Full opinion text
BOOTH, Chief Justice. The Commissioner of Internal Revenue, upon a reeomputation of the plaintiff’s tax liabilities for the yea rs 1919, 1920, and 1921, determined that the plaintiff had overpaid its taxes for those years in the aggregate sum of $295,150.59. The commissioner credited these delermined overpayments to the liquidation of deficiency assessments which ho had made against the plaintiff for the years 1917 and 1918. The plaintiff sues to recover the amount of the credit, together with interest thereon. The plaintiff’s books were kept on the basis of a fiscal year ending November 30, and all its tax returns were made upon that basis. The plaintiff made timely tax returns for the years 1916, 1917, and 1918, a,nd paid the taxes shown to be due thereon for each of those years. On December 19, 1922, the Commissioner of Internal Revenue wrote the plaintiff that an audit of its tax returns for the years 1916, 1917, and 1918 disclosed a deficiency in its tax liability for those years of $349,631.84. The deficiency for the year 1916 was $5,-781.35. The statute of limitations for the assessment of the tax for that year having then expired, the plaintiff filed a waiver as to that year. The commissioner signed a deficiency assessment list for the years in question on February. 8,192-3, and notice and demand for the payment of the taxes so assessed, $349,631.-84, was mailed to the plaintiff on February 23, 1923. Plaintiff filed timely income and profits tax returns for the years 1919, 1920, and 1921, and the taxes shown to be due on such returns were paid. Immediately upon the receipt of the deficiency assessment notice and demand from the commissioner for the payment of the additional taxes for the years 1916, 1917, and 1918, the plaintiff prepared, and on March 5, 1923, filed, amended tax returns for the years 1919, 1930, and 1921. The amended returns were made upon the same method of computation of its tax liability for those years as the commissioner had used in his determination of deficiency assessments for the years 1916, 1917, and -1918, and showed that the plaintiff had overpaid its taxes for the years 1919, 1920, and 1921 in the aggregate sum of $306,391.68. Concurrently with the filing of its amended returns for the years in question, the plaintiff filed on Form 843 claims for credit for the full amount of the overpayment of its taxes for-the years 1919, 1920, and 1921, as shown by its amended returns against the deficiency assessments which the commissioner had made against it for the years 1917 and 1918. The plaintiff in the claim for credit pointed out with particularity the application of the overpayments to the deficiencies for each of the years 1917 and 1918, computed precisely the extent to which the credit would liquidate the deficiency assessments for 1917 and 1918, and inclosed its cheek for $37,458.81 in payment of the balance of the taxes due for those years. It also, on March 6, 1923, paid the $5,781.35 deficiency assessment for the year 1916. These payments, $37,458.81 and $5,781.35, together with the sum of '$306,391.68, the total overpayment, for the years 1919, 1920, and 1921, as shown by the plaintiff’s amended returns, totaled $349',631.84, the exact amount of the deficiency assessments for the years 1916, 1917, and 1918. Upon the receipt of plaintiff’s amended returns for 1919, 1920, and 1921 and its requests for credit of overassessments disclosed therein, the commissioner caused an investigation and audit of these returns to be made, and on May 15, 1924, acting upon the audit of a designated revenue agent filed February 12) 1924, advised the plaintiff by registered mail that its income and profits tax returns for the fiscal years 1919, 1920, and 1921 disclosed an aggregate overassessment of $295,-196.75) and on August 15, 1924, signed and transmitted to the collector a schedule of over-assessments, with instructions to the collector to enter all or any portion of said sum as a eredit upon outstanding and unpaid taxes of former years. This the collector did by crediting this sum in payment, in so far as it extended, upon plaintiff's unpaid deficiencies for 1917 and 1918. The commissioner received in due course from the collector the schedule of overassessments and the collector’s schedule of refund and credits, .whereupon the commissioner signed his authorization to the disbursing clerk of the Treasury Department February 19, 1925. This schedule did not list any amount to be refunded plaintiff. Plaintiff, on April 6, 1925, received the commissioner’s certificates of overassessments for the years 1919, 1920, and 1921. The overassessments for these years, after due allowance of abatement and eredit claims theretofore filed, together with the application of the overassessments as a credit upon the unpaid deficiencies for the years 1916, 1917, and 1918, left due and unpaid upon plaintiff’s tax liability for the years involved the sum of $11,241.09 on the 1918 tax account, and on February 4, 1925, the plaintiff paid to the collector this sum, with the added legal interest due thereon, without protest or objection. The plaintiff contends that sections 607 and 609 of the Revenue Act of 1928 (26 US CA §§ 2607, 2609), rendered void the credit made against plaintiff’s tax liability for its unpaid deficiencies for the years 1917 and 1918, and therefore under the Bonwit Teller & Company Case, 283 U. S. 258, 51 S. Ct. 395, 75 L. Ed. 1018, plaintiff is entitled to recover the full amount, with interest, of the overpayments made upon its tax returns for 1919, 1920, and 1921. ' The pertinent provisions of the Revenue Act of 1928, 45 Stat. 874, 875, are as follows: “See. 607. Any tax (or any interest, penalty, additional amount, or addition to such tax) assessed or paid (whether before or after May 29, 1928 [the enactment of this act]) after the expiration of the period of limitation properly applicable thereto shall be considered an overpayment and shall be credited or refunded to the taxpayer if claim therefor is filed within the period of limitation for filing such claim.” “See. 609. Erroneous Credits “(a) Credit against Barred Deficiency. Any eredit against a liability in respect of any taxable year shall be void if any payment in respect of such liability would be considered an overpayment under section 2607 [607]. * * •' “(c) Application of Section. The provisions of this section shall apply to any credit made before or after May 29, 1928 [the enactment of this act].” The Commissioner of Internal Revenue signed the schedule of refunds and credits on February .19, 1925', more than five years subsequent to the date of the filing of plaintiff’s returns for the fiscal years 1917 and 1918, and if this act alone determines the issue in this ease the plaintiff would he entitled to recover. Both parties to the suit concede this to be the ease. The defendant, however, conteste the right of recovery, and grounds its defense upon two legal propositions: First, it interposes the rule of equitable or quasi estoppel, and, secondly, that plaintiff’s claims for credit timely filed are tantamount to and have the effect of a consent in writing by the taxpayer to a collection of the tax after the statute of limitations had run; in other words, it is the equivalent of the written consent required by section 250 (d) of the Revenue Act of 1921, which provides in pari; that income and profits taxes due under any return made thereunder “shall be determined and assessed within five years after the return was filed, unless both the Commissioner and the taxpayer consent in writing to a later determination, assessment, and collection of the tax.” A great number of cases and authorities are cited in the briefs covering the rule as to estoppel, equitable estoppel, and waiver. We need not review them, in view of the fact that this court in a recent opinion had occasion to express its opinion upon this identical subject in the ease of Ralston Purina Company v. United States, 58 F.