B-45014 November 4, 1944

B-45014 November 4, 1944

The Honorable, The Secretary of the Treasury.

My dear Mr. Secretary:

There was received a letter dated October 5, 1944, (WORD NOT READABLE), from the Commissioner of Internal Revenue, as follows:

"In re: Virginia Electric & Power Co. v. Early (Collector).

Rodney, Incorporated, v. Hoey (executrix of former collector).

"In the Virginia Electric & Power Company case, a judgment of the Distric Court of the United States, Eastern District of Virginia, was allowed in the amount of $18,823.01 on Schedule of Overassessments No. 91774 (Voucher No. 2051187, dated April 7, 1944, Guy F. Allen, Chief Disbursing Officer, Treasury Department), including costs of $#59.80, with a statement in the Certificate of Overassessment as follows:

"'The item of $68.70 claimed as stenographer's fees is not allowed for the reason that it is not properly payable from the appropriation for refunding taxes, and the subject of payment should be taken up with the United States Attorney with a view to possible reimbursement from an appropriation available to the Department of Justice.'

"The judgment in that case recited as follows:

"'Ordered, Adjudged and decreed that the plaintiff recover of the defendant the sum of $14,285.42, with interest thereon at 6% per annum from December 28, 1938 and also the costs of this action to the extent permitted by law, to all of which the defendant excepts on the grounds stated at the hearings and on brief; **'

"The claim for the payment of the judgment included 'Cost taxed on February 18, 1944, $128.50' and the itemized statement of costs accompanying the claim, was in the same amount, including Official Stenographer, $68.70'. Costs were allowed by this office in the amount of $59.80, the remaining portion $68.70 not having been allowed for the reason stated in the Certificate of Overassessment.

"In the case of Rodney, Incorporated, a judgment of the United States District Court, Southern District of New York, was allowed int he amount of $16,682.23, on Schedule of Overassessments No. 93951, dated September 21, 1944 (this office not having been informed of the voucher number) including costs of $24.00, with a statement in the Certificate of Overassessment as follows:

"'Costs claimed in the amount of $144.95 for stenographer's fees will be made the subject of a separate communication.'

"The judgment in that case recited that recovery he had of $13,362.46, with interest according to law, from August 6, 1940,

"'together with costs as taxed in the sum of $168.95, and that execution issue therefor;'

"The claim for the payment of the judgment included $168.95 court costs, and the itemized statement of costs accompanying the claim, was in the same amount, including 'Stenographic minutes at request of the Court, $144.95'. Costs were allowed by this office in the amount of $24.00, the remaining protion, $144.95, not having been allowed, with a statement in the Certificate of Overassessment as previously stated.

"Title 31, Section 602k of the United States Code, as amended by Section 1317 of the Revenue Act of 1921, approved November 23, 1921, requires that estimates for appropriations for the refund of taxes include an amount 'to pay judgments, including interest and costs, rendered for taxes', and in letter (A-20919) dated December 17, 1927, it is stated that the appropriation for refunding taxes (now entitled 'Refunding Internal Revenue Collections') is available for the payment of court judgments, citing 27 Comp. Gen. 442.

"The decision of your office, 12 Comp. Gen., 474, dated December 22, 1932, has been cited to this office as authority for the payment of stenographer's fees as part of the court costs.

"However, in Certificate of Settlement No. 0319767, dated January 5, 1934, in Herold, et al., Liquidators Exchange Bank v. United States (Schedule of Overassessments 51745) issued by your office, contained the statement: 'There is no appropriation available for the payment of costs of the United States Circuit Court of Appeals and for stenographer's fees.' (Underscoring supplied). It is noted, however, that this was a judgment against the United States, and some confusion may have arisen between judgments of that character and those against Collectors of Internal Revenue.

"In view of the fact that suits for the recovery of internal revenue taxes are under the jurisdiction of the Department of Justice, it appeared that the subsequent ruling of your office, dated November 21, 1939 (19 Comp. Gen. 551), to the effect that expenses of all court actions under the control of the Department of Justice are chargeable to the appropriations of the Judiciary rather than the appropriations of the administrative office which may be involved in the proceedings, had some bearing upon the question.

"In view of the uncertainty, this office has not made it a practice for a number of years to include court reporter's fees in the costs allowed in settlement of judgments, whether rendered against Collectors or the United States, with the statement in the former class of cases as indicated herein in the Virginia Electric & Power case and where the judgments were against the United States, referring to Title 28, Section 258, of the United States Code, limiting costs.

"In view fo the fact that both of the cases herein specifically referred t are now before this office for consideration as to payment or disallowance of the reporter's fees, a decision in advance of payment is requested, as contemplated by Section 3 of the Act approved December 29, 1941 (55 Stat. 876).

"An expression of opinion is also requested as to the position of your office, in the nature of an advance ruling, with respect to the payment of court reporter's or stenographer's fees and cost of transcribing minutes in cases involved in judgments rendered directly against the United States, as a defendant, for the recovery of internal revenue taxes, in cases in which the Court provides in the judgment for the inclusion of costs, in view of the provisions of Title 23, Section 258, of the United states Code, to the effect that:

"'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 requested that as prompt a reply as possible be made in view of the fact that one of the taxpayers referred to insists upon payment of the items in question prior to satisfying the judgment."

