The Memorandum Decision of
this Court dated July 12, 1957, and filed in the above actions on that
date as the Findings of Fact and Conclusions of Law in said actions is
supplemented and amended to the extent and in the manner hereinafter
In the eighth paragraph of
said Memorandum Decision dated July 12, 1957, it is stated that L. B.
Mast, one of the persons named by Mary Stone in her last will and
testament as one of the independent executors of said will, died before
the will of Mary Stone was probated on August 24, 1953. This statement
is erroneous. L. B. Mast is still alive, but he failed and refused to
qualify as one of the independent executors of the Estate of Mary Stone.
In the Memorandum Decision
dated July 12, 1957, it was found and concluded that in the event the
proceeds from the foreclosure sale of the J. E. Stone Property exceed
the court costs accrued in Civil Action No. 1933, the amount of the
indebtedness of J. E. Stone and Mary Stone to Plaintiff for income taxes
assessed against them for the years 1940 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 of Nacogdoches, Texas, and the Nacogdoches
Independent School District for the years 1955 and 1956, 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 said six months period was found to be
a reasonable time within which to allow J. E. Stone to invest such funds
in a homestead. Such conclusion is unquestionably correct under the
holding of the Supreme Court of Texas in Lucas v. Lucas, 143 S.
W. 1153, even though Mary Stone by her will devised her undivided
one-half interest in the J. E. Stone Property to her children, share and
share alike, subject to a life estate therein devised to J. E. Stone. As
to the judgment that should be entered in Civil Action No. 1933 the
original Memorandum Decision, above referred to, directed that such
judgment should provide that in the event the proceeds from the
foreclosure sale of the J. E. Stone Property is such that there would
remain in the registry of the Court as a part of said proceeds a sum in
excess of the amount necessary to pay the costs incurred in connection
with the sale, the costs of Court 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 for the years 1949 and 1950 and
the amount of the income taxes owed Plaintiff by J. E. Stone for the
year 1947 and the amount of the taxes assessed against the J. E. Stone
Property and owed the City of Nacogdoches, Texas, and the Nacogdoches
Independent School District for the years 1955 and 1956, such excess sum
would be held in the registry of the Court for distribution to J. E.
Stone, upon order of this Court, for investment in a homestead provided
J. E. Stone elected to invest said sum in a homestead within said six
months period, and in the event said J. E. Stone did not elect to invest
said sum in a homestead within said six months period, such funds would
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 them, respectively. In
giving further consideration to the matter, I have concluded, in view of
the fact that the undivided one-half interest of Mary Stone in the J. E.
Stone Property passed to her children, subject to a life estate therein
in J. E. Stone, that in the event there remains in the registry of this
Court out of the proceeds of the sale of the J. E. Stone Property an
amount subject to investment in a homestead by J. E. Stone, and J. E.
Stone does not elect to invest said sum in a homestead within the six
months period following the sale of the J. E. Stone Property, such
excess sum should be distributed, per order of this Court, as follows:
one-half thereof to the children of Mary Stone and one-half thereof to
Texas Power and Light Company and Texas Employers Insurance Association
in satisfaction of the judgments against J. E. Stone owned by them,
respectively; and the judgment entered in said Civil Action No. 1933
should so provide.
The original Memorandum
Decision dated July 12, 1957, and above referred to, as amended by this
Supplemental Memorandum Decision, together with this Supplemental
Memorandum Decision, will constitute the Findings of Fact and
Conclusions of Law herein.
Stone v. Huffstutler (5th Cir.) 227 Fed. (2d) 217.
26 U. S. C. A. (1946 ed.) Sec. 3670; and 26
C. A. (1954 ed.) Sec. 6321.
26 U. S. C. A. (1946 ed.) Sec. 3671; and 26
C. A. (1954 ed.) Sec. 6323.
26 U. S. C. A. Sec. 6323.
Art. 8, Sec. 15,
Constitution; and Art. 7320,
's Civil Statutes of
Harms v. Ehlers (
Civ. App.) 179 S. W. 2d 582 (Writ of Error Refused); Hughes v.
Civ. App.) 150 S. W. 2d 827; Oakwood State Bank v.
Civ. App.) 21 S. W. 2d 586; and Savage v. Cowan (
Civ. App.) 113 S. W. 319 (Writ of Error Refused).
Hunter v. Wooldert, 55
433; North v. Shearn, 15
175; and Wood v. Wheeler, 11
United States v. Kaufman, 267
408 [1 USTC ¶116];
v. Manning (3rd Cir.) 176 Fed. (2d) 190 [49-2 USTC ¶9370]; and Scherf
v. Commissioner of Internal Revenue (5th Cir.) 161 Fed. (2d) 495
[47-1 USTC ¶9260] (Certiorari Denied) 332
's Civil Statutes of
U. S. Fidelity & Guaranty Co. v. The First National Bank of
(5th Cir.) 172 Fed. (2d) 258; Trinidad Asphalt Mfg. Co. v.
Gregory (5th Cir.) 166 Fed. (2d) 745;
v. Georgia Marble Co. (5th Cir.) 106 Fed. (2d) 955; and Title
Guarantee & Trust Co. v. McIlwain (9th Cir.) 73 Fed. (2d) 754.
Lessing v. Russek (
Civ. App.) 234 S. W. 2d 891, 894 (Writ of Error Refused NRE); Ball v.
Civ. App.) 278 S. W. 2d 189, 192; Sloan v. Dahl, 27 S. W. 2d 284,
285; and Ewing v. Schultz (
Civ. App.) 220 S. W. 625 (Writ of Error Refused).
United States of America
, Plaintiff v. J. Francyl Howard, a/k/a J. F. Howard; Mary B. Howard,
et al., Defendants
S. District Court, Dist. Ore., Civil No. 68-51, 296 FSupp 264, 12/3/68
[Code Secs. 6322, 6335, 7402 and 7424]
Lien for taxes: Action to enforce lien: Foreclosure: Various
defenses.--Government's motion for a summary judgment in an action
to foreclose its tax lien was granted. The District Court had no
jurisdiction to consider the taxpayer's argument that the tax
assessments were based upon the use of written evidence and documents
taken from the taxpayer in an unlawful search and seizure in violation
of his constitutional rights, since such would require a judicial review
of a Tax Court decision which is within the exclusive jurisdiction of
the Court of Appeals. Further, the time for filing a petition for review
had expired and the Tax Court decision was res judicata as to the
tax liability of the taxpayers. Nor did the Court have jurisdiction to
set aside a prior judicial sale of property under a lien foreclosure in
the absence of a charge of fraud or a showing that the sales price was
so inadequate as to amount to fraud. Nor did the Oregon Homestead Act
exempt the property from foreclosure. Also, the Government's present
foreclosure action was not barred by the statute of limitations since
its lien is enforceable as long as its judgment against the taxpayers
Sidney I. Lezak, United
States Attorney, Jack G. Collins, First Assistant United States
Attorney, Portland, Ore., for plaintiff. Robert Y. Thornton, Attorney
General, G. F. Bartz, Assistant Attorney General, 403 State Office
Bldg., Salem, Ore., Courtney R. Johns, District Attorney, P. O. Box 100,
Albany, Ore., for defendants.
and Summary Judgment
KILKENNY, District Judge:
Before the Court is the
motion of the plaintiff for a summary judgment as to all issues, or, in
the alternative, for a partial summary judgment as to certain of the
defenses claimed by defendants Howard.
Plaintiff seeks to
foreclose a tax lien created by a 1958 Tax Court judgment. The tax lien
was previously foreclosed in this Court on other property by judgment
dated April 29, 1966. The property which was the subject of the lien in
that foreclosure was sold under execution issued out of this Court, the
sales being confirmed by orders of the Court dated August 9, 1966.
Certified copies of all of the proceedings in said foreclosure are
before the Court. No appeal was taken from the decision of the Tax
Court, nor was there an appeal from the decree of foreclosure in this
First, defendants claim
that the tax assessments made by plaintiff against the defendants were
based upon the use of written evidence and documents taken from the
defendants in an unlawful search and seizure in violation of their
Not even the Court of
Appeals has jurisdiction to review a decision of the Tax Court once the
time has expired for filing a petition for review. Lasky v.
