author: COXE, District Judge.

text:
    FREEPORT TEXAS CO. v. BOWERS.
    District Court, S. D. New York.
    March 5, 1934.

      Douglas, Armitage & McCann, of New York City (Paul Armitage, of New York City, George B. Furman, of Washington, D. C., and Edward Holloway, of New York City, of counsel), for plaintiff.
    •George Z. Medalie, U. S. Atty. (Leon E. Spencer, Asst. 17. S. Atty., of New York City, of counsel), for defendant.
   COXE, District Judge.

This is an action to recover $1,260,446.18 alleged to have been illegally collected from the plaintiff as additional income and excess profits taxes for the fiscal year ending November 30, 1918.

The suit is brought by the Freeport Texas Company, parent company of a group of wholly owned subsidiaries, consisting of Free-port Sulphur Company, Freeport Sulphur Transportation Company, Freeport Townsite Company, Freeport Light, Water & Ice Company, Freeport Gas Company, and Freeport Terminal Company; and the amended complaint contains two separate causes of action, one challenging the legality of the entire assessment, and the other asserting that the tax was overpaid to the extent of $347,436.36.

The plaintiff’s contention with respect to the first cause of action is that there was no agreement for the assessment of the tax upon the respective affiliated corporations in such proportions as agreed upon among them, as required by section 240 (a) of the Revenue Act of 1918 (40 Stat. 1081), and that, therefore, the tax should have been assessed “on the basis of the net income properly assignable to each,” and not entirely against the plaintiff, as was actually done. In the second cause of action, it is insisted that invested capital was undervalued to the extent of $5,354,-440.15, and that as a result there was an over-assessment of $347,436.36.

The case was tried before a jury of one, and, at the conclusion of the trial, both sides moved for a directed verdict.

On March 15, 1919, the plaintiff, as parent for the affiliated group, filed a tentative return for the fiscal year ending November 30, 1918, showing an estimated tax of $617,-478.85, and at the same time delivered to the Collector a check of Freeport Sulphur Com- . pany for the full amount of the estimated tax. Then, on June 14, 1919, the plaintiff filed a consolidated return for the entire group) in which the total tax was computed at $696,-671.90, or $79,193.05 more than as shown in the earlier tentative return. This additional tax of $79,193.05 was again paid by a cheek of Freeport Sulphur Company; and, almost simultaneously, information returns on Form 1122 were filed by four of the subsidiaries, showing the proportionate amount of tax to be allocated to each, respectively; and by the remaining two subsidiaries, stating that no part of the tax was to be apportioned to either of them.

Thereafter, in February, 1920, Freeport Sulphur Company, Freeport Sulphur Transportation Company, and Freeport Light, Water & lee Company filed amended information returns on Revised Form 1122, in which each company answered “None” to the following question of the printed form:

“7. In case of all consolidated returns, the department prefers that the total tax assessed against the affiliated group he paid by the parent company or principal reporting company, instead of being apportioned among the affiliated companies.”

“If apportionment is made state the amount of income and profits tax for the taxable'year to be assessed against the subsidiary or affiliated company making the return.”

These three subsidiaries, together with Freeport Terminal Company, were the only members of the group reporting net income for 1918, and although the record does not contain an amended information return on Revised Form 1122 for Freeport Terminal Company, I think it may be fairly assumed that such an amended return was aiso filed by that company. But irrespective of whether it was or not, the-fact remains that in these amended information returns the three principal subsidiaries, which for all practical purposes reported the entire income for the group, deliberately reversed their previous statements that the tax was to be apportioned in specified amounts, and advised the Department that no tax at all was to be assessed against any of them; and the other subsidiaries had previously advised the Department to the same effect in the prior information returns filed by them, respectively.

On January 23, 1924, the Commissioner advised the plaintiff in a 39-day letter of a proposed additional assessment of $2,124,-341.89; and in arriving at that figure, the Department estimated the sulphur reserves as of March 1, 1913, at 3,459,000 tons, with a valuation of $7,722,217.50. The plaintiff appealed from this ruling on February .19,1924, stating specifically that it was the “Taxpayer,” and insisting that the March 1,1913, sulphur valuation was inadequate, and should be increased to $17,220,000. There was, however, no complaint regarding the tonnage estimate of 3,459,000 tons allowed by the Department, which the plaintiff expressly stated to be “acceptable to the Taxpayer.” This figure was in fact 459,000 tons greater than the estimate of Messrs. Fisher and Lowrie, plaintiff’s own engineers, in their valuation report submitted to the Department with the appeal.

Subsequently, conferences were had between the representatives of the Department and the plaintiff, at which an agreement was apparently reached to the effect that the sulphur reserves, as of March 1,1913, amounted to 3,459,000 tons, with an estimated life of 17 years, and net profits estimated at $10 per ton. Then on June 23,1925, the plaintiff was advised by the Commissioner in a second 30-day letter that the sulphur valuation, as of March 1,1913, had been raised to $13,375,857, invested capital correspondingly increased, and the proposed additional tax reduced to $1,276,728.43. Thereupon the plaintiff filed, on July 16, 1925, a formal protest, in which the “Particular points at issue” to which the “taxpayer” took exception were stated to be three minor items having no relation to the valuation of the sulphur reserves as of March 1, 1913.

Nothing further appears to have been done until February 8,1926, when the plaintiff wrote the Commissioner, requesting “that the assessment be made immediately,” and stating that “Matters of importance with respect to the present apparent surplus of the corporation make it urgent that this eontingent liability be definitely stated and disposed of before the next regular meeting of the Directors, which is now imminent.” In response to this request, the Commissioner, on February 13,1926, assessed an additional tax of $1,276,728.43 against the plaintiff; and 'on February 19,1926, the plaintiff, by its own check, paid the amount of the tax to the Collector without protest, and without any formal demand from the government. On the same day, the Freeport Sulphur Company reimbursed the plaintiff for the payment, debiting its own surplus in a like amount.

On October 29, 1926, the plaintiff answered a request for further waivers from itself and its subsidiaries, by stating that the additional tax of $1,276,728.43 had been paid in full, “making further waivers unnecessary.”

On April 19, 1929, the plaintiff, on behalf of itself and its subsidiaries, filed a claim for refund for $93,990.21, being part of the total tax of $1,973,400.33 for 1918, in which it was stated as follows:

“This refund is claimed on account of an insufficient deduction for depletion and an insufficient amount of invested capital for the year ended November 30, 1918. Supporting data and evidence is being filed with the Commissioner of Internal Revenue, Washington, D. C.”

This was followed on April 25, 1929, by the filing of a supporting brief by the plaintiff, which specified only two items as forming the “Basis of Claim for Refund,” as follows:

“(a) Depreciation deductions for the year ending November 30, 1918 of the plant and equipment of the Freeport Sulphur Co.”

“(b) Reduction of consolidated invested capital for the year ending November 30, 1918 on account of income and profits taxes for the year ending November 30, 1917.”

Nothing was discussed in this brief outside of the two items mentioned above, and it was not even suggested that the valuation of the sulphur properties previously made by the Department was in any way erroneous.

On August 15,1929, a conference was held with respect to the claim, at which the Department and the plaintiff were represented; and Cardwell and Williamson, the Department’s conferees, testified that at no time was there any discussion regarding a revaluation of the sulphur properties, or any contention that the tonnage allowance should be increased. This testimony was not contradicted at the trial, and the conferee for the plaintiff was not even called to give his version of what took place at the conference. Moreover, the conference report signed by the two conferees for the government shows that the only points pressed by the plaintiff were those speeifieal-ly mentioned in the claim itself and the accompanying brief. The Department suggested, also, the correction of an error made by the government in the computation of invested capital, as appearing in the letter of June 23, 1925. This latter adjustment concerned only the deduction from surplus of $465,259.-34, representing the original cost to the plaintiff of the stock of the Freeport Sulphur Company. It had nothing to do with the sulphur reserves. Subsequently, and on October 22, 1929, the attorneys for the plaintiff wrote the Commissioner, protesting against what was termed “excessive reduction of invested capital”; but there was still no contention that the valuation of the sulphur reserves, as previously allowed by the Department, was inadequate.

On January 28,1930, the plaintiff filed its claim for refund for $1,276,728.43, in which it was asserted that the entire additional' assessment was void, and in violation of section 240 (a) of the Revenue Act of 1918; and on February 17, 1930, an amended claim for the same amount was filed, in which additional grounds were stated as the basis of the claim.

On June 3, 1930, the Commissioner allowed $16,250.25 on the first claim for refund of $93,990.21, but rejected the balance of the claim; and the second claim for refund of $1,276,728.43 was at the same time rejected in toto. The schedules attached to the Commissioner’s letter of rejection show that there was deducted from the sulphur valuation of $13,375,857, as of March 1,1913, the sum of $465,259.34, representing “cost of purchase already included in invested capital”,; and this is the “Issue 4” referred to in the body of the letter as follows:

“Issue 4” — Protest against reduction of invested capital for depletion is denied as determined after a conference in the Bureau.”

This “Issue 4” was the same “Issue 4” referred to in the earlier conference report, and had nothing whatever to do with any revaluation of the sulphur properties.

The amount of the overpayment of $16,-260.25 was scheduled by the Commissioner on July 7, 1930, and thereafter a cheek for the amount, with interest, was issued to the plaintiff, and by it indorsed to Freeport Sulphur ■Company, and paid to that company.

While the two claims for refund were pending and undetermined in the Commissioner’s Office, and on April 19, .1930, the plaintiff and its subsidiaries filed with the Commissioner a protest “against the depletion allowance for its Bryan Mound property for 1928 and subsequent years,” calling attention to the fact-that the “tax payer finds himself in the position of having substantial remaining reserves in the property, and for which there is no depletion allowable for a portion of the year 1928 and subsequent years.” The request was then made that additional depletable reserves of 1,626,357 tons be allowed over the previous allowance of 3,-459,000 tons. This protest resulted in a further examination by the Department, and in an exhaustive report made by the Valuation Division of the Mining section, dated June 3, 1931, it was recommended that the tonnage reserves, as of March 1, 1913, be increased from 3,459,000 tons to 5,000,000 tons, and the depletion rate reduced from 3.867 to 3.561.

