Respondents Brief — Mascot Oil Co. v. United States

IN THE

Supreme Court of the United States.

OcToBER TERM, 1930.

No. 416.

UNITED STATES OF AMERICA, PETITIONER,

vs.

WYMAN PARTRIDGE & COMPANY.

BRIEF FOR THE RESPONDENT.

“FRANK J. ALBUS,

National Press Bldg.,

Washington, D. C.

Attorney for Respondent.

Of Counsel:

WILLIAM MEYERHOFF,

Washington, D. C.

THE LAW REPORTER PRINTING COMPANY, WASHINGTON, DO, C.

a OR GAME LS LEI PLIES AT a BOE SLE I TE Wem mR YE CA NOt MIR IPI OPP 5 a aN: RIS ESET AR EAE e-em

reer fini. OER

os cae asa OT OTD Nae ALS CO EI

Jurisdiction

Argument:

Preliminary Statement

3

II.

III.

Sections 606 and 611 of the Revenue Act of

1928 are administrative provisions ap-

plying only to the Commissioner of In-

ternal Revenue and do not apply to a

case where suit is brought in the Courts

Under the provisions of Section 1106(a) of

the Revenue Act of 1926 which provides

that the bar of the statute shall not only

bar the remedy but shall extinguish the

liability, the respondent acquired a vested

SiMe CO ee

If Section 611 of the Revenue Act of 1928

be construed as an attempt to deprive the

respondent of its property and its vested

right of action to recover, it would be

contrary to the Fifth Amendment of the

Constitution

. The cases cited by the petitioner to show

that Congress has power to alter and

amend a statute pertaining to the remedy

have no application to the ease of the

respondent...

. Section 611 of the Revenue Act of 1928 did

not withdraw the consent of the United

States to be sued by the respondent

10

13

16

il INDEX

Page

VI. Section 612 of the Revenue Act of 1928

which attempts to repeal Section 1106(a)

of the Revenue Act of 1926 as of the

date of its enactment has no effect on the

right of the respondent to recover_......... 25

VII. Seetion 611 of the Revenue Act of 1928 did

not recreate any liability that had been

extinguished by Section 1106(a) of the

WOVOMD FOE OE BI oiiving ccc cccccvceeccsicvccssne 27

VIII. The legal principles established by the

eases of United States vs. Heinszen,

206 U. 8. 370; Rafferty vs. Smith, Bell

& Company, 257 U.S. 226, and Campbell

vs. Holt, 115 U.S. 620, do not apply to the

case of this respondent................................ 29

IS EES ENE LIED CeCe RAN 32

CITATIONS.

Cases:

Atchison, Topeka & Santa Fe Railway Co. vrs.

O’Connor, 223 U. 8. 280.................. SRA TEI 14

Beers vs. Arkansas, 20 How. 527........0000020000000.. 17

Blodgett vs. Holden, 275 U. 8. 142.0000... peetatae 13

Brushaber vs. Union Pacific R. Co. 240 U. S. at

I, SPT ssccslaccicidensesteeseinnsss acuaeeeacomrinestiaataoan 24

Caider ve. Bull, 3 Dall. 366............-<.cc-....................-. 11-13

Caminetti vs. United States, 242 U. S. 470... 23

Campbell vs. Holt, 115 U. S. 6200.00.00... 29

Chapman vs. United States, 63 Ct. Cls. 424.0000... 7

Chelentis vs. Luckenback S. S. Co., 247 U.S. 384... 19

Christie-Street Commission Co. vs. U. SS. 136

Clinton Iron & Steel Co. vs. Heiner, 30 F. (2d) 135... 31

Collector vs. Hubbard, 12 Wall. 1... 16

INDEX ili

Page

Crooks vs. Harrelson et al., No. 24, Oct. Term.

1950 DPE De PTL RAS PRISE the ot 28

Crump vs. Guyer, 157 Pae. 321. SRSA rooney ae

Dartmouth College vs. Senet 4 Wheat. . 518. _ 14

De Lima vs. Bidwell, 182 U. S., p. 199. EEE SR 26

Diamond Alkali Co. vs. Fidei: 39 F. (2d) 643. 10-31

Dobbins vs. Comm., 31 F. (2d) 935... ”:COY

Dooley vs. United States, 182 U.S. 222. si

Kberhart vs. United States, 204 F. 890... BI

Klay Co. vs. Bowers, 25 TF. (2d) 637. oe Ss

emery, Bird, Thayer Realty Co. rs. United States,

IMS I. 242 (affirmed 237 U. S. 28)... 14-20-22

rie Coal & Coke Co. vs. Heiner, 33 F. (2d) 135. 31

Ikttor vs. Tacoma, 228 U.S. at pp. 1550. — 19

Fidelity & Columbia Trust Co. vs. Lueas, 7 F. (2d)

i, See ES ee Oe pee ne a 14

Fletcher rs. Peck, 6 re ‘ranch 133; 10 U. B40:..2..... 98

Forbes Boat Line vs. Comm. 258 U. 8. 338, beats 30

Frost vs. Corporation Commissioner, 278 U. 8.

te ae am - |. er ere Res a ee

Gladney rs. Ryndor, te Se | Sete ere ae ae 11

Heiner vs. Erie Coal Co., 42 F. slg SRE IN A ete 31

Langford rs. United States, 101 U. ee 24

Lineoln vs. United States, 202 U.S. 485 badbiedet 26

Maeallen Co. rs. Commonwealth of Mass., 279 U.S

ag RY TORE Nee et tA Se MTA: 25

Marbury vs. Madison, 1 C ranch, Seah aiken 20-22

Marshall vs. King, 24 Miss., 85........................ 11

MeCracken vs. Mereantile Trust Co., 84 Ky. 314:

1B. OW. B68. enc. natch thes, a POS

MeCullough vs. Maryland, W heat. 316... Baer |

Memphis vs. United States, ee U. 8. 202... Meloy |

Nichols vs. Coolidge, 274 U. 8. 530. 13

Pearsall vs. Railway Co., lt v. S. 646 11

Pepsin Syrup Co. rs. Schwaner, 35 F. (2d) 197 31

Prichard vs. Norton, 106 UL 3. I 39 14

Rafferty vs. Smith, Bell & Co., 257 U. 8. 226... 29

iv INDEX

Page

Rock Island, A. & L. R. Co., vs. United States,

en Oe PY Ae the Ah aon 16

Smallwood vs. Gallardo, 275 U. 8. 56; 48 8. Ct. 28... 19

Southern Lbr. Co. vs. United States (Not yet re-

ported), Commerce Clearing House Tax Serv-

ice, 1930, Vol. 3, page 8962.............................. 31

The King vs. The Commissioners, 5 A. and E. 804.0 25

United States vs. Hartwell, 6 Wall. 385, 396.000... 25

United States vs. Heinszen, 206 U. 8. 370. 29

United States vs. Henrich, 12 F. (2d) 940 14

United States vs. Lexington Mill Co., 232 U.S. 399... 23

United States et al. vs. Missouri Pac. R. Co., 49

eet Tee See ee Oy ees i

Unterniyver et al. vs. Anderson, 276 U.S. 440 13

Wettengel vs. Robiason, 289 Pa. 525; 1386 Ath 673 31

Win. Danzer & Co., Ine. rs. Gulf & Ship Island

Railway Co., 268 U.S. 633 15

Statutes: .

