A-24158, SEPTEMBER 17, 1928, 8 COMP. GEN. 126

A-24158: Sep 17, 1928

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FOR FOR WHICH CERTIFICATES OF PROBABLE CAUSE HAVE BEEN ISSUED. "FROM THE DATE OF THE PAYMENT OR COLLECTION" FOR WHICH A JUDGMENT WAS ENTERED "TO A DATE PRECEDING THE DATE OF THE REFUND CHECK BY NOT MORE THAN 30 DAYS.'. SAME WILL THEREAFTER BE COMPUTED ON THE AMOUNT OF THE JUDGMENT AS PROVIDED IN SAID STATUTE. NO JUDGMENTS AGAINST COLLECTORS OF INTERNAL REVENUE FOR REFUND OF TAXES ERRONEOUSLY COLLECTED MAY BE PAID UNLESS AND UNTIL CERTIFICATES OF PROBABLE CAUSE ARE FURNISHED AS PROVIDED IN SECTION 989 OF THE REVISED STATUTES. IN WHICH REFERENCE IS MADE TO DECISION OF DECEMBER 31. IRRESPECTIVE OF WHETHER SAME ARE INCLUDED IN THE JUDGMENTS AND IRRESPECTIVE OF WHETHER THE JUDGMENTS ARE AGAINST THE UNITED STATES OR COLLECTORS.

A-24158, SEPTEMBER 17, 1928, 8 COMP. GEN. 126

JUDGMENTS - INTERNAL-REVENUE TAX REFUNDS - COSTS - INTEREST - CERTIFICATES OF PROBABLE CAUSE NO COSTS IN JUDGMENTS AGAINST THE UNITED STATES FOR REFUND OF INTERNAL- REVENUE TAXES MAY BE RECOVERED EXCEPT IN THE DISCRETION OF THE COURT, AND THEN ONLY FOR WITNESS FEES AND FEES PAID THE CLERK AS PROVIDED IN SECTION 152 OF THE JUDICIAL CODE OF MARCH 3, 1911, 36 STAT. 1138. COSTS RECOVERED IN JUDGMENTS AGAINST COLLECTORS OF INTERNAL REVENUE, FOR FOR WHICH CERTIFICATES OF PROBABLE CAUSE HAVE BEEN ISSUED, MAY BE PAID WHEN UNDER THE JUDICIAL PROCEDURE OF THE PARTICULAR JURISDICTION COSTS FOLLOW THE JUDGMENT. INTEREST ON JUDGMENTS AGAINST EITHER THE UNITED STATES OR COLLECTORS OF INTERNAL REVENUE FOR REFUND OF TAXES ERRONEOUSLY COLLECTED MAY BE ALLOWED BY THE COURT UNDER SECTION 615 OF THE ACT OF MAY 29, 1928, 45 STAT. 877, ON AND AFTER JULY 29, 1928,"FROM THE DATE OF THE PAYMENT OR COLLECTION" FOR WHICH A JUDGMENT WAS ENTERED "TO A DATE PRECEDING THE DATE OF THE REFUND CHECK BY NOT MORE THAN 30 DAYS.' SUCH JUDGMENTS SHOULD SHOW THAT THEY BEAR INTEREST, AND SAME WILL THEREAFTER BE COMPUTED ON THE AMOUNT OF THE JUDGMENT AS PROVIDED IN SAID STATUTE. NO JUDGMENTS AGAINST COLLECTORS OF INTERNAL REVENUE FOR REFUND OF TAXES ERRONEOUSLY COLLECTED MAY BE PAID UNLESS AND UNTIL CERTIFICATES OF PROBABLE CAUSE ARE FURNISHED AS PROVIDED IN SECTION 989 OF THE REVISED STATUTES.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE TREASURY, SEPTEMBER 17, 1928:

THERE HAS BEEN RECEIVED YOUR LETTER OF AUGUST 15, 1928, IT:C:-CC ECW, IN WHICH REFERENCE IS MADE TO DECISION OF DECEMBER 31, 1925, AND RECONSIDERATION THEREOF DATED FEBRUARY 29, 1928, TO THE EFFECT THAT (1) JUDGMENTS AGAINST THE UNITED STATES FOR REFUND OF INTERNAL-REVENUE TAXES SHOULD BE FORWARDED TO THIS OFFICE FOR SETTLEMENT IN ACCORDANCE WITH THE ACT OF FEBRUARY 18, 1904, 33 STAT. 41; (2) JUDGMENTS AGAINST COLLECTORS FOR REFUND OF SUCH TAXES SHOULD BE PAID, WHEN A CERTIFICATE OF PROBABLE CAUSE HAS BEEN ISSUED, TOGETHER WITH INTEREST AND COST OF SUIT BY THE COMMISSIONER OF INTERNAL REVENUE UNDER THE AUTHORIZATION GIVEN HIM BY THE SECOND DIVISION OF SECTION 3220, REVISED STATUTES, AS AMENDED; AND (3) JUDGMENTS AGAINST COLLECTORS BY REASON OF ANYTHING DONE BY THEM NOT INVOLVING REFUND OF TAXES SHOULD BE SUBMITTED TO THIS OFFICE FOR CERTIFICATION TO CONGRESS. YOU NOW REQUEST DECISION (A) WHETHER THERE MAY BE APPROVED FOR PAYMENT INTEREST AND/OR COSTS, IRRESPECTIVE OF WHETHER SAME ARE INCLUDED IN THE JUDGMENTS AND IRRESPECTIVE OF WHETHER THE JUDGMENTS ARE AGAINST THE UNITED STATES OR COLLECTORS; AND (B) WHETHER JUDGMENTS AGAINST COLLECTORS FOR REFUND OF INTERNAL-REVENUE TAXES MAY BE PAID WHEN NOT SUPPORTED BY CERTIFICATES OF PROBABLE CAUSE.

WITH RESPECT TO THE MATTER OF COSTS IN SUITS AGAINST THE UNITED STATES, YOU REFER TO THE GENERAL RULE THAT COSTS FOLLOW THE JUDGMENT IN LITIGATION BETWEEN PRIVATE PARTIES. HOWEVER, THE RULE IS DIFFERENT WHERE THE UNITED STATES IS CONCERNED. THE LIABILITY OF THE UNITED STATES FOR THE PAYMENT OF COSTS WAS EPITOMIZED BY THE SUPREME COURT OF THE UNITED STATES IN UNITED STATES V. CHEMICAL FOUNDATION COMPANY, 272 U.S. 1, REVERSING THE JUDGMENT OF THE LOWER COURT AGAINST THE UNITED STATES FOR COSTS, AS FOLLOWS:

THE GENERAL RULE IS THAT, IN THE ABSENCE OF A STATUTE DIRECTLY AUTHORIZING IT, COURTS WILL NOT GIVE JUDGMENT AGAINST THE UNITED STATES FOR COSTS OR EXPENSES. UNITED STATES V. HOOE, 3 CRANCH 73, 91, 92; SHEWAN AND SONS V. UNITED STATES, 267 U.S. 86; UNITED STATES V. DAVIS, 54 FED. 147, 152 ET SEQ. BUT THE FOUNDATION INSISTS THAT UNDER EQUITY RULE 50, TAKEN WITH THE CONSENT OF COUNSEL AND THE ORDERS, THE COURT WAS AUTHORIZED TO DIRECT THAT THESE ITEMS BE TAXED AS COSTS AND TO GIVE JUDGMENT AGAINST THE UNITED STATES THEREFOR.

EQUITY RULE 50 IN GENERAL TERMS PROVIDES THAT STENOGRAPHERS' FEES SHALL BE FIXED BY THE COURT AND TAXED AS COSTS, BUT IT DOES NOT SPECIFY COSTS OR JUDGMENT FOR MONEY AGAINST THE UNITED STATES. THE RULE DOES NOT MENTION THE UNITED STATES AND DOES NOT AFFECT THE SOVEREIGN PREROGATIVE NOT TO PAY COSTS. CONGRESS ALONE HAS POWER TO WAIVE OR QUALIFY THAT IMMUNITY. BUT NO STATUTE AUTHORIZES THE GIVING OF JUDGMENT AGAINST THE UNITED STATES FOR THESE ITEMS OR AUTHORIZES THE ATTORNEY GENERAL OR OTHER COUNSEL IN THE CASE TO CONSENT TO SUCH A JUDGMENT. NO SUCH AUTHORITY IS NECESSARY FOR THE PROPER CONDUCT OF LITIGATION ON BEHALF OF THE UNITED STATES, AND THERE IS NO GROUND FOR IMPLYING THAT AUTHORITY. IT FOLLOWS THAT THE DIRECTION FOR JUDGMENT AGAINST THE UNITED STATES FOR COSTS CAN NOT BE SUSTAINED.

