Rubber Works for the years 1918, 1919, and 1920 in the amount of $76,995.93. The Asbestos & Rubber Works has never been solvent since this assessment was made.
On the 15th day of March, 1924, a proceeding was brought in the District Court of the United States for the Southern District of New York by the United States in the case of United States of America v. Asbestos & Rubber Works of America, to collect the amount of $76,995.93 assessed by the Commissioner. The summons was endorsed as follows:
I hereby certify that after due and diligent search I am unable to find the within named * * * Asbestos and Rubber Works of America 1819 Broadway N Y C within the Southern District of New York.
Dated New York.
March 24, 1925. WM. HECHT.
New York, March 7th, 1925. Served R. T. Norment by handing him a true and attested copy of this summons and making contents of same known to him. W. Frank Mathew, U. S. Marshal, W. A. Simpson, Deputy.
Endorsed:
U. S. District Court, 3d of NY, filed Mar. 6, 1925.
The second endorsement was made in Lancaster, Pa., by the United States Marshal for the Eastern District of Pennsylvania. On May 25, 1925, the United States Marshal for the Southern District of New York effected service upon petitioner in the city of New York. In response to such summons petitioner and Norment disclaimed any liability in respect of the defendant corporation. Norment was secretary of the company in 1922.
On or about December 15, 1925, a judgment was entered in favor of the United States against the Asbestos & Rubber Works. The judgment was duly docketed in the office of the clerk and an execution issued thereon which was on the 22nd day of July, 1926, returned by the marshal wholly unsatisfied.
On October 5, 1926, the respondent mailed a letter to the petitioner asserting a deficiency against him as transferee of the property of the Asbestos & Rubber Works.
OPINION.
McMAHON:
The respondent has determined that petitioner is liable to the extent of $66,388.54 as a transferee of the assets of the Asbestos & Rubber Works for the unpaid income and profits taxes in the amount of $76,995.93 assessed against such company for the years 1918, 1919, and 1920.
Section 280 of the Revenue Act of 1926 provides in part as follows:
(a) The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject to the same provisions and limitations as in the case of a deficiency in a tax imposed by this title (including the provisions in case of delinquency in payment after notice and demand, the provisions authorizing distraint and proceedings in court for collection, and the provisions prohibiting claims and suits for refunds.
(1) The liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed upon the taxpayer by this title or by any prior income, excess-profits, or war-profits tax Act.
Section 602 of the Revenue Act of 1928 provides:
Title IX of the Revenue Act of 1924, as amended, is further amended by adding at the end thereof one new section to read as follows:
"TRANSFEREE PROCEEDINGS
"SEC. 912. In proceedings before the Board the burden of proof shall be upon the Commissioner to show that a petitioner is liable as a transferee of property of a taxpayer, but not to show that the taxpayer was liable for the tax."
The petitioner contends that section 280 of the Revenue Act of 1926 is unconstitutional. We have heretofore held that a petitioner, having invoked section 280 to secure a redetermination, may not question its validity. Henry Cappellini, 14 B. T. A. 1269. See also Phillips v. Commissioner, 42 Fed. (2d) 177.
The burden of proof in the instant proceeding is upon the respondent to show that the petitioner is liable as a transferee. Section 602 of the Revenue Act of 1928. Assuming that burden, the respondent introduced in evidence certain exhibits and the testimony of S. R. Zimmerman, president of the United States Asbestos Company. At the conclusion of the introduction of respondent's proof, counsel for the petitioner moved for judgment on the ground that the respondent had failed to sustain the burden of proving that the petitioner is liable as a transferee. This motion was taken under advisement and the petitioner proceeded to introduce further proof upon the question of whether petitioner is liable as a transferee and also upon the question of the statute of limitations.
The evidence discloses that on January 5, 1920, petitioner entered into a contract with the United States Asbestos Company whereby he agreed to sell to that company all his common and preferred stock in the Asbestos & Rubber Works. Under the agreement, which we have set forth in our findings of fact, the United States Asbestos Company was granted certain options in the manner of payment of the purchase price of the stock, which we need not set forth in detail here. The parties are agreed that the contract for the sale of the stock was made in good faith and without intent to defraud the creditors of the Asbestos & Rubber Works. The respondent apparently contends, however, that the consummation of the transaction resulted in petitioner's securing certain assets of the Asbestos & Rubber Works, thereby depleting that corporation's assets to the detriment of its creditors.