Section 1106 (a), Revenue Act of 1926 2

Section 1113, Revenue Act of 1926... |

Section 607, Revenue Act of 1928... 5

Section 611, Revenue Act of 1928 3

Section 612, Revenue Act of 1928 3

Miscellaneous:

‘. T.. 2382, ©. B. Vi-2d, 102._. ee Te 4)

Kent’s Commentaries, Vol. 4, 202. vk 1)

Vol. 4, Ency. of U.S. S. Ct. Reps., p. 228........ 22

IN THE

Supreme Court of the United States.

OcTOBER TERM, 1930.

UNITED STATES OF AMERICA, PETITIONER,

US.

WYMAN PARTRIDGE & COMPANY.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF CLAIMS.

OPINION BELOW.

The opinion of the Court of Claims (Ree., p. 9) is

reported in 41 F. (2d) 886.

JURISDICTION.

The judgment of the Court of Claims was entered

June 2, 1930, (Ree., p. 17). The petition for writ of certiorari

was filed September 2, 1930, (Ree., p. 21). This Court

granted ¢ertiorari on October 20, 1930, (Ree., p. 18) 282

U. Ss. —. Jurisdiction is conferred upon this Court by

Section 3 (b) of the Act of February 18, 1925.

QUESTIONS PRESENTED.

The questions presented are:

1. Whether Section 611 of the Revenue Act of 1928,

(U.S. C. Supp. IIT, Title 26, Section 2611) should be con-

strued as an administrative provision applying only to the

4

7

2

Commissioner of Internal Revenue and not applying to

suits in the Courts. a

2. Whether Section 611 of the Revenue Act of 1928 is

to be construed so as to deprive the respondent of its title

and right to possession and enjoyment of the money illegally

collected from it as a tax after the statutory period for

collection had expired and after Section 1106 (a), (U. S. C.

App., Title 26, Section 1249) of the Revenue Act of 1926

had completely extinguished the liability.

3. Whether Section 611 of the Revenue Act of 1928

is constitutional under the Fifth Amendment of the Con-

stitution of the United States if it be construed as an attempt

to deprive the respondent of the rights which accrued to it

under Section 1106 (a) of the Revenue Act of 1926.

4. Whether Section 611 of the Revenue Act of 1928

should be construed as a withdrawal by the Government

of its consent to be sued.

5. Whether the attempted repeal of Section 1106 (a) of

the Revenue Act of 1926 by Section 612 of the Revenue

Act of 1928, (U. S. C. Supp. III, Title 26, Section 2611)

as of the date of its enactment can prevent the respondent

from recovering in this action.

6. Whether Section 611 of the Revenue Act of 1928

should be construed as a recreation of a tax liability which

had been completely extinguished by Section 1106 of the

Revenue Act of 1926, which provided in part, ‘that the bar

of the statute of limitations against the United States in

respect of any internal-revenue tax shall not only operate

to bar the remedy but shall extinguish the liability.”

STATUTES INVOLVED.

The statutes involved in this proceeding are as follows:

Section 1106 (a) of the Revenue Act of 1926, 44 Stat.

9, 113, provides:

Sec. 1106. (a) The bar of the statute of limi-

tations against the United States in respect of any

internal-revenue iax shall not only operate to bar

3

the remedy but shall extinguish the liability; but

no credit or refund in respect of such tax shall be

allowed unless the taxpayer has Overpaid the tax.

The bar of the statutes of limitations against the

taxpayer in respect of any internal-revenue tax shall

not only operate to bar the remedy but shall extinguish

the liability; but no collection in respect of such tax

shall be made unless the taxpayer has underpaid

the tax.

Section 607 of the Revenue Act of 1928, 45 Stat. 791,

874, provides:

Sec. 607. EFFECT OF EXPIRATION OF

PERIOD OF LIMITATION AGAINST UNITED

STATES.—Any tax (or any interest, penalty, addi-

tional amount, or addition to such tax) assessed or

paid (whether before or after the enactment of this

Act) after the expiration of the period of limitation

properly applicable thereto shall be considered an

overpayment and shall be credited or refunded to the

taxpayer if claim therefor is filed within the period

of limitation for filing such claim.

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

875, provides:

Sec. 611. COLLECTIONS STAYED BY

CLAIM IN ABATEMENT.—-If any internal-revenue

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

addition to™uch tax) was, within the period of limi-

tation properly applicable thereto, assessed prior to

June 2, 1924, and if a claim in abatement was filed

with or without bond, and if the collection of any

part thereof was stayed, then the payment of such

part (made before or within one year after the enact-

ment of this Act) shall not be considered as an over-

payment under the provisions of section 607, relating

to payments made after the expiration of the period

of limitation on assessment and collection.

Section 612 of the Revenue Act of 1928, 45 Stat. 791,

875, provides:

Sec. 612. REPEAL OF SECTION 1106 (a)

OF 1926 ACT.—Section 1106 (a) of the Revenue

Act of 1926 is repealed as of February 26, 1926.

ae

4

Section 1113 of the Revenue Act of 1926 provides as

follows:

See. 1113. (a) Section 3226 of the Revived

Statutes, as amended, is reenacted without change,

as follows:

“See. 3226. No suit or proceeding shall be

maintained in any court for the recovery of any

internal-revenue t#x alleged to have been 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 maintained, whether or

not such tax, penalty, or sum has been paid under

protest or duress. No such suit or proceeding shall-

be begun before the expiration of six months from the

date of filing such claim unless 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 begun 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 such disallowance,

notify the taxpayer thereof by mail.”

(b) This section shall not affect any proceeding

in court instituted prior to the enactment of the

Revenue Act of 1924. (U.S. C. App. Title 26, Sec.

156.)

Section 3226 of the Revised Statutes was not amended

by the Revenue Act of 1928.

STATEMENT OF FACTS.

The Statement of Facts in the brief of the petitioner

(pages 2 and 3) is a fair statement of the case. Suffice it Is

to say, that the year involvedis the fiscal yearended November

30, 1918. (Ree., p. 8); that in May, 1924, an additional

5

assessment of income and excess profits taxes was made

against the respondent by the Commissioner of Internal

Revenue (Rec., p. 8); that the respondent did thereupon

file a claim in abatement without bond (Rec., p. 8); that the

statutory period for collection as extended by waivers

expired on December 31, 1925, (Rec., p. 8); that Section

1106 (a) of the Revenue Act of 1926 became law on February

26, 1926; that on August 17, 1926, the respondent, under

protest, paid an amount of $45,992.87, being a portion of the

additional assessment made in May, 1924, (Rec., p. 8);

that on July 18, 1927, respondent filed its claim for refund on

the grounds that collection was improperly made after the

statutory period for collection had expired (Rec., p. 8);

that the claim was rejected on April 4, 1928, (Rec., p. 8)

and*suit was instituted on June 7, 1928, (Rec., p. 6).

SUMMARY OF ARGUMENT.

The respondent shalf show that Section 6f1 of the

Revenue Act of 1928 is merely a limitation upon Section 607

of the same act and that Section 607 was enacted to enlarge

the power of the Commissioner of Internal Revenue in

making refunds and credits of amounts collected as taxes

after the statutory period for collection had expired, con-

sequently, that section has no application to suits filed in ~

the Courts for the recovery of amounts illegally collected.

