The opinion of the court was delivered by: GOURLEY
In this reorganization proceeding trustee of Pittsburgh Railways Company petitions for an order directing the United States of America to refund certain interest alleged to have been illegally, erroneously or excessively collected. The United States of America moves the court to dismiss said petition.
1. Does this court sitting as a Court of Bankruptcy in a proceeding for reorganization of a corporation under Chapter X of the Bankruptcy Act, as amended, 11 U.S.C.A. § 501 et seq., have jurisdiction to hear and determine the trustee's suit for refund of an alleged erroneous Internal Revenue collection?
This proceeding was commenced in this court on May 10, 1938, by the filing of a petition for reorganization of the corporation. Thereafter the United States filed claims for various taxes and interest thereon to date of payment of said taxes.
Negotiations were conducted between counsel for the debtor and representatives of the Chief Counsel for the Internal Revenue resulting in the submission of an offer in settlement by the trustee for the debtor by letter dated June 15, 1950, the last paragraph of which reads as follows:
'Pursuant to the said authority granted under the Plan, we the Trustees of Pittsburgh Railways Company and Pittsburgh Motor Coach Company, respectfully submit an offer of settlement of the said tax claims, subject to the approval of the Reorganization Court, on the basis of (a) fifty per centum (50%) of the tax amounts of the claims included in the foregoing under Group I (50% of $ 158,880.72) or $ 79,440.36, together with statutory interest on the said $ 79,440.36 from the due date of the various reduced amounts to the date of payment; and (b) the full amount of the said tax claims included in the foregoing under Group II, or $ 55,529.24, together with statutory interest on the said $ 55,529.24 from the due date of the various amounts to the date of payment; and (c) with the understanding that the amount offered herein in settlement of said tax claims will be paid not later than sixty (60) days after the date of the allowance of the said claims.'
This offer was duly considered and accepted by the Secretary of the Treasury.
On December 5, 1950, my late associate, Judge Owen M. Burns, entered an order, without objection, approving this settlement and authorizing the trustee to pay the taxes and interest as agreed to and directing that stipulations be entered into with Government counsel to appropriately dispose of the cases pending in the Tax Court of the United States.
Payment of $ 257,023.93 was made on December 15, 1950, fully completing the compromise and settlement.
Subsequent thereto, and after the death of Judge Burns, this member of the court held to a contrary view of Judge Burns and concluded that tax claims in reorganization proceedings bear interest only to the date of commencement of reorganization. In re Industrial Machine & Supply Co., D.C., 112 F.Supp. 261. It was my judgment that by reason of the unavailability of Judge Burns, exceptional circumstances had arisen upon which one judge of a District Court might overrule a decision of another judge of the same court. TCF Film Corp. v. Gourley, 3 Cir., 240 F.2d 711.
In addition, after the compromise and settlement had been thus completed, on January 14, 1952, the Supreme Court of the United States in the case of United States v. Edens, 342 U.S. 912, 72 S. Ct. 357, 96 L. Ed. 682, by per curiam decision affirmed the United States Court of Appeals for the Fourth Circuit, 189 F.2d 876, holding that the government could not collect interest beyond the date a petition in reorganization was filed.
Thereafter, petitioner filed claims for refund seeking the return of interest computed on the taxes paid from May 10, 1938, the date the petition for reorganization was filed, to date of payment of the sum agreed on plus interest thereon.