THE JURISDICTION OF COURTS TO ENTERTAIN SUITS AGAINST THE UNITED STATES FOR REFUND OF INTERNAL-REVENUE TAXES IS BY VIRTUE OF THE TUCKER ACT OF MARCH 3, 1887, 24 STAT. 505, 508, AS AMENDED BY SECTION 24, PARAGRAPH 20, AND SECTIONS 136 TO 187, INCLUSIVE, OF THE JUDICIAL CODE OF MARCH 3, 1911, 36 STAT. 1093, 1135-1143, AND BY SECTION 1310 (C) OF THE ACT OF NOVEMBER 23, 1921, 42 STAT. 311. SECTION 15 OF THE 1887 ACT AND SECTION 152 OF THE 1911 ACT ARE IN SIMILAR LANGUAGE AS FOLLOWS:

IF THE GOVERNMENT OF THE UNITED STATES SHALL PUT IN ISSUE THE RIGHT OF THE PLAINTIFF TO RECOVER THE COURT MAY, IN ITS DISCRETION, ALLOW COSTS TO THE PREVAILING PARTY FROM THE TIME OF JOINING SUCH ISSUE. SUCH COSTS, HOWEVER, SHALL INCLUDE ONLY WHAT IS ACTUALLY INCURRED FOR WITNESSES, AND FOR SUMMONING THE SAME, AND FEES PAID TO THE CLERK OF THE COURT.

IT IS CLEAR FROM THE EXPRESS LANGUAGE OF THE STATUTE THAT NO COST IN SUITS AGAINST THE UNITED STATES MAY BE ALLOWED EXCEPT IN THE DISCRETION OF THE COURT AND THEN ONLY WHEN THE UNITED STATES HAS PUT IN ISSUE THE RIGHT OF THE PLAINTIFF TO RECOVER AND FOR LAWFUL EXPENDITURES MADE BY THE PLAINTIFF FOR WITNESSES AND FOR SUMMONING SAME AND FOR FEES PAID TO THE CLERK OF THE COURT.

SUITS AGAINST COLLECTORS FOR REFUND OF INTERNAL-REVENUE TAXES WERE ORIGINALLY MAINTAINED ON COMMON-LAW PRINCIPLES. ELLIOTT V. SWARTWOUT, 10 PET. 150; PHILADELPHIA V. COLLECTOR, 5 WALL. 720. THE RIGHT TO MAINTAIN SUCH SUITS WAS SUBSEQUENTLY RECOGNIZED AND REGULATED BY STATUTE. SEE SECTIONS 3226, 3227, AND 3228, REVISED STATUTES. JUDGMENTS IN SUCH CASES ARE NOT AGAINST THE UNITED STATES BUT IT IS PROVIDED IN SECTION 989, REVISED STATUTES, THAT:

WHEN A RECOVERY IS HAD IN ANY SUIT OR PROCEEDING AGAINST A COLLECTOR OR OTHER OFFICER OF THE REVENUE FOR ANY ACT DONE BY HIM, OR FOR THE RECOVERY OF ANY MONEY EXACTED BY OR PAID TO HIM AND BY HIM PAID INTO THE TREASURY, IN THE PERFORMANCE OF HIS OFFICIAL DUTY, AND THE COURT CERTIFIES THAT THERE WAS PROBABLE CAUSE FOR THE ACT DONE BY THE COLLECTOR OR OTHER OFFICER, OR THAT HE ACTED UNDER THE DIRECTIONS OF THE SECRETARY OF THE TREASURY, OR OTHER PROPER OFFICER OF THE GOVERNMENT, NO EXECUTION SHALL ISSUE AGAINST SUCH COLLECTOR OR OTHER OFFICER, BUT THE AMOUNT SO RECOVERED SHALL, UPON FINAL JUDGMENT, BE PROVIDED FOR AND PAID OUT OF THE PROPER APPROPRIATION FROM THE TREASURY.

THE CERTIFICATE OF PROBABLE CAUSE CONVERTS A JUDGMENT AGAINST A COLLECTOR INTO ONE FOR ALL SUBSTANTIAL PURPOSES AGAINST THE UNITED STATES. SEE KLOCK PRODUCE COMPANY V. HARTSON, 212 FED.REP. 758. THE COURT SAID IN UNITED STATES V. SHERMAN, 98 U.S. 567, WITH RESPECT TO A CERTIFICATE OF PROBABLE CAUSE, THAT:

THE ACT OF CONGRESS ENACTS THAT WHEN THE CERTIFICATE OF PROBABLE CAUSE IS GIVEN, THE AMOUNT RECOVERED SHALL, UPON FINAL JUDGMENT, BE PAID OUT OF THE APPROPRIATION FROM THE TREASURY. WHEN THE CERTIFICATE IS GIVEN, THE CLAIM OF THE PLAINTIFF IN THE SUIT IS PRACTICALLY CONVERTED INTO A CLAIM AGAINST THE GOVERNMENT. BUT NOT UNTIL THEN.