If this Court holds that Section 611 of the Revenue Act

of 1928 applies to suits in the Courts, then the respondent

shall show that by virtue of Section 1106 (a) of the Revenue

Act of 1926 it acquired a vested property right which could

not be affected by any subsequent legislation of Congress,

and shall show further that Section 611 did not, and could

not, recreate any tax liability ‘hat had been completely

extinguished by Section 1106 (a) of the Revenue Act of

1926. The respondent shall show further that any attempt

by Congress to recreate a liability which had been extinguished

by Section 1106 (a) of the Revenue Act of 1926 is uncon-

stitutional and void as a taking of property in violation of

6

the Fifth Amendment of the Constitution of the United

States. The respondent shall also show that Section 61]

of the Revenue Act of 1928 was not a withdrawal by the

Government of its consent to be sued and that under the

facts in this case if Section 611 is so construed then it would

be repugnant to the Constitution.

ARGUMENT.

PRELIMINARY STATEMENT.

At the outset the respondent wishes to call the attention

of this Court to a very important fact in this ease which is

not present in the case of Graham and Foster vs. Collector,

now pending in this Court, No. 36, October Term, 1930.

This important fact is that the collection of the amount in

controversy was made from the respondent on August 17,

1926, while Section 1106 (a) of the Revenue Act of 1926

was in effect, which section provided that the bar of the

statute of limitations against the United States shall not

only bar the remedy but shall extinguish the liability. In

the Graham and kindred cases pending before this Court

collection was made prior to February 26, 1926, the date

‘of the passage of the Revenue Act of 1926. The importance

of this distinction can readily he seen when it is noted that

the Court of Claims rendered judgment in favor of this

respondent after that Court had already given judgment

in favor of the Government in a number of eases where

collection had been made prior to the passage of Section 1106

(a) of the Revenue Act of 1926. The respondent shall show

that it is entitled to recover in this proceeding regardless

of what the decision of this Court may be in the ease of

Graham and Foster vs. Collector.

~J

SECTIONS 607 AND 611 CF THE REVENUE ACT OF

1928 ARE ADMINISTRATIVE PROVISIONS AP-

PLYING ONLY TO THE COMMISSIONER OF

INTERNAL REVENUE AND DO NOT APPLY TO A

CASE WHERE SUIT IS BROUGHT IN THE COURTS.

Section 1106 (a) of the Revenue Act of 1926 (C. 27,

44 Stat. 9, 115) provides in part as follows:

“The bar of the statute of limitations against the

United States in respect of any internal-revenue tax

shall not only operate to bar the remedy but shall

extinguish the liability; but no eredit or refund in

respect of such tax shall be allowed unless the tax-

payer has overpaid the tax.”

~

\

It will he noted that Section 1106 (a) prevents & “credit

or refund” unless the taxpayer has overpaid the tax. Since

the Commissioner of Internal Revenue is the only person

authorized to make a “credit” orva “refund,” it is quite

apparent that the limitation against sueh credits or refunds

in Section TCG (a) had application to him alone. This

conclusion is fully sustained by the final action taken in the

ease of Adelaide F. Chapman vs. United States, 63 Ct. Cls.

424, in which the Court of Claims construed Section 1106 (2)

of the Revenue Act of 1926 as preventing the plaintiff in a

sult frota 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 the decision in Bowers vs. New York and

Albany Lighterage Company, supra, was handed

down and it was disclosed that the Court of Claims

Was in error in holding that the claim of the United

States Lad not been barred, and on Marek 31, 1927,

tie petitioner filed a motion for new trail, which was

overruled October 24, 1927. Section 1106 (a) was

mms eee

8

brought to the attention of the Court of Claims in

connection with that motion, althoug): the record

does not disclose it, and the action of tle Court of

Claims in overruling the motion can only be explained

on the theory that it held that Seetion 1106) (a)

operated to prevent petitioner from obtaining a

refund of the tax paid notwithstanding that wher

paid its collection was barred by the statute of

limitations.

“The phrase ‘but no credit or refund in respect

of such tax shall be allowed unless the taxpayer

has overpaid the tax,’ literally construed, may mean

that where a tax has been paid which was barred by

the statute of limitations when paid. refund. shall

nevertheless be denied unless the taxpayer has over-

paid the tax in the sen-e of paying mere than was

justly due without regard to the statute of lin itations.

“Sueh a construction leads to results wie!

Congress could never have intended. Its effeet is to

nullify the statute of limitations against the United

States, beeause if the taxpayer may not enjoin the

collection of a tax barred by the statute of limitations,

as held in Graham vs. Dupont, supra, or prevent

distraint proceedings by injunction and toay be com-

pelled by the Collector to pay a tax, the ccllection of

whieh is barred by the statute of lisitations, and then

miay not obtam a refund of the tax as one illegally

collected unless the amount paid was more than

justly due before the statute of limitations ran against

the claim, it is clear that the statute of limitations

becomes a dead letter.”

‘

The judgment of the Court of Claims was vaeated and

the case remanded to enter judgment for the taxpayer.

October term, 1928, 49 8. Ct. p. 7; 278 U.S. G60. (See also

Ellay Co. vs. Bowers, 25 F (2d), 637: certiorari denied 48

S. Ct. 601.)

The Commissioner of Internal Revenue also was of the

opinion that Section 1106 (a) of the Revenue Act of 1926

merely limited his right to make refunds and credits of

amounts collected after the statutory period for collection

had expired and that it did not prevent recovery in the

— a

courts.

9

In I. TP. 2382, C. B. VI-2-102, issued during the

Fall of 1927, the Commissioner of Internal Revenue said:

“Many inquiries are being received both from

Within and without the Bureau as to the action which

the Bureau should take in making refunds as a result

of the decision of the Supreme Court in the case of

Bowers vs. New York & Albany Lighterage Company.

Great uncertainty exists as to the extent and appli-

cation of the decision of the Supreme Court. It has

been suggested that the New York & Albany Lighter-

age Company decision may have no application to

eases where bonds were filed or where claims in

abatement were tiled, and that, in view of Section

1106 of the Revenue Act of 1926, the decision should

be limited to refunds resulting from court decisions

and has no applications to refund by the Commissioner.

Furthermore, Section 1106 was not raised in the

Albany Lighterage Company case and was not con-

sidered in connection with the confession of error

made by the Government in the Toxaway Mills case

before the Supreme Court (47 8. Ct. 471). The

subsequent action of the Court of Claims raises

vrave doubt as to the application of the Albany

Lighterage Company decision t other cases in view

of Section 1106.

“In view of th great uncertainty as to the whole

matter it is believed that no action toward making

refunds should be ,aken by the Bureau in reliance

upon the Albany Lighterage Company decision unless

and until the situation is clarified by further court

decision or by legislative action. The problem is

already under consideration by the Joint Com-

inittee on Internal Revenue Taxation and it will be

presented to the Congress as soon as it convenes for

such action toward a clarification of the situation as

it deems proper.”’