The evidence discloses that a "short cut" was employed whereby petitioner received the cash which the Asbestos & Rubber Works had on hand and the excess of its accounts receivable over its accounts payable, the total received by petitioner being $46,934.44. After the transaction in question there remained to the Asbestos & Rubber Works certain office furniture, merchandise, patterns, good will, trade-marks, trade names and unfilled contracts. The Asbestos & Rubber Works was not dissolved, but continued in operation for a year or a year and a half after this transaction took place. Zimmerman testified that the Asbestos & Rubber Works was solvent at the time the contract was made and continued so for a year or a year and a half thereafter. Upon cross-examination he testified that in arriving at this conclusion he had not taken into consideration the asserted Federal taxes which are the basis of the liability questioned in this proceeding.
A close scrutiny of the evidence discloses that while the transaction in question took the form of a sale of petitioner's stock in the taxpayer company to the United States Asbestos Company, the real fact is that the petitioner, by virtue of his position as sole stockholder of the taxpayer corporation, withdrew from such taxpayer assets of the value of $46,934.44. We have not been furnished with evidence as to the exact value of the assets remaining in the taxpayer corporation, but from the evidence we believe it clear that these did not have a value greatly in excess of $21,500. This was the amount fixed by the petitioner and the United States Asbestos Company as the value of the remaining inventory of merchandise, patterns, good will, etc., plus one-half of the estimated value of the remaining unfilled contracts. Even if we assume that the merchandise, patterns, good will, etc., were of only nominal value and that the unfilled orders remaining to the taxpayer corporation had a value of $43,000, the value of the assets remaining to the taxpayer corporation would still be less than the amount of taxes assessed against that corporation for the years 1918, 1919, and 1920 in the amount of $76,995.93. The value of the assets would, in fact, be less than the amount of the 1918 taxes ($63,133.74) due and payable at the time of the transaction in question.
It is well settled that if a stockholder withdraws assets of a corporation, rendering it insolvent, he is liable, as a transferee, to the creditors of the corporation. In Samuel Keller et al., 21 B. T. A. 84, we stated:
So it seems to us that the important question for us to determine in this proceeding is whether, at the time the assets named in our findings of fact were transferred to petitioners, the corporation was made insolvent thereby. If it were made insolvent thereby, then unquestionably petitioners are liable as transferees under section 280 of the Revenue Act of 1926, as construed by the courts and the decisions of this Board.
In determining the question of insolvency, the liability for the taxes involved in this proceeding should be considered, although such liabilities were unknown at that time. A tax retroactively and subsequently levied is a potential liability of a corporation of which the stockholders must take notice. United States v. Keaton, 26 Fed. (2d) 227; Updike v. United States, 8 Fed. (2d) 913. * * *
See also Curran v. State of Arkansas, 15 How. 304; United States v. Courts et al. (not reported), decided June 13, 1929, by the United States District Court, Eastern District of Oklahoma; McDonald v. Williams, 174 U. S. 397; Hatch v. Morosco Holding Co., 34 Fed. (2d) 579; and Fulton Auto Supply Co. v. Sullivan, 148 Ga. 347; 96 S. E. 875.
While it is true that the burden is upon the respondent to show that petitioner is liable as a transferee of the assets of the taxpayer, yet that burden has been met if the respondent has made out a prima facie case. C. A. Hutton, 21 B. T. A. 101. From a consideration of all the evidence in the instant proceeding, we must conclude that the respondent has made a prima facie showing that the petitioner is liable as a transferee and that petitioner has not rebutted such prima facie case. Accordingly, the petitioner's motion for judgment on the ground that respondent has failed to sustain the burden of proving that petitioner is liable as a transferee is hereby denied. Since a transferee's liability is measured by the value of the assets received by him (Annie G. Phillips et al., Executors, 15 B. T. A. 1218; affd., Phillips v. Commissioner, 42 Fed. (2d) 177), the liability of the petitioner for unpaid taxes of the taxpayer corporation is limited to $46,934.44, plus interest from January 5, 1920, at the rate of six per cent per annum, being the legal rate of interest provided by the laws of the State of New York. Henry Cappellini, 16 B. T. A. 802 ____.
We now turn to a consideration of whether the statute of limitation bars collection of the liability of the petitioner as a transferee.
Section 280 (b) of the Revenue Act of 1926 provides:
The period of limitation for assessment of any such liability of a transferee or fiduciary shall be as follows:
(1) Within one year after the expiration of the period of limitation for assessment against the taxpayer; or
(2) If the period of limitation for assessment against the taxpayer expired before the enactment of this Act, but assessment against the taxpayer was made within such period, — then within six years after the making of such assessment against the taxpayer, but in no case later than one year after the enactment of this Act.
(3) If a court proceeding against the taxpayer for the collection of the tax has been begun within either of the above periods — then within one year after return of execution in such proceeding.