Following this report, the Commissioner and Freeport Sulphur Company entered into a “Waiver and agreement,” dated March 28,1931, in which it was agreed “that the fair market value, as of March 1,1913, of the ores in said sulphur deposit, remaining on December 1, 1927, is $5,410,052.35, and that the sulphur reserves, as of December 1,1927, are 1,793,882.17 tons.” There is a recital in the agreement' that the Commissioner is unwilling to approve a revaluation if “the said taxpayer would continue to demand or claim any further or other revaluation in the future, or on past returns, such as the now pending 1918 claim for refund on the same or similar grounds.”

The plaintiff insists that the agreement required by section 240 (a) of the Revenue Act of 1918 (40 Stat. 108.1) is a formal instrument signed by every member of the affiliated group; but there is nothing in the language which requires such a construction. The statute provides that where the tax is assessed upon the basis of a consolidated return, “the total tax shall be computed in the first instance as a unit and shall then be assessed upon the respective affiliated corporations in such proportions as may be agreed upon among them, or, in the absence of any such agreement, then on the basis of the net income properly assignable to each.” The agreement specified in the statute need not be in any particular form; nor is it stated what the character of the proof necessary to establish. the existence of the agreement shall be. All that is required is that there be an agreement; and this may be shown by any competent evidence, direct or circumstantial, sufficient to prove the fact. That is the construction placed upon the statute by the Board of Tax Appeals in numerous cases; Bermont Oil Co. v. Commissioner, 22 B. T. A. 182, 188; Furniture Exhibition Building Co. v. Commissioner, 24 B. T. A. 1279 ; Washburn Wire Co. v. Commissioner, 26 B. T. A. 464; Himelhoch v. Commissioner, 26 B. T. A. 541; and I do not think that the language is susceptible of any other interpretation. Nor is Essex Coal Company v. Commissioner (C. C. A.) 39 F.(2d) 892, 894, in conflict with this view; for all that that ease decided was that “mere failure to object to the assessment of the whole additional tax against the petitioner cannot be construed as an implied agreement to be so taxed.”

In the present case, there is ample proof that an agreement in fact existed for the assessment of the entire tax against the plaintiff. It was the parent company, and owned all of the capital stock of the different subsidiaries; it assumed to speak as the taxpayer for the group in all of the negotiations with the Department. Moreover, the subsidiaries themselves expressly represented to the Department in the information returns that no part of the tax was to be assessed against any of them; and these information returns were just as applicable to the additional assessment as to the payments made when the tentative and consolidated returns were filed. Furthermore, after the proposed additional tax had been reduced to $1,276,-728.43, and a formal protest against some minor items had been filed with the Department, the plaintiff wrote the Commissioner on February 8, 1926, requesting “that the assessment be made immediately.” Certainly, there can be no doubt that the plaintiff intended by this letter to ask that the tax be assessed against it as parent for the group, and not apportioned among the affiliates, for the letter states as a reason for the request for immediate action that “Matters of importance with respeet to the present apparent surplus of the corporation make it urgent that this contingent liability be definitely stated and disposed of.” If, as now insisted, the plaintiff was not to be charged with any portion of the additional tax, there could have been no liability to the government, contingent or otherwise, carried on the books of the company.

Formal protest was unnecessary, as a prerequisite to suit. Moore Ice Cream Co. v. Rose, 289 U. S. 373, 53 S. Ct. 620, 77 L. Ed. 1265. But after such a request for immediate assessment as contained in the letter of February 8, 1926, the plaintiff is hardly in a position now to assert that there was no agreement among the affiliates as required by section 240 (a) of the Revenue Act of 1918. See Clift & Goodrich v. U. S. (C. C. A.) 56 F.(2d) 751. Besides, the burden of the tax was actually borne by the Freeport Sulphur Company, which was the one subsidiary ultimately liable for its payment. I am clear, therefore, that the plaintiff is not entitled to succeed on the first cause of action.

With respeet to the second cause of action, it is the.plaintiff’s contention that the government admitted in the “Waiver and agreement” of March 28,1931, that there was “gross error” in the valuation of the sulphur reserves as of March 1,1913, and that the entire 1918 tax should be recast so to conform to the new valuation agreed upon by the Department. The 1931 revaluation was made, however, in response to a formal protest from the plaintiff and its subsidiaries stating specifically that it related only to “1928 and subsequent years.” This protest had nothing whatever to do with any valuation or revaluation of invested capital for the purposes of the 1918 tax. Moreover, the only reason given by the plaintiff for the request that the earlier sulphur valuation should be changed was the realization that there were still “substantial remaining reserves in the property and for which there is no depletion allowable for a portion of the year 1928 and subsequent years.” The demand was for the allowance of additional depletable reserves of 1,626,357 tons beyond the previous allowance of 3,459,-000 tons. Yet Messrs. Fisher and Lowrie, the plaintiff’s own engineers, had stated in a report submitted by the plaintiff to the Department at the time the proposed additional assessment for 1918 was under discussion, that the estimated sulphur reserves as of March 1,1913, were only 3,000,000 tons; and the plaintiff itself, in its appeal of February 19, 1924, advised the Commissioner that the Department’s estimate of 3,459,000 tons was “acceptable to the Taxpayer.” In none of the subsequent discussions with the Department, in connection with the assessment, was this tonnage figure questioned, or the March 1,1913, valuation disputed; so that if, as the plaintiff now contends, the allowance made by the Department for invested capital was inadequate, it was of the plaintiff’s own doing, and not something for which the government was in any way responsible.

But regardless of the merits of the claim, the government insists that the claim for refund is insufficient to support the alleged second cause of action. The claim for refund was filed April 19, 1929, for $93,990.21, and states as follows:

“This refund is claimed on account of an insufficient deduction for depletion and an insufficient amount of invested capital for the year ended November 30, 1918. Supporting data and evidence is being filed with the Commissioner of Internal Revenue, Washington, D. C.”

The “supporting data and evidence” referred to appears in the brief filed by the plaintiff on April 25, 1929; and this brief makes no mention of any contention that the sulphur valuation as of March 1, 1913, was inadequate. Manifestly, this was not a compliance with the statute requiring the filing of a claim for refund as a prerequisite to the maintenance of a suit, nor did it satisfy Article 1254 of Regulations 74, providing that “all facts relied upon in support of the claim should be clearly set forth in detail under oath.” Henry Prentiss & Co. v. U. S. (D. C.) 46 F.(2d) 159, 160; U. S. v. Felt & Tarrant, 283 U. S. 269, 51 S. Ct. 376, 75 L. Ed. 1025.

The plaintiff at no time during the later discussions with the Department either contended or suggested that the sulphur reserves were insufficient, or that the sulphur valuation should be increased; and it is entirely clear from the report of the conference on August 15, 1929, and the Commissioner’s letter of June 3, 1930, allowing the claim to the extent of $16,260.25, and rejecting the balance, that the Department never had presented to it for determination, nor considered, any such claim as the plaintiff now seeks to establish in the second cause of action. Moreover, the plaintiff did not request or suggest any amendment to include such a claim. Arthur Solomon v. U. S. (C. C. A.) 57 F.(2d) 150. There is no analogy, therefore, to U. S. v. Memphis Cotton Oil Co., 288 U. S. 62, 53 S. Ct. 278, 77 L. Ed. 619, U. S. v. Factors & Finance Co., 288 U. S. 89, 53 S. Ct. 287, 77 L. Ed. 633, and Bemis Bros. Bag Co. v. U. S., 289 U. S. 28, 53 S. Ct. 454, 77 L. Ed. 1011, recently decided by the Supreme Court. It follows that there can be no recovery under the second cause of action.

The motion of. the defendant for a directed verdict is granted, and the complaint dismissed, with costs.


source: Caselaw Access Project

author: KIRKPATRICK, District Judge.

license: Public Domain

text:
    LAWRENCE v. TRAVELERS’ INS. CO. et al.
    No. 17744.
    District Court, E. D. Pennsylvania.
    March 16, 1934.

      Edward A. Collins, Jr., and Hepburn & Norris, all of Philadelphia, Pa., for plaintiff.
    Charles B. Ermentrout, of Philadelphia, Pa., for defendants.
   KIRKPATRICK, District Judge.

This is an interpleader, under which the life insurance company has paid the face value of the policy into court, and the only question is whether the fund shall be paid to the assignee of the policy or to the administrator of the insured.

The parties waived jury trial, and on the hearing the only evidence offered was a stipulation in which all material facts were agreed upon. This stipulation is adopted by the court as findings of fact and may be taken as a special verdict.

Summarized, the facts are that on August 13, 1925, one Walter Scholes took out a policy of life insurance upon his own life in the amount of $10,000, payable to his executors, administrators or assigns. Six days later he assigned the policy by an absolute assignment to Geraldine Lawrence, which assignment was delivered to her on August 27th. Miss Lawrence had not, and has never had, any insurable interest in the life .of the insured, and for that reason the company would not have allowed the insured to designate her as beneficiary in the policy. The assignment was without consideration. Thereafter all notices of premium were sent to the insured until the date of his death, and he paid all the premiums until February 13, 1933, when, being unable to pay the premium then due, he instructed the plaintiff to pay it, promising to reimburse her. For this purpose the plaintiff borrowed upon the policy, and with money so borrowed paid the premium due as well as the next two premiums. Scholes died September 12, 1933, while the policy was in full force.

Whether an assignee who has no insurable interest may recover upon a policy of life insurance is a question which has been before the courts of the country on many occasions, and the decisions are in conflict. The eases are collected and digested in a very complete ease note to be found in 73 A. L. R. at page 1036, and the earlier cases may be found listed in the opinion in Gordon v. Ware National Bank (C. C. A.) 132 F. 444, 67 L. R. A. 550. It would serve no purpose to review them here.