The above statement by the Commissioner of Internal

Reventie was an invitation by the Commissioner to Congress

to pass legislation to clarify his power in making refunds

and credits in cases where suns had been collected after the

siatutory period for collection had expired. Congress an-

auswered the invitation of the Commissioner of Internal

sme

10

Revenue by enacting Sections 607 and 611 of the Revenue

Act of 1928. By Section 607 Congress provided that any

amount collected after the expiration of the period of lin-

tation properly applicable thereto either before or after the

passage ofthe Revenue Act of 1928 shall be considered

an “overpayment” and shall be refunded to the taxpayer if

claim therefor is properly filed. In other words, Section 607

merely removed the, bar which Section 1106 (a) of the

Kevenue Act of 1926 had imposed upon the Commissioner

and mace it possible for him.to make refunds and credits of

amounts collected after the statutory period had expired.

provided claim for refund was properly filed. This Section

had no application to suits in ©. urt since the Chapman case,

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

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

Revenue Act of 1926.

Section 611 of the Revenue Act of 1°28 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, then the payment of such part was hot

to be considered an orerpayment under the provisions ef Section

607. But sinee Section 611 was merely a limitation upon

Seetion 607 and as Section 607 had no reference to suits in

Court it follows as a matter of course that Section 611 like-

wise had no reference to suits in Court. It was so held jn

Diamond Alkali Company vs. Heiner, 39 I. (2d) 643.

Il.

UNDER THE PROVISIONS OF SECTION 1106 (a) OF

THE REVENUE ACT OF 1926 WHICH PROVIDES

THAT THE BAR OF THE STATUTE SHALL NOT

ONLY BAR THE REMEDY BUT SHALL EXTIN-

GUISH THE LIABILITY, THE RESPONDENT AC-

QUIRED A VESTED PROPERTY RIGHT.

Kent in his Commentaries, Vol. 4, page 202, defines a

vested right as follows:

‘‘A vested right isan immediate right of present

1]

enjoyment, or a present, fixed right of future en-

joyment.”’

In the case of Pearsall vs. Railway Company, 161 U. 3.

646, this Court said:

* “Rights are said to be vested, when the right to

enjoyment, present or prospective, has become the

property of some particular person or persons as a

present interest.”

In the case of Gladney vs. 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 of their creation, they

are entitled to the same protection.”’ (Italics supplied. )

In Marshall vs. King, 24 Miss. 85, the Court defined a

vested right ‘to be an immediate fixed right of present or

future enjovment.”’

Justice Chase in the case of Calder vs. Bull, 3 Dall. 386,

1 L. kd. 648, when speaking of a vested right said:

“When I say that a right is vested in a citizen, I

mean that he has the power to do certain acts, or to

mney certain things, according to the law of the

land.”

When we consider the above definitions there appears

to be no doubt that when Section 1106 (a) of the Revenue

sect of 1926 extinguished the liability of the respondent

With respect to its tax liability for the fiseal year 1918, it

acquired a vested right of present enjoyment in the realization

that no further liability remained for that year and _ this

realization was just as effectual as though the respondent

had taken its money to the collector of Internal Revenue

and removed the liability by a payment in eash. In the

latter ease the liability would have been removed by payment

in cash while in the former case the liability was removed

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

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

2

12

It seems fundamental that a taxpayer who paid his lability

in eash thereby acquired a vested right not to be ealled upon

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

taxpayer whose liability was extinguished by operation of

law acquired a vested right of present enjoyment in knowing

that the liability that had been extinguished is forever

gone. ¢

Judge Green in the opinion below aptly set forth the

effect of Section 1106 (a) of the Revenue Act of 1926 when

he said:

“The collector or commissioner, therefore, took

money which was not owing to the United States and

for that reason could not belong to it after it had been

received. After it had been paid it was still the rightful

property of the taxpayer .

“Tt (Seetion 1106 (a) of the Revenue Act. of

1926) had no application to what had been done

prior to its enactment, but it warned the public

officials that after it was enacted thecexaction of a

payment upon a tax as to which the statute of limita-

tions had run was taking money from the taxpayer

without any liability on its part existing, or, im short,

| ee —a eollection made where there was no debt.” (Italics

supplied. )

It is submitted, therefore, that by virtue of Section

1106 (a) of the Revenue Act of 1926 the respondent acquired

a vested property right and that the collection of the amount

involved in this actien was a confiscation of property which

rightfully belonged to the respondent. ‘The respondent shall

show that the vested right which it acquired by virtue of

Section 1106 (a) of the Revenue Act of 1926 is fully protected

under the Fifth Amendment of the Constitution of the

United States and that this right could not be taken from it

by any subsequent legislation.

MT On ee a

13

Il.

IF SECTION 611 OF THE REVENUE ACT OF 1928 BE

CONSTRUED AS AN ATTEMPT TO DEPRIVE THE

RESPONDENT OF ITS PROPERTY AND ITS

VESTED RIGHT OF ACTION TO RECOVER, IT

WOULD BE CONTRARY TO THE FIFTH AMEND-

MENT OF THE CONSTITUTION.

If this Court determines that Congress intended by

section GIL of the Revenue Act of 1928 to deprive re-

spondent 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 respondent's ease is con-

cerned. ‘Phe decisions of this Court sustain the respondent

in this contention.

Mr. Justice Chase, in the case of Calder vs. Bull, supra,

said:

“There are acts which the Federal or State

Legislatures can not do, without exceeding their

authority, . . . as to authorize manifest injustice

by positive law, or to take away that security for

personal liberty, or private property, for the protection

whereof the government was established. An act

of the Legislature (for ‘I can not eall it a law), con-

trary to the great first principles of the social compact,

can not be considered a rightful exercise of legislative

authority . . . or a ‘law that takes property

from A and gives it to B; it is against all reason and

justice, for a people to intrust a Legislature with

such powers; and therefore, it can not be presumed

that they have done it.”

To apply Section 611 to respondent’s case, notwith-

standing Section 715, the Separability Clause of the Revenue

Act of 1928, would render that section unconstitutional.

Nichols vs. Ceolidge, 274 U. 8. 53; 52 A. L. R. 1081.

Blodgett vs. Holden, 275 U. 8. 143.

Untermyer et al. vs. Anderson, Collector of Internal

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

14

Justice demands that respondent be permitted to assert

its legal and constitutional rights on reasonably equal terms

with the petitioner before an impartial Judietal tribunal.

Atchison, Topeka & Santa Fe Railway Company vs.

O’Connor, 223 U. S. 280.

Christie-Street Commission Co. vs. United States.

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

Emery, Bird, Thayer Realty Co. vs. United States,

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

Fidelity & Columbia Trust Co. rs. Lueas, 7 F. (2d),

146.

In the early case of Dartmouth College rs. Woodward,

4 Wheat, 51S, this Court laid down the rule that where

individuals have acquired absolute or vested rights uader a

statute a subsequent repeal can not divest these rights.

And in the ease of Pritehard vs. Norton, 106 U.S. 132.

this Court said:

“A vested right of action is property in the same

sense in which tangible thmgs are property and _ is

equally protected agaimst arbitrary interference.

Whether it springs from contract or from the principles

of the common law it is not competent for the legis-

lature to take it away.”

A similar conclusion was reached by the Court in United

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

“My conelusion here is tuet Cougress ean not

enact a liw that would de-tros. lnpair or iajuriously

affect mghts that have vested under a former c@a-

stitutional enactment, and that to enforce the Net

of June 4, 1920, agamst the defendant and require

him again to pay for his property would be in violation

of the constitutional guarantee heretofore cited.”

(Fifth Amendment of the Constitution of the United

States. )

In the case of Crump rs. Guyver, 157 Pae. 321: 2 A. L. R.

