Petition for a Writ of Certiorari — Katzberg v. United States

CHARLES £1

SUPREME COURT OF THE UNITED=SPATES—2~

OCTOBER TERM, 1940

No. 1075 °'7

SAMUEL J. KATZBERG, LOUIS HAIG ann JACOB F.

SCHMITT,

Petitioners,

vs.

THE UNITED STATES.

PETITION FOR WRIT OF CERTIORARI TO THE

COURT OF CLAIMS AND BRIEF IN SUPPORT

THEREOF.

Davin STECKLER,

Counsel for Petitioners.

INDEX.

Susgect Inpex.

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Petition for writ of certiorari ...:................

I Se a ne, fe cettgas

RNIN WN a ney ewes

Reasons for allowance of writ.................

Re ee ee ae cei

Priel in eupmert at peiiion ...-.. 22.2...

Se I ee a ee eer ey te

Statutory provision believed to sustain juris-

IN tg uP cane ome errr eet ooo CAS

Date of judgment sought to be reviewed .......

WN I he eu ao:

lll sell peed

ooowofo CUDA QNW-

MA. 5 os ke ee Ol hhh a

I. The contract alleged in the petition was

not void for want of definiteness. . .

II. Even if the contract is too indefinite

for enforcement because it is lacking

in the amount to be paid, petitioners

are entitled to recover upon a quan-

Tt a sh a eek 14

III. The matter of payment of rewards to

informers does not lie in the favor

of the Government, but is compensa-

tion for value of services rendered. . 15

IV. The Court of Claims has jurisdiction of

a contract implied in fact, and it is

immaterial that the petition did not

proceed on the theory of a quantum

I ie irc ce aes 16

V. The petition below sets forth sufficient

grounds entitling the petitioners to

relief against the defendant........ 17

rary

Oo

TaBLE or Cases CITep.

Bluemer v. Garvin, 120 App. Div. 29............... 14

Bryant v. Flight, 5 M. & W.114................... 13

Butler v. Winona Mill Co., 28 Minn. 205, 9 N. W.

NE cance aes Veen LEE dees Bee 13

Chesapeake & Ohio R. R. Co. v. Knapp, 34 U. 8. (9

POS NaS S so eee A eee eG 16

—4470

i PURE EMER LD ELIE EL EGE SLR LEP LA LLL IVETE LLP ERLE

ii INDEX

oes re eC ay kta Sede» 17

Lockhart v. Hamlin, 190 N. Y. 132............-.--. 16

N. Y.C. 4 H.R. R. Co. v. Gray, 239 U.S. 583........ 14

Phoenix Sec-rity Co. v. Dittmar, 224 Fed. 892... . 16

Plattenberg v. Briggs, 166 App. Div. 326........... 14

Hood, Be warts, 100. &. O0.. . 0... 5-0-5. 10

Rubin v. Cohen, 129 App. Div. 395................. 16

Shirk v. Brookfield, 77 App. Div. 295............... 16

Sussdorf v. Schmidt, 55 N.Y. 319.................. 16

Tennant v. Fawcett, 55 S. W. 611.................. 13

United States v. Moorehead, 243 U.S. 607.......... 10

Von Reitzenstein v. Tomlinson, 249 N. Y.60........ 13

Waters v. Guile, 234 Fed. 532, 148 C. C. A. 298..... 17

Wi. » v. Warner, 186 App. Div. 710............... 14

Wenon v. Amos, Zoo U. B. Bis ........- esse: 14, 15

Wood v. Duff-Gordon, 222 N. Y. 88................ 12

Srarutes CItTep.

Act of Congress, March 3, 1887, Ch. 399, See. 1, 24

Se ei cee re Chak Waal 16

Act of Congress, March 3, 1911, Ch. 231, See. 145,

I ee is ve Aaa on Os 16

Act of Congress, March 3, 1921, 41 Stat. 1274....... 16

Act of February 13, 1925, See. 3(b), 43 Stat. 939... 9

Act of Congress, March 15, 1934, Ch. 70, pages 430-1 12

Revised Statutes, Sec. 3463................ 2, 6, 10, 15, 19

Tome Be ae Be ee UP... og eee. 6, 19

7, MC eee a ee wo ee eee. 2

MISCELLANEOUS.

