263 F. 527 | 2d Cir. | 1920
We are reminded that the tax in question is not “in any proper sense an income tax,” but is an excise on plaintiffs conduct of business in a corporate capacity. Anderson v. Forty-Two Broadway Co., 239 U. S. at page 72, 36 Sup. Ct. 17, 60 L. Ed. 152. This truth does not affect the present litigation, for we are concerned, in respect of the major proposition argued, not with what income is, but what shall be, deducted from an admitted gross income.
It is here admitted that, judged by any standard familiar to business men, the securities of plaintiff were worth at the end of 1910 several million dollars less than they were at the beginning of that year. It is further admitted that, not only was it the business custom of plaintiff to revalue its securities .in accordance with the market annually, but that such procedure was and is a reasonable business conservatism, and a frequent, though not. universal, statutory requirement.
Under this taxing act the question is not strictly whether depreciation in market value is a loss, but whether, when Congress specifically includes within “losses actually sustained within the year, * * * a reasonsFle allowance for depreciation of property,” depreciation does not become a loss, no matter what persons other than Congress may think on the subject.
We have no doubt that this loss in market value is depreciation. The word means, by derivation and common usage, a “fall in value; reduction of worth”; and it seems to us to require mention only to prove that the average citizen, for whom statutes are assumed to be made, would judge depreciation of his own bonds by the opinion of the public, however thoroughly convinced of the ultimate wisdom of holding onto what had depreciated.
This definition, as applied to securities, has been accepted in National Bank v. Baker, 27 Ill. App. at page 359, and the view of the scope of the word has been judicially indicated in Von Baumbach v. Sargent, etc., Co., 242 U. S. at page 524, 37 Sup. Ct. 201, 61 L. Ed. 460, where it is said that calling the taking of ore from a mine depreciation would be “a strained use of the term * * * as generally understood in business circles.” The plain inference is that the phrase is used in the statute in a sense that would be generally understood in business
That a taxpayer’s suit of this sort is essentially an action of assumpsit for money had and received has been too long settled to admit of doubt. Philadelphia v. The Collector, 5 Wall. 720, 18 L. Ed. 614; Cary v. Curtis, 3 How. 236, 11 L. Ed. 576; Bailey v. Railroad Co., 22 Wall. 604, 22 L. Ed. 840. Any assumpsit of this kind is of an equitable nature and of comparatively modern growth. Its history is classically set forth by Story, J., in Cary v. Curtis, supra, and by Selden, J., in McKyring v. Bull, 16 N. Y. 297, 69 Am. Dec. 696.
Ingrafting equitable principles on the common-law action has giyen rise to many anomalies, and just what defenses may be interposed under a general denial is a matter of great doubt. See an admirable summary in 5 Corp. Jur. p. 1405. In this case plaintiff urges that defendant has in effect been permitted under the general denial to use set-offs not pleaded, and indeed forced into the case by the trial court itself.
That an unpleaded set-off is not available under the general issue in assumpsit is certainly true. Cases cited above. It is equally true that, if we are to apply the New: York Code of Civil Procedure even as laxly as is required by R. S. § 914 (Comp. St. § 1537), defendant has been given the benefit of issues not tendered'by him.
But the section of the Revised Statutes only requires us to apply the Code “as near as may be,” and we are of opinion that the decisions of the Supreme Court in tax cases like this have established the rule that the burden is on the plaintiff to show that the tax collected, or some part of it, was not due (Anderson v. Farmers’, etc., Co., 241 Fed. 329, 154 C. C. A. 202), and that this must be done in a suit where the defendant may give in evidence anything showing or tending to show that no debt was due to the plaintiff when the action began, no matter whether such absence of indebtedness depends on the legality of the tax exacted or the existence of another tax right against the plaintiff enforceable through the party defendant.
It may be admitted that this is illogical and is based merely on a spirit of convenience. The same course was pursued in Crocker v. Malley, 249 U. S. 223, 39 Sup. Ct. 270, 63 L. Ed. 573, 2 A. L. R. 1601 (March 17, 1919), and the only comment upon it by Holmes, J., is that—
“If tlie United States retains from the amount received by it the amount that it should have received, it cannot recover that sum in a subsequent suit.”
We therefore think that the anomalous practice pursued below is required by federal authority. The only limitation upon it is not suggested by anything in this record. In assumpsit for money received, the plaintiff has long been able under the common counts to introduce
The point now suggested as novel is that in all these decisions the dividends allowed by the insurers to their policy holders were voluntarily credited or paid to them, as elected; whereas, by virtue of the present statutes of New York, such allotment, dividend, or apportionment is imposed on companies such as is this plaintiff.
We fail to see that the distinction entails a difference, for-purposes of taxation, at all events. It may be assumed that such obligatory apportionment or allotment gives to the policy holder proprietary rights in the company’s surplus. Equitable, etc., Society v. Brown, 213 U. S. 25, 29 Sup. Ct. 404, 53 L. Ed. 682. But the sole question here is, not what the policy holder owns, but what the insurance company gets, and it gets no more or less when it acts fairly of its own motion and when such fairness becomes a statutory virtue. We adhere to our former ruling on this subject.
“No one could contend that technically a judgment of a District Court in a suit against the collector was a judgment against or in favor of the United States.” Sage v. United States, 250 U. S. 33, 39 Sup. Ct. 415, 63 L. Ed. 828 (May 19, 1919).
Consequently no question of allowance of interest or costs as against the sovereign arises and the suit is to be regarded (except as affected by certificate of probable cause under R. S. § 989 [Comp. St. § 1635]) as against a private person. We are not advised by this record as to whether any certificate has been issued, and our decisions in Treat v. Farmers’, etc., Co., 185 Fed. 760, 108 C. C. A. 98, and New York Mail, etc., Co. v. Anderson, 234 Fed. 590, 148 C. C. A. 356, are applicable.
It is also urged that interest should not have been allowed as complained of, because the Commissioner signified his willingness to re
“On the bearing of any * * * writ of error * * * the court shall give judgment after an examination of the entire record before tbe court, without regard to technical errors, defects, or exceptions which do not affect the substantial rights of the parties.”
We do not think that these words give, or were intended to give, the power suggested; but, if the statute does mean what plaintiff asserts, it is to that extent unconstitutional under Slocum v. New York, etc., Co., 228 U. S. 364, 33 Sup. Ct. 523, 57 L. Ed. 879, Ann. Cas. 1914D, 1029.
Judgment reversed, with costs, and new trial ordered.