Commissioner [56-2 USTC ¶9684], 235 F. 2d 97 (9th Cir. 1956); Schaffner
v. Bingler [59-1 USTC ¶9446], 268 F. 2d 76 (3d Cir. 1959). If any
jurisdiction exists in the District Court to review a decision of the
Tax Court, in a proceeding such as this, it is certainly no greater than
in the jurisdiction of the Court of Appeals. Sprague Elec. Co. v. Tax
Court [64-2 USTC ¶9565], 230 F. Supp. 779 (D. Mass. 1964), aff'd.
[65-1 USTC ¶9184] 340 F. 2d 947 (1st Cir. 1965); Baglivo v.
Commissioner [64-2 USTC ¶9712], 235 F. Supp. 493 (E. D. Pa. 1964).
Aside from that, the judgment entered in the Tax Court in April, 1958,
is res judicata on that tax liability of the defendant taxpayers.
Commissioner v. Sunnen [48-1 USTC ¶9230], 333
To be kept in mind is the
fact that the proceedings in this cause are civil in nature, rather than
criminal. Even Mathis v. United States [68-1 USTC ¶9357], 391 U.
S. 1 (May 6, 1968), while warning that routine tax investigations are
not immune from constitutional requirements, is no authority for the
position of defendants. In Mathis, the defendant was in custody,
although on a different charge, and the proceedings were criminal,
rather than civil. I do not mean that the constitutional issue may never
be raised in a civil case. I do say this issue, on those facts, cannot
be raised after two final adjudications, one in the Tax Court and the
other in the District Court.
and Previous Foreclosure
As a second defense, the
defendants Howard charge that plaintiff conducted the previous sales of
property of the defendants in such an unlawful and an unconscionable
manner that the properties of defendants were sold to persons who were
not the highest bidders and at prices which were a small fraction of the
value of the property. Defendants made no objection to the sales, nor
did defendants appeal from the orders confirming the sales. Generally,
after a confirmation of a judicial sale, neither the inadequacy of the
price, nor offers of higher prices, nor anything less than actual fraud,
mistake or accident, will permit a Court to set aside the sale. Morrison
v. Burnette, 154 F. 617 (8th Cir. 1907), appeal dismissed sub.
nom. Laurel Oil & Gas Co. v. Morrison, 212
291 (1909); Weir v.
, 339 F. 2d 82 (8th Cir. 1964). The charges in defendants' answers
are mere conclusions and do not fall within the rule just stated. Under
Rule 56(e), FRCivP, effective July 1, 1963, a party may not rest upon
the mere allegations or denial in his pleadings, but must set forth
specific facts showing that there is a genuine issue for trial. Turner
v. Lundquist, 377 F. 2d 44 (9th Cir. 1967); Scarboro v. Universal
C. I. T. Credit Corp., 364 F. 2d 10 (5th Cir. 1966); Int'l.
Longshoremen's & Warehousemen's
v. Kuntz, 334 F. 2d 165 (9th Cir. 1964); Trustees of the Puritan
Church v. United States [61-1 USTC ¶9135], 191 F. Supp. 670 (D. C.
1960), aff'd. [61-2 USTC ¶9567] 294 F. 2d 734 (D. C. Cir. 1961).
Without a charge of fruad or a showing that the sales price was so
inadequate as to amount to a fraud, defendants should not be permitted
to collaterally attack a judicial sale made over nineteen months prior
to the challenge.
The third defense presented
by defendants is that the property in question is used by defendants,
both as a residence and for their business purposes, and that the
property has been so used since 1937. While the pleading is inexpertly
drawn, it is assumed that the defendants are attempting to claim the
property as a homestead under
law. Unfortunately for defendants, the Internal Revenue Code makes no
provision for a homestead exemption. The
exemption law is of no avail. Leuschner v. First Western Bank &
Trust Co. [58-2 USTC ¶9723], 261 F. 2d 705 (9th Cir. 1958); United
States v. Haffron [47-1 USTC ¶9194], 158 F. 2d 657 (9th Cir. 1947);
Kieferdorf v. Commissioner [44-1 USTC ¶9323], 142 F. 2d 723 (9th
It is difficult to follow
the defendants' claim that a statute of limitations bars the claim. The
record is clear that defendants executed waivers extending the six year
statute of limitation to December 31, 1966. Prior to that date, on
September 30, 1965, Judge Solomon granted to the Government a partial
summary judgment against defendants for unpaid taxes, interest and
penalties, on the 1958 Tax Court judgment. Later, on April 29, 1966 in
the same action, as previously stated, judgment of foreclosure was
entered directing the sale of certain property. Defendants cite no
statute which would apply to these facts, nor have I been able to find
one. The life of the Government's lien is measured by 26
C. §6322. The waiver and the judgments previously mentioned prevented
the lien from expiring. The lien is enforceable as long as the judgment
remains enforceable. United States v. Hodes [66-1 USTC ¶9232],
355 F. 2d 746 (2d Cir. 1966), cert. denied 386
On the record before me, I
find there is no genuine issue of fact to be resolved. Consequently, the
plaintiff's motion for a summary judgment must be allowed.
Delores A. Rippley, Plaintiff v.
United States of America
S. District Court, Dist. N. Dak., Southwestern Div., A1-75-43, 10/20/75
[Code Secs. 6321 and 6323]
Lien for taxes: Priority over homestead exemption: Tax liens under
state law: North Dakota.--A Federal tax lien had priority over the
homestead exemption claimed under North Dakota law by the taxpayer's
Joseph A. Vogel, Jr.,
P. O. Box 484
, N. Dak., for plaintiff. Harold O. Bullis, United States Attorney,
Fargo, N. Dak., Vincent J. Ferraro, Department of Justice, Washington,
D. C. 20530, for defendant.
VAN SICKLE, District Judge:
The singular issue involved
in Defendant's pending motion to dismiss is whether the Plaintiff (wife
of the taxpayer) can assert whatever homestead rights she may have under
North Dakota law to effectively preclude the Defendant from selling real
property solely owned by her husband to satisfy a federal tax lien.
Plaintiff forcefully argues
that a determination of such issue hinges on whether the North Dakota
homestead laws confer upon the wife a present property interest as
opposed to a mere exemption, and asserts that this question has not been
litigated and finally adjudicated.
My reading of the opinion
of the Court of Appeals for the Eighth Circuit in United States v.
Heasley et al. [60-2 USTC ¶9744], 283 F. 2d 422, at page 427,
clearly reveals, however, that such issue was considered on its merits
and decided against the Plaintiff here. The Court therein considered
homestead statutes and stated:
exploration of the question on the merits has convinced us that
as against federal tax liens, homestead exemptions prescribed by state
laws, are of no effect." (Emphasis added.)
Subsequent to the decision
in Heasley, supra, this Court (the late Chief Judge Register),
when presented with a similar argument, quoted the above statement in
holding against the proponent.
v. Olgierson et al. [68-1 USTC ¶9302], 284 F. Supp. 655, 658.
Finally, a recent decision
of the Eighth Circuit reaffirms the position of that Court taken in Heasley
by stating that:
". . . state exemption
laws . . . even if the state, through case interpretation, statute, or
constitutional provisions, characterizes its homestead exemption statute
as creating a present property interest--do not preclude the
from levying upon and selling the taxpayer's interest in the
property." Herndon v. United States [74-1 USTC ¶16,127],
501 F. 2d 1219, 1222-3 (8 Cir. 1974).
Now Therefore, the Court
having considered the pending motion to dismiss, together with briefs
and other pertinent documents on file herein, and being fully advised in
all the premises, it is
ORDERED that said motion
be, and the same hereby is, granted, for failure to state a claim
upon which relief can be granted. Rule 12(b)(6) of the Federal Rules of
I deem it proper to add
this advice, in the words of Judge Gibson found at page 1223 in Herndon,
"We think it advisable
as a matter of fairness under the circumstances of this case that the
Government in selling this real estate should advise all prospective
purchasers that the real property is being sold subject to any homestead
interest that Mrs. (Rippley) may have under (
) law. The possible purchasers should also be advised of the litigation
in this case."
of Entry of Judgment of Dismissal
PLEASE TAKE NOTICE that the
above judgment of which the enclosed is a copy, was duly entered in the
above entitled action on October 28, 1975.
