UNITED STATES V. MARQUETTE, H. & O. R. CO.
719
fact his deposition was not taken, neither washe served with a summons to appear at this term, when be was in this state in February. I think, from all the facts stated in the case, that there is no doubt about the materiality of the testimony of the co-defendant, Brown, who is now in Canada. His brother was led to believe, even as late as this month,-about the sixth or seventh of this month,-that he would be in attendance, by a correspondence that he had with him. In view of these facts, stated in the affidavit, notwithstanding objection being made by plaintiff to the continuance of this case, it will have to go over the term. The motion for continuance is granted:
UNITED STATES
v.
MARQUETTE,
H. & O. R. Co. July 23, 1S83.)
((:'ircuit Court, lV. D. M!c'ligan, N. D.
Action of Debt. John TV. Stone, for the United States. TV. P. Healey and J. L. Stackpole, for the defendant. WITHEY, J. The question in this case is whether a railroad company, in 1871, was required to pay an income tax on its undivided profits used for construction. In toat year the Marquette & Ontonagon Railroad Company owned and operated a road in the upper peninsula of Michigan. In 1872 the road was sold and reorgnnized
720
FEDERAL REPORTER.
with another road umler the name of l\farquette, Houghton & Ontonagon Railroad Company. By the state laws the new is liable for the debts of the former company. The gross receipts of the company, in 1871, were $578,565.93. It paid for operation expenses, repairs, incidedal expenses, interest, and dividend, $417,121.06. There reo mained $161,444.87, were also expended during the year, together with $231,658.54, for the following purposes: For a piece of new line, shortening the old llne, and improving the grade, _ _ _ - $ 58,706 57 For llepuulic uranch road, 28,537 05 " piers and water front, _ 12",449 46 .. miscellaneous, 66,042 60 .. ellllipluent, 111,367 67 $393,103 41
'fhe United States claims a tax of 2! per cent. upon the bal. ance of tbe earnmgs before mentioned-SU)l,444.87-as undivided profits of the company for the year 1871. 'fhe company paid the tax on the divided earning'3. The railroad company contends that the undivided profits used, during the year they were earned, [;)1' con· struction were not subject to tax by the act of July 14, 1870, which controlled as to 1871 profits. The question arises from a change made in 1870 in the language of the provision of the act of 1866 imposing an internal revenue tax on the profits of railroad and some other corporations. The substance of the provision in the act of 1866 is this: "Any railroad company * * · that may have declared any dividend * * * as part of the earnings, profits, income, or gains of such company, and all pro[its of such company ca1Tied to the account of any fund, or used for COllstl'udion, shall be suLject to and pay a duty of 5 per centum on the amount of all such ( * * dividend or profits." 14 St. at Large, p. 139, § 9; re-enacting section 122, act of 1864, (13 St. at Large,) p. 284. The act of 1870, entitled" An act to reduce taxes, and for otber purposes," wholly does away with such income tax after the year 1871, and reduces the tax for that year from 5 to 2! per cent. 1'he provision i:l question reads as follows: ., There Shall be levied and collected for and during the year 1871 a tax of two and one-half per centum on the amOI;nt of * * * "II dividends of eanlill;;:(5, incullle. or gains hereafter declare<.l bya!1y * * * railroad company, * * * and on ali undicidfd profits of any Sitch corporation which hare accrned and been earned anI added tu any sa/plus, contingent, or other fund." 1'3 St. at Large, p. 260, § 15.
Both acts required returns to be made to the proper internal revenne officer of the amount of income, profits, and taxes aforesaid, and impose a penalty for neglect to make such returns. Without the proper retern of income the officers of the government would not know whether there were profits other than such as were divided on which the tax was paid. And yet defendant claims that, by
721
not demanding the tax now sought to be recovered, the govunment mnst have construed the change in the tax provision as exempting undivided used for construction from the tax of per Nlnt. That the internal revenue commissioner did not re!f6ire the tax to be paid till 1881, is urged as evidence of a change in the views of that office as to defendant's liability. But there is no evidence that it was known to the officers of the revenue that there were undivided profits in 1871, or that th fact was known to them until about the time this suit was brought, in August, 1881, which is a sufficient reply to the claim that in 1871 the government officers recognized the constructIOn now contended for by defendant. This view leaves section 15 of the act of 1870 open to such construction as it ought to receive, considered in connection with the corresponding provision in the act of 1866, without its being said that any department of the government has acquiesced for 10 years in such construction of the law as contended for by the defendant. Both the provisions in 1866 and 1870 relate to and emorace profits not divided. That of 1866 is: "All profits carried to the account of any fund, or used tor construction." In 1870, as recast, it reads: "Alliudivided profits added to any surplus, contingent, or other fund. If the words "or used for constrllction" had been omitted from the clause in the act of 1866, would the scope of the provision be materially, or at all, different? Undivided profits are carried or added to construction fund as a matter of book-keeping, and, in fact, whenever they are used for construction. Do not and should not railroad companies transfer net earnings used Or construction to construction fund accounts? If, as a matter of book-keeping, such is not only the proper but the usual practice, then it WOl1ld not seem to affect the meaning and scope of the provision if tue words "or used for construction" were omitted altogether from the act of 1866, for the congress of the United States will be presumed to have employed the language with reference to the known usage and proper practhl in suoll cases. This view narrows the question to whether the ulldinded profits in question were "adrteJ" to "any fund." It is in proof, and is conceded by defendant's counsel, that these undivided profits of 1871 were carried to an account called "expended earnings," and that they were used for construction. Then it is manifest that the expended earnings account represented construction account, or construction fund, and when such undivided profits were carried to such account they were "added to a fund." In book-keeping, and "ithin the meaniug of the act of 1870, net earnings or undivided profits are added to a particular fund by proper transfer entries in the books of accot;ut. But the object of the statute is not defeated if profits used [or construction are not earned into the proper account on the books; for within tbe meaning of the statute, and according to common understancling and experience, tiley mU::lt 1>e considered us adcleJ to con· v.17.no.l0-4G