Even if it be assumed that, as the defendant argues, Pennsylvania is one of the jurisdictions in which the assignee under the facts of this case may not recover, this court would not be bound by those rulings. The question is clearly one of general law not involving local statutes or usages or settled rules of property, and therefore one upon which the federal courts must exercise independent judgment. Russell v. Grigsby (C. C. A.) 168 F. 577, 580 (unaffected upon this point by the reversal) ; Gordon v. Ware National Bank, supra. In the absence of controlling federal decisions, we should of course, if possible, follow the Pennsylvania rule, unless it appeared to be clearly wrong. But the Supreme Court of the United States and the Circuit Court of Appeals for this circuit have taken a different view, and of course we are bound by their decisions.

In Grigsby v. Russell, 222 U. S. 149, 32 S. Ct. 58, 59, 56 L. Ed. 133, 36 L. R. A. (N. S.) 642, Ann. Cas. 1913B, 863, the court, overruling at least the dicta of Warnock v. Davis, 104 U. S. 775, 26 L. Ed. 924, and other earlier cases, held the general rule to be that the fact that an assignee has no insurable interest does not, upon any ground of public policy or otherwise, prevent recovery by him. The court allowed what is, in all jurisdictions whieh have adopted the same rule, held to be an exception — that, where the whole transaction from the beginning is entered into as a mere cover for a wager or gambling transaction, the assignment is void. As Mr. Justice Holmes puts it: * * * Cases in which a person having an interest lends himself to one without any, as a cloak to what is, in its inception, a wager, have no similarity to those where an honest contract is sold in good faith.”

It is true that facts before the court in Grigsby v. Russell showed affirmatively that the policy was originally taken by the insured without any immediate idea of assignment, for it appeared that, after he had paid two premiums and a third was overdue, being in want and needing money for a surgieal operation, he asked the assignee to buy the policy, and sold it to him for $100. However, the opinion is based upon much broader grounds, and the discussion of the public policy involved shows beyond question that the court intended to lay down a general rule in favor of such assignments, and was not merely dealing with an exception, based upon the facts of that ease, to a general rule the other way. The importance of having a correct view of Grigsby v. Russell upon this point appears in the present case, because here there is no evidence one way or the other as to the motivating cause for takmg out and assigning this policy and none as to the circumstances surrounding the transaction. If I have correctly understood Grigsby v. Russell as laying down the general rule, then we must take the position that the transaction is to be sustained unless the defendant shows that it was “in its inception, a wager.”

The assignment was in point of time very close to the issuance of the policy, and it may well have been (although there is no evidence on the point) that, when the insured took out the policy, he intended to assign it to the'plaintiff. This, however, would not be sufficient. If it is to be shown that he, in the words of Mr. Justice Holmes, lent himself to one without an insurable interest as a cloak to a gambling transaction, it must appear that the assignee participated in some way. But she did not buy the policy or give any consideration for its assignment to her. So far as it appears, she did not even know that it had been taken out until the assignment was delivered to her nearly a month after it had been applied for. She paid no premiums and invested nothing in the contract until financial difficulties nearly eight years later compelled the insured to appeal to her, and even then she merely acted as a medium through which he was enabled to borrow upon the policy. These admitted facts do much more than overcome any suspicion of collusion to evade the law which might arise from the proximity in time of the issuance of the policy and the assignment.

Another point made by the defendant is based upon the agreed fact that the company would not have written the policy with the plaintiff as the beneficiary because of her lack of insurable interest. Consequently, the defendant argues, the insured must have adopted the course he did in order to circumvent this rule or policy of the company. Even so, he was not violating any rule of law or public policy, because it is everywhere conceded that a man has an insurable interest in his own life and may legally name whomever he pleases as beneficiary. Haberfeld v. Mayer, 256 Pa. 151, 100 A. 587; Steen v. Lowry, 85 Pa. Super. Ct. 365. So far as the company is concerned, by paying the money into court, it has waived any objection arising from infraction of its rules or of the terms of the policy.

Prom what has been said it follows that the plaintiff is entitled to recover.

Judgment may be entered for the plaintiff upon the special verdict in the amount claimed with interest.


author: PETER B. OLNEY, JR., Referee. WOOLSEY, District Judge.

text:
    In re JEROLOMAN.
    District Court, S. D. New York.
    March 24, 1934.
    David W. Kahn, of New York City, for trustee.
    Henry P. Goldstein, of New York City, for bankrupt.
   PETER B. OLNEY, JR., Referee.

On July 7, 1933, one of the bankrupt’s creditors, the Chemical National Bank & Trust Company, obtained a deficiency judgment against bankrupt after foreclosure of a mortgage, bankrupt having executed an extension agreement of a bond and mortgage made in reference to certain property owned by bankrupt prior to 1926, and which property was transferred by sale some time in 1926.

Bankrupt at the time of his bankruptcy had in force two insurance policies upon his life, one in the Prudential Insurance Company in the sum of $3,900, issued September 2, 1924, and another in the Equitable Life Assurance Society in the sum of $5,000, issued March 10,1924. In each of these policies the beneficiary is bankrupt’s wife and the right to change the beneficiary has been reserved by the bankrupt.

On this state of facts trustee contends that Chemical National Bank & Trust Company was a creditor of the bankrupt prior to March 31,1927, and that as such trustee he is entitled to the cash surrender value of the policies as of the date of the filing of the petition in bankruptcy for the benefit of the creditors who were such prior to March 31, 1927, the effective date of section 55-a of the New York Insurance Law (Consol. Laws N. Y. c. 28). In re Messinger (C. C. A. 2d) 29 F.(2d) 158, 68 A. L. R. 1205.

In opposition to the trustee’s contention bankrupt cites a decision of Judge Knight in the Western District of New York, In re Crayton (D. C.) 56 F.(2d) 282, where on a similar state of facts, Judge Knight held that a deficiency judgment creditor who had obtained his judgment in 1980 upon a bond and mortgage executed prior to March 31, 1927, was not a creditor on March 31,1927, because at that time and up to the deficiency judgment the claim was contingent as it was uncertain whether there would be any deficiency judgment.

With the utmost respect for Judge Knight, I am reluctantly compelled to disagree with his decision in Re Crayton, which as I read it is based on the assumption that there is no indebtedness against an obligor upon his bond where it is secured by mortgage until it is determined whether the liquidation of the collateral, which the court says is principally liable for the amount of the mortgage, will realize sufficient to pay the claim in full; in other words, that until such time the claim is merely contingent. This it seems to me is to lose sight of the fundamental distinction between a secured and a contingent claim. In the former case, the debt exists, and has from the inception of the transaction between the parties, but the creditor has security for his debt. The mere fact that where a creditor holds security, he must first determine the value thereof and his claim be allowed only for the difference does not mean that prior to such time no debt existed. In the latter case at the time in question no claim exists at all, the situation being that upon the happening of some event in the future a claim will spring into existence.

I am confirmed in my view by the fact that the law is that an obligee on a bond or note secured by mortgage may sue either on the bond or to foreclose the mortgage. Jones v. Conde, 6 Johns. Ch. (N. Y.) 77; see Continental Securities Co. et al. v. Interborough Rapid Transit Co., 118 Misc. 11, see page 16, 193 N. Y. S. 892, affirmed General Inv. Co. v. Interborough Rapid Transit Co., 200 App. Div. 794, 193 N. Y. S. 903; Id., 235 N. Y. 133, 139 N. E. 216. Compare Civil Practice Act, § 1078.

In my opinion, in the Crayton matter and in the matter at bar the court is dealing with a debt which was in existence on March 31, 1927, when section 55-a of the Insurance Law became effective, which debt was to be sure secured, and therefore the trustee is entitled to the cash surrender value for the benefit of said creditor and any others who may have been such at the time. In re Messinger, supra.

Motion granted. Settle order on notice.

Memorandum on Petition to Review Referee’s Order.

WOOLSEY, District Judge.

Petition to review is dismissed and referee’s order and decision confirmed on authority of In re Messinger (C. C. A.) 29 F.(2d) 158, 161, 68 A. L. R. 1205.


author: BYERS, District Judge.

text:
    In re SOKOL et al.
    Ne. 25890.
    District Court, E. D. New York.
    March 15, 1934.
    M. Mal. Deitch, of New York City, for petitioning creditors.
    Herman G. Robbins, of Brooklyn, N. Y., for alleged bankrupts.
   BYERS, District Judge.

This involuntary proceeding came to trial on the question of whether jurisdiction pertains to the Court. A motion to dismiss the petition succeeded heretofore as to alleged acts of bankruptcy 1 and 2, but not as to 5 and 6; no proof was tendered by the alleged bankrupts, on the trial, in opposition to these. Their case rests upon a denial of the following allegation in the petition:

"That Sam Sokol and Barnet Hyman, co-partners doing business under the name of 20th Century Carpeting Co., have for the greater part of six months next preceding the date of the filing of this petition, had their principal place of business at No. 168-12 Jamaica Avenue in the Borough of Queens City of New York County of Queens and State of New York and are * * *,"

The proof is that they have resided in this district since October 23, 1933, and the petition was filed on February 14, 1934, so that, for over three months, i. e., the greater part of six months, their residence in this district is deemed to have been established.

On October 23, 1933, they swore to a certificate, which was filed in the County Clerk’s office in Queens County in this district, that they were doing business under the name and style set forth in this proceeding; that they resided, respectively, at 637 Barbey Street, Brooklyn, and 87-50 111th Street, Richmond Hill, and they have not been shown to have given up those residences prior to the filing of the petition.

They assert, however, that this does not constitute proof in accordance with the quoted allegation of the petition.

As to their place of doing business, the proof is that on October 18, 1933, they entered into a lease of premises 168-04-20 Jamaica Avenue, Queens, but did not take possession until about November 18, 1933.

They opened a bank account in the Bank of Manhattan Company, and began to issue cheeks thereon as early as October 23, 1933.

They contracted for merchandise on October 28, 1933, to be delivered as per shipping instructions later to be received, and the first of these instructions seems to have been issued about November 20th.

The alleged bankrupts executed a deed of trust for the benefit of creditors on January 16,1934, and have testified that since that time they have not conducted business. The deed of trust is construed, for present purposes, as a general assignment for the benefit of creditors, and therefore as an act of bankruptcy.