Dated this 28th day of
The above-entitled matter
having come on for hearing before the Court upon the Defendant's Motion
to Dismiss, the Plaintiff having filed a Brief resisting the same and
the Court having entered a Memorandum and Order granting said Motion to
IT IS HEREBY ORDERED,
ADJUDGED AND DECREED that the aboveentitled matter be and hereby is
dismissed with prejudice and without cost to either party.
of Entry of Memorandum and Order Granting Motion to Dismiss
PLEASE TAKE NOTICE that the
above Memorandum and Order of which the enclosed is a copy, was duly
entered in the above entitled action on October 20, 1975.
United States of America, Plaintiff v. Robert H.
Olgeirson, Evelyn N. Olgeirson, Bank of North Dakota, Humble Oil &
Refining Co., Stephens Lumber Co., Unemployment Compensation Division
and Division of Workmens Compensation Bureau of the State of North
Dakota, Quality Builders, Inc., Snell Sash & Door Co., Meisner &
Co., W. T. Jennings Lumber Co., State of North Dakota, Defendants
S. District Court, Dist. N. Dak., Southwestern Div., Civil N. 704, 284
FSupp 655, 3/20/68
[1954 Code Sec. 6323]
Liens for taxes: Priorities: State law.--In an action to enforce
federal tax liens against property occupied as a homestead, the federal
liens were superior to state tax and judgment liens. The state tax liens
were unperfected at the time the federal liens were filed since the
amount of the liens was not established. The judgment liens had not
attached to the subject property since, at the time the judgments were
entered, the property was being occupied as a homestead and the judgment
lienors had not come within any of the conditions required by state law
for such liens to attach.
[1954 Code Secs. 6321 and 6323]
Liens for taxes: Priority of federal liens: Unpaid income tax lien v.
unpaid withholding tax liens: Property owned jointly by husband and
exemptions.--Federal tax liens may validly attach to homestead
property even though state law may prescribe an exemption. However, as
between competing federal liens, a federal income tax lien against
homestead property held jointly was entitled to priority over federal
liens for unpaid withholding and unemployment taxes. The assessment for
unpaid income taxes was against the husband and wife jointly, while the
assessments for unpaid withholding taxes had been assessed against the
husband only. On the sale of the property, the income tax lien was to be
satisfied from the entire proceeds but the withholding liens were to be
satisfied from the husband's share only. BACK REFERENCES: 68FED ¶5357.09,
68FED ¶5357.1245, 68FED ¶5357.1275 and 68FED ¶5362.9408.
John O. Garaas, United
States Attorney, Fargo, N. Dak., for plaintiff. Drey & Tuntland, P.
O. Box "A", Garrison, N. Dak., for Stephens Lumber Co.;
Charles Tighe, Bismarck, N. Dak., for R. Olgeirson; Lawrence E. Watson,
Assistant Attorney General, Bismarck, N. Dak., for Unemployment
Compensation Division of N. Dak. Workmen's Compensation Bureau; Joseph
R. Maichel, Special Assistant Attorney General,
, for N. Dak. State Tax Comm'r.; Pearce, Engebretson, Anderson &
Schmidt, First Federal Savings & Loan Bldg., 320 N. Fourth St.,
Bismarck, N. Dak., for Meisner & Co.; Helgi Johanneson, Attorney
General, Bismarck, N. Dak., for State of N. Dak.; Robert A. Birdzell,
Special Assistant Attorney General, Bismarck, N. Dak., for Bank of N.
Dak.; Kenneth M. Jakes, Special Assistant Attorney General, Bismarck, N.
Dak., for State Tax Dept.; for defendants.
REGISTER, District Judge:
This is a civil action
whereby the Plaintiff seeks a judgment for unpaid federal taxes and to
foreclose certain tax liens against real property owned by the
taxpayer-Defendants Robert H. and Evelyn N. Olgeirson. Jurisdiction of
this Court is found in Title 28, Section 1340, U. S. C. and Section
7402(a) of the Internal Revenue Code of 1954. Default judgments have
been rendered against the Defendants Humble Oil & Refining Company,
Quality Builders, Inc., Snell Sash & Door Company, and W. T.
Jennings Lumber Company. On June 28, 1967, Plaintiff filed its motion
for judgment on the pleadings; this was followed on June 30 with the
filing of a motion for judgment on the pleadings by Defendants
Olgeirson. On August 30, 1967, a hearing concerning the then pending
motions was held, at which time the testimony of Defendants Olgeirson
was taken. On this date also, the Defendant Bank of
filed its motion for dismissal. Following the August 30 hearing, all
motions were taken under abvisement pending receipt of briefs, the last
of which was filed on November 17, 1967.
The real property here
involved is and has been since November of 1951 occupied as the
homestead of Olgeirsons; ownership thereof is vested in Robert H.
Olgeirson and Evelyn N. Olgeirson, husband and wife, as joint tenants.
For reasons of brevity and
clarity, the various liens asserted against the subject property are
categorized as follows:
(1) The judgment liens
asserted by the Defendants Meisner & Company and the Unemployment
Compensation Division, Workmens Compensation Bureau of the State of
(2) The statutory income
tax and use tax liens asserted by the Defendant State of North Dakota;
(3) The mortgage liens
asserted by Defendants Stephens Lumber Company and Bank of North Dakota;
(4) The federal tax liens
asserted by the Plaintiff United States of America.
Section 47-18-04, N. D. C.
C., sets forth the exceptions to the general provision exempting a
homestead from execution or forced sale in satisfaction of a judgment
lien (section 47-18-01, N. D. C. C.). That excepting provision reads as
When homestead subject to execution. A homestead is subject to execution
or forced sale in satisfaction of judgment obtained in the following
debts secured by mechanics' or laborers' liens for work or labor done or
performed or material furnished exclusively for the improvement of the
debts secured by mortgage on the premises executed and acknowledged by
both husband and wife, or an unmarried claimant;
debts created for the purchase thereof and for all taxes accruing and
levied thereon; and
all other debts when it appears that said homestead is within a town
plat and, upon an appraisal as provided by section 47-18-06, it appears
that the value of said homestead is more than twenty-five thousand
dollars over and above liens or encumbrances thereon, and then only to
the extent of any value in excess of the sum total of such liens and
encumbrances plus said twenty-five thousand dollars."
It is undisputed that the
judgment of Meisner & Company and the two judgments of the
Unemployment Compensation Division were entered at a time when the
subject property was being occupied as a homestead by the judgment
debtor. It is further undisputed that the judgments of the Unemployment
Compensation Division were rendered in connection with unpaid
unemployment contributions owed by the judgment debtor Robert H.
Olgeirson. There is no showing by either of the judgment creditors that
the homestead has been appraised, or that its value over and above liens
or encumbrances is in excess of twenty-five thousand dollars; in fact,
at the August 30 hearing, upon inquiry by the Court, no counsel asserted
that the gross value of the property exceeded twenty-five thousand
dollars. There is no assertion made by the judgment creditor Meisner
& Company that its judgment was rendered in connection with any of
the matters set forth in Section 47-18-04.
A review of the facts
presented leads this Court inescapably to the conclusion that the
judgments above referred to do not come within the exceptions provided
by Section 47-18-04, N. D. C. C., and that they are therefore not liens
against the property here sought to be foreclosed.
It is pertinent to observe
that neither of the judgment creditors here involved (Meisner &
Company and the Unemployment Compensation Division, Workmens
Compensation Bureau) submitted briefs in connection with this matter.
Statutory Tax Liens
The Defendant State of
North Dakota, by its Tax Commissioner, asserts a statutory lien for
unpaid use taxes and penalties, and a statutory lien for unpaid income
taxes and penalties. The Tax Commissioner contends that applicable
statutes provided for the attachment of these alleged liens on a date
which would place them high in priority under the "first in time,
first in right" rule. The Plaintiff, on the other hand, contends:
First, that the unpaid taxes giving rise to the alleged liens do not
come within the exception of Section 47-18-04(3), N. D. C. C., and,
Second, that the alleged liens were not choate at the time the federal
tax liens attached and must therefore fail under the "first in
time, first in right" rule.
