1. Collectors of Internal Revenue are subordinate officers
charged with the ministerial duty of collecting taxes, and, in the
absence of any statute granting the authority, they cannot release
a bond to the Government of the United States securing payment of a
tax. Only the Commissioner of Internal Revenue, with the consent of
the Secretary of the Treasury, is authorized to compromise a tax
deficiency for a sum less than the amount lawfully due. P.
313 U. S.
294.
2. The rule against allowing interest as damages for delay in
paying interest alone is inapplicable to an action to enforce a
surety's agreement to pay a tax with interest found due to the
Government under the revenue laws. P.
313 U. S.
295.
3. A suit upon a contractual obligation to pay money at a fixed
or ascertainable time is a suit to recover damage for its breach,
including both the principal amount and interest by way of damage
for delay in payment of the principal, after the due date. And, in
the absence of any controlling statutory regulation, the trial
court is as competent to determine the amount of interest for delay
as any other item of damage. P.
313 U. S.
295.
4. In the absence of an applicable federal statute, it is for
the federal courts to determine, according to their own criteria,
the appropriate measure of damage, expressed in terms of interest,
for delayed payment of a contractual obligation of the United
States. P.
313 U. S.
296.
5. In an action at law by the United States to recover an amount
due and owing from a taxpayer's surety, equitable rules governing
interest recoverable in suits for an accounting or for recovery on
quasi-contractual obligations are inapplicable, and
interest upon the principal sum from the date of default at a fair
rate is an appropriate measure of damage for the delay in payment.
P.
313 U. S.
296.
6. In the circumstances of this case, a suitable rate of
interest is that prevailing in New York, the State where the
obligation was contracted and to be performed. P.
313 U. S.
297.
116 F.2d 247 affirmed.
Page 313 U. S. 290
Certiorari,
post, p. 552, to review a judgment
affirming with modification a recovery by the United States in an
action against the surety on a taxpayer's bond.
Page 313 U. S. 292
MR. JUSTICE STONE delivered the opinion of the Court.
A collector of internal revenue, who had accepted a surety bond
filed with him by a taxpayer to accompany his claim for abatement
of income tax, consented to termination of all liability upon the
bond and surrendered it before its obligation was fully satisfied.
The questions for decision are whether the collector had power to
release the obligation of the bond and, if not, whether the United
States is entitled to interest on the amount of its claim against
the surety.
Upon the Commissioner's assessment in 1920 of additional income
taxes in the sum of $29,128, asserted to be due from the taxpayer
for 1917, the taxpayer filed a claim for abatement of the
assessment, and to secure suspension of collection of the tax,
executed a bond to the
Page 313 U. S. 293
collector in the sum of $38,000 with petitioner as surety,
conditioned upon payment on May 2, 1923, of the tax with interest.
The Commissioner allowed the claim in abatement in part, but
rejected it to the extent of $8,223.38, on which interest had then
accrued in the sum of $4,169.07. On demand of the Commissioner on
August 5, 1926, for the principal amount of the tax with interest
to the date of demand, petitioner paid only the principal amount of
the tax to the collector by draft of December 17, 1926, bearing the
notation on its face that it was in full payment of the tax and of
all liability on the bond. The collector collected the draft and
surrendered the bond to petitioner with the statement that all
liability on it had terminated.
In the present suit on the bond, the District Court held that
the collector was without authority to release the bond, and gave
judgment for the sum of $4,169.07 found by the Commissioner to be
the interest on the unpaid tax to the date of the rejection of the
claim for its abatement, but refused to allow interest accruing
subsequent to that date. On appeal, the Circuit Court of Appeals
ruled that, under § 370 of the New York General Business Law,
interest at six percent. should be added to the unpaid balance
found to be due on the bond, and modified the judgment accordingly.
116 F.2d 247. We granted certiorari April 7, 1941, 313 U.S. 552,
because of the importance of the questions presented, and of a
conflict of the decision below with that of the Circuit Court of
Appeals for the Third Circuit in
Heinemann Chemical Co. v.
United States, 92 F.2d 302.
It is not denied that the collector had authority to accept the
bond, that it created a new cause of action distinct from that, on
the taxpayer's obligation, and that, if it has not been released,
the United States has authority to sue upon it,
see United
States v. John Barth Co., 279 U. S. 370;
Gulf States Steel Co. v.
United States, 287
Page 313 U. S. 294
U.S. 32;
United States v. Wolper, 86 F.2d 715;
United States v. Oswego Falls Corp., 113 F.2d 322. And it
is conceded that, as the bond was conditioned on the payment of the
taxes with interest, petitioner is indebted to the Government upon
it for the amount of the interest which had accrued at the time of
the rejection of the claim in abatement.
