Homesteaded Property page1

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Sara Joy Militello, Plaintiff v. Michael W. Bardell, a/k/a/ M. Barr, Mike Barr, M. Bardell, in his Official Capacity as Revenue Officer with the Internal Revenue Service and the United States of America, Defendants

U.S. District Court, Mid. Dist. Fla., Tampa Div., 96-2249-CIV-T-17C, 7/10/97, 970 FSupp 1022.

[Code Sec. 7402 ]

Levies: Homestead property: State exemptions: Tax liens: Attachment of: Suits against the government: Sovereign immunity: IRS employee: Qualified immunity.--The IRS properly levied against an individual's homestead property in satisfaction of her tax liabilities. The IRS agent who initiated the levy had qualified immunity from suit because he acted within his discretionary authority. Also, after the government was substituted as defendant in the action, it was immune from any lawsuit with respect to which it did not consent to be a party. The taxpayer's arguments that this case met certain exceptions to the sovereign immunity of the government were meritless because her case was not a tax refund appeal, she did not pay her taxes before bringing suit, and the government no longer had a lien interest in the property at the time of the lawsuit. A state homestead exemption statute did not shield her property from attachment of a tax lien. The government had placed a lien against her property and the state statute did not govern the validity of such tax liens. Also, Code Sec. 6334 does not provide an exception for homestead property, and no judicial intervention is needed for an administrative levy under Code Sec. 6331.

Sara Joy Militello, pro se.

ORDER ON MOTION TO DISMISS AND MOTION FOR SUMMARY JUDGMENT

KOVACHEVICH, Chief District Judge:

This cause is before the Court on the following motions and responses:

Defendants' Motion to Dismiss (Dkts. 7, 8)

Plaintiff's Motions for Summary Judgment (Dkts. 11, 14)

Defendants' Opposition to Plaintiff's Second Motion for Summary Judgment (Dkt. 16)

Plaintiff's Response to Defendants' Opposition to Plaintiff's Motion for Summary Judgment (Dkt. 13)

I. Standard of Review

This Court must read Plaintiff's pro se allegations in a liberal fashion. Haines v. Kerner, 404 U.S. 519 (1972). Plaintiff's complaint should not be dismissed for failure to state a claim unless it appears beyond a reasonable doubt that Plaintiff can prove no set of facts that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). A trial court, in ruling on a motion to dismiss, is required to view the complaint in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232 (1974). The allegations in the complaint should be taken as admitted by Defendants and liberally construed in favor of the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969).

II. Statement of Facts

The Internal Revenue Service ("IRS") made assessments against Plaintiff for tax liabilities for the tax years of 1987, 1988, 1989, and 1990.

On August 14, 1995, Defendant, Revenue Officer Mike Barr, filed with the Hillsborough County Official Records a notice of Federal Tax Lien on Plaintiff's property for the unpaid tax balances from 1987 to 1990. Plaintiff, the paramount owner of the property, held a fee simple title to the real property at issue in Hillsborough County , Florida .

Plaintiff maintains that the United States must seek a judicial sale of the property to foreclose a Federal Tax Lien under 28 U.S.C. §2410.

On April 25, 1996, Plaintiff alleges that Mike Barr, in his official capacity, violated the law when he offered Plaintiff's homestead property at a public auction for sale to a third-party bidder for $14,100. Defendant, Mike Barr, sold the property subject to a prior mortgage from Meritor Savings Bank. Plaintiff alleges that her property is exempt from a forced sale under Article 10, Sec. 4(a) of the Florida Constitution.

Plaintiff asserts that Article 4, Sec. 4(a) of the Florida Constitution provides three provisions under which a lien may be recorded and enforced against a homestead property. They include a mechanic's lien, property tax, and money purchase mortgage.

Plaintiff further maintains that Defendant, Mike Barr, acted wrongfully, fraudulently, and without legal authority in the filing a notice of lien, seizing and selling Plaintiff's homestead property.

Accordingly, Plaintiff requests this Court to set aside the sale of her "homestead property" as void, and return the property to Plaintiff.

III. The Government's Motion to Dismiss

A. Defendant Mike Barr

Defendants, the United States of America , (hereinafter, "the Government") claim that a suit against IRS employees in their official capacity is a suit against the United States . Since Mike Barr is a Revenue Officer with the IRS, the Government argues that Mike Barr should be dismissed as a Defendant in this action.

The Court agrees with the Government's contention that this is a suit against the United States . The Court therefore grants the Government's motion to dismiss Mike Barr as a defendant in this action. Rosado v. Curtis, 885 F.Supp. 1538, 1542 (M.D. Fla. 1995), aff'd 84 F.3d 437 (11th Cir. 1996), cert. denied 117 S.Ct. 689 (1997).

B. Immunity As To The United States

The Government asserts that the doctrine of sovereign immunity bars any lawsuits against the United States . Further, a party cannot sue the United States without its consent. See United States v. Dalm [90-1 USTC ¶50,154; 90-1 USTC ¶60,012], 494 U.S. 596, 608 (1990); United States v. Sherwood, 312 U.S. 584, 586 (1941). The Government further alleges that "the waiver of the United States ' immunity from suit must be strictly construed, unequivocally expressed, and cannot be implied." United States v. King [69-1 USTC ¶9410], 395 U.S. 1, 4 (1969).

In Plaintiff's Complaint (Dkt. 1), Plaintiff alleges that this Court has subject matter jurisdiction of her claims pursuant to 28 U.S.C. §§1346(a)(1), 2410(c), and 7804(b). The Court considers these sections below.

1. Section 1346

With respect to the 28 U.S.C. §1346(a)(1), this Court has held that §1346(a)(1) applies to tax refund cases only. Also, the Court requires the taxpayer to pay the tax assessment before challenging the validity of §1346(a)(1) in court. Rosado, 885 F.Supp. at 1542. In this case, Plaintiff is not seeking a tax refund, but is seeking instead to have the sale of her home set aside. See Young v. I.R.S. [84-2 USTC ¶9860], 596 F.Supp. 141, 147 (N.D. Ind. 1984) (stating that the Government reserves its immunity regarding claims arising out of tax assessment and collection). As to Section 1346, the Court finds that sovereign immunity bar this case.

2. Sections 2410(c) and 7804(b)

Under 28 U.S.C. §2410, "the United States may be joined as a party to a quiet title action affecting property upon which it claims a lien." Erickson v. Unites States, 780 F.Supp. 733, 736 (W.D. Wash. 1990), aff'd 952 F.2d 1399 (9th Cir. 1992). See also MacElvain v. United States [94-2 USTC ¶50,531], 867 F.Supp. 996, 1003 (M.D. Ala. 1994) (stating that the purpose of a quiet-title action §2410 is to "determine who owns the title to the real or personal property over which the United States has asserted some interest").

While it is true that §2410 waives sovereign immunity as to actions contesting the procedural validity of a tax lien, Section 2410 does not apply to Plaintiff's claim. At the time when Plaintiff commenced this action, the Government no longer had a lien interest in the property at issue. Since the Government had already sold the property prior to the filing of the suit, and no longer claimed any interest in the property, §2410 does not apply. Bay Savings Bank, F.S.B. v. I.R.S., 837 F.Supp. 150, 153 (E.D. Va. 1993); Hughes v. United States [92-1 USTC ¶50,086], 953 F.2d 531, 538 (9th Cir. 1992). Finally, " §2140 should not be read to provide a means of disturbing a sale long since final." Erickson, 780 F.Supp. at 736.

With respect to 28 U.S.C. §7804(b) as basis for jurisdiction, no such section exists.

This Court therefore concludes that neither §2410(c) nor §7804(b) contains a waiver of sovereign immunity that is applicable to this case. As stated above, these sections do not provide a basis for the Court to exercise subject matter jurisdiction of Plaintiff's claim against the Government.

C. Florida's Homestead Exemption

The Government alleges that the IRS has authority to seize and sell Plaintiff's homestead property to satisfy a federal tax lien. The Government relies on 26 U.S.C. §6331(a) and (b).

Section 6331(a) and (b) provide:

(a) AUTHORITY OF SECRETARY. If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax by levy upon all property and rights to property (except such property as is exempt under Section 6334) belonging to such person or on which there is a lien provided in this Chapter for payment of such tax . . .

b) SEIZURE AND SALE OF PROPERTY. The term "levy" as used in this title includes the power of distraint and seizure by any means. Except as otherwise provided in this subsection (e), a levy shall extend only to property possessed and obligations existing at the time thereof. In any case in which the Secretary may levy on property or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible or intangible).

Plaintiff argues that her residential property is a homestead property, and is therefore exempt from the forced sale by the IRS. Article 10, Section 4(a) of the Florida 's Homestead Exemption Statute is inapplicable here. A party cannot use a state's homestead exemption statute against the United States in its attempt to enforce a federal tax lien. United States v. Rodgers [83-1 USTC ¶9374], 461 U.S. 677, 700 (1983).

Additionally, this Court has consistently held that 26 U.S.C. §6334(a) and (c) do not provide an exception for homestead property. Thompson v. Adams , 685 F.Supp. 842, 846 (M.D. Fla. 1988). See also United States v. Mitchell [71-1 USTC ¶9451], 403 U.S. 190, 204-05 (1971); United States v. Estes [71-2 USTC ¶9677], 450 F.2d 62, 65 (5th Cir. 1971) (stating that the homestead exemption does not erect a barrier around a taxpayer's home sturdy enough to keep out the Commissioner of Internal Revenue).

Plaintiff further contends that a judicial foreclosure was necessary to sell her property. However, the administrative levy provided for in §6331 does not require any judicial intervention. Rodgers [83-1 USTC ¶9374], 461 U.S. at 682-83. The Court therefore grants the Government's motion to dismiss Plaintiff's Florida Homestead Exemption claim.

IV. Summary Judgment

Summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). "The substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of a summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson, 477 U.S. at 248. The moving party bears the burden of proving that no genuine issue of material facts exists. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25 (1986).

In determining whether a material fact exits, the Court must consider all evidence in the light most favorable to the non-moving party. Sweat v. The Miller Brewing Co. , 708 F.2d 655 (11th Cir. 1983). All doubt as to the existence of a genuine issue of material fact must be resolved against the moving party. Anderson, 477 U.S. at 255.

I. Immunity As To Defendant Mike Barr

Plaintiff alleges that Defendant, Mike Barr, was acting in bad faith in his official capacity as an IRS agent. Plaintiff further alleges that Defendant, Mike Barr, willfully and knowingly filed a Federal Tax Lien on Plaintiff's residential property. Plaintiff cites to Larson v. Domestic & Foreign Commerce Corporation, 337 U.S. 682 (1949) as support for her claim. In Larson, the United States Supreme Court held that "an officer of the government [who] wrongfully takes or holds specific property to which Plaintiff has title then his taking or holding is a tort, and 'illegal' as a matter of general law, whether or not it be within his delegated powers." Larson, 337 U.S. at 692.

The above case is inapplicable to the instance case, i.e., the United States does have a legitimate lien against Plaintiff's property. See Plaintiff's Complaint (Dkt. 1), Ex. #3 and Ex. #5.

Additionally, this Court agrees with the Government's contention to drop Mike Barr as a defendant in this action. See Rosado 885 F.Supp. at 1542. Even if Defendant Mike Barr should remain as a defendant in this action, he is still entitled to qualified immunity. Id. at 1543. As submitted in Plaintiff's Affidavit (Dkt. 21), Ex. #2 and Ex. #3 clearly show that Defendant, Mike Barr, was acting within his discretionary authority as an IRS agent at the time when he filed a Federal Tax Lien on Plaintiff's homestead property. Accordingly, the Court finds Defendant Mike Barr is entitled to qualified immunity.

II. Sovereign Immunity

Plaintiff also claims that the Government should not be entitled to sovereign immunity because it failed to respond to Plaintiff's request for the "release of levy" of her property. As stated above, the Government is not subject to 28 U.S.C. §2410 since at the time when Plaintiff commenced this action, the United States no longer claimed a lien or a mortgage on Plaintiff's property. Hughes [92-1 USTC ¶50,086], 953 F.2d at 538. See Defendants' Opposition to Plaintiff's Second Motion for Summary Judgment (Dkt. 16), Ex. #1.

Plaintiff further argues that the Government puts forth a false assertion in its Motion to Dismiss (Dkt. 7 and Dkt. 8). Plaintiff asserts that at the time when the Government filed its motion to dismiss, the Government still had an ownership interest in the property at issue. Plaintiff points to the issuance date of the Deed of Real Estate on January 8, 1997. Since the Government filed its Motion to Dismiss on January, 6, 1997, which was before the issuance date of the Deed, Plaintiff contends that the Government still claimed an interest in Plaintiff's homestead property.

The Government claims that it could not issue a Deed of Real Estate at the time of sale in June 1996. Instead, it had to wait 180 days after the date of sale to give Plaintiff the opportunity to redeem the property under 28 U.S.C. §6337. During this 180-day period, the United states no longer retained any interest in the sold property.

