FLORA v. UNITED STATES
Legal provision: 28 U.S.C. 1346
Argument of Randolph W. Thrower
Chief Justice Earl Warren: Number 492, Walter W. Flora, Petitioner, versus United States of America.
Mr. Randolph W. Thrower: Mr. Chief Justice, members of the Court.
First may I express appreciation of the petitioner and the counsel for the consideration which the Court has given to this case?
We do believe that it involved very fundamental right and that it justifies all of the attention that has been given to it.
The single question involved here is whether the District Court had jurisdiction of a suit to recover an alleged over payment of tax.
The facts are very simple and they're not in dispute.
The taxpayer filed his return for the year 1950 and he paid the tax shown thereon.
Thereafter, the Commissioner assessed an amount of $28,000 additional tax against him.
After notice and demand the taxpayer in 1953 made two payments totaling approximately $5000 and brought this suit to recover those payments after rejection of his claim for refund.
The Government answered denying the complaint and asserting a counterclaim in the amount of $23,000 the balance of the assessment.
It also raised the special defense that the Court had no jurisdiction of the cause of action because the total amount of the assessment had not been paid.
In determining whether or not, the complaint stated a cause of action, the allegations of facts setout in the complaint must of course be assumed to be true.
Therefore, for purposes of this argument, we must assume that the amount of $5000 was wrongfully collected from the taxpayer and necessarily that the assertion of the additional claim by the Government of $23,000 was likewise wrongful.
The issue of the case therefore maybe stated thusly.
Is this taxpayer to be denied the right to recover a wrongful collection of money from him simply because the Government at the time is pressing an illegal claim against him for any -- for even more money?
Now, we contend that jurisdiction here is authorized by the very clear provisions of Section 1346 (a) (1) of Title 28 of the United States Code, commonly referred to as the Tucker Act of 1887.
Now, this Court has concluded and this is not been denied or challenged by the Government, that on the face of the language of the statute, this suit is clearly authorized.
The language of the statute does not lend itself to a construction which would deny jurisdiction.
If the Government is to prevail, it must be by an addendum to the statute.
It cannot be by construction of the language of the statute.
Now, such clear statutory authorization, we submit, should be sufficient to support jurisdiction, particularly as is true where a departure from the statute immediately encounters incongruities and hardships to the taxpayer, obviously never intended by Congress.
If this position should be upheld, a taxpayer unable to pay the full amount of an assessment could never recover the amounts of money wrongfully collected from him under an illegal assessment.
Furthermore, the statute of limitations for -- for bringing his suit could run against him as it has run against him in the present case before he was ever able to complete the payment of the entire amount of the illegal assessment.
Now, recent procedural development in the present case, not shown in the record but setout in our brief, provide an example we believe of the succession of incongruities which were reproduced by upholding the Government's position.
When jurisdiction was denied here by the Court of Appeals and the Court of Appeals, the Government contends to rely upon its assessment which had all the effect of a judgment anyway, withdrew its counterclaim.
Now, in the present year, May of 1959, the Government has brought a direct action against the taxpayer in the same District Court asserting the same claim setout originally in its counterclaim.
Now nothing has been produced by this procedural complexity and oddity except in the (Inaudible) the statute of limitations has run against the taxpayer's claim and there has been a completely unnecessary delay of at least four years in the resolution of this controversy on the merits.
Now this we submit is just the beginning of the procedural oddities which will be produce by this unnatural and unintended restriction on jurisdiction which the Government asserts here.
Now we cannot believe that this Court upon reconsideration can be led to depart from the clear language of the statute, particularly where such results are produced.
Now this argument as I've noted, we believe should be sufficient, within itself to dispose of the case, but there's a completely different approach to this question, which is equally conclusive and which requires the same result.
In the Government latest brief, it is implicit within its argument that it cannot possibly prevail here unless it can show that this same restriction, the so-called “full payment restriction” had also become attached to the traditional right to sue the Collector in personam to recover moneys wrongfully collected from him.
In fact, the Government argues that the origin of its rule that it would assert here arose in the action against the Collector and was merely incorporated by implication in the Tucker Act of 1887.
Now, it is clear of course, that a -- at common law, a taxpayer could sue a Collector personally to recover any amount of money wrongfully taken from him over protest without regard to what claims the Government or the crown might be pressing against him.
This the Government will admit.
To prevail therefore, it must show that this common law right against the Collector somewhere, somehow, has been made subject to this unusual restriction which it urged.
Now this, it has undertaken to do in its latest brief, we submit with total failure.
Now, I call to your attention that what it does argue in its brief is that in the customs field, a statute of 1839 by requiring the Collector of Customs to make prompt payment over of moneys to the Treasury of the United States without regard to protest or threat of litigation had taken away one of the elements of the common law right against the Collector and though they were other remedies available to the taxpayer, he could no longer maintain this common law action.
