Porto Rico Fertilizer Co. v. Sancho

MORTON, Circuit Judge

(dissenting),

There is no disagreement as to the general scheme of the statute under discussion. Income taxes imposed by it fall into two classes (1) those shown to be due on the face of the return, and paid voluntarily without objection or protest, (2) those collected on deficiency assessments. In regard to the latter there are careful and adequate provisions. (Sections 57 and 76(a).) If deficiency assessments are objected to the taxpayer may appeal to the Board of Review; if the Board of Review decides against him he must pay, and may sue in the courts to recover back the alleged illegal exaction.

The present case does not relate to deficiency taxes; it concerns only taxes which were voluntarily paid without protest and deals only with claims for refund. The statute provides very specifically for the return of overpayments without any requirement of objection or protest against the original payment. (Sections 53, 64.) These sections apply to voluntary overpayments, made presumably by mistake on the part of the taxpayer. It also authorizes and directs the Treasurer to repay erroneous or illegal collections and to report annually to the Legislature his transactions under this authority. (Section 75.) While no express provision is made therefor it is not doubted that a person who has voluntarily overpaid his tax may apply to the Treasurer under these sections for a refund; and it is clearly the Treasurer’s duty if overpayment is established to make a proper refund. The crucial question is who is to determine whether there has been overpayment of a tax voluntarily paid, i. e. to pass on such claims for refund.

The statute makes only one reference to them. (Section 76(b)*). The present case *404involves the correct construction of this subsection. At first reading it appears to be a limitation or restriction on suits for the recovery of overpayments, already authorized elsewhere in the statute. It says in effect that no suit shall be maintained in any court until a claim for refund shall have been filed with the Treasurer and on appeal with the Board of Review “according to the provisions of law in that regard, and the regulations established in pursuance thereof.” The difficulty is that there are no provisions of law authorizing suits in court for the recovery of taxes voluntarily paid or empowering the Board of Review to deal with claims for refund on appeal from the Treasurer, or with taxes which have been paid. I agree with my brother Bingham that Section 76(a) relates only to deficiency assessments and payments, and is of no assistance. The reference to suits in court and to appeals to the Board of Review although in the negative form might possibly have been construed as conferring by implication the jurisdiction now held to exist in the Board of Review and in the Courts if these references had not been limited as they are very expressly by the last clause in the sub-section. It seems clear that provisions assumed to be in the statute are absent. My brethren elaborate Section 76(b) to include by construction what they suppose the omitted provisions to have been. Even so there remain unsolved difficulties. If the Board of Review decides in favor of the taxpayer what happens? The Supreme Court of Puerto Rico evidently felt that the mistake was the other way, i. e. in allowing Section 76(b) to stand, when the provisions to which it refers were elided. The Supreme Court accordingly held that with respect to voluntary overpayments the taxpayer was in the hands of the Treasurer on matters of refund, “if the decision of the Treasurer is against him he cannot appeal from the same to Courts of justice.” This does not seem to me an unreasonable solution of the difficulty which confronted them Indeed I incline to think it was right. Under the view, taken in the majority opinions, every tax which has been voluntarily paid without protest may be reopened on claims for refund at any time within four years and resettled de novo in court proceedings. This is in fact what is approved by the decision in the Yabucoa Sugar case before us. Greater consideration is shown to voluntary overpayments than to deficiency assessments. This is a wide departure from the view of the Supreme Court of Puerto Rico, and from anything to be found in the statute in express terms at least. It has often been said that in matters of local law the opinion of that court is not to be set aside unless clearly wrong. As I have said I incline to think the Supreme Court of Puerto Rico was right; I certainly do not think it was clearly wrong.

In the Fertilizer Company case there was clearly an overpayment of tax which it was the Treasurer’s duty to recognize and refund. His refusal to do so is on the facts before us a clear breach of his statutory duty. No attempt is made to defend it. The Fertilizer Company had no right to bring suit on its claim for refund. Its remedy appears to be a suit against the Treasurer for mandamus to compel him to perform his statutory duty. Lane v. Hoglund, 244 U.S. 174, 37 S.Ct. 558, 61 L.Ed. 1066; Dismuke v. United States, 297 U.S. 167, 56 S.Ct. 400, 80 L.Ed. 561.

In the Sugar Company case the claim for refund rested on changes in income ór deductions made by the taxpayer after the tax had been voluntarily paid. They were not approved by the Treasurer. It does not appear that the Sugar Company’s claim was established beyond fair doubt nor that it was clearly the duty of the Treasurer to accept it.

I think both judgments should be affirmed. In the case of the Fertilizer Company with leave to bring further proceedings by mandamus or otherwise as advised.

“No suit or proceeding shall be maintained in any court for the recovery of any income tax or excess-profits tax alleged to have been erroneously or illegally assessed or collected, or of any pecuniary penalty claimed to have been collected •without authority, or of any sum alleged to have been excessive or in any manner *404wrongfully collected until a claim for refund or credit has been duly filed with the Treasurer and with the Board of Review and Equalization on appeal, according to the provisions of law in that regard, and the regulations established in pursuance thereof.”