Internal Revenue Regulation No. 99—5th Revision

(Department Circular No. 147 of 1899).......... 2, 10

ee in ic hve ey Cesc eee els 11

ee Oy near i 11

ee I I I re Pen ede eee cede 15

ee ee een ere ere 15

26 Dec. Compt. of the Treasury 531, at page 532.... 15, 18

Restatement of the law of Contracts, Sees. 265, 794. 14

III Williston on Contracts, 1937 Revised Ed. Sec.

I ee Bote aera sks was an hes 14

REP EELS ELIE PTI GLE YI OO SLES EER LINTON LIN LE SLL EL OLE LIE OA

MES capa © heen

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1940

No. 1075

SAMUEL J. KATZBERG, LOUIS HAIG ano JACOB F.

SCHMITT,

Petitioners,

vs.

THE UNITED STATES.

PETITION FOR WRIT OF CERTIORARI TO THE

COURT OF CLAIMS OF THE UNITED STATES.

To the Honorable the Supreme Court of the United States:

The petition of Samuel J. Katzberg, Louis Haig and

Jacob F. Schmitt, respectfully shows:

1. They are citizens of the United States and reside in

the City and State of New York.

2. This petition seeks a review of a decision of the Court

of Claims of the United States, sustaining a demurrer by

the defendant to a petition filed by the petitioners in that

court for the recovery of a reward offered by the Commis-

sioner of Internal Revenue, and ordering the dismissal of

the petition.

3. The ground upon which the petition was dismissed was

that it did not set forth facts furnishing any ground of re-

lief against the United States, in that the offer of reward

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did not state a definite sum offered by the defendant, and

therefore no contract arose from the offer of reward and ~

the giving of the information by the petitioners. The de-

cision was filed March 3, 1941, and is reported in Case No.

45,289 March 3, 1941 (91 Ct. Cls. —).

Statement.

4. The petitioners in the court below alleged that they

were entitled to recover from the defendant compensation

in excess of $5,000 for furnishing information to the defend-

ant which led to the detection and punishment of Isidore

Goldberg and others named in the petition, for violating

the Internal Revenue laws, and the recovery by the defend-

ant of a sum in excess of $50,000 in income taxes of which

the treasury was defrauded.

5. The statute under which the reward was offered is

Section 1242 of Title 26 of the United States Code, Section

3463 Revised Statutes, reading as follows:

‘“‘The Commissioner of Internal Revenue, with the

approval of the Secretary of the Treasury, is author-

ized to pay such sums, not exceeding in the aggregate

the sum appropriated therefor, as he may deem neces-

sary for detecting or bringing to trial and punishment

persons guilty of violating the Internal Revenue laws,

or conniving at the same, in cases where such expenses

are not otherwise provided by law.’’

6. Pursuant to said statute the Commissioner of Inter-

nal Revenue promulgated Department Circular No. 147 of

1899, known as ‘‘Internal Revenue, No. 99-5th Revision.’’

Its material parts are as follows:

‘Rewards for information leading to the Detection

and Punishment of Persons violating the Internal Reve-

nue Laws:

‘‘Under and by virtue of the provisions of Section

3463 of the Revised Statutes of the United States, which

TENSEI AO POLIS _ PSTN SAS

3

authorize the Commissioner of Internal Revenue, with

the approval of the Secretary of the Treasury, to pay

such sums as he may deem necessary, not exceeding in

the aggregate the sum appropriated therefor, for de-

tecting and bringing to trial and punishment persons

guilty of violating the internal revenue laws, or conniv-

ing at violations of the same, in cases where such ex-

penses are not otherwise provided for by law, I do

hereby, with the approval of the Secretary of the

Treasury, offer for information given by persons other

than officers of internal revenue, or persons appointed

or employed in, or acting in connection with, the In-

ternal Revenue Service, that shall lead to the detection

and punishment of persons guilty of violating the inter-

nal revenue laws, or conniving at the same, whether

such punishment be by fine or other pecuniary mulect or

penalty, or by forfeiture of property, such reward as

the Commissioner of Internal Revenue may deem suit-

able, but in no case exceeding 10 percent of the net

amount of fines, penalties, forfeitures, and taxes, which

by reason of said information shall be recovered by suit

or otherwise and actually paid to the United States, or

of any sums which shal! be accepted in compromise by

the Commissioner of Internal Revenue and received by

the United States.