This Court so held that in Cary versus Curtis in 1845.
Within five weeks of that decision, Congress had completed the enactment of a statute which stated expressly that nothing in the statute of 1839 should be construed to take away or in anyway impair this right of action against the Collector.
Yet it is on this statute of 1845 that the Government relies as originating this restriction against suit against the Collector.
I might add that that argument is wrongly made without reference to the very clear language of that statute of 1845.
There is not a word, or a suggestion, or a hint within that statute, or within any other statute that the Government has cited that Congress has ever intended in anyway such as argued here to restrict or impair or narrow the scope of this common law right of action against the Collector.
Now, we believe that our briefs show conclusively that in 1887 this kind of a suit could have been brought against the Collector, that was the time of the enactment of the Tucker Act, and that such a suit could be brought today without regard to what claims the Government might be pressing illegally against the taxpayer.
I am sure that Government counsel here today will concede that if such a suit could be brought in 1887 and if such a suit could be brought today, there could exist no possible reason in the statute or anywhere else for that matter for attaching this restriction in a suit brought against the United States under the Tucker Act.
Now it -- it is of course, not possible in the brief time that I have here to discuss all of the reasons that have been proffered by the Government to this Court for departing from the clear language of the statute.
Our briefs have, I believe, shown the fallacy of each legal position which the Government has taken.
I believe also our briefs have discredited the nonlegal representations which have been made to this Court, first as to consistent and long existing right -- long established facts, now as to the dire of threats to the Treasury if this suit is upheld.
I would like to reserve the balance of my time to reply to such reasons as maybe given here today for departing from that statute.
I do hope that Government counsel will make it clear as to whether or not it is relying upon a construction of the jurisdictional statute.
And if so, how conceivably can that statute be so construed and if it is not relying upon a construction of the statute, but would depart from the statute, what conceivably could be the support for such a departure?
Chief Justice Earl Warren: Mr. Rice.
Argument of Rice
Mr. Rice: Mr. Chief Justice, may it please the Court.
The Government's position in this case is that the case was correctly decided on the prior submission.
There has been nothing shown by the counsel for the taxpayer which would warrant any rehearsal of that decision and that the decision should be adhered to as it was originally rendered.
More succinctly, our position is that there are only two methods in which tax controversies can be decided.
One is by petition to the Tax Court of the United States, prior payment of the tax and resolution in that manner or secondly, by payment of the full amount of the tax due and suit in the Court of Claims or the District Court and resolution in that manner.
Justice Potter Stewart: How about a controversy as to excise taxes recently?
Mr. Rice: Well excise tax Your Honor is a different matter.
That would go only to the District Courts or the Court of Claims.
Justice Potter Stewart: So they're not too --
Mr. Rice: But not go to the -- would not go to the Tax Court.
Now I think the -- I might point out parenthetically here and I think the reason for that distinction is that excise taxes are usually passed on and usually collected from the seller rather than purchaser who was the one who actually reports them.
And for that reason, there wasn't the hardship that you found in the income tax and the state tax cases of having to pay before you could litigate so -- because in the excise tax cases, the person who filed the return wasn't really a person who's paying it.
Now that I think was the reason why the excise taxes were not included.
At the outset, we would like to call attention to the shift which has taken place from time to time in the taxpayer's position in this case as it's gone through that.
Chief Justice Earl Warren: Mr. Rice, I wonder if you could take just a moment to -- to answer the question that counsel asked as he concluded his argument.
Mr. Rice: Well I'm not sure but I'll recall exactly what the question was.
Chief Justice Earl Warren: One was to -- to rely on the construction of the -- of the statute itself or do you rely on -- on your administrative practice?
Mr. Rice: We rely primarily on the construction of the statute itself and we regard the administrative practice is only utmost a make way point.
We rely primarily on the statutes.
Now we think it's important to note that the outset -- the shifting positions which the taxpayer has taken in this case, if you will recall when this case was before you -- the first time, the emphasis then was largely on the fact that after all the Collector could command and recover the balance of any tax, so that the United States was not without remedy and what harm was there in permitting the person to pay part of the tax and sue for the recovery.
And that as you may recall is the theory of Sirian Lamp in the Third Circuit and the taxpayer's position was pitched primarily on that point, I think, in the first presentation of this Court.
Well, this Court met that head on in its original opinion by reviewing the statutory -- the legislative history of the statutes involved and particular -- particular reference to the legislative history relating to the Board of Tax Appeals and the Court concluded that the hardship which Congress was seeking to alleviate in creating the Board of Tax Appeals was not the hardship of post collec -- of post litigation collection of the hardship of free litigation payment.