331, the sua reaches the same legal conclusion, and thes

said:

4

“To hold otherwise would leave us at sea and

place it in the power of the legislature at will to

-12 § EA PECAN OR DE ER

Res "

15

disturb, and even destroy by subsequent legislation

]

rights which had accrued under existing laws.”’

By what right does the United States retain this illegally

collected suin, or what statute creates and imposes any new

liability upon this respondent, or precludes it from recovering

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

statute of Congress could deprive respondent 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 petitioner.

This Court in the case of Wm. Danzer and Company, Ine.

vs. Gulf & Ship Island Railway Company, 268 U. 8. 633,

had occasion to pass upon a question closely related to the

one found in the case of this respondent. The facts in that

case show that in 1920, Congress passed the Transportation

Act which contained a provision to the effect that the period

of Federal control over railroads was not be computed as a

part of the two year period of limitation for bringing action

against carriers or for filing claims for reparation with the

Interstate Commerce Commission for causes of action

arising prior to Federal control. A claim for damages had

heen filed with the Interstate Commerce Commission against

the railroad in question and an award was made by the

Commission. The claim was not filed within two years

from the date of the cause of action, however, if the period

during which the Federal Government had control over the

railroad were excluded, then the claim was filed in time.

‘his Court held that the expiration of the two vear period

of limitations for filing the claim against the railroad not

only barred the remedy but extinguished the liability and

that the attempt of Congress by the Transportation Act

of 1920 to modify the statutory period to recreate the liability

after it had been extinguished was to deprive the carrier

of its property without due process of law in violation of the

Firth Amendment to the Constitution of the United States.

It appears that the attempt of Congress in passing Section

16

611 of the Revenue Act of 1928, either to recreate a lability

which had been completely extinguished by operation of

law or to retain the property of the respondent illegally

taken, is subject to the same objection.

IV.

THE CASES CITED BY THE PETITIONER TO SHOW

THAT CONGRESS HAS POWER TO ALTER AND

AMEND A _ STATUTE PERTAINING TO THE

REMEDY HAVE NO APPLICATION TO THE CASE

OF THE RESPONDENT.

On page 17 of the petitioner’s brief reference is made to

the ease of Beers vs. Arkansas, 20 How. 527, to support its

contention that Congress has power to deprive the respondent

of the rights aequired under Section 1106 (a) of the Revenue

Act of 1926. The petitioner also refers to its brief in the case

of Graham and Foster vs. Goodeell, No. 36, October Term,

1930, now pending in this Court, in which it cites the cases

of Collector vs. Hubbard, 12 Wall.’1, and Rock Island, A.

and L. R. Company vs. United States, 254 U. 8. 141, in

support of the same principle. The respondent shall show

that none of these cases have any application to the principle

involved in its case.

The Beers’ case arose under a statute of the State of

Arkansas permitting the State to be sued on State*bonds.

Under this statute a suit was brought upon State bonds

and while the suit was in litigation the legislature passed

another law requiring the bonds to be filed in Court or the

suit to be dismissed. The suitor refused to file his bonds

in Court Sind the suit was dismissed. “The Supreme Court

of Arkansas sustained the dismissal of the suit and the case

was then carried to this Court. The question for determi-

nation was whether or not the original law authorizing suit

without the filing of the bonds in Court was a contract which

was impaired by the subsequent act of the legislature. This

Court held that the original law was not a contract and

that the provisions of the subsequent act requiring the

17

_ filing of the bonds in Court before the suit could be continued

violated no constitutional rights of the suitor. Certainly

this case has nothing to do with the case of the respondent.

In the first place the question of a vested right was not in-

volved and in the second place the subsequent act of the

legislature of the State of Arkansas merely referred to the

remedy. It prescribed certain conditions that had to be

complied with before the Court acquired jurisdiction. The

record in the ease of this respondent clearly shows that it

has complied with all of the conditions requisite to the juris-

diction of the Court. After it was required to pay the

amount in controversy it filed its appeal with the Com-

missioner of Internal Revenue for refund and upon rejection

of its claim it filed this suit in the Court within the two

vear period provided by law. The petitioner has never

contended that the respondent did not comply with these

conditions.

In order to show that the decision of this Court in the

Beers case was limited to the one question referred to above,

the following quotation is made from the case:

“Nor has the State Court, in the judgment

brought here for review, decided anything but the

question of Jurisdiction. It has given no decision in

relation to the validity of the contract on which

the sult is brought nor the obligations it created or the

rights of parties under it. It has decided merely, that

it had no right under the law of the State to try this

question unless the bonds given by the State are

filed.’ (Italics supplied.)

It is clear that the ease of Beers vs. Arkansas has no

application to the ease of this respondent.

Nor do the cases of Collector vs. Hubbard, supra, and

Rock Island R. Company vs. United States, supra, apply

to the case of the respondent. The Hubbard case arose

under the Act of June 30, 1864, 13 Stat. at Large, 281, which

laid what is known as an income tax. Hubbard protested

payment of the tax under the Act and on August 19, 1865,

he paid the tax under compulsion. Hubbard then brought

18

suit to recover the amount illegally colleeted and under the

law im effect at that time it was not necessary to first appeal

to the Collector or the Commissioner of Internal Revenue

before suit could be brought. While the suit of Hubbard

Was pendimg m the Cireuit Court, Congress, on July 13,

IN6G, passed an act which provided that no suit shall be

instituted im any Court unless an appeal is first made to

the Conimussioner of Internal Revenue for a return of the

amount illegally collected. The suit was called for trial in

June, IS67, and on the basis of the admitted fact that no

appeal had been made to the Commissioner, the Circuit

Court dismissed the case. Hubbard then on August 9, S67,

sued the collector ino imdebitatus assumpsit in the State

Court of Connecticut without first having appealed to tie

Commissioner of Internal Revenue. Hubbard contended

that ne such appeal was necessary in his case for the reason

that he had acquired a vested right to bring the suit without

appealing to the Commissioner of Internal Revenue. This

Court held that Hubbard could not bring the suit without

having first appealed to the Commissioner in view of the Act

of July 13, 1S66.

In the Rock Island ease the claimant had filed an abate-

ment elaim against certain proposed taxes. The Commis-

sioner of Internal Revenue rejected the abatement claim

and required payment of the tax. The claimant then

brought suit on the rejected claim without appealing to the

Commissioner of Internal Revenue after payment of the tax.

This Court held that the claimant had not complied with the

conditions of the remedy and could not maintain its suit

because it had not appealed to the Commissioner of Internal

Revenue for a refund after payment of the tax.

The above eases clearly apply only to a compliance of

the conditions of the remedy. As already pointed out the

record in this ease clearly shows that the respondent has

complied with all of the conditions of the remedy. If it

had failed to file its claim for refund within the proper time

or if it had failed to lodge its suit in the Court within two

19

years of the time of the rejection of the claim for refund,

it would not be before this Court prosecuting this action,

The petitioner has confused rights with remedies and has

cited law in support of the latter to sustain the former. As

was said by this Court in Chelentis vs. Luekenback S. 3.

Company, 247 U. 8. 384:

“The distinction between rights and remedies is

fundamental. A right is a well founded or acknowl-

edged claim; a remedy is the means employed to.

enforee a right or redress an injury.”