While the matter is not properly before me for decision on the basis of the Commissioner's letter, you may be advised as follows:

There may be stated at the outset the postulate that when the United States is a litigant, whether suitor or defendant, costs are not taxable against it in the absence of direct statutory authorization therefor. United States v. Chemical Foundation Co., 272 U. S. 1, 20; United States v. Worley, 281 U. S. 339, 344; United States v. Hooe, et al., 3 Cranch 73, 92; United States v. Knowles' Estate, 58 F. 2d 718; United States v. Pacific Fruit & Produce Co., 138 F. 2d 367; 23 Comp. Gen. 805. That principle has been incorporated without change in rule 54(d) of the Federal Rules of Civil Procedure, 28 U.S.C. following section 723(c). Reconstruction Finance Corporation v. J. G. Menihan Corporation, 312 U.S. 81, 83.

However, so far as concerns suits against collectors of internal revenue for recovery of internal revenue taxes, it would appear that the principle above referred to is not for application since it is evident that judgments in such cases are not against the United States. It is provided in section 989, Revised Statutes, 28 U.S.C. 842, 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."

In the case of Sage v. United states, 250 U.S. 33, the Supreme Court considered the nature of a suit against a collector of internal revenue for recovery of wrongfully collected taxes and held it to be a personal action against the collector, notwithstanding the above-quoted statutory provision for payment of the potential judgment by the United States under certain circumstances. In the course of the opinion Justice Holmes, speaking for the Court, stated:

"* * * But no one could contend that technically a judgment of a District Court in a suit against a collector was a judgment against or in favor of the United States. It is hard to say that the United States is privy to such a judgment or that it would be bound by it if a suit were brought in the Court of Claims. The suit is personal and its incidents, such as the nature of the defenses open and the allowance of interest, are different. It does not concern property in which the United states asserts an interest on its own behalf or as trustee, as in Minnesota v. Hitchcock, 185 U.S. 373, 388. At the time the judgment is entered the United States is a stranger. Subsequently the discretionary action of officials may, or it may not, give the United States a practical interest in the amount of the judgment, as determining the amount of a claim against it, but the claim would arise from the subsequent official act, not from the judgment itself." (Underscoring supplied.)

To like effect see Smietanka v. Indiana Steel Co., 257 U.S. 1, 4; United States v. Kales, 314 U.S. 186, 199; and United states v. Nunnally Investment Co., 316 U.S. 258. In the last-named decision the court reviewed historically and affirmed the doctrine announced in the Sage case, supra, "that the United States is a 'stranger' to a judgment resulting from a suit brought against a collector," and reiterated the personal character of a suit against a collector and his personal liability thereunder. Noting and responding to the coiticism by Justice Cardozo in Moore Ice Cream Co. v. Rose, 289 U.S. 373, of the personal character of suits against the collector as a legal anachronism, the court demonstrated conclusively that the doctrine laid down in the Sage case remains unimpaired.

Upon the basis that such an action is not one against the United States, it has been held that where a judgment is rendered against a collector of internal revenue the court is authorized to tax costs with the same latitude of discretion as is permitted in suits between other private litigants, Treat v. Farmers' Loan & Trust Co., 185 F. 760; New York Insurance Co. v. Anderson, 263 F. 527, 531, even though, upon the issuance of a certificate of probable cause by the court under section 989, Revised Statutes, supra, the liability of the Government to pay the judgment attaches, United States v. Sherman, 98 U.S. 575; Drakine v. Van Arsdale, 15 Wall. 75; Nat'l Volunteer Home v. Parrish, 229 U.S. 494, 496.

Further, it has been held in decisions of this office that costs which are included in a judgment against a collector of intermal revenue are a part of the amount recovered against the defendant for the payment of which the United States becomes liable when the court grants a certificate of probable cause. see 12 Comp. Gen. 474, cited in the submission, and 8 Comp. Gen. 126. In the latter decision it was held:

"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 generlly following the judgment either by direction of the court or by express statutory provision of the particular judicial jurisdiction."

In view of the foregoing, and since stenographic and reporting charges generally are taxable as costs in suits between private litigants (see rule 80, Federal Rules of Civil Procedure), it may be held that court reporters' fees are proper for payment in the settlement of judgments rendered against collectors of internal revenue.

However, the allowance of costs in judgments directly against the United States for the recovery of internal revenue taxes is governed by section 152 of the Judicial Code (28 U.S.C. 258), which provides:

"If the Government of the United States shall put in issue the right of the planitiff 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."

Since it is clear from the express language of the statute that the sovereign prerogative not to pay costs has been waived by the Congress only with respect to expenditures made by the plaintiff for witnesses and for summoning the same and for fees paid to the clerk of the court, it must be held that the paymetn of court reporters' or stenographers' fees and cost of transcribing minutes is unauthorized in the case of judgments rendered directly against the United States for the recovery of taxes.

Inasmuch as the letter of October 5, 1944, supra, suggests doubt as to the appropriation properly available for payment of judgments of the nature here involved, in view of the holding in 19 Comp. Gen. 551,it is deemed appropriate to observe that the cited decision merely states the general rule-that expenses of judicial proceedings under the control of the Department of Justice are chargeable to the appropriations of the judiciary-but was not intended to imply that appropriations specifically made available by statute for that purpose were not available. It long has been held that judgments for the recovery of internal revenue taxes, whether against collectors of internal revenue or against the United States, are to be charged to the appropriation made available to the Bureau of Internal Revenue for refunding internal revenue collections. 2 Compl Ben. 501; 27 comp. Dec. 442; A-20919, December 17, 1927, to the secretary of the Treasury.

Respectfully,

Comptroller General of the United States.