
    THOMAS P. STOTESBURY v. THE UNITED STATES.
    [No. 14558.
    Decided April 16, 1888.]
    
      On the Proofs.
    
    'The Commissioner of Internal Revenue transmits to the Secretary of the Treasury a schedule of claims for the refunding of taxes erroneously assessed “which have leen examined and allowed, and are transmitted to the Secretary for his consideration and advisement.” The Secretary advises against their payment. A subsequent Commissioner accordingly rejects them.
    
    I. An award of the Commissioner of Internal Revenue for the refund of a tax illegally assessed can not become final and irrevocable before it has passed out of his control by being transmitted to the First Comptroller. While it remains in the office of the Commissioner it is subject to his revision, correction, or revocation.
    II. When a report comes back to the Commissioner’s office with the advice of the Secretary of the Treasury the final decision is still to be exercised by the Commissioner.
    •III. The regulations prescribed by the Secretary of the Treasury were properly within the discretion reposed in him by the Revised Statutes (§ 3220).
    
      The Reporters' statement of the case:
    This case was referred to the court by the Secretary of the ‘Treasury after more than six years had expired since the claim first accrued. The defendants maintained that the Secretary had no power to're-open the,case and make the reference, and .that the claim was barred by the statute of limitations.
    
      ■The court found a number of facts which the claimant deemed material, but which were not involved in the decision. The facts upon which the decision was placed were the following:
    I. The copartnership of Harris & Stotesbury, of which the claimant is the surviving partner, was, during the years 1865, 1866, and 1867, engaged in the business of manufacturing sugar in Philadelphia, Pa.; and during said years, and from and during January, 1865, to and including December, 1867, said firm was assessed and taxed by the proper officers of internal revenue of the United States the sum of $67,335.85 as “ sugar refiners,” and such assessments and taxes were duly paid to the United States by said firm, commencing, for the first payment, March 3, 1865, and ending, with the last payment, on 27th of January, 1868. The whole amount paid by said firm for and on account of such assessments and taxes was the said sum of $67,335.85.
    II. On the 19th day of December, 1870, the said firm appealed to the Commissioner of Internal llevenue, and presented a claim to him against the United States for the refunding of the said sum of $67,335.85, so assessed and paid, on the ground that the taxes had been erroneously assessed aud collected.
    III. On the 26th day of July, 1871, having examined said claim, the Commissioner signed aud transmitted to the Secretary of the Treasury the following schedule:
    No. 99. — A schedule of claims for the refunding of taxes erroneously assessed and paid, which have been examined and allowed, and are transmitted to the Secretary of the Treasury for his consideration and advisement, in accordance with regulations dated January 12,1866.
    District. Claimants. Amount. Disposition. Reason of disposition. 1st Penn... Harris & Stotesbury. Harris, Heyle & Co.. $67,335.85 26, 642.96 Allowed.... Were not sugar refiners within the definition of section 75 of an act to provide internal revenue, etc., approved July 1, 1862, as amended by the act approved Mar. 3,1863.
    I hereby certify that the foregoing claims for the refunding of taxes, erroneously assessed and paid have been examined and allowed, and are transmitted to the Secretary of the Treasury for his consideration and advisement.
    A. Pleasonton, Commissioner.
    
    Office of Internal Revenue, July 26, 187-.
    IV.On the 8th day of August, 1871, the said Alfred Pleas-ontou, having resigned ab Commissioner of Internal Bevenue, ceased to discharge the duties of that office, and on the 9 th day of August, 1871, J. W. Douglass, having been duly appointed, began to exercise and discharge the duties of that office. On the 9th day of August, 1871, the Secretary of the Treasury returned the said claim of the claimants to the new Commissioner of Internal Eevenue, with a letter of instructions and directions, in the words and figures following, to wit:
    “ Treasury- Department,
    “ Washington, D. C., August 9, 1871.
    “ Sir : The enclosed refunding claims of Harris & Stotes-bury and Harris, Heyl & Co., transmitted by your predecessor to this office for approval, would 'seem to have been passed by a reversal of the construction of the law relative to sugar manufacturers which obtained during the whole period of its existence.
    “ Under these circumstances I deem it proper to return them to you for re-examination, declining to consider them unless again submitted by your office.
    “ Respectfully, yours,
    “Geo. S. Boutwell, u Secretary of the Treasury.
    