And I think the legislative history very amply bears that out.
Well, that was the first go around.
On the petition for rehearing the emphasis shifted and then it was said that -- that the Government had alleged as it did that the practice over the years, the treasury practice had been consistent with the interpretation of the statute which it urged, and the petitioner in the petition for rehearing had a great deal -- had a great deal to say about that and contended that in fact the practice was quite the opposite.
Now, however when we come to the third stage on the -- on the briefing on rehearing, there's relatively little emphasis on the practice and if you will refer to page 22 of the taxpayer's main brief on rehearing, you'll find the statement that such a practice, even if shown, even if the Government showed it that it'd hardly be material for the construction of statutory language drafted almost 100 years ago.
In other words, the practice isn't very material according to the taxpayer on his present argument.
Justice Charles E. Whittaker: Mr. Rice, do you deny that the question presented by the taxpayer in the -- his brief now before us on petition for rehearing is incorrectly stated?
Isn't that the question, the precise question for us to decide?
Mr. Rice: Well I don't quite know how to respond.
The question is whether his brief is incorrectly stated.
Justice Charles E. Whittaker: No, no, no, no whether or not the question there stated is not the precise question we must decide?
Mr. Rice: Well if the question is whether you may, as I assume to this, whether you may maintain an action in the District Courts to recover part of a tax assessment which has been paid, then that is the question before the Court.
Now after on the -- if to complete my reference to the shifting positions of the taxpayer, we find the emphasis at this stage of the argument not so much on what the practice has been because the taxpayer states in his brief that that could hardly be material to the construction of statutes enacted nearly a hundred years ago.
The emphasis now is that on suits against the Collector and it is said that in the personal actions against the Collector that you could have sued him for part payment and therefore the same thing must be assumed in suits against the United States.
Well that is the emphasis here.
Now if the Court please, I'd like to -- after adverting to those shifting positions to submit that there's no merit to any of them and that the decision of the Court in its earlier opinion should be reaffirmed.
First of all, we contend that the rule of -- of payment first and litigate -- litigate later was a well understood principle which was in effect at the time of the Tucker Act was enacted which was in effect at the time the Tucker was incorporated in the Revenue Act of 1921, was well understood by Congress and was well understood by the Bar, and was incorporated as an essential provision of those Acts.
Now one of the difficulties which I think the taxpayer had to this case is that he can't quite see why there should be such a rule.
It seems a very arbitrary and -- and perhaps unnecessary rule to him, but the reason for the rule is equally rooted and it's rooted in the need of Government.
It's rooted in the need of Government for a prompt and sure tax collection and except this, Mr. Justice Miller said in the Cheatham case, except for such -- with such exceptions as the lawmakers' deem expedient that is the governing principle.
Now you see that back in Cary against Curtis, which I hope to be able to get back to later when we discuss the Collectors, suits against the Collectors where they said regularity and certainty in the payment of the revenue must be admitted by everyone as a primary importance.
They must be said almost to constitute the basis of good faith in the transactions of the Government to be essential to its practical existence.
And in Cheatham itself where they said if there existed in the Courts any general power of impeding or controlling the collection of taxes or relieving the hardship incident to taxation the very existence of the Government might be placed in the power of a -- of a hostile judiciary.
And then going on to say in the internal revenue branch, it has been further prescribed that no such suit shall be brought until a remedy by an appeal has been tried.
And if brought after this, it must be brought within six months after the decision on the appeal.
We regard this as a condition on which alone the Government consents to litigate the lawfulness of the original tax.
It is not a hard condition; few Governments have conceded such a right on any condition.
If the compliance of this condition requires the party aggrieved to pay the tax, he must do it.
He cannot after the decision is rendered against him, protract the time within which he can contest that decision in the courts by his own delay in paying the money.
It is essential to the honor and orderly conduct for the Government that its taxes should be promptly paid and drawback speedily adjusted and the rule prescribed in these classes of cases is neither arbitrary nor unreasonable.
And at the same term this Court said in the State Railroad Tax cases, the Government of the United States has provided both in the customs and in the Internal Revenue a complete system of corrective justice in regard to all taxes imposed for the General Government which in both branches is founded upon the idea of appeals within the executive departments.
If a party aggrieved does not contain satisfaction in this mode there provisions for the recovering of tax after it has been paid by suit against the collecting officer, But there is no place in this system, meaning the Federal Tax System, or an application to a court of justice until after the money is paid that there might be no misunderstanding of the universality of this principle.
It was expressly enacted in 1867 that no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.
And though this was intended to apply alone to taxes levied by the United States, it shows the sense of Congress of the evils to be feared if courts of justice could in any case interfere with the process of collecting taxes on which the Government depends for its continued existence.
