United States v. Nunnally Investment Co.

delivered the opinion of the Court.

This is a suit against the United States to recover taxes for the year 1920. In that year the taxpayer, the respondent here, sold its business and all its assets to another corporation. The consideration consisted of cash and the assumption of certain of the respondent’s obligations, including federal taxes for previous years. The purchaser paid part of these taxes in 1920, the remainder in 1921 and 1922. In determining a deficiency for the year 1920, the Commissioner employed a lower basis of the assets sold than was used by the respondent. The Commissioner computed the selling price by including the full amount of the taxes which the purchaser agreed to assume. After paying the assessed tax, the respondent filed a claim for refund, alleging only that the Commissioner had understated the basis of the assets sold. In due course a suit was brought against the Collector in the District Court. A settlement was reached, under which judgment for the taxpayer was entered. In accordance with their agreement, neither party appealed.

Thereafter, the respondent filed a second refund claim, asserting that the taxes assumed by the purchaser which were not paid in 1920 were not taxable to the respondent in that year. This claim was rejected, and a suit against the United States was begun in the Court of Claims.

Nearly a quarter-century ago in Sage v. United States, 250 U. S. 33 , this Court upon full consideration announced the doctrine that the United States is a “stranger” to a judgment resulting from a suit brought against a collector, and that such a judgment is, therefore, not a bar in a subsequent action upon the same claim against the United States. This was not a novel doctrine. The result was drawn from the conception of a suit against a collector as “personal,” since he was personally responsible for illegally exacting monies under the claim that they were due as taxes. Such a “personal” remedy against the collector, derived from the common-law action of indebitatus assumpsit, has always been part of our fiscal administration. Unless the application given to this remedy by the doctrine of the Sage case has been displaced by Congress or renounced by later decisions of this Court, the judgment must stand. Concededly, Congress has not done so. And although recognition has been made of the technical nature of a suit against a collector, no support can be found for the contention that the Sage doctrine has been discarded as an anachronism. On the contrary, the rule has been reaffirmed in an unbroken line of authority.

Soon after the decision in the Sage case, the question was presented whether an action against a collector could be continued against his successor. This Court held that it could not, because the Sage case had settled that such a suit was “personal.” See Smietanka v. Indiana Steel

The Government leans heavily upon Moore Ice Cream Co. v. Rose, 289 U. S. 373 . In that case the constitutionality of § 1014 of the Revenue Act of 1924, 43 Stat. 253 , 343, providing that a taxpayer may recover an unlawful federal tax even though he paid the tax without protest, was upheld as applied to a payment without protest made prior to the enactment of the provision. In reaching this conclusion, the Court noted that, under R. S. § 989, 28 U. S. C. § 842 , a collector who acts under the directions of the Secretary of the Treasury, or other proper officer of the Government, “is entitled as of right to a certificate converting the suit against him into one against the Government ... A suit against a Collector who has collected a tax in the fulfillment of a ministerial duty is today an anomalous relic of bygone modes of thought. He is not suable as a trespasser, nor 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

The Government urges that, even though the Moore Ice Cream case was not concerned with the conclusiveness of a judgment in a suit against the collector, its rationale undermined the Sage doctrine. But such has not been the influence of the Moore Ice Cream case on the subsequent course of decisions relevant to our purpose. Tait v. Western Maryland Ry. Co., 289 U. S. 620 , decided by a unanimous Court three weeks after the decision in the Moore Ice Cream case, is incontrovertible proof that the Sage doctrine was left unimpaired. The Court there held that a judgment in a suit against the Commissioner was binding in a subsequent action against the United States and the collector. The doctrine in the Sage case was explicitly reaffirmed: “In a suit for unlawful exaction the liability of a collector is not official but personal. Sage v. United States, 250 U. S. 33 ; Smietanka v. Indiana Steel Co., 257 U. S. 1 ; Graham &, Foster v. Goodcell, 282 U. S. 409 , 430. And for this reason a judgment in a suit to which he was a party does not conclude the Commissioner or the United States. Bankers Pocahontas Coal Co. v. Burnet, 287 U. S. 308 , 311. We think, however, that where a question has been adjudged as between a taxpayer and the Government or its official agent, the Commissioner, the Collector, being an official inferior in authority, and acting under them, is in such privity with them that he is estopped by the judgment.” 289 U. S. at 627.

More recently, in Sunshine Coal Co. v. Adkins, 310 U. S. 381 , where the principle of res judicata was applied to

In summary, therefore, an imposing series of opinions has fortified the original authority of the Sage doctrine. No doubt the precise question raised in each of these cases was different from the one now before us, and each case might have been decided without reference to the prin

Even when this Court found that the common-law right to sue the collector had argumentatively been withdrawn, see Cary v. Curtis, 3 How. 236 , Congress promptly restored that right. Act of February 26, 1845, c. 22, 5 Stat. 727 . The problem of legal remedies appropriate for fiscal administration rests within easy Congressional control. Congress can deal with the matter comprehensively, unembarrassed by the limitations of a litigation involving only one phase of a complex problem. The Government itself does not now ask us to jettison the whole notion of suing a collector personally. It merely asks us to eliminate one consequence of that conception. In the field of custom duties Congress has devised a comprehensive and interrelated scheme of administrative and judicial remedies. See Act of June 17,1930, 46 Stat. 590 , 734, 19 U. S. C. §§ 1514—15 ; Freund, Administrative Powers over Persons and Property, pp. 553-60. If the doctrine of the Sage case is now to be abandoned, such a determination of policy in the administration of the income tax law should be made by Congress, which maintains a Joint Committee on Internal Revenue Taxation charged with the duty of investigating the operation of the federal revenue laws and recommending such legislation as may be deemed desirable.

Affirmed.

Me. Justice Black, Me. Justice Douglas, and Me. Justice Byenes dissent for the reasons (1) that here, un- ' like the situation in United States v. Kales, 314 U. S. 186 , the taxpayer had but a single cause of action and could have raised every issue with respect to the validity of the taxes in the earlier suit; (2) that here, unlike the situation in Sage v. United States, 250 U. S. 33 , 38-39, there had been no intervening legislation which created rights and lifted the bar of the judgment in the earlier suit; and (3) that in the earlier suit the United States became “a party to the judgment as a matter of law” (Griswold, Res Judicata in Federal Tax Cases, 46 Yale L. Journ. 1320,1342), since in these days the presence of the collector as a defendant who acts “in the line of duty” is “merely a remedial expedient for bringing the Government into court.” Moore Ice Cream, Co. v. Rose, 289 U. S. 373 , 383.