2t
722
struction fund, if they are used for construction. It is inconect to say, in relation to this statute of 1870, that undivided profits cannot be added to a fund unless there remains in the particular fund a balance to be added to; for if undivided profits are carried in the books of account to surplus, contingent, or other fund account overdrawn, they are considered added to the fund which that account represents as much as though it was not overdrawn. In short, the provision of the statute of 1870 was intended to reduce the tax on profits from 5 to 2t per cent., but was not intended to remove from such reduced tax any part of the profits. 'fhe further contention is that the claim of the government is barred by time. Congress has not seen fit to enact a statute limiting the time within which the United States shall bring suit, in a case like the present one, and it does not appear that the defendant has been prejudiced by such delay as has occurred after allowing reasonable time to bring suit. In a case where commencement of suit by the United States is delayed many years, and the delay has prejudiced a defendant by the disappearance or loss of evidence essential to his defense, courts ought to apply a rule that will protect individual rights by giving repose and security to the citizen against stale claims; but such is not this case. The item of $58,706.57, expended by the railroad company for a piece of new line of road, for the purpose of shortening its track and reducing the grade of its road, properly belongs with expenditures for improvements, and, having been IJaid from earnings, reduces the undivided profits to $102,738.30. The court finds that this last sum was subject to a tlt {, by the law of 1870, as undivided profits, and that defendant is indebted to the plaintiff for a tax of 2t per centum thereof, being a tax of $2,568.46, and also for interest from the time of the commencement of the suit, t,YO years and one month, $374.56. J uc1gment will be entered accordingly in favor of the plaintiff, and against the defendant, for $2,O4:3.02, and for costs of suit, to be taxed, with interest on the judgment from tllis date. Dnder act of June 30, 1864, C. 173, § I:!:!, as amended by Act ot July 13, lsGG, c. 184, tbe eal'llings of a railroad, useu to pay interest or dividends, are
laxable, wbetber actual profits or not; but earnings used for construction, or earried to the account of a fund, are not so taxeu, unless they repre:;ent tbe profits of the company as a whole. Tile law intended an annual statement of accounts, and when. in such it appeared that a part of the excess of gains over losses had been used for construction, or added to some fund, a tax was to be paid on what had been w used or appropriated. Little Miami & O. d': X. R. Co. v. U. S. 2 Sup. Ct. 627.-[ED.
, IN HE WHITE.
723'
In re
·WHITE.
(Circuit Court, D. California. I. COURT MARTIAL-JURISDICTION.
July 24,1883.)
A court martial has exclusivc jurisdiction to try a party duly cnlisted in the army for the military offense of desertion. The limitation prescribed for the trial and punishment of the offense of desertion by the l03d article of war is matter of defense, and the trilJUnal having jurisdiction to try the charge of desertion, is the tribunal having jurisdiction to determine whether the bar of the statute has attached or not. Civil courts have no jurisdiction to interfere with the military tribunals, while proceeding regularly in the exercise of their jurisdiction to try parties accused of desertion from the army.
2.
DESEUTION-STATUTE OF LnnTATIOxs.
3. S.UlE-lNTERFEHENCE OF CIVIl, CounTS.
Petitioner, in pro. per·. Major W. Winthrop, Judge Advocate, for Major Frank. Before FIELD and SAWYER, JJ. SAWYER, J. On July 13th a writ of habeas corpus was issued upon the petition of Arno White, in which he alleges that he is unlawfully detained by Major Royal T. Frank, of the First regiment of artillery, United States army, commanding the post at Alcatmz island; that the illegality consists in this' that he was arrested on J line 23d last, and he is now held for trial before a court martial as an alleged deserter from the Eighth regiment of infantry, for the offense of desertion, alleged to have been committed at Benicia, California, on February 7, 1880; that the military statute of limitations in the 103d article of war provides that "no person shall be liable to be tried and punished by a general court martial for any offense which appears to have been committed more than two years before the issuing of the order for such trial, unless by reason of having absented himself, or of some other manifest impediment, he shall not have been amenable to justice within that period;" that more than two years had elapsed before his arrest, after the date of said alleged desertion; and he has not during said perivd absented himself, but has remained openly in San Francisco, and been, during all said period, within the jurisdiction of said court martial, amenable to justice. The writ having been served, the said Major Frank produced the bodyof the petitioner, and made due return to the writ that he is the officer in command of the post at Alcatraz island, employed by the military authorities as a place of detention and confinement of mil]ary prisoners; tl1at the petitioner was, on June 23, 1883, by order of the commander of the proper military department, arrested and committed to said post, and to his charge as commandant, in whose custody he now is held in confinement; that he is so held by authority of the United States, and the order of his commander, as an alleged deserter from the Eighth regi-