(2,d) 1065, 1067, decided June 6, 1932. In this ease the court said: “But for the plaintiff’s telegram to the commissioner the additional tax for the fiscal year 1918 would have been collected or a distraint proceeding for the collection thereof would have been begun prior to the expiration of the limitation period of five years after the return for L918 was filed on June 16, 1919. When the overpayment of $68,-724.90 for the fiscal year 1918 was determined on November 3, 3924, and formally allowed on March 7, 1925, the government retained $23,846.88 thereof, as the plaintiff had requested and agreed should be done, and the balance of $44,878.02 was duly refunded to plaintiff, together with interest of $17,051.-26. Plaintiff was duly notified of the action taken. It made no objection thereto' and for more than five years thereafter acquiesced in the action which had been taken. In these circumstances it is our opinion that plaintiff is estopped to assert that the government had no right to retain that portion of the 1919 overpayment equal to the additional tax duo for 1918. In Dickerson v. Colgrove, 100 U. S. 578, 580, 25 L. Ed. 618, the court said: “ 'The estoppel here relied upon is known as an equitable estoppel, or estoppel in pais. The law upon the subject is well settled. The vital principle is that he who by his language or conduct leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which, he acted. Such a change of position is sternly forbidden. ’s * There is no rule more necessary to enforce good faith than that which compels a person to abstain from asserting claims which he has induced others to suppose he would not rely on. The rule does not rest on the assumption that he has obtained any personal gain or advantage, but on the fact that he has induced others to act in such a manner that they will he seriously prejudiced if he is allowed to fail in carrying out what he has encouraged them to expect.’ “The relief of equitable estoppel is administered in favor of one who has been induced to alter his line of conduct with respect to the subject matter in controversy so as to have foregone some right or remedy which he otherwise would have taken. Under the doctrine of equitable estoppel, a person is held to a representation made or a position assumed, where otherwise inequitable consequences would result to another, who, having the right to do so under all the circumstances of the case, has, in -good faith, relied thereon. Cf. Lucas v. Hunt (C. C. A.) 45 F.(2d) 781; Louis Werner Saw Mill Go., 26 B. T. A. 141, decided May 24, 1932. Although this ease is not a suit in equity hut is one at law in assumpsit,' however an assumpsit of this kind is of an equitable nature, New York Life Insurance Co. v. Anderson (C. C. A.) 263 F. 527, and the defendant may rely upon any defense which shows that the plaintiff in equity and good conscience is not entitled to recover in whole or in part. Myers v. Hurley Motor Co., 273 U. S. 18, 47 S. Ct. 277, 71 L. Ed. 515, 50 A. L. R. 1381; section 274b, of the Judicial Code, section 398, USCA tit. 28.” In the case of Daube v. United States (D. C.) 1 F. Supp. 771, the court’s opinion, announced November 14, 1932, in part states: “The argument made on behalf of plaintiff assumes that the case-at bar is one in which the government, after action to collect the tax was barred, initiated some kind of proceedings to obtain its payment. On the contrary, the plaintiff initiated proceedings to have money which belonged to him and was held by defendant applied on the tax debt. The direction to make the application was made before the expiration of the statute of limitations. It is true that the period of limitation as to a part of plaintiff’s taxes had expired when the application was made, but that does not alter the situation. The direction to apply the overpayments on the tax still unpaid had not been withdrawn. In the ease of Stange v. United States, 282 U. S. 270, 51 S. Ct. 145, 75 L. Ed. 335, the Supreme Court) in affirming the decision of this court (68 Ct. Cl. 395), held that a waiver filed’ after the period of limitations had expired was not ineffective, and that, by reason of the waiver, money paid on a tax which was barred by the statute of limitations, could be retained by the government. Such a holding would hot have been made if the Supreme Court considered that the debt had been completely extinguished by the statute of limitations.” The facts exhibit .that on February 23, 1923, the plaintiff received notice and demand for the payment of the additional taxes assessed upon its 1916, 1917, and 1918 returns. This proceeding was within the statute of limitations; the five-year limitation for the collection of the taxes for 1917 expired March 31, 1923, i. e., one month and eight days after the notice and demand for payment had been served upon the plaintiff, and we are warranted in the assumption that the commissioner would have proceeded to collect such additional tax if the plaintiff did not take some action to prevent the same. The plaintiff’s response to the commissioner’s demand for payment appears in the amended returns which it filed for the years 1919, 1920, and 1921, showing a reduction in its tax -liability for the years 1919, 1920, and 1921, and the claims for credit filed therewith. The .amended returns disclosed a reduction in its tax liability for the years 1919, 1920, and 1921 of $306,391.68, and the claims for credits set forth in detail plaintiff’s computation of its -tax liability for the six years mentioned, .and requested that the sum of the overassessments for the years -1919, 1920, and 1921 be credited in payment of the deficiencies due and unpaid for the years 1916, 1917, and 1918. Plaintiff’s computation of its total tax liability on this date admitted that after allowing credits of its overassessments in payment of defieienej’’ taxes there still remained a balance due the government of $37,458.