SECTION 3220, REVISED STATUTES, AS AMENDED BY THE ACT OF FEBRUARY 24, 1919, 40 STAT. 1145, AUTHORIZED REPAYMENT TO A COLLECTOR OF---

* * * THE FULL AMOUNT OF SUCH SUMS OF MONEY AS MAY BE RECOVERED AGAINST HIM IN ANY COURT, FOR ANY INTERNAL REVENUE TAXES COLLECTED BY HIM, WITH THE COST AND EXPENSES OF SUIT. * * *

THE HISTORY AND DEVELOPMENT OF THE RIGHT OF ACTION AGAINST COLLECTORS FOR REFUND OF TAXES ERRONEOUSLY OR ILLEGALLY COLLECTED, THE PROVISION FOR ASSUMPTION OF LIABILITY BY THE UNITED STATES THEREFOR, AND THE PROVISIONS FOR PAYMENT OF SUCH JUDGMENTS SHOW CLEARLY THAT COSTS WHICH FOLLOW AS A PART OF A JUDGMENT AGAINST A COLLECTOR MAY BE PAID BY THE UNITED STATES, THE COSTS GENERALLY FOLLOWING THE JUDGMENT EITHER BY DIRECTION OF THE COURT OR BY EXPRESS STATUTORY PROVISION OF THE PARTICULAR JUDICIAL JURISDICTION.

THE RULE WITH RESPECT TO INTEREST ON JUDGMENTS FOR REFUND OF TAXES ERRONEOUSLY OR ILLEGALLY COLLECTED, WHETHER THE JUDGMENTS BE AGAINST THE UNITED STATES OR COLLECTORS IS STATED IN SECTION 615 OF THE REVENUE ACT OF MAY 29, 1928, 45 STAT. 877, AMENDING SECTION 177 OF THE JUDICIAL CODE AND PROVIDING, IN PERTINENT PART, AS FOLLOWS:

(B) IN ANY JUDGMENT OF ANY COURT RENDERED (WHETHER AGAINST THE UNITED STATES, A COLLECTOR OR DEPUTY COLLECTOR OF INTERNAL REVENUE, A FORMER COLLECTOR OR DEPUTY COLLECTOR, OR THE PERSONAL REPRESENTATIVE IN CASE OF DEATH) FOR ANY OVERPAYMENT IN RESPECT OF ANY INTERNAL REVENUE TAX, INTEREST SHALL BE ALLOWED AT THE RATE OF 6 PERCENTUM PER ANNUM UPON THE AMOUNT OF THE OVERPAYMENT, FROM THE DATE OF THE PAYMENT OR COLLECTION THEREOF TO A DATE PRECEDING THE DATE OF THE REFUND CHECK BY NOT MORE THAN THIRTY DAYS, SUCH DATE TO BE DETERMINED BY THE COMMISSIONER OF INTERNAL REVENUE.

JUDGMENTS FOR REFUND OF INTERNAL REVENUE TAXES, WHETHER AGAINST THE UNITED STATES OR COLLECTORS, ENTERED ON AND AFTER JUNE 29, 1928, THE DATE THE ABOVE-QUOTED PROVISION BECAME EFFECTIVE, SHOULD CARRY INTEREST AS A MATTER OF COURSE FROM THE DATE OF THE PAYMENT OR COLLECTION WHICH IS RECOVERED IN THE JUDGMENT TO A DATE PRECEDING THE DATE OF THE CHECK IN PAYMENT OF THE JUDGMENT BY NOT MORE THAN 30 DAYS. THE JUDGMENT IN SUCH CASES SHOULD SHOW THE DATE OF PAYMENT OR COLLECTION OF THE TAXES FOR WHICH THE JUDGMENT IS ENTERED AND SHOULD STATE "WITH INTEREST.' THE MATTER THEN IS ONE OF MATHEMATICAL COMPUTATION OF INTEREST ON THE AMOUNT OF THE JUDGMENT FROM THE DATE OF PAYMENT OR COLLECTION TO A DATE NOT LESS THAN 30 DAYS PRECEDING THE ISSUANCE OF THE CHECK IN PAYMENT THEREOF, SUCH DATE TO BE DETERMINED BY THE COMMISSIONER OF INTERNAL REVENUE.