This Court agrees with the Government's contention that at the time when the Government sold Plaintiff's homestead property on June 5, 1996, it ceased to retain any interest in the property during the 180-day period. The fact that the county did not issue a Deed of Real Estate until January 6, 1997 is consistent with the 180-day requirement under 28 U.S.C. §6337. This Court denies Plaintiff's Motion for Summary Judgment under the sovereign immunity claim.

III. Florida Homestead Exemption Claim

Plaintiff cites Meyer v. United States [64-1 USTC ¶9111], 375 U.S. 233 (1963) to support her position that "property and rights to property" are measured by policy contracts as enforced by applicable state law. The Supreme Court in Meyer states that "absent a lien, recovery of federal income taxes can be had only to the extend applicable state law permits such recovery." Meyer [64-1 USTC ¶9111], 375 U.S. at 236.

This Court finds Plaintiff's argument unavailing. In this case, the United States did place a lien on Plaintiff's property for back taxes owed. Plaintiff contradicts herself when she alleges that the United States still "claims a lien or mortgage on her property" in defeating the Government's sovereign immunity claim. At the same time, Plaintiff claims that the United States cannot place a lien on her residential property because it is homestead property. See Plaintiff's Response to Defendants' Opposition to Plaintiff's Motion for Summary Judgment (Dkt. 13), pp. 3-8.

Plaintiff also relied on City of Tampa for Use and Benefit of City of Tampa Code Enforcement Bd. v. Braxton, 616 So.2d 554 (Fla. 2d DCA 1993) to support her contention that homestead property is not subject to lien or "notices of lien" by any person.

The Supreme Court has held that "the relative priority of federal tax liens is always a federal question to be determined finally by the federal courts." United States v. Acri [55-1 USTC ¶9138], 348 U.S. 211, 213 (1955); United States v. Security Trust & Savings Bank of San Diego [50-2 USTC ¶9492], 340 U.S. 47, 49 (1950). Plaintiff's reliance on state law authority is inapplicable here.

Finally, as stated above, Florida 's Homestead Exemption statute does not prevent a federal tax lien from attaching to Plaintiff's property. Thompson, 685 F.Supp. at 842. For the reasons stated, the Court denies Plaintiff's Motion for Summary Judgment on the Florida Exemption Claim. Accordingly, it is

ORDERED that Defendants' Motion to Dismiss (Dkt. 7) is granted, and Plaintiff's Motions for Summary Judgment (Dkt. 11 and Dkt. 14) is denied. The Clerk of Court shall enter a final judgment of dismissal.

DONE AND ORDERED.

 

 

 

Earl R. Meyers and Karin E. Meyers, Plaintiff and Counterclaim Defendant v. Michael Sassi, as District Director of the United States Internal Revenue Service, and the United States of America, Defendants Earl R. Meyers and Karin E. Meyers, as owners of 4105 El Bosque, Pebble Beach, California, et al., Additional Defendants on Counterclaim

U. S. District Court, No. Dist. Calif. , No. C 84-20211 RPA, 9/16/85

[Code Secs. 6321 and 6323]

Lien for taxes: Homestead property: Bankruptcy and receivership.--The United States was entitled to a judgment of foreclosure equal to the value of a homestead exemption (plus interest) upon the property of a homeowner couple who had received a discharge from their debts in bankruptcy. The discharge did not release the taxpayers from the government's remedy created by the filing and recordation of the tax lien, nor did it affect the validity of the lien. Although the homestead exemption was recognized in the bankruptcy proceeding, it was ineffective against the federal tax liens that were created or levied more than three years before the taxpayers' bankruptcy. The taxpayers presented no facts which would warrant imposing the doctrine of estoppel upon the government's attempt to collect the tax debt; therefore, injunctive relief was denied to the taxpayers.

Richard D. Gorman, Gerstl & Gorman, Inc., 33 Soledad Dr. , Monterey , Calif. 93940 , for plaintiff and counterclaim defendant. Joseph P. Russoniello, United States Attorney, Michael D. Howard, Assistant United States Attorney, San Francisco, Calif. 94102, for defendants.

Findings of Fact and Conclusions of Law

AGUILAR, District Judge.

This matter came on regularly for trial on August 8, 1985, before the Honorable Robert P. Aguilar, United States District Judge, presiding without a jury. The parties presented all their testimony and all of their evidence and presented their arguments. The Court took the matter under submission and after due consideration now makes its Findings of Fact and Conclusions of Law as follows:

1. Plaintiffs are residents of Monterey County , California and citizens of the United States .

2. Plaintiffs were, during all relevant dates herein, husband and wife and residing together.

3. Plaintiffs are the record owners of the real estate (single family dwelling and lot), the subject matter of this action.

4. The real property in question is commonly described as 4105 El Bosque, Pebble Beach , California .

5. The Internal Revenue Service has assessed income taxes against plaintiffs for the years 1969, 1970 and 1972.

6. The taxes assessed for these three years are not in dispute and are as follows as of February 2, 1984:

December 31, 1969           $15,185.53          Tax

                             15,824.95        Interest

                            $31,010.48

December 31, 1970           $17,120.14          Tax

                             21,686.42        Interest

                              3,875.87        Penalty

                            $42,682.43

December 31, 1972           $ 8,356.65          Tax

                              9,364.77        Interest

                              1,794.60        Penalty

                            $19,516.02

TOTAL                       $93,208.93

 

7. The Internal Revenue Service has given notice of said assessments and has made demand for payment of said taxes.

8. The statutes of limitation for collection of the 1969, 1970 and 1972 income taxes were extended to December 31, 1984, by plaintiffs.

9. The United States filed its counterclaim seeking to reduce the 1969, 1970 and 1972 taxes to judgment prior to December 31, 1984.

10. Plaintiffs purchased the subject real property in 1968.

11. The net purchase price of the subject real property before closing costs was $149,500.00.

12. Plaintiffs financed the purchase as follows:

a) $120,000.00 Loan represented by Note and First Deed of Trust to Home Savings and Loan

b) 29,500.00 Cash Down Payment $149,500.00 Total Purchase Price

13. The source of the cash down payment ($29,500.00) was plaintiffs' cash or credit reduced to cash.

14. The present fair market value of the property in question is over $245,000.00.

15. On February 13, 1979, plaintiffs filed a petition in bankruptcy.

16. Sometime prior to the filing of their petition in bankruptcy, plaintiffs caused to be recorded in Monterey County a valid homestead exemption on the subject real property.

17. Plaintiffs listed the subject real property as exempt property in their bankruptcy petition and claimed a homestead exemption of $30,000.00.

18. Plaintiffs did, in fact, have an equity value in the subject property in an amount equal to at least $30,000.00 at the time that they recorded their homestead exemption.

19. The Trustee's Report of Exempt Property filed March 1, 1979 lists in Item 1 thereof, "Residence located at 4105 El Bosque, Pebble Beach, California, $30,000.00" as property set apart as provided under the Bankruptcy Act as an exemption allowed by law.

20. On June 5, 1979, plaintiffs filed a Complaint to Determine Dischargeability of Taxes in the Bankruptcy Court.

21. Plaintiffs Discharge of Bankruptcy was signed and filed on August 31, 1979.

22. The Discharge contained the following reservation:

"There is still pending the hearing under Section 17 on the dischargeability of the debt of Internal Revenue Service of the United States ."

23. On October 2, 1979, the United States Attorney and Attorney W. A. McGugin, attorney for plaintiffs herein (the Bankrupts) stipulated in writing, inter alia, as follows:

"2. That the plaintiff and defendant agree that the said income taxes, interest and penalties owned by plaintiffs-bankrupts, EARL R. MEYERS and KARIN E. MEYERS, for the years 1969, 1970, and 1972 are dischargeable in the above entitled bankruptcy proceedings in that said taxes became legally due and owing by bankrupts-plaintiffs to the United States more than 3 years preceding the filing of these bankruptcy proceedings."

The stipulation was approved and it was so ordered by E. A. Thompson, U. S. Bankruptcy Judge on October 17, 1979.

25. This Stipulation and Order had the legal effect of extinguishing and discharging the debt for the income taxes owed by plaintiffs for the years 1969, 1970 and 1972 but it did not discharge or extinguish the remedy created by the tax liens which were created by the filing and recordation of Notices of Federal Tax Lien under Internal Revenue Laws.

26. On or about July 12, 1979, the Internal Revenue Service filed and recorded its Notice of Tax Lien with the County recorder for Monterey County , California for the tax year 1969 and the tax years 1970 and 1972 by way of two separate documents.

27. These Notices of Tax Liens created liens against real property owned by plaintiffs of record in Monterey County , California as of that date or thereafter acquired.

28. The Stipulation and Order referred to in Findings 23 and 24 and the Discharge of Bankrupts did not discharge or affect the validity of these Notices of Tax Liens.

29. The homestead exemption was ineffective against the federal tax liens created by Notices of Tax Liens duly recorded by the Internal Revenue Service.

30. The bankruptcy discharge of plaintiffs did not invalidate these tax liens which were created or levied more than three years before the bankruptcy of plaintiffs.

31. There are no facts sufficient to warrant a finding which would cause this Court to impose the doctrine of estoppel against the United States .

32. Plaintiffs are not entitled to injunctive relief against the Internal Revenue Service or the United States .

33. The United States has proved that it is entitled to relief under its counterclaim.

34. The United States is entitled to judgment against plaintiffs and each of them for unpaid taxes, interest and penalties for the tax years 1969, 1970 and 1972.

35. The United States is entitled to judgment in the principal sum of $30,000.00 (the amount of the exemption) plus the legal rate of interest thereon provided by the Internal Revenue Code, at that time, from October 17, 1979, the date upon which the underlying tax debts were discharged.

36. The United States is entitled to a Judgment of Foreclosure and an order that the real property, the subject of this action, be sold at public auction as required by law and that the proceeds thereof be applied in the manner of law provided and then in satisfaction of the income tax liens.

37. The United States is entitled to its costs of suit.

38. The Government is ordered to prepare an appropriate judgment pursuant to these Findings of Fact and Conclusions of Law and, in particular, set forth the proper legal description of the subject property commonly known as 4105 El Bosque, Pebble Beach, California.

IT IS SO ORDERED.

 

 

 

United States of America v. Ernest L. Bowers, et al.

U. S. District Court, No. Dist. Tex. , Fort Worth Div., Civil Action No. CA 4-77-180-E, 5/15/80

[Code Sec. 6323]

Lien for taxes: Validity: Priority of liens.--The court determined the priority of liens, including a lien for taxes, that could properly be asserted against real property qualifying under a state homestead exemption. Those liens that were not barred by the homestead right of the taxpayer were foreclosed, and it was determined that two purchase money notes had priority over the lien for taxes. Other creditors' claims were barred by the homestead exemption and not foreclosed.

[Code Sec. 6672]

Withholding of tax on wages: Failure to withhold: Penalty tax.--A chairman of the board of directors of a company was liable for the 100 percent penalty for failing to pay over the employment taxes of the company. The individual knew that employment taxes were not paid, yet authorized payment from the company to other creditors.

Kenneth J. Mighell, United States Attorney, Richard B. Vance, Assistant United States Attorney, Fort Worth, Texas 76102, William W. Guild, Tom Rhodus, Department of Justice, Dallas, Texas 75242, for plaintiff. Ernest L. Bowers, P. O. Box 26000, Fort Worth, Texas 76107, pro se, Brown & deBullet, 1025 West Bluff, Fort Worth, Texas 76102, for Ernest L. Bowers. Mark White, Attorney General of Texas , Gilbert J. Bernal, Jr., Austin , Texas 78811 , for State of Texas . Thomas J. Williams, 1500 First National Bank Bldg., Fort Worth, Texas 76102, for Louis Bull, Inc., James A. Baker, 917 Republic National Bank Tower, Dallas, Texas 75201, for US Gypsum Co., Clark Williams, Strasburger & Price, One Main Place, Dallas, Texas 75250, for GAF Corporation, William C. Pannell, Pannell and Pannell, 403 Fort Worth Club Bldg., Fort Worth, Texas 76102, for Ryan Mortgage Company, Norman A. Zable, True & Zable, 777 Dallas Federal Savings Tower, Dallas, Texas 75225, for General Electric Credit Corp., Peter J. Grabicki, 600 Lincoln Building, Spokane, Washington 99201, for Linda Bowers, Richard L. Hanna, P. O. Box 3400, Amarillo, Texas 79106, for Monsanto Company, Brown & deBullet, 1025 West Bluff, Fort Worth, Texas 76102, for Ernest L. Bowers, William C. Pannell, Pannell and Pannell, 403 Fort Worth Club Bldg. Fort Worth, Texas 76102, for Texas Life Insurance Company, Spencer Shropshire, 201 N. E. 7th Street, Fort Worth, Texas 76106, for Par Painting Service, Gene deBullet, 1025 West Bluff, Woodbine Square, Fort Worth, Texas 76102, for Circle Communications, Inc., for defendants.

Memorandum Opinion

MAHON , District Judge:

The United States of America (the Government) brings this action against taxpayer Ernest L. Bowers to foreclose a federal tax lien on a parcel of real property owned by Bowers. The other defendants in this action have been joined as parties because of claims that they assert against Bowers. Trial before the Court was concluded on June 2, 1979, and because Bowers appeared pro se, the Court has carefully scrutinized the contentions of each party. After careful consideration, the Court enters this memorandum of its findings of fact and conclusions of law.