-81 and in payment of the same enclosed its check with the amended returns and credit claims. The amended returns and credit claims were filed on March 5,1923, twenty-six days prior to the expiration of the five-year period applicable to the 1917 return. The plaintiff’s intervention in the way just narrated clearly discloses that it was its intention and desire to liquidate its tax liability in the manner requested. Plaintiff did not want the commissioner within twenty-six days to compel it to pay in cash $260,227.35, with interest thereon, the total amount of its additional taxes determined for the years 1916, 1917, and 1918, when it claimed and had reason to believe an overassessment for 1919, 1920, and 1921 would practically absorb this liability by way of credit. The action which the plaintiff took was for the express purpose of forestalling a forced collection in the way the commissioner would have proceeded had the plaintiff’s credit claims never been filed. We say this with confidence, for the record reveals the fact that the plaintiff in the compilation of its amended returns, as to its claimed overassessments and credits, computed its tax liability upon precisely the same basis and methods of accounting resorted to by the commissioner in his determination of deficiencies for 1916, 1917, and 1918, and obviously if the method employed to determine a deficiency was sound, the precise method was available to determine overassessments. (See next to last paragraph of finding 11.) We are to presume the commissioner would have performed his duty. It was at the request and demand of the plaintiff that immediate payment of the additional taxes for 1916, 1917, and 1918 were not enforced. The plaintiff’s actions and procedure set in motion the indispensable accounting processes of • the bureau, which the plaintiff well knew exacted time in investigation of claims involving such substantial sums. The plaintiff was alone concerned over the liquidation of its total tax liability for the years involved, and was seeking a final settlement of the same, irrespective of technical procedure, and was perfectly content to submit the question to the commissioner upon the terms and conditions set forth in its claims, without raising or preferring a single objection o-f any kind or character until more than seven years thereafter. The commissioner did not institute distraint proceedings for the collection of the additional taxes for 1917 subsequent to plaintiff’s action in filing amended returns for 1919, 1920, and 1921 and credit claims concurrently therewith. On the contrary, he caused an investigation and audit to be made of plaintiff’s returns for these* years by an agent of the bureau, and on February 12, 1924, the agent reported for,the three years an overassessment of plaintiff’s taxes in the sum of $295,196.75, and later by proper and unchallenged procedure this sum of money was duly credited in payment of plaintiff’s additional taxes due and unpaid for the years 1917 and 1918. This is not all, for technically the schedule of refund and credit claims prepared by the collector and transmitted by him to the commissioner finally became effective on February 19, 1925, and of course this schedule, bearing the authorization of the commissioner to the disbursing clerk of the Treasury Department, disclosed no refund due the plaintiff. On the contrary, the certificate of overassessment mailed the plaintiff showed a balance of $11,241.09 remaining after the credit of the overassessments for 1919, 1920, and 1921, due and unpaid by the plaintiff to the government on its 1918 tax account, and the plaintiff on February 4, 3925, seven months and fourteen days after the statute of limitations for the collection of this sum had expired, paid the full amount without protest or objection to the commissioner in final liquidation of its tax liability for the years involved, and which sum is not now claimed as a part of the judgment in this case. On July 31, 1930, five years, five months, and twenty-seven days after the credits had been made as stated herein, the, plaintiff protested a.nd demanded the refund of the sum of overassessments for 3 919, 1920, and 1921, on the ground that the statute of limitations precluded the commissioner from making the same. The refund claim was denied. This suit followed on August 8, 1930, almost five and one-half years after the credits had been entered and allowed. The facts, we think, bring this case within the doctrine of estoppel or equitable estoppel, established a.nd discussed in the citations heretofore cited. The doctrine of equitable estoppel is predicated upon the fact “that it would be unconscionable to permit a person to maintain a position inconsistent with one in which he has acquiesced or of which he has accepted any benefit.” If a person is induced by another’s acts and conduct to do what he would not otherwise have done, or, as is said, if he abstained from doing what he would have done, the person inducing such conduct may not suddenly change his attitude to the injury of the other. We are unable to perceive barriers in the revenue acts which preclude the operation of the doctrine of quasi or equitable estoppel. The courts have sustained its application when properly invoked. In this ease the plaintiff in every respect acquiesced in the action of the commissioner as to its tax liability. It cquld not have done less, for its tax liability was adjusted in the way the plaintiff sought to have it adjusted. There were no protests, no claims for refund of overassessments, no demands for refund filed until just prior to the expiration of the six-year statute of limitation, when the plaintiff suddenly as an obvious afterthought concluded to assert a claim predicated upon the strict letter of the revenue laws without disavowing in the slightest degree that the entire transaction had been long since adjusted and settled in pursuance of mutual and satisfactory proceedings between it and the commissioner, irrespective of limits of time. Beyond a doubt the instant ease is a conspicuous one for the application of the doctrine, for if the plaintiff recovers, its belated change of position enables it to not only recover $295,150.59, the amount stated in its petition, but interest thereon for a period of many years, during which time it acquiesced in the settlement made and does not now assert or claim that the additional taxes assessed for the years 1916, 1917, and 1938 were unlawfully determined or liquidated in opposition to its request and demand. The established general procedure of the Bureau of Internal Revenue with respect to claims for credit is not of significance in this ease. The plaintiff attempts to show that what was done by it and the commissioner was in accord with a general procedure uniformly and universally adopted as to all claims for credit by the bureau, and that no act of the plaintiff diverted the commissioner from doing what he would have done in any event. The facts of record do not sustain the contention; the plaintiff not only did the unusual thing of acknowledging at onee liability for the deficiency taxes assessed for the years 1917 and 1918, hut within the statutory period of limitation forwarded its cheek in claimed liquidation of its total tax liability, both as to deficiencies and overassessments. 