Petitioners Brief — Graham & Foster v. Goodcell

- Office Suprema Court, U. S.

FTLns Dp

_ FILE COPY cor 14m

ith

IN THE

| Supreme Court of the United States.

OctoserR TERM, 1930.

No. 105 ‘

TAFT WOOLEN COMPANY, Petitioner,

v.

THE UNITED STATES.

BRIEF FOR THE PETITIONER.

Pde J. ALBUS,

Attorney for Petitioner.

F Tamopore B. BEnson,

E Gon BarBer,“ yA

| Wruas MeyerHorr, “©

TER F. WILLIAMS, (A

Rcy A. MATTHEWS, > -

G. Fiscqer, “)jy

Of Counsel.

Page

I. Opinion of the Court of Claims SS ee a 1

INNO 9 PS Sate by Sieg it, iy ba dane *Be ee 1

» Questiona Presented . 2... et eee 2

IV. AssignmentofErros ....--.-+,-+:-+: 2

FEY, StetementoftheCase . 2... - wee st: 3

~ ‘VI. Statutes involved: Sec. 250(d) Rev. Act.of 1921; Secs.

--.. 607 and 611 Rev. Act 1928; R. S., Sec. 3226. 5

NNR S Pes ee Ee. ea ae 6-22

1. (a) Sections 607 and 611 of the Revenue Act of —

1928 are administrative provisions @pplying

only to the Commissioner of Internal Reve-

‘ " nue and do not apply to a case where suit is

broughtintheCourts .......... 6

a (b) Section 611 of the Revenue Aet of 1928 did.

_-. ° ~ not withdraw the consentof the UnitedStates

: to be sued in cases where money was coliect-

od sp taxes alter the statetaty parted forest,

lectiomhadexpired ........:. 10

2. (a) If it be held that Congress intended by the

enactment of Section 611 of the Revenue Act

___. = Of 1928 to deprive the petitioner of its‘right é!

i to recover the sum collected after the statu-

tory period for collection had expired, then it

is contended that such attempt is unconati-

tutional and-void in that it deprives the peti-

tioner of its property. t due process of

—— =) Upon the of the time limitation

at Sasauika tat ty thx Soteinen ca tannin

gan tioner acquired a vested propertyright .. 16

~ ____ () If Section 611 is so coustrued as to deprive =

“ae | petitioner of its property and its vested right

_ of action of recovery, it would be contrary to

the Fifth Amendment of the Constitution . 17

(d) Congress was without power to extend the

statutory bar, in petitioner’s case, after it.

had fallen and petitioner had acquired a

_ vested property right

( 3.\\ The legal principles established by the cases

of United States v. Heinszen, 206 U. S. 370;

Rafferty v. Smith, Bell & Company, 257 U. 8.

226; and Campbell v. Holt, 115 U. 8. 620, do

not apply to the case of this petitioner. . .

TABLE OF CASES.

Atchison, Topeka & Santa ae Railway Co. v. O’Conner,

223 U.8.280 .

Bashara v. Hopkins, 290 Fed. 592; affirmed 295 Fed. 319;

Certiorari denied, 265 U.S.584;448.Ct.459. . . . 14, 2%

Bessemer Coal & Coke Co. ». Heiner, 39 F. (2d)492 ... 2

Blodgett v. Holden, 275 U.S. 142 ,

Botany Worsted Mills v. U. S., 278 U. S. 282; 498. Ct. 129 21

Bowers v. N. Y. & Albany Lighterage Co. et als., 273 U. S. 3

346 7, 8, 13, 21, 22

Calder v. Bull, 3 Dall. 385 at p.388;1L.Ed.648 .... 17

Caminetti v. U. 8., 242 U.S. 470-485; 37 S. Ct. 192;61L.

Ed. 442; L. R. A. 1917F, 502 Ann. Cas. 1917B,1168 .. 12

Campbell ». Holt, 15 U.8. 628 68. Ct. 209; 29 L. Ed. =

23, 24

Paw “Vermont Railway Co. » White, 238 U. Sat

p. 611 13,

Chapman, Adelaide F. ». U.S., 63 Ct. Cls. 424; reversed

498. Ct. 7;278 U.S. 660 . ; Pamers: * 8, 9%. 0

“Chelentis ». Luckenback 8. S. Co., 247 U. S. 384 CE:

Christie Street Commission Co. ». U. S., 136 Fed. 326; 69

eens Se eS ay SS

County of Meracen 2. Marentie Trt Co, 4 Ky. 314;

18. W. 585~ . :

~

1

Danzer & Co. ». Gulf & Ship Island Ry. Co., 268 @. 8.

ey ce goa se te 14, 21, 24

Dartmouth College v. Woodward,4 Wheat.518 .... BB

De Lima v. Bidwell, 182U.S.199 .......2.2.. 20

Diamond Alkali Co. v. Heiner, 39 F. (2d),643.. ... . . . — Oa

Teale oe. U. B., 398 U8 SRB ES 10

Eberhert ». U S., 204 Fed.890-891 ......... 14, 24

Ellay Co. »v. Bowers, 25 F. (2d), 687; panel Ged, 488.