Findings of Fact

1. Mobol Distributing Company, Inc. began active business operations in the summer of 1971. Mobol did business during 1972 and entered into bankruptcy in 1973. Throughout its existence, Mobol had insufficient capital and experienced severe cash flow problems. As a solution to its financial problems, Mobol failed to pay to the Government the employment taxes Mobol withheld from its employees.

2. The Government seeks to collect from Bowers the employment taxes due from Mobol. The Government claims that Bowers was a person responsible for collecting, accounting for, and paying to the Government the employment taxes withheld from Mobol employees and that, therefore, he is liable for 100 percent of the employment taxes owed by Mobol. This 100 percent penalty was assessed against Bowers on May 13, 1974.

3. On July 26, 1974, a notice of federal tax lien was filed with the county clerk in Tarrant County , Texas , for this tax liability. This notice shows an unpaid balance of assessment of $25,419.94. On February 1, 1977, the fact of the filing of notice of lien was entered and recorded in a public index at the District Office of the Internal Revenue Service for the Dallas District (the district in which the property subject to the lien is situated).

4. Throughout all pertinent periods of time, Bowers was the Chairman of the Board of Directors of Mobol.

5. Throughout all pertinent periods of time, Bowers was the chief administrative officer of Mobol.

6. Bowers owned at least 50 percent of the outstanding shares of stock in Mobol.

7. Bowers controlled Mobol. He made the major financial decisions for Mobol. He determined whether and when Mobol would expand its facilities into new markets. When Mobol had insufficient cash on hand to pay its bills, he determined which creditors would be paid and which creditors would not be paid.

8. Bowers had the authority to sign Mobol checks individually.

9. During 1972, Bowers knew that Mobol was not paying its employment taxes. He signed the quarterly tax returns for the first and second quarters of 1972 which showed that no federal tax deposits had been made. Bowers caused these returns to be filed without remitting payment of the amount shown due.

10. At a time when Bowers knew that Mobol had not paid its employment taxes, he caused Mobol to pay other creditors. On one occasion, two Mobol checks were simultaneously presented for payment at a time when Mobol had insufficient funds on deposit to pay both. One check was payable to the Internal Revenue Service; the other was payable to a furniture company. Bowers directed Mobol personnel to instruct the bank to pay the check to the furniture company, thus causing the check written to the Internal Revenue Service to be dishonored.

11. Bowers was a person responsible for collecting, accounting for, and paying to the Government the employment taxes due from Mobol for all quarters of 1972.

12. Bowers willfully failed to account for and pay to the Government the employment taxes Mobol withheld from its employees.

13. By a deed dated November 4, 1971, Bowers and his wife, Linda Bowers, acquired title to Lot 10, Block 3, Ridglea Country Club Estates Addition to the City of Fort Worth , Tarrant County , Texas . This real property consists of a house and a lot located on a golf course and has the residential address of 7055 Serrano, Fort Worth , Texas . In purchasing this parcel of property, Bowers and Linda Bowers assumed liability on a note dated December 13, 1968, for the principal amount of $36,500. This note and the lien securing its payment are owned and held by Texas Life Insurance Company. The deed of trust, dated December 13, 1968, and recorded in Volume 2137 Page 843 of the Deed Records of Tarrant County, Texas, and the vendor's lien described and retained therein, cover the Serrano property, secure the note owned by Texas Life Insurance Company, and constitute a first and prior lien against the Serrano property having priority over the claims of the Government and all other defendants.

14. The note owned by Texas Life Insurance Company is in default and has been matured. The note remains unpaid, and Texas Life Insurance Company is entitled to foreclosure of its lien. Bowers owes Texas Life Insurance Company $37,180.17 plus additional interest of $8.2407 per day after March 1, 1979. This balance is computed as follows:

Principal Balance ....................         $30,078.59

Interest 2/1/78 through 2/28/78 at

3 3/4 percent ........................             194.26

Interest 3/1/78 through 2/28/79 at

10 percent 365 days ($8.2407 per

day) .................................           3,007.86

Advance to pay 1978 City & School

taxes 1132007 account ................           1,385.15

......................................         $34,665.86

LESS: Escrow funds ...................             -83.89

......................................         $34,581.97

Plus attorney fees ...................           3,458.20

......................................         $38,040.17

LESS: Insurance claim proceeds .......            -860.00

......................................         $37,180.17

At trial, Texas Life Insurance Company agreed to credit against the above balance any other sums it received as a result of insurance claims pending on the Serrano property.

15. In purchasing the Serrano property, Bowers and Linda Bowers also assumed liability on a second note which is now owned by General Electric Credit Corporation. This note is secured by a deed of trust dated December 13, 1968, and recorded in Volume 2137, Page 839 of the Deed of Trust Records of Tarrant County, Texas. This deed of trust and the vendor's lien described therein cover the Serrano property and constitute a second lien having priority over the claims of all other parties to this lawsuit except for Texas Life Insurance Company. The note owned by General Electric Credit Corporation is in default and has been matured. The note remains unpaid, and General Electric Credit Corporation is entitled to foreclosure of its lien. Bowers owes General Electric Credit Corporation $4,506 plus additional interest of $1.02 per day after March 1, 1979. This balance is computed as follows:

Principal Balance ...................         $3,723.98

Interest from 12/13/68 to 3/1/79 ....            372.39

Attorney's fees .....................            409.63

.....................................         $4,506.00

 

16. Bowers and Linda Bowers married in 1967. They divorced on September 11, 1974. They purchased and held the Serrano property as part of their community estate.

17. With the exception of a brief period of time in 1973, Bowers and Linda Bowers resided at the Serrano property with their five children from the time of their purchase in 1971 until they separated in 1974.

18. Bowers continued to reside at the Serrano property after he and Linda Bowers were divorced.

19. In August 1975, Bowers married Glenice Bowers.

20. Bowers or Glenice Bowers resided at the Serrano property from January 1975 until June 1978.

21. Glenice Bowers ceased to reside at the Serrano property in June 1978.

22. The Serrano property was unoccupied and devoid of clothing or furnishings from June 1978 to the date of the trial in this case.

23. Bowers resided in Frisco, Collin County, Texas, from April 1979 to the date of trial of this case.

24. At the time of trial, Bowers did not know the residence or whereabouts of Glenice Bowers.

25. Neither Bowers, nor Glenice Bowers, nor any member of their family, have occupied or resided in the Serrano property since June 1978.

26. In June 1978, Glenice Bowers established a residence at 6701 Calmont, Fort Worth , Texas .

27. During her marriage to Bowers, Linda Bowers occupied the Serrano property as her homestead. Prior to July 1978, however, Linda Bowers moved to her residence in Spokane , Washington and intended not to return to occupy the residence at the Serrano property.

28. During her marriage to Bowers, Glenice occupied the Serrano property as her homestead.

29. From November 1971 until June 1978, Bowers occupied the Serrano property as his homestead.

30. Bowers moved from the Serrano property in June 1978.

31. Bowers stopped making mortgage payments on the Serrano property in June 1978.

32. Between July and December of 1978, Bowers attempted to sell the Serano property.

33. Between June 1978 and April 1979, Bowers led a vagabondish existence, spending time in Washington , Tennessee , North Carolina , and Fort Worth . Apparently, during portions of this period of time, Bowers was incarcerated in North Carolina and in Washington .

34. In April 1979, Bowers established a residence in Frisco, Collin County, Texas. This residence is a mobile home which Bowers rents.

35. Immediately prior to trial, Bowers had the lawn at the Serrano property mowed for the first time in 1979.

36. At the time of trial, Bowers had employed workers who were repairing damage to the roof of the Serrano residence. This repair work was paid by insurance coverage on the property.

37. Bowers keeps a car at the Serrano residence.

38. Bowers has purchased (but not installed) kitchen appliances to replace those that were stolen from the Serrano residence after he moved in June 1978.

39. Bowers did not acquire a new homestead after moving from the Serrano property.

40. The evidence is insufficient to show that Bowers intended not to return to reside in the Serrano property either when he moved in June 1978 or at any time between June 1978 and trial.

41. In addition to the federal tax liens and the mortgages executed with respect to the Serrano property, the following claims exist:

(a) Louis Bull, Inc., received a judgment against E. L. Bowers for the principal amount of $946.65, which judgment was filed for record on February 8, 1973, and recorded in Volume 196, Page 499, Abstract of Judgment Records of Tarrant County, Texas.

(b) United States Gypsum Company obtained a judgment against E. L. Bowers for the principal amount of $15,705.61, which judgment was abstracted and filed for record on April 11, 1973, and recorded in Volume 197, Page 895, Abstract of Judgment Records of Tarrant County, Texas.

(c) Monsanto Company received a judgment against E. L. Bowers for the principal amount of $25,723.15, which judgment was abstracted and filed for record on June 13, 1973, and recorded in Volume 198, Page 955, Abstract of Judgment Records of Tarrant County, Texas.

(d) GAF Corporation obtained a judgment against E. L. Bowers for the principal amount of $20,359.79, which judgment was abstracted and filed for record on November 15, 1974, and recorded in Volume 209, Pages 573-74, Abstract of Judgment Records of Tarrant County, Texas.

(e) The State of Texas filed a lien for sales taxes for the principal amount of $414, which lien was recorded on November 8, 1974, in Volume 37, Page 728, State Tax Lien Records of Tarrant County, Texas.

(f) Ken Siefort, d/b/a Siefort Lawn Service, filed a lien against the real property which is the subject of this litigation for the amount of $851.70 based upon a mechanic's lien affidavit dated December 12, 1977, and recorded on December 13, 1977, under County Clerk File No. 93237, Deed Records of Tarrant County, Texas.

The judgments and liens described in this paragraph are unpaid.

42. Under the terms of the divorce decree dissolving the marriage of Bowers and Linda Bowers, Bowers was to receive the Serrano property and Linda Bowers was to receive $9,000 in cash for her interest in the community homestead and furnishings. Bowers has not paid this $9,000 to Linda Bowers.

43. Any finding of fact which should be a conclusion of law is hereby made a conclusion of law.

Conclusions of Law

1. The Court has jurisdiction of the parties and the subject matter, and venue is appropriate in the Northern District of Texas.

2. The Internal Revenue Code provides:

Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.

26 U. S. C. §6672.

The Code further provides:

(a) Penalty Assessed as Tax. The penalties and liabilities provided by this subchapter shall be paid upon notice and demand by the Secretary or his delegate, and shall be assessed and collected in the same manner as taxes. . . .

(b) Person Defined. The term "person" as used in this subchapter, includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

26 U. S. C. §6671.

3. With reference to Section 6671 and 6672 of the Internal Revenue Code, the Fifth Circuit has recently stated:

Under the statute, a person has willfully breached his duty if he voluntarily, consciously, and intentionally fails to collect, account for, and pay over the taxes due. E.g., Newsome v. United States [70-2 USTC ¶9597], 5 Cir. 1970, 431 F. 2d 742. Willfulness is shown if the responsible person knows or is aware that the money owing to the government for unpaid withholding taxes is used for other corporate purposes. Id.

The principles governing the decision are well settled. If an assessment is made against a corporate officer as a responsible person, the burden of proof is on the taxpayer to show that he did not willfully fail to ensure that the taxes were paid. Anderson v. United States [77-2 USTC ¶9614], 8 Cir. 1977, 561 F. 2d 162; Liddon v. United States , supra; Psaty v. United States [71-1 USTC ¶9346], 3 Cir. 1971, 442 F. 2d 1154. The taxpayer has the burden of proof because the Commissioner's determination of a tax deficiency is presumed to be correct. See also Potito v. Commissioner [76-2 USTC ¶9494], 5 Cir. 1976, 534 F. 2d 49, cert. denied, 1977, 429 U. S. 1039, 97 S. Ct. 736, 50 L. Ed. 2d 751.

We have previously held that the taxpayer cannot satisfy the burden of proof merely by showing that he delegated his responsibility to someone else. Newsome v. United States, supra. See also Lawrence v. United States, N. D. Tex. 1969, 299 F. Supp. 187. Responsible persons owe a fiduciary obligation to care properly for the funds that are temporarily entrusted to them for the ultimate use of the United States . See e.g., Slodov v. United States [78-1 USTC ¶9447], 1978, 436 U. S. 238, 98 S. Ct. 1778, 56 L. Ed. 2d 251; Moore v. United States [72-2 USTC ¶9569], 5 Cir. 1972, 465 F. 2d 514, cert. denied, 1973, 409 U. S. 1108, 93 S. Ct. 907, 34 L. Ed. 2d 688. A fiduciary cannot absolve himself merely by disregarding his duty and leaving it to someone else to discharge.

