Cappellini v. Commissioner

GReen,

dissenting: In the main I find myself in accord with what has been said in the foregoing dissenting opinions, except that I believe that in certain cases this Board not only can, but must, pass on constitutional questions. I believe that to be imposed upon us by Congress.

The majority opinion is based, in part, upon a “well settled principle that one can not invoke the aid of a statute conferring jurisdiction and at the same time attack the validity of the statute so invoked.” It is also based upon a rule of law which “seems to be equally well established that one can not take advantage of a statute and then question its constitutionality.” I am unable to see how either of these rules or principles is applicable in this case. As to the first rule, it should be stated that neither the parties nor the writer of the prevailing opinion have questioned our jurisdiction. As to the second rule, I believe it to be applicable only where the party litigant has invoked the statute and then questioned its constitutionality. In this case the petitioners did not invoke section 280. They could not. The respondent invoked the section by proposing to collect the transferor’s tax thereunder. It is not enough to say that the transferee might have paid the amount claimed and brought suit for refund. That does not relieve him of section 280 nor the collection which has been made thereunder. Once the Commissioner of Internal Revenue, using the means provided in section 280, has started to collect from the transferee, all subsequent proceedings, whether they be before this Board or a court of appeals or in a suit for refund, have their foundation in the section and their validity depends upon its validity, for from that section and that section alone does the Commissioner derive his right to collect from the transferee, without suit, the liability of the transferor. But for section 280 there would have been no such proceedings. Under such circumstances I do not see how it can be said that these petitioners may not challenge the validity of the section. They could not choose the method of enforcing payment which the Commissioner was to use. They could not prevent him from proceeding under section 280. They have taken no action giving rise to a waiver or estoppel. They have accepted the jurisdiction of this Board and challenged *1294the validity of the statute under which the Commissioner proposes to collect from them. I am accordingly of the opinion that neither of the principles upon which the prevailing opinion is based has any application to these cases.

The Committee Reports would indicate that it was intended that section 280 do away with other means of assessment, collection, refund or credit. If this be the law, and the transferee brought a suit for refund, since his right to refund would depend upon section 280, it might, with equal propriety, be held that he could not in that proceeding, test the constitutionality of the section. If the suit for refund is not under section 280, still the determination by the Commissioner and his assessment and collection of the liability are based upon section 280 and many of the transferee’s rights are bound up therein and again there is presented the question of his right to challenge the constitutionality of the section.

Some of the results which follow from an application of the section have already been pointed out. There are others which I believe worthy of brief mention. Some of the most serious of these arise from the fact that this Board is not a court. Its decision that the transferee is liable is not a judgment or decree and can not serve as a basis for suit for contribution from the cotransferees. Whether in a suit by other creditors, our decision and payment thereunder may be set up as a defense by the transferee, is, to say the least, an open question.

There are situations where the Government is not a preferred creditor and in such cases a unique situation arises. If in such a case a transferee is held liable to the full amount of the corporate distribution to him and there are other creditors of the corporation, how can he escape his liability to the other creditors for an amount equal to their pro rata share of the excess paid by him to the Government over and above the Government’s share as an ordinary creditor ? Likewise how can he compel contribution by his cotransferees for such excess ?

By this section those secondarily liable are subjected to a proceeding to collect from them as if they were primarily liable, when in fact the liability is only secondary and the primary liability has not been first established.

It is true, of course, that the courts have been very loath indeed to hamper the collection of revenues, but there is a limit beyond which Congress, by legislation, and the Commissioner, by enforcement, may not go. It seems to me that this section deprives citizens of so many of the rights which the courts have so jealously protected for them, that it has gone beyond the limit, particularly if, since it prescribes collection from transferees, the collection is not of a tax but of a debt. See Fong Yue Ting v. United States, 149 U. S. 698.