which the United States has agreed to pay over the money plaintiff seeks. It should be mentioned at this point that the Government also contends that Section 7422, 26 U.S.C.A., bars plaintiff because plaintiff did not and could not file a claim for refund which is a prerequisite to bringing suit under 1346(a)(1). However, it is believed under the facts that plaintiff made a demand for the money upon the Director and that it was refused.
Counsel have not pointed to any decision precisely deciding the jurisdictional point raised by defendant. There are a number of decisions in which a Collector of Internal Revenue, now the Director, is named defendant and no question as to the jurisdiction arose. This is so in decisions involving alleged wrongful distribution of the proceeds of a distraint sale. Horvitz v. Granger, D.C., 134 F.Supp. 957. There are any number of cases in the books indicating that a taxpayer or a lien holder or other person having an interest in the subject matter of the sale has brought suit against the Collector. These cases are illustrated by the line of cases, Stuart v. Chinese Chamber of Commerce of Phoenix, 9 Cir., 168 F.2d 709; Raffaele v. Granger, 3 Cir., 196 F.2d 620, and Moore Ice Cream Co. v. Rose, 289 U.S. 373, 53 S. Ct. 620, 77 L. Ed. 1265.
There is no authoritative decision which holds that the United States can be sued as the result of the wrongful distribution by the Director of funds realized from a distraint sale under the summary procedures. It is noticed at this point that the code provides for the distribution of the money realized in a distraint sale by Section 6342(b), 26 U.S.C.A.
The language in several recent decisions refers generally to the theory of law that is stated in Harmon v. Brucker, 355 U.S. 579, 78 S. Ct. 433, 435, 2 L. Ed. 2d 503, that:
'* * * Generally, judicial relief is available to one who has been injured by an act of the government official which is in excess of his expressed or implied powers. (Citing cases.) The District Court had not only jurisdiction to determine its jurisdiction but also power to construe the statutes involved to determine whether the respondent did exceed his powers.'
The decision, however, is a case in which the Secretary of the Army was the defendant, not the United States.
Plaintiff points to Szerlip v. Marcelle, D.C., 136 F.Supp. 862, 863, by Judge Bruchhausen, as follows:
'It is settled law that nondelinquent third-parties, whose property has been taken by the Collector of Internal Revenue for the tax liability of another, may maintain actions in the Federal District Courts under this section, to stay the sale thereof, without being bound by provisions of the Internal Revenue Code forbidding suits restraining the assessment of tax (now Sec. 7421 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 7421). Long v. Rasmussen, D.C.Mont., 281 F. 236; Rothensies v. Ullman, 3 Cir., 110 F.2d 590; Tomlinson v. Smith, 7 Cir., 128 F.2d 808; Raffaele v. Granger, 3 Cir., 196 F.2d 620.'
In the cited case the court refers to 28 U.S.C.A. § 1340 and 'former similar statutes in the Judiciary Code, giving Federal District Courts jurisdiction of any civil action arising under an Act of Congress providing for internal revenue.' But in this case the plaintiff Sidney Szerlip sued Joseph P. Marcelle as Collector of Internal Revenue, defendant.
The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers and not to non-taxpayers. With them Congress does not assume to deal, and they are neither of the subject nor of the object of the revenue laws. See Stuart v. Chinese Chamber of Commerce of Phoenix, supra.
Szerlip v. Marcelle, supra, and Horvitz v. Granger, supra, are examples of suits by nontaxpayers against Collectors of Internal Revenue. The law expressed in the decisions of the various cases is that a taxpayer is bound by the revenue law and must proceed thereunder. A nontaxpayer having a pecuniary interest in the subject matter of a distraint sale may sue the Collector for any wrong committed by him in seizing property or property rights. Plaintiff in the instant case comes within the decision law in this respect, except that its case was filed directly against the United States. No doubt plaintiff should have judicial review of the method and application of the money realized by the Director from the sale of the property in question here. Nevertheless, it is believed that no review can be had in a suit filed naming the United States as defendant.
It seems to me that there are good reasons why a suit of the kind brought here should be against the Director of Internal Revenue. Historically, Collectors of Internal Revenue have been held responsible when they exceeded their powers. Smietanka v. Indiana Steel Co., 257 U.S. 1, 42 S. Ct. 1, 66 L. Ed. 99. This liability is touched upon by Mr. Justice Cardozo in Moore Ice Cream Co. v. Rose, supra, in his discussion of the act of Congress removing the requirement of protest at the time a tax was paid as a prerequisite to bringing suit. Under the law, a Director is required to pay over to the Government money he receives, even though he is aware that suit for collection or return of the money is about to be instituted. In the event that the Director has exceeded his powers and the court grants a certificate that there was probable cause for the act done by the Collector, or that he acted under the directions of the Secretary of the Treasury or other proper Government official, no execution is to issue upon the judgment, but the amount of the recovery is to be paid out of the Treasury. This has long been the law, and was re-enacted in 1948, 28 U.S.C.A. § 2006.
It is noted that Justice Cardozo said, 289 U.S. at page 382, 53 S. Ct. at page 623, of the Moore Ice Cream Co. v. Rose case:
'A suit against a collector who has collected a tax in the fulfillment of a ministerial duty is to-day an anomalous relic of bygone modes of thought. He is not suable as a trespasser, nor is he to pay out of his own pure. He is made a defendant because the statute has said for many years that such a remedy shall exist, though he has been guilty of no wrong, and though another is to pay. (Citing cases.) There may have been utility in such procedural devices in days when the government was not suable as freely as now. (Citing cases and statutes.) They have little utility to-day, at all events where the complaint against the officer shows upon its face that in the process of collecting he was acting in the line of duty, and that in the line of duty he has turned the money over. In such circumstances his presence as a defendant is merely a remedial expedient for bringing the government into court.'
Nevertheless, there still may be good reason why a suit such as the present one should be against the Director. For instance, in Smietanka v. Indiana Steel Co., supra, the Supreme Court held that an action such as in the instant case is still a personal one against the official; and that when the suit is begun it cannot be known with certainty that the judgment will be paid out of the Treasury. That depends upon the certificate of the court in the case. There may be cases in which a court would refuse to give the certificate. For instance, in a situation in which a Director flagrantly or grossly exceeds his powers and can offer no justification therefor. He then becomes liable and he is not to be reimbursed by the Government.
The conclusion must be that the district courts have jurisdiction to entertain civil actions against Directors of Internal Revenue but there is no authority under the law to sue the United States. The complaint will be dismissed.
© 1992-2004 VersusLaw Inc.