* * *

[T]he liability imposed on responsible persons by Section 6672 is distinct from the corporation's duty to pay the taxes withheld from its employees. E.g., Emshwiller v. United States [77-2 USTC ¶9744], 8 Cir. 1977, 565 F. 2d 1042; Moore v. United States , supra; Datlof v. United States [67-1 USTC ¶9167], 3 Cir. 1966, 370 F. 2d 655 cert. denied, 1967, 387 U. S. 906, 87 S. Ct. 1688, 18 L. Ed. 2d 624. The fact that there are other financially responsible persons does not relieve [the Taxpayer] of his personal liability under Section 6672. See Moore v. United States, supra; Braden v. United States [71-1 USTC ¶9428], 6 Cir. 1971, 442 F. 2d 342, cert. denied, 404 U. S. 912, 92 S. Ct. 229, 30 L. Ed. 2d 185; Monday v. United States [70-1 USTC ¶9205], 7 Cir. 1970, 421 F. 2d 1210, cert. denied, 400 U. S. 821, 91 S. Ct. 38, 27 L. Ed. 2d 48.

Hornsby v. Internal Revenue Service [79-1 USTC ¶9188], 588 F. 2d 952 (5th Cir. 1979).

4. Pursuant to Section 6671 and 6672 of the Internal Revenue Code, Bowers was a person responsible for collecting, truthfully accounting for, and paying to the Government the employment taxes that Mobol withheld from its employees during 1972.

5. Bowers' failure to account for and pay to the Government the employment taxes that Mobol withheld from its employees was willful within the meaning of Section 6672 of the Internal Revenue Code.

6. Bowers is liable for the 100 percent penalty assessed against him pursuant to Section 6672 of the Internal Revenue Code. Under this assessment, Bowers owes the Government the sum of $24,867.56 plus interest as provided by law from May 13, 1974, and the Government is entitled to judgment against Bowers for this amount.

7. The Texas Constitution provides:

The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for the purchase money thereof, or a part of such purchase money, the taxes due thereon, or for work and material used in constructing improvements thereon, and in this last case only when the work and material are contracted for in writing, with the consent of both spouses, in the case of a family homestead, given in the same manner as is required in making a sale and conveyance of the homestead.

TEX. CONST. art. 16 §50.

8. State exemption statutes are not effective against the claims of the federal government under its taxing authority, United States v. Estes [71-2 USTC ¶9677], 450 F. 2d 62 (5th Cir. 1971), and the homestead is not exempt from federal tax liens. Shambaugh v. Scofield [42-2 USTC ¶9826], 132 F. 2d 354 (5th Cir. 1943).

9. At the time that the federal tax lien arose and also at the time that the notice of federal tax lien was filed, the Serrano property was the community property of Bowers and Linda Bowers. TEX. FAM. CODE §5.01.

10. The Texas Family Code provides:

The community property subject to a spouse's sole or joint management, control, and disposition is subject to the liabilities incurred by him or her before or during marriage.

TEX. FAM. CODE §5.61(c). The Government's lien against Bowers extended to the entire community estate of Bowers and Linda Bowers and, thus, attached to the entire Serrano property. See Mulcahy v. United States [68-1 USTC ¶9159], 388 F. 2d 300 (5th Cir. 1968); Short v. United States [75-1 USTC ¶9232], 395 F. Supp. 1151 (E. D. Tex. 1975). Cf. United States v. Mitchell [71-1 USTC ¶9451], 403 U. S. 190 (1970).

11. "When homestead rights are once shown to exist in property, they are presumed to continue, and anyone asserting an abandonment has the burden of proving it by competent evidence. [citations omitted] The party claiming abandonment must plead it and carry the burden of proving it". Sullivan v. Barnett, 471 S. W. 2d 39 ( Tex. 1971).

12. Under Texas law, "[t]he evidence relied on as establishing abandonment of a homestead must make it 'undeniably clear' that there has been 'a total abandonment with an intention not to return and claim the exemption.'" West v. Austin National Bank, 427 S. W. 2d 906 (Tex. Civ. App.--San Antonio 1968, writ ref'd n. r. e.) (citations omitted). "[T]he party asserting the abandonment of a homestead has the burden of proving if 'by evidence undeniably clear and beyond almost the shadow--at least all reasonable ground of dispute.'" Gulf Production Co. v. Continental Oil Co., 132 S. W. 2d 553, 557 ( Tex. 1939) (emphasis in original); accord Morris v. Porter, 393 S. W. 2d 385 (Tex. Civ. App.--Houston 1965, writ ref'd n. r. e.)

13. To constitute an abandonment of a homestead, the claimant either must move from the homestead with a definite intention not to return or must form such an intention after moving from the homestead. Gulf Production Co. v. Continental Oil Co., 132 S. W. 2d 553, 556 ( Tex. 1939).

14. The evidence does not show that Bowers has abandoned his homestead rights in the Serrano property.

15. The liens of Texas Life Insurance Company, General Electric Credit Corporation, and the Government are not barred by Bowers' homestead right. Accordingly, each of these liens will be foreclosed.

16. All other claims asserted against the Serrano property are barred by Bowers' homestead right and, accordingly, will be denied.

17. After payment of the expenses of foreclosure, Texas Life Insurance Company shall participate in the proceeds of the sale of the Serrano property until its lien of $37,180.17 plus additional interest of $8.2407 per day after March 1, 1979, is satisfied.

18. If any proceeds remain after the distribution to Texas Life Insurance Company, General Electric Credit Corporation shall participate in the proceeds of the sale of the Serrano property until its lien of $4,506 plus additional interest of $1.02 per day after March 1, 1979, is satisfied.

19. If any proceeds remain after the distribution to General Electric Credit Corporation, the Government shall participate in the proceeds of the sale of the Serrano property until its lien of $24,867.56 plus interest as provided by law is satisfied.

20. Any conclusion of law which should be a finding of fact is hereby made a finding of fact.

Judgment will enter accordingly.

Memorandum

On May 15, 1980, the Court ordered the United States of America (the Government) to submit to the Court a computation of the interest due on its federal tax lien. By letter dated May 22, 1980, the Government responded to this order. The Court has caused this letter to be file marked, docketed, and placed with the other documents in this action. Pursuant to the information supplied by the Government in this letter, the Court makes the following findings of fact.

1. As of April 21, 1979, Bowers owed the Government $33,200.64 in penalty, costs, and interest.

2. Between April 21, 1979, and January 1, 1980, additional interest of $1,164.01 accrued at the rate of 6% per annum.

3. Between February 1, 1980, and May 20, 1980, additional interest of $899.32 accrued at the rate of 12% per annum.

4. As of May 20, 1980, Bowers owed the Government $35,263.97.

$33,200.64

  1,164.01

    899.32

   $35,263

       .97

 

5. After May 20, 1980, additional interest accrues at the rate of $8.18 per day.

Judgment will enter in accordance with this Memorandum and the Memorandum Opinion dated May 15, 1980.

 

 

 

United States of America , Appellant, v. J. E. Stone, et al., Appellees

(CA-5), U. S. Court of Appeals, 5th Circuit, No. 17058, 257 F2d 685, 6/30/58, Affirming Dist. Ct. (Texas), 57-2 USTC ¶9864

[1954 Code Sec. 6502--similar to 1939 Code Sec. 276(c)]

Statute of limitations: Collection after assessment: Collection proceedings commenced against estate of deceased taxpayer after expiration of statutory period of limitations.--Although timely suit to enforce an income tax lien was begun against several named individuals, one of whom was then dead, an amended complaint, naming the deceased taxpayer's estate as a party defendant, was not filed until after the expiration of the 6-year statutory period of limitations (plus 1 additional year allowed by Texas statute law). The District Court held that collection proceedings could not be considered to have been commenced against the estate until the amended complaint was filed and that therefore the suit to enforce collection against the estate was barred by the statute of limitations. On appeal taken by the Commissioner as to this particular issue, the court of review affirmed the trial court, holding that the institution of the suit against the deceased, along with the other individuals named, did not operate to toll the statute of limitations and that therefore collection proceedings against the decedent's estate were not commenced until the filing of the amended complaint which made the estate a party defendant.

Charles K. Rice, Assistant Attorney General, Kenneth E. Levin, Melva M. Graney, Fred E. Youngman, Lee A. Jackson, Department of Justice, Washington, D. C., William M. Steger, United States Attorney, John L. Burke, Jr., Assistant United States Attorney, Tyler, Tex., for appellant. Marion T. Holt, Edmund F. Benchoff, Nacagdoches , Tex. , for appellee.

Before HUTCHESON, Chief Judge, and TUTTLE and CAMERON, Circuit Judges.

HUTCHESON, Chief Judge:

Based on its holding that the statute of limitations had run against collection of 1947 income taxes against Mary Stone, deceased, the district judge entered judgment that plaintiff take nothing on its claim for these taxes and that its prayer for foreclosure of its lien for the amount of said taxes be denied.

Appealing from that judgment, the United States is here urging one point, that the district court erred, under the facts and the law, in holding that the statute of limitations had run against collection of the tax.

The facts material to the issue involved are not in dispute and may be thus briefly stated:

"This action was brought by the United States to collect income taxes, with interest, assessed against the taxpayer and his wife, since deceased, for the years 1947, 1949, and 1950, and to foreclose federal tax liens therefor against certain described premises owned by the taxpayer and his wife, which, from some time prior to 1947 until the death of the wife on February 25, 1952, were claimed and occupied as their homestead. The facts material to the issue involved on this appeal are not in dispute, and are included in the District Court's lengthy memorandum decision.

In September, 1949, the Commissioner of Internal Revenue made an assessment of $7,922.59 as taxes upon the income of Mary Stone for the calendar year 1947, together with interest thereon in the sum of $696.88, making a total assessment of $8,619.47, and made like assessments against J. E. Stone. The lists containing these assessments were received by the Collector of Internal Revenue on Sept. 26, 1949, who, within ten days of receipt thereof, issued notice to and made demand upon each for the payment of such assessments.

On January 13, 1950, the Collector filed notices of such assessments with the Clerk of the County Court of Nacogdoches County, Texas, claiming a lien on behalf of the United States for the amount of the assessments against all of the property belonging to Mary Stone and to J. E. Stone, respectively. Payments were thereafter made and credits allowed upon each of these assessments in the amount of $4,370.61, so that at the time the complaint was filed there remained unpaid upon each assessment the sum of $4,248.84, plus interest as allowed by law.

Mary Stone, wife of the taxpayer, died testate on February 25, 1952. Subsequent to her death her last will and testament was duly filed for probate, and on August 24, 1953 admitted for probate in the Probate Court of Nacogdoches County, Texas. Under the terms of her will, the decedent bequeathed to her husband, the taxpayer, a life estate in all her property with remainders over to her seven children. The will named Clyde and Sidney Stone, two of her sons, as executors, but they did not qualify as such until March 4, 1957.

The original complaint herein was filed July 26, 1955. The answer of J. E. Stone to the merits disclosed for the first time, so far as the record is concerned, that Mary Stone had died and that two of her unmarried daughters who were residing on the property described in the complaint had a homestead interest in the premises and were necessary parties to the suit.

On Sept. 2, 1955, J. E. Stone, as "Community Survivor of the Estate of Mary Stone", filed an answer of the Estate of Mary Stone, in which "the defendant, the Estate of Mary Stone, adopts in its entirety the pleadings of the defendant, J. E. Stone, on file in this case."

On April 25, 1957, the United States filed its amended complaint herein, naming as defendants, in addition to those named in the original complaint, the surviving children of Mary Stone and the newly qualified independent executors of the estate of Mary Stone, deceased. Other than making the additional parties defendants and the allegations made in connection with the making of such additional defendants, the amended complaint was substantially the same as the original complaint. Answers to the amended complaint were filed by Irene Stone and Fannie Mae Stone, by Sidney Stone, individually and as one of the independent co-executors of the estate of Mary Stone, deceased, and Mary Louise Stone Curie and husband, and by Clyde Stone, not individually, but as one of the co-executors of the estate of Mary Stone, deceased, in all of which the statute of limitations was pleaded for the first time as a bar to the collection of taxes and interest assessed against the decedent for the year 1947.

On these facts the District Court [57-2 USTC ¶9864] held that the Government did not proceed against the Estate of Mary Stone, Deceased, to collect the 1947 taxes assessed against Mary Stone until the amended complaint was filed by plaintiff, making the executors of the Estate of Mary Stone, Deceased, parties to such action, and that at that time collection was barred. The Government has appealed from this part of the court's decision.

In complete disregard of the fact: that the sole issue presented in this case is whether the separate income tax liability of Mary Stone, deceased, for the year 1947 is barred by the statute of limitations; that the lien sought to be foreclosed is only an incident to the claim for taxes it secures; and that, the claim for taxes barred, the lien falls with it, the United States argues this case as though the question involved here was whether the homestead property was community property of the Stones and was, therefore, subject to the federal lien for taxes assessed against the wife.

Stating: "This action is to foreclose a tax lien on real property owned by the taxpayers and is essentially an action in rem or quasi in rem", the United States argues: "The lien for 1947 taxes assessed against Mary Stone arose and was recorded prior to the date of her death and was not in any way affected by the death and any interest in the property acquired by her devisees was taken subject to the lien."

No one disputes these contentions. What and all that is in question here is whether the suit to collect the tax was timely filed and prosecuted. The United States had six years plus the one year provided in Article 5538, Vernon 's Texas Civil Statutes for tolling the statute after death, or a total of seven years, and the suit against Mary Stone's executors and devisees was not brought until nearly eight years had elapsed. It is quite plain that unless the filing of the suit against Mary Stone after her death operated to toll the statute, the taxes are barred and the judgment was right.

