Appeal from the District Court of the United States for the District of Connecticut; Edwin S. Thomas, Judge.
Before SWAN, CHASE, and FRANK, Circuit Judges.
This is an appeal from a judgment of the District Court holding that appellee was entitled to recover for the overpayment of taxes. The facts are set out in our opinion on a prior appeal. Hammond-Knowlton v. Hartford Connecticut Trust Co., 2 Cir., 89 F.2d 175 certiorari denied 302 U.S. 707, 58 S. Ct. 27, 82 L. Ed. 546, and need be only briefly restated here. Charles C. Knowlton died October 12, 1924. Appellee, his administratrix, filed a federal estate tax return the following year, showing a tax of $79,686.06, against which she claimed a credit of 25% (which was the maximum allowable) for estimated state inheritance taxes. She paid the difference on or before October 10, 1925. The Commissioner of Internal Revenue made a final audit of the estate, and reported on October 21, 1926, an increase in the value of certain securities. Since the rate of tax was reduced by section 322(a) of the Revenue Act of 1926, 26 U.S.C.A. Int.Rev. Acts, page 261, however, the tax was determined as $609.04 less than the amount paid. The amount of $59,155.51 thus shown to be due, was before deduction of a credit for state inheritance taxes. On April 12 ,1927, the estate paid to the State of Connecticut the sum of $73,372.21, the amount certified by the probate judge as due for state inheritance taxes. On October 16, 1931, taxpayher filed with the Commissioner a document labelled "Supplemental data on audit of return - Evidence for credit and refund", claiming a refund for the payment of state taxes. The Commissioner treated this as a claim for re fund, and rejected it because not filed within four years after payment of the tax sought to be recovered. In 1933 the taxpayer sued the Collector of Internal Revenue in the District Court and won.On the prior appeal, without finally passing on the timeliness of the refund claim, in an opinion by Judge Manton, we sustained the contention (not made in the District Court and first made in this court,*fn1 after the statute of limitations had barred any new suit against the United States) that suit against the Collector could not be maintained because the alleged overpayment resulted from the action of the Commissioner in disallowing a credit claimed by the taxpayer, rather than from the wrongful collection of the tax by the Collector. We reversed the District Court on that issue, and remanded the case for a new trial. The District court, thereupon, in 1938, permitted appellee to amend her complaint, nunc pro tunc, to substitute the United States as defendant in place of the executor of the Collector, and to reduce her original claim of $15,397.92 to $10,000, the jurisdictional limit of the District Court under the Tucker Act, 28 U.S.C.A. § 41(20), although, at the date of the filing of the amendment, the statute of limitations barred the bringing of an original suit against the United States. The District Court then found that a claim for refund had been filed within the four-year limit imposed by sections 3226 and 3228 of the Revised Statutes, 26 U.S.C.A. Int. Rev. Code, §§ 3313, 3772 (on the ground that that period began when the final payment of state inheritance taxes was made on October 16, 1930), and that taxpayer, being entitled to a credit which the Commissioner had wrongfully disallowed, should recover. On this second appeal, the United States questions the order allowing the amendment, after the running of the statute of limitations, of appellees complaint so as to substitute it as defendant in place of the collector, and the claim to $10,000. Appellant also reducing asserts taht the claim for refund was filed too late. These are the only issues in the case; there appears to be no doubt that, aside from these obstacles, taxpayer is entitled to a refund. We first consider appellant's contention that the District Court erred in permitting appellee's amendment to be filed in 1938.
Appellee, when she began her suit in 1933, was not unreasonable in believing that on the basis of Moore Ice Cream Co. v. Rose, 289 U.S. 373, 53 S. Ct. 620, 77 L. Ed. 1265, 1932, she could, without amendment, maintain her action against the Collector, for, on the same basis, on similar facts, the Court of Appeals for the Fourth Circuit later reached that same conclusion in United States v. Piedmont Mfg. Co., 89 F.2d 296, 298, 1937.*fn2 But the subsequent decision, in 1938, in Lowe Bros. v. United States, 304 U.S. 302, 305, 58 S. Ct. 896, 82 L. Ed. 1362 (which inferentially overruled the Piedmont case) makes it clear that our decision on the prior appeal was correct, i.e., that appellee could not have recovered against the Collector. The question, then, is whether the amendment, substituting the United States as defendant, "related back" so as to prevent the running of the statute of limitations.