‘<The rewards hereby offered must be understood to

be limited in their aggregate to the sum appropriated

therefor.

* * . * * * +

‘*Claims for reward under the provisions of this cir-

cular should be made on Form No. 211, which will be

furnished by Collectors of Internal Revenue on request

therefor.

D. H. Buarr,

Commissioner.

Approved,

A. W. MELLon,

Secretary of the Treasury.’’

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SEPP I REL REMMI Ye BREE LIM SE CIM TSE SRE UI EME

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7. It is to be noted that Section 3463 of the Revised Stat-

utes does not authorize or empower the Commissioner of

Internal Revenue to fix a maximum of compensation, nor

that the same shall be based upon any recovery of fines,

penalties, forfeitures or taxes, which by reason of the in-

formation furnished might be recovered by the Commis-

sioner, except that it fixes the limit as ‘‘such sums, not ex-

ceeding in the aggregate the sum appropriated therefor, as

he may deem necessary’’.

8. By Act of Congress of March 15, 1934, Congress ap-

propriated to the Bureau of Internal Revenue $100,000 for

the year ending June 30, 1935, to pay ‘‘for detecting and

bringing to trial persons guilty of violating the internal

revenue laws, including payments for information leading

to the detection of such violators’’.

9. The petition, after setting forth the statute and the

substance of the circular, alleged that for some years prior

to 1934, Isidore Goldberg and two of his companies were

engaged in the wholesale millinery business and were im-

porting merchandise, and that in making these importations

were engaged in cheating and defrauding the defendant out

of its customs and internal revenues to the defendant’s

detriment in large and substantial sums; that on November

27, 1934, the petitioners gave original information to a

customs officer at New York and to the Secretary of the

Treasury of these frauds on the customs, and that at their

request and in the due course of his procedure, a customs

officer at the same time notified the Internal Revenue office

of the frauds with the view of investigating the same; that

in January 1935, the petitioners orally and in writing again

advised the customs officers and the Intelligence Bureau of

the Collector of Internal Revenue in New York, that the

importers had not only been guilty of frauds on the customs,

but that in order to cover up such frauds lad committed

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frauds upon the internal revenues of the defendant. The

petition specifically referred to the income tax returns filed

by I. Goldberg, Ine. for the years 1932 and 1933, I. Goldberg

& Sons for the years 1933 and 1934, and Eigee Millinery

Corp. and I. Hihner (R. 2-3).

10. The petition also alleged that the information thus

given led to the recovery by the defendant of customs duties

unlawfully withheld, by reason of which the petitioners filed

a claim for reward under See. 619 of the Tariff Act of 1930,

which claim was allowed and partly paid by the Secretary

of the Treasury; that the information so furnished to the

defendant’s officers also led to the detection and punish-

ment of the persons guilty of violating the Internal Revenue

laws and to the recovery of fines, penalties, forfeitures and

taxes; that among the sums so recovered was the sum of

approximately $50,000 received by transfer from the Col-

lector of Customs to the Commissioner of Internal Revenue

of refunds of customs duties to which such importers were

entitled to receive from defendant (R. 3).

11. The petition also alleged that about January 18, 1937,

petitioners made claim for the reward offered by the Com-

missioner of Internal Revenue; that the Commissioner of

Internal Revenue disallowed and rejected the claim without

notice or hearing, despite the fact that petitioners’ claim

for customs reward had been allowed; and that such dis-

allowance and rejection were arbitrary and capricious.

12. Notwithstanding the fact that the circular letter of

the Commissioner of Internal Revenue offered a sum not

‘“exceeding 10%’’of any recovery actually paid to the United

States, the Court below determined that ‘‘no definite or

ascertainable sum was offered, and therefore no contract

arose from the offer of reward and the giving of informa-

tion by plaintiffs.’’ Its decision was based upon a prior

PRS NEL RENE HEMEL Te TPMT R RR, | CRE aK te? ihe

6

decision made by the Court below in the case of Abraham L.