No statute or decision is called to our attention, we know of none, holding that a suit against and in the name of a deceased person tolls the statute of limitations. The reliance which the government places on the fact, that the husband was the survivor in community and that his answer filed in the suit as such operated as an appearance, will not do. It is settled law in Texas that the husband, while entitled to administer the community as survivor without appointment by the Probate Court, is not thereby made the personal representative of the deceased the personal representative of the deceased wife's estate, Fairbanks Estate v. Commissioner, 128 Fed. (2d) 537 [42-2 USTC +10,188], and certainly he is not the representative of her children, devisees under her will.

The issue which the Government has tried to make much of, by debating questions not in the case, is simple and as simply answered.

The judgment was right. It is affirmed.

 

 

 

United States of America, Plaintiff v. Clyde Stone, Ruby Stone, also known as Mrs. Clyde Stone, Finch Cigar Company, Texas Power & Light Company, The Texas Employers Insurance Association, City of Nacogdoches, Nacogdoches Independent School District, County of Nacogdoches, and State of Texas, Defendants v. L. E. Jowell, Trustee in Bankruptcy, Third Party Defendant United States of America, Plaintiff v. J. E. Stone, Individually and as Community Survivor of the Estate of Mary Stone, Deceased; Clyde Stone and Sidney Stone, Individually and as Independent Co-Executors of the Estate of Mary Stone, Deceased; Fanny Mae Stone, A Feme Sole; Irene Stone, A Feme Sole; Arline Stone, A Feme Sole; Mary Louise Stone Curie and Husband, Pierre Curie; Mona Faye Stone Hoffman and Husband, Bob Hoffman; Texas Power & Light Company; The Texas Employers Insurance Association; City of Nacogdoches; Nacogdoches Independent School District; County of Nacogdoches; and State of Texas, Defendants v. L. E. Jowell, Trustee in Bankruptcy, Third Party Defendant

U. S. District Court, East. Dist. Tex., Tyler Div., Civ. Action Nos. 1932, 1933, 7/12/57

[1939 Code Sec. 3672--similar to 1954 Code Sec. 6323]

Lien for taxes: Priority of federal liens over local tax liens: Liability of corporation succeeding to partnership.--Federal tax liens attach to homestead property. They have priority over liens for local taxes which are assessed and become due after the federal liens have attached. Liens of judgment creditors do not attach to homestead property. Upon an involuntary sale of such property, the owner must be given a reasonable time within which to reinvest in another homestead the excess of the proceeds over the tax liens before judgment creditors may assert a claim to such excess proceeds. In bankruptcy proceedings against a corporation which had succeeded to a partnership, taking over its assets and liabilities, the former partners could not contend that the Government's claim for taxes owed by them should be paid by the corporation.

 
[1954 Code Sec. 6502--similar to 1939 Code Sec. 276(c)]

Statute of limitations: Collection after assessment: Change in party after limitation period has run.--Within six years after assessment of taxes, suit to enforce the tax lien was begun against several named individuals, one of whom was then dead. More than six years after the assessment, an amended complaint was filed, naming the deceased taxpayer's estate as a party defendant. The suit to enforce collection against the estate was barred by the statute of limitations, since the Government did not proceed against it until the amended complaint was filed.

William M. Steger, United States Attorney, John L. Burke, Jr., Assistant United States Attorney, Tyler, Tex., for plaintiff, United States. McAlister & Benchoff, Nacogdoches, Tex., for Nacogdoches Co., Tex., State of Tex., Nacogdoches Independent School District, Sidney Stone, individually, and as one of Independent Co-Executors of Estate of Mary Stone, Deceased, Mary Louise Curie, et vir, Pierre Curie, Irene Stone, Fanny Mae Stone. Marion G. Holt, Nacogdoches , Tex. , for Clyde Stone, individually, Ruby Stone and J. E. Stone. Carlton & Street, Dallas , Tex. , for Arline Stone. A. J. Thompson, Nacogdoches, Tex., for Clyde Stone as one of independent co-executors of Estate of Mary Stone, Deceased. S. M. Adams, Nacogdoches , Tex. , for City of Nacogdoches , Tex. F. I. Tucker, Nacogdoches , Tex. , for Texas Power and Light Company. Leachman, Gardere, Akin & Porter, Dallas , Tex. , for Texas Employers Insurance Association. Ben Goodwin, Tyler , Tex. , for L. E. Jowell, trustee in bankruptcy.

Memorandum Decision

SHEEHY, District Judge:

The above cases presenting, to a large extent, common questions of fact and of law were consolidated for trial and were tried together before the Court without a jury.

The original complaint was filed in Civil Action No. 1932 on July 26, 1955, and the parties named as the Defendants therein were the same parties as those listed as defendants in the caption of that action above.

The original complaint in Civil Action No. 1933 was filed on July 26, 1955, and in that complaint the following and only the following were named as defendants: J. E. Stone, Mary Stone, sometimes known as Mrs. J. E. Stone, Texas Power and Light Company, Texas Employers Insurance Association, City of Nacogdoches, Texas, Nacogdoches Independent School District, County of Nacogdoches, Texas, and the State of Texas.

Each of these actions was instituted by Plaintiff under the authority of Title 26 U. S. C. A. Sec. 7402 upon the request of the Commissioner of Internal Revenue Service.

[Foreclosure of Federal Tax Lien]

In Civil Action No. 1932, Plaintiff seeks a recovery against the Defendants, Clyde Stone and wife, Ruby Stone, for income taxes alleged to be owing Plaintiff by Clyde Stone and wife, Ruby Stone, for the years 1947, 1949 and 1950 with a foreclosure of Plaintiff's lien for said taxes so owing on a part of Lot 49, Block 45 of the City of Nacogdoches, Nacogdoches County, Texas, which said land and premises is particularly described in paragraph VII of Plaintiff's original complaint in said action. In said original complaint Plaintiff alleged that the Defendants named, other than Clyde Stone and wife, Ruby Stone, were claiming some interest in the land and premises described in paragraph VII of said complaint and Plaintiff seeks a determination of the merits of the claims of said Defendants, and each of them, to said land and premises. For convenience the land and premises described in paragraph VII of the original complaint in said Civil Action No. 1932 will hereinafter be referred to as the Clyde Stone Property.

[Other Tax and Judgment Liens]

In Civil Action No. 1932 the Defendants answered and contend as hereinafter stated in this paragraph. The City of Nacogdoches, Texas, answered alleging that there were ad valorem taxes assessed against the Clyde Stone Property due and owing it for the years 1952, 1953 and 1954, together with penalties and interest, and prayed that its lien against said property be established and enforced. Nacogdoches Independent School District answered alleging there were certain ad valorem taxes, together with penalties and interest thereon, due it that were assessed against the Clyde Stone Property for the years 1952, 1953 and 1954 and prayed for enforcement of its lien against said property for the payment of said taxes. The County of Nacogdoches and the State of Texas each answered with each alleging that certain ad valorem taxes assessed against the Clyde Stone Property were due it for the years 1933 to 1953, both inclusive, together with penalties and interest thereon and prayed for the enforcement of their respective liens against the Clyde Stone Property for said taxes. The Defendant, Finch Cigar Company, although having been served with summons on the 20th day of July, 1955, wholly failed to appear and answer herein. The Defendant, Texas Power & Light Company, by way of answer and cross action herein, sought a foreclosure of a judgment lien on the Clyde Stone Property it claims by virtue of a judgment it obtained in the District Court of Nacogdoches, Texas, on June 24, 1954, against J. E. Stone and Clyde Stone, jointly and severally, for the sum of $3,226.38, with interest thereon from June 1954 at the rate of 6% per annum, together with costs of court in the sum of $12.90. The Defendant, Texas Employers Insurance Association, answered and prayed for a foreclosure of a judgment lien it claims against the Clyde Stone Property by virtue of a judgment it obtained against J. E. Stone and Clyde Stone, jointly and severally, in the District Court of Dallas County, Texas, on October 22, 1954, in the sum of $17,268.00 with interest thereon from October 22, 1954, at the rate of 6% per annum, together with court costs in the amount of $17.45. The Defendants, Clyde Stone and Ruby Stone, have answered denying that they, or either of them, are liable to the Plaintiff for the income taxes or any part thereof claimed by Plaintiff for the years 1947, 1949 and 1950 and further allege that the income taxes for those years claimed by Plaintiff against Clyde Stone and Ruby Stone are owed to Plaintiff by J. E. Stone Lumber Company, a corporation, and not by Clyde Stone and Ruby Stone, or either of them. The Defendants, Clyde Stone and Ruby Stone, further contend that the Plaintiff is estopped from asserting any liability against them, or either of them, for said income taxes because Plaintiff made a claim for such taxes against J. E. Stone Lumber Company, a corporation, in a bankruptcy proceeding in this court in which J. E. Stone Lumber Company, a corporation, is the bankrupt. By way of a third party action against L. E. Jowell, Trustee in Bankruptcy, in the matter of J. E. Stone Lumber Company, a corporation, Bankrupt, Clyde Stone and Ruby Stone seek to recover against said Trustee any and all sums that might be recovered by the Plaintiff herein against them, and each of them, on a contention that J. E. Stone Lumber Company, a corporation, as a matter of law is liable for said taxes or, in the alternative, that J. E. Stone Lumber Company, a corporation, agreed to assume, to become liable for and pay on behalf of Clyde and Ruby Stone said income taxes assessed against Clyde Stone and Ruby Stone, and each of them, for the years 1947 and 1949. L. E. Jowell, Trustee in Bankruptcy, in answer to said third party action of Clyde Stone and Ruby Stone denies that J. E. Stone Lumber Company, a corporation, agreed either to assume, to become liable for or to pay the 1947 and 1949 income taxes assessed against Clyde Stone and Ruby Stone, or either of them, or any other income taxes assessed against Clyde Stone and Ruby Stone, or either of them. Said L. E. Jowell, as Trustee in Bankruptcy, in further answer to said third party action contends that under the law of Texas any agreement that J. E. Stone Lumber Company, a corporation, might have made to assume, to become liable for and pay said income taxes is void because such agreement was not in writing as required by the applicable laws of the State of Texas.

[Second Suit to Foreclose Tax Lien]

In the original complaint in Civil Action No. 1933 the Plaintiff seeks a recovery against J. E. Stone and wife, Mary Stone, for income taxes alleged to [be] owed Plaintiff by J. E. Stone and wife, Mary Stone, for the years 1947, 1949 and 1950 and for a foreclosure of Plaintiff's lien for said taxes so owing on a part of Lots 16 and 18 in Block 26 in the City of Nacogdoches County, Texas, which said land and premises is the property described in paragraph VII of the original complaint in said action. In said original complaint Plaintiff alleged that the Defendants named, other than J. E. Stone and wife, Mary Stone, were claiming some interest in the land and premises described in paragraph VII of said complaint and prayed for a determination of the merits of the claims of said Defendants, and each of them, to said land and premises. For convenience the land and premises described in paragraph VII of the original complaint in said Civil Action No. 1933 will be referred to as the J. E. Stone Property.

Mary Stone, wife of J. E. Stone, died testate in Nacogdoches , Texas , on February 25, 1952. Subsequent to the death of Mary Stone her last will and testament was duly filed for probate in the Probate Court of Nacogdoches County, Texas, and by order of that court entered on the 24th day of August, 1953, said will was admitted to probate. Under the terms of said will, Mary Stone bequeathed to her husband, J. E. Stone, for and during his natural life, all of her property of every kind and character, with said property upon the death of J. E. Stone passing to her seven children, namely, Clyde Stone, Sidney Stone, Fanny Mae Stone, Irene Stone, Mona Faye Stone Hoffman, Arline Stone and Mary Louise Stone Curie, share and share alike. The will named Clyde Stone, Sidney Stone and L. B. Mast as independent executors of the Estate of Mary Stone with the provision that in the event any person named as such executor should die or refuse to serve or resign, then the remaining executors shall perform the duties of independent executors of said estate. L. B. Mast died before said will of Mary Stone was probated. On March 4, 1957, Clyde Stone and Sidney Stone duly qualified as independent executors of the Estate of Mary Stone.

On April 25, 1957, Plaintiff filed its first amended complaint herein and named as Defendants therein the Defendants as shown in the caption to Civil Action No. 1933 above. This was the first time that the surviving children of Mary Stone and the independent executors of the Estate of Mary Stone, or any of them, were made parties in said Civil Action No. 1933. Other than making the additional parties defendants and the allegations made in connection with the making of such additional defendants the amended complaint was substantially the same as the original complaint.