    “ Hon. J. W. Douglass,
    “ C’om’r of Int. Revenue”
    
    Thereupon, and on the 9th day of November, 1871, the Commissioner indorsed on said claim the following, to wit: “November 9, 1871. Rejected on re-examination. J. W. Douglass, Commissioner.”
    YI. (1) It does not appear from the evidence that any notice of any kind was ever given to said claimants that their said claim had been adjudged in their favor and allowed by Commissioner Pleasonton on the 26th day of July, 1871, as stated in the third finding, or that it had been forwarded by him to the Secretary of the Treasury;
    And (2) it does not appear from the evidence that the claimants ever had notice of any kind of the action of the Secretary of the Treasury, as recorded in his letter of August 9,1871 (set out in the fourth finding), nor that they had notice of any kind of the intention of the new Commissioner to re-examine the said claim, or that they had notice of any kind of the action of Commissioner Douglass, of the 9th of November, 1871, other than that contained in the said notice of November 13,1871;
    And (3) it does not appear from the evidence that there was any error of calculation in the decision of Commissioner Pleas-onton, of tbe 26tb day of July, 1871, nor that there was any mistake of any kind therein, nor that there was any fraud of any kind practiced by the claimants in connection with said claim or said decision.
    
      Mr. Enoch Totten for the claimant.
    If it be true, as the courts have declared, that the judgment of the Commissioner can not be reviewed or revised by the Secretary, then it must follow that tbis is the correct interpretation of the statute. If it is not, then the Commissioner is not “authorized” to “payback” money'wrongfully collected. It may be admitted that the Secretary has and should have control of the public funds, but still he may not in these cases refuse to pay in any event, nor agree to pay only on the happening of an impossible event.
    The statute says he may regulate the manner of paying, but impliedly declares that these adjudicated claims shall absolutely be paid in some way. The public funds must be applied to the discharge of these debts thus found to be due from the United States to citizens. The Secretary can neither prevent nor unreasonably postpone the payment by so-called regulations.
    A statutory authority “to regulate and control” does not give authority to prohibit (McConville v. Jersey City, 38 N. J.j L. 38). Power granted by law to the directors of a national ■bank to regulate the manner in which its stock shall be transferred on its books, does not authorize the directors to prohibit the transfer of the stock of a debtor of the bank by regulation. ■(Bullard v. Banh, 18 Wall., 589.)
    But these regulations undertake to instruct the Commissioner as to what kind of evidence he shall require and upon which he shall render judgment; yet both this court and the Supreme Court declare that his judgment upon the facts of the case can not be re-examined — neither by the Secretary nor by the courts. The statute declares that the Commissioner is authorized, on appeal to him, to pay back such taxes as he may decide to have been wrongfully collected. The regulations limit and modify this, and say that he shall not •do this without first transmitting the case to the Secretary “for his consideration and advisement.” Why, in view of the statute, should the Secretary of the Treasury consider these claims aiiy more than should the Postmaster-General? Why should they be submitted for his “advisement?” Advisement of whom ? Of the Secretary $ or for the advisement by the Secretary of the Commissioner? This statute does not intimate that the Commissioner shall pay back these taxes with the advice of the Secretary. As well might Congress enact a statute requiring the Supreme Court of the United States to submit all cases in that court to Congress for its “ consideration and advisement” before venturing to decide them! If this regulation means anything, it means that no final judgment or decision can be made without the consent of the Secretary of the Treasury, or, in other words, that the Commissioner is “ authorized” to pay back money wrongfully collected from the citizens with the consent of the Secretary, and not otherwise That this is the interpretation put upon the regulation by several Secretaries, we need not look beyond the acts of the Secretary mentioned in the Bupassu&r' Case (10 O. Cls. R., 1) and in the Sybrandt Case (id., 461). In this very case the Secretary alleged in his letter of disapprobation that the claim had been transmitted by the new Commissioner’s predecessor to his office for “ approval,” thus clearly indicating that in the mind of that executive officer the Commissioner could not pay back any of those taxes which the statute declared he might pay back, without the previous approval of the Secretary. He also says in this letter that he declined “to consider” the case, unless again submitted to him by the Commissioner. This was a plain nullification of the statute, and an usurpation of power by the Secretary. From the foregoing considerations, if they be well founded, it follows that the meaning and intention of these regulations was to prohibit entirely the payment of such claims unless the appeal to the Commissioner should be decided with the approval and according to the judgment of the Secretary.
    