If the suit were between private persons, it might well be regarded as having originally been brought against a defendant, sued in the wrong capacity, so as not to preclude an amendment, rectifying that error, filed after the statute had run. Missouri, Kansas & Texas R. co. v. Wulf, 226 U.S. 570, 33 S. Ct. 135 ,57 L. Ed. 355, Ann.Cas. 1914B, 134. On that analogy, were this a case of first impression, we would incline to hold that appellee's amendment effectually related back.
We are, however, here confronted with two barriers to such a conclusion: First, in the suit as originally begun, service was not formally had upon the United States, as defendant. Second, the amount for which plaintiff originally sued was in excess of the amount of $10,000, for which suit can be maintained against the United States in the federal District Court. In dealing with cases involving either of these factors, the decisions of the Supreme Court have, at times, been ungenerous to the citizen; in such cases the attitude is that the United States, as sovereign, being immune from suit, except with its consent, the courts must insist that, when it gives such consent, attaching conditions thereto, it is fatal not to comply literally with those conditions. True, the Supreme Court indicated strongly in Moore Ice Cream Co. v. Rose, 289 U.S. 373, 53 S. Ct. 620, 77 L. Ed. 1265, 1933, that such strictness was to be relaxed. But the lower courts have been admonished not to enlarge too widely upon the implications of the case.*fn3 We, therefore, conclude, reluctantly, that, if appellee is to be successful, it must be by direction of the Supreme court and not by ours. Because the matter is of general importance and not entirely free of doubt, we feel it appropriate to set forth in some detail the bases of our conclusion:
As above noted, the first obstacle to appellee's success is the fact that her suit, as originally begun, was not against the United States but against the Collector. The government asserts the doctrine that such a suit is "personal" to the Collector, and is not against the United States. The historic purpose of that doctrine, devised by the courts, was to do justice to taxpayers who, at one time, could not directly sue the government to recover wrongful exactions by its officers. A review of that doctrine's history is instructive:
Early in American jurisprudence, cases arose where a citizen sued an officer of the State or of the United States, alleging that the defendant, acting pursuant to an unconstitutional statute, had invaded or thereatened to invade the citizen's individual legal rights, as, for instnace, through seizure, by a distress warrant, of his personal property to collect a tax, or by the taking of his land, or the like. On the facts, it appeared that the government would benefit from the officer's conduct; therefore, had the defendant been the officer of a private corporation, the suit could have been brought against it as the real party in interest. There was the rub; the government could not be sued without its consent, and it had withheld its consent.*fn4 At first blush, that absence of consent seemed to be an impassable barrier to any such action. That obstacle, however, was easily and frequently surmounted by a doctrine plainly devised to avoid injustice to the citizen: The Supreme Court repeatedly held that, if the government officer's conduct, regarding him as a private citizen, would constitute an invasion of the citizen's individual legal rights, then the action would be considered as one brought against the defendant not as an officer but as a private person; if, then, he could show that he was acting in accordance with a valid statute, the suit was at an end because it was a suit against a non-consenting government and must fail; but, if he could not prove that he was acting pursuant to a valid statute, then it was held that he had no defense and must answer personally for his misconduct as an individual, notwithstanding that the government was, in fact, the real party in interest. See e.g. Cunningham v. Macon & Brunswick