Samples of merchandise were delivered by one of the creditors to the' alleged bankrupts on November 2, 1933, at the premises which were later opened as the place of business in question, although one of the alleged bankrupts testified that they had no possession of the said store at that time.

The circumstances shown, as to the residence of the alleged bankrupts within this district for the greater part of six months preceding the filing of the petition are sufficient to confer jurisdiction upon the Court.

There seems to be no reported case involving faets similar to those under examination, and, while it would be difficult to conclude that the alleged bankrupts maintained the store for the greater part of six months prior to the filing of the petition, at the address in question, the fact is that they were constantly at the premises, supervising alterations and repairs, from the first of November, 1983, and it was therefore their principal place of transacting business until January 16th, following, and therefore the quoted allegation of the petition cannot be deemed to have been established by the evidence.

The evidence demonstrated, however, that the Court has. jurisdiction over the alleged bankrupts by reason of their residence in this district for the statutory period; and, that fact having been shown, there js no good reason why the proceeding should be dismissed ; if to accomplish this result it is necessary to deem the petition amended to conform to the proof, so as to include residential allegations, such amendment will be deemed to have been granted. In re Lange (D. C.) 97 F. 197.

Adjudication ordered.


author: PATTERSON, District Judge.

text:
    WARSHAUER v. LLOYD SABAUDO S. A.
    District Court, S. D. New York.
    Dec. 22, 1933.
    Barron, Rice & Rockmore, of New York City (Bernard S. Barron and George P. Halperin, both of New York City, of counsel), for plaintiff.
    Loomis, Williams & Donahue, of New York City (Homer L. Loomis and Thomas F. Peterson, Jr., both of New York City, of counsel), for defendant.
   PATTERSON, District Judge.

The action is at law, brought by one Warshauer, a citizen of the United States, against the Lloyd Sabaudo, a corporation of Italy, and owner of the steamship Conte Biancamano. The complaint alleges that the plaintiff and a companion were in a small motorboat which was carried out to sea from the Long Island coast by forces beyond their control; that after drifting about for six days in a helpless condition they sighted the Conte Bianeamano and made signals of distress which were observed by the operating personnel of the steamship; that the steamship could have stopped and taken them on board without running any risks; that it nevertheless ignored the signals and proceeded on its course without stopping; and that the plaintiff and his companion were left to shift for themselves until they were picked up two days later by another vessel. Damages are demanded for injuries and suffering by exposure, hunger, and thirst alleged to have resulted from the failure of the defendant’s steamship to render assistance.

The defendant has moved to dismiss the complaint on the ground that it fails to state a cause of action. In its brief it denies that those on the Conte Bianeamano saw the plaintiff or his boat, but for present purposes its position is that «in any event the facts set forth by the plaintiff do not make out a case of legal liability against it.

The ease seems to be one of first impression. The plaintiff has found no precedent for the action, one where liability is said to arise from the alleged refusal of a ship to come to the aid of a stranger in peril on the seas. He relies to some extent on section 2 of the Salvage Act of 1912 (46 USCA § 728), providing that the master of a vessel shall render aid to every person found at sea in danger of being lost, where he can do so without serious danger to his own vessel, and imposing punishment on a master who fails to give such assistance. On the other hand, the defendant has found dicta in early cases intimating that no civil action may be brought in a case of this character. Saunders v. The Hanover, Fed. Cas. No. 12,374; United States v. Knowles, Fed. Cas. No. 15,540. Most of the arguments in the case are directed to the general point whether any duty is imposed by law on a stranger to follow the example of the good Samaritan and render assistance to a person who is helpless and in peril. I find it unnecessary to pursue these arguments, interesting as they are, or to determine whether the Salvage Act can he construed as creating a civil as well as a criminal liability, for the reason that there are provisions in the International Salvage Treaty of 1910 which conclusively settle the rights of the parties now before the court.

The International Salvage Treaty, to which both the United States and Italy were parties, was signed on September 23, 1910. It was ratified by this country on March 14, 1912, and was declared effective on March 1, 1913. The text of the treaty will be found in 37 Statutes at Large, p. 1658. Article 11 provides:

“Every master is bound, so far as he can do so without serious danger to his vessel, her crew and passengers, to render assistance to everybody, even though an enemy, found at sea in danger of being lost.

“The owner of the vessel incurs no liability by reason of contravention of the foregoing provision.”

This is a square declaration that, while the master of a ship is under a duty to rescue persons found in distress where he can do so without danger to his own ship, the owner of the ship incurs no liability if the master fails to discharge this duty.

The present ease being one by a citizen of the United States against an Italian corporation, as owner of the steamship Conte Biancamano, the provisions of the treaty are controlling. See article 15. It foEows that on the plaintiff’s own showing he has no ease against this defendant as owner of the steamship on account of the aEeged failure by the master to pick him up. Whether he has a cause of action against the master, by virtue of the treaty or by virtue of the Salvage Act, is a matter that is foreign to the present issue. The defendant’s motion to dismiss the complaint for failure to state a cause of action will accordingly be granted.


author: JOHNSON, District Judge.

text:
    In re WRUBLE.
    No. 8489.
    District Court, M. D. Pennsylvania.
    March 24, 1934.
    Edwin H. Sheporwich, of Wilkes Barre, Pa., for alleged bankrupt.
    Reynolds & Reynolds, of Wilkes Barre, Pa., for petitioning creditors.
   JOHNSON, District Judge.

This is a motion to dismiss a creditors’ petition on the ground that it fails to set forth an act of bankruptcy within the meaning of the Bankruptcy Act of 1898 and its amendments. The act of bankruptcy intended to be charged by the petition is the fourth act, created by the amendment of 1926 (11 USCA § 21 (a) (4), as follows: “(4) Suffered, or permitted, while insolvent, any creditor to obtain through legal proceedings any levy, attachment, judgment, or other lien, and not having vacated or discharged the same within thirty days from the date such levy, attachment, judgment, or other lien was obtained.”

The petition, which was filed on October 2, 1933', avers: “That the alleged bankrupt is insolvent and while insolvent, suffered or permitted The Kingston Bazik and Trust Company, a creditor, to obtain through legal proceedings judgment, to-wit: No. 2911 October Term, 1932, entered on September 26, 1932, in the amount of $14,000 and not having vacated or discharged the same within thirty days from the date such judgment was obtained.” The alleged bankrupt contends that since the alleged act of bazikruptey occurred more than four months prior to the time of the filing of the petition in bankruptcy, it is in effect no act of bankruptcy and the petition must therefore be dismissed.

It will be seen that the judgment against the alleged bankrupt was entered on September 26, 1932, long before the four-month period had commenced to run. The question arising, therefore, is whether or not an act of bankruptcy is committed by an insolvent debtor’s failure to vacate a judgment that gave rise to a lien at a date prior to the commencement of the four-month period.

To constitute an act of bankruptcy under clause (4) of section 3 a, 11 USCA § 21 (a) (4), two elements must concur: (1) The debtor must, while insolvent, suffer or permit a preference to be obtained; (2) he zhust fail to discharge such preference within thirty days. Both elements must occur within the four-month period pi’ior to the filing of the petition in bankruptcy. Northwestern Pulp & Paper Co. v. Finish Luth Book Concern et al. (C. C. A.) 51 F.(2d) 340; Remington on Bankruptcy, § 194, vol. 1, p. 259 (3d Ed.); In re McGraw (D. C.) 254 F. 442. Since the creditors’ petition was not filed untü over a year after the eoznmission of the aEeged act of bankruptcy, one of the essential requisites of an act of bankruptcy is lacking, and the petition must he held insufficient.

And now, March 24, 1934, the motion to dismiss the creditors’ petition is sustained, and the petition is dismissed, with costs.


text:
    FORDHAM v. MUNSON S. S. LINE.
    District Court, S. D. New York.
    Dec. 20, 1933.
    Bigham, Englar, Jones & Houston, of New York City (Richard F. Shaw, of counsel), for libelant.
    Irving L. Evans, of New York City, for respondent.
   PATTERSON, District Judge.

Two suits in admiralty were brought by the libelant to recover pilotage fees. The libelant holds a license to navigate that part of the East river known as Hell Gate, such license being issued by the board of commissioners of pilots of the state of New York. The first ease involves the steamship Profit, a foreign vessel under charter to the respondent. On September 5, 1930, the libelant tendered his services to the master of the Profit to take the vessel through Hell Gate. The Profit was then lying 'at Oak Point, Bronx. The offer was declined. A few hours later the Profit proceeded down the East river bound to see, passing through Hell Gate under the pilotage of one Rasmussen, a New York pilot who had a license from the United States covering New York harbor but had no Hell Gate license from the state of New York.

The second case involves the steamship Margit, also a foreign vessel. On November 20, 1929, the libelant offered his services as a Hell Gate pilot to the Margit, of whieh the respondent was the consignee. The Margit was then tied up at Potts Cove, Astoria, whieh is on the south side of Hell Gate. The services were rejected. The Margit was taken down the East river to a destination in Brooklyn, necessarily passing through the lower part of Hell Gate, and it is conceded that no Hell Gate pilot was on board.

The jurisdiction of the District Court as a court of admiralty is beyond doubt. This is true although the pilotage fee sought is one imposed by the state-laws. Hobart v. Drogan, 10 Pet. 108, 9 L. Ed. 363; In re McNiel, 13 Wall. 236, 20 L. Ed. 624.

On the merits I see no escape from the conclusion that the respondent is liable in both cases for the pilotage fee fixed by the state statutes. The New York statutes provide for the appointment of pilots to guide vessels “through the channel of the East River, commonly called Hellgate,” such pilots to be under control of the board of commissioners of pilots for the port of New York. It is made a misdemeanor for a person other than a Hell Gate pilot to pilot a vessel through Hell Gate, except where the vessel is propelled by steam and is in the coasting trade (section 2130, Consolidation Act N. Y. [Laws 1882, e. 410]). Among other provisions is the following (section 2133, as amended by Laws 1895, c. 691, § 1):

“And all foreign vessels and vessels under register navigating the channel of Hell Gate, who shall be spoken, shall be subject to the pilotage fees as provided in section 2129 to the first pilot who tenders his services.”