It is a wise policy.
It is founded in the simple philosophy derived from the experience of ages that the payment of taxes has to be enforced by summary and stringent means against a reluctant and often adverse sentiment and to do this successfully, other instrumentalities and other modes of procedure are necessary than those which belong to courts of justice, citing the Cheatham case and two other cases.
Justice Felix Frankfurter: Summary in stringent, summary in stringent sounds to me like a string.
Mr. Rice: Well --
Justice Hugo L. Black: Summary in stringent.
Mr. Rice: By a summary means -- well I will branch Your Honor that the collection procedures often -- of the Government often referred to as summary procedures but I think the point which the Court was trying to make there was that taxes have to be collected -- have to paid in.
The Government must meet its obligations on time except when Congress -- unless Congress has provided otherwise, the litigation must come after the payment.
Justice Charles E. Whittaker: What situation does an ordinary taxpayer delay (Inaudible)
Mr. Rice: Yes.
Justice Charles E. Whittaker: (Inaudible)
Mr. Rice: Well, if there were a willful failure to pay, of course, there'd be a --
Justice Charles E. Whittaker: He doesn't pay.
Mr. Rice: Well he doesn't pay that, of course, if he doesn't pay over a continued period of time that would set the collection procedures in motion.
Justice Charles E. Whittaker: And it would give --
Mr. Rice: And if all taxpayers did that, we'd be in a -- in a very bad way.
Justice Charles E. Whittaker: Well isn't that the law.
Mr. Rice: No Your Honor, we don't think it is the law.
The law is you must pay on time.
Justice Charles E. Whittaker: What law says you must pay on any time, (Inaudible) pay or pay interest?
Mr. Rice: Well, you pay or pay interest or you're prosecuted if you willfully fail to pay.
Now, if the Court please, we feel we could rest our case right there, that showing the -- the principle lying back of the requirement of payment first and litigating after which was well understood and enunciated by this Court and we believe necessarily incorporated in the Tucker Act and in the Revenue Act of 1921 and taken in conjunction with the strict construction of the waiver of sovereign immunity, we feel that we could rest the case right there, but in addition to that, all of the subsequent action taken by Congress, various interrelated statutes tend strongly to confirm this belief.
You have it in 1867 in the anti-injunction statute which clearly manifested an intention to prevent any interference with the prompt collection of taxes.
You have it again in the statutory history relating to the creation of the Board of Tax Appeals or despite all of the long debate the many reports and so forth on that Act the taxpayer has been unable to point to a single reference which would contemplate and that it would possible to pay part of the assessment and suit rather than pay all of it.
And we believe that the legislative history conclusively demonstrates as this Court found in the earlier opinion, at the hardship which the -- which they were providing against was the hardship of payment of all of the tax before litigation.
We think that it would inexplicable that then the long debates over that Act in the Committee Reports there would, by experts on appeal, there would not be a single word said to indicate that the hardship really was not having to pay all the tax.
The hardship was having the Collector come after you, after you would pay part of it.
And then finally going to the Declaratory Judgment Act 1934 or 1935 where at first it appeared that declaratory judgments could be rendered with respect to tax controversies.
In a subsequent amendment they removed tax controversies from the coverage of the Act, and this Court in Great Lakes against Huffman, 319 U.S., stated that the amendment excluding taxes was passed merely for the purpose of making it here that the Declaratory Judgment Act would not permit a radical departure from the long continued policy of Congress to require a prompt of federal taxes.
In other words, the same principle that was originally enunciated this far back as Cary against Curtis continued on through Cheatham, State Railroad Tax cases, and other cases of that type.
Justice Felix Frankfurter: Well if the exception haven't been made of Declaratory Judgment Act not a penny would have been required to be paid for the taxpayer to go in and get a ruling.
Mr. Rice: Well, that maybe true Your Honor but the --
Justice Felix Frankfurter: Isn't that true?
Mr. Rice: But the exception was made.
Justice Felix Frankfurter: Yes.
But -- but there's a difference between saying you don't have to pay a penny and get a -- have a -- start a litigation without paying anything and paying a part.
There's a difference.
I am not saying what the legal consequences are but the declaratory judgment exception shows what can't be done if Congress wanted to say what can't be done.
Mr. Rice: Well I don't know whether I -- I couldn't say whether the Declaratory Judgment Act was broad enough in its terms.
I haven't studied enough to say whether it would have covered taxes without this amendment or not, but what they wanted to do was to make it clear --
Justice Felix Frankfurter: I'm -- I'm agreeing with you as to the importance of that statute.
I'm suggesting it different between the problem that would have been direct or the situation that would have confronted the Government if that limitation had been -- had not been placed upon the Declaratory Judgment Act and the problem we have to decide in this case.