R. Co., 109 U.S. 446, 456, 3 S. Ct. 292, 27 L. Ed. 992; Poindexter v. Greenhow, 114 U.S. 270, 287, 5 S. Ct. 903, 962, 29 L. Ed. 185; United States v. Lee, 106 U.S. 196, 1 S. Ct. 240, 27 L. Ed. 171; In re Ayers, 123 U.S. 443, 500, 8 S. Ct. 164, 31 L. Ed. 216; Ex parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714, 13 L.R.A., N.S., 932, 14 Ann.Cas. 764; Hopkins v. Clemson Agricultural College, 221 U.S. 636, 644, 31 S. Ct. 654, 55 L. Ed. 890, 31 L.R.A., N.S., 243; Philadelphia Co. v. Stimson, 223 U.S. 605, 620, 32 S. Ct. 340, 56 L. Ed. 570, 1912; Ex parte La Prade, 289 U.S. 444, 455, 53 S. Ct. 682, 77 L. Ed. 1311, 1933.*fn5 In Davis v. Gray, 16 Wall. 203, 220, 21 L. Ed. 447, and United States v. Lee, supra, 106 U.S. at page 215, 1 S. Ct. at page 256, 27 L. Ed. 171, the court said that, in such cases, "making a state officer a party does not make the state a party, although her law may have prompted his action, and the state may stand behind him as a real party in interest."*fn6
But the Supreme Court has also held that if and when a State or the United States has waived its immunity from suit, then, in such a proceeding against its officer, he will be regarded as a formal party and the government as the real party in interest, with the result that a judgment against the officer will be res judicata in a subseqauent suit, involving the same issues, in which the citizen and the government are both formally made parties. Gunter v. Atlantic Coast Line R. Co., 200 U.S. 273, 284, 285, 26 S. Ct. 252, 50 L. Ed. 477, 19066; cf. Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 403, 60 S. Ct. 907, 84 L. Ed. 1263, 1940. For, in such circumstances, that obstacle discussed in Davis v. Gray, supra, to the use of the "real party in interest" doctrine has disappeared. Accordingly, when consent to be sued has been given, the cases would seem to be pertinent in which it has been held that a person who is not made a defendant of record, even if he is not in privity with a party to the action, may nevertheless subject himself to being concluded by way of res judicata, if openly and actively, in respect to some interest of his own, he actually assumes and manages the defense of the action. Souffront v. La Compagnie des Sucreries De Porto Rico, 217 U.S. 475, 30 S. Ct. 608, 54 L. Ed. 846; Van Kannel Revolving Door Co. v. Winton Hotel Co., D.C., 263 F. 988; Elliott Co. v. Roto Co., 2 Cir., 242 F. 941, 942; 34 C.J. 977, note 60, and 1006, note 83.
But, when, in the early cases, suits were first brought by citizens against Collectors of the United States to recover taxes paid but not due by law, the United States had not consented to be sued for such grievances. Had the Collector levied a distress warrant, such a suit could have been maintained against him for committing, as an individual, an actionable wrong invading the citizen's right, and the Collector, because he collected an unlawful tax, would have been unable to assert as a defense that he was lawfully acting as a government officer pursuant to statute. So, it was held that, where actually or impliedly threatened with such a levy, the citizen, if he paid the exaction under protest, could maintain a suit against the Collector, as an individual, for money wrongfully and involuntarily paid under compulsion, although the Collector had paid the collected funds to the Treasury. Elliot v. Swartwout, 10 Pet. 137 ,153, 155, 156, 9 L. Ed. 373, 1836; Story, J. in Cary v. Curtis, 3 How. 236, 254, 11 L. Ed. 576, 1845; Cf. Atchison, etc., R. Co. v. O'Connor, 223 U.S. 280, 287, 32 S. Ct. 216, 56 L. Ed. 436, Ann.Cas. 1913C, 1050, 1912. The taxpayer's protest was a warning not to pay to the Treasury the moneys collected. Later statutes made it the duty of the Collector to turn in the moneys to the government, regardless of the protest; there were decisions to the effect that such statutes barred suits against the collector; but subsequent decisions cleared up that doubt. Philadelphia v. The Collector, 5 Wall. 720, 731, 18 L. Ed. 614; Arnson v. Murphy, 109 U.S. 238, 241, 3 S. Ct. 184, 27 L. Ed. 920.
