17 Syllabus However, the practical effect of our judgment is to put the plaintiff back on the payroll of the United States as a deputy collector of Internal Revenue. He gets a judment now for the pay he would have earned to date, and the next year he can bring another suit for his pay for that year, and so on until he is formally reinstated and discharged according to law. The question of the legality of the discharge can never be relitigated in this court or any other court since it is a question of law which is res judicata between the parties. Moser v. United States, 49 C. Cls. 285, appeal dismissed, 239 U. S. 658. The Government would have no defense to future suits. Plaintiff would continue to get his salary as of course. While the plaintiff is not physically restored to his position, the effect of our judgment is to give him all the emoluments of his position to the same extent as if he had been formally reinstated. To all intents and purposes he has been reinstated, and the Secretary might as well do it formally. I think Congress in the 1948 Act intended that such a practical, though not formal, "reinstatement" should be governed by its terms. JOHN J. STARZEC v. THE UNITED STATES [No. 102-58. Decided February 11, 1959. Defendant's motion for rehearing overruled April 8, 1959] ON PLAINTIFF'S AND DEFENDANT'S MOTIONS FOR SUMMARY JUDGMENT Civilian pay; dismissal; regulation of executive department.—In an action by a veteran preference eligible for back pay where his discharge from his position as Tax Collector for failure to include interest income in his income tax returns was effected under security regulations not applicable to his situation, it is held that his discharge was procedurally defective in that the Internal Revenue Service failed to comply with its own regulations, thereby depriving the plaintiff of a substantial and important right, because the Regional Commissioner was not given an opportunity to exercise his broad discretion as to the type of disciplinary action to be taken as he would have had the proper regulations been followed, and there is a probabil Opinion of the Court 145 C. Cls. ity that the Regional Commissioner would not have recommended the discharge of the plaintiff. Civilian pay; dismissal; regulation of executive department-failure to comply with.-Where a Government employee who fails to report interest income in his income tax returns is thereafter dismissed for suitability reasons but his removal is effected under departmental regulations pertaining to security procedures, the section in such regulations entitled "Suitability Decisions" takes coloring from its surroundings and implies suitability from the standpoint of security rather than suitability from the standpoint of a failure to report interest income. The employee's removal under regulations not applicable to his situation violated the regulations of the Internal Revenue Service and was prejudicial to the employee in that it deprived the Regional Commissioner of an opportunity, which he would have had if the proper regulations had been followed, to exercise his broad discretion as to the kind of disciplinary action to be taken. Internal Revenue 1221 Civilian pay; dismissal; regulation of executive department--administrative interpretation of.-The Government is not at liberty to misapply its own regulations merely because it authored them unless the regulations in question are housekeeping directions. Administrative Law and Procedure 425 Mr. Arthur L. Nims III for the plaintiff. Mr. Norman Hyman, with whom was Mr. Assistant Attorney General George Cochran Doub, for the defendant. MADDEN, Judge, delivered the opinion of the court: The plaintiff, a preference eligible under the Veterans' Preference Act of 1944, 5 U.S.C. § 851, et seq., was employed as a Tax Collector by the Newark Office, Philadelphia Region, United States Internal Revenue Service, on November 28, 1955. In February 1956, the plaintiff's income tax returns for the years 1952, 1953, and 1954 were audited by an Internal Revenue Agent and it was found that he had failed to include in his income interest which had accrued on savings accounts in those years. Because of these omissions, additional taxes were assessed, and the plaintiff paid them. Thereafter, presumably in April 1956, the plaintiff filed his return for the year 1955, and again failed to include savings account interest credited to him by banks in 1955. 25 Opinion of the Court In September 1956 the plaintiff was called before an official of the Internal Revenue Inspection Service and questioned about the omission of the interest income in his returns for 1952, 1953, and 1954. His return for 1955 had not yet been audited at that time. In January 1957 the plaintiff was questioned by two Special Agents of the Internal Revenue Service as to the interest income not reported for the years 1952-1955. The 1955 return was audited in April 1957 and additional taxes were assessed and paid. No fraud penalty was imposed and no prosecution for violation of the Internal Revenue laws was ever instituted against the plaintiff for any of the omissions referred to above. On May 7, 1957, the plaintiff received a letter, a "Notice of Proposed Adverse Action" from the District Director of Internal Revenue, Newark, New Jersey, proposing to discharge the plaintiff from the Service at or after the end of 30 days from the plaintiff's receipt of the notice. The letter contained charges and specifications forming the basis of the proposed discharge. The plaintiff replied to the charges in writing and at an interview on May 21 with the Director and two of his