It is stipulated by all
parties that notice of the latest of the several federal tax liens was
filed in the appropriate office on November 18, 1964. It is further
stipulated by all parties that it was not until May 6, 1965 that the Tax
Commissioner notified the lienor (Robert H. Olgeirson) to file correct
and sufficient returns, based upon estimated amounts computed by the Tax
Commissioner, concerning unpaid use taxes; and, further, it is
stipulated that said Robert H. Olgeirson on May 6, 1965 filed with the
Tax Commissioner returns establishing his state income tax liabilities
for certain prior years. Upon these facts, the Plaintiff asserts that
one of the elements of a perfected, or choate, lien was missing until
May 6, 1965--that element being, of course, the necessary fact that the
amount of the lien was not established. See:
[54-1 USTC ¶9191], 347
81, at page 84; and
v. Equitable Life Assur. Soc'y [66-1 USTC ¶9444], 384
Since this matter has been
argued and briefed, the Court of Appeals for the Eighth Circuit has
rendered an opinion in
v. First National Bank & Trust Company of Fargo, North Dakota,
Trustee of Travis Bros. Body Works, Inc., Bankrupt, and State of North
Dakota [68-1 USTC ¶9102], 386 F. 2d 646 (1967), in which that Court
reversed the Honorable Ronald N. Davies, a Judge of this Court, for
holding precisely in line with what the Tax Commissioner argues here.
The gist of the decision of the Court of Appeals in that case is that,
in line with
, supra, and Equitable Life Assur. Soc'y, supra, a state
tax lien does not become specific, perfected or choate until the
amount of the lien is established. The undisputed facts before us
reveal that date to be May 6, 1965. It follows that the federal tax
liens, the last of which was noticed of record on November 18, 1964, are
entitled to priority over the alleged statutory liens of the State of
North Dakota for unpaid use and income taxes under the "first in
time, first in right" doctrine.
Because of the dispositive
effect of this conclusion, together with the fact that all parties have
stipulated that the mortgage liens are prior in time and entitled to
priority over all other liens asserted in this action, this Court need
not and will not determine the issue whether North Dakota statutory tax
liens of this character will attach to homestead property--a question
which apparently has not been resolved by the Supreme Court of North
The mortgage liens asserted
by Defendants Stephens Lumber Company and Bank of North Dakota have
been, as above stated, stipulated to be prior and superior to all other
liens here involved. Therefore, there is no question of their priority
before the Court. However, the Defendant Bank of North Dakota has filed
a motion to dismiss, based upon all the records, documents and other
pertinent matters here on file, which motion has not in any manner been
resisted by any of the parties hereto. This being the case, and good
cause herefor appearing, the subject property will be ordered sold
subject to the valid, subsisting first mortgage owned by said Bank of
Federal Tax Liens
Olgeirsons first contend that their homestead property is not subject to
federal tax liens by virtue of the homestead exemption laws (Chapter
47-18, N. D. C. C.). The short answer to this assertion is found in United
States v. Heasley [60-2 USTC ¶9744], 283 F. 2d 422, 427 (8 Cir.,
1960), wherein it is stated:
exploration of the question on the merits has convinced us that as
against federal tax liens, homestead exemptions prescribed by state
laws, are of no effect." (Emphasis added.)
this authority, we hold that the federal tax liens asserted in this
action are valid, choate and existing liens upon the homestead property
owned by the Defendants Olgeirson, and are subject to foreclosure action
upon order of this Court.
Having determined that the
Plaintiff is entitled to an order foreclosing its tax liens against the
property described in the Complaint, and an order directing that such
property be sold at public sale, we turn to the problems spawned in
making proper allocation of the proceeds of such sale.
We previously noted that
the subject property is owned by the Defendants Olgeirson and held by
them as joint tenants. As such joint tenants, each of the Olgeirsons
owns an equal share in the property and is entitled to be credited with
an equal share of the proceeds derived from a sale thereof. This
conclusion is apparently not disputed by any of the parties.
There are two categories of
federal tax liens involved in this action: (1) a federal lien for unpaid
income taxes, assessed against both Robert H. and Evelyn N. Olgeirson,
notice of such lien being filed in the appropriate office on August 20,
1963; and (2) three separate federal liens for unpaid withholding and
FUTA taxes, assessed against Robert H. Olgeirson only, notices of such
liens being filed in the appropriate office on August 8, September 16
and November 18, 1964. As between these two categories of federal tax
liens, it thus appears that the lien for unpaid federal income taxes
asserted against the taxpayers Olgeirson, together, is superior and
prior to the federal tax liens asserted solely against the taxpayer
Robert H. Olgeirson.
For many years prior to and
including the year 1959, the Defendants Olgeirson filed a joint federal
income tax return. No income tax returns were filed by either of the
Defendants Olgeirson for the years 1960 and 1961. Appropriate action by
the Internal Revenue Service resulted in assessments being made against
the Defendants Olgeirson for the years 1959, 1960 and 1961, for unpaid
personal income taxes, penalties and interest. The amount of taxes due
for each of the years in question was determined by an agent of the
Internal Revenue Service, and culminated in the preparation and
execution of an Internal Revenue Service Form 870 (Gov. Exhibit 1). This
form, entitled "Waiver of Restrictions on Assessment and Collection
of Deficiency in Tax and Acceptance of Overassessment" sets forth
the amount of income tax and penalty due for each of the three years
involved, computed upon the basis of a joint income tax return
being made by the Defendants Olgeirson, and was executed by Robert H.
Olgeirson and Evelyn N. Olgeirson on April 5, 1963.
Upon the basis of the
assessments as made in this document, the Plaintiff contends that the
liability for unpaid income taxes, penalties and interest is joint and
several for each of the three years involved. Defendants Olgeirson,
while conceding that the liability for the year 1959 is a joint and
several liability, nevertheless argue that the liability for the years
1960 and 1961 is the sole liability of Robert H. Olgeirson--not
withstanding the existence of the executed Form 870. Olgeirsons
recognize the monetary benefit accruing to them by reason of computing
the taxes due on a joint basis, rather than an individual basis, but
contend that, since Evelyn N. Olgeirson had no income for the years 1960
or 1961, they (Olgeirsons) probably would not have filed joint returns
for those years. Mrs. Olgeirson testified that Form 870, when presented
to her for her signature, was not explained to her; that she, in effect,
did not comprehend exactly what she was signing; but that she did sign
such form upon the advice and direction of her husband.
The Court rules in favor of
the Plaintiff on this issue. Clearly, the advantage to Olgeirsons lies
with the execution and filing of a consent to the assessment (Form 870)
as if a joint return had been filed, since they are then benefited by
reduced tax rates. Had Olgeirsons elected not to execute Form 870
jointly, then the Internal Revenue Service would have had no alternative
but to make an assessment against Robert H. Olgeirson only, computed
upon an individual basis at the higher tax rate. Under the circumstances
here present, it is clear that the Defendants Olgeirson intended to take
advantage of the reduced tax rates afforded those filing joint returns
by signing jointly the Form 870. A finding to the contrary would be
We therefore find that the
liability for deficiencies in unpaid income taxes for the years 1959,
1960 and 1961, assessed as a result of the authorization contained in
Government Exhibit 1 (Form 870), is joint and several.
We have purposely avoided
making reference to dollar amounts in discussing the liens here
involved, for the reason that apparently certain payments or other
adjustments have been made since the filing of the complaint and the
several stipulations. Undoubtedly in preparing a judgment herein,
counsel and the parties are in a position to arrive at current, true
Now Therefore, having
considered the motions now pending, together with the testimony,
exhibits, briefs and other pertinent documents on file herein, and being
fully advised in all the premises, it is
ORDERED that the Motion for
Dismissal presented by the Defendant Bank of
be, and the same hereby is, in all things, granted; and its
ORDERED that the within
action and complaint against said Bank of North Dakota be, and the same
hereby is, in all things, dismissed. Counsel for said Bank of
North Dakota will forthwith prepare and submit appropriate form of
judgment in conformity herewith.