This statute covers the two eases before the court. Both vessels were foreign; both navigated Hell Gate; the libelant was the first Hell Gate pilot to offer his services. It does not matter that the Margit did not navigate the entire length of the Hell Gate channel, nor does it matter that her destination was merely another point in New York harbor. It does not matter that both vessels were obliged to hire a Sandy Hook pilot later in order to leave the harbor. The other points pressed by the respondent are equally unsubstantial. The payment of the fees may be an onerous and useless burden, but that is a consideration for the lawmakers rather than the courts.

The state statutes are not in contravention of any statute passed by Congress. While the power of Congress over pilotage in ports of the United States is paramount, that power has never been exercised to the full extent, the subject being left in the main to the control of the several states. Act August 7, 1789, c. 9, § 4 (46 USCA § 211). There is a prohibition against the levy of pilot charges on any steamer carrying a pilot with a federal license for the locality (Act February 28, 1871, c. 100, § 51 [46 USCA § 215]) but the context indicates that this prohibition applies only to coastwise steam vessels not under register. Anderson v. Pacific Coast Steamship Co., 225 U. S. 187, 32 S. Ct. 626, 56 L. Ed. 1047.

The libelant will recover the amount demanded in each ease — $30 in the case of the Profit, and $55 in the ease of the Margit.


text:
    THE SOUTHERN CROSS. THE WESTERN WORLD. BAIBIENE & ANTONINI, Limited, v. MUNSON S. S. LINE.
    District Court, ¡3. D. New York.
    Dec. 16, 1933.
    Single, Atkins & Tyler, of New York City, for libelant.
    Irving L. Evans, of New York City, for respondents.
   COXE, District Judge.

The libel in this ease alleges that the libelant owned the merchandise, and that the damage was occasioned while the merchandise was being carried by the Southern Cross. This is enough; and it was not necessary to set np the bill of lading. The respondent can allege that document in its answer if it intends to rely on any of its provisions. Furthermore, it can ascertain the character and extent of the damage by interrogatories.

The exceptions to the libel are overruled.


author: GALSTON, District Judge.

text:
    DELCO-REMY CORPORATION v. PREFERRED ELECTRIC & WIRE CORPORATION. SAME v. P. SORENSEN MFG. CO., Inc. SAME v. AUTOMOTIVE SPECIALTY CORPORATION. SAME v. STANDARD MOTOR PRODUCTS CO., Inc. SAME v. P. & D. MFG. CO., Inc.
    Nos. 6388, 6389, 6391-6393; 6526.
    Nos. 6399, 6400, 6402-6404, 6527.
    Nos. 6407, 6408, 6410-6412, 6693, 6904.
    Nos. 6419, 6420, 6422-6424, 6905.
    Nos. 6433, 6434, 6436-6438, 6800.
    District Court, E. D. New York.
    March 20, 1934.

      Cooper, Kerr & Dunham, of New York . City, for plaintiff.
    Schechter, Lotsch & Sulzberger, of New York City, for defendants, Preferred Electric Corporation, Automotive Specialty Corporation, and Standard Motor Products Co.
    Kenyon & Kenyon, of New York City, for defendants P. Sorensen Mfg. Co., Inc., P. & D. Manufacturing Co.
    Theodore S. Kenyon, John L. Lotsch, and W. Houston Kenyon, Jr., all of New York City, of counsel, for defendants in each of these eases.
   GALSTON, District Judge.

These are identical motions in thirty-one patent eases now pending in this court against five different defendants.

Plaintiff seeks an order permitting it to file a bill of complaint in the nature of a supplemental bill of complaint, naming the General Motors Corporation plaintiff in the proposed bill.

It appears that on December 30, 1933, and subsequent to the joinder of issue in this ease, plaintiff assigned and transferred to the General Motors Corporation all of its business, good will, property, trade-marks, letters patent, etc., including the patents in suit.

The effect of this assignment was to abate the suit. It was said in Automatic Switch Co. v. Cutler-Hammer Mfg. Co. (C. C. A.) 147 F. 250, 251: “The effect of this assignment was to abate the suit. If a sole plaintiff, suing in his own right, assigns his whole interest to another, he is no longer able to prosecute the suit because he is without interest in the litigation. It is unnecessary to refer to any authorities in addition to those cited in our opinion in Ecaubert v. Appleton, 67 F. 917, 15 C. C. A. 73. The suit is completely suspended and cannot be proceeded in till it is revived, and all orders and proceedings pending such abatement mil be considered nugatory. After such an abatement, i. e., one caused by assignment of plaintiff’s whole interest, the successor in interest, claiming by a title which may be litigated, may revive the suit by an original bill in the nature of a supplemental bill.”

Applying the law of that case to the present motion forces the conclusion that the Deleo-Remy Corporation, the plaintiff, having divested itself of all interest in the letters patent in suit, is without standing to move since the suit abated as to it.

This same opinion indicates, however, how the successor in interest may proceed after the abatement. It may revive the suit by an original bill in the nature of a supplemental bill.

The difficulty with the practice adopted on this motion is that the party in interest, the General Motors Corporation, has initiated no process. It has not subjected itself to the jurisdiction of the court. It has neither filed a petition for leave to intervene, by availing itself of the provisions of Equity Rule 37 (28 USCA § 723), nor has it filed in this court an original bill in the nature of a supplemental bill.

Accordingly, the motions must be denied. Settle order on notice.


author: GREEN, Judge.

text:
    HOLMES MFG. CO., Inc., v. UNITED STATES.
    No. M-391.
    Court of Claims.
    April 2, 1934.

      William A. Neacey, of Washington, D. C. (William Cogger, of Washington, D. C., on the brief), for plaintiff.
    John W. Hussey, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
    Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
   GREEN, Judge.

This suit is begun to recover $1,600.95, representing part of an overpayment of income and profits taxes for 1917 which had been credited to deficiencies in the taxes for the years 1915 and 1916, more than five years after the original returns for those years had been filed. The petition in the case was not filed within the period prescribed for the commencement of suits to obtain a refund of taxes, but plaintiff bases its ease upon the theory that the so-called “certificate of overassessment” which it received about November 11, 1925, constituted an account stated, or at least was such as to the' item of overassessment contained therein. This certificate showed the amount of the overassessment and that disposition had been made of it by crediting it upon certain deficiencies in taxes for other years, and the balance refundable after such credits had been made. A check was inclosed for this balance, which was received and cashed by plaintiff. In other words, it was a statement of the account between the plaintiff and defendant with reference to taxes which had been assessed against plaintiff showing that a balance was due the plaintiff thereon vyhieh was accordingly refunded. The findings show that there was no agreement express or implied that any other sums would be refunded beyond the amount which was paid.

It is quite obvious there was no account stated in favor of plaintiff except for the balance shown. The amount of this balance was paid leaving nothing due as the account was stated. Plaintiff seeks to take the one item of the account which showed the amount of the overassessment and ignore the credits and the refund made on the other side of the account. We have repeatedly held that this cannot be done, and, without citing all of the many cases that support our holding would call attention particularly to R. H. Stearns Co. v. United States, 291 U. S. 54, 54 S. Ct. 325, 78 L. Ed. -, Leisenring v. United States, 3 F. Supp, 853, 77 Ct. Cl. -, certiorari denied 54 S. Ct. 558, 78 L. Ed. -, and Samuel Daube v. United States (Ct. Cl.) 5 F. Supp. 769, decided February 5, 1934.

The plaintiff received the cheek for the balance shown to be due by the account, and cashed it without making any objection thereto until almost six years later when this suit was commenced. Instead of being an account stated in favor of the plaintiff, it was really an account settled. Cf. Steams Co. v. United States, supra.

Plaintiff’s action is without merit, and it is ordered that its petition be dismissed.

BOOTH, Chief Justice, and WHALEY, WILLIAMS, and LITTLETON, Judges, concur.


author: BOOTH, Chief Justice.

text:
    STUBBLEFIELD v. UNITED STATES.
    No. 42038.
    Court of Claims.
    April 2, 1934.

      Frederick Schwertner, of Washington, D_ C., for plaintiff.
    J. H. Sheppard, of Washington, D. C.,. and Frank J. Wideman, Asst. Atty. Gen.. (Elizabeth B. Davis, of Washington, D. C.r on the brief), for the United States.
    Before BOOTH, Chief Justice, and. GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
   BOOTH, Chief Justice.

The plaintiff in this ease is the executrix of the estate of her deceased husband, Thomas W. Stubblefield. The suit is for the recovery of an estate tax alleged to have been illegally assessed and collected by the Commissioner of Internal Revenue under the following provisions of the Revenue Act of 1924 (43 Stat. 253, 304, 26 USCA § 1094 note):

. “Sec. 302. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated — * * *

“(e) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended' to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for a fair consideration in money or money’s worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of Part I of this chapter.”

'The facts of record determine the issue. The ease of United States v. Wells, 283 U. S. 102, 51 S. Ct. 446, 75 L. Ed. 867, is the applicable precedent. Plaintiff in filing an estate-tax return with the collector omitted from the same the value of certain parcels of real estate and the sum of $69’,085.95 in money admittedly received by her within two years of the death of the testator. The Commissioner in an audit and review of the return determined an increase in the value of the gross estate, and after the allowance of certain deductions assessed and collected a deficiency tax of $5,426.54, which with interest amounted to $6,025.23-. This amount the plaintiff paid under protest, later filed a timely claim for refund, and this suit is for the recovery of a judgment for the tax so paid.

The Commissioner justified his action under the theory that the transfer of the real property, as well as the money paid to the plaintiff, had been and was made by the testator in contemplation of death.

All the transfers occurred within two years prior to the testator’s death. The realty deeded embraced several properties determined by the Commissioner to be of the net value of $328,000. The testator had been in poor health for several years prior to the execution of the deeds, and híÜ physical condition was precarious. The attending physician had warned him repeatedly as to the necessity of observing rigid rules of diet, rest, and inactivity if he wished to escape the consequences of serious organic ailments.