There's a great difference between the two.
That if the -- if the Declaratory Judgment exception had not been made and the implication has not been read into it, then our tax -- all the taxpayers would say, “Where would we get a relief from the Court without paying a penny?”.
Mr. Rice: Now, coming next to the matter of suits against the Collector, matters had probably the Court knows rather interesting history in that suits were first permitted against the Collector as far back as 1837 in Elliott against Swartwout or there was when taxes had been paid under protest, there was implied a promise to repay up it had been wrongfully collected.
That was quite a bit of confusion in the revenue system because when Collectors realized that they were under that liability, they simply refused to turn over taxes which they -- which had been paid to them under protest and they held them aside to cover any liability they might have. So because of that situation, the Congress enacted an act saying Collectors must turnover taxes whether paid under protest or not.
So thereafter, they did turn them over but when a suit was commenced against the Collector, it was held in Cary against Curtis that the suit couldn't be maintained because if the Collector was under a statutory duty to turnover the tax to the Treasury, you couldn't imply any promise on his part to return it.
And therefore the -- you couldn't have any remedy against the Collector.
Well, that brought Congress into action and they enacted an Act in 1845 saying that they hadn't meant to -- as far as Collector of Customs is concerned, they hadn't meant to take away any action against the Collector and that they intended that action should be brought against Collectors.
And the same thing has been held with respect to suits their collection of Internal Revenue taxes not by virtue of any express statutory language as we had in 1845 with respect to the -- with respect to the Collectors -- I mean with respect to the customs people but as an implication from statutes, providing for reimbursement of the Collector in requiring the statute -- Collectors to turn over the money and making them whole for any loss they may have suffered, Congress held that -- I mean the Court held that Congress had impliedly consented the suits against Collectors.
Now the important point here is that this action in that form was no longer a common law action against the Collector.
And as this Court said in Auffmordt against Hedden, 137 U.S., the right to bring such a suit is exclusively statutory and is substituted for any and every common law right.
So our contention is that there are no more basis for the -- for a suit against the Collector for a part payment than there is against a -- a suit against the United States.
And in that connection we have to remember that Cheatham itself in which the rule of payment first and litigate later was strongly announced, Cheatham itself was an action against the Collector and the Tucker Act did not then come into being and the rule itself being enunciated in that type of case, we contend that suit could no more be brought against the Collector for a part payment than suit could be brought against the United States.
Justice Charles E. Whittaker: Isn't that statute (Inaudible) merely codify the common law?
Mr. Rice: Which statute do you refer to?
Justice Charles E. Whittaker: The Tucker Act of 1887.
Mr. Rice: The Tucker Act of 1887.
Justice Charles E. Whittaker: So far as the suit.
Mr. Rice: I didn't codify the common law because a common law, you couldn't sue the United States who took the statute to --
Justice Charles E. Whittaker: (Voice Overlap) -- as to the Collector, as to the Collector.
Mr. Rice: Codify the common law as to the Collector.
Justice Charles E. Whittaker: Just suing the Collector.
Mr. Rice: Well, I don't think it did, Your Honor, because it didn't purport to apply to the Collector it was against suits against the United States.
Justice Charles E. Whittaker: (Inaudible)
Mr. Rice: The suits against the Collector derived their statutory authority from Acts in 1860s, 1962, 1963, 1964 where there were statutes which provided for reimbursement of the Collector and that sort of thing.
Now, I'd like to say a word about the -- the contention made, rejected for -- rejected here that the -- after all the Collector could come after the taxpayer with the balance of the tax and collected so that the principle of pay first is really grounded on that fact that there could be -- if you didn't pay, there would be summary collection.
There, I'd like to say that in a self assessment system, we simply cannot compel the Government to resort to summary and extraordinary procedures for the collection of all moneys which go into litigation.
We have now something like $1.5 billion involved in federal tax litigation and each of those taxpayers could pay $1 or $10 in payment of his tax liability and sue compelling the United States collect the balance by summary and extraordinary procedures which are designed for the (Inaudible) of taxpayers, we would be in a rather difficult position, I think.
Justice Potter Stewart: Why is it so -- why is that that your argument these procedures are extraordinary not because they're extraordinarily involved or difficult but because they're extraordinarily simple in summary the procedures of levy and restraint, isn't that correct?
Mr. Rice: Well, I don't think they're quite simple Your Honor.
There's quite a lot of work, I think, attending upon each summary collection, it's work of maybe paperwork, it's work of going out into the field, it's work of filing papers, there's quite a lot of work to do it.
And if we've got to do that, well virtually, all of the $1.5 billion now in litigation and undoubtedly that's going to increase in amount.