'This could not have been done under any other theory and for any other purpose, and it could not have had any other effect than to stay the immediate collection by the commissioner of the deficiencies assessed. One’s intention is deducible from conduct, and the position assumed by the taxpayer in this case clearly indicates that it was not only, desirable but extremely important from its relationship to a tax liability that the commissioner accept at once its method of discharging the same, irrespective of established procedure or what might or might not have been done in the absence of such conduct upon its part. If an ex parte telegram dispatched by a delinquent taxpayer requesting departure from an established system in the bureau— which request was granted — is sufficient to invoke the principle of equitable estoppel, and this court has held that it is, it is difficult indeed to withhold the application of the rule in a case where the taxpayer files a more ■ detailed and formal request for credit, which on its face acknowledges a tax liability, points out a way in which it can be paid, requesting that the way pointed out be adopted, and at the same time sends a cheek for what is an admitted balance due upon the account as stated by the taxpayer itself. We think the taxpayer knew what it did would forestall immediate collection of the deficiencies and that it was so done for that express purpose. We say this deliberately, for the record discloses that what was done was approved and acquiesced in by the taxpayer for years, and no attempt was made to repudiate the position thus assumed coincident with the transaction, or even afterwards until it had almost passed beyond the six-year statute of limitation. The facts in this case distinguish it from the principles involved in the case of Bowers v. New York & Albany Lighterage Co., 273 U. S. 346, 47 S. Ct. 389, 71 L. Ed. 676, and the case of Russell v. United States, 278 U. S. 181, 49 S. Ct 121, 73 L. Ed. 255. The difference, we think, is marked. Herein we have the government refraining from distraint or suit for the collection of the taxes because of the request of the plaintiff contained in a proposed settlement prior to the expiration of the statute of limitations, and the additional fact that the plaintiff not only consented to the application of the credit after the expiration of the statute, but voluntarily paid a balance then due but barred by the statute and not included in the judgment herein sought. In our opinion sections 607 and 609 of the Revenue Act of 1928, heretofore quoted, apply in cases where the commissioner acts independently of the taxpayer in the absence of a request, or conduct upon the part of a taxpayer, to proceed differently. The sections relied upon are not, we think, conclusive in cases where a taxpayer of his own volition and at his own request seeks and consents within the statutory period to have overassessments credited against deficiencies after the statúte has run, and does not thereafter, with full knowledge of his rights, contest the allowance nor challenge the legality of the proceedings until a period of time just preceding his right to proseeute a claim at all. In Bigelow on Estoppel (6th Ed.) p. 30, a citation in defendant’s brief, appears the following: “This completes estoppel proper, in substantive law, and brings us to what may be called ‘quasi-estoppel.’ A party will not be permitted to assume inconsistent positions, and where one has an election between inconsistent courses of action he will be confined to that course which he first adopts.” In Walker v. Commissioner, 23 B. T. A. 1, 6, the opinion in part states: “The taxpayers were on a cash basis of accounting, and in line with the statute above quoted, they did return the profits from this sale ‘in the gross income for the taxable year in which received by the taxpayer,’ proportioning the profit in accordance with the quoted Regulation. Conceding, for the argument, that the statute and regulation afforded the taxpayers the election of treating the obligations of the purchaser as the equivalent of cash, the taxpayers otherwise elected; they may not now change that election, particula/rly since the result would be to throw all of the profit into a year where collection is barred by limitations. Lucas v. St. Louis National Baseball Club (C. C. A. 8) 42 F.(2d) 984; Rose v. Grant (C. C. A. 5) 39 F.(2d) 340; Alameda Investment Co. v. McLaughlin (C. C. A. 9) 33 F.(2d) 120; Holmes on Federal Income Tax (6th Ed.) 1278.” (Italics ours.) The doctrine of estoppel is invoked and commented upon in the case of Pittsburgh Terminal Coal Corporation v. Heiner (D. C.) 56 F.(2d) 1072, 1076, Prentice-Hall, 1932, pp. 664, 667. The district judge, in delivering the opinion of the court, said: “In our opinion, the notice given by the Commissioner in the instant matter was a sufficient compliance with section 274 (a) of the Act of 1926 (26 USCA § 1048). But, even if we were to admit error in this respect, it still would seem thaktlie complainant is in no position to appeal to a court of equity. By filing its petition for review it affirmed the sufficiency of the notice as to itself. It maintained that position for five years and thus delayed the Commissioner in the collection of the tax due for that period. Had it not filed its petition for review after the notice, or even had it asserted its mistake in filing it within, a reasonable time after doing so, the complainant’s bill, looking at it only from the standpoint of the equities involved, would have had considerably more weight than at present, but after accepting the notice as sufficient, and thus disarming the Commissioner, and then delaying for a period of five years before alleging the insufficiency of the notice, it plainly should be held to he estopped from assuming a new position and so obtaining further delay.” We desire also to call attention to the opinion of the Supreme Court in Lewis v. Reynolds, 284 U. S. 281, 52 S. Ct. 145, 146, 76 L. Ed. 293, with reference to a matter which has not been presented. In that ease, an assessment was made, after the expiration of the period of limitations, of an income tax upon the property of an estate in charge of an administrator, and upon this tax the commissioner applied money received through an overpayment of the taxes by the administrator resulting from certain deductions allowed. The lower court held that the case was controlled by section 322 of the Revenue Act of 1928 (26 USCA § 2322) and referring thereto said [(C. C. A.) 48 E.(2d) 515, 516] : “The above quoted provisions clearly limit refunds to overpayments. It follows that the ultimate question presented for decision, upon a claim for refund, is whether the taxpayer has overpaid his tax. This involves a redetermination of the entire tax liability. While no new assessment can be made, after the bar of the statute has fallen, the taxpayer, nevertheless, is not entitled to a refund unless he has overpaid his tax. The action to recover on a claim for refund is in the nature of an action for money had and received, and it is incumbent upon the claimant to show that the United States has money which belongs to him.” The Supreme Court stated that it agreed with the.conclusion reached by the court below, as stated in the above quotation, and said further: “While the statutes authorizing refunds do not specifically empower the Commissioner to reaudit a return whenever repayment is claimed, authority therefor is necessarily implied. An overpayment must appear before refund is authorized. Although the statute of limitations may have barred the assessment and collection of any additional sum, it does not obliterate'the right of the United States to retain payments already received when they do not exceed the amount which might have been properly assessed and demanded.” The only difference between the ease at bar and the one from which these quotations are made is that in the Lewis Case, supra, the additional assessment was made for the -same year as that upon which the overpayment had boon made. In the ease at bar the additional assessment was made for a different year. In both there was a reaudit, and the assessment and application of the money received from the overpayment were made" after the statute of limitations had run. Sections 607 and 609 of the Revenue Aet of 1928 are not referred to in the opinion rendered in the Lewis Case, but it would seem that the Supreme Court regarded money which came lawfully into the hands of the eonimissioner by reason of the original assessment simply as an item of credit on the general account between the taxpayer and the government and that, although assessment and collection “of any additional sum” might be barred by the statute of limitations, his taxes could be re-audited and the overpayment applied thereon. We think the petition should be dismissed. It is so ordered. WHALEY and WILLIAMS, Judges, concur. Not for publication.