It is further
ORDERED that the pending
Motion for Judgment on the Pleadings presented by the Defendants
Olgeirson be, and the same hereby is, in all things, denied. It
ORDERED that the Plaintiff
has a valid and subsisting lien on the real property jointly owned by
Defendants Olgeirson, described as Lot Eight (8), Block Four (4),
Highland Acres Addition to the City of Bismarck, North Dakota; that such
liens be foreclosed against said property; and that such property be
sold (subject to the valid and subsisting mortgage lien of Bank of North
Dakota) according to law, and that distribution of the proceeds thereof,
after deducting the costs of such sale, be made in the following manner:
lien of Stephens Lumber Company be fully paid and satisfied;
lien of Plaintiff United States of
for unpaid income taxes for the years 1959, 1960 and 1961 be in all ways
fully paid and satisfied;
sum remaining after satisfaction of the liens referred to in paragraphs
(1) and (2) be equally divided and one-half thereof be turned over to
Evelyn N. Olgeirson;
the sum remaining after disposition has been made in fulfilling
paragraphs (1), (2), and (3) hereof, the federal liens for unpaid
withholding and FUTA taxes be fully paid and satisfied. In this
connection, if the funds remaining are insufficient to satisfy this
requirement, then the Plaintiff shall have a deficiency judgment against
Robert H. Olgeirson in an amount equal to the unpaid balance.
there remains any monies from the aforesaid sale, after satisfying the
requirements of paragraphs (1), (2), (3), and (4) hereof, then the same
shall be paid over to Robert H. Olgeirson.
Counsel for the Plaintiff
shall forthwith prepare and submit an appropriate form of Judgment in
conformity with this memorandum and order.
We consider the foregoing
memorandum and order to fully satisfy the conditions of Rule 52(a),
Federal Rules of Civil Procedure.
United States of America
, Plaintiff v. George E. Myers, Jr., Helen J. Myers, and Security
Trust & Savings Bank of
S. District Court, Dist. Mont., Billings Div., Civil No. 1093, 6/14/76
[Code Secs. 6321 and 7403(c)]
Lien for taxes: Foreclosure: Priority over homestead exemption:
Montana.--Federal tax liens attaching to the home of the delinquent
taxpayer were valid and had priority over any other lien. The Court did
not feel it was within its discretion to refuse to enter a decree of
foreclosure. Taxpayer's wife could not block sale of the house under the
homestead provisions since such provisions are merely exemption
provisions and create no independent property interest. Therefore,
foreclosure of the liens was appropriate.
Robert Zimmerman, Assistant
United States Attorney,
, for plaintiff. Cliff Schleusner, Schleusner & Jones, Alpine
16th St. West
, for defendants.
BATTIN, District Judge:
Presently pending is the
plaintiff's motion for summary judgment.
The defendant, George
Myers, has consented to the granting of the plaintiff's motion.
Defendant Helen J. Myers filed a partial consent and counter-motion to
the plaintiff's motion, asking that her interest in their home not be
sold during her lifetime to satisfy any portion of the judgment against
Helen Myers argues that the
fact that the Government has a lien under 26
C. §6321 does not automatically give it the right to foreclose the lien
and sell the home pursuant to 26
C. §7403. §7403(c) reads as follows:
and decree.--The court shall, after the parties have been duly
notified of the action, proceed to adjudicate all matters involved
therein and finally determine the merits of all claims to and liens upon
the property, and, in all cases where a claim or interest of the United
States therein is established, may decree a sale of such property, by
the proper officer of the court, and a distribution of the proceeds of
such sale according to the findings of the court in respect to the
interests of the parties and of the United States. If the property is
sold to satisfy a first lien held by the
may bid at the sale such sum, not exceeding the amount of such lien with
expenses of sale, as the Secretary or his delegate directs."
asserting that the Court has discretionary power to refuse to enter a
decree of foreclosure, the defendant relies on United States v. Boyd
[57-2 USTC ¶9791], 246 F. 2d 477 (5th Cir. 1957), cert. den. 355
899. There, the Court stated that Congress intended that the Court
function with full traditional flexibility of the power of equity. In
speaking of Section 7403(c), the Court stated:
broader language could hardly be suggested since the Court, Section
7403(c), is required to '* * * proceed to adjudicate all matters
involved therein and finally determine the merits of all claims
to and liens upon the property * * *.' As though this were not enough,
Congress, presumably conscious of the purpose of the change, amended the
Act, 49 Stat. 1648, Sec. 802, to substitute the word 'may' for 'shall'
in the predecessor to Section 7403, so that it now reads, note 7, supra,
'* * * in all cases where a claim or interest of the United States
therein is established, [the Court] may decree a sale of such
property * * * and a distribution of the proceeds * * *.'
because the statute speaks in terms of foreclosure does not compel the
court to use that remedy. If under controlling legal principles, the
lien does not exist, if it has been lost, if the property is not that of
the taxpayer, if the Federal tax lien is junior to undisputed prior
liens which will exhaust the full value of the property, a decree of
foreclosure would be neither appropriate nor effective. A court required
by the express terms of the statute to adjudicate all matters, the
merits of all claims to and liens upon the property and, in the event of
a sale, distribute the proceeds in accordance with the findings
respecting the interests of all parties and the United States (Section
7403(c), note 7, supra) has the full capacity, and corresponding duty,
to assure that the liens and interests are effectually respected in
accordance with the court's determination of validity, rank and
v. Boyd, supra at 481-2.
The issue presented in Boyd
"concerns the extent and circumstances under which a nonjudicial
sale under a valid power to foreclose a mortgage lien superior to a
federal tax lien extinguishes or affects the government lien or its
rights to a federal court foreclosure or other protective decree."
The Court held that Section 7403 is flexible enough to permit the
mortgagee to exercise its powers of a nonjudicial sale commenced but not
completed prior to institution of the Section 7403 foreclosure action.
While the statute uses the word "may", the defendant has
stretched the Boyd decision to give this Court more equitable
power than it actually has. The Court cannot ignore the remedy of
foreclosure once the priority of the Government's lien is established.
Since the priority and validity of the tax lien is unquestioned,
foreclosure is appropriate.
The defendant, Helen Myers,
also relies upon United States v. Hershberger [73-1 USTC ¶9289],
475 F. 2d 677 (10th Cir. 1973), where the Court refused to order the
sale of a home in which a taxpayer's wife had a homestead right and
joint tenancy ownership. But in
, the homestead provisions are merely exemption provisions and create no
independent property interest. Aronow v. United States, [65-2
USTC ¶9692], (D. Mont. 1965).
For the foregoing reasons,
IT IS ORDERED that:
1. The defendant taxpayer,
George E. Myers, Jr., is indebted to the
for Federal Income Taxes in the amount of $23,760.68 plus interest from
November 15, 1974, to the date of entry of summary judgment, at the rate
of $2.23 per day;
2. The federal tax liens
arising from the assessment against Mr. Myers attach to the subject real
property located at
2207 Virginia Lane
3. The federal tax liens
attaching to the subject property be foreclosed pursuant to a judicial
sale, with one-half the proceeds to be distributed to Helen K. Myers,
who has a one-half interest in the real property, and with one-half of
the proceeds of the sale to be distributed to the United States towards
satisfaction of its liens;
4. If the amount that is
distributed to the
is insufficient to fully satisfy the outstanding tax liens, the
is entitled to a judgment for the deficiency against the taxpayer,
George E. Myers, Jr.
This action came on for
(hearing) before the Court, Honorable James F. Battin, United States
District Judge, presiding, and the issues having been duly tried (heard)
and a decision having been duly rendered.
It is Ordered and Adjudged:
1. The deft. taxpayer, George E. Myers, Jr., is indebted to the
U. S. A.
for Fed. Income taxes in the amount of $23,760.68 plus interest from
Nov. 15, 1976, to date of entry of Summary judgment at the rate of $2.23
2. The federal tax lien
arising from the assessments against Mr. Myers attach to the subject
real property located at
2207 Virginia Lane
3. The federal tax liens
attaching to the subject property by foreclosed pursuant to a judicial
sale, w/1/2 proceeds to be distributed to Helen K. Myers, who has 1/2
interest in the real property, w/1/2 proceeds of the sale to be
distributed to the U. S. A. towards satisfaction of its liens.
4. If the amt. that is
distributed to the
U. S. A.
is insufficient to fully satisfy the outstanding tax liens the
is entitled to a judgment for the deficiency against the taxpayer George
E. Myers, Jr.
Frances G. Aronow, Plaintiff v. The
ofAmerica, et al., Defendants
S. District Court,
, Missoula Div., Civil No. 1228, 9/30/65
[1954 Code Sec. 6321]
Tax liens: Real property: Effect of homestead declaration: Montana.--Under
the Montana statutes, the filing of a homestead declaration creates
merely a privilege or exemption rather than an interest in the property
involved. Therefore, where federal tax liens attached to a husband's
joint tenancy interest in property on which a homestead declaration had
been filed and such interest was later transferred to his wife, the
transferred interest, including the husband's homestead interest, was
still subject to the tax liens.
