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RUBEL CORP. v. RASQUIN

January 26, 1942

RUBEL CORPORATION
v.
RASQUIN



The opinion of the court was delivered by: ABRUZZO

ABRUZZO, District Judge.

The defendant has made four motions to dismiss and for summary judgment dismissing the complaint in the four actions brought by the plaintiff.

The motion in the action numbered 1472 to recover $356,944.84 shall hereinafter be referred to as Motion No. 1. In the action, numbered 1473, to recover $368,268.22, the motion shall hereinafter be designated as Motion No. 2. The motion in the action numbered 1549 to recover $276,534.09 shall be referred to hereinafter as Motion No. 3; and the motion in action 1559 for $326,394.50 shall be designated for the purposes of this decision as Motion No. 4.

 Motion No. 1.

 The complaint, relating to this motion, seeks to recover $356,944.84 applied by the defendant to satisfy an assessment for additional Federal income taxes for the fiscal year ended March 31, 1926, against The Rubel Corporation, a corporation organized and existing under and by virtue of the laws of the State of Delaware, and hereinafter referred to as the Delaware Corporation.

 It appears and the complaint alleges that for the year ended March 31, 1926, the Delaware Corporation filed with the Collector of Internal Revenue for the First District of New York at Brooklyn, New York, on or about September 15, 1926, a consolidated income tax return, including therein the income and deductions of its wholly owned subsidiary, the New York Corporation, the plaintiff herein.

 On September 20, 1929, the Commissioner of Internal Revenue mailed to the Delaware Corporation a notice of deficiency for the said fiscal year ended March 31, 1926; but none to the New York Corporation. Pursuant to that notice, the Delaware Corporation filed its petition with the New York Board of Tax Appeals seeking a redetermination of the said deficiency.

 The New York Corporation was erroneously joined as a petitioner in that appeal, according to the complaint, and it is set forth that the United States Board of Tax Appeals had no jurisdiction of the proceeding since no notice of deficiency had been sent to the New York Corporation.

 On September 13, 1939, pursuant to a stipulation signed solely by counsel for the parties, and not by the Secretary of the Treasury of the United States, or the Under-Secretary or an Assistant Secretary, the United States Board of Tax Appeals entered its decision in this proceeding, declaring a deficiency against the Delaware Corporation in the amount of $218,982.86 for the fiscal year ended March 31, 1926. The said deficiency with interest, amounting to $356,944.84, was collected by the defendant from the plaintiff, the New York Corporation.

 Paragraph IX of the complaint in the proceeding No. 1473 alleges that certain payments in the total sum of $2,096,585 were made by the plaintiff to the defendant, pending proceedings before the United States Board of Tax Appeals, which were evidently held in a suspense account to be applied against the legally and finally determined income tax liability against the plaintiff.

 It is further alleged that when the assessment of $218,982.86, together with interest, totalling $356,944.84, was made against the Delaware Corporation, the defendant satisfied the same by using the moneys deposited by the plaintiff with the defendant as set forth in paragraph IX of the complaint.

 The plaintiff contends that in applying the said sum, the action of the defendant was illegal and erroneous; and that the plaintiff, the New York Corporation, is entitled to a refund, in that the United States Board of Tax Appeals was without jurisdiction of its proceeding; that the said deficiency was determined against the Delaware Corporation, a taxpayer other than the plaintiff; and if the deficiency were deemed to be that of the plaintiff, its assessment and collection in September 1939 was barred by the statute of limitations.

 Plaintiff filed on or about June 17, 1940, and July 27, 1940, its original and supplemental claims for refund. Based upon the claim set forth in the aforesaid complaint, the Commissioner of Internal Revenue rendered his decision disallowing and rejecting said claim on August 23, 1940.

 Motion No. 2.

 This motion is related to the action numbered 1473 which seeks to recover $368,268.22 with interest, part of certain amounts deposited with the defendant and erroneously and illegally applied to satisfy an assessment for additional Federal income tax for the fiscal year ended March 31, 1929, made against the Rubel Corporation, a corporation organized and existing by virtue of the laws of the State of Delaware. The problem involved is analogous to that of Motion No. 1.

 Motion No. 3.

 In connection with this motion, the complaint alleges that the plaintiff is entitled to a refund of $276,534.09, with interest, the said sum being part of certain moneys deposited by the plaintiff with the defendant and applied by the latter erroneously and illegally to satisfy an assessment for an additional Federal income tax for the fiscal year ended March 31, 1927, made against the plaintiff.

 The complaint further alleges that on September 13, 1939, the United States Board of Tax Appeals entered its final decision in its proceeding No. 52,763 upon a stipulation signed solely by counsel for the petitioner and counsel for the said Commissioner; and not by the Secretary of the Treasury of the United States, or the Under-Secretary or an Assistant Secretary. The decision was:

 "Ordered and decided: That there are deficiencies in income tax for the fiscal year ended March 31, 1927, of $173,132.81 and for the fiscal year ended March 31, 1928, of $210,068.37.

 "(Signed) C. R. Arundell, Member."

 On the same day, the United States Board of Tax Appeals entered its final decision in its proceeding No. 77,807, upon a stipulation signed only by counsel and not by the Secretary of the Treasury of the United States, or the Under-Secretary or an Assistant Secretary, which was:

 "Ordered and decided: That there is no deficiency, penalty or overpayment in income tax for the fiscal year ended March 31, 1927.

 "(Signed) C. R. Arundell, Member."

 Thus, there appears to be two final decisions of the United States Board of Tax Appeals rendered on the same day, by the same member, involving the same taxpayer and the same subject matter; one of which holds that there was a deficiency for the year ended March 31, 1927; the other holding that there was no deficiency for said fiscal year ended March 31, 1927.

 Paragraph IX of this complaint is similar to that of the complaint in Motion No. 1, setting forth the moneys deposited with the defendant and held in a suspense account. On November 3, 1939, the defendant used part of that money to satisfy the deficiency claimed to be due.

 In paragraph XI of the said complaint, it is alleged that the action of the defendant in applying the said sum of $276,534.09 as set forth in paragraph IX was illegal and erroneous and that the said sum is refundable as an overpayment to the plaintiff, in that the determination of the deficiency by the United States Board of Tax Appeals was null and void as well as the assessment; and that there is no legally determined additional tax liability for the fiscal year ended March 31, 1927.

 Based on these facts, the plaintiff contends it is entitled to a refund; as well as on the ground that the final decisions of the United States Board of Tax Appeals are mutually repugnant and contradictory. The amount sought to be recovered is $173,132.81, with interest, aggregating the sum of $276,534.09.

 On September 20, 1940, a claim for refund was duly filed with the Commissioner of Internal Revenue for the said sum of $276,534.09, setting forth the grounds for the refund. On October 3, 1940, the Commissioner disallowed and rejected the claim.

 Motion No. 4.

 The complaint related to Motion No. 4 seeks to recover $326,394.50 with interest, the said sum being part of the moneys paid by the plaintiff to the defendant at various times and erroneously and illegally applied by the defendant to satisfy an assessment for additional Federal income tax for the fiscal year ...


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