See Botany Worsted
Mills v. United States, 278 U. S. 282;
Hughson v. United States, 59 F.2d 17, 19;
United
States v. Steinberg, 100 F.2d 124, 126. Respondent's
contentions are that the balance of interest then due was released
by the collector, and that, in any case, it was not bound to pay
interest on that balance.
Power to release or otherwise dispose of the rights and property
of the United States is lodged in the Congress by the Constitution.
Art. IV, § 3, Cl. 2. Subordinate officers of the United States are
without that power, save only as it has been conferred upon them by
Act of Congress or is to be implied from other powers so granted.
Whiteside v. United States, 93 U. S.
247,
93 U. S.
256-257;
Hart v. United States, 95 U. S.
316,
95 U. S. 318;
Hawkins v. United States, 96 U. S.
689,
96 U. S. 691;
Utah Power & Light Co. v. United States, 243 U.
S. 389,
243 U. S. 409;
Wilber Nat. Bank v. United States, 294 U.
S. 120,
294 U. S.
123-124;
cf. United States v. Shaw,
309 U. S. 495,
309 U. S. 501;
Ritter v. United States, 28 F.2d 265;
United States v.
Globe Indemnity Co., 94 F.2d 576. Collectors of internal
revenue are subordinate officers charged with the ministerial duty
of collecting the taxes. R.S. § 3183.
Erskine v.
Hohnbach, 14 Wall. 613,
81 U. S. 616;
Harding v. Woodcock, 137 U. S. 43,
137 U. S. 46;
Moore Ice Cream Co. v. Rose, 289 U.
S. 373,
289 U. S.
380-381. There is no statute in terms authorizing them
to remit taxes, to pass upon the claims for abatement of taxes, or
to release any obligation for their payment. Only the Commissioner,
with the consent of the Secretary of the Treasury, is authorized to
compromise a tax deficiency for a sum less than
Page 313 U. S. 295
the amount lawfully due. R.S. §§ 3220, 3229, 26 U.S.C. § 1661;
45 T.R., Art. 1011 (1918 Act);
Botany Worsted Mills v. United
States, supra, 278 U. S. 288;
Loewy & Son v. Commissioner, 31 F.2d 652, 654.
There is thus no basis in the statutes of the United States for
implying an authority in a collector to release a bond for the
payment of the tax which the Commissioner alone is permitted to
reduce by way of compromise when the Secretary of the Treasury
consents.
Heinemann Chemical Co. v. United States, supra,
and
Brewerton v. United States, 9 F. Supp. 503, to the
contrary, plainly rest upon a misapplication of the ruling in
United States v. Alexander, 110 U.
S. 325, which sustained the release of a bond for taxes
by the Secretary of the Treasury which had been specifically
authorized by an Act of Congress.
The District Court rejected the Government's claim for interest
upon the balance found due upon the bond as a demand for interest
on interest which has generally been held not to be an appropriate
measure of damages for the delayed payment of interest alone.
See Cherokee Nation v. United States, 270 U.
S. 476,
270 U. S. 490.
In any case, it thought that the allowance of interest would be
inequitable because of the collector's return of the bond to
petitioner and the Government's delay in bringing the suit. But, as
the Court of Appeals held, the obligation of petitioner to pay the
interest accrued on the principal amount of tax under the
applicable provisions of the Revenue Act was not damage assessed
against petitioner for its nonpayment of interest. Petitioner's
obligation was contractual to pay an amount found to be due from
the taxpayer, and the suit against it is for a debt
ex
contractu, due and owing in conformity to the terms of the
bond.
See United States v. John Barth Co., supra; Gulf States
Steel Co. v. United States, supra.
A suit upon a contractual obligation to pay money at a fixed or
ascertainable time is a suit to recover damage
Page 313 U. S. 296
for its breach, including both the principal amount and interest
by way of damage for delay in payment of the principal after the
due date. And, in the absence of any controlling statutory
regulation, the trial court is as competent to determine the amount
of interest for delay as any other item of damage.
United
States v. United States Fidelity Co., 236 U.
S. 512,
236 U. S. 528;
Young v.
Godbe, 15 Wall. 562,
82 U. S. 565;
Maryland Casualty Co. v. United States, 76 F.2d 626;
United States v. Wagner, 93 F.2d 77;
United States v.
Hamilton, 96 F.2d 878;
Massachusetts Bonding & Ins.
Co. v. United States, 97 F.2d 879, 881.
