Application of Willmann , 96 Conn. 73 ( 1921 )

The trustees applied to the Superior Court for a limitation of time for the presentation of claims against the corporation under § 3448 of the General Statutes, and a limitation was made by the court. The trustees were thereafter winding up the corporation under the direction of the court, and were authorized to secure the direction of the court in the same manner as if they were receivers.

The trustees claimed that their possession of the assets was the custody of the law, that they were, under General Statutes, §§ 3447 and 3448, receivers of the court. In this application they asked that the court, by a restraining order upon the collector, should protect the assets of the corporation in the custody of the law from distraint or seizure by the collector for application to the payment of taxes of the United States.

We have held in the companion case (Willman v.Walsh, infra, p. 79, 112 A. 804) heard with this case, that the trustees in liquidation acting under General Statutes, §§ 3447 and 3448, are not receivers, and that their possession of the assets of a corporation is not the custody of the law, and that the assets in their hands are therefore subject to such procedure for the collection of taxes of the United States as the laws of the United States permit. The court, therefore, under this claim, correctly refused to issue the restraining order.

There was further presented to the trial court the request of the trustees for instructions and for a hearing by the court to determine what federal taxes, if any, were due, and the petition of the United States reading as follows: (1) that no action be taken relative to the claims of the United States against the Derby Manufacturing Company until the Treasury Department has rendered its decision upon the allowance or disallowance of said claim for abatement; (2) that an order be entered instructing said trustees of said Derby Manufacturing Company to pay the claims of the United States in the amount of $539,259.20 as above set forth, or in such sum as the Commissioner of Internal Revenue shall determine to be due after consideration of said claim for abatement.

Under the record and facts found, it appears that the Collector of Internal Revenue presented claims of the United States for taxes to the trustees.

The trustees, in a supplemental report to the Superior Court, filed June 1st, 1920, reported these claims, and stated that there were five items of such claims, and that the trustees had paid two items and disallowed three items, and recommended the court to disallow the three items. The court, on the same day, obviously pro forma, disallowed the three items, and ordered notice to be given to the United States and its Collector of Internal Revenue, as appears in paragraph two of the finding, recited in the preliminary statement. Upon notice to the collector of such disallowance, he appeared in court and made application for an order that the claim of the United States for taxes so disallowed be paid.

The collector in his application alleged that the three items of federal taxes in controversy were "duly assessed by the proper authority on behalf of the United States."

In the recommendation of the trustees to the court for the disallowance of the three items of federal taxes, there is no suggestion that such assessment of federal taxes as was made against the corporation, whether legal or not, was not made by the proper authority of the United States.

The trustees moved that the court proceed to a hearing and determination of the taxes legally due by the corporation to the United States.

The court ruled that it then had no jurisdiction to hear and determine the amount of taxes legally due the United States from the corporation. This ruling of the court was correct.

It is a necessary inference from the finding (paragraph six) that the corporation had applied to the proper officials of the Treasury Department of the United States for the abatement of the taxes objected to. Upon the record there was no question that the proper officials of the United States had made an assessment of the taxes in question.

Section 5947 of the United States Compiled Statutes, Vol. 6, 1916, provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court." Section 5949 of such compilation provides that "no suit shall be maintained in any court for the recovery of any internal tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until appeal shall have been duly made to the Commissioner of Internal Revenue, according to the provisions of law in that regard, and the regulations of the Secretary of the Treasury established in pursuance thereof, and a decision of the Commissioner has been had thereon: Provided, that if such decision is delayed more than six months from the date of such appeal, then the said suit may be brought, without first having a decision of Commissioner at any time within the period limited in the next section."

These restrictions are binding upon State courts.Collector v. Hubbard, 79 U.S. (12 Wall.) 1, reversingHubbard v. Brainard, 35 Conn. 563. In Snyder v.Marks, 109 U.S. 189, 193, 3 Sup. Ct. 157, the United States Supreme Court held, in regard to the above provisions of the federal statutes: "The remedy of a suit to recover back the tax after it is paid is provided by statute, and a suit to restrain its collection is forbidden. The remedy so given is exclusive, and no other remedy can be substituted for it." Hastings v. Herold, 184 F. 759.

The facts found disclose that the federal taxes involved in these proceedings have not been paid, and that a claim for the abatement of said taxes is pending before the Commissioner of Internal Revenue, under § 5949 of the United States Compiled Statutes, 1916. Under such facts, in accord with the terms of § 5949, no suit, formal or, as here, informal, can be maintained to recover back or to abate such federal taxes in any court, State or Federal.

Under § 5947 of such compilation, no suit, formal or informal, can be maintained to restrain the collection of federal taxes.

Therefore the Superior Court had no jurisdiction to pass upon the legality of the assessment of the Internal Revenue taxes in question, or to issue a restraining order relating thereto, because of the provisions of the United States Statutes quoted above.

The orders and decree of the trial court as above recited, rendered in response to the applicants' requests for instructions and the petition of the United States, were in accord with the law.

There is no error.

In this opinion the other judges concurred.