BUONO: S52 oc 6 a Finis Rea ek ee eee 8

Ettor v. Takoma, 228 U.S. at pp. 155, 1h6and158 ... 18

Fidelity & Columbia Trust Co. v. Lucas, 7 F. (2d), 146 os

Forbes Boat Line Co. v. Commissioners, 258 U.8.338 .. 23

Gladney v.Syndor,172Mo.318 ........... 16

Graham v. duPont, 262U.S.234 ....... 1 ee

Graham & Foster v. Gdodcell, 36 October Term,1930 .. 12

Kent Commentaries, Vol.4,p.202 ......:.... 16

King (The) v. Commissioners, 5 A. & E.804,816 .... 12

A A Me OM Oe dee a ew bi pes 20

Memphis ».U.8.,97U.8.298 ....... SE ae 19

Nichols v. Coolidge, 274 U.S:531;52A.L.R.1081 . .. 17

Pearsall ». Ry. Co., 161 U.S.646 ............ 16

Prichard v. Norton, 106U.S.182 ........... 19

Rafferty v. Smith Bell & Co.,257U.8.226 ...... 22, 23

Rock Island Ry. Co. ». U.S. 254U.S8.,atp.148 ..... 18

Russell et al. v. U. S.,49 S. Ct. 121 123; 278 U.S. 181 . 14, 15,22

Smallwood v. Gallardo, 275 U.S.56;488.Ct.238 .... 18

Toxaway Mills v. U. S., 61 Ct. Cls. 363; reversed on con-

fession of error, 273 U.S. 781 ES reer, fi

U. 8. ». John Barth Co., 27 F. (2d) 782, 784 (reversed on |

: another ground, 279 U. ES cS Sk ee ee 14

U. 8. ». Emery Byrd Thayer Realty Co., 198 Fed. 242;

ed OE OO gc ek gS ew ek 10, 18

U.S. , Hartwell, 6 Wall. p.396;18L.Ed.830 ..... 12

U.S. ». Heinszen & Co.,206U.S.270 ...... . . 22,23

- U.8.0. Henrich, 12F.(2d)940 ....... pioaaina 295" cs 19

Uv. 8. ». Lexington Mill Co., 232 U. S. 399; 34 S. Ct. 337; 58

z L.Ed. 658; 2 SF ME, SRM enn 12

=e

iy

U.S. v. Magnolia Petroleum Co., 276 U. S. 160; 48 8. Ct.

U.S. et al. v. Mo. Pac. R. R. Co., 498. Ct. 133; 278 U.S. Shee

Unterntyer v. Anderson, 276 U.S. 440; 488. Ct.353 —

Wagner ». Baitimore, 239 U. 8. 207, 216, 217 fe <5.

~

: MISCELLANEOUS. )

LT.2382C.B.VI-2-108 gg,

Vol.4, Eney. U.8.8. Ct. Repe, 228 Cte ek ee ate

%

ie >

* ~~ x

| form oe eid Sts,

Ocrossr TERM,

No. 105,

TAFT WOOLEN COMPANY, prerrrionse,

v.

THE UNITED STATES.

tt

BRIEF FOR THE PETITIQNER.

-

| ;

a _ OPINION OF THE COURT BELOW.

Tue Opinion of the Court below was sendevstt iy. the Court :

Claims on March 3, 1980, in the case of thia petitioner againet .

the United States, No. J-61 on the records of that court. The

opinion has been reported in 38 } Di Mirae neat te

a (R. a

QUESTIONS PRESENTED.

Upon the limited basis under which the petition for oer

‘tiorari was granted in the case, the questions presented are,

whether Section 611.of the Revenue Act of 1928 (45 Stat. 791,

875), is to be so construed as to deprive the petitioner of its.

title to and right to possesgion and enjoyment of the money

illegally collected from it as a tax after the statutory period for

collection had expired, and to deprive it of a vested right of

action, which it otherwise would have to its recovery; and, if

so construed, does the section violate the Fifth Amendment of

the Constitution.

IV.

ASSIGNMENT OF ERRORS.

gl: The Court of Clnine eriod in holding that Seotion O18

aa

of the Revenue Act of 1928 was more than an administrative.

and that it was s withdrawal of the consent of the

>» 3

ehusetts, with its principal place of business at Caryville, town

of Bellingham, State of Massachusetts. (R. 16 and 17.)

On June 14, 1919, the pétitioner filed its statutory income

and excess profits tax return for the calendar year 1918, showing

a total tax liability of $429,616.20. This amount, plus interest

of $89.55, was all paid to the Collector of Internal Revenue by

December 13, 1919. (R. 17 and 18.)

On July 29, 1921, petitioner paid an additional income and

excess profits tax for the year 1918 in the amount of $3,262.18,

making a total payment for the year of $432,967.93. (R. 18.)

On December 8, 1921, petitioner filed its claim for refund of

taxes erroneously assessed and collected, the basis of said claim

being an application for assessment under the provisions of

Sections 327 and 328 of the Revenue Act of 1918. (R. 18)

On or about October 7, 1922, the Commissioner of Internal

Revenue in consequence of the aforesaid application and claim

caused. plaintiff’s tax liability to be recomputed under the relief

provisions of said Act and as a result thereof found that the

plaintiff had been overassessed the sum of $92,443, which

| _ mount was duly refunded to the petitioner. (R. 18.)

Qn or about March 25, ee

‘evenue sdviced plaintiff that a of its applica-

en

"

4

in abatement and advised the petitioner that the comparatives

used in the redetermination ‘‘are in the aggregate fairly repre.

sentative in all the material particulars specified in i Act.” _

(R. 19 and 20.)

On June 1, 1925, the petitioner, under protest, sal to the

Collector of Internal Revenue at Boston the sum of $45,398.73

and interest demanded thereon in the amount of $1,800.81,

(R. 20.) |

On or about May 9, 1927, plaintiff filed with the Collector of

Internal Revenue its claim for refund of taxes illegally collected

for the. year 1918 in the amount of $47,199.54, wherein it

alleged that the refund should be made for the reason that the

collection of the said $47,199.54 was made more than five years

after the return of the plaintiff for the year 1918 had been filed.