Robert G. Anderson, Aronow
153 Main St.
, for plaintiff. Moody Brickett, United States Attorney, Donald A.
Douglas, Assistant United States Attorney, Butte, Mont., for defendant.
[Nature of Action]
JAMESON, District Judge:
Plaintiff seeks to quiet
title to certain real property located in
The case was originally filed in Montana state court naming the United
the State of Montana, and four corporations as party defendants. The
cause was removed to this court upon petition of the Government. Except
, all the named party defendants either have filed disclaimers or were
defaulted for failure to answer.
The matter came on for
trial and was heard on August 16, 1965. Post-trial briefs were filed by
The facts giving rise to
the controversy may be summarized as follows: Plaintiff and her husband,
Willard B. Aronow, purchased the property on February 12, 1957, title
being taken in the names of both as joint tenants. On February 28, 1961,
plaintiff and her husband executed and filed a declaration of homestead.
In April, 1963, Willard Aronow conveyed all of his interest in the
property to plaintiff. Prior to the transfer of Willard Aronow's
interest to plaintiff the Government had filed with the Clerk and
Recorder of Flathead County, Montana, notices of tax liens against the
property of the husband, as follows:
Filing Assessment as of
Date Date Amount 8-13-65
12-27-60 8-19-60 ....... $ 6,906.55 $ 417.71
5-31-61 5-12-61 ....... 15,605.57 11,155.23
5-31-61 5-12-61 ....... 6,170.67 6,170.67
7-7-61 5-19-61 ....... 1,216.22 1,216.22
Plaintiff contends that the
notices of tax liens filed against her husband constitute a cloud upon
her title to the homestead property. Accordingly, she seeks a decree (1)
adjudging that the defendant
has no right in or encumbrance against the property, and (2) quieting
her title against the
In view of the nature of
the relief sought some initial observations are in order. The case does
not involve a foreclosure of the tax liens or other lien involving the
question of priorities between various lien holders. Rather plaintiff
seeks to extinguish the
' liens against the property, and the Government seeks to prevent the
extinguishment. The crux of the plaintiff's argument centers around the
nature and extent of her homestead interest in the property. Before
considering that specific point, however, some related matters should be
By virtue of the conveyance
in April, 1963, plaintiff is now the sole record owner of the property.
However, at the time of the filings of the notices of the tax liens, the
property was held in joint tenancy by plaintiff and her husband. With
the filings of the notices all her husband's interest in the property,
including his homestead interest, become subject to the liens. Kieferdorf
v. Commissioner, 9 Cir. 1944, [44-1 USTC ¶9323] 142 F. 2d 723; United
States v. Heffron, 9 Cir. 1947, [47-1 USTC ¶9194] 158 F. 2d 657; 26
U. S. C. A. §6321. The subsequent transfer of the husband's interest
was of course made subject to these liens.
The law is also clear, as
both parties concede, that the liens are valid only against Willard
Aronow's interest in the property. The tax liens in no way encumbered
plaintiff's joint interest. Shaw v.
Case Relied Upon]
This brings us to the
question of the extent of plaintiff's interest in the homestead. Both
parties cite and rely upon Shaw v.
, supra. In Shaw the wife of a taxpayer brought an action to
quiet title upon joint tenancy property held by her husband and upon
which, pursuant to
law, a declaration of homestead had been filed. She also sought to have
cancelled and set aside a federal tax lien, notice of which was filed in
connection with a tax assessed against her husband. Although the court
recognized an apparent conflict in the authorities as to whether a
federal tax lien is valid upon a homestead, it ruled that under
California law the homestead declaration did not create an interest in
the property, but was merely a privilege attaching to it and not
otherwise affecting title. The court dismissed the wife's action for
failure to state a claim upon which relief could be granted due to her
failure to show any invasion of property interests of her own.
relies upon Shaw in support of its position that the filing of
the homestead declaration created merely a privilege or exemption and
did not give plaintiff any property right in her husband's joint tenancy
interest. Accordingly, it is contended that the federal tax liens,
having been filed prior to the conveyance by the husband to plaintiff,
constitute valid liens against the husband's entire joint interest,
including the homestead interest, so conveyed to plaintiff. Plaintiff,
on the other hand, argues that Shaw was based upon relevant
law, and that while the
courts have held that a homestead declaration is merely a privilege or
exemption, under the
law the homestead declaration created a property interest.
court has not determined the nature of the homestead interest in this
state. However, the personal property exemption statutes (R. C. M. 1947,
sections 93-5813 and 5814) which were enacted pursuant to the same
constitutional authority as the homestead statutes (Montana
Constitution, Art. XIX, Section 4), 3
have received judicial construction.
In Mettler v. Rocky
Mountain Security Co. 1923, 68 Mont. 406, 409, 219 Pac. 243 the
Montana Supreme Court, citing Mennell v. Wells, 1915, 51 Mont.
141, 149 Pac. 954, stated: "[T]his court [has] held that our
exemption statute confers a right as distintinguished from a
personal privilege." (Emphasis added.) A careful reading of Mennell
discloses the meaning of the right spoken of in Mettler.
The right is a family right which in effect gives not only the debtor,
but also the wife or any other person upon whom the care of the family
has been cast, the right to invoke the exemption provisions. In support
of this conclusion the court in Mennell recognized that "the
expression 'head of the family' as defined in the title of the Revised
Codes relating to homestead, clearly includes the abandoned wife";
that "where the husband fails to select a homestead the wife may
select it"; and that "the husband cannot abandon his homestead
merely by the desertion of his wife and family". (51
It does not follow from a
recognition of these rights, however, that a declaration of homestead in
itself creates an indivisible vested property interest. As noted supra,
the liens attached to the husband's homestead interest when they were
filed. Had the husband retained his joint tenancy interest, the lien
would still attach to his entire interest, including the homestead
interest. His conveyance to plaintiff did not, in my opinion, terminate
or affect the liens which had already attached prior to the conveyance.
As noted supra,
's homestead statutes were taken from
courts have held repeatedly "that the filing of a homestead
declaration in that state creates merely a privilege or exemption
attached to but not otherwise affecting title". Shaw v. United
States, supra, at 331 F. 2d 497, and cases there cited. It is of
course true, as plaintiff contends, that even though the Montana
statutes were taken from California, the Montana courts are not bound by
California's construction of those provisions. As I read the
statutes and cases, however, I find nothing which leads me to conclude
that the question here presented would be decided differently in
. In the absence of any specific holding by the
court, I conclude that the declaration of homestead by plaintiff and her
husband did not create a property interest in plaintiff which prevents
the tax liens from being effective against the property to the full
extent of Willard B. Aronow's interest at the time the liens attached. 4
In her reply plaintiff
suggests that if it is held that the interest conveyed by Willard B.
Aronow, including his homestead interest, is still subject to the tax
liens, then provision should be made for an allowance of costs and
attorney fees in quieting title, so that upon the sale of the property
"these costs should be paid in full before any of the balance of
the purchase price of the property in question is divided between
plaintiff and the defendant United States of America". As noted supra,
however, the action seeks merely to quiet title and not to foreclose any
lien. It does not appear that the court would have any authority in this
action to direct the sale of the property or do more than enter a decree
quieting title in plaintiff subject to the tax liens against the
interest Willard B. Aronow conveyed to the plaintiff.
It is the court's
recollection that it appeared from the testimony of the trustee in
bankruptcy that there are ample funds in the bankrupt estate to pay the
Government tax liens in full. Possibly arrangements may be made for the
payment of the tax liens from these funds. If not, and if the parties
are unable to agree upon a form of decree in the light of this opinion,
both parties will be given an opportunity to present their views to the
court regarding the form of decree to be entered.
The property is described as follows:
"Lot Seven (7) of
Block Seven (7) of Cameron's Addition to the City of
according to the official map or plat of said Addition on file and of
record in the office of the
and Recorder of said
Jurisdiction over the
was obtained pursuant to 28
C. A. §2410. See Shaw v. United States, 9 Cir. 1964, [64-1 USTC
¶9421] 331 F. 2d 493.
Section 4 of Article XIX provides: "The legislative assembly shall
enact liberal homestead and exemption laws."