GREEN, Judge (concurring). I concur in the foregoing opinion but think that it might bo well to make some further observations upon matters to which no direct reference has been made therein. Necessarily this will have to be done at the risk of some repetition in order to present continuity of thought. While the case presents some quite interesting questions of law, its determination must rest largely upon the findings of fact made by the court which, with the exception of finding 23 (not included in the court commissioner’s report), are accepted by both parties to the ease. The plaintiff filed a request for some additional findings, but evidently it was concluded they were not material as no reference was made thereto in argument. The last finding (finding 23) was made by the court aud is one of ultimate fact upon all of the evidence in the case. In my opinion it precludes any recovery on behalf of the plaintiff for reasons hereinafter stated. In connection with this finding it should be stated that the defendant called as a witness on its behalf the collector of the district in which the plaintiff resided and much argument has been presented on both sides, both written and oral, as to what construction should be placed upon the testimony of the collector. Any questions arising upon the argument as to ho-w his testimony should be interpreted are necessarily settled by the findings.- The foregoing findings and opinion show that the taxes for the years 1916, 1917, and 1918 were audited by the commissioner and the plaintiff was advised of the results of this audit and the manner in which they had been calculated; that shortly thereafter the commissioner proceeded to assess additional taxes for these years accordingly and a little later sent plaintiff a notice and demand for the payment thereof; that the plaintiff thereupon filed amended returns for the years 1919, 1920, and 1921 computed on the same .basis and showing overassessments for whieh it made claims for credit, the amount of whieh it requested be applied in part to the satisfaction of the taxes now in controversy. Plaintiff’s computation showed $37,458.81 due the government for whieh a cheek was inclosed. The collector was advised of this proceeding and thereafter, as finding 13 recites, “took no further action toward the collection of the balance of the tax deficiencies outstanding against the plaintiff for the fiscal years ended November 30, 1917 and 1918, respectively, until the claims for credit were acted upon by the Commissioner of Internal Revenue.” The finding further recites that this was in accordance with the general practice of the office of the collector in such cases. To this finding the plaintiff made no exception and it is not now claimed by any one that the additional findings requested by plaintiff with reference to the collect- or’s testimony are in any degree material. Upon this condition of the record the question of what construction should be placed upon the collector’s testimony and what weight should be given it can safely rest. Further than this on the controverted point the court did not go in making its findings and its reasons for so doing appear to me to be quite obvious. In this particular ease, where the determination of the matters in controversy rested wholly with the commissioner’s office, what the collector did is quite important but what he considered was the effect of the regulations and what he, thought was the proper construction to place upon them, are, as it seems to me, of no importance whatever, lie was under the direction and orders of the treasury, which direction and orders were given by the commissioner’s office, and the government is not precluded by any ideas he might have had about the matter. The commissioner could, at any time áfter the taxes had been assessed and proper notice given, have directed the collector to proceed with the collection thereof. What the prior rulings of the office had been may be a factor in determining such ultimate facts as are stated in finding 23, but it is the province of the court to determine the weight thereof under the circumstances. Departmental rulings have often been inconsistent and ambiguous and not always in accordance with law. I do not think it is necessary to review those which have been cited on behalf of the plaintiff any further than to say that I do not entirely agree with the construction placed thereon by counsel for defendant and think that all questions in connection with their application to the case are completely settled by the findings of the court. In a case like the one now before the court where the motives of the parties thereto are a very material factor in its determination, the court properly takes into consideration in determining the ultimate facts not only the facts concerning which direct testimony is given but all of the circumstances of the case which bear thereon and throw light upon the motives of the parties. When the evidence was so reviewed, the majority of the court has found in effect that the officials of the commissioner’s office were lulled to sleep by the actions of the plaintiff in concurring in the basis of computing the amount of over-assessment, in submitting for defendant’s consideration a computation thereof, in requesting that the amount thereof so far as necessary be applied upon the payment of the settlement of the taxes in controversy, and filing a claim for such a credit. The court has found that the plaintiff understood very well that time would be taken for such computation and this was evidenced by the fact that after the computation had been made the plaintiff promptly settled the balance although the statute of limitations had expired. Where an account is hanging in the balance, and one party says to another with reference to certain items of credit that they should be applied on another item,owing to the first party, and the second party says in effect, “That is right and I ask that you so apply it,” then and in such a ease the minds of the parties have met as completely as if they ha.d signed and sealed a written agreement; and that, as the majority views it, is the situation whieh is presented here. The understanding was complete from the time the plaintiff responded to the notice and demand of payment and told the commissioner’s office in substance that it was in entire aceord with their view of the ease and wanted its taxes to be settled accordingly. In my opinion it is useless to speculate as to what the defendant through the eommissioner might have done if the actions of the plaintiff and the circumstances of the case had been different. The argument seems to be that the commissioner's office would have taken no different action if the plaintiff had not substantially agreed to pay the taxes when they were computed. Of this we have no testimony, no findings, nor do I know how it would be possible to introduce competent evidence as to what any individual might do under circumstances which never existed. Under the understanding