At the time of the filing of the suit by the petitioner in the

Court of Claims on February 21, 1928, more than six months

had expired since the filing of the claim for refund of May 9;

1927, and the Commissioner of Internal Revenue had rendered

no-desision: thereon st the’ time:of the filing of enid petition,

(R. 22.)

ein cecal ithe ae a siectolawernnccaa

nor fraudulent with intent to evade the tax, nor had plaintiff ©

signed any waiver in connection with said calendar year, nor

‘apy consent in writing with the Commissioner for a later

» Renn eee nd enlbection af the tan.

aes | eae

STATUTES INVOLVED . ie

"The statutes involved are Section 250(d) of the Revenue Act

GF 1021 (42 Stat. 227, 265, 266); Seotions 607 and 611 of the

f ‘Moreen beh of 908 08 Di 791, ty yin Fars? i

Z

5 of

salts mantel ant a

as quickly as practicable. Any tax or

then determined to be due shall

within ten days after notice and demand by the collector

as hereinafter provided, and in such cases no claim in

ae We of the amount so assessed shall be eee:

»)

Sections 607 and 611 of the Revenue Act of 1928 (45 Stat.

791, 874, 875) read as follows:

“Sec, 607. Effect: of Expiration of Period of Limitations

Against United States.

Any tax (or any interest, penalty, additional amount,

or addition to such tax) assessed or paid (whether before of

_ after the enaetment of this Act) after the expiration of te

period 0 itation properly applicable: thereto shall

considered an overpayment and shall be credited or re-

funded to the taxpayer if claim therefor is filed within the

period of limitation for filing such claim.” ,

“Sec, 611. Collections Stayed by Claim in Abatement.

“If any internal-revenue tax (or pense

r to June 2, 1924, and if a ok 2

Meith or wikadt Bead cnt the ?

cine crear

3 shall nos be considetcd as an ovectaamneae

Bee ee oe ecole OM, ons le

~~) et

eo oe

for the recovery of any internal-revenue tax alleged to

have beez erroneously or illegally assessed or collected,

or of any penalty claimed to have been collected without

authority, or of any sum alleged to have been. excessive or

in any manner wrongfully collected until a claim for refund

or credit has been duly filed with the Commissioner of

{Internal Revenue, according to the provisions of law in

that regard, and the regulations of the Secretary of the

Treasury established in pursuance thereof; but such suit

or proceeding may be ne whether or not such

tax, penalty, or sum has paid under protest or duress.

No such suit or p ing shall be begun before the ex-

piration of six morths f the date of filing such claim

(fol. 6)/unle&s the Commissioner renders a decision thereon —

within that time, nor after the expiration of five years

from the date of the payment of such tax, penalty, or sum,

‘unless such suit or proceeding is within two years

after the disallowance of the part of such claim to which

such suit or proceeding relates. The Commissioner shall

within 90 days after any guch disallowance notify the tax-

payer thereof by mail.” :

VI.

ARGUMENT.

1. (a) Sections 607 anp 611 or THe Revenve Act oF

1928 ARE ADMINISTRATIVE PROVISIONS APPLYING ONLY

TO THE CoMMISSIONER OF INTERNAL REVENUE AND DO

NOT APPLY 70 4 CASE WHERE SUIT IS BROUGHT IN THE _

COURTS. 7

Ristkes 1106(0) of the events Act of 1098 (C. 27, 44 Stat.

_ 9, 113) provides in part as follows: eae

“The bar of the statute of tesikationa naninis ticle

States in respect of any myer et rig ir

operate to bar the emedy but sal extinguish the

in

-

but no credit or scaseok of cath ax

slowed unless the taxpayer has overpaid the tax.”

It will be noted that Section 1106(a) provents« “credit

7

Commissioner of Internal Revenue is the only person authorized

to make a “‘credit” or a “refund,” it is quite apparent that

the limitation against such credits or tefunds in Section 1106(a)

had application to him alone: This conclusion is fully sus- -

tained by the final action taken in the case of Adelaide F. Chap-

many. United States, 63 Ct. Cis: 424, in which that Court. gon-

strued Section 1106(a) of the Revenue Act of 1926 as prevent-

ing the plaintiff in-a suit from recovering barred taxes unless

the taxpayer has actually overpaid the tax. Petition for

certiorari was filed by the taxpayer and in a brief submitted on

behalf of the United States, in which the Solicitor General

agreed that the writ should issue, it was said: =~

“ After we decision in Bowers v. New York and Albany

coee C me eg supra, was handed down and it was

discl that the Court of Claims was in error in holdi

that the claim of the United States had not been

and on March 31, 1927, the petitioner filed a motion for

new trial, which was overruled October 24, 1927. Section

1106(a) was brought to the attention of the Court of

Claims in connection with that motion, although the

record does not Yisclose it, and the action of the Court of

in ov the motion can only be explained on

the theory that it.held that Section 1106(a) "ppatated to

prevent petitioner’ obtaining a refund of the tax paid

notwithstanding Peon cet Fy Sin Ag s

eco ete

ern ‘but no t or in respect

otax shall be allowed unless the taxpa:

paid,

has o

| than a justly — cet regard to is of

ro “Such 8 construction leads to results whos |

i injunction

ed by the a apa

is’ barred by the statute of limitations,

7

case remanded to enter judgment for the taxpayer. October |

term, 1928, 49S. Ct. p. 7; 278 U. 8.660. (See also Fllay Co. v.

