Republic Ins. Co. v. Commissioner

13 B.T.A. 568, 1928 BTA LEXIS 3226

• Court: United States Board of Tax Appeals
• Decided: September 26, 1928
• Docket: Docket No. 19693.
• Status: Published

Opinions

OPINION.

Littleton :

It is claimed by petitioner that assessment and collection of any additional tax are barred by the statute of limitations for the reason that the two written consents are invalid.

It is argued that the consents in question are invalid because the directors did not specifically authorize the execution thereof and that the respondent was charged with notice of the want of authority in Geo. W. Jalonick to make the agreement implied in the consents.

In the performance of his duties with the petitioner, Geo. W. Jalonick signed a great many papers, “ principally loans, papers connected with loans, releases, assignments, and frequently other instruments connected with the underwriting end of the business.” He also signed “ a great many checks.”

The inference to be drawn from the testimony of Geo. W. Jalonick is, clearly, that he signed checks, releases, etc., and did many things in the way of business for petitioner not jointly with the president, not both signing the same instruments or papers, but he alone doing this. The interpretation which the corporation and its officers put upon the section of the by-laws that “ both officers shall have authority to execute deeds, assignments, releases and other instruments in connection with the conduct of the business of the company,” evidently was that the chairman of the board and the president each possessed the authority to “ execute deeds, assignments, releases and other instruments in connection with the conduct of the business of the company.”

Jalonick signed the consents and affixed the seal of the company thereto in due course of business and the interpretation he put upon his authority to do so was consistent with the authority he had generally exercised and the acts of a similar nature which he was in the habit of performing alone for the corporation. See American Feature Film Co., 11 B. T. A. 1271, in which the Board stated:

* * * The general rules applicable to the determination of the validity of contracts are not applicable in the determination of the validity of the consent to a later determination, assessment, and collection of additional tax under the various revenue acts. We think Congress used the word “ consent ” advisedly. To consent implies the idea of acquiescence to a matter of conduct, the assent to the performance of an act or duty in other than the usual or customary manner, or at a time other than that prescribed, and we think a consent to a later determination and assessment of tax of a corporation signed by an officer of the corporation in the regular course of business, although without specific authorization by the board of directors, is valid and effectual to suspend the operation of the statute of limitation for such period as may be specified therein. It is well known that in the general conduct of affairs of corporations it is customary for the corporate officers to perform many acts that partake of agreements or consents, as may be for the best interest of the corporation, and it would be unreasonable to suppose that every act of regularly constituted officers of a corporation must have specific approval by vote of the Board of directors. A consent to a determination and assessment of whatever tax may be due by the corporation beyond the period specified in the statute is nothing more than approval by the officer or officers of a corporation of a policy to be pursued in the conduct of affairs of a corporation in respect of such matters or the concurrence or acquiescence by such officer on behalf of the corporation to the performance by the Commissioner at a later date of an act which the statute prescribes shall otherwise be performed by him within a specified time. There is no element of bargain in the execution of a consent for a later determination and assessment of a tax imposed by Congress.

See also Wirt Franklin, 7 B. T. A. 636.

While the by-laws expressly provide that “ Both officers shall have authority to execute deeds, assignments, releases and other instruments in connection with the conduct of the business of the company,” there is no evidence in the record indicating that either the president or the chairman of the board of directors construed such by-law to mean that “ both ” the president and chairman must sign or execute all “ deeds, assignments, releases and other instruments in connection with the conduct of the business of the company,” as now argued in behalf of petitioner. No one testified that such was the practice or custom, or that any such paper was ever so signed. The object of the by-laws in conferring authority on “both” the president and chairman of the board of directors was evidently, as may be inferred from the statement of the president in recommending that the office of chairman of the board of directors be created, that either might exercise the authority which was conferred on “ both.” It was to relieve the president of some of the work, not to require him to join the chairman, or the chairman to join him, in the execution of all such instruments. Each drew the same salary. Both possessed the same authority, which either might exercise. Such, we think, is clearly indicated by the evidence.

We are of the opinion that the deficiencies are not barred, and the plea of the statute of limitations is accordingly denied.

The proceeding will be restored to the calendar for hearing on the merits in due course.

Reviewed by the Board.

Order will be entered accordingly.