The opinion of the court was delivered by: FRANKEL
This is an action for refund of withholding and Social Security taxes for the third quarter of 1971 paid under protest by the plaintiff. The United States has counterclaimed for taxes assessed but not paid for earlier periods extending back to 1965. The action is now before the court on the Government's motion for dismissal of the plaintiff's complaint for failure to state a claim upon which relief can be granted, and for judgment on the pleadings on its counterclaim. This has been treated as a motion for summary judgment on the opposing claims, as was announced in the court's memorandum of November 1, 1977. Further submissions were received in response to the court's memorandum of December 8, 1977. The Government's motion is now ripe for decision and is granted in all respects.
The dispute grew out of acts of embezzlement by the taxpayer's accountant, one Robert Runyon, who diverted to his own use funds intended for payment of the taxpayer's employer's withholding and social security tax liabilities and failed to file the required federal tax returns as he was commissioned by the taxpayer to do. These defalcations took place over the period from 1965 through 1972, and the plaintiff was unaware of them as they occurred. It is undisputed that the I.R.S. had no actual knowledge of the plaintiff's failure to remit these taxes. In November of 1972, the plaintiff discovered that the taxes had gone unpaid, and reported this information to the I.R.S. It is agreed that plaintiff filed its withholding tax returns for the years 1965 through 1972 in two installments, in December 1972 and January 1973. The Commissioner then made assessments against the plaintiff for those years.
The taxpayer entered into an installment payment agreement with the I.R.S. in 1975. The taxpayer also asserts that an I.R.S. agent gave oral assurances that if the taxpayer complied with the terms of the payment agreement, no further enforcement of the assessments would be attempted. The Government disputes the making of any oral agreement not to sue, but argues in any event that it would not be bound by it. The written agreement, which was renewed in 1976, contained the following statement under the heading "Other Conditions or Information":
"PAYMENTS MADE UNDER PROTEST & ADVISEMENT.
COURT ACTION TO BE INITIATED.
PAYMENTS MUST BE APPLIED TO TAX PRINCIPLE ONLY -- NO PAYMENT TO BE APPLIED TO INTEREST OR PENALTY."
These hand printed words were apparently inserted by the taxpayer. The taxpayer made the payments required under the agreement until the commencement of this action.
Plaintiff proceeds on the theory that an action for a refund is essentially a common law action for money had and received, and is therefore governed by general equitable principles. The specific equitable principles relied upon by plaintiff are laches, estoppel, and one styled "negligence." The sole authority cited in support of the asserted equitable nature of tax refund claims is Stone v. White, 301 U.S. 532, 81 L. Ed. 1265, 57 S. Ct. 851 (1937), in which it was held that the United States could interpose a defense of equitable recoupment to bar an action for a refund by trustees where a change in interpretation of the relevant law shifted the tax liability from the trustees to the beneficiary, long after the trustees had paid the tax and the statute of limitations had run as against the beneficiary. However, Stone v. White has not been applied outside the special context of equitable recoupment and in no sense provides authority for the sweeping proposition asserted by plaintiff. Freewheeling invocation of equitable principles in tax cases has been authoritatively condemned. United States v. California, 332 U.S. 19, 39-40, 91 L. Ed. 1889, 67 S. Ct. 1658 (1947); Babcock & Wilcox Co. v. Pedrick, 212 F.2d 645 (2d Cir. 1954), cert. denied, 348 U.S. 936, 99 L. Ed. 733, 75 S. Ct. 355 (1955).
In the present case the applicable statute unambiguously provides that when no return has been filed, an assessment may be made at any time. 26 U.S.C. § 6501(c)(3). There is no provision for mitigating circumstances such as the plaintiff would invoke.
The specific principles relied upon by the plaintiff are no more availing than its general argument. Laches -- in this case the delay in assessing the tax from the time it was due -- cannot provide a basis for affirmative relief. Northern Pacific Ry. Co. v. United States, 277 F.2d 615, 624 (10th Cir. 1960). Moreover, laches is not available against a party acting within an applicable statute of limitations. United States v. Mack, 295 U.S. 480, 489, 79 L. Ed. 1559, 55 S. Ct. 813 (1935). Since no returns were filed by the plaintiff when the taxes were due, the statute of limitations was the open-ended one of 26 U.S.C. § 6501(c)(3). Finally, laches cannot be invoked against the United States. United States v. California, supra, 332 U.S. at 39-40; United States v. Summerlin, 310 U.S. 414, 416, 84 L. Ed. 1283, 60 S. Ct. 1019 (1940); Guaranty Trust Co. ...