Bowers, 25 F(2d), 637; certiorari denied 48 S. Ct..601.)

inquiries are being received both from within

F tka Meee ante the action hich neice

should take in making refunds as a result of the decision

ried!

it st

ne shore een by Se Lee ae

to

the invitation of the Commissioner of Internal Revenue by — 7

enacting Sections 607 and 611 of the Revenue Act of’ 1928.

Section 1106(a) of the Revenue Act of 1926 had imposed

tho Comuninsosser and mada it posse or hin So masks rotunda

oe Section had no application to suits in Court since the Chapman

case, supra, clearly shows that the authority of the Court to

3 allow recovery had not been curtailed by Section 1106(a) of

~ . the Revenue Act of 1926.

-- Section 611 of the Revenue Act of 1928 is merely a limitation

on Section 607 and provides that in a case where an assessment

- was made prior to June 2, 1924, and if a claim in abatement

was filed, and if the collection of any part of the tax was stayed,

ss then the payment of such part was not to be considered an

qverpayment. under the provisions of Section 607. But since

Section 611 was merely a limitation- upon Section 607 and as

Section 607 had no reference to suits in Court it follows as a

matter of course that Section 611 likewise had no reference

to suits in Court. 3 rap: n0: bald tn Domend Alban Co, v.

= Heiner, 39 F. (2d) 648

» ~

(b) Secrion 611 oF THe Revenve Act or 1928 pm nor

WITHDRAW THE CONSENT OF THE UNITED SraTes TO Bp

SUED IN CASES WHERE MONEY WAS COLLECTED AS TAXES

AFTER THE STATUTORY PERIOD FOR COLLECTION HAD

EXPIRED.

The Government contends that by Section 611 of the Reve-

nue. Act of 1928 Congress has withdrawn the consent of the

United States to be sued in the Courts in cases falling within

the purview of that Section. As already pointed out Section

611 is merely a limitation upon Section 607. Section 607

was an enlargement of the power of the Commissioner of

Internal Revenue to make refunds or credits of amounts

collected after the statutory period for collection had expired.

The Chapman case, supra, showed that the Courgs did not

need the additional power which Section 607 gave to the Com-

missioner of Internal Revenue as they already had it. Since,

therefore, Sections 607 and 611 were merely the restoration of

authority in the one case and the limiting of that authority

under certain conditions in the other case, how can it be con-

tended that these Sections withdrew the consent of the United

States to be sued? The word “Court” does not appear in

Sections 607 and 611, and there is no statement in either of

these Sections to the effect that the right of the petitioner to

sue has been..curtailed. The jurisdiction of the Court of

Claims to entertain the suit of the petitioner was established

by the so-called Tucker Act, passed in 1883, which became

Section 145 of the Judicial Code and which now appears as.

Section 250 of Title 28 of the Code of Laws of the United States

of America. The question of the jurisdiction of the Court of

Claims in cases of this type is no longer in controversy. Dooley

v. United States, 182 U. S. 222; United States v. Emery, Bird,

Thayer Realty Company, 237 U.8.28. The petitioner acquired

ita right to bring the suit ixfeconnection with Section 3226 of

the Revised Statutes as. amended. Whenever Congress

intended to change or modify the provisions of Section 3226

of the Revised Statutes it specifically referred to that section

and set forth the particulars in which it was amended. See

11 ;

Revenue Act of 1921, Chap. 136, Sec. 1318, 42 Stat. 315;

Revenue Act of 1924, Chap. 234, Sec. 1014, 43 Stat. 343; Rev-

~ enue Act of 1926, Chap. 27, Sec. 1113, 44 Stat. 9. Certainly

if Congress by any provision of the Revenue Act of 1928 in-

tended to amend Section 3226 specific reference would have

been made to this section in the Revenue Act of 1928. Sections

3220, 3228, and 3176 of the revised statutes were amended by

the Revenue Act of 1928. See Section 619 of the Revenue

Act of 1928. It will be noted that specific reference is made

to these sections of the revised statutes and amendments

enacted in connection therewith. Certainly if Congress in-

tended to amend Section 3226 it would have appeared specifi-

cally as an amendment in the Revenue Act of 1928. |

Any Government ‘‘of the people, by the people, for the

people”’ will afford its citizens a proper judicial tribunal wherein

to fairly litigate wrongs committed by that Government

against its citizens, and when that consent has become a matter

~~ ~of settled law, certainly the courts will not by implication

determine such consent to have been withdrawn. Such a

conclusion should be reached only if the language employed

_ permits of no other construction. Sections 607 and 611. of

the Revenue Act of 1928 are not only devoid of any clear

language to show a withdrawal of the consent of the United

States to be sued but on the other hand they clearly indicate

an intent merely to apply to the powers of the Commissioner

of Internal Revenue. ..

a os of justice have no jurisdiction to make exceptj

Statute, nor to add to the exceptions which thé

. , as this would be legislating. Where the language :

od anh net in explicit, it is not for the court to change it by con- -

struction based upon some supposed legislative policy. It is

not for the court to say that it shall be so construed as to em-

brace other cases because no good reason can be assigned why

they were excluded from its provisions. If the meaning of the

legislature is plain, it must be obeyed.

Vol. 4, Ency. of U. S. S. Ct. Reps. p. 228.

United States, et al. Sie Pek: R. Co., 49 8. Ct.

133; 278 U. 8. 269. *

}

12

The rule was tersely stated in United States v. Hartwell, § :

Wall., 385, 396 (18 L. Ed. 830):

“Tf the language be clear it is conclusive. There can

be no construction where there is nothing to construe.”