between the parties as found by the court, the defendant could safely pigeonhole the ease until the office had time to properly compute and determine the amount of credit to he given the plaintiff and give no thought to the matter for the time being. The ease was completely settled; there was no occasion for any haste in relation to it, no reason on the part of the commissioner’s office to doubt that the plaintiff would make good the understanding between them, which its subsequent payment of the balance of the taxes (for which no recovery is now sought) clearly showed existed on its part as well as on the part of the commissioner’s office. The commissioner was induced by the acts and conduct of the plaintiff to take the course which he followed and had the right to expect the payment according to the understanding. When the plaintiff, years later, changed attitude, the law, as stated in Dickerson v. Colgrove, 100 U. S. 578, 580, 25 L. Ed. 618, quoted in the majority opinion, is peculiarly applicable. In such cases the plaintiff, having led the defendant to expect payment, could not subject the defendant “to loss or injury by disappointing the expectations” upon which the defendant acted. “There is no rule more necessary to enforce good faith than that which compels a person to abstain from asserting claims which -he has induced others to suppose ho would not rely on.” It should he carefully kept in mind that in the foregoing opinion of the majority the matter of estoppel is not based merely upon the fact that plaintiff filed a claim for credit. Conceding for the sake of the argument that this alone would not be sufficient, there is still no occasion to discuss that matter. It is the actions of the plaintiff as a whole and all the circumstances of the case as shown by the evidence taken in connection with such actions, which form the basis of the findings in the ease and upon which the decision of the court, is founded. One other matter ought to he mentioned. It seems to be contended by counsel for plaintiff in argument that it is impossible for a taxpayer whoso taxes were originally properly assessed and computed to make such a payment after the time the statute of limita^lions has run without having the right to sue and recover it back. Reasoning from the statute, it is argued that any such payment is void and in effect that there are absolutely no exceptions to this rule. I cannot believe lhat Congress ever intended by the provisions of the statute which are relied upon to provide that a taxpayer who went to the commissioner’s office and said to the commissioner, “Some taxes have been properly assessed against me. The time of limitation for collection through your office has expired, but I feel that I am ethically bound to pay these taxes,” and thereupon makes payment to the commissioner, could the next day, upon motives not quite so honorable, bring suit to recover the payment. It may be said that such is the lang uage of the act but it is not difficult to find cases in which the literal application of statutes has not been held to apply to eases which obviously were not in contemplation by Congress at the time the statute was enacted. A conspicuous example is often broughl to the attention of this court. In the most sweeping terms, seetion 3477 of the Revised Statutes (31 USCA § 203) declares all assignments of claims upon the United States to be void unless made after the allowance thereof. Yet the Supreme Court, in Goodman v. Niblack, 102 U. S. 556, 561, 26 L. Ed. 229, held that a voluntary assignment for the benefit of creditors was “such a meritorious act” that it did not come “within the evil which Congress sought to suppress” by the statute referred to and was valid as to a claim against the government. The construction contended for by the plaintiff would lead to such grotesquely absurd results that I hardly think anyone would claim that it was so intended by Congress, notwithstanding it may be within the literal application of the language of the statute. It is said that at the time when the provision under consideration was placed in the statute, the House bill originally had a provision modifying it somewhat so that it would not apply to cases where claims for credit had been filed but that this was taken out in conference. Whatever this may show with reference to the mere filing of a claim for credit, I think it has no application here because the whole ease of defendant, in my opinion, is founded upon the series of.transactions that included a request for the application of the overassessment upon the taxes in controversy; and which upon the whole of the evidence as shown by the findings, constitute an understanding and agreed ment between the parties. It is, however, not necessary to pass on the question just considered in order to make a decision in the instant case. ” If the plaintiff is estopped at all, it is estopped from claiming any benefit under the sections upon whieh it relies. It is one' of the features of quasi or equitable estoppel that it prevents the operation of some provision of law whieh might otherwise be invoked in favor of the party estopped. I am dearly of the opinion in concurrence with the majority of the court that this estoppel exists and that the plaintiff therefore cannot recover.
LITTLETON, Judge (dissenting). I cannot concur in the majority opinion dismissing plaintiff’s petition on the ground .that it is estopped to claim. the overpayments for 1919, 1920, and 1921 credited against an additional tax assessed for 1917 and 1918, whieh credit was allowed and made after the expiration of the statute of limitation within whieh the tax for 1917 and 1918 could be collected. The plaintiff is held es-topped to question the legality of the credit of overpayments against the tax assessed for prior years because it filed claims for credit in whieh it alleged certain overpayments for 1919, 1920, and 1921, made certain statements therein, and filed amended returns for those years. Prom a consideration of the circumstances under which the claims for credit were filed and of the statements contained therein, the stipulation of facts, the testimony introduced, the various statutes and regulations with reference to the filing of claims for credit, the decisions of the Treasury Department, and the long-continued practice of the department and the collectors of internal revenue, I am of the opinion that the doctrine of estoppel is not applicable and should not be invoked in this case. Throughout this case it should be kept in mind that each taxable year stands alone, Burnet v. Sanford & Brooks Co., 282 U. S. 359, 51 S. Ct. 150, 75 L. Ed. 383, and that the rights and liabilities of the taxpayer and the Government with respect thereto are fixed by the statutes, whieh prescribe the procedure to be followed, the time within whieh certain acts of the taxpayer or the Commissioner of Internal» Revenue in respect of a particular taxable year or years shall be taken, and the effect thereof upon the rights of the taxpayer or the government. .Section 252 of the Revenue Act of 1918, approved February 24,1919 (40 Stat. 1085), was the first statute providing for a system of crediting overpayments for one taxable year against a tax that may be due for a different taxable year, and said section was the first provision of law providing for the filing of a claim for credit. Prior to that time sections 3220 and 3228, Revised Statutes (see 