Appeal from orders of the United States District Court for the Northern District of New York.
Before SWAN, AUGUSTUS N. HAND, and PATTERSON, Circuit Judges.
AUGUSTUS N. HAND, Circuit Judge.
This is an action brought by the United States against Oswego Falls Corporation, as principal, and Massachusetts Bonding and Insurance Company as surety to recover upon an indemnity bond in the amount of $12,000 given by them to the Collector of Internal Revenue to stay the collection and to secure the payment of a balance of $7,642.98 alleged to be due from the principal upon an unpaid assessment of income taxes for the year 1919.
On May 11, 1920, the Oswego Falls Pulp and Paper Company (hereinafter called the Paper Company) made a return for its 1919 income in which it reported a tax liability of $12,232.50. On the same date it filed a claim for credit on its 1919 tax liability of an alleged overpayment of its 1917 taxes in the amount of $7,642.98. On September 11, 1920, and January 11, 1921, it made payments aggregating $4,589.52 on account of the assessment, leaving an unpaid balance of $7,642.98.
On January 30, 1922, the Oswego Falls Corporation (hereinafter called the Corporation) was organized pursuant to an agreement of consolidation between the Paper Company and two other companies. On July 30, 1923, the Corporation, styling itself successor to the Paper Company, filed a claim for refund of $29,604.44, and on September 12, 1923, filed another claim for refund of $40,100.66 paid by the latter company as income taxes for the year 1917, both of which claims were rejected.
On October 4, 1927, the Corporation was notified by mail that the Commissioner had determined a deficiency of $27,612.09 as its liability for taxes for 1917, as transferee of the assets of the Paper Company, unless the Corporation should file a petition with the United States Board of Tax Appeals within sixty days from the date of mailing for a redetermination of this deficiency.
On November 18, 1927 the Corporation and its surety Massachusetts Bonding and Insurance Company delivered a bond of $12,000 to the Collector on which the present action was brought. The bond recited that the Corporation was a transferee of the Paper Company and as such was liable for certain obligations including income and profit taxes assessed against the Paper Company; that an assessment for income and profit taxes for 1919 had been made against the Paper Company, of which $7,642.98 was then unpaid; that the Paper Company had filed a claim to have an alleged overpayment of income and profits taxes for the year 1917 applied as a credit against the $7,642.98 unpaid asessment for 1919 and that the question of income and profit taxes of the Paper Company for the year 1917 had been or was about to be taken before the Board of Tax Appeals for review. The bond further recited the following:
"Whereas, this bond is conditioned upon the payment of the amount of assessment stayed by this bond, less the amount of any overassessment of 1917 income and profits tax as determined by the United States Board of Tax Appeals.
"Whereas, this bond is further conditioned that that amount stayed by it less the amount of any overassessment of 1917 income and profits tax as determined by the United States Board of Tax Appeals, together with interest thereon as provided by law, will be paid upon notice and demand issued subsequent to the date of decision of the United States Board of Tax Appeals in the matter of 1917 income and profits tax * * *
"Whereas, the * * * Collector of Internal Revenue now stands charged with the responsibility for the collection of the total unpaid balance of said assessment amounting to Seven thousand six hundred forty two dollars ninety eight cents ($7,642.98), with interest thereon as provided by law, and the said principal desires to stay the collection of the amount hereinbefore specified and in the manner stated and desires to protect the said Collector of Internal Revenue or any of his successors in office with respect to the matter of the collection of the amount so stayed, together with interest thereon; and
"Whereas, it appears that the amount of this bond is sufficient to cover the amount so assessed for which stay and collection is desired, with interest thereon as provided by law.
"Now, Therefore, if the said principal shall well and truly observe and comply with all of the provisions of law and regulations made pursuant thereto for the payment of the amount so assessed and stayed and shall duly pay to the said Collector of Internal Revenue or to any of his successors in office on notice and demand therefor the amount so assessed and stayed, less the amount of any overassessment of 1917 income ...