This is also the recognized rule of the English courts. In

one of the English decisions Lord Denman said the court was

bound to look to the language employed and construe it in its

natural and obvious sense, even though that was to give the

words of the act an effect probably never contemplated by

those who obtained the act and very probably not intended

by the Legislature which enacted it.

The King v. The Commissioners, 5 A. and E. 804, 816.

See also, United States v. Lexington Mill Co., 232 U. S.,

399, 34S. Ct. 337, 58 L. Ed., 658, L. R. A. 1915B, 774.

Caminetti v. United States, 242 U. S. 470, 485, 37 8. Ct.

192, 61 L. Ed. 442; L. R. A. 1917F, 502, Ann. Cas.

1917B, 1168.

The petitioner wishes to call the attention of this court to

the briefs Amici Curiae filed in the case of R. E. Graham and

E. E. Foster v. Rex. B. Goodcell, 36, October term, 1930, in

which the foregoing propositions are discussed in all their

detail.

2. (a) Ir rr BE HELD THAT CONGRESS INTENDED BY THE EN-

ACTMENT OF SeEcTION 611 or THE REvENUE AcT oF

1928 TO DEPRIVE THE PETITIONER OF ITS RIGHT TO RE-

COVER THE SUM COLLECTED AFTER THE STATUTORY PERIOD

FOR COLLECTION HAD EXPIRED, THEN IT IS CONTENDED

THAT SUCH ATTEMPT IS UNCONSTITUTIONAL AND°VOID IN

THAT If DEPRIVES THE PETITIONER OF ITS PROPERTY

WITHOUT DUE PROCESS OF LAW IN VIOLATION OF THE

FIFTH AMENDMENT OF THE CONSTITUTION OF THE UNITED

Thess in &. edamented distinction. tetwesn limitation

statutes that merely bar the remedy and those which also

extinguish the liability. General limitation statutes are of

13

the former type and their expiration afford to the defendant a

mere remedy, namely, the setting up of the defense of the ~

statute of limitations. Since such. a statute of limitations

affects the remedy only and does not destroy the liability the

defendant acquires no constitutional rights of protection and

it is within the power of the legislature to alter, amend, or

even completely remove the bar of the Statute of Limitations.

However, the petitioner shall show that with respect to the

latter type of limitation statutes the expiration of the specified

time not only bars the remedy but extinguishes the liability

and gives to a citizen a vested property right which under the

Constitution of the United States is fully protected against

any subsequent legislation of Congress.

In support of the above contention the petitioner relies upon

no less authority than decisions of this court. In the case of

Tozaway Mills v. United States, 61 Ct. Cls. 363, decided by

the Court of Claims under date of December 7, 1925, that

Court applied the rule that the bar of the Statute of Limitations

found in Federal Tax Acts merely barred the remedy and did

not destroy the liability; consequently, the claimant could

not, as a plaintiff, sue to recover taxes alleged to have been

collected after the bar of the Statute of Limitations since this

matter could be raised only as a defense. This theory of the

Court of Claims was exploded by this Court in the cases of

Bowers v. New York & Albany Lighterage Company, 273 U. 8.

send Graham v. du Pont, 262 U. S. 284. The Solicitor

General of the United States thereupon confessed error in the

Toxaway Mills case and this Court remanded the case to the

Court of Claims with instructions to enter judgment in favor

of the plaintiff. 273 U. 8. 781. This case in itself shows a

distinction between general statutes of limitations and the

time limitations a. specified in the various revenue acts, since

if there is no distinction then the conclusion of the Court of

Claims to the effect that the bar of the statute can be raised

only as a defense was correct.

This Court recognized the distinction referred to above in

the case of Central Vermont Railway v. White, 238 U. S. at p.

511, when it said:

tied

14

;

And in the case of Eberhart v. United States, 204 Fed. Rep.

pp. 890-891, the Court stated in clear terms the very distinc-

tion for which the petitioner now contends. In the course of

the opinion the Court said:

**An act of Congress, which at the same time and in

itself authorizes or creates a new liability and prescribes

the limitations thereof and of its enforcement, makes those

limitations conditions of the liability itself. Such an act i is

not a statute of limitations, and a compliance with the

conditions which it prescribes is indispensable to the

enforcement of the liability it authorizes or creates, * * *

because such limitations are conditions of the liability

itself and not limitations of the remedy only.”

In this connection see also Bashara v. Hopkins, 290 Fed.

592; affirmed 295 Fed. 319; Certiorari denied, 265 U. S. 584;

44 S. Ct. 459; svemtachog v. Gulf & Ship Island R. R. Co.,

268 U. S. 633.

Similarly, i tei hate United States v. John Barth Company,

27 Fed. (2d) 782, 784 the Court said:

The statement of this Court in the case of Russell et al. v.

United States, 49 8. Ct. 121, 123; 278 U. 8. 181, shows that it

is in full accord with the principle of law announced in the

cases referred to above. This Court said:

15

“‘Manifestly, but for Section 278 (Revenue Act of 1924) ;

petitioners would be free from li pe oy Jive- year

limitation in the act of 1918, continued by the act of 1921. ©

If Sectiog278 refers only to assessments few’ after June

2, 1924, petitioners are not liable.

“Tf an assessment made before that date comes within

the ambit of Section 278, its effect would be retroactive ;

and certainly it would ‘produce radical change in the

existing status of the claim against the petitioners—

would extend for some five years a liability which had almost

expired. United States v. Magnolia a ro Nag ay

276 U. S. 160, 48 S. Ct. 236, 72 L. Ed

‘Statutes are not to be given retroactive page or construed

to change the status of claims fixed in accordance with

earlier provisions unless the legislative purpose so to do

plainly appears.’” (Itslics ours.)