      Mr. Assistant Attorney-General Howard (with whom was Mr. Felix Bra/nnigan) for the defendants.
   Nott, J.,

delivered the opinion of the court:

The claimant’s case rests upon a single fact — that the Commissioner of Internal Revenue, having this claim for a refund of taxes illegally collected before him, on the 26th July, 1871, signed and transmitted to the Secretary of the Treasury tho schedule set forth in the preceding findings, of which the following are the only significant clauses:

“No. 99. A schedule of claims for the refunding of taxes erroneously assessed and paid, which have been examined and allowed, and are transmitted to the Secretary of the Treasury for his consideration and advisement, in accordance with regulations dated January 12, 1866.
“ I hereby certify that the foregoing claims for the refunding of taxes erroneously assessed and paid have been examined and allowed, and are transmitted to the Secretary of the Treasury for his consideration and advisement.
. “A. Pbeasonton,
1 ‘ Commissioner.”

Whether this schedule and these sentences constituted a final award by the Commissioner of Internal Revenue is the-only ultimate question in the case.

There are other facts connected with the official transaction,, bub they are matters of defense or explanation; the claimant’s whole case exists iii the fact that Commissioner Pleasonton on the 26th July, 1871, signed and sent to the Secretary of the-Treasury the foregoing schedule.

The law which was applicable to that fact was the Act 13th July, 1866 (Rev. Stat., § 3220), in these words:

“ The Commissioner of Internal Revenue, subject to regulations prescribed by the Secretary of the Treasury, is authorized, on appeal to him made, to remit, refund, and pay back all taxes erroneously or illegally assessed or collected, all penalties collected without authority, and all taxes that appear to be unjustly assessed or excessive in amount, or in any manner wrongfully collected.”

And the regulations which the Secretary of the Treasury had prescribed under the authority given to him by the statute were the following:

“ By the forty-fourth section of the act of Congress to provide internal revenue, etc., approved June 30,1864, a duty is devolved upon the Secretary of the Treasury to prescribe certain regulations whereby the Commissioner of Internal Revenue is authorized, on appeal to him, to remit, refund, and pay back all duties erroneously or illegally assessed or collected, and all duties that shall appear to be unjustly assessed, or excessive in amount, or in any manner wrongfully collected. The Commissioner of Internal Revenue will therefore consider the following as tbe regulations established for conducting this branch of the public business:
<£ 1. As evidence in support of the claimant’s appeal there must be required the assessor’s statement of the tax assessed, and the nature of the tax, with the date of assessor’s list of taxes on which the tax appears,'and whether it is an annual, monthly, or special list of taxes. The collector must be required to state the amount of the assessed tax committed to him to collect and the amount he actually collected.
“2. In the examination of the merits of the appeal the Commissioner of Internal Revenue must require evidence of the character of the tax; that is, whether it was assessed on income, manufactures, etc., that the nature of the tax may accurately appear; and the ground should be stated upon which the tax is paid back, whether because it was erroneously or illegally assessed, or otherwise, carefully distinguishing between the remission of a tax or the refunding of a tax.
“ 3. When the appeal has been fully heard and examined the Commissioner of Internal Revenue must put into the case a certificate of his decision or judgment, with the amount in writing which should be paid back.
“4. A proper book or docket must be carefully kept in the office of the Commissioner of Internal Revenue, in which should be entered, under its proper date, the name of the claimant, with the amount of the tax which is the subject of appeal,, and the final decision of the said Commissioner.
5. When, from time to time, and as the Commissioner of' Internal Revenue in the course of his public duties shall complete his examinations and give-his judgment on these appeal cases, he will transmit a weekly list of them to the First Comptroller of the Treasury, together with all the vouchers upon which,-as evidence, he rests his decision, as a matter of account, giving upon the list the proper date, the name of the claimant, and the amount found due each claimant.
“ 6. The Comptroller of the Treasury, upon receiving these lists and vouchers from the Commissioner of Internal Revenue, will cause an account to be stated and the amount to be refunded, certified to the Register of the Treasury, who will transmit a certified copy thereof to the Secretary of the Treasury, upon which a warrant on the Treasurer will be issued for the payment in the usual manner; the draft of the Treasurer, unless otherwise directed, shall be transmitted to the Commissioner of Internal Revenue, to be by him remitted, either directly to the proper parties, or through the collectors of the several districts, as the said Commissioner may deem best.
• “ 7. Where the case of an appeal involves an amount exceeding $250, and before it is finally decided, the Commissioner of Internal Revenue will transmit the ease,, with the evidence in support of it, to tbe Secretary of tbe Treasury for bis consideration and advisement.
“H. McCulloch,
“ Secretary of the Treasury.
Treasury Department,
January 12, 1866.”

It is questionáble whether tbe Commissioner’s signing tbe schedule before quoted was tbe putting “ into the case a certificate of Ms decision or judgment,” as prescribed by the third regulation; it is not shown that the, Commissioner ever entered a “final decision” in the proper docket, as prescribed by the second; and it is certain that he never transmitted the claimant’s case to the First Comptroller, as prescribed .by the fifth. All that the Commissioner is shown to have done was “ to transmit the case” “to the Secretary of the Treasury for his consideration and advisement,” as prescribed by the seventh regulation, which transmission of the case was required in the express terms of that regulation to be “ before it is finally decided.”

The court is of the opinion that an award of the Commissioner of Internal Revenue for the refund of a tax illegally assessed can not become final and irrevocable before it has passed out of the control of the Commissioner by being transmitted to the First Comptroller of the Treasury, as prescribed by the fifth regulation of the Secretary. While it remains in the office of the Commissioner it is subject to his revision, correction, or revocation.

The court is accordingly of the opinion that in this case the action of Commissioner Pleasouton never reached the point of ultimate decision, and that when the case came back to the Commissioner’s office with the advice of the Secretary of the Treasury, the final decision was to be exercised by the Commissioner, and necessarily by the Commissioner then in office— a decision which was adverse to the claim and final as regards all other jurisdictions.

The court is also of the opinion that the regulations prescribed by the Secretary of the Treasury were properly within the .discretion reposed in him by the statute, and being authorized by law had the force of law. The ultimate decision rests with the Commissioner of Internal Revenue in such cases, but the Secretary may prescribe the manner in which the claims shall be examined, the records by which they shall be authenticated, and the methods by which they shall pass to another Bureau of the Department. The accidental language of the schedule, or other papes,by which the claim is transmitted to the Secretary for his consideration and advisement, can not control the regulation; nor could it'if it were intentionally used for that purpose by the Commissioner.

The court being of the opinion that no award was made upon which an action can be maintained, no opinion is expressed upon the question whether, if such a cause of action existed, it would be barred by the statute of limitations; nor upon the question whether the Secretary of the Treasury had authority to re-open the case and refer it to this court.

The judgment of the court is that the petition be dismissed.  