The Defendants named in the amended complaint in said Civil Action No. 1933 answered and contend as hereinafter stated in this paragraph. The City of Nacogdoches, Texas, answered alleging that there were certain ad varorem taxes assessed by it against the J. E. Stone Property due and owing it, together with penalties and interest, and prayed that its lien against said property for said taxes be established and enforced. Nacogdoches Independent School District answered alleging that certain ad valorem taxes assessed by it against the J. E. Stone Property, together with penalties and interest, were due and owing it and prayed that its lien against said property be established and enforced. The County of Nacogdoches, Texas, and the State of Texas each answered alleging certain ad valorem taxes assessed by them against the J. E. Stone Property, together with penalties and interest, were due and owing them, respectively, and prayed that their liens against said property for said taxes be established and enforced. The Defendant Texas Power and Light Company, by way of answer and cross action herein, sought a foreclosure of a judgment lien on the J. E. Stone Property it claims by virtue of the judgment it obtained in the District Court of Nacogdoches County, Texas, on June 24, 1954, against J. E. Stone and Clyde Stone, jointly and severally, and hereinabove referred to. The Defendant Texas Employers Insurance Association answered and prayed for a foreclosure of a judgment lien it claims against the J. E. Stone Property by virtue of the judgment it obtained against J. E. Stone and Clyde Stone, jointly and severally, in the District Court of Dallas County, Texas, on October 22, 1954, and above referred to. The Defendant J. E. Stone, individually, has answered denying that he is liable to the Plaintiff for the income taxes or any part thereof claimed by Plaintiff for the years 1947, 1949 and 1950 and further alleges that the income taxes for those years claimed by Plaintiff against him are owed to Plaintiff by J. E. Stone Lumber Company, a corporation, and not by him. Defendant J. E. Stone further contends that the Plaintiff is estopped from asserting any liability against him for said income taxes because Plaintiff made a claim for such taxes against J. E. Stone Lumber Company, a corporation, in a bankruptcy proceeding in this Court in which J. E. Stone Lumber Company, a corporation, is the bankrupt. By way of third party action against L. E. Jowell, Trustee in Bankruptcy, J. E. Stone seeks to recover against said trustee any and all sums that might be recovered by the Plaintiff against him herein on a contention that J. E. Stone Lumber Company, a corporation, as a matter of law, is liable for said taxes or in the alternative that J. E. Stone Lumber Company, a corporation, is liable for said taxes because it agreed to assume, become liable for and pay on behalf of J. E. Stone said income taxes assessed against J. E. Stone for the years 1947 and 1949. On September 2, 1955, there was filed on Action No. 1933 a document designated as "Original Answer of the Estate of Mary Stone," which document was signed by Marion G. Holt purporting to act as attorney for J. E. Stone, Community Survivor of the Estate of Mary Stone. In this answer J. E. Stone purported to act as Community Survivor of the Estate of Mary Stone, and in so doing adopted as the answer of the Estate of Mary Stone the pleading of the Defendant J. E. Stone, individually. Clyde Stone in his capacity as one of the independent executors of the Estate of Mary Stone, Deceased, answered alleging that Plaintiff's actions herein against the Estate of Mary Stone, Deceased, for income taxes assessed against Mary Stone for the year 1947 are barred by the limitation provisions of Title 26 U. S. C. A. Sec. 6502. He further alleged that the Plaintiff could not assert herein any claims against the Estate of Mary Stone, Deceased, because its claims asserted against the Estate of Mary Stone, Deceased, had not been presented to the executors of the Estate of Mary Stone, Deceased, for allowance or rejection. The Defendant Sidney Stone, individually and as one of the independent executors of the Estate of Mary Stone, Deceased, Mary Louise Stone Curie and husband, Pierre Curie, Irene Stone and Fanny Mae Stone answered and have alleged that the causes of action asserted by Plaintiff against the Estate of Mary Stone, Deceased, for income taxes assessed against Mary Stone for the year 1947 are barred by the limitation provisions of the Internal Revenue Code, above referred to. Arline Stone answered and denied all allegations contained in Plaintiff's first amended complaint. The Defendant Mona Faye Stone Hoffman, although duly serve with summons herein on April 30, 1957, and husband, Bob Hoffman, although duly served with summons herein on May 1, 1957, have wholly failed to appear and answer. L. E. Jowell, Trustee in Bankruptcy, answered the third party action asserted against him by J. E. Stone, and in so doing denied that J. E. Stone Lumber Company, a corporation, was liable for the income taxes assessed against J. E. Stone and for which Plaintiff seeks recovery herein, and further denied that J. E. Stone Lumber Company, a corporation, agreed to assume, become liable for or pay on behalf of J. E. Stone any income taxes assessed against J. E. Stone. L. E. Jowell, Trustee, further alleged that under the law of Texas any agreement that J. E. Stone Lumber Company, a corporation, might have made to assume, become liable for and to pay said income taxes owed by J. E. Stone is void because such agreement was not in writing as required by the applicable laws of the State of Texas. The answers filed by Clyde Stone, in his capacity as one of the independent executors of the Estate of Mary Stone, Deceased, Sidney Stone, individually, and as one of the independent executors of the Estate of Mary Stone, Deceased, Fanny Mae Stone, Irene Stone, Arline Stone and Mary Louise Stone Curie and husband, Pierre Curie, and each of them, were filed herein subsequent to the filing of Plaintiff's first amended complaint in said Civil Action No. 1933.

From the admissions contained in the pleadings of the parties, the stipulations of the parties and the evidence offered at the trial the facts in these cases are found to be as hereinabove and hereinafter stated.

For convenience the Commissioner of the United States Internal Revenue Service will be hereinafter referred to as Commissioner, and the Collector of Internal Revenue for the Second Collection District of Texas, the district in which Nacogdoches County, Texas, is located, will hereinafter be referred to as the Collector.

[Notice of Assessments]

In September 1949 the Commissioner made an assessment of $7,469.25 as taxes upon the income of the Defendant Clyde Stone for the calendar year 1947, together with interest thereon in the amount of $656.98, making a total assessment of $8,126.23. The Commissioner certified the list of said assessment to the Collector by whom it was received on September 26, 1949, and by whom, within ten days of the receipt thereof, notice of said assessment was given to and demand was made upon the said Clyde Stone for payment of the amount of such assessment. On January 13, 1950, the Collector filed notice of such assessment with the Clerk of the County Court of Nacogdoches County, Texas, wherein a lien was claimed on behalf of the Plaintiff for the amount of said assessment against all property belonging to the said Clyde Stone. Payments have been made and credits allowed upon said assessment in the aggregate amount of $4,307.11. There now remains unpaid on such assessment and due and owing Plaintiff by the Defendant Clyde Stone as taxes upon the income of the said Clyde Stone for the calendar year 1947 the sum of $3,819.12 plus interest accrued to June 3, 1957, in the amount of $2,147.14 plus interest thereafter until paid at the rate of 6% per annum or at the rate of 62¢ per day.

In September 1949 the Commissioner made an assessment of $7,611.75 as taxes upon the income of Ruby Stone for the calendar year 1947, together with interest thereon in the amount of $669.51 making a total assessment of $8,281.26. The Commissioner certified the list of said assessment to the Collector by whom it was received on September 26, 1949, and by whom, within 10 days of the receipt thereof notice thereof was given to and demand was made on the said Ruby Stone for the payment of the amount of such assessment. The Collector filed a notice of such assessment on January 13, 1950, with the Clerk of the County Court of Nacogdoches County, Texas, wherein a lien was claimed on behalf of the Plaintiff for the amount of said assessment against all property belonging to the said Ruby Stone. Payments have been made and credits have been allowed upon said assessment of Ruby Stone in the amount of $4,403.18. There remains unpaid and due and owing Plaintiff on the income taxes owed Plaintiff by Ruby Stone for the calendar year 1947 the amount of $3,878.08 plus interest accruing to June 3, 1957, in the amount of $2,144.65 plus interest thereafter until paid at the rate of 6% per annum or at the rate of 64¢ per day.

In August 1951 the Commissioner made an assessment of $2,007.20 as taxes upon the income of Clyde Stone and wife, Ruby Stone, for the calendar year 1949, together with interest thereon in the amount of $159.45, making a total assessment of $2,166.65. The Commissioner certified the list of said assessment to the Collector by whom it was received on August 13, 1951, and by whom, within 10 days of the receipt thereof, notice was given to and demand was made upon the said Clyde Stone and Ruby Stone for the payment of the amount of such assessment. The Collector filed a notice of such an assessment on December 28, 1951, with the Clerk of the County Court of Nacogdoches County, Texas, wherein a lien was claimed on behalf of the Plaintiff for the amount of said assessment against all property belonging to the said Clyde Stone and Ruby Stone. Payments have been made and credits have been allowed upon said assessment in the amount of $750.00. There remains unpaid, due and owing Plaintiff on the income taxes owed Plaintiff by Clyde Stone and wife, Ruby Stone, for the calendar year 1949 the amount of $1,416.65 plus interest accrued to June 3, 1957, in the amount of $542.37 plus interest thereafter until paid at the rate of 6% per annum or at the rate of 23¢ per day.

In August 1951 the Commissioner made an assessment of $871.68 as taxes upon the income of Clyde Stone and wife, Ruby Stone, for the calendar year 1950, together with interest thereon in the amount of $13.07, making a total assessment of $887.75. The Commissioner certified the list of said assessment to the Collector by whom it was received on or about August 20, 1951, and by whom, within 10 days of receipt thereof, notice was given to and demand for payment of the amount thereof was made upon the said Clyde Stone and Ruby Stone. The Collector filed a notice of such assessment on December 28, 1951, with the Clerk of the County Court of Nacogdoches County, Texas, wherein a lien was claimed on behalf of the Plaintiff for the amount of said assessment against all property belonging to the said Clyde Stone and wife, Ruby Stone. Payments have been made and credits have been allowed upon said assessment in the amount of $234.75. There remains unpaid, due and owing Plaintiff on the income taxes owed Plaintiff by Clyde Stone and wife, Ruby Stone, for the calendar year 1950, the amount of $684.10 plus interest accruing to June 3, 1957, in the amount of $201.76, plus interest thereafter until paid at the rate of 6% per annum or at the rate of 34¢ per day.

In September 1949 the Commissioner made an assessment of $7,922.59 as taxes upon the income of J. E. Stone for the calendar year 1947, together with interest thereon in the amount of $696.88, making a total assessment of $8,619.47. The Commissioner certified the list of said assessment to the Collector by whom it was received on September 26, 1949, and by whom, within 10 days of the receipt thereof, notice of said assessment was given to and demand was made on the said J. E. Stone for the payment of the amount of such assessment. The collector filed a notice of such assessment on January 13, 1950, with the Clerk of the County Court of Nacogdoches County, Texas, wherein a lien was claimed on behalf of the Plaintiff for the amount of said assessment against all property belonging to the said J. E. Stone. Payments were made and credits have been allowed upon said assessment in the amount of $4,370.61. There remains unpaid, due and owing Plaintiff on the income taxes owed Plaintiff by J. E. Stone for the calendar year 1947 the amount of $4,248.84 plus interest accrued to June 3, 1957, in the amount of $2,154.74, plus interest thereafter until paid at the rate of 6% per annum or at the rate of 70¢ per day.

In September 1949 the Commissioner made an assessment of $7,922.59 as taxes upon the income of Mary Stone for the calendar year 1947, together with interest thereon in the amount of $696.88, making a total assessment of $8,619.47. The Commissioner certified the list of said assessment to the Collector by whom it was received on September 26, 1949, and by whom, wtihin 10 days of the receipt thereof, notice thereof was given to and demand was made on the said Mary Stone for the payment of the amount of such assessment. The Collector filed a notice of such assessment on January 13, 1950, with the Clerk of the County Court of Nacogdoches, Texas, wherein a lien was claimed on behalf of Plaintiff for the amount of said assessment against all property belonging to the said Mary Stone. Payments have been made and credits have been allowed upon said assessment in the amount of $4,370.61. There remains unpaid on the income taxes assessed by Plaintiff against Mary Stone for the calendar year 1947 the sum of $4,248.84 plus interest accrued to June 3, 1957, in the amount of $2,154.74 plus interest thereafter until paid at the rate of 6% per annum or at the rate of 70¢ per day.

In August 1951 the Commissioner made an assessment of $1,961.80 as taxes upon the income of J. E. Stone and wife, Mary Stone, for the calendar year 1949, together with interest thereon in the amount of $155.84, making a total assessment of $2,117.64. The Commissioner certified the list of said assessment to the Collector by whom it was received on August 13, 1951, and by whom, within 10 days of the receipt thereof, notice was given to and demand was made on the said J. E. Stone and wife, Mary Stone, for the payment of the amount of such assessment. The Collector filed a notice on December 28, 1951, with the Clerk of the County Court of Nacogdoches, Texas, wherein a lien was claimed on behalf of the Plaintiff for the amount of said assessment against all property belonging to the said J. E. Stone and wife, Mary Stone. Payments have been made and credits have been allowed upon said assessment in the amount of $7.50. There remains unpaid, due and owing Plaintiff on the income taxes owed Plaintiff by J. E. Stone and the Estate of Mary Stone, Deceased, for the calendar year 1949 the amount of $1,367.64 plus interest accrued to June 3, 1957, in the amount of $525.38, plus interest thereafter until paid at the rate of $6% per annum or at the rate of 22¢ per day.