On December 25, 1923, the testator suffered a collapse while walking on the street toward his home, and had to be assisted thereto. The doctor was immediately called, and the diagnosis of his condition disclosed an unsound heart, due to a development of previous organic trouble of a serious nature. His serious illness continued for many days, and it was during this period that the testator executed to the plaintiff the deeds for the realty involved.

We need not recite in detail all that occurred; it is sufficient to state that it is impossible, in view of the record, to reconcile the transaction upon any other basis than that th'e “controlling motive” for the transfer of the property was contemplation of death. Not only were deeds drawn up for the transfer of the most valuable of the testator’s realty possessions, but a will was executed disposing of the remainder of his estate, and notwithstanding this will was superseded by a later one, all the facts and circumstances indicate positively that the existing serious illness of the testator moved him to comply with the wishes of the plaintiff, which she had persistently theretofore urged him to do before it was too late, and this he did, despite the protests of his business partner, and contrary to his attitude with respect to the subject when he deemed himself a well man. The first deed was executed on January 10, 1924, fifteen days after the serious attack of December 25, 1923. This deed embraced all the properties transferred; it was not recorded, for later separate deeds were executed for individual properties and recorded. At no time following this transaction was the testator well, or ever able to give to his affairs the time and attention previously accorded them, and on August 19, 1925, he died suddenly while at Ventnor, N. J., for the summer. That he knew and appreciated his physical condition and remained in constant dread of the very fate which terminated his career is proven beyond a doubt. He was an intelligent man, active and alert when in health, knew precisely what he was doing and the reasons for doing it, and had he not contemplated the imminence of death he probably would have continued to refrain from doing the very thing that was done, and which he had refused to do despite the wishes of the plaintiff, until this sudden illness warned him to immediately adjust his affairs.

The testator owned in his own name the Dresden Apartment House in Washington. In March, 1925, he was in a position to conclude a sale of the same for approximately $200,000 in cash, and he was anxious to sell and realize the money. The plaintiff, his wife, had for a long time been much disturbed over her husband’s realty speculations, and possessed an acute antipathy for his business partner. She was anxious to secure adequate financial protection for herself and daughter in the event of her husband’s demise. In 1924, a short time after the deeds to the property heretofore mentioned had been executed, she consulted a lawyer and placed before him the financial status of herself and her husband. She was advised that she had acted wisely in procuring deeds to certain properties, and under no circumstances to allow the property deeded to her “to get out of her name.” So, when the transaction involving the sale of the Dresden Apartment arose, acting upon the advice of her lawyer she positively declined to join her husband in executing a deed for the same, unless she received part of the cash consideration. Obviously, the sale could not be effected without release of her inchoate right of dower. ' The testator yielded to the demand, and to the plaintiff he gave a cashier’s check at the time and in the bank where the money was paid to him, for $80,000, the plaintiff agreeing that out of said sum she would discharge an indebtedness of the testator of $10,914.05.

The defendant insists that this transaction constituted a transfer in contemplation of death, i. e., the testator received the entire consideration of $200,000, and after receiving the same made a transfer of $80,000 of the same to the plaintiff. The plaintiff insists that it was “a bona fide sale for a fair consideration in money” of her inchoate right of dower in the realty. The defendant concedes that the plaintiff was under no obligation to sell her dower -right in the property, and that the following citations of authority that a transfer of this kind is excepted from taxation under the quoted sections of the Revenue Act of 1924 are apposite, viz.: Reilly v. Cullinane, 53 App. D. C. 17, 287 F. 994; Ferguson, Collector, v. Dickson et al. (C. C. A.) 300 F. 961; Id., 266 U. S. 628, 45 S. Ct. 126, 69 L. Ed. 476; and McCaughn v. Carver (C. C. A.) 19 F.(2d) 126.

The issue, then, as we see it, resolves itself into one of fact.

The findings correctly disclose that the plaintiff was decidedly adverse to her husband’s extensive speculation in real estate. She was aware that his financial situation was not conducive to her welfare in the event anything happened to him. His equities in real property, together with his financial obligations incurred in guaranteeing notes and borrowing money, of which she had knowledge, justified her apprehension that he was involved greatly beyond his resources to meet a sudden emergency either as to market conditions or health, and she continuously exercised all the influence and means available to her to provide for herself and child.

The lawyer with whom she advised counseled her with respect to her marital rights in the Dresden Apartment and told her not to sign the deed unless she received a part of the cash consideration to be paid. Plaintiff accompanied her husband to the bank and received in person the check for the $80,000 at the very moment the money was paid to him, an unusual procedure, and we believe the record warrants the inference that the sum received was paid to her in order to secure a release of her inchoate right of dower and enable the sale of the property to be completed.

While the record is silent as to whether the testator parted with the payment involuntarily, yet the fact that prior to this transaction the plaintiff had willingly joined in deeds of conveyance, regardless of her marital rights without participation in the monies_ exchanged, indicates that in this instance in accord with legal advice she was unwilling to part with her lawful rights without consideration.

A wholly disinterested witness, in no way involved in the acute disputation which the record exhibits, and without the slightest interest in the controversy, testifies from his own knowledge that the money paid to the plaintiff was paid in lieu of her dower right in the property.

That the plaintiff was in a position to exact a portion of the purchase price of the property on a basis of her marital rights therein is of course clear, as is the fact that a mutual agreement existed as to the amount and the manner of payment, characterizing the transaction, we think, as a transfer for a consideration rather than a gift. One with an inchoate dower right to realty who declines to part therewith without the payment of a fair and adequate consideration therefor can hardly be said to have transferred it upon any other basis.

Judgment in the ease will be suspended awaiting a new computation of the tax to be filed by the parties in accord with this opinion; It is so ordered.


text:
    PEOPLE’S PITTSBURGH TRUST CO. v. UNITED STATES.
    No. M-90.
    Court of Claims.
    April 2, 1934.

      L. L. Hamby, of Washington, D. C., for plaintiff.
    Elizabeth B. Davis, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
    Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
   GREEN, Judge.

This suit was begun by a petition filed March 12,,1931> to recover alleged overpayments of income taxes collected for the years 1920, 1922, and 1923, in the respective amounts of $74,846.95, $53,976.73, and $36,-737.91, with interest. The plaintiff, as executor under the will of J. J. Fisher, deceased, claims that it was entitled to deduct from the income of the estate certain amounts which were distributable under the will to the beneficiaries; also for the year 1920, plaintiff contends that it is entitled to deduct a net loss sustained in 1919.

The decedent in his lifetime was engaged' in the business of buying and selling stocks, bonds, and securities. His will provided among other things for the payment of various legacies and to his wife the amount to which she would be entitled under the law after which the residue of his estate was granted to the executor as trustee for two grandsons of the decedent with provisions that for a certain length of time periodical payments should be made to them of their share of the income therefrom.

The testator died November 13, 1919. His will was admitted to probate November 18 of the same year, and letters testamentary were issued to the plaintiff on the same date. Almost immediately after his death the mar- • ket value of the stocks and bonds constituting the estate began to decline, and this decline continued until at one time the estate was insolvent. Some time after the death of the testator the executor had a conference of the heirs which resulted in an understanding that all parties would forego the receipt of any income until the estate was settled and plaintiff, acting through its trust officers, carried on active dealings upon the market and even borrowed money at times to buy new stock and used other measures to protect the property of the estate, all of which are set forth more particularly in finding 6. The result of these activities on the part of the executor was to save the estate from insolvency and in the end have assets for distribution under the will.

Taking up first plaintiff’s claim for a deduction in computing the 1929 taxes by reason of a loss in 1919, it is evident that it can only be allowed in event the plaintiff was carrying on a business during the period when the loss was sustained.

The parties agree that a loss was sustained in the brief period from the date of the appointment of the executor on November 18, 1919', to and including December 31, 1919; but there is no testimony as to how the loss occurred.

There is no question but that an executor may carry on a business, and where this is done the same rules apply as would if an individual were so acting. The evidence, however, fails to show what the plaintiff was doing with the estate property up to the time when an agreement was made with the heirs to use the income in paying debts. It was some time later when the executor began buying and selling stocks when it was thought to be for the best interests of the estate and even borrowed money when necessary for the purchases which were made. The authorities are not entirely uniform as to whether a party whose occupation is buying and selling stocks is engaged in a trade or business. The activities of the executor were very similar to those in which the decedent engaged, but the purpose was not to carry on a business but to close out a business and to realize as much as possible out of the assets of the estate. While the evidence is not very definite, we think that when stocks, were bought or sold it was not for the purpose of enabling the estate to continue in the field where the decedent had occupied himself. The evidence shows that the purpose in buying stocks was to sustain the market until stocks of a similar kind could be sold without a loss.

In Refling v. Burnet (C. C. A.) 47 F.(2d) 859, 869, it is said with reference to a similar situation: “The statute is restricted in its application to those regularly engaged in business, while it is the business of a personal representative to administer and wind up the affairs of the deceased.”

In Ames v. Commissioner (C. C. A.) 49 F.(2d) 853, the court found that the executors in order to conserve the property of the estate carried on operations very similar to those shown by the operations of the executor in the ease before us. While the court intimated that an executor might carry on a business, it was held that the executors were not carrying on a business in the statutory sense. See, also, Rogers v. United States, 41 F.(2d) 865, 79 Ct. Cl. 159.

It is not necessary, however, that we should determine whether the executor was eanying on a business after December 31, 1919. Our concern is with reference to the short period that intervened between November 18, 1919, and that date, and, as we have before stated, there is nothing in the evidence to show what the executor was doing with the property of the estate in that brief period. It may be that some stocks or securities were sold at a loss, for the market was rapidly declining, but this would not show that the executor was carrying on a business for profit. It is true that the will authorized the executor to continue the business on its former lines, but conceding that it had the power, there is nothing to show that it exercised such power during this period. On the contrary, the executor seems to have waited to obtain an agreement with the heirs before engaging in those activities which the evidence shows were eventually pursued. Our conclusion is that plaintiff is not entitled to a deduction for a net loss sustained in 1919 for the purpose of reducing the amount of tax paid in 1920.

Plaintiff also seeks to recover a part of the taxes paid for 1920, 1922, and 1923, on the ground that it was entitled to deduct the income distributable to the beneficiaries or any of them under the will of John J. Fisher.