It's going to be a very substantial proposition.
Justice Potter Stewart: And does that $1.5 billion -- does that $1.5 billion include the amount of litigation in the Tax Court?
Mr. Rice: Yes, it does.
Justice Potter Stewart: Well, of course you can't collect it.
Mr. Rice: Yes, that's true, of course.
Justice Potter Stewart: Except (Voice Overlap)
Mr. Rice: But much of -- but much of that, Your Honor, we feel it would not be in the Tax Court if this Court sustained the taxpayer here.
It would be in the District Court by all the $1 payment.
Justice Potter Stewart: But that part of it, it's not in the Tax Court, of course, isn't subject to reference.
Mr. Rice: No, it wouldn't.
No, it wouldn't.
Justice Potter Stewart: A jeopardy assessment of course is available during for a --
Mr. Rice: Yes.
Justice Potter Stewart: -- for taxpayer who's going to Tax Court.
Mr. Rice: Yes.
Justice John M. Harlan: What do you do with the word any summon statute?
You said you denied the correctness of the taxpayer's contention on the face of the statute.
You haven't addressed yourself to what (Voice Overlap) --
Mr. Rice: Well, we contend, of course that -- though that language was taken from the claim for refund statutes which --
Justice Felix Frankfurter: There would be jurisdiction statute.
Mr. Rice: Pardon me.
Justice Felix Frankfurter: There would be in the jurisdiction statute.
Mr. Rice: Yes it is Your Honor.
But it was taken from the claim for refund statutes which was the very statutes which this Court was construing in Cheatham.
Justice Felix Frankfurter: But Cheatham doesn't control this case, you don't think that controls this case, do you?
Mr. Rice: Not -- not in holding, Your Honor, no not in holding, but we think that the --
Justice Felix Frankfurter: Well, that problem adverted to in -- in briefs or arguments anything except this talk in Cheatham.
Is there anything in Cheatham except a passing reference not related to this problem?
Mr. Rice: Well, we think that the reference in Cheatham where they talked of paying the money first, taken in combination with the references to the fact that the Government depends for its very existence on the collection of taxes must mean that payment first means payment of all the tax.
Taken in context, we think it can't mean anything else.
Justice Felix Frankfurter: Well, you think that that passing reference, or that reference in Cheatham under a totally different statute with the problem not in the mind of the Court at all so far have any -- any indication was implied be put into the statute in 1921.
Mr. Rice: Well --
Justice Felix Frankfurter: But if they use the language to which Justice Harlan just called attention.
Mr. Rice: We think -- we think that this is a principle which in the State Railroad Tax cases was said to be of universality --
Justice Felix Frankfurter: Yes, but Congress can change that universality that we did by writing a different jurisdictional statute.
Mr. Rice: Well and so it can Your Honor, but here -- here we have the --
Justice Felix Frankfurter: It is so universal that you think --
Mr. Rice: So here we have the -- the doctrine of strict construction of waiver sovereign immunity and if such a principle exists and we find no -- no indication of any intention to abandon that, then it would seem to me that under the --
Justice Felix Frankfurter: Except the word of the statute, nothing else except the word of the statute.
Mr. Rice: Well, the statute back in the -- in the claim for refund days had the same language in it.
Justice Felix Frankfurter: But I don't know, you don't know what would have happen if the question had no reason then with that language in it?
You don't know and I don't know.
Mr. Rice: Well --
Chief Justice Earl Warren: You may proceed to answer.
Mr. Rice: We don't know -- we think we know.
Chief Justice Earl Warren: Well --
Mr. Rice: Thank you.
Chief Justice Earl Warren: Mr. Thrower.
Rebuttal of Randolph W. Thrower
Mr. Randolph W. Thrower: Mr. Chief Justice, I'm certain that Your Honors noted the Government's reliance upon taxpayer's brief to show the immateriality of a proposition that it first been brought in by the Government.
And that was the issue of practice which this Court indicated it had relied heavily upon in its decision.
Now, the Government when our petition for rehearing was first filed showed a great deal of sensitivity to our challenge of this representation of fact that there had been in fact a long existing and consistent practice and I think we showed very conclusively that it did not exist.
We showed that in the Government's brief itself, it had flatly misstated the facts of important cases set forth at the critical junction in its brief, that it had so confused the issue as to disguise the real fact that it had from page to page been inconsistent in its statement of what its practice had been, and yet there has been no reply whatsoever to this proposition into our explanation of the real practice that existed and this Court was to that extent on (Inaudible) know that faith was misled as to what the practice of the Government had been.
Because during the 1920s, which the Government refers to as a very important formative period, this particular statute was amended in 1921 to put into the jurisdictional statute clear language inconsistent with the Government's position.