The final return of the Asbestos & Rubber Works for 1918 was filed on June 20, 1919, and the period for assessment and collection of the tax against the taxpayer expired on June 20, 1924. The return for 1919 was filed on March 15, 1920, and the period within which assessment and collection could be made against the taxpayer expired on March 15, 1925. The return for 1920 was filed on March 15, 1921, and the period expired on March 15, 1926. Assessment against the taxpayer for all three years was made on February 19, 1924.
As to the year 1920, since the period for assessment against the taxpayer did not expire until after the passage of the 1926 Act, section 280 (b) (1) is applicable. Notice of proposal to assess petitioner as transferee was mailed on October 5, 1926, which was within one year after the passage of the 1926 Act and was, therefore, timely. See Louis Costanzo, 16 B. T. A. 1294; Caroline J. Shaw, Executrix, 21 B. T. A. 400; and The Newport Co., 22 B. T. A. 833.
With regard to the years 1918 and 1919, a different situation arises. Subdivision (b) (3) of section 280, supra, provides that if a court proceeding against the taxpayer for the collection of a tax has been begun within either of the periods set forth in subdivisions (1) or (2), the assessment against the transferee shall be made within one year after the return of execution in such proceeding. Since subdivision (b) (1) applies only when the period of limitation for assessment against the taxpayer expires after the passage of the 1926 Act, and such is not the case with regard to these years, we are concerned only with the question whether the court proceeding was brought within the time provided in subdivision (b) (2). Proceedings for the collection of the tax against the taxpayer were begun on March 15, 1924, which was within the statutory five-year period for assessment and collection, and which is the period stated in subdivision (b) (2) of section 280. See Caroline J. Shaw, Executrix, supra, E. N. Ennis et al., 21 B. T. A. 406, and The Newport Co., supra. The return of execution was made on July 21, 1926, which was less than one year prior to the respondent's notice of proposal to make assessment against the petitioner as transferee.
The petitioner contends, however, that this subdivision has no application here. It is his position that the judgment of the District Court is void because neither a summons, citation, or any process whatsoever was served on any officer, director or agent of the Asbestos & Rubber Works, and that neither Norment nor Garcin was an officer, director or agent of that company in May, 1925. He further contends that the summons was not served within 60 days from the time the petition was filed with the Court in accordance with sections 16 and 17 of the Civil Practice Act of the State of New York.
This is a collateral attack by the petitioner upon the judgment of a court. Courts are very slow to hold that the judgment of another court is void when attacked collaterally. The only grounds upon which such an attack can be made is that the judgment was procured by fraud or that the court rendering it did not have jurisdiction. Such want of jurisdiction must affirmatively appear on the face of the record. See 34 C. J. 511 and 528; Thompson v. Whitman, 18 Wall. 457. Moreover, a defect in the form or manner of the summons or in a procedural matter does not deprive the court rendering it of jurisdiction.
In Cooper v. Reynolds, 10 Wall. 308, the Supreme Court of the United States held that when a judgment is attacked collaterally it is of no avail to show that there are errors in the record in procedural matters unless they be such as to show that the court has no jurisdiction. The parties in that case were claiming that the court in which the judgment was rendered had no jurisdiction because the affidavit was defective, there was no service made of the summons, and there was no publication notifying the defendants to appear as required by statute. That was an attachment proceeding and the Supreme Court held that since the lower court had jurisdiction of the res, its judgment was valid regardless of the fact that the summons was not served nor publication had against the defendants as required by State law. See also In re Lennon, 166 U. S. 553, and Thompson v. Thompson, 226 U. S. 561.
In the instant proceeding the judgment roll offered in evidence shows that the proceeding was filed in the Southern District of New York, that the marshal was unable to find the defendant at its supposed office address, that he served the summons on R. T. Norment in Pennsylvania, and that a copy of this summons was served on Garcin in New York on May 25, 1925. Both Norment and Garcin failed to appear and a default judgment was rendered in favor of the United States, the plaintiff in the proceeding. The Court, having all the above facts before it, took jurisdiction of the proceeding and rendered judgment thereon, upon which execution was delivered, issued and returned unsatisfied. In such a situation we do not believe that this judgment can be attacked collaterally upon the grounds claimed by the petitioner.
We must, therefore, hold that the suit in the District Court was a valid proceeding and that the assessment and collection of the petitioner's liability as a transferee of the assets of the Asbestos & Rubber Works of America, Inc., for the taxes of that company for the years 1918 and 1919 are not barred by the statute of limitations.
Reviewed by the Board.
Judgment will be entered under Rule 50.