United States v. Pacific Railroad. taxes should be paid in gold, and that the legal-tender laws then in existence, and in existence long before, had no application to taxes, whether state or national, except as they were made receivable for dues to the United States by the act itself. And the question turned on whether the taxes which the state of Oregon assessed against her citizens was a debt within the meaning of the legal-tender laws, which provided in terms that they should be receivable in payment of all debts. The supreme court unanimously held that in that sense, at all events, and for that purpose, a tax was not a debt. In other words, the meaning of it was that the congress of the United States did not, by the use of the word "debt" in that act, intend to include taxes of the states. Chief Justice CHASE delivered the opinion, and he referred to several of the authorities cited yesterday on the subject whether a tax is a debt or not. On the other hand, in a later case, found in 19 Wallace, 227, coming up from Pennsylvania, where the United States brought an action at law for some internal revenue taxes, a recovery was stoutly resisted on the ground that a tax was not a debt, and as it was not a debt within the common law meaning of the phrase, that it could not be so collected. In that case the supreme court held that, for the purposes of that collection, and in some senses, it was a debt; that the tax- which, I presume, was the same kind of a tax as this is- could be so collected. Whenever the proper officers themselves ascertained their earnings for that particular year, the law applied and made the assessment; it could be neither more nor less than that amount, and no assessment by the officers of the government was necessary to ascertain the amount; therefore, it is a debt collectible by suit. I state these things merely to show the difference of opinion that has existed upon the subject, as also to show the fact that the supreme court has, under one set of circumstances, recognized that a tax is a debt, while under another that it was not a debt. In the view that all of us here take, I think, however, that this discussion is immaterial. It is immaterial what you call the obligation of a citizen to pay his taxes; it is very United States v. Pacific Railroad. clearly an obligation which may be enforced by the courts. In the case from the state of Pennsylvania, it was simply a suit for taxes, and nothing else; but if it was not such a suit, an equitable lien, it is claimed, would give the right in chancery to recover what was merely a debt at common law. The question remains whether it is liable to a set-off. This depends upon a principle of policy, in which both the government of the United States and its courts have sounded no uncertain note at any time. We have even, without the aid of an act of congress, refused to grant an injunction to stay the collection of taxes under any circumstances and this upon the broad ground applicable to this case, that the taxes of the government are essential to the support and existence of the government; and we have always refused to permit any interference with their collection by injunction. The principle involved is this: That by setting up other debts, and cross-actions and counterclaims against the government, it would, in effect, be placing the existence of the government at the mercy of any person who chose to set up his right in this way, and thus hinder the collection of the taxes. Since that decision was originally made, the statutes passed by congress go very strongly in that direction. Congress has passed a statute expressly forbidding the granting of an injunction for that purpose. It has passed a statute for the correction of errors of the assessing and collecting officers of the government, which the supreme court has said, in two or three cases, is a complete and perfect system. If the tax is unjustly assessed, or supposed to be unjustly assessed, the remedy allowed is an appeal to the commissioner of internal revenue. If he decides against the party, or fails to decide within six months, the party injured can pay his taxes and go into court and sue for the amount, and recover it back if he is wrongfully assessed, the court being unprejudiced by any action of the commissioner. The statute says he may bring his suit to recover it back, and he will get it back if the court so decides. The time for bringing such a suit is limited, so as to have no delay in settling the matter. It must be within twelve months-six United States v. Pacific Railroad. months after the commissioner has decided, and twelve months after the appeal has been taken. And we have said over and over again in our courts that that was a complete and exclusive system of correctional justice in regard to the collection of taxes unjustly assessed; that it was the only system, and by that ruling we abide. There can be no such thing as obstructing and objecting to the payment, as in the case of adjusting the accounts of individuals. It may be said that since the government has refused, by its auditing officers, to allow this party their claim, they have no remedy, and that it is inequitable to allow the government to recover one hundred and twenty thousand dollars against them, when the government owes them half a million. And the argument would have some force, notwithstanding the want of any express provision on the subject, if