And in the ease of Ettor rs. Tacoma, 228 U.S. at pp.

155, 156 and 158, this Court said:

-“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 change and alteration,

and even repeal, provided the legislation does not

operate to impair a contract or deprive one of a vested

property right. If the changing or repealing statute

leaves the parties a substantial remedy, the legislature

does not exceed its authority. Rights and remedies

shade one into the other so that it is sometimes

difficult to say that a particular act creates a right

or merely gives aremedy. So also a statute, under the

form of taking away or changing a particular remedy,

may take away an existing property right, or inpair

the obligation of a contract. . . . The right to

compensation was a vested property right.”’ (Italies

supplied.)

See also the ease of Smallwood vs. Gallardo, 275 U. 8.

56; 48 S. Ct. 23.

While, therefore, Congress has power to legislate with

respect to the remedy, it can not legislate to defeat a vested

property right which is something separate and distinct from

a remedy. And im the Ettor case, supra, this Court said

that a statute obstensibly affecting the remedy could not be

sustained “if it deprives one of a vested property right.”

EP ce eee cere er ures. —— 2 ARR Ar gO * a —,

a .

20

Chief Justice Marshall in the case of Marbury vs.

Madison, 1 Cranch, 137, said:

_“To take away all remedy for the enforcement of

a right is to take away the right itself. But this is

not within the power of the State.”’

It is submitted, therefore, on the basis of the decisions

of this Court, supra, any attempt on the part of Congress

by Sections 611 or 612 of the Revenue Act of 1928 to deprive

the respondent of the rights which accrued to it under Section

1106 of the Revenue Act of 1926 is unconstitutional and

void for the reason that it violates the Fifth Amendment.

V.

SECTION 611 OF THE REVENUE ACT OF 1928 DID

NOT WITHDRAW THE CONSENT OF THE UNITED

STATES TO BE SUED BY THE RESPONDENT.

The petitioner contends that by Section 611 of the

Revenue Act of 1928 Congress withdrew the consent of

the United States to be sued by the respondent. It is not

clear to the respondent upon what basis the petitioner sup-

ports its contention. The word “Court”? does not appear

in Section 611 and there is no statement in that section

to the effect that the right of the respondent to sue has

been curtailed. The jurisdiction of the Court of Claims

to entertain the suit of the respondent 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 con-

troversy. Dooley vs. United States, 182 U. S. 222; United

States vs. Emery, Bird, Thayer Realty Company, 237 U. 8.

28. The respondent acquired its right to bring the suit

in connection with Section 3226 of the Revised Statutes as _

amended. Whenever Congress intended to change or modify

an

21

the provisions of Section’$226 of the Revised Statutes it

specifically referred to that section and set forth the particu-

lars in which it was amended, See Revenue Act of 1921,

Chap. 136, Sec. 1318, 42 Stat. 315; Revenue Act of 1924,

Chap. 234, See. 1014, 43 Stat. 343; Revenue Act of 1926,

Chap. 27, Sec. 1113, 44 Stat. 9.

Certainly if Congress by any provision of the Revenue

Act of 1928 intended to amend Section 3226, specific reference

would have been made to that 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 that act. It will be noted that specific reference

is made to these sections of the revised’statutes and amend-

ments enacted in connection therewith. If Congress intended

to amend Section 3226 it would have appeared specifically

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 Govern-

ment against its citizens, and when that consent has become

a matter of settled law, certainly the courts will not by

impheation determine such consent to have been withdrawn.

Section 611 of the Revenue Act of 1928 is 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 it

clearly indicates an intent merely to apply to the powers

of the Commissioner of Internal Revenue.

The Circuit Court of Appeals for the Eighth Cireuit

in the case of Christie-Street Commission Company vs.

United States, 136 Fed. 326, announced the prevailing

rule when that Court, speaking through Judge Sanborn,

said:

“The Acts of 1855 and 1887 here under con-

sideration mark a rational and gratifying advance in

civilization and public policy, and they should be

liberally construed to accomplish the benign purpose

of their enactment. The theory that a nation or

its government should refuse to submit its contro-

De eee ee ee . 5 —_ s ~ . ~ a

22

versies with its citizens to the adjudication of impartial

tribunals is but the fast receding echo of the rule

that the king ean do no wrong. There are few more

grievous wrongs than the denial by a nation of a hearing

and trial of ihe just claims which its citizens may have

against it. There is no reason why a Government

should not submit its controversies with its subjects

to adjudication or why it should not itself practice

that justice whose administration Is the great purpose

of its existence. Justice demands, and a wise public

policy requires, that nations should submit themselves

to the judgments of impartial tribunals, to the enforce-

ment of “their contracts and to satisfaction of their

wrongs as universally as individuals. The decisions

of the Supreme Court upon the specifie question before

us evidence a constantly imereasing tendency to

adopt this view.”’ (Italies supplied.)

Phi doctrine was reaffirmed in Emery, Bird, Thayer

Realty Company rs. United States, supra.

In Marbury vs. Madison, supra, Chief Justice Marshall

said:

“The Government of the United States has been

emphatically termed a Government of laws and not

of men. It will certainly cease to deserve this high

appellation if the laws furnish no remedy for the viola-

tion of a vested legal right.’ (Italies supplied.)

Courts of justice have no jurisdiction to make exceptions

to a statute, nor to add to the exceptions which the legislature

has made, as this would be legislating. Where the language

of an act is explicit, it is not for the court to change it by

construction based upon some supposed legislative policy.

It is not for the court to say that it shall be so construed

as to embrace 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 obyed.

Vol. 4, Eney. of U. 8. 8S. Ct. Reps., p. 228.

United States et al. vs. Missouri Pac. R. Co., 49 8S. Ct.

133; 278 U.S. 269.

23 .

The rule was tersely stated in United States vs. Hartwell,

6 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 con-

templated by those who obtained the act and very probably

not intended by the Legislature which enacted it.

The King vs. The Commissioners, 5 A. and E. 84

S16.

See, also, United States vs. Lexington Mill Co., 232

U.S. 399, 34.8 . Ct. 33/7, 58 L. Ed. 658, L.'R. A.

1915B, 774. /

Caminetti vs. United States, 242 U. 470, 485, 37

Ss. Cta 192, 61 L. Ed. 442; L. R. “ 1917F, 502

Ann. Cas. 1917B, 1168.

It is submitted that under the most liberal construction

Scehion 611 of the Revenue Act of 19628 ean not be construed

to be a withdrawal by the Government of its consent to be

sued.

Furthermore, the respondent contends that under the

ict. as found in this ease, an act of Congress attempting

‘o ceprive the respondent from recovering its property

would in itself offend the Constitution in that it would result

in x taking of the property of the respondent without due

process of law. Nor does this contention offend the general

preposition that a Government can prescribe the conditions

incer which it may be sued. Congress has prescribed the

conditions under which it may be sued in this ease and as

already stated the respondent has fully and completely

complied with all of these conditions. The question then

ix: if the Government has given its consent to be sued and

a?

24

eevinin vested rights have been aequired, the ive-ting of

witel) would offend the Constitution, ean Congress defest

the protection sfforded by the Constitution by completely

withdrewing all redress? If this question is answered in the

affirm stuive then the -uppo-ed guarantees in our social compact

beeotve a hollow myth and the efforts of our enunent jurists

who have mearnsii our principles of constituuonal law

have been im van

In the enve at Langford rs. United States, LOL U.S. 341,

this Court said:

4

“As applicable to the Government, or any of its

offieers, the maximum that the king cangdo no wroug

has no plaee in our system of constitutional law.”

