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OLSON v. MELLON

October 18, 1933

OLSON
v.
MELLON; UNITED STATES ex rel. KNIGHT v. MELLON et al.



The opinion of the court was delivered by: GIBSON

In each of the above-entitled cases a statutory demurrer has been filed by the defendant. The cases are qui tam actions, wherein the plaintiff alleges in each that the defendant has defrauded the United States of income tax due by means of a false and fraudulent return, and seeks a verdict in behalf of the United States and himself for twice the amount of the alleged unpaid tax and the statutory penalty of $2,000 imposed upon one who has presented a false claim against the United States. The demurrer asserts that no law of the United States exists which authorizes the plaintiff to bring the suit, and that the averments of the plaintiff's statement do not constitute a cause of action under the laws of the United States.

As statutory authority for his action the plaintiff Olson has pointed to the Act of March 2, 1863, "as supplemented and amended," and the plaintiff Knight to USCA title 31, §§ 231-235, and title 18, USCA § 80.

 Section 80 of title 18 is as follows: "Whoever shall make or cause to be made or present or cause to be presented, for payment or approval, to or by any person or officer in the civil, military, or naval service of the United States, or any department thereof, or any corporation in which the United States of America is a stockholder, any claim upon or against the Government of the United States, or any department or officer thereof, or any corporation in which the United States of America is a stockholder, knowing such claim to be false, fictitious, or fraudulent; or whoever, for the purpose of obtaining or aiding to obtain the payment or approval of such claim, or for the purpose and with the intent of cheating and swindling or defrauding the Government of the United States, or any department therefor, or any corporation in which the United States of America is a stockholder, shall knowingly and willfully falsify or conceal or cover up by any trick, scheme, or device a material fact, or make or cause to be made any false or fraudulent statements or representations, or make or use or cause to be made or used any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry, shall be fined not more than $10,000 or imprisoned not more than ten years, or both. (R.S. § 5438; May 30, 1908, c. 235, 35 Stat. 555; Mar. 4, 1909, c. 321, § 35, 35 Stat. 1095; Oct. 23, 1918, c. 194, 40 Stat. 1015.)"

 Sections 231 and 232 follow:

 "§ 231. Liability of Persons Making False Claims. Any person not in the military or naval forces of the United States, or in the militia called into or actually employed in the service of the United States, who shall do or commit any of the acts prohibited by any of the provisions of section 80 of Title 18, shall forfeit and pay to the United States the sum of $2,000, and, in addition, double the amount of damages which the United States may have sustained by reason of the doing or committing such act, together with the costs of suit; and such forfeiture and damages shall be sued for in the same suit. (R.S. § 3490.)

 "§ 232. Same; Suits. The several district courts of the United States, the supreme court of the District of Columbia, the several district courts of the Territories of the United States, within whose jurisdictional limits the person doing or committing such act shall be found, shall, wheresoever such act may have been done or committed, have full power and jurisdiction to hear, try, and determine such suit. Such suit may be brought and carried on by any person, as well for himself as for the United States; the same shall be at the sole cost and charge of such person, and shall be in the name of the United States, but shall not be withdrawn or discontinued without the consent, in writing, of the judge of the court and the district attorney, first filed in the case, setting forth their reasons for such consent. (R.S. § 3491.)"

 The statutes, as quoted supra, on their faces at least, furnish strong support of the right of the plaintiffs to institute the present actions. In the Olson case, however, the defendant asserts that the Act of March 2, 1863 (12 Stat. 696), is now obsolete; and in the other cases the defendants contend that the quotation of sections 231-235, title 31, USCA, was in fact an unofficial and mistaken substitution of the text for sections 3490 et seq., Rev. St., which was narrower in scope and did not authorize qui tam actions to collect income tax unlawfully withheld.

 The act establishing the Revised Statutes of the United States was approved June 20, 1874 (18 Stat. 113).By it all acts of Congress passed prior to December 1, 1873, any section of which was embraced in the revision, were repealed, and the section applicable thereto was established in lieu thereof. Sections 5438 and 3490 of the Revised Statutes had each been a part of the Act of March 2, 1863. Section 5438 imposed a penalty upon those presenting, or obtaining the proceeds of, false claims against the United States. Section 3490 is as follows: "Any person not in the military or naval forces of the United States, or in the militia called into or actually employed in the service of the United States, who shall do or commit any of the acts prohibited by any of the provisions of section fifty-four hundred and thirty-eight, Title 'Crimes,' shall forfeit and pay to the United States the sum of two thousand dollars, and, in addition, double the amount of damages which the United States may have sustained by reason of the doing or committing such act, together with the costs of suit; and such forfeiture and damages shall be sued for in the same suit."

 Section 3491, Rev. St., also part of the act of 1863, authorized qui tam actions to recover the penalties fixed by section 3490.

 It will be noted that section 5438, R.S., related only to false claims against the United States, and was not wide enough, in its original form, to include the suppression of material matters in an income tax return. See United States v. Cohn, 270 U.S. 339, 46 S. Ct. 251, 70 L. Ed. 616, Capone v. United States (C.C.A.) 51 F.2d 609, 614, 76 A.L.R. 1534.

 Section 5438, R.S., became section 35 of the Criminal Code (March 4, 1909), but section 3490 was not repealed when the Criminal Code was adopted, and has not since been re-enacted.

 By Act of October 23, 1918, section 35, Criminal Code was amended by the insertion of the following: "* * * Or whoever, for the purpose of obtaining or aiding to obtain the payment or approval of such claim, or for the purpose and with the intent of cheating and swindling or defrauding the Government of the United States, or any department thereof, or any corporation in which the United States of America is a stockholder, shall knowingly and willfully falsify or conceal or cover up by any trick, scheme, or device a material fact, or make or cause to be made any false or fraudulent statements or representations, or make or use or cause to be made or used any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry. * * *" (18 USCA § 80.)

 Counsel for the plaintiff Olson has contended that section 5438, Rev. St., prior to the amendment of 1918, was wide enough to cover a false return of income. In this contention, as stated supra, we cannot agree with him. Counsel for the other plaintiffs, as we understand his position, admits that the original section, 5438, Rev. St., is insufficient to cover a false tax return, but asserts that the amendment of 1918 is sufficient; and further asserts that section 3490, Rev. St., now includes not only the subject-Matter of the original section 5438, Rev. St., but also the amendment of 1918. Counsel concede, where a statute has been incorporated as a whole by another statute, that any amendment or repeal of the incorporated statute will not, as a general rule, either add to or take away its original effect from the incorporating act, but will leave that statute with just the same scope it had at the time of its enactment. They contend, ...


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