We showed that in 1924 at the very time that Congress first considered the adoption of BTA provision, the Commissioner himself in a bond to secure the balance of the payment of an assessment had required a taxpayer to bring a suit to recover the part payment that had been made on the assessment in the Detroit Trust Company case.
And that 15 years later in the Court of Appeals in briefs that approved by the Solicitor's office, the Government was arguing that the taxpayer couldn't bring his suit after having made full payment because he had not conformed with the condition of the bond and brought to part payment suit.
We also showed that at the time of the adoption of the Revenue Act of 1926, Congress recognized that suits could be brought without paying the full amount asserted by the Government, because in the 1926 Act, Congress provided that from hereon where a taxpayer files a petition in the Board of Tax Appeals, he can no longer bring his suit for refund.
Now, that didn't just incorporate some existing law as the Government would argue because Congress said, this doesn't apply to existing cases and it was pointed out to this Court in briefs in the Old Colony Trust Company case that Congress, when the BTA provisions were adopted recognized that there were many cases pending in the Tax Court where suits for refund coming in the Board of Tax Appeals, where suit for refunds were brought in the District Court or where taxpayers were planning to bring such suits.
It shows a clear recognition of (Inaudible).
In two cases in this Court in 1924 and 1926, suits were brought without full payment and yet, despite all of this, the Government argues that there was some recognition of the existence of this rule when Congress adopted the BTA provisions.
Now, the Government is suggesting that these elaborate provisions which presented an alternative remedy under which the restraint could be obtained pending final decision that these elaborate provisions for adopting to give remedy from a rule that never had existed.
Now these cases are very infrequent.
We have pointed out that they can have any practical significance at all until you get to the case where a taxpayer is faced with an assessment he cannot pay.
In its long and extensive memorandum in opposition to the petition for certiorari, I mean the petition for rehearing, the Government acknowledged that even if the taxpayer's file was able to complete the payment of the tax after bringing his suit, jurisdiction would still lie.
It's only the fellow who can never pay that has the horrible imposition put upon him by this rule, that he can never go into a court of law and test his right to recover moneys which he thinks have been wrongfully collected from him.
Now, having brought in the representation about practice and having relied on our brief to take it out again, the Government has now brought in a representation of policy, of -- of threat to the Treasury.
There has been no showing whatsoever to support such a representation.
It certainly is not true as a legal proposition.
There is no restraint whether or not suit is filed to recover payments that are made.
A taxpayer who makes his payments, he can't run right in the Court.
He's gotten his notice and demand.
He's compelled by any other taxpayer to meet that notice in demand.
If he makes a payment of all he can, he must then file a claim for refund.
He must wait six months unless the Commissioner acts in the meantime and then bring his suit.
Now the mere fact that he may file his suit doesn't cause the Collector to stand back and say and refrain from saying, “Pay up” as he would to any other taxpayers.
The Government recognizes that the fact that the suit is filed doesn't compel the Collector to stand back and refrain from saying “Pay up”.
We submit that it's utterly ridiculous to say that the mere prospect of filing the suit or the filing of the suit forces a Collector to come in and levy on a man home and sell him.
Somehow he's trying to -- the Government is trying to put this group of taxpayers into a special case, class of tax evaders or avoiders, who are never going to meet their -- the demand unless the Collector comes out and sells their home.
There isn't any basis here, and if I may suggest that that's not the sort of an inquiry that a Court is prepared or equipped to look into and search into.
I can't conceive that such a proposition would ever be made to the searching inquiry of the expert on the staff of the committees of Congress.
If it did represent any kind of a threat, now I might say this is same (Inaudible) was made in the Sirian Lamp case 18 years ago and absolutely no threat has occurred.
I might point out to you that immediately after making -- it -- it -- most exhaustive obviously -- the most exhaustive examination of all of these cases in writing 125 briefs -- page brief on this subject the most that the Government could suggest in the way of a threat to the Treasury was that if the taxpayer finally prevailed on the merits in the lower court, in the District Court, or the Court of Claims, which would be at least a year-and-a-half or two years or more after the notice in demand, but the only threat would be that if he got a favorable judgment below, the Government might not want to try to collect the balance of the tax even if the fellow could pay it pending appeal which would be simply a voluntary decision and it could hardly present any great threat to the Treasury of our United States Government.
The complete (Inaudible) of this proposition that's now being urged before the Court is nonlegal proposition as a substitute for the other nonlegal proposition that they've carried out is in the fact that the Government urges that the taxpayer where he can ought to appeal to the Tax Court and there he doesn't have to pay anything and millions and millions, hundreds of millions of dollars are restrained legally there as compared to the very few cases that will arise on this problem where a taxpayer --
Justice Felix Frankfurter: (Voice Overlap)
Mr. Randolph W. Thrower: -- is subject to assessment and he does not have the benefit of restraint upon the Commissioner's powers to collect.