Gordon, Case No. 45170, decided by the Court of Claims

February 3, 1941 (91 Ct. Cls. —), where the precise ques-

tion was presented.

Questions Presented.

13. The questions presented are:

(a) Whether the contract was void for want of definite-

ness in failing to state a definite sum offered by way of

reward?

(b) Whether the petitioners were not entitled to recover

upon quantum meruit for their services even if the con-

tract was lacking in definiteness?

(c) Whether the petition below sets forth sufficient

grounds entitling the petitioners to relief against the

respondeiut?

Reasons for Allowance of Writ.

14. The reasons relied on by petitioners for allowance of

the writ are as follows:

(a) The policy of the Treasury Department from time

immemorial has been to offer rewards for the detection and

punishment of violators of the customs and internal revenue

laws in order to encourage informers to aid the government

in protecting its revenue, and in the case of the customs a

specific reward of 25% of the amount recovered is pro-

vided for in tariff acts running back many generations, the

latest of which is the Tariff Act of 1930 (Sec. 619). In the

ease of internal revenue, the statute (Sec. 3463 Revised

Statutes) does not specify any particular sum, leaving it to

the Commissioner, with the approval of the Secretary of

the Treasury, to pay rewards not exceeding the sum appro-

priated by Congress therefor. However, the Commissioner

ee AT EEE Qa ESN SOV ROMINA RROI AY SAT ANC lel" LAREN IONE LT NES AIAN NEN, SPS SMG ONLY ABO IE EEA

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of Internal Revenue, instead of fixing the reward in a spe-

cific sum, stated in his circular letter that it shall be such

sum as he shall deem suitable, ‘‘in no case exceeding 10%

of the net amount of fines, penalties, forfeitures and taxes

* * * recovered by suit or otherwise and actually paid to

| the United States.’’

(b) The Commissioner of Internal Revenue for more

than fifty years has generally paid the maximum of 10%,

and the public at large has so understood the circular. Cer-

| tainly the public has understood the Commissioner’s cireu-

lar letter to mean that a reward would be paid for informa-

tion furnished to him by the informer, and that he would

not, after receiving the information, tell the informer that

the offer of reward was void and unenforceable for indefi-

niteness.

(c) There are many claims for reward filed with the

Commissioner of Internal Revenue, and on the basis of

the decision of the Court below it is entirely within the

power of the Commissioner to reject them all for indefinite-

ness, notwithstanding the intent of the statute that a re-

ward would be paid.

(d) Were the public in general to know that the statute

and the cireular letter are unenforceable, it would discourage

informers from giving any information to the Government,

and thus deprive the Government of the protection of the

revenues afforded to it by the aid of informers.

(e) The question decided by the Court below was an im-

portant Federal question involving as it does also the

validity of the Commissioner’s regulation, which has the

force of law, and which should be settled by this Court.

(f) The questions here presented have never been passed

on by this Court.

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Wuenrerort, petitioners pray that a writ of certiorari may |

be issued out of, and under the seal of this Court, directed

to the Court of Claims of the United States, commanding

that Cvurt to certify and send to this Court, on a day cer-

tain to be designated therein, a full and complete transcript

of the record of all proceedings of the said Court in this

cause, to the end that the same may be reviewed and deter-

mined in this Court; and that the final order of the said

Court, and every part thereof, may be reviewed and cor-

rected by this Court in conformity with the Constitution

and laws of the United States; and that the said final order

may be reversed and the Court below directed to proceed to

fix and determine the fair and reasonable compensation to

which the petitioners are entitled, not exceeding 10% of

the recoveries made by the United States in connection

with the violations as to which the petitioners’ information

was given; and petitioners pray for such other and further

relief as to this Court may seem just and proper; and peti-

tioners will ever pray.

Dated, New York, N. Y., May —, 1941.

Samvueu J. Karzserc, Louis Hate

and Jacos F.. Scumirtt,

Petitioners,

By Davip STECKLER,

Attorney for Petitioners,

25 West 44th Street,

Borough of Manhattan,

City of New York.

PERRIN RRA In IRE ati 2 En RRR RAI IRS SIN APIA BRE aS ARIS. i.