WITH REFERENCE TO THE SECOND QUESTION AS STATED IN THE FIRST PARAGRAPH HEREOF, IT IS SUGGESTED IN THE REQUEST FOR DECISION THAT WHILE THE PRACTICE HAD BEEN TO DEFER PAYMENT OF JUDGMENTS AGAINST COLLECTORS UNTIL AND UNLESS CERTIFICATES OF PROBABLE CAUSE PROVIDED BY SECTION 989, REVISED STATUTES, ARE SUBMITTED, THE PRACTICE SOMETIMES RESULTED IN THE PAYMENT OF INTEREST PENDING RECEIPT OF THE CERTIFICATES OF PROBABLE CAUSE WHICH DID NOT ACCOMPANY THE JUDGMENTS AND IT WAS THOUGHT THAT UNDER THE PRINCIPLES OF UNITED STATES V. FRERICHS, 124 U.S. 315, THE GOVERNMENT COULD WAIVE THE REQUIREMENT THAT A CERTIFICATE OF PROBABLE CAUSE BE SUBMITTED BEFORE PAYMENT BY THE UNITED STATES OF JUDGMENTS AGAINST COLLECTORS. A CAREFUL EXAMINATION OF THE FRERICHS CASE WILL DISCLOSE THAT THE DECISION IN SAID CASE DID NOT HOLD THAT THE GOVERNMENT MAY WAIVE THE REQUIREMENT THAT A CERTIFICATE OF PROBABLE CAUSE BE SUBMITTED BEFORE PAYMENT BY THE UNITED STATES OF A JUDGMENT AGAINST A COLLECTOR. WHILE IN THAT CASE THERE HAD BEEN A JUDGMENT AGAINST THE COLLECTOR IN THE UNITED STATES CIRCUIT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, THE SUIT IN THE COURT OF CLAIMS, WHICH WAS CARRIED TO THE UNITED STATES SUPREME COURT ON APPEAL, WAS NOT FOR THE COLLECTION OF THE FORMER JUDGMENT BUT MERELY FOR THE RECOVERY OF THE VALUE OF PROPERTY SEIZED FOR ALLEGED VIOLATION OF THE INTERNAL REVENUE LAWS AND WAS BASED NOT ON SECTION 989, REVISED STATUTES, BUT ON AN ALLOWANCE OF THE CLAIM BY THE COMMISSIONER OF INTERNAL REVENUE, WITH THE APPROVAL OF THE SECRETARY OF THE TREASURY, UNDER SECTION 3220, REVISED STATUTES, AND THE COURT HELD THAT PAYMENT OF THE AMOUNT THUS ALLOWED TO THE OWNER OF THE PROPERTY SEIZED WAS AUTHORIZED.

IT IS ONLY BY THE CERTIFICATE OF PROBABLE CAUSE, AS HELD IN UNITED STATES V. SHERMAN, SUPRA, THAT LIABILITY FOR A JUDGMENT AGAINST THE COLLECTOR MAY BE SHIFTED TO THE UNITED STATES AND SECTION 989, REVISED STATUTES, DOES NOT CONTEMPLATE THAT LIABILITY FOR SUCH JUDGMENTS SHALL BE ASSUMED BY THE UNITED STATES IN THE ABSENCE OF A CERTIFICATE OF PROBABLE CAUSE. THIS PROCEDURE MAY NOW BE ADMINISTRATIVELY UNDESIRABLE BUT AS THE LAW NOW STANDS NO JUDGMENTS AGAINST COLLECTORS MAY BE PAID BY THE UNITED STATES UNLESS AND UNTIL CERTIFICATES OF PROBABLE CAUSE ARE FURNISHED IN ACCORDANCE WITH PRIOR PRACTICE AND IT WOULD SEEM THAT PROPER INSTRUCTIONS TO UNITED STATES ATTORNEYS MAY RESULT IN SUCH CERTIFICATES BEING PROMPTLY SECURED IN PROPER CASES AND FORWARDED WITH CERTIFIED COPIES OF FINAL JUDGMENTS SO AS TO PREVENT THE UNNECESSARY ACCUMULATION OF INTEREST. THE MATTER MAY ALSO BE VIEWED AS ONE MAKING IT INCUMBENT UPON THE COLLECTOR IN HIS OWN INTEREST TO HAVE THE JUDGMENT AND THE PROCURING OF THE CERTIFICATE OF PROBABLE CAUSE BROUGHT TO ATTENTION WITHOUT DELAY.