In August 1951 the Commissioner made an assessment of $807.88 as taxes upon the income of J. E. Stone and wife, Mary Stone, for the calendar year 1950, together with interest thereon in the amount of $12.12, making a total assessment of $820.00. The Commissioner certified the list of said assessment to the Collector by whom it was received on or about August 20, 1951, and by whom, within 10 days of the receipt thereof, notice thereof was given to and demand was made on the said J. E. Stone and wife, Mary Stone, for the payment of the amount of such assessment. The Collector filed notice of such assessment on December 28, 1951, with the Clerk of the County Court of Nacogdoches County, Texas, wherein a lien was claimed on behalf of the United States to the extent of $600.00 of said assessment against all property belonging to J. E. Stone and wife, Mary Stone. Payments have been made and credits have been allowed upon said assessment in the amount of $220.00. There remains unpaid, due and owing Plaintiff on the income taxes owed Plaintiff by J. E. Stone and the Estate of Mary Stone, Deceased, for the calendar year 1950 the amount of $631.48 plus interest accrued to June 3, 1957, in the amount of $214.24, plus interest thereafter until paid at the rate of 6% per annum or at the rate of 10¢ per day.

[ Homestead Property]

From sometime prior to 1947 up to date, Clyde Stone and wife, Ruby Stone, have owned the Clyde Stone Property, above referred to, and during said time said Clyde Stone and wife, Ruby Stone, have continuously claimed and occupied said property as their homestead, and I find that at all times pertinent hereto said Clyde Stone Property was and is the homestead of Clyde Stone and wife, Ruby Stone.

From sometime prior to 1947 up to the death of Mary Stone, as aforesaid, J. E. Stone and wife, Mary Stone, owned the J. E. Stone Property, and during that time the said J. E. Stone and wife, Mary Stone, claimed and occupied said property as their homestead. I find that during that time said property was the homestead of J. E. Stone and wife, Mary Stone. At all times subsequent to the death of Mary Stone, J. E. Stone has occupied and claimed the J. E. Stone Property as his homestead, and I find that at all times subsequent to the death of Mary Stone said J. E. Stone Property has been and is the homestead of J. E. Stone.

[Local Tax Liens]

For the years 1955 and 1956 the City of Nacogdoches, Texas, assessed certain ad valorem taxes against the J. E. Stone Property, which taxes have not been paid and are now delinquent. The amount of the taxes assessed by the City of Nacogdoches against the said J. E. Stone Property for the years 1955 and 1956 now delinquent, owing and unpaid, together with penalties and interest thereon amounts to the sum of $295.68 as of March 31, 1957.

The Nacogdoches Independent School District assessed certain taxes against the J. E. Stone Property for the years 1955 and 1956, which taxes are now due, owing and delinquent, and that as a result thereof J. E. Stone and the Estate of Mary Stone, Deceased, are indebted to the Nacogdoches Independent School District for said taxes, penalties and interest in the amount of $272.38, with interest thereon at the rate of 6% per annum from and after April 1, 1957.

[Tax Claims Denied in Bankruptcy]

In Bankruptcy Cause No. 3741 pending in this Court, J. E. Stone Lumber Company, Inc., a corporation, was, on September 4, 1953, on its voluntary petition in bankruptcy adjudicated bankrupt and the matter was referred to the Referee for administration. On March 24, 1954, the United States filed in said bankruptcy proceeding a claim for the income taxes assessed against the Stones and forming the basis of these actions. This claim was filed by the United States at the request of Clyde Stone purporting to act on behalf of himself, his wife and his father, J. E. Stone, and after Clyde Stone had represented to representatives of the Internal Revenue Department that the bankrupt corporation had agreed to assume and pay the income taxes assessed against Clyde Stone, J. E. Stone and their wives for the years 1947, 1949 and 1950. After a hearing on said claim of the United States the Referee in Bankruptcy denied said claim. The Stones, claiming to be parties in interest affected by said order of the Referee denying said claim, filed a Petition for Review with this Court. This Court, after considering the Petition for Review, entered an order denying the petition and affirmed, approved and adopted the order of the Referee denying said claim of the United States . The Stones appealed to the Court of Appeals from the order of this Court denying said Petition for Review, and the Court of Appeals held that the Stones were not entitled to a Petition for Review and to appeal from the order denying their petition and directed this Court to dismiss as unauthorized the Petition for Review. ¹

[Judgment Creditors]

On June 24, 1954, Texas Power and Light Company, a corporation, recovered a judgment in Cause No. 9736 in the District Court of Nacogdoches, Texas, against J. E. Stone and Clyde Stone, jointly and severally, for the sum of $3,226.38, together with court costs in the amount of $12.90, with interest thereon from the date of said judgment at the rate of 6% per annum. Thereafter on July 2, 1954, an abstract of such judgment was duly filed for record in the Office of the County Clerk of Nacogdoches County , Texas , which abstract of judgment was duly recorded in the abstract of judgment records in said Office of the County Clerk of Nacogdoches County , Texas . No part of said judgment has been paid or otherwise satisfied.

On October 22, 1954, Texas Employers Insurance Association recovered a judgment in Cause No. 83960-E/G in the District Court of Dallas County, Texas, against J. E. Stone and Clyde Stone, jointly and severally, for the sum of $17,268.00, together with court costs in the amount of $17.45, with interest thereon at the rate of 6% per annum from date of judgment until paid. On December 15, 1954, Texas Employers Insurance Association duly filed for record in the Office of the County Clerk of Nacogdoches County , Texas , an abstract of such judgment, which abstract of judgment was duly indexed and recorded in the abstract of judgment records in Nacogdoches County , Texas . No part of said judgment has been paid or otherwise satisfied.

[Corporation Not Liable for Stockholders' Taxes]

As to the claim of Clyde Stone, Ruby Stone and J. E. Stone to the effect that the J. E. Stone Lumber Company, a corporation, agreed to assume and thereby became liable for the income taxes assessed against J. E. Stone and wife, Mary Stone, and Clyde Stone and wife, Ruby Stone, and each of them, for the years 1947, 1949 and 1950, I find and conclude that the J. E. Stone Lumber Company, a corporation, did not agree to pay or otherwise assume or become liable for the income taxes assessed against J. E. Stone, Mary Stone, Clyde Stone and Ruby Stone, or either of them, or any part thereof, and in this connection I further find that neither Clyde Stone, Ruby Stone nor J. E. Stone contends that any such agreement on the part of J. E. Stone Lumber Company, a corporation, to assume and become liable for such income taxes was in writing.

[Priority of Tax Liens]

There is no evidence that there are any taxes assessed against the Clyde Stone Property by either the State of Texas , the County of Nacogdoches County, Texas, the City of Nacogdoches, Texas, or the Nacogdoches Independent School District now due, owing and unpaid. There is no evidence that there are any taxes assessed against the J. E. Stone Property by either the State of Texas or the County of Nacogdoches County, Texas, now due, owing and unpaid. The only ad valorem taxes assessed against the J. E. Stone Property due, owing and unpaid at this time are the 1955 and 1956 taxes assessed by the City of Nacogdoches, Texas, as aforesaid, and the 1955 and 1956 taxes assessed by the Nacogdoches Independent School District , as aforesaid.

Unquestionably, the Plaintiff has liens on the Clyde Stone Property securing the income taxes owed it by Clyde Stone and wife, Ruby Stone, for the calendar years 1947, 1949 and 1950, as above found, and has liens on the J. E. Stone Property securing the income taxes owed by J. E. Stone and wife, Mary Stone, for the years 1947, 1949 and 1950, as above found, ² and these liens arose at the times the assessments were received for the respective years by the Collector, as above found. ³ Such liens were valid as against any and all other liens established against said property after notices of the assessment and claims of lien were filed by the Plaintiff in the Office of the Clerk of the County Court of Nacogdoches County, Texas, as hereinabove found. ⁴

Under the law of Texas the City of Nacogdoches, Texas, and the Nacogdoches Independent School District have liens against the J. E. Stone Property to secure the payment of taxes assessed by them, respectively, against the said J. E. Stone Property and now due and owing, as above found. ⁵ The City of Nacogdoches and the Nacogdoches Independent School District , and each of them, claim that, under the provisions of Art. 7269, Vernon 's Civil Statutes of Texas, Annotated, their liens constitute prior liens to the liens of Plaintiff on the J. E. Stone Property. This contention cannot be sustained under the holding of the Supreme Court in United States v. New Britain , 347 U. S. 81 [54-1 USTC ¶9191]. Plaintiff's liens, and each of them, on the J. E. Stone Property having attached to said property before the taxes due and owed the City of Nacogdoches and the Nacogdoches Independent School District, and each of them, were assessed and became due, the Plaintiff's liens on said J. E. Stone Property are prior to the liens of the City fo Nacogdoches and the Nacogdoches Independent School District on said property and being prior liens are entitled to prior satisfaction.

[Rights of Judgment Creditors]

It is the settled law in Texas that a judgment lien cannot and does not attach to a homestead while such property remains a homestead. ⁶ That being true, neither the Texas Power and Light Company nor the Texas Employers Insurance Association has a lien on either the J. E. Stone Property or the Clyde Stone Property by virtue of their respective judgments against J. E. Stone and Clyde Stone, above referred to, and the abstracting thereof. Both the Texas Power and Light Company and the Texas Employers Insurance Association seem to recognize this; however, they contend that if Plaintiff's liens on the J. E. Stone Property and the Clyde Stone Property are foreclosed herein and such property sold pursuant to such foreclosure, their judgment liens would attach to the proceeds of the sale of said property over and above the amount necessary to satisfy Plaintiff's liens, and they would be entitled to have their judgment liens satisfied out of the proceeds of the sale of said property over and above that necessary to satisfy Plaintiff's liens, with the Texas Power and Light Company being entitled to satisfaction prior to the Texas Employers Insurance Association because the abstract of judgment of Texas Power and Light Company was filed in Nacogdoches County, Texas, prior to the filing of the abstract of judgment of the Texas Employers Insurance Association. Art. 16, Sec. 52 of the Constitution of Texas, provides, in effect, that on the death of the husband or wife the homestead shall not be partitioned between the decedent's heirs during the life of the surviving husband or wife or so long as the survivor may elect to keep it as a homestead. Art. 16, Sec. 50 of the Constitution of Texas provides, in effect, that the homestead shall be protected from forced sale for the payment of all debts except for the purchase money thereof, the taxes due thereon or for work or material used in constructing improvement thereon and further provides that no lien on the homestead shall be valid except for one of those three purposes. Art. 3834, Vernon's Civil Statutes of Texas, Annotated, provides that the proceeds of a voluntary sale of the homestead shall not be subject to garnishment or forced sale within six months after such sale. There is no Texas statutory provision for a like exemption for the proceeds of an involuntary sale of the homestead. The statutory provisions contained in Art. 3834, above mentioned, have been incorporated in the statutes of Texas since 1897. Prior to the adoption of such statutory provisions the proceeds of a voluntary sale of a homestead of Texas were not protected, but by judicial interpretation of the homestead provisions of the Constitution of Texas the proceeds of an involuntary sale of a homestead were protected for a reasonable time after the involuntary sale in order that the person whose homestead was sold could have an opportunity to invest the proceeds of such involuntary sale in another homestead. ⁷ Texas Power and Light Company and Texas Employers Insurance Association contend that since the Legislature made no provision for an exemption as to the proceeds of an involuntary sale of the homestead but did make provisions for an exemption as to the proceeds of a voluntary sale, the proceeds from an involuntary sale of the homestead are no longer entitled to an exemption in Texas. As I construe the law recognized in Texas , this contention is incorrect. The Supreme Court of Texas in Lucas v. Lucas, 143 S. W. 1153, decided in 1912, held that the statutory provision for an exemption as to the proceeds of a voluntary sale on the homestead did not preclude an exemption as to the proceeds of an involuntary sale, and that when there was an involuntary sale of the homestead, the proceeds of such involuntary sale are exempt for a reasonable time after the involuntary sale in order that the homestead owner might invest such proceeds in another homestead.