The plaintiff relies on the provisions of section 219 (a) (4) and (d) of the Revenue Atitsf of 1918 and 1921 (40 Stat. 1071, 42 Stat. 246), but defendant contends that these provisions have no application to income which is not distributed unless under the will it was required to be distributed periodically. This rule seems to be conceded, but counsel for plaintiff insists that there were considerable sums which were distributable although they do not undertake to fix the amount thereof.

The findings in the ease, to which both parties agree, show that no amounts were actually distributed until after December 13, 1923. Some distributions were made shortly after, but how long after does not appear from the evidence, nor is there anything from which an itemized statement can be made up of the distributions. Under the decree made November 13, 1928, $260,298.50 was turned over to plaintiff to take care of any additional taxeá which might be levied and to meet any possible demands against the estate. A part of such amount has been disbursed. Under the will, the executor was authorized to hold the estate “intact and undivided until such time as it shall have paid all of my debts and worked out each and every enterprise or transaction in which I may be occupied or engaged at the time of my decease to full completion.” In order to accomplish this the executor was given very extensive powers practically the same as the decedent “could do if living.” Shortly after his death, the market value of stocks and bonds constituting the estate began to fafi and continued to decline until at one time the estate was insolvent. By agreement with the heirs, plaintiff used the income from the estate in carrying its indebtedness and in paying loans when it was deemed for the best interests of the estate. Securities were purchased and sold and traded in upon the market. Loans were taken over by the plaintiff in its individual capacity. Plaintiff borrowed money from banks to buy new stocks when there was a drop in the market of a particular stock which it desired to dispose of and in general endeavored to liquidate the estate in the manner considered most advantageous by its trust officer. These operations saved the estate from insolvency and, as before stated, resulted in plaintiff’s having assets to distribute to the trustee under the will when it was finally determined to make distribution, but the amount to be distributed was uncertain even after the decree of the court authorizing distribution had been made. If the estate in the final outcome had been insolvent the claims of the creditors would have come first and there would have been nothing to distribute.

The argument for plaintiff proceeds as if the executor and trustee were one and the same under the will, when in fact the plaintiff acted in a dual capacity, first as 'executor and then as trastee, and in law there were two different entities. The will is not entirely clear, but we do not think it was intended to require the executor to pay over income of the estate to distributees before the estate was settled; and if it had, under the particular circumstances of the case, such a provision could not prevail over the claims of creditors and no distribution could properly be made until authorized by the probate court. There is nothing in the evidence to show that the probate court authorized any distribution until November 13, 1923, when a large sum was turned over to plaintiff to take care of taxes. The record is silent with reference to any order for distributions to the legatees, of which the trustee was one. All we know is that the estate was not completely settled at the time the last evidence was taken. There is not even any evidence to show when the trust was established beyond a statement made by the Commissioner in denying a refund in which he says that the trust was established January 25, 1924, and at that time the assets were transferred from the estate to the trust. Although this is not disputed by the plaintiff, it cannot be accepted as evidence, and we are left without any testimony as to when the trust was established, which does not help plaintiff’s case, to say the least. It is clear that during the years involved the estate was in process of settlement. No distributions were in fact made to the heirs and none were authorized by the court to be made to them. The evidence as a whole shows plainly that no sums were distributable for which the executor could claim an, allowance or deduction in computing the taxes for the years in question.

For the reasons above given, the petition must be dismissed, and it is so ordered.


author: WILLIAMS, Judge.

text:
    AMERICAN BOSCH MAGNETO CORPORATION v. UNITED STATES (two cases).
    Nos. H-516, H-517.
    Court of Claims.
    April 2, 1934.

      Merrill G. Hastings, of Boston, Mass., for plaintiff.
    James A. Cosgrove, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen. (Elizabeth B. Davis, of Washington, D. C., on the brief), for the United States.
    Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.

       New trial granted in Ervine Case on another question.

   WILLIAMS, Judge.

The plaintiff! in these eases seeks recovery of excise taxes paid on the sales of electrical appliances and equipment, and parts therefor, including magnetos, magneto fittings, coils, switches, impulse couplings, horns, etc., all of which were manufactured by it and were in some degree suitable for use, and used, on automobiles.

The taxes involved were assessed and collected under the provisions of section 900 (3) of the Revenue Acts of 1918 and 1921 (40 Stat. 1122, 42 Stat. 291), and section 600 (3) of the Revenue Act of 1924 (26 US CA § 881 note). The sales were made, and the taxes were paid, during the period from March, 1919, to March, 1926. The first case (H — 516) covers the sales for the period January, 1922, to March, 1926, the amount involved for the period, less refunds heretofore made, being $114,182.05, and the second case (H — 517) covers the period March, 1919, to December 31, 1921, the amount involved, less refunds heretofore made, being $71,-239.62.

With the exception of the periods involved, the status of the claims for refund, their rejections, etc., the material facts of the two eases are identical. The two cases therefore will be disposed of in one opinion.

It is conceded on behalf of the defendant that the articles sold were not parts or accessories of automobiles within the meaning of the statutes under which the taxes were assessed and collected. The taxes were therefore erroneously assessed and collected, and the plaintiff is entitled to recover if the statutory requirements for the institution and maintenance of its suits have been met.

The plaintiff in neither of the cases has made a showing that it bore the economic burden of the tax. The defendant makes the point that because of this failure the plaintiff is precluded from recovery by the provisions of section 424 (a) (1, 2, 3) of the Revenue Act of 1928, 45 Stat. 791, 866 (26 USCA § 2424 (1, 2, 3), which reads:

“Sec. 424. Refund of Automobile Accessories Tax..

“(a) No refund shall be made of any amount paid by or collected from any manufacturer, producer, or importer in respect of the tax imposed by subdivision (3) of section 600 of the Revenue Act of 1924, or subdivision (3) of section 900 of the Revenue Act of 1921 or of the Revenue Act of 1918, unless either—

“(1) Pursuant to a judgment of a court in an action duly begun prior to April 30, 1928; or

“(2) It is established to the satisfaction of the Commissioner that such amount was in excess of the amount properly payable upon the sale or lease of an article subject to tax, or that such amount was not collected, directly or indirectly, from the purchaser or lessee, or that such amount, although collected from the purchaser or lessee, was returned to him; or

“(3) The Commissioner certifies to the proper disbursing officer that such manufacturer, producer, or importer has filed with the Commissioner, under regulations prescribed by the Commissioner with the approval of the Secretary, a bond in such sum and with such sureties as the Commissioner deems necessary, conditioned upon the immediate repayment to the United States of such portion of the amount refunded as is not distributed by such manufacturer, producer, or import'er, within six months after the date of the payment of the refund, to the persons who purchased for purposes of consumption (whether from such manufacturer, producer, importer, or from any other person) the articles in respect of which the refund is made, as evidenced by the affidavits (in such form and containing such statements as the Commissioner may prescribe) of such purchasers, and that such bond, in the case of a claim allowed after February 28, 1927, was filed before the allowance of the claim by the Commissioner.”

The foregoing section is a limitation on the refund of excise sales taxes collected under the revenue acts named. Subdivision (a) prohibits all refunds unless either (a) (1) pursuant to a judgment of a court in an action brought before April 30, 1928, or (a) (2) where it is shown the taxpayer alone, and not his customers, bore the burden of the tax, or (a) (3) where bond is given by the claimant to use the refund in the reimbursement of his customers and to repay any sum not so distributed to the United States. There is no conflict between any of the provisions of this section. It is the duty of the court to so construe it, if possible, that no clause, sentence, or word shall be superfluous, void, or insignificant, Montclair Twp. v. Ramsdell, 107 U. S. 147, 2 S. Ct. 391, 27 L. Ed. 431, giving to all words used in the section their proper signification and effect, United States v. Lexington Mill & Elevator Co., 232 U. S. 399, 34 S. Ct. 337, 58 L. Ed. 658, L. R. A. 1915B, 774, and presuming that the Congress has used no superfluous words.

Platt v. Union Pacific Railroad Co., 99 U. S. 48, 25 L. Ed. 424. Some meaning- therefore must be given to the provision (a) (1) “pursuant to a judgment of a court in an action duly begun prior to April 30', 1928.” If claimants for refund of excise sales taxes are subject to the restrictions imposed in subdivision (a) (2) or subdivision (a) (3) without regard to the date on which suit is instituted, subdivision (a) (1) becomes meaningless and is entirely superfluous. The court will not presume Congress has incorporated a superfluous or meaningless provision in the statute. Subdivision (a) (1) is therefore construed to mean what its plain words import, that in suits brought prior to April 30, 1928, claimants are not required to show, as a condition precedent to recovery, that they bore the burden of the tax as in subdivision (a) (2) or that they have given bond as required in subdivision (a) (3). These subdivisions have application and are restrictive of a claimant’s right to recover only in suits instituted subsequent to April 30, 1928.

We think the view we have expressed as to the construction to be placed on subdivision (a) (1) of section 424 of the act (26 USCA § 2424 (1), was in effect announced by the Supreme Court in United States v. Jefferson Electric Mfg. Co., 54 S. Ct. 443, 448, 78 L. Ed. -, decided February 12, 1934. The court in that case, where suit was brought subsequent to April 30, 1928, upheld the validity of subdivision (a) (2) of section 424 of the 1928 act (26 USCA § 2424 (2), and overruled the taxpayer’s contention that the restriction imposed by subdivision (a) (2) of the section was in contravention of the due process clause of the Fifth Amendment in that it strikes down rights accrued theretofore and still subsisting, but not sued on prior to April 30, 1928. In discussing the constitutional question the court said:

“ * * * It must be conceded also that section 424 applies to rights accrued theretofore and still subsisting, but not sued on prior to April 30, 1928, and subjects them to the restriction that the taxpayer (a) must show that he alone has borne the burden of the tax, or (b), if he has shifted the burden to the purchasers, must give a bond promptly to use the refunded sum in reimbursing them.”