And in the ease of Brushaber rs. Union Paciffe KR.

Company, 240 U.S. at pp. 24-25, this Court, speaking

through Chief Justice White, said:

“So far cas the due process clause of the Filth

Amendment is relied upon, it suffices to say that

there is no ba-is for such reliance sinee it is equally

well se(tled that such clause is not a limitation upon

the taxing power conferred upon Congress by the

Con:tituticn; in other words, that the Con- —

does not confliet with iteelf by conferring upon the one

hand a taxing power and taking the sane power ay

on the other by the limitations of the due process

chine. (Citing authorities. )

‘And no change in the situation here would arise

even if it be coneeded, as we think it must be, that

this doctrine would have no application tn a case where

although there was a seeming exercise of the taxing

power, the act complained of was so arbitrary as lo

constrain to the conclusion that it was not the exertion

of taxation but a confiscat?on of property, that is a

taking of the same in violation of the Fifth Amendment.”

(Italics supplied.)

Any statute of Congress which would attempt to pernut

the United Statesto ret: Uunmgroperty which rightfully belongs

to the re. ponder t on the sole basis that the respondent shell

not have it, would, in the words of Chief Justice White be so

‘oil rir: rv vas to eonstrain to the eonehi Oi that it Was not

the exertion of texation but on eonfi-eation of property,

th tT is ou king ot 1: ( Wiie 11 Viol dion of the rifth Amend-

Mik

Furthermore, in the eave of Maeallen Company rs.

Commonwealin of Ma-sachu-etty, 279 U. S. 620; 49 S. Ct.

Ries th ie t itl

Con-titutionsl PrvOVI-1OUS, either operating by

vo ther letter and spirit and enn pot be evaded by

nav legidation whieh seeks to secou:plsh indireetly

Pe ae ‘

. : . . wen

Way OF Bravt or Tnatation are to be eforeed aceccoralng

} | (be - -

hich ean uot be adore direetly.

7

+

bi is sub: ited, therefore, that Section O11 of the Revenue

Act of 1628 ean pot be construed as a withdrawal by the

Uiited States of it~ consent to be sued and furthernore,

any -veh constrnetion would cause the Sceuon to offend the

pal a a ae SURFS PLB

n iifth AIeRaGMeNnt OF The ( Onstitution.

SECTION 612 CF THE REVENUE ACT OF 1928 WHICH

ATTEMPTS 1G REPEAL SECTION 1106 (a) OF

TEE REVENUE ACT OF 1926 AS OF THE DATE

OF ITS ENACTMENT HAS NO EFFECT ON THE

RIGHT OF THE RESPONDENT TO RECOVER.

The petitioner at page 15 et seq. of its brief contends

that any rights which aeerued to the respondent under

“cetion 1106 (a) of the Revenue Act of 1920 were divested

by Section 612 of the Revenue Act of 1928, which attempts

io repeal Scetion T1C6 (a) as of the date of its enaetment.

ihe respondent will show that Seetion 611 had no such effeet.

This Court, in the ease of Meniphis vs. United States,

97 U.&., p. 203, said:

“We do not deny that it is competent for a legis-

lature to repeal an act which when it was passed was

a mere gratuity, Uf while it was in exisience no vested

rights have been acquired under it or in virtue of it.”

(Italics supplied.)

26

In the ease of County of MeCracken vs. Mereantile

Trust Company, $84 Ky. 314; 1 8. W. 585, the Court said:

“A law ean be repealed by the lawgiver but

the rights which have been aequired while it was in

force do not thereby cease. This was the rule of the

civil law and has been strietly adhered to in England,

Where there is no express restriction upon legislative

power.”

This Court in the ease of De Lima vs. Bidwell, 182

U.lS., p. 199, speaking through Mr. Justice Brown said:

“Plainwiffs sue in assumpsit for money which the

collector has in his hands, justly and equitably belong-

ng to thein. To say that Congress could by a sub-

sequent act deprive them of the right to pro-ecute

this netion, would be beyond its power. In any event

it should not be interpreted so as to make it retro-

active.”

To the same effect see the case of Lineoln vs. United

States, 202 U. S., p. 485.

The above principle of law was also announced by

Chief Justice Marshall in the case of Fletcher vs. Peck, 6

Cranch 133; 70 U.S. 75, when he said:

“The principle asserted is that, one legislature

ix Competent to repeal an act which a former legis-

lature Was competent to pass; and that one legislature

can not abridge the powers of a succeeding legislature.

The correctness of this principle so far as respects

general legi-lation can never be controverted. But

if an act be done under a law, a succeeding legislature

can not undo it. The past can not be recalled by the

most obsolute power.’ (Italies supplied.)

And in the case of Frost vs. Corporation Commissioner,

278 U.S. 515; 49 S. Ct. 235, this Court, speaking through

Mr. Justice Sutherland, referred to the case of Davis vs.

Wallace, 257 U. 8. 478, in which it was said:

“An existing statute can not be recalled or re-

stricted by anything short of a constitutional en-

actment.”’

27

The petitioner in its brief calls attention to the faet

that the action in this case was not filed in the Court until

after the Revenue Act of 1928 was passed. The reeord

shows that the elaim for refund was filed with the Com-

missioner of Internal Revenue prior to the pas-age of the

Revenue Aet of 1928. The petitioner in its brief advese

no argument with respect to this question of fact. Nor

could it, for as already pointed out, the repeal of Section

612 could not affect the right. of the respondent and furthers

more in the ease of Crump vs. Guyer, supra, at page 336,

the Court said:

“A failure to exercise a vesied right before the.

passage of a subsequent statute whieh eck- to dive t

it in no wise affects or lessens that right.” Cithog

many Cases.) ;

?

It seems clear that Seetion 612 of the Revenue Act of

Ie2S which attempted to repeal Section 1106 (2) of the

Revenue Aet of 1926 as of the date of its ennetment hed no

eifect on the rights of the repondent.

VII.

SECTION 611 OF THE REVENUE ACT OF 1928 DID NOT

RECREATE ANY LIABILITY THAT HAD BEEN

EXTINGUISHED BY SECTION 1106 a) OF THE

REVENUE ACT OF 1926.

The coneurring opinion below advaneed a separate and

distinet reason why the respondent should recover in. this

action. This opinion made it unnecessary to deterinine the

constitutional law question but it coneluded that the re-

spondent was entitled to recover for the reason that the

repeal of Section 1106 (a) of the Revenue Act of 1926 by

Seetion 612 did not recreate the liability extinguished by the

former section. In the view of the ease taken in the con-

curing opinion the conclusion reached — is undoubtedly

correct. In the ease of MeCulloeh vrs. Maryland, 4 Wheat.

316, Chief Justice Marshall said thai ‘the power to tax

a

28

involves the power to destroy.” Certainly no such potent

power will be imposed by implication, As said in the con-

eurring opinion below:

“Taxes are not imposed by implication and we

ray not hold that a lability fora tax once impored,

on extinguished, is revived or reimposed by a retro-

nective repel of the statute which extinguished the

linbility.