there were no other remedy. But it is to be considered that the application to the auditing officers is in itself a remedy. They act in a judicial capacity, and are impartial, or supposed to be so, and perhaps are just as good judges as to what ought to be done as we are. But suppose they are not, there remains the right to sue in the court of claims. That court was instituted for this very purpose. But it may be said that the claim set up here is not of a character over which the court of claims has jurisdiction. I cannot see, if it is a claim which can be made a set-off, why it is not a case which can be enforced in the court of claims, because the court of claims has jurisdiction of all claims against the United States growing out of contracts, express or implied. And surely no one can suppose that a claim can be used as a set-off if it does not grow out of a contract, expressed or implied. No statute of any state or of any government, and no principle of law, ever allows any set-off which does not grow out of a contract; so that, in refusing to allow this set-off to come in here and delay the government in the collection of its taxes, we do not leave the party without judicial remedy. The judgment of the court is that the exceptions to the answer which sets up that defence must be sustained. EXCEPTIONS SUSTAINED. United States v. Pacific Railroad. THE UNITED STATES v. THE PACIFIC RAILROAD et al. The internal revenue act of July 13, 1866 (14 Stats. at Large, 104; Rev. Stats. sec. 3186), provides, in reference to certain taxes, that if any person liable to pay the same, "neglects or refuses to pay them after demand, the amount shall be a lien in favor of the United States from the time it was due until paid, with interest, penalties, and costs, upon all property and rights of property belonging to such person:" Held-1. That a demand is necessary to create and bring into operation this lien. 2. It is essential to such a demand that it should state the amount of the tax and demand payment thereof. 3. That each of the three several demands here alleged was insufficient to create the lien. (Before MILLER and DILLON, JJ.) Internal Revenue Act of July 13, 1866 (14 Statutes at Large, 104). Revised Statutes, Sec. 3186.-Demand of Taxes.Lien. THIS was a suit in equity, brought in 1877, under the authority of the statute (Rev. Stats. sec. 3213), which provides for the recovery of taxes by suit and to enforce the lien of the taxes against the property owned by the delinquent (the Pacific Railroad) at the time the taxes accrued (Rev. Stats. sec. 3186). The taxes sought to be recovered, amounting to about twentyfive thousand dollars, accrued in 1871 against the Pacific Railroad. The property of that company has since been sold on a decree of foreclosure, and is owned by and in possession of the other defendants to the bill. The defendants, the present owners of the property, demurred to the bill, raising, principally, the question of the sufficiency of the demand averred in the bill and amended bill, to create or give a lien for the taxes. Three demands are relied on by the government: 1. The letter of collector Maguire, of July 25, 1874. 2. A demand on August 29, 1874. 3. A suit brought in October, 1874, against the lessee of the Pacific Railroad, viz., the Atlantic and Pacific Railroad, for the recovery of said taxes, which suit is still pending, and to which the Pacific Railroad is United States v. Pacific Railroad. not a party. The particulars of these several demands appear in the opinion of the court, which was orally pronounced by Mr. Justice MILLER. Mr. W. H. Bliss, district attorney, for the United States. Mr. Melville C. Day, for the defendants. MILLER, Circuit Justice. We have before us the case of the United States against the Pacific Railroad et al. It was first submitted on the exceptions to the answer. (Ante, p. 66.) The purpose of the bill is to enforce by a decree in equity a lien against the Pacific Railroad Company, and those into whose hands the property has since come, for taxes, which, it is alleged, were never paid and never reported by the Pacific Railroad Company for assessment. The first proposition which we had to decide was that the defence pleaded as a set-off could not be set up; that no set-off or counter-claim could be set up in any suit against a party in favor of the government for the collection of taxes. The question here involved then came up on other exceptions to the answer. We soon discovered that the main question to be decided in this case was whether such a demand had been made of these taxes as brought it within the operation of section 3186 of the Revised Statutes, originally enacted on the 13th day of July, 1866, which is that "if any person liable to pay any tax neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the United States from the time it was due until paid, with the interest, penalties, and costs that may accrue in addition thereto, upon all property and the rights to property belonging to such person." Now the main question is, whether such a demand had been made as makes effective the lien mentioned against the property of the Pacific Railroad. In order that the question might be fully considered by this court on the facts just as they could be proved, the parties concluded to abandon the exceptions to the answer, and the attorney for the government took leave to amend his bill and perfect it |