+ It will be noted this Court stated that if it were not for —

Section 278 of the Revenue Act of 1924 the petitioners would

be free from liability under the five year limitation in the Act of

1918 continued by the act of 1921. The words “free from

liability” are not ambiguous. They can be cofistrued to mean

but ene thing, namely, upon the expiration of the five year

limitation period the liability of the petitioner would have been

completely extinguished. Furthermore, this Court said that

if Section 278 of the Revenue Act of 1924 were construed to

apply retroactively it would extend for some five years the

liability which had almost expired. The words ‘‘almost ex-

pired” means that the expiration of time had almost extin-

guished the liability. They could reasonably have no other

Other authorities could.be aited to the same effect. The

cases referred to seem to establish beyond any doubt that

the time limitation provisions found in the various Revenue

Acts not only bar the remedy at the expiration of the period

specified but that they also extinguish the liability.

(b) UpoN THE EXPIRATION OF THE TIME LIMITATION PRO-

VIDED FOR BY THE REVENUE ACTS, THE PETITIONER

ACQUIRED A VESTED PROPERTY RIGHT.

16 NG

mena Vol. 4, page 202, defines avoid Pa

“A vested right is an immediate right of present en-

eee of future enjoyment.” —

In the case of nidicanacds Railway Cini, 161 U. 8. 646,

“Rights are said to be vested, terol ES, sala

joyment, present or prospective, has become

of Lan hasncacntach ater senate haces ery

In the case of Gladney v. Syndor, 172 Mo. 318, the Court

said:

“Vested rights may be created either by the common

‘law, by statute, or by contract, and it makes,no difference

as to the method o their creation, they are entitled to the

is same protection.” (Italics supplied.)

.' When we consider the above definitions there appears to be

‘no doubt that when the passing of time under the various

Revenue Acts extinguished the liability of this petitioner with

' respect to its tax liability for the year 1918 it acquired a vested

right of present enjoyment in the realization that no further

liability remained for that year and this realization, upon the

expiration of the time limitation under the statute, was just as

effectual as though the petitioner had taken its money. to the

Collector of Internal Revenue before the expiration of the

period and removed the liability by a payment in cash. In

the latter case the liability would have been removed by pay-

ment in cash while in the fosmer case the liability was removed

by operation of law. The result in either case would be exactly

the same, namely, the extinguishment of the liability. It

seems fundamental that 4 taxpayer who paid his liability in

cash thereby acquired a vested right not to be called upon

again to satisfy the same liability. For the same reason the

whose liability is extinguished by operation of law

acquires a vested right of present enjoyment in knowing that

17

- the liability which had been extinguished is forever gone. The

petitioner shall show that such a right is fully protected under

the Fifth Amendment of the Constitution of the United States.

(c) lr Szcrion 611 18 SO CONSTRUED AS TO DEPRIVE PETITIONER

OF ITS PROPERTY AND ITS VESTED RIGHT OF ACTION OF

RECOVERY, IT WOULD BE CONTRARY TO THE FirrH AMEND-

MENT OF THE ConsTITUTION.

“Fy sil Comat deteominen Gat Conavenniiahanial ae Macias

611 to deprive petitioner of its property and also of its vested

right of action of recovery, this Section would be violative of

the Fifth Amendment, and void so far as petitioner’s case is

eoncerned. The decisions of this Court sustain the petitioner

in this contention.

Mr. Justice Chase, in the case of Calder y. Bull, 3 Dall. 385,

at p. 388 (1 L. Ed. 648), said:

_ uarane ous woah te Tasniee Sie

can not do, without _— on

crn et injure by po : we madlga Noe

-_ security for , OF pri ,

protection whereof the es oad

Peper pcg oehe sm “a Se eeeen

irony $a. She ena’, See rene te Jane

ean not be considered a rightful serie of opal

to intrust a with powers; and

erin to, inion 0. Kaionhans. a> oi Revers, tt

To apply Section 611 to petitioner’s caseonotwithstanding

_ Section 715, the Separability Clause of the Revenue Act of

1928, would render that section unconstitutional.

Nichols v, Coolidge, 274 U.S. 58;52 A, L. R. 1081.

"Blodgett v. Holden, 275 U. 8. 142,

Untermyer et al, v. Anderson, Coliector of Internal

Revenue, 276 U, 8. 440; 48 S, Ct. 353,

Justice demands that petitioner be permitted to assert its

legal and constitutional rights on reasonably equal terms with

the respondent before an impartial judicial tribunal. °

18

Atchison, Topeka & Sanita Fe Railway Company y, ~

O’Connor, 223 U. S. 280.

Christie-Street Commission Co. v. United States, 136 -

Fed. 326, 69 C. C. A. 464.

Emery, Bird, Thayer Reality: Co. v. United States, 198

Fed. 242 (affirmed 237 U. S. 28).

Fidelity & Columbia Trust Co. v. Lucas, 7 F. (2d), 146.

In the case of Rock Island Ry. Company v. United States, 254 .

U. S. at page 143, this Court said that men must turn square

corners when they deal with the Government. Should not the —

Government ‘also be required to turn square corners when it

deals with its citizens?

The distinction between rights and remedies is fundamental.

A right is a well founded or acknowledged claim; a remedy is

the means employed to enforce a right or redress an injury.

Chelentis v. Luckenback S. 8. Co., 247 U. 8. 384.