It is clear the court regarded the taxpayer’s contention in respect to subdivision (a) (2) pertinent only because suit was instituted subsequent to April 30, 1928. This amounts to a direct holding that if the suit had been brought prior to that date, the restrictions imposed in subdivisions (a) (2) and (a) (3) would not have been applicable, and would have imposed no limitation on the taxpayer’s right to recover. The remarks of the court were highly pertinent to the taxpayer’s contention in respect to subdivision (a) (2) and (a) (3), and, while the direct question was not before the court as to whether the restrictions of these subdivisions were applicable to suits brought before April 30, 1928, we think the decision that they were applicable and operative in that case because suit was brought subsequent to April 30, 1928, definitely limits the scope and applicability of these subdivisions to that class of suits.

We, therefore, hold that the plaintiff, having brought its suits prior to April 30, 1928, is not required to show that it bore the burden of the tax.

We now come to a consideration of the facts particularly applicable to the respective suits.

No. H — 516

The period covered by the petition in this case is January, 1922, to March, 1926. On August 2, 1926, the plaintiff filed a claim for refund of the entire amount of taxes paid during the period in the amount of $161,-344.53. The claim was rejected by the Commissioner on October 7, 1927. The taxes paid by the plaintiff during the four-year period immediately preceding the filing of the claim for refund, less adjustments and refunds heretofore made, amount to $114,182.-05. The plaintiff is entitled to recover this amount, together with interest thereon computed in accordance with the applicable provisions of law.

No. H — 517

The plaintiff, on April 27, 1923, filed a claim for refund in respect to taxes paid on certain sales from January 1, 1920, to August 1,1921, in the amount of $195.90'. This claim was rejected by the Commissioner of Internal Revenue on September 5, 1924, for lack of evidence.

On June 11, 1925, plaintiff filed a second claim for refund in the amount of $78,243, covering the period from March 1, 1919, to December 31, 1921, across the face of which was written the words “corrected claim no. 299652,” that being the number of the claim theretofore filed on April 27, 1923. With this claim the plaintiff transmitted a letter protesting the action of the Commissioner in rejecting the refund claim of April 27, 1923, and requesting its reconsideration, together with a demand for refund of the amount claimed in “corrected elaim no. 299652.” The claim of June 11, 1925, was rejected for lack of evidence on September 28, 1927.

The refund elaim of June 11, 1925, although designated by plaintiff as “corrected claim no. 299652,” did not operate to correct or amend the claim of April 27, 1923, as that elaim had already been considered and rejected by the Commissioner, and the statutory period of limitations prescribed in section 3228 of the Revised Statutes for filing elaim for refund had expired except as to the small portion of the taxes paid subsequent to June 11, 1921. See Sugar Land Railway Co. v. United States, 48 F.(2d) 973, 71 Ct. Cl. 628.

United States v. Memphis Cotton Oil Co., 288 U. S. 62, 53 S. Ct. 278, 77 L. Ed. 619, and United States v. Factors & Finance Co., 288 U. S. 89; 53 S. Ct. 287, 77 L. Ed. 633, cited by plaintiff as holding that a claim for refund may be amended and corrected by a subsequent claim, filed after the running of the statute, are not in point, as the amendatory claim in each of those' cases was filed before the Commissioner had acted on the former elaim. The law is so well settled that a claim for refund may not be amended after its disallowance and the expiration of the statutory period for filing claims that citation of authorities in support of the rule is unnecessary. The Commissioner of Internal Revenue properly treated the claim of June 11,1925, as a distinct claim. It was a timely claim for all payments made subsequent to June 11, 1921, which, less refunds heretofore made, amount to $7,901.68.

Suit was instituted on December 1,1927, more than five years after the payment of the taxes involved, and more than two years after the rejection by the Commissioner of the claim of April 27, 1923. Action upon this claim was therefore barred by the provisions of section 3226 of the Revised Statutes at the time the suit was brought. The plaintiff contends, however, that subsequent to the rejection of the elaim, on September 5, 1924, the Commissioner of Internal Revenue reopened the case and reconsidered the elaim upon its merits, and, after such reconsideration, made his final decision thereon within the two-year period preceding December 1, 1927. If the Commissioner did this, the statute of limitations on plaintiff’s right to institute suit runs from the date on which he made his final decision on the elaim, after reconsideration, and not from the date of the original rejection of the claim. McKesson & Robbins, Inc., v. Edwards (C. C. A.) 57 F.(2d) 147; Mobile Drug Co. v. United States (D. C.) 39 F.(2d) 940; Wm. E. Jones et al. v. United States, 5 F. Supp. 146, 78 Ct. Cl. -; American Safety Razor Corp. v. United States, 6 F. Supp. 293, decided by this court March 5, 1934.

The question as to what action on the part of the Commissioner of Internal Revenue constitutes a reopening of a case and a reconsideration of a elaim on its merits has been before this court in a number of cases recently. Ford Motor Co. v. United States (Ct. Cl.) 3 F. Supp. 423; Ervine & Co. v. United States (Ct. Cl.) 3 F. Supp. 334; Wm. E. Jones et al. v. United States, supra; American Safety Razor Corp. v. United States, supra. What constitutes such action is a question of fact to be determined from the particular facts and circumstances surrounding the case. While no hard and fast rule can be laid down which would govern and be applicable in all instances, and each case must be considered on its own peculiar facts, certain general principles . applicable to all cases are, we think, quite well established by the decisions. For instance it is settled that the filing by a taxpayer of an application for reconsideration of a claim, even when accompanied with supporting affidavit and data, does not operate to reopen a closed ease. It is also settled that the action of the Commissioner in assembling and reviewing the files of a ease to determine whether there may be a sufficient basis for the taxpayer’s request does not constitute a reopening of the case and a reconsideration of the claim. Nor does the fact that he answers letters from the taxpayer or extends to him the courtesy of an examination of the files mean that he has entered upon a reconsideration of the elaim. What is done in respect to the assembling and review of the files of the case, and what is said in letters written by the Commissioner during his consideration of a request for the reopening of a case, may be evidentiary facts to be taken into consideration in arriving at a conclusion as to whether he reopened the case and reconsidered the claim, but they are not conclusive as to such action. These acts may well be preliminary and necessary to the Commissioner’s decision as to whether the matters and things set forth in a taxpayer’s application warrant a reconsideration of the claim. It must appear from all the facts shown that the Commissioner has in fact reopened the case and reconsidered the claim on its merits, Ford Motor Company v. United States, supra, and the reconsideration of a refund claim on the merits constitutes a reopening of the ease, Wm. E. Jones et al. v. United States, supra, so as to hold in abeyance the running of the statute of limitations until the Commissioner makes his final decision on the claim. And it is immaterial whether the Commissioner’s final decision results in a change or in the affirmance of his former decision. It is sufficient if the decision is based on the merits of the claim.

The facts do not support the contention that the Commissioner reconsidered the plaintiff’s claim on the merits. Consequently the ease was not reopened and the disallowance of the earlier claim on September 5, 1924, stands as the Commissioner’s final decision on that claim. The formal application for reopening, and reconsideration, with supporting affidavit and data was made on December 4, 1925. On February 5, 1926, the Commissioner acknowledged receipt of the application and evidence and requested the plaintiff to furnish specific information as to certain items, stating “it is requested that you advise this office as to just what each of the above listed items covers. It is also requested that you give the sales price and amount of tax in each instance where it is not given above.” Although the plaintiff acknqwledged receipt of this letter on February 15, 1926, it did not furnish nor attempt to furnish the additional information requested by the Commissioner. Failing to receive the information requested, the Commissioner, on March 3, 1928, wrote plaintiff stating:

“The statements contained in your letter have been carefully noted. No additional information has been submitted in support of your claim, and you are requested to advise this office if you intend to submit the evidence which was requested in office letter of February 5, 1926.

“If you desire to prosecute the matter further, you should also furnish a sworn statement to the effect that, if the tax involved was collected from your customers, these amounts have been returned to the customers making such overpayments, or that any tax which might be refunded will be returned by you, upon proper application to the person from whom it was collected.

“Unless and until the evidence requested herein and in office letter dated February 5, 1926, is submitted the case will necessarily be considered closed on the records of this office.”

The plaintiff made no response to this letter and the Commissioner took no further action on the application to reopen the case. This letter was a plain denial by the Commissioner of the application for reopening unless or until the evidence requested was submitted. The evidence requested was not submitted, consequently the case was not reopened and reconsidered.

It is suggested that the evidence requested by the Commissioner in addition to that furnished by the plaintiff in its formal application was immaterial and could not rightfully be demanded of it, especially the furnishing of a sworn statement to the effect that if the tax involved had been collected from plaintiff’s customers, the amounts had been returned to the customers, or that any tax which might be refunded would be returned by plaintiff to the person from whom it was collected. It was not for the plaintiff to determine whether the evidence required by the Commissioner was material to his decision as to whether he would reopen the ease and reconsider the claim. Whether the case should be reopened was a matter wholly witlrin the discretion of the Commissioner. He had the authority to reopen the ease, but the plaintiff could not require him to do so as a matter of right. As an incident to the exercise of his discretionary authority, he requested the plaintiff to furnish certain specific information. Whether the information requested was material or immaterial is beside the point. We certainly cannot enter into an inquiry either as to the sufficiency of the evidence furnished by the plaintiff in support of its application or the materiality of the additional evidence demanded by the Commissioner. The court is only concerned with what the Commissioner did in respect to the plaintiff’s application for a reopening, not why he did it, or whether upon the evidence before him he should have acted otherwise. We cannot review the action of the Commissioner in denying the application for reconsideration.

Since the claim of April 27,1923, was not reconsidered by the Commissioner, it is unnecessary to consider to what extent and in what respect, if any, the so-called “corrected. claim” of June 11, 1925, would have operated to amend it had the case been reopened.

The plaintiff under the refund claim of June 11, 1925, is entitled to recover the payments made subsequent to June 11, 1921. These payments to December 31, 1921, less refunds heretofore made, amount to $7,991.-68. The statute of limitations bars recovery of the balance of the payments made during the period March 1, 1919, to December 31, 1921, inclusive, amounting to $63,337.94.

Judgment in the sum of $7,991.68 with interest as provided by law is awarded. It is so ordered.