[Corporate Liability]

J. E. Stone Lumber Company, a corporation, was incorporated as a Texas corporation on August 4, 1949, with the stock thereof being owned by J. E. Stone and Clyde Stone. For approximately 25 years prior to August 4, 1949, J. E. Stone and Clyde Stone were partners and operated under the name of J. E. Stone Lumber Company, a partnership. At the time of its incorporation J. E. Stone Lumber Company, a corporation, took over the assets and liabilities of J. E. Stone Lumber Company, a corporation, and from thereafter the corporation operated the business. J. E. Stone, Clyde Stone and wife, Ruby Stone, contend that under those facts J. E. Stone Lumber Company, a corporation, is liable for the income taxes assessed against J. E. Stone, Mary Stone, Clyde Stone and Ruby Stone and herein involved. It is well settled that such contention is without merit. ⁸ Under the finding, above mentioned, to the effect that J. E. Stone Lumber Company, a corporation, did not agree to assume, become liable for and to pay the income taxes herein involved, there is no merit to the contention of J. E. Stone, Clyde Stone and wife, Ruby Stone, to the effect that J. E. Stone Lumber Company, a corporation, and not them, is liable for the income taxes herein involved because of the alleged agreement on the part of J. E. Stone Lumber Company, a corporation, to become liable for said taxes. Likewise under such finding there is no merit to the third party action herein asserted by J. E. Stone, Clyde Stone and Ruby Stone against L. E. Jowell, Trustee in Bankruptcy. There could be no recovery herein by J. E. Stone, Clyde Stone and Ruby Stone, or either of them, against L. E. Jowell, Trustee in Bankruptcy, even if the J. E. Stone Lumber Company, a corporation, did in fact agree to assume and become liable for the taxes herein involved (which agreement did not exist as hereinabove found) because such alleged agreement admittedly was not in writing as required by the Statute of Frauds of the State of Texas. ⁹

The claims of J. E. Stone, Clyde Stone and Ruby Stone to the effect that the Plaintiff, because it filed a claim in the bankruptcy proceeding involving J. E. Stone Lumber Company, a corporation, for the income taxes herein involved, is estopped to assert liability herein against them, and each of them, for said taxes are wholly without merit. ¹⁰

[Statute of Limitations]

As above pointed out, the executors of the Estate of Mary Stone, Deceased, plead and contend that as to the taxes assessed against Mary Stone for the calendar year 1947, and as above found, the collection of such taxes is barred under the provisions of Title 26 U. S. C. A. Sec. 6502 because this proceeding as to the Estate of Mary Stone, Deceased, was not instituted by the Plaintiff until April 25, 1957, when it filed its amended complaint in Civil Action No. 1933 which was more than six years after the assessment of such taxes by Plaintiff against Mary Stone for the calendar year 1947. As above found, the 1947 taxes as to Mary Stone were assessed by Plaintiff in September 1949 which is more than six years prior to the filing of the amended complaint in Civil Action No. 1933. Although Mary Stone was named as a party defendant in Civil Action No. 1933 when the original complaint was filed in that action on July 26, 1955, she was dead and, therefore, could not be and was not a party to the suit at that time. Upon the death of Mary Stone her income tax liability to the Plaintiff for the calendar year 1947 became a claim against and a liability of her estate. In order for the Plaintiff to enforce said claim it would of necessity have to proceed against the Estate of Mary Stone. The parties interested in this action have filed briefs on the point and each of them refers to an excellent annotation under the heading "Changes in Party After Statute of Limitations Has Run," appearing in 8 A. L. R. (2d) pp. 6, et seq. After a careful study of the cases cited in the mentioned annotation and the other authorities referred to by the parties in their respective briefs, I have reached the conclusion that the plaintiff did not proceed against the Estate of Mary Stone, Deceased, to collect the 1947 taxes assessed against Mary Stone until the amended complaint was filed by Plaintiff making the executors of the Estate of Mary Stone, Deceased, parties to such action. In light of that conclusion, I find and conclude that Plaintiff's action in Civil Action No. 1933, insofar as it seeks to collect or enforce the collection of the taxes assessed by it against Mary Stone for the calendar year 1947, is barred under the provisions of Title 26 U. S. C. A. Sec. 6502(a).

The contention of the independent executors of the Estate of Mary Stone, Deceased, to the effect that the Plaintiff is not entitled to assert its tax liens herein against the Estate of Mary Stone, Deceased, because said claims have not been presented to said executors for approval or rejection is of no merit. It is the settled law of Texas that the presentation of a claim against an estate to an independent executor of such estate for approval or rejection is not necessary and is not a condition precedent to the institution of a suit against such an estate or the executor thereof for the enforcement of such claim. ¹¹

[Disposition of Sale Proceeds]

In the event the proceeds from the sale of the Clyde Stone Property, which property is to be sold in connection with the foreclosure of Plaintiff's liens on said property, as will hereinafter be set out, exceed the court costs accrued in Civil Action No. 1932 and the amount of the indebtedness of Clyde Stone and Ruby Stone to Plaintiff for income taxes assessed against them for the years 1947, 1949 and 1950 such part of such proceeds in excess of said amounts should be made available to Clyde Stone and Ruby Stone for investment in a homestead provided said Clyde Stone and Ruby Stone invest said funds in a homestead within six months from the date of the sale of said Clyde Stone Property, which six months period I find to be a reasonable time within which to allow Clyde Stone and Ruby Stone to invest such funds in a homestead.

In the event the proceeds from the sale of the J. E. Stone Property, which property is to be sold in connection with the foreclosure of Plaintiff's liens on said property, as will hereinafter be set out, exceed the court costs accrued in Civil Action No. 1933 and the amount of the indebtedness of J. E. Stone and Mary Stone to Plaintiff for income taxes assessed against them for the years 1949 and 1950 and against J. E. Stone for the year 1947 and the taxes assessed against the J. E. Stone Property and owed the City Nacogdoches, Texas, and the Nacogdoches Independent School District for the years 1955 and 1956, as hereinabove found, such part of such proceeds in excess of said amounts should be made available to J. E. Stone for investment in a homestead provided said J. E. Stone invests said funds in a homestead within six months from the date of the sale of said J. E. Stone Property, which six months period I find to be a reasonable time within which to allow J. E. Stone to invest such funds in a homestead.

[Judgment]

In light of the findings and conclusions hereinabove made, judgment will be entered in Civil Action No. 1932 providing as follows:

(1) That Clyde Stone is indebted to the Plaintiff for income taxes for the calendar year 1947 in the amount of $3,819.12 plus interest thereon accrued to June 3, 1957, in the amount of $2,147.14, and the Plaintiff is entitled to judgment herein against Clyde Stone for the aggregate of said amounts with interest on the sum of $3,809.12 at the rate of 6% per annum from June 3, 1957;

(2) That Ruby Stone is indebted to the Plaintiff for income taxes for the calendar year 1947 in the amount of $3,878.08 plus interest thereon accrued to June 3, 1957, in the amount of $2,144.65, and the Plaintiff is entitled to judgment herein against Ruby Stone for the aggregate of said amounts with interest on the sum of $3,878.08 at the rate of 6% per annum from June 3, 1957;

(3) That Clyde Stone and wife, Ruby Stone, jointly, are indebted to the Plaintiff for income taxes for the calendar year 1949 in the amount of $1,416.65 plus interest accrued thereon to June 3, 1957, in the amount of $542.37, and the Plaintiff is entitled to judgment herein against Ruby Stone for the aggregate of said amounts with interest on the sum of $1,416.65 at the rate of 6% per annum from June 3, 1957;

(4) That Clyde Stone and wife, Ruby Stone, jointly, are indebted to the Plaintiff for income taxes for the calendar year 1950 in the amount of $684.10 plus interest thereon accrued to June 3, 1957, in the amount of $201.76, and the Plaintiff is entitled to judgment herein against Clyde Stone and Ruby Stone, jointly, for the aggregate of said amounts with interest on the sum of $684.10 at the rate of 6% per annum from June 3, 1957;

(5) That the Plaintiff has a lien on the Clyde Stone Property to secure the payment of the income taxes plus interest thereon owed Plaintiff by Clyde Stone and wife, Ruby Stone, for the calendar years 1947, 1949 and 1950, as above set forth;

(6) That the Plaintiff's lien on the Clyde Stone Property, mentioned in the paragraph next above, be foreclosed and that said property be sold as under execution;

(7) That the proceeds from the sale of said Clyde Stone Property, less the cost incident to the sale thereof incurred by the officer selling said property, be paid by the officer selling said property into the registry of this Court, and upon said sum being paid into the registry of this Court the Clerk of this Court is to pay to Plaintiff out of said sum, after paying all costs of court incurred herein in Civil Action No. 1932, the amount of the indebtedness of Clyde Stone and wife, Ruby Stone, to Plaintiff, as hereinabove stated, for income taxes for the years 1947, 1949 and 1950, and the remainder of the proceeds of said sale, if any there be, is to be held by the Clerk of this Court for a period not to exceed six months from and after the date of the sale of the Clyde Stone Property for distribution upon order of this Court to Clyde Stone and Ruby Stone for investment in a homestead, and if Clyde Stone and Ruby Stone do not elect, within such six months period, to invest such funds, if any there be, in a homestead, upon teh expiration of said six months period such funds, if any there be, will be subject to distribution, per order of this Court, to Texas Power and Light Company and Texas Employers Insurance Association in satisfaction of the judgment against Clyde Stone owned by Texas Power and Light Company and Texas Employers Insurance Association, above set out;

(8) That neither Finch Cigar Company, City of Nacogdoches , Texas , Nacogdoches Independent School District , Nacogdoches County , Texas , nor the State of Texas has any interest in the Clyde Stone Property or in the proceeds from the sale of said property;

(9) That Clyde Stone and wife, Ruby Stone, and each of them, take nothing on their third party action herein against L. E. Jowell, Trustee in Bankruptcy; and

(10) That all costs of Court herein in Civil Action No. 1932 be adjudged against Clyde Stone and Ruby Stone, jointly and severally.

Under the findings and conclusions hereinabove made judgment will be entered in Civil Action No. 1933 providing as follows:

(1) That J. E. Stone is indebted to the Plaintiff for income taxes for the calendar year 1947 in the amount of $4,248.84 plus interest thereon accrued to June 3, 1957, in the amount of $2,154.74, and the Plaintiff is entitled to judgment against J. E. Stone for the aggregate of said amounts with interest on the sum of $4,248.84 at the rate of 6% per annum from June 3, 1957;

(2) That J. E. Stone and the Estate of Mary Stone, Deceased, are indebted to the Plaintiff for income taxes for the calendar year 1949 in the amount of $1,367.65 plus interest thereon accrued to June 3, 1957, in the amount of $525.35, and the Plaintiff is entitled to judgment herein against J. E. Stone and Clyde Stone and Sidney Stone, independent executors of the Estate of Mary Stone, Deceased, for the aggregate of said amounts with interest on the sum of $1,367.64 at the rate of 6% per annum from June 3, 1957;

(3) That J. E. Stone and the Estate of Mary Stone, Deceased, are indebted to the Plaintiff for income taxes for the calendar year 1950 in the amount of $631.48 plus interest thereon accrued to June 3, 1957, in the amount of $214.24, and the Plaintiff is entitled to judgment against J. E. Stone and Clyde Stone and Sidney Stone, independent executors of the Estate of Mary Stone, Deceased, for the aggregate of said amounts with interest on the sum of $613.48 at the rate of 6% per annum from June 3, 1957;

(4) That the Plaintiff has a lien on the J. E. Stone Property to secure the payment of the income taxes plus interest thereon owed Plaintiff by J. E. Stone for the calendar year 1947 and owed Plaintiff by J. E. Stone and the Estate of Mary Stone, Deceased, for the calendar years 1949 and 1950, as above set forth, which lien is entitled to satisfaction prior to the satisfaction of the liens of the City of Nacogdoches, Texas, and the Nacogdoches Independent School District, respectively, on the J. E. Stone Property for taxes assessed by them against the J. E. Stone Property and due and owing them for the years 1955 and 1956;

(5) That the Plaintiff's lien on the J. E. Stone Property, mentioned in the paragraph next above, be foreclosed and that said property be sold as under execution;

(6) That the proceeds from the sale of said J. E. Stone Property, less the cost incident to the sale thereof incurred by the officer selling said property, be paid by the officer selling said property into the registry of this Court, and upon said sum being paid into the registry of this Court, the Clerk of this Court is to pay to Plaintiff out of said sum, after paying all costs of Court incurred herein in Civil Action No. 1933, the amount of the indebtedness of J. E. Stone and the Estate of Mary Stone, Deceased, to Plaintiff for income taxes owed Plaintiff by J. E. Stone for the year 1947 and for income taxes owed Plaintiff by J. E. Stone and the Estate of Mary Stone, Deceased, for income taxes for the years 1949 and 1950, as hereinabove stated, and out of the remainder of the proceeds of said sale, if any there be, the Clerk is to pay the taxes assessed against the J. E. Stone Property and due and owing to the City of Nacogdoches, Texas, and the Nacogdoches Independent School District for the years 1955 and 1956, as hereinabove stated, and if the funds available are inadequate to pay the entire amount of the taxes so due, the sum that is available shall be prorated between the City of Nacogdoches, Texas, and the Nacogdoches Independent School District on a pro rata basis, and if, after the Clerk has paid to Paintiff the amount due it, as aforesaid, and has paid to the City of Nacogdoches, Texas, and the Nacogdoches Independent School District, the amounts due them for taxes, as aforesaid, there remains in the registry of this Court any portion of the proceeds of the sale of the J. E. Stone Property, such remaining proceeds are to be held by the Clerk of this Court for a period not to exceed six months from and after the date of the sale of the J. E. Stone Property for distribution, upon order of this Court, to J. E. Stone for investment in a homestead, and if J. E. Stone does not elect, within said six months period, to invest any such funds in a homestead, upon the expiration of said six months period, such funds will be subject to distribution, per order of this Court, to Texas Power and Light Company and Texas Employers Insurance Association in satisfaction of the judgments against J. E. Stone owned by Texas Power and Light Company and Texas Employers Insurance Association, as above set out;

(7) That neither the County of Nacogdoches, Texas, nor the State of Texas has any interest in the J. E. Stone Property or in the proceeds of the sale of said property;

(8) That J. E. Stone take nothing on his third party action against L. E. Jowell, Trustee in Bankruptcy; and

(9) That all costs of Court incurred herein in Civil Action No. 1933 be adjudged against J. E. Stone and Clyde Stone and Sidney Stone, independent executors of the Estate of Mary Stone, Deceased, jointly and severally.

This Memorandum Decision will constitute the Findings of Fact and Conclusions of Law herein as authorized by Rule 52, F. R. C. P.