“Statutes concerning remedies are such as relate to

the course and mode of procedure to enforce or defend a

substantive right. Matters which belong to the remedy

are subject to changg ~~ : nes and even repeal,

provided the legislati¢n'doe: indoe: ot operate toimpair a contract

pectin. stem tagi-ty Svat weak right. If the changing

= i ~~ rat i" pet tharcggae ee ages

pated thority. Rights

ies shade one into the wiher'so that is ia sometimes

difficult to say that a particule act creates a right or merely

gives a remedy: So also & statute, under the form of

taking away or changingaps —_ eteaian att

an existing perty ri mpai tion of a

contract. * Be The right to compenss on was a vested

property right.” (Italics supplied.) ~

Ettor v. Tacoma, 228 U. 8. at pp. 155, 156 and 158. f

Smallwood v. Gallardo, 275 U. 8. 56; 48 8. Ct. 23.

In the early case of Dartmouth College v. Woodward, 4 Wheat,

518, this Court laid down the rule that where individuals have

acquired absolute or vested rights under a statute.a subsequent

repeal can not divest these rights. 4

‘

ha

oe

And in the case of Pritchard vy. Norton, 106 U. 8. 132, this

Court said: a :

B Regents t of action is property in the same sense

in which tangible things are property and is equally

tected against arbi interference. Whether it

from contract or from the principles of the common law it is

not competent for the legislature to take it away.”

“In the case of Memphis v. United States, 97 U: 8, p. 293, this

Court said:

“‘We do not deny that it is competent for a legislature

to repeal an Act which when it was passed was a mere

gratuity, if while it was in existence no vested righis have

been acquired under it or in virtue of it.’’ (Italica supplied.)

A similar conclusion was reached by the Court in United

States v. Henrich, 12 Fed.(2d) 940, viz:

‘*My eonclusion here is that Congress can not enact a

law that would destroy, impair or injuriously affect rights

‘that have vested under a former constitutional enactment, —

and that to enforce the Act of June 4, 1920, against the -

defendant and require him to pay for his property

would bein violation of constitutional guarantee

heretofore cited.’ (Fifth Amendment of the Constitution

of the United States.)

A law can be repealed by the lawgiver, but the rights which

have been acquired under it while it was in force do not thereby

cease. This was the rule of the civil law and has been strictly .

adhered to in England where there is no express restriction upon

legislative power. County of McCracken v. Mercantile Trust

Company, 84 Ky. 314; 1S. W. 585.

In the case of Crump v. Guyer, 157 Pac. 321; 2 A, L. R. 331,

the Court reached the same legal conclusion, and then said:

“To hold otherwise would leave us at sea and place it

in the power of the legislature at will to disturb, and even

destroy by subsequent legislation rights which hed accrued .

under existing laws.”

20

By what right does the United States retain this illegally

collected sum, or what statute creates and imposes any new

liability upon this petitioner, or precludes it from recovering

‘back the illegally collected sum of money, or what law or

statute of Congress could deprive petitioner of its property

and authorize the United States to keep and retain its property

in violation of the Fifth Amendment of the Constitution?

Certainly Section 611 did not confer such right and authority

in the respondent.

Thijs Court, in the case of De Lima v. Bidwell, 182 U. S. p.

199, speaking through Mr. Justice Brown, said:

“‘ As the action in this case was brought March 13, 1900,

eleven days before the act was passed, the right to recover

the money sued for could not be taken away by a subsequent

act of Congress.

“Plaintiffs sue in assumpsit for money which the Col-

lector has in his hands, justly and equitably belonging to

them. To say that Congress could by a subsequent act

deprive them of the right to prosecute this action, Would

be beyond its power. In any event, it should ‘not be

interpreted so as to make it retroactive.”

To the same effect is Lincoln v. United States, 202 U.S. p.

485. In this connection we invite the Court’s attention to the

arguments presented by the appellants and the United States

in this latter case, at pp. 485-495, for the reason that many of

the questions-there discussed are similar, if not identical, to

most of the questions involved in the instant case.

(d) CONGRESS WAS WITHOUT POWER TO EXTEND THE

! STATUTORY BAR, IN PETITIONER’S CASE, AFTER IT HAD

FALLEN AND PETITIONER HAD ACQUIRED A VESTED

PROPERTY RIGHT.

A claim for abatement, by no stretch of the imagination, can

be construed so as to extend the statute of limitations, except,

of course, such claims for abatement as came within the scope

of Sections 214 and 234 of the 1918 and 1921 Revenue Acts.

As claims for abatement were recognized prior to the enact-

ment of Section 250(d) of the Revenue Act of 1921 and have

21

been directly legislated on in that Section, that Act, for the

first time, specifically provided that taxes should be determined

and assessed within five years after the return was filed, unless

both the Commissioner and the taxpayer consent in writing to a

later determination, assessment, and collection of the tax. Bowers,

etc. v. New York & Albany Lighterage Company, et als., 273 U.S.

346, at p. 351; 47.S. Ct. 389, at pp. 390-391). This Court held

in the case of Botany Worsted Mills v. United States, 278 U.S.

282; 49 S. Ct. 129:

‘When a statute limits a thing to be done in a particular

mode, it includes the negative of any other mode.”

Moreover, if a claim for abatement in all cases “‘stayed”’ the

running of the statute, the enactment of Section 611, of the

Revenue Act of 1928, would be of no significance whatsoever.

(Danzer & Co. v. Gulf & Ship Island R. R. Co., supra; and

Bessemer Coal & Coke Co. v. Heiner, 39 F. (2d), 492.)

Under Section 250(d) of the Revenue Act of 1921, as con-

strued by this Court in the case of Bowers, etc. v. New York and

Albany Lighterage Company, et al., 273 U. S. 346, the claim of

the United States for the alleged additional tax against this

petitioner was barred by the operation of the limitation statute

prior to the time when it was collected and any collection by

means of distraint proceedings instituted after the five year.

period was unlawful.