26 USCA §§ 149, 157 and notes), provided only for the filing of claims for refund and authorized the commissioner to remit, refund, and pay back taxes erroneously or illegally assessed or collected. Prior to the enactment of the Revenue Act of- 1918 the Treasury Department had no system for filing of claims for credit by taxpayers or for the making of credits of overpayments of taxes for a particular period against taxes due for another period. Article'267, Regs. 33, Revised, relating to the Revenue Act of 1916 (39 Stat. 756), as amended by the Revenue Act of 1917 (40 Stat. 300), discloses the only practice in force in the Treasury Department with reference to the payment of claims. That article provided that upon allowance of claims for taxes overpaid warrants would be issued in favor of the party entitled to the money and would be sent by the Treasurer to such party, "but if the claimants are indebted to the United States for taxes, they must be paid before the warrants are delivered.” This article was predicated on the Act of March 3,1875,18 Stat. 481 (31 USCA § 227), which authorized the Treasury Department to withhold monies due if the person entitled thereto should be indebted to the United States, until the termination of a suit by the government to recover such claimed indebtedness. Section 1006 of the Revenue Act of 1918 (26 USCA § 704) provided that the commissioner, with the approval of the Secretary of the Treasury, shall make all needful rules and regulations for carrying the provisions of this act into effect. Subsequent acts contained the same provision. Prior to the enactment of that act the commissioner had prescribed separate forms, 46 and 47, to be used in making a claim for refund or a claim for abatement, respectively, and had made certain regulations with reference to the filing thereof and as to the information to be contained therein. In Regs.'45, issued and promulgated under the Revenue Act of 1918, the Treasury Department prepared and issued another form, known as Form 47-A, to be used by taxpayers in making claims for .credit, which form prescribed the manner in whieh sueh claim should be prepared and made, and the information to be contained therein. Article 1034, Regs. 45, provided that: “Any amount of income, war-profits, or excess-profits tax paid in excess of that properly due shall bo credited against any such taxes due from the taxpayer under any other return. To obtain such credit taxpayers should proceed as follows: (1) Where the credit demanded is equal to or less than any outstanding assessment of tax, a taxpayer desiring to obtain such credit shall file with the collector for the district in which his original return was filed a claim on Form 47-A, which shall bo sworn to and shall contain the following statements: (os) Business engaged in by claimant; (6) character of assessment; (e) amount of tax paid and for what taxable year; (á) portion of tax under (c) claimed as a credit; (e) unpaid assessment against which credit is asked and for what taxable year; and (/) all facts regarding the overpayment.” (Italics supplied.) Said article also provided that where the amount claimed as a credit is greater than the outstanding assessment of tax, the taxpayer desiring’ to obtain such credit and refund ol the balance should file a claim for refund, Form 46, in addition to the claim for credit, and that all the facts regarding the total overpayment should be stated in the claim for refund and a reference made therein to the claim for credit. Article 1035, Regs'. 45, provided for the procedure to be followed by the commissioner and the collector in making tho credits which was tho same as the procedure followed in this case. The 1921 regulations further provided that: “Under no circumstances will a taxpayer be entitled to credit for an alleged overpayment of tax prior to the allowance of such credit by the commissioner. An attempt to take a credit prior to such allowance shall not be held to be tho filing of a claim under section 252 of the Revenue Act of 1921.” See article 1035, Regs. 62, and T. D. 3154, April 11, 1921. The revenue act had provided that if any tax remained unpaid after the date when it was due and for ten days after notice and demand by the collector there should be added as a part of the tax the sum of 5 per cent, of the amount due and unpaid, plus interest at 12 per cent, a year, from the time it became due until paid, but that as to any amount which was made the subject of a bona fide claim for abatement the 5 per cent, should not be added and the interest from the time the amount was due until the claim is decided should be at the rate of 6 per cent, a year. Article 1035, above mentioned, relating to credits of overpayments against taxes due, provided that: “The filing of a claim for credit of a tax due under another return shall be subject to the samo rules with respect to the addition of interest arid penalties as if the taxpayer had filed a claim for abatement of the tax against which credit is desired.” Articles 1003 and 1006 of Regs. 45 related to interest and penalties where payment was not made within ten days after notice and demand and where a claim for abatement was filed. On December 8, 1921, the Commissioner of Internal Revenue, with the approval of tho Secretary of the Treasury, issued and published Treasury Decision No. 3260, 5 C. B. 243, relating to adjustments by credit, in which it was stated that: “Reduction of internal-revenue assessments and adjustments of overpayments of revenues will hereafter be accomplished * * * on the basis of an application submitted by a taxpayer on form * “ 'f 47-A, together with appropriate supporting evidence to be filed in the office of ’the collector of internal revenue of the district in which the tax is assessed.” This provision is contained in article 1033-A, Regs. 62, under the revenue act of 1921. Such Treasury decision contained other provisions relating to abatements and refunds, and the manner in which they would be accomplished, as had been prescribed by article 1034 of Regs. 45, theretofore issued. Article 261, Regs. 33, revised, under the Revenue Act of 1916, as amended by the Revenue Aet of October 3, 1917, which regulation was issued before the statute and the regulations had authorized a system of credits, provided that: “The filing of a claim for abatement of a tax alleged to have been erroneously assessed does not necessarily operate as a suspension of the collection of the tax, or make it any less the duty of the collector to exercise due diligence to prevent the collection of the tax being jeopardized. ITo should, if necessary, collect tho tax and leave the taxpayer to his remedy by claim on Form 46 [for refund].” In or about January, 1922, the Commissioner of Internal Revenue rendered and published a decision under section 252 of the Revenue Act of 1921 (42 Stat. 268) and article 1034 of Regs. 45 and 62, being I. T. 1373, I—1 C. B. 318, in which it was held that: “The filing of a claim for credit does not necessarily operate as a suspension of the collection of tax or make it any less the duty of the collector to exercise due diligence to prevent the collection of the tax from being jeopardized. He may, if he considers it necessary, collect the tax and leave the taxpayer to his remedy by a claim for refund.” This decision, as well as others herein mentioned, was furnished to collectors of internal revenue. Shortly prior to making