Plaintiff also relies strongly upon the decision of the Court of Appeals
for the Tenth Circuit in Jones v. Kemp, 1944, [44-2 USTC ¶9410]
144 F. 2d 478, holding that an Oklahoma wife had an indivisible and
vested interest in homestead property which could not be subjected to
levy and sale for the federal tax liability of her husband. However, as
recently as 1956, the
court re-stated the rule that under
law the homestead right is not an estate in land but a mere privilege of
exemption from execution of such estate as the holder has. Evans v.
, 1956, 301 P. 2d 232. See also Mercer
v. McKeel, 1940, 188
, 280, 108 P. 2d 138. Regardless of the interpretation given the
law by the Tenth Circuit, I feel that the interpretation of the effect
of this type of interest given by the court in Shaw is binding
upon this court.
Builders Supply Company of
, et al. v. Pine Belt Savings & Loan Association, et al.
, No. 51,067, 4/4/79
[Code Secs. 6323 and 6334]
Federal tax liens: Validity of: Priorities: Property exempt from
levy: Homestead exemption.--The government's federal tax lien
attached to the amount of the taxpayer's homestead exemption ($5,000)
and had priority over various judgment lien creditors. The court noted
that Code Sec. 6334(a) does not recognize homesteads as property that is
exempt from federal tax levies.
M. Carr Ferguson, Assistant
Attorney General, Department of Justice, Washington, D. C. 20530, Stone
D. Barefield, Hattiesburg, Miss., for appellee. Van C. Temple, H. A.
Moore, III, Moore, Jones & Moore, First Magnolia Federal Building,
Hattiesburg, Miss. 39401, J. Kearney Travis, Jr., Travis, & Travis,
400 Citizens Bank Building, Hattiesburg, Miss. 39401, for appellant.
Before SMITH, SUGG and
This appeal involves three
questions: (1) Was the holder of the second deed of trust entitled to
payment of its junior lien out of any surplus arising from a sale under
a first deed of trust? (2) Were the homestead exemptionists entitled to
an exemption of $15,000 under Miss. Gen. Laws, Ch. 323, Sec. 5 (1970),
which increased the exemption from $5,000 to $15,000? (3) Was the
entitled to apply exempt proceeds to satisfy a federal tax lien?
Mason M. Baker and wife,
Charlene P. Baker, executed a deed of trust on May 21, 1965, securing a
debt due Pine Belt Savings & Loan Association. After default, the
property described in the deed of trust was sold at a foreclosure sale
for $29,882.17 on December 11, 1975. The trustee applied the proceeds to
the debt due Pine Belt, the trustee's fee and expense of sale, leaving a
surplus of $15,911.37.
Three classes of creditors
claimed the surplus. (1) Builders Supply Company claimed part of the
surplus to satisfy the amount due on its second deed of trust. (2)
Thirteen judgment creditors claimed the surplus to satisfy their
judgment aggregating $15,784.48 which were enrolled on varying dates
from February 5, 1969 to July 17, 1970. (3) The
claimed the surplus proceeds to satisfy its tax lien in the amount of
$17,050.82 which was filed on the 6th day of February, 1975. In
addition, the Bakers claimed $15,000 of the surplus as a homestead
I. WAS THE HOLDER OF THE
SECOND DEED OF TRUST ENTITLED TO SATISFY ITS JUNIOR LIEN OUT OF THE
SURPLUS ARISING FROM THE
UNDER THE FIRST DEED OF TRUST?
Mr. and Mrs. Baker executed
a second deed of trust on the 4th day of October, 1968, which secured an
indebtedness to Builders Supply Company. The chancellor held that the
balance due on March 16, 1977, on the Builders Supply debt was
$10,319.22, which was itemized as follows:
Principal ................ $ 5,500.00
Interest ................. 3,473.25
Attorney's Fees (15%) .... 1,345.98
Total .................... $10,319.23
The chancellor held that
the foreclosure of the Pine Belt's senior deed of trust terminated the
lien created by Builders Supply second deed of trust, and the Builders
Supply was not entitled to satisfy its lien out of the surplus arising
from the forclosure of the senior deed of trust. This holding by the
chancellor was erroneous because we stated in O'Reilly v. Hendricks,
388, 2 S&M (1844), the following:
As a general rule a junior
lien entitles the holder to the residue of the encumbered property,
after an older lien has been satisfied. In equity the junior claimant
would be entitled to the surplus of arising from a sale under the older
In Great Southern Land
Co. v. Valley Securities Co., 162
120, 137 So. 510 (1931) we stated:
general rule is that, where a surplus remains after satisfying a senior
mortgage, it should be applied on the junior mortgage. O'Reilly v.
Hendricks, 2 Smedes & M. 388. (162
at 136, 137 So. at 514).
We have not departed from
the rule announced in O'Reilly v. Hendricks, supra, that the
surplus arising from a sale under a senior lien should be applied on a
junior lien. We therefore reverse the chancellor on this issue. On
remand, the trial court shall allow Builders Supply, from the surplus,
the sum of $10,319.23 which was due it on March 16, 1977, plus interest
at the rate of 7 1/2% from March 16, 1977, until paid on the principal
of $5,500 and attorney's fees of 15% on the additional interest as
provided in the note.
II. WERE THE BAKERS
ENTITLED TO A
EXEMPTION OF $15,000?
Miss. Gen. Laws Ch. 323,
Sec. 5 (1970), was approved April 6, 1970, effective July 1, 1970. Among
other things, the act increased the homestead exemption from $5,000 to
$15,000. The act provided:
7. Nothing in this act shall affect any execution or attachment upon
which levy has been made and under which an execution sale or attachment
is pending at the time of the effective date of this act, but such
execution or attachment may proceed in all respects according to the law
prevailing at the time such levy or attachment is made.
8. This act shall not affect any matter in any court of this state that
is pending at the time this act takes effect.
Sections 7 and 8 of the act
indicate that the legislature recognized that it could not enlarge the
exemptions of property from liability to existing creditors thereby
impairing the obligations of contracts prohibited by the federal and
state constitutions. 1
It is firmly settled that any law which materially increases the amount
of exempt property withdrawn from liability for the debts of the owner
of the property impairs the obligation of existing contracts and is, as
to existing creditors, unconstitutional because an exemption may not be
applied retroactively. Odom v. Leuhr, 226
661, 85 So. 2d 218 (1956); Johnson v. Fletcher, 54
628 (1877); Lessley v. Phipps, 49
We held in Odom that the
landowner in that case was entitled to the increased exemption because
the judgment in question was not obtained until after the effective date
of the increase in the homestead exemption. Odom did not involve
an existing contract but was an action for damages for a tort committed
by the landowner. Although the cause of action accrued and suit was
filed in Odom before the effective date of the increased
homestead exemption, we held this fact did not bring the case within the
prohibition of the federal and state constitutions against the
legislature passing a law impairing a contract.
Odom reaffirmed the
rule stated in Johnson v. Fletcher, supra, that the execution
rights of a judgment creditor becomes fixed when he obtains his judgment
and the legislature cannot increase the exemption as to existing debts.
In this case, all of the
judgments were obtained and enrolled before July 1, 1970, the effective
date of the amendment increasing the homestead exemption, except the
claim at Atlas Brick Company. The judgment in favor of Atlas Brick
Company was rendered July 17, 1970, in the
. The judgment recites that it was a suit on a promissory note and that
personal service of process was had on the defendant, Mason Baker,
returnable to a prior term of the court. The claim of Atlas Brick
Company was pending on the effective date of the act increasing the
homestead exemption so the increased exemption did not apply. (Section
We therefore conclude that
the $5,000 exemption which existed before the amendment was applicable
to the claims of all the judgment creditors and the chancellor erred in
holding that the landowners were entitled to a homestead exemption of
III. IS THE UNITED STATES
ENTITLED TO APPLY EXEMPT PROCEEDS TO SATISFY A FEDERAL TAX LIEN?
The chancellor held that
was entitled to recover the amount of the homestead exemption to satisfy
its tax lien. Section 6334(c) of the Internal Revenue Code of 1954 (26
C.) provides that the only property exempt from a levy to satisfy unpaid
federal taxes is the property specified by Section 6334(a). Section
6334(a) does not recognize homestead exemption. The appellants have not
challenged the correctness of this holding of the chancellor.
Accordingly that part of the decree specifying that the
is to receive the amount of the homestead exemption is affirmed;
however, since we have held that the homestead exemption of $5,000
applies rather than $15,000, recovery by the
will be limited to $5,000.