Included in such legislation was a statute, enacted in 1863, 12 Stat. 741, § 12,*fn7 which provided that, when judgment is procured against "a collector or other officer of the revenue for * * * the recovery of any money exacted by or paid to him and by him paid into the Treasury, in the performance of his offical duty, and the court certifies" either (1) "that there was probable cause for the act done by the collector or other officer, or (2) that he acted under the directions of the Secretary of the Treasury, or other proper officer of the Government, no execution shall issue against such collector or other officer, but the amount so recovered shall, upon final judgment, be provided for and paid out of the proper appropriation from the Treasury." In United States v. Sherman, 98 U.S. 565, 25 L. Ed. 235, 1878, (as interpreted in Moore Ice Cream Co. v. Rose, supra) it was held that the effect of the filing of such a certificate is to convert the suit into one against the United States.
Nevertheless, in Sage v. United States, 250 U.S. 33, 39 S. Ct. 415, 416, 63 L. Ed. 828, 1919, it was held that, in a suit against the United States for a tax refund, a judgment for part of the claim, entered in a prior suit against the Collector, raising the same issues, was not res judiciata. The court said that, under the statute, "the judgment is to be paid * * * if a certificate is granted by the Court that there was probable cause for his [the Collector's] act". But it said that a suit against a Collector "is personal [in] its incidents", and that "at the time the judgment is entered the United States is a stranger", because, only if the court, after the entry of judgment, finds that there was probable cause, will the certificate be issued. This thesis was explained in Smietanka v. Indiana Steel Co., 257 U.S. 1, 42 S. Ct. 1, 2, 66 L. Ed. 99, 1921; there the tax had been collected by Collector Fitch, but suit for recovery was brought against his successor, Smietanka; the court held that the suit must be dismissed, because not authorized by statute; in that connection the court said: "To show that the action still is personal, as laid down in Sage v. United States, 250 U.S. 33, 37, 39 S. Ct. 415, 63 L. Ed. 828, it would seem to be enough to observe 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. It is not to be supposed that a stranger to an unwarranted transaction is made answerable for it; yet that might be the result of the suit if it could be brought against a successor to the collectorship. A personal execution is denied only when the certificate is given." In Graham & Foster v. Goodcell, 282 U.S. 409, 430, 51 S. Ct. 186, 194, 75 L. Ed. 415, 1931, the court, in passing, rejected an argument that the United States, without substituting another remedy, could enact a valid statute depriving citizens of the right to recover from a Collector monies unlawfully collected by him, saying: "Such an action is personal and not against the United States", citing the Sage and Smietanka cases. In Bankers Pocahontas Coal Co. v. Burnet, 287 U.S. 308, 53 S. Ct. 150, 77 L. Ed. 325, 1932, it was held, on the authority of the Sage and Smietanka cases, supra, that issues determined in a suit against a Collector were not res judicata in a subsequent suit against the Commissioner.
Congress had provided, in 1924, Revenue Act 1924, § 1014, 26 U.S.C.A. Int. Rev. Acts, page 128, that a suit against the Collector for recovery of taxes unlawfully collected might be brought, regardless of whether the tax had been paid under protest, and made that provision retroactive. In Moore Ice Cream Co. v. Rose, 289 U.S. 373, 53 S. Ct. 620, 77 L. Ed. 1265, 1933, no protest had been filed, and the tax had been paid and the Collector had remitted the funds to the Treasury before the 1924 amendment was enacted; the collector, when sued, argued that the suit was personal and that the retroactive provision of that statute infringed his individual rights under the 5th Amendment. Mr. Justice Cardozo, speaking for the Court, rejected that argument, saying (289 U.S. at page 382, 383, 53 S. Ct. at page 623, 77 L. Ed. 1265): "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, not is he to pay out of his own purse. 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. * * * There may have been utility in such procedural devices in days when the government was not suable as freely as now. * * * 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."*fn8 In that opinion there was noted an aspect of the statute of 1863 which had apparently been overlooked in the earlier Sage, Smietanka, Goodcell and Bankers Pocahontas cases: The condition of the grant by the trial court of the certificate, making the judgment one against the United States, is, the court pointed out in Moore Ice Cream Co. v. Rose, "either (a) that there was probable cause for the act done by the collector or other officer, or (b) that he acted under the directions of the Secretary of the Treasury or other proper officer of the Government"; the court, after so observing, went on to say that, since, in the case then before it, the ...