But the rule governing the interest to be recovered as damages
for delayed payment of a contractual obligation to the United
States is not controlled by state statute or local common law. In
the absence of an applicable federal statute, it is for the federal
courts to determine, according to their own criteria, the
appropriate measure of damage, expressed in terms of interest, for
nonpayment of the amount found to be due.
Board of County
Commissioners v. United States, 308 U.
S. 343,
308 U. S.
350-352;
Young v. Godbe, supra, 82 U. S. 565;
cf. Billings v. United States, 232 U.
S. 261,
232 U. S. 284,
et seq.
The present suit is at law for the recovery of an amount due and
owing which petitioner has contracted to pay. To such a case,
equitable rules relating to interest recoverable in suits for an
accounting, or for recovery on
quasi-contractual
obligations arising from payment of money by mistake, are
inapplicable.
United States v. United States Fidelity Co.,
supra, 236 U. S. 528;
cf. Redfield v. Ystalyfera Iron Co., 110 U.
S. 174,
110 U. S. 176.
United States v. Sanborn, 135 U.
S. 271,
135 U. S. 281;
Redfield v. Bartels, 139 U. S. 694,
139 U. S. 702.
Here, responsibility for delay in payment rests quite as much upon
the debtor, who is chargeable with knowledge of its own obligation
and the breach of it, as upon the creditor. And, in the meantime,
the debtor has had the use of the money, of which its default has
deprived
Page 313 U. S. 297
the creditor. Interest upon the principal sum from the date of
default at a fair rate is therefore an appropriate measure of
damage for the delay in payment.
United States v. United States
Fidelity Co., supra, 236 U. S. 528;
Massachusetts Bonding & Insurance Co. v. United States,
supra; United States v. Wagner, supra; Maryland Casualty Co. v.
United States, supra. While the New York statute fixing the
rate of interest is not controlling, the allowance of interest does
not conflict with any state or federal policy, and we think that,
in the circumstances of this case, a suitable rate is that
prevailing in the state where the obligation was given and to be
performed.
See Young v. Godbe, supra, 82 U. S. 565;
Board of County Commissioners v. United States, supra,
308 U. S.
352.
Affirmed.
MR. JUSTICE BLACK, dissenting.
I agree with the Court's judgment that the Collector of Internal
Revenue did not have power to release a taxpayer from his
obligation to pay, but I am unable to agree with the Court's
conclusions on the question of interest. The contract on which the
Government's suit rests contained no provision for interest. The
state's interest law, according to the holding of the Court, is not
controlling. Congress has enacted no law requiring payment of
interest and fixing an interest rate on contracts guaranteeing tax
payments. Nevertheless, this Court now requires that interest be
paid -- a judicial requirement which under similar circumstances
has been frankly described as "judicial lawmaking."
Board of
County Commissioners v. United States, 308 U.
S. 343,
308 U. S.
350.
Were the question an open one, I would be reluctant to acquiesce
in holding that federal courts, in the absence of statutes, could
or should assume the power to fix interest in such a case. But,
granting that we have the power to take this step, the rate of
interest to be charged
Page 313 U. S. 298
is, from necessity, an element of the legislative and policy
power thus exercised, and that rate must therefore be determined by
the Court. The rate fixed in this case is 6%. Resolution as to the
amount is rested in part, at least, on New York's legislative rate.
The inference is that a different rate might apply to contracts
guaranteeing tax payments made in other states. For it is well
known that interest rates fixed by state legislatures are not
uniform, but vary in amount.
Since, in prescribing interest and fixing an interest rate, we
are passing upon questions of public policy not marked at all by
definite legislative boundaries, I find it difficult to agree to
the result here for two reasons: (1) Unless the rate fixed is to be
considered in the nature of a penalty, 6% seems very high. A
smaller rate would appear to come nearer to harmonizing with fair
and equitable interest exactions. (2) I am of opinion that, since
our "judicial lawmaking" is and must be national in its scope, the
law which we adopt fixing a rate of interest for transactions such
as that here involved should operate with uniformity throughout the
nation. Federal taxpayers or their sureties should not be required
to pay 6% in one state, 4% in a second, and 10% in a third. Such
varying rates are not subject to criticism by federal courts if
they govern local intrastate transactions subject to state law. But
it seems to me that federal taxpayers and their sureties should be
subject to the same interest rate without regard to the state rates
governing purely local transactions within a particular area in
which federal taxpayers happen to reside. To the extent that the
Court's opinion indicates the possibility of such a variance among
the states, I am compelled to disagree.
MR. JUSTICE DOUGLAS and MR. JUSTICE MURPHY concur in this
opinion.