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June 30, 1955


The opinion of the court was delivered by: LA Buy, District Judge.

The plaintiff, who paid certain taxes and penalties for the years 1937 and 1938 on an alleged "transferee" basis, seeks to recover the penalties assessed thereon pursuant to Section 2707(a) of the Internal Revenue Code, 26 U.S.C.A. § 2707(a). It is alleged that plaintiff was an officer, director and stockholder of the William J. Nugent Contracting Company, Inc. and West Shore Stevedores, Inc., during the calendar years in question; that certain employment excise taxes under the Social Security Act were assessed against these corporations for the years 1937 and 1938; that due to certain litigation by the State of Wisconsin concerning the applicability of these taxes to the aforesaid corporations and also due to the fact that the corporations became insolvent prior to the termination of said litigation, the aforesaid employment excise taxes were never collected by the United States from these corporations; that during 1941 and 1942 penalties provided under Section 2707(a) were levied against the plaintiff and two other individuals, all former officers of the two corporations; that the other two individuals are deceased and left insolvent estates; that in 1949 plaintiff tendered an offer of compromise in the amount of $1,000 for the tax liability, which offer was rejected and the tendered amount applied toward the payment of the tax liability due; that on or about July 1952 plaintiff, having paid the tax liability in its entirety, filed claims for refund, which claims were rejected by the Commissioner.

The parties have filed cross-motions for summary judgment. The plaintiff avers that the government's answer denies only the ultimate fact of alleged illegal assessment and the allegation that the claim in question does not exceed $10,000. The government has filed a motion to dismiss on the ground the court lacks jurisdiction herein since the claim exceeds the sum of $10,000; and, in the alternative in the event jurisdiction is found to exist, for a summary judgment in its favor.

Jurisdiction is alleged to exist under Section 1346(a)(1), 28 U.S.C.A. which provides that the district courts shall have original jurisdiction of any action for the recovery of internal revenue tax or penalties if the claim does not exceed $10,000 and where the claim exceeds that amount when the collector of internal revenue by whom said tax or penalty was collected is dead or not in office when the action is commenced. The government's motion to dismiss is predicated on the contention that the first count of the complaint prays judgment for $6,426.66 including interest for the year 1937 and the second count prays judgment for $6,290.50 including interest for the year 1938 resulting in a sum total of $12,717.16, including interest. The total amount claimed being therefore in excess of $10,000 the action cannot be maintained against the United States since the collector who received the payment is still holding office. It is also urged that the taxpayer had heretofore treated his liability for the years 1937 and 1938 as one "unified and integrated" matter and he cannot now split his claim and contend that since his total liability for each year, taken separately, is less than $10,000 that he may split his claim into two component parts in order to meet the jurisdictional requirements. Further, despite the requirement that each tax year stand on its own footing and that a separate claim on the prescribed form be filed for it, only one issue is in dispute which will affect both years and the taxpayer could have stated his claim in one count instead of two.

Two cases have been cited by the parties on this issue: Sutcliffe Storage & Warehouse Co. v. United States, 1 Cir., 1947, 162 F.2d 849; and Oliver v. United States, 9 Cir., 1945, 149 F.2d 727, 728.

In the Oliver case, the Court of Appeals reversed an order of the district court dismissing the claims for want of jurisdiction where the action was for refund involving separate years, in no one of which did the claims exceed $10,000, but the aggregate of said claims for the several years did exceed that sum. In its opinion holding that the district court had jurisdiction, the court said:

    "We are unable to see anything in the statute which
  warrants the contention that Congress intended to
  impose upon the small claimants, including taxpayers,
  such an expensive procedural absurdity. Our whole
  system for recovery of tax overpayments treats as a
  separate unit the single calendar or fiscal tax year.
  Heiner v. Mellon, 304 U.S. 271, 274 [275], 58 S.Ct.
  926, 82 L. Ed. 1337, and cases cited. The term
  `claim' is a statutory one for the recovery of taxes
  illegally collected. 26 U.S.C. § 3772, 26 U.S.C.A.
  Int. Rev.Code, § 3772. Nothing in our income tax law
  considers a taxpayer as having a single aggregate
  claim of his several claims for refunds for several
  different tax years."

The Sutcliffe case, supra, involved compensation for the use of the same real estate over different periods of time. The Court of Appeals held [162 F.2d 852] that "there is no reason why a plaintiff cannot make all his claims on a running account at one time without piecemeal presentation" and held that the plaintiff could not split his claims. It also made reference to the Oliver case, supra, stating that it asserted no doctrine to the contrary since

    "* * * The court definitely assumed the existence
  of a separate claim for federal income taxes for each
  year involved. * * *"

The court is of the opinion the motion to dismiss directed to the jurisdiction of this court to entertain the present complaint is without merit and should be overruled.

The purpose of the summary judgment rule is to permit expeditious disposal of cases where there is no material issue of fact. Cross-motions for summary judgment do not warrant the granting of summary judgment where decision of a question of law by the court depends upon inquiry into surrounding facts and circumstances and the court should refuse to grant summary judgment until facts and circumstances have been sufficiently developed to enable the court to be reasonably certain that it is making a correct determination of the question of law.

The plaintiff's motion is predicated on the grounds (1) that the application of Section 2707(a) regarding assessment and collection of penalties is illegal and wholly void when applied to a "direct levy" such as the federal unemployment taxes involved herein, In re Haynes, D.C. Kan. 1949, 88 F. Supp. 379; and (2) that as a matter of law there is no "willful failure to pay" on the part of the plaintiff within the meaning of Section 2707(a) of the Internal Revenue Code. The motion is based upon its amended complaint, affidavit of the plaintiff as to the truth of the matters contained therein, and the documents prepared by him in connection with his claim for refund of the penalties which are attached to his complaint.

The government's motion for summary judgment is supported by an affidavit of Kurt W. Melchior, one of its attorneys, to which affidavit are attached certain documents, being letters and some correspondence exchanged by the taxpayer, his counsel, and the Treasury Department. The plaintiff has not objected to the documents attached to said affidavit nor does it challenge the truth of the matters contained therein, but asserts that they constitute a group of "self-serving documents" which indicate on their face that plaintiff's employer did not fully explain his contention on the tax items but such a position "is not in the least detrimental to this plaintiff's argument * * *".

Copies of the refund claims and statements accompanying same are attached to the amended complaint. In said statement it is contended by the taxpayer that he is not and never has been liable for the assessments of the penalty provided for in Section 2707(a) since

  "nonpayment of the unemployment taxes herein involved
  was not `without reasonable cause' inasmuch as the
  applicability of the unemployment tax to the
  activities of the corporation, of which he was an
  officer and director, was being litigated and it was
  not until such litigation was settled that taxpayer
  knew that the unemployment tax applied to the wages
  paid by said corporation. At the time this fact was
  ascertained the corporations were in straightened
  financial condition ...

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