assistants. At this interview the plaintiff was represented by counsel. On June 11 the plaintiff received a letter from the District Director advising him that the charges were sustained and that he would be discharged effective June 14, 1957. The plaintiff was removed from the Service on that date. He appealed to the Regional Director of the Civil Service Commission. That official held a hearing and sustained the action of the Internal Revenue Service. The plaintiff then appealed to the Board of Appeals and Review of the Civil Service Commission. That Board affirmed the decision of the Regional Director. The plaintiff thereupon brought this suit. The plaintiff asserts that the action of the District Director of Internal Revenue discharging the plaintiff was arbitrary and capricious, and was procedurally defective. The plaintiff's discharge was based upon his failure to include interest income in his income tax returns, and upon his statements made to an Inspector, to two Special Agents, and to the Regional Director and his assistants. The statements Opinion of the Court 145 C. Cls. indicated that the plaintiff was aware, when he omitted the interest income from his return, that he should have included it, but that he thought it was a rather usual practice of taxpayers not to include such income, and he therefore omitted it. As to the 1955 return, made after the omissions in the prior years had been called to his attention, his answer was, in effect, that one does not always give heed to warnings which one has received. The plaintiff asserts, as a procedural defect, the provisions of a detailed directive, issued by the Office of the Regional Commissioner of the Philadelphia Region as RC-PHIMemorandum No. 19-3, Revised (July 14, 1955). The memorandum was entitled "ADVERSE ACTIONS" and covered in minute detail the steps to be taken to accomplish any degree of adverse action against an employee, from oral admonishment to discharge. It said, in its "Section 9. Procedures" that when a conduct investigation had been initiated, the Regional Inspector would submit reports of the investigation to the Regional Commissioner on all persons employed under the Regional Commissioner's jurisdiction, and that from the Regional Commissioner's Office reports disclosing derogatory information about employees whom the District Director had authority to appoint, would be forwarded to the District Offices. The memorandum said, in section 9 (.02) (2) that a report so forwarded from the Regional Office to a District Office will "contain a recommendation by the Regional Office of action to be taken only when the appropriate penalty is considered to be removal." It then says that if the District Director concurs with the Regional Office's recommendation of removal, he may accomplish the removal, except that even then the proposed letter of removal must, before issuance, be submitted to the Regional Office for prior review and clearance. We gather from the above summarized provisions, and from other provisions in the memorandum, that the Regional Commissioner was insistent that there should be uniformity of disciplinary action in the several Districts within his Region, and that he was keeping close supervision over the removal of employees. According to the memorandum, if he sent to a District Director a report of investigation contain 25 Opinion of the Court ing derogatory information about an employee, and did not recommend removal, that would amount to an expression of the opinion that the report did not justify removal. That opinion of the Regional Commissioner would, naturally, carry great weight with his subordinate, the District Director. In the plaintiff's case, the provisions of the memorandum discussed above were not followed. The report or reports of investigation did not pass through the Regional Commissioner's office and he had no opportunity to make a recommendation. The plaintiff was a young married man, 32 years old at the time of his discharge in 1957. He went to elementary school for eight years, then to a trade school for three years, then into the Navy. Upon his release from the Navy he went to a night high school and a night college, and graduated from both. He must have been industrious and bright, to have carried out such a strenuous program for so many years. His work as a Tax Collector was satisfactory. He omitted the following amounts of interest from his income tax returns, $57.14 in 1952, $106.89 in 1953, $134.58 in 1954, and $213.12 in 1955. His answers to questions as to why he had omitted these items were completely unconvincing. Was the failure of the Internal Revenue Service to comply with its own regulations a mere failure to comply with a formality, or was it, in the plaintiff's case, an omission prejudicial to the plaintiff? To know whether it, in fact, affected the ultimate decision in the plaintiff's case, one would have to know whether the Regional Commissioner, if the question had been presented to him, would have recommended dismissal of the plaintiff. Since that question cannot be answered, we must proceed upon what we do know. We know that the Regional Commissioner would have been faced with the problem of whether this competent and, in general, deserving young man, who had shown serious deficiencies in his attitude toward the responsible public position which he held, was nevertheless salvageable and worth saving. The Regional Commissioner would have had a broad discretion in the matter, with many different kinds of disciplinary action at his disposal. We think there is enough of a probability that the Regional Commissioner would not have recom |