Justice Felix Frankfurter: I meant to ask Mr. Rice to that thing.
I'll ask you have you got any figure which showed roughly sufficiently with approximate accuracy the proportion of cases of -- of taxpayers who raised the Court of the Tax Court as against going to the District Court under the Tucker Act?
Mr. Randolph W. Thrower: I don't -- I would think of a much larger proportion if you included the Tucker Act cases and the Collector's cases together. I believe there are about a total of 2000 in the District --
Justice Felix Frankfurter: Well --
Mr. Randolph W. Thrower: -- in the District Courts and the Court of Claims and probably six times, five or six times as many in the Tax Court.
Justice Felix Frankfurter: And in -- in terms of money, is there are any light -- is there any light on that?
Mr. Randolph W. Thrower: I don't have any figure.
Justice Felix Frankfurter: Some is involved.
Mr. Randolph W. Thrower: -- figures on this.
I will call to Your Honors' attention that the greatest number of cases filed involving this kind of a suit under the -- I may say so what we consider the exaggerated claims of the Government, the most filed in any 12-month period were 11 as compared in that same fiscal period approximately 11,000 petitions filed in the Tax Court.
Justice Felix Frankfurter: I was interested in the question of the money that is withheld can be legally considerably withheld by going to the Tax Court.
Mr. Randolph W. Thrower: It seems to us that the Government has here undertaken to pick up a slogan which paid for it's litigate layer and instead of seeking construction of a statute, he's seeking construction of a slogan.
Now, that is an easy and popular expression which means simply that a taxpayer cannot restrain the collection of a tax.
He can't get an injunction and therefore, the merits can't be determined on an injunctive action.
He must pay and sue to recover, in all of these cases.
Cheatham and all of the other cases not a single one of them makes the slightest reference to the particular question raised here as to whether when he does sue to recover an amount that he has paid, there's any loss of jurisdiction because he has not been able to pay the entire amount of the Government's claim.
Justice Hugo L. Black: May I ask you?
Is there anything come up about this case of the Congress such as it was written and headed down as its subject been treated in Congress and anywhere?
Mr. Randolph W. Thrower: No, it has not.
If I may say it to the Court, I think perhaps it might be a concern to the Congress but it was well known that a petition for rehearing was being filed.
Now, does that satisfy Your Honor?
Justice Hugo L. Black: (Inaudible)
Mr. Randolph W. Thrower: Mr. Justice Whittaker asked me a question about whether Congress had codified the statutory -- the common law action against the Collector.
Perhaps the statute of 1845 can be treated as a codification of that action.
I noted that the counsel in arguments still has never referred to the language of the statute upon which it relies to restrict and attach this condition as restricting and attaching this condition to the action against the Collector.
That language is set out on page 9 of our reply brief is that nothing in the 1839 Act shall take away or be construed to take away or impair the right of any person or persons who have paid or shall hereafter pay money as and of duties to maintain any action at law against such collector and they have a right to a trial by jury touching the same according to the due course of law.
I want to point out to Your Honors that in referring to what the Government calls functionally related statute it has avoided altogether any reference to our argument with respect to the statute of limitations.
In 1924 Congress, to clarify the statute of limitation, adopted a provision which said as each payment of tax is made, the statute of limitations on claiming a refund shall begin to run then and the Senate Finance Committee Report pertaining to that provision said that it was done in order to make the running of the statute of limitations coincide with the accrual of the cause of action.
Those are the very same words which the Solicitor General made to this Court in the petition for certiorari in 1934 in the Clark case which we have pointed out when he was arguing that with respect to a state tax statute which Congress had failed to clarify.
He was arguing the general proposition that the cause of action clearly approves when each separate payment is made just as we're arguing in this case.
And that therefore the statute of limitations on a state tax should accrue at that particular time.
We believe Your Honors, as I have said that the clear language of the statute supports this action.
That language was put into the statute in 1921.
We don't say that that language created the right.
The right had always existed.
It was equally clear under the original Tucker Act of 1887.
It was clear in suits against the Collector prior to that time subsequent to the 1845 Act.
It was perfectly clear at common law what we say is that Congress in 1921 could not have used this very clear language of the statute if it had recognized the existence of any such rule and if it had attended -- intended to attach any such restriction.
Thank you Your Honors.
Rebuttal of Rice
Mr. Rice: Your Honor, may I ask the counsel a question on (Inaudible) referring to Justice Frankfurter's question.
Chief Justice Earl Warren: Well it is a little out of order, but there's not --
Mr. Rice: It's not out in a million and a half of the taxpayer --