The opinion of the court was delivered by: GALSTON
This suit is brought pursuant to title 28, U.S. Code, § 41 (20), 28 USCA § 41 (20), Judicial Code, § 24 (20), as amended.
The plaintiff, a taxpayer, seeks to have an offer of compromise in the amount of $13,803.21, which was submitted on or about May 28, 1926, and duly accepted by the Commissioner of Internal Revenue, set aside, as made under duress, and therefore illegal and void; to recover the said sum of $13,803.21, with interest thereon from May 28, 1926; and to recover from the defendant the sum of $19,148.04, with interest thereon from December 13th, 1924. At the trial plaintiff withdrew such part of the prayer of the complaint as seeks to recover the sum of $19,148.04, with interest.
It is alleged that the plaintiff filed its income and profits tax return for the fiscal year ended June 30, 1917, and paid the taxes thereon; that thereafter the Commissioner of Internal Revenue assessed additional income and profits taxes for that fiscal year in the sum of $15,686.82, together with a penalty in the sum of $16,931.52 for the making of a false and fraudulent return. On April 23, 1923, the plaintiff paid the additional taxes in the sum of $15,686.82.
A similar situation arose with respect to the filing of its income and profits tax return for the fiscal year ended June 30, 1918. The Commissioner of Internal Revenue assessed additional income and profits taxes for that year in the sum of $22,190.69, and a penalty assessment of $11,095.35 also, for the alleged making of a false and fraudulent return. The additional taxes of $22,190.69 so assessed was paid in two installments: on April 23, 1923, $3,042.65; on December 13, 1924, $19,148.04.
It is alleged that neither of these income and profits tax returns was fraudulently made or filed, but that the returns contained errors which were unknown to the plaintiff's officers when the returns were filed.
It is alleged that on or about May 28, 1926, the plaintiff was advised by the collector of internal revenue for the First district of New York that, unless the penalties were paid, he would distrain and seize the plaintiff's business to collect the same; and, by virtue of such notice and acting under compulsion and duress to protect the alleged illegal distraint and seizure, and after protesting and explaining to the Commissioner of Internal Revenue that no errors were made by the plaintiff with fraudulent intent, the plaintiff, on or about May 28, 1926, filed with the collector of internal revenue an offer of compromise of these penalties in the amount of $13,803.21, which the plaintiff tendered at the same time to the said collector in full settlement.
The answer sets up the offer of compromise as a full and complete settlement of the penalties assessed, and denies that there was any duress asserted in obtainingthe offer of compromise.
There are important questions presented by the defendant. Among them are these:
(1) Does the evidence introduced at the trial establish that the plaintiff submitted the offer of compromise under duress or as a result of illegal and unlawful coercion on the part of the defendant?
(2) Has this court jurisdiction of a suit in equity against the United States to set aside and cancel a contract in the form of an offer in compromise and acceptance thereof wherein the amount involved exceeds $10,000; the collector of internal revenue being out of office at the time the proceeding was commenced?
(3) Has this court jurisdiction of a suit in equity brought against the United States as defendant to cancel and set aside an offer of compromise which was duly accepted in accordance with the provisions of the Revised Statutes, § 3229 (U.S. Code, title 26, § 158 [26 USCA § 158]) on the ground of duress?
The view which I take of the first question makes unnecessary the consideration of the second and third.
The only evidence on which the plaintiff relies to show duress, in addition to the notice of distraint from the collector of internal revenue, is consultation which the plaintiff's president had with the collector of internal revenue about the penalties. But he was unable to fix the date of these consultations, and, unless the ...