the above-men.tioned decision the commissioner had made and published a decision, I. T. 1333, I — 1, C. B. 305, in which he held that the running of the statute of limitation against the government, as a result of which the government would be precluded from bringing suit or proceedings against the taxpayer, placed the tax in jeopardy. Thereafter, in or about July, 1922, the commissioner made and published a decision known as I. T. 1446, 1-2 C. B. 218, under sections 250 of the Revenue Acts of 1918 and 1921 (40 Stat. 1082; 42 Stat. 264), and article 1109 of Regs. 45 and 62, in which he held that when a tax had been assessed within the five years provided by section 250 (d) of the Revenue Act of 1921 the tax so assessed could be collected by means other than a proceeding in court after the expiration of such five-year period. Said decision was as follows: “The income-tax return of the company was filed February 27, 1917. Notice and demand for additional income taxes due for the year 1916 was mailed by the collector on March 1 and received on March 2, 1922. “Second notice and demand for the tax was sent on March 10, 1922. The collector has notified the corporation that if the taxes are not paid he will distrain its property. “Under the provisions of section 250 of the Revenue Act of 1921 taxes for years prior to_ 1921. must be determined and assessed within -five years after the return was filed, and no suit or proceeding for the collection of the tax may be begun after the expiration of such five years. It is contended that in this case neither of these requirements of the statute has been met, and request is made that the collector be instructed to refrain from distraining the property. “This office is of the opinion that * * * section 250 (d) of the Revenue Act of 1921 * * * refers only to judicial proceedings for the collection of such taxes and not to the summary proceeding by means of distraint authorized by sections 3187 to 3209 of the Revised Statutes of the United States (see 26 USCA §§ 116-138). “As the additional taxes in question were placed on the assessment list under date of February 24, 1922, it will be seen that such taxes were determined and assessed within the five-year period of limitation provided in section 250 (d) of the Revenue Act of 1921, and that the action of the collector in demanding payment after the expiration of such' five years was entirely proper. If payment of the additional assessment of taxes was not made within the prescribed time, the collector may proceed by means of distraint to collect such taxes.” It was the practice of the Treasury Department to obtain a waiver of the statute of limitation by the taxpayer or secure a bond in eases where it was believed collection of the tax would be jeopardized by delay. See section 250 (d) of the Revenue Act of 19-21 providing for waivers of the statute of limitation, and the collector’s testimony hereafter referred to. After January, 1922, claims for abatement, credit, and refund, theretofore required by the regulations and rulings of the Treasury Department to be made on separate forms provided for that purpose, were combined into one form, No. 843, which was the form used'by plaintiff in this .case. After January, 1922, taxpayers making a claim indicated thereon whether it was a claim for abatement, credit, or refund, and filled in onl3T that portion thereof which was required in such cases. I shall next point out certain matters contained in the claims for credit filed by the plaintiff, with reference to the statements printed thereon by the Treasury Department and inserted therein by the plaintiff, as required by said form and the regulations and rulings of the Treasury Department. The claims were headed: “Claim For “Abatement of Tax Assessed “X Credit against Outstanding Assessments “Refund of Taxes Illegally Collected “Refund of Amounts Paid for Stamps” The letter “X” was inserted by the plaintiff to indicate the nature of the claim. The claim also contained the following printed statement: “Important. Not acceptable unless complete^ filled in.” After showing the name of the taxpayer and its place of business, the claim contained the following-; the italicized statements, the dates, and the amounts shown being inserted in the claim by the plaintiff: “This deponent, being ■ duly sworn according to law, deposes and says that this statement is made on behalf of the taxpayer named, and that the facts given below with reference to said statement are true and complete : 1. Business in wliicli engaged: Manufacture of cotton sheeting. 2. Character oi assessment or tax: Income and access profits iaoc. Period Year Prom Not. 3o| 1919 To “ 27! 19.20 8. Amount of assessment or stamps purchased ................................. $248,089.85 4. Reduction of tax liability requested (income and profits tax).............. 195,030.41 5. Amount to be abated.............................. 6. Amount to bo refunded (or such greater amount as is legally refundable)............ 7. Dates of payment (if statement covers income tax liability, items 8-11, inclusive, must be answered) 2/15/21-5/15/21-8/15/21-11/15/21. 8. District in which return, if any, was filed: Massachusetts, Boston. 9. District in which unpaid assessment appears: Hone unpaid. 30. Amount of overpayment claimed as credit .................................. 195,630.41 11. Unpaid assessment against wiiich credit is ashed: period from — -Fiscal year ended Dec. 1, 1917...................... 21,341.98 “Deponent verily believes that this application should be allowed for the following reasons: As per statement attached hereto/’ The remaining statements which were written into each of the claims for credit by the plaintiff are set forth in finding 11. The practice of the Treasury Department was that "no credit will be .allowed after the expiration of the statutory period of limitation applicable to the filing of a claim therefor except upon one or more of the grounds so set forth in a claim.” See T. D. 4265. The registered letter of May 15, 3924, from the commissioner to the plaintiff, mentioned in finding’ 14, Exhibit I to the stipulation of facts, setting forth the result of the commissioner’s determination upon the claims for credit allowing the same to the extent of $295,196.75 and rejecting them to the extent of $11,241.09, contained the following statement : "Under no circumstances should payment of the amount rejected be made until a bill is received from the collector of internal revenue for your district.” At the time the aforementioned registered letter of May 15, 3924, was mailed to plaintiff the statute of limitation relating to the collection of the tax assessed for the fiscal year ending Novernlier 30, 1918, had not expired and did not expire until June 16, 1921, for the reason that plaintiff’s return for said fiscal year ending November 30,1918, was filed June 16, 3919. Notwithstanding this, the government delayed until February 19, 1925, to mal?e the credit, which date was eight months after the overpayments had been determined. The reason for this, I think, is plain. The government was not relying upon plaintiffs claims for credit as an agreement to a settlement of the rax accounts for the several years, irrespective of any statute of limitation,- for the Treasury Department had long prior thereto rendered and published its opinion that the filing of a claim for credit would not operate as a suspension of collection o