Upon its payment under protest and duress when barred it

became a tax illegally collected, and the petitioner was entitled

to its refund and to maintain a suit to recover the amount paid.

Under the decision in Graham v. du Pont, 262 U. S. 234, the

petitioner could not have maintained an action to restrain

collection of the tax on the ground that it was barred by the

Statute of Limitations. It was compelled to pay the additional

tax with the right then to demand a refund.

After its claim for refund was made, the petitioner filed its

suit in the Court of Claims, and while its suit was pending

Section 611 of the Revenue Act of 1928 was enacted.

Section 611 should not be interpreted to be retrospective in

tion so as to destroy a right to recovery in a case where a

suit’was properly filed and was pending at the time of the

passage of the Revenue Act of 1928 because, if so construed,

the result would be to discriminate between the petitioner,

whose case had not proceeded to final judgment, and those

taxpayers. whose cases had proceeded to judgment as in the

cases of Bowers v. New York & Albany Lighterage Company et

al. supra, and Russell v. United States, supra. Furthermore

such construction would deprive the petitioner of a vested

property right to recover by judgment the amount of money

sued for which would be in violation of the Fifth Amendment.

It is further contended that a subsequent Congress does not

have the power to declare that money which a former Con-

gress, and this Court, have said belongs to a taxpayer because

unlawfully and illegally collected by duress, shall be retained

by the Treasury Department.

3. THE LEGAL: PRINCIPLES ESTABLISHED BY THE CASES OF

Unrrep Sratas v. Hernszen, 206 U.S. 370; Rarrerty

v. Smira, Bert & Company, 257 U. S. 226; ann

CamPBELL v. Hort, 115 U. S. 620, po Not APPLY TO

THE CASE OF THIS PETITIONER.

The lower Courts that have decided in favor of the Govern-

ment on the issue found in the case of this petitioner relied

principally upon the three cases cited in the above heading. It

is submitted that the principles annougced in these cases have

no application to the case of this petitioner. The cases of

United States v. Heinszen and Rafferty v. Smith, Bell & Com-

pony, terely raised the question of the right of Congréss to

pass an act legalizing and ratifying the imposition and collection

of duties by the authorities of the United States in the Philip- _

. pine Islands prior to the passage of the Act. The only question

of constitutional law involved in this issue was whether or not

Congress could pass a law imposing a tax or a duty retroactive-

ly. There is no doubt but that Congress has such power.

However, the application of Section 611 of the Revenue Act

23 .

of 1928, if it be held to be an attempt to deprive this petitioner

from recovering, presents an entirely different question of con-

gtitutional law. The act under consideration in the Heinszen

case, created an original liability retroactively. On the basis

of the argument of the Government, Section 611 would not

’ result in the creation of an original liability but would be an

attempt to recreate a liability that had been created by a

prior Revenue Act, which liability had been completely ex-

tinguished by operation of law upon the expiration of the period

specified in the statute.

This distinction is clearly shown by this Court j in the case of

Forbes Boat Line v. Commissioners, etc.; 258 U. S. 338, 339.

When speaking through Justice Holmes the Court said:

“Stripped of conciliatory phrases the question is

whether a state legislature can take away from a private

party a right to recover money that is due when the act

is passed. The argument that prevailed below was based

on the supposed analogy of United States v. Heinszen & Co.,

206 U. S. 370; (Rafferty v. Smith, Bell & Company, 257

U._S. 226), which held that Congress could ratify the

collection of a tax that had been made without authority

of law. That Snalogy, however, f fails.\ A tax may be

imposed in respect of past benefits, so that if instead of

calling it a ratification Congress had purported to impose

the tax for the first time the enactment would have been

within its power. Wagner v. Baltimore, 239 U. 8. 207,

216, 217. But generally ratification of an act is not good

if attempted at a time when the ratifying —w could

not lawfully do the act.”

The case of Campbell v. Holt, supra, involved the breach of a

common law liability on a tontract. This Court held that

the expiration of the bar of limitations applied to the remedy

only, and did not extinguish the liability. Consequently,

subsequent legislation affecting the remedy did not deprive

the citizen of his property without due process of law. It is

quite apparent that the principle in the case of Campbell v.

Holt does not apply to the case of this petitioner. The Court

4

recognized the distinction in the case of Eberhart v. t

States, supra, when it said (page 511):

“They (statutes of time litnitation that not only bar.

remedy but extinguish the liability) are exce from

rule announced in Campbell v. Holt, 115 U. 3. 628; 6 Sup.

a just personal debt for a common law liability, in that case

for a conversion of the plaintifi’s money, is not a vested

right, which the legislature may not overthrow at pleasure.

by extending the time for collecting it.” :

See also Danzar and Bashara cases, supra.

It is submitted, therefore, that the principles of law found —

in the three cases relied upon by the lower Courts have no *”

application to the case of this petitioner and are not authorities |

to defeat its vested property rights. 2

CONCLUSION.

In conclusion the petitioner contends that Sections 607 and —

611 of the Revenue Act. of 1928 are administrative provisions

affecting only the Commissioner of Internal Revenue; that —

they in no sense can be construed as a withdrawal by the —

United States of its consent to be sued; that upon the expira-

tion of the time specified in the statute the petitioner acquired —

vested property rights, subject to the protection of the Fifth

Amendment of the Constitution of the United States, and that

itis beyond the power of Congress to affect those rights by any —

subsequent legislation. 4