“No language ean be found in any of the pro-

visions of the Revenue Act of 1928 reimposing the

tux or reerenting the Hebility. therefor whieh tad

been extinguished by Seetion T1006) Gu of the 1926

Aet.”

In the very recent ease of Crooks rs. Harrelson et al.

No. 24. October Term, 1630, decided by this Court) on

November 24, 19830, Justice Sutherland announced — the

following rule:

“Finally. the facet must not be overlooked that we

are here coneerned with a taxing set, with regard

to whieh the general rule requiring adherence to the

letter applies with peeuliar stricteess. In United

States rs. Merriam, 263 U. 8. 179, US87-188,_ after

saving that ‘in statutes levying taxes the literal

meaning of the words employed is rost Important

for sueh statutes are not to be extended by jiupl-

ention beyond the clear import of the Linguage us sed,’

we quoted with approval id words of Lord Cairns

in Partington rs. Attorney-General, LD. Re 4 He 7.

1GQ, 122, that ‘if the Crown, pone e to reeover the

tex. eam not bring the subject within the letter of

the law, the subjeet is free, however apparcitly

Within the -pirit of the how, the ease might otherwh °

appear to "a In other word., if there be ndibss th

in any -tatute, What is called an equitable con truction,

certainly -ueh a eonstruetion is not adiussible in a

taxing statute, where you enn simply adhere to the

words of the statute.’

When we — with strictness to the lotter of the

law it is quite apparent that nothing in Seetion OTE and Se ion

612 of the Revenuy Aet of 128 reevented any Habiltty that

4

A GS aie

29

had been extinguished by Section 1106 (a) of the Revenue

Act of 1926.

VIII.

THE LEGAL PRINCIPLES ESTABLISHED BY THE

CASES OF UNITED STATES vs. HEINSZEN, 206

U. S. 370; RAFFERTY vs. SMITH, BELL & COM-

PANY, 257 U. S. 226, AND CAMPBELL vs. HOLT,

115 U. S. 620, DO NOT APPLY TO THE CASE OF

THIS RESPONDENT.

The petitioner in its brief stresses the above cases to

sustain its position that Congress by the Revenue Act of

1928 had authority to reimpose the liability which had been

extinguished by Section 1106(a) of the Revenue Act of 1926.

It is submitted that the principles announced in the above

eases have no application to the ease of this respondent.

The cases of United States vs. Heinszen and Rafferty vs.

Smith, Bell & Company merely raised the question of the

right of Congress to pass an act legalizing and ratifying

the imposition and collection of duties by the authorities

of the United States in the Philippine Islands prior to the

passage of the aet. The only question of constitutional

inw involved in this issue was whether or not Congress

could pass a law imposing a tax or a duty retrosetively.

There is no doubt but that Congress has sueh power. How-

ever, the applieation of Section 611 of the Revenue Act

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

spondent from recovering, presents an entirely different

question of constitutional law. The Act under considera-

tion in the Heinszen and Rafferty cases created an original

liability retroactively. On the basis of the argument of the

Government, Section 611 of the Revenue Act of 1928 did

not result in the creation of an original liability but would

be an attempt to reereate a liability that had been created

by a prior revenue act, which liability had been completely

extinguished by Section 1106(a) of the Revenue Act of 1926.

The vear involved in this action is the fiscal vear ended

November 30, 1918. The Revenue Act of 1918 was passed

30

on February 24, 1919, and was made to apply retroactively

to the vear 1918. The respondent has raised no complaint

about the Revenue Act of 1918 on the basis that it applied

retroactively to include income accrued in the year I9I1S8.

If it had, the petitioner would have a complete answer

by eiting the Heinszen and Rafferty cases. However, it is

submitted that this is the fullest extent to which the law

in these cases can be applied.

This distinction is clearly shown by this Court in the

ease of Forbes Boat Line rs. Commissioner, 258 U. 8. 338,

339. 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 pre-

vailed below was based on the supposed analogy of

United States vs. Heinszen & Co., 206 U. S. 370;

(Rafferty vs. Smith, Bell & Company, 257 U. 3.

226), which held that Congress could ratify the

collection of a tax that had been made without au-

thority of law. That analogy, however, fails. A tax

may be imposed in respect of past benefits, so that if

instead of calling it a ratification Congress had pur-

ported to impose the tax for the first time the enact-

ment would have been within its power. Wagner

vs. Baltimore, 239 U. 8S. 207, 216, 217. But generally

ratification of an act is not gocd if attempted at a

time when the ratifying authority could not lawfully

do the act.”

The case of Campbell vs. Holt, supra, involved the

breach of a common law liability on a contract. This Court

held that the expiration of the bar of limitations applied to

the remedy only and did not extinguish the liability. Con-

sequently, subsequent legislation affecting the remedy did

not deprive the cititizen of his property without due process

of law. It is quite apparent that the principle in the case

of Campbell vs. Holt does not apply to the case of this

respondent for the reason that its liability had been com-

pletely extinguished by Section 1106(a) of the Revenue

31

Act of 1926. The Court recognized the distinction in the

ease of Eberhart vs. United States, 204 Fed. 890, when it

sald:

“They (statutes of time limitation that not only

bar the remedy but extinguish the liability) are

excepted from the rule announced in Campbell vs.

Holt, 115 U. S. 628; 6 Sup. Ct. 209; 21 L. Ed. 483,

to the effect that the right to defeat a just personal

debt. for a common law liability, in that case for a

conversion of the plaintiff's money, is not a vested

right, which the legislature may not overthrow at

pleasure by extending the time for collecting it.”’

As far as the respondent can find no case in which the

facts are similar to those in its case have been decided in

favor of the Government. In fact, there does not appear

to have been a dissenting opinion in any case. Decisions

have been rendered against the Government on similar facts

in the following cases:

a “ig Co. vs. Schwaner, 35 F. (2d) 197 (S. D.

Clinton. Iron & Steel Co. vs. Heniner 30 F. (2d)

542 (W. D. Pa.).

Erie Coak & Coke Co. vs. Heiner, 33 F. (2d) 135,

(W. BD, Pa.).

wes — Co. vs. Heiner 39 F. (2d) 643 (W. D.

a.).

Dobbins vs. Comm. 31 F. (2d) 935.

Heiner vs. Erie Coal & Coke Co. 42 F. (2d) 214

(C. C. A. 3rd).

Wettengel vs. Robinson, 289 Pa. 525; 136 Atl. 673

(Sup. Ct. Penna.).

Southern Lumber Co. vs. U. S. (W. D. Ark.) not yet

reported. See Commerce Clearing House Tax

Service 1930, Vol. 3, page 8962.

The respondent particularly wishes to call the attention

of this Court to the Wettengel decision by the Supreme

Court of Pennsylvania in which that Court in a well-reasoned

opinion held that the provisions of the Revene Act of 1928

32

had no effect upon the liability that had been extinguished

by Section 1106(a) of the Revenue Act of 1926. The Court

clearly distinguished the rule found in the case of Campbell

vs. Holt.

CONCLUSION.

In conclusion the respondent contends that upon the

law as developed by this and other Courts the judgment

of the Court of Claims in its case should be sustained.

Respectfully submitted,

FRANK J. ALBUS,

National Press Bldg.,

Washington, D. C.

Attorney for Respondent.

Of Counsel:

WILLIAM MEYERHOFF,

Washington, D. C.

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