The chancellor will order
distribution of the surplus as follows: (1) the claim of Builders Supply
in the amount heretofore set forth; (2) $5,000 to the
; (3) any balance remaining to be distributed to the judgment creditors
in accord with the final decree of March 21, 1978. We are unable to
ascertain the balance remaining for distribution to the judgment
creditors because the surplus proceeds were invested and the amount of
interest accruing is not shown by the record; therefore, it is necessary
to remand for entry of a final decree of distribution to the judgment
AFFIRMED IN PART, REVERSED
IN PART AND REMANDED.
PATTERSON, C. J., SMITH, P.
J., ROBERTSON, P. J., AND
, BROOM, LEE, BOWLING AND COFER, JJ., CONCUR.
Art. 1, §10 ¶1 United States Constitution and Art. 3, §16
Constitution of 1890.
Melba L. Harvey v. Noel Thomas, Nehemiah L. Palmer,
Sheriff v. Melba L. Harvey et al.
Supreme Court, No. 43409, 119 SO2d 446, 3/21/60
Lien for taxes: Priority over homestead exemption claimed under state
law.--Proceeds from the sale of a federal income tax delinquent's
homestead in Louisiana, in an amount sufficient to satisfy the
Government's lien for such taxes, were payable to the United States,
since the Louisiana homestead exemption is ineffective against a
recorded federal income tax lien.
Joseph A. Gladney, 130 St.
Louis St., Baton Rouge, La., and Ponder & Ponder, Carondelet Bldg.,
New Orleans, La., for Mr. and Mrs. Noel Thomas, Richard Kilbourne,
Clinton, La., for Mrs. Inez Durham. Seale, Kelton & Hayes and John
700 Florida St.
, for Melba L. Harvey.
The primary issue in these
matters is whether appellant Noel Thomas is entitled to be paid, by
virtue of his homestead exemption, the full sum of $4,000.00 from the
proceeds of a sheriff's sale. The property sold was seized under a
judgment in favor of Melba L. Harvey for the principal sum of $2,500.00
plus 8 per cent per annum interest from December 22, 1951, until paid,
10 per cent attorney's fees on the principal and interest, and all
costs. After seizure of the property but before public sale, the
judgment debtor, Thomas, intervened alleging that the property seized
was his homestead, and that he was entitled to be paid $4000.00 out of
the proceeds of the sale because of this homestead exemption. At the
sale the property was adjudicated to the judgment creditor for
$18,000.00 in cash, and the sheriff, after paying all costs of the
proceedings and the full amounts due under first and second mortgages,
instituted a concursus proceeding, deposited the balance of the proceeds
in the registry of the court, and cited all claimants, including the
judgment debtor who was claiming the amount of his homestead exemption,
to appear and assert their respective claims.
The concursus proceeding
was tried, and the district court rendered judgment ordering
disbursement of the proceeds of the sale, including payment of $768.40 1
to Thomas, the homestead claimant. In due course the clerk of court
disbursed the funds under the authority of the judgment, and thereafter
Thomas took a devolutive appeal.
The mortgage certificate
obtained by the sheriff and read by him before the sale disclosed that
there were some 16 encumbrances against the property including
conventional mortgages, judicial mortgages, and various liens, and that
the proceeds of the sale were insufficient to pay and discharge all of
these claims. It was conceded that the property seized and sold was the
homestead of the judgment debtor and had been his homestead since
January 1, 1952.
Under the provisions of
Article 11, Section 1, of the Louisiana Constitution of 1921, if the
homestead exceeds $4,000.00 in value, the beneficiary shall be entitled
to that amount in case the sale of the homestead under legal process
realizes more than that sum. Under Section 2 of this article, however,
this homestead exemption does not apply to certain debts specifically
enumerated. Among these are debts (No. 2) "For labor, money, and
material, furnished for building, repairing or improving
homesteads" and (No. 4) "For taxes or assessments".
As stated previously, the
property sold was burdened with numerous encumbrances. Article 3329 of
our Civil Code provides that among creditors mortgages, whether
conventional, legal, or judicial, take rank in the order in which they
are recorded. Bank of Erath v. Broussard, 161
657, 109 So. 347; see
. Bank & Trust Co. v. Tucker, 182
289, 161 So. 759; Union
Ass'n v. Finck, 180
437, 156 So. 458. Although mortgages must be paid according to their
rank, mortgages without homestead waiver cannot encroach upon the
homestead exemption of $4,000.00, but the holder of a mortgage superior
in rank which does not contain a homestead waiver has the right to be
paid out of the excess of the proceeds above the $4000.00 homestead
exemption in preference to subsequent mortgages which enjoy a homestead
waiver. Bank of Erath v. Broussard, supra.
With these principles of
law in mind, let us now consider the disbursement of the proceeds of the
sheriff's sale in the present case.
of Funds from Forced
As stated above, the
property was sold for $18,000.00 in cash, and the sheriff after paying
all costs paid in full the holder of the first mortgage in rank (as
disclosed by the mortgage certificate), in which there was no homestead
waiver. This mortgage was properly paid from the excess above the
$4000.00 homestead exemption, there being a sufficient amount in this
excess to pay this mortgage in full. The sheriff then paid the second
mortgage in rank, which contained a homestead waiver. This left a
balance of $7709.85. The sheriff deposited this balance in the registry
of the court in the concursus proceeding, and cited the numerous
claimants to appear and assert their respective rights to be paid from
The question for decision
is: How should this fund be disbursed under the principles of law set
The court costs of $52.40
in the concursus proceeding were paid first. There was also paid to the
clerk of court $73.00 as costs incurred in the concursus proceeding in a
matter growing out of the claim of L. A. Picou to be paid the 10 per
cent attorney's fees provided for in the judgment of the seizing
creditor Melba L. Harvey. After payment of these two items there
remained a balance of $7584.45.
The next encumbrance in
rank, No. 3 on the mortgage certificate, is a materialman's lien in
favor of W. A. Hood Lumber Company for the amount alleged to be due for
lumber and building materials sold to Thomas. The trial judge did not
order this lien paid, and properly so, for the apparent reason that it
was not reinscribed in the mortgage records within one year from the
date of its initial recordation. R. S. 9:4812; Shreveport Long Leaf
Lbr. Co. v. Wilson, 195
814, 197 So. 566.
The next encumbrance in
rank is the judicial mortgage of the seizing creditor Harvey. This
mortgage enjoys no homestead waiver and cannot encroach upon Thomas'
$4,000.00 homestead exemption, but, being next in rank of recordation,
it is entitled to be paid from the excess above the homestead exemption,
which excess was $3,584.45. 2
The total amount due under this mortgage, including court costs,
interest, and attorney's fees, exceeds the amount of this excess, 3
and accordingly Harvey is entitled to the entire excess. Thus at this
point Thomas was left with the full amount of his homestead exemption of
$4,000.00, and this sum is all that remained from the proceeds of the
sale deposited in the registry of the court.
There are other
conventional and judicial mortgages inferior in rank in point of
recordation which do not enjoy any homestead waiver and which cannot
encroach on Thomas' $4,000.00 homestead exemption. Consequently the
holders of these mortgages are not entitled to receive anything from the
proceeds of the sale.
We come next to the very
crux of Thomas' complaint. Although the trial judge gave full
recognition to his claim for $4,000.00 homestead exemption, the judge
nevertheless ordered paid out of this $4,000.00 two claims for debts,
although inferior in rank as regards recordation to numerous other
judicial and conventional mortgages which did not enjoy the homestead
waiver and whose owners received nothing from the proceeds of the sale.
The first of these debts resulted from federal income tax liens
amounting to $2,047.56, and the other was for materials sold for
building, repairing, or improving the homestead as evidenced by a
judgment in favor of Clinton Lumber Company, Inc., formerly W. A. Hood
Lumber Corporation, on which judgment there was due the sum of
$1,184.40. Apparently the trial judge ordered these items paid from the
homestead exemption under the provisions of Paragraphs 2 and 4 of
Section 2 of Article 11 of the Constitution, as set out above.
The first question for our
determination is whether Thomas' homestead exemption is effective
against recorded federal income tax liens.
The idential question was
considered in United States v. Heasley, 170 F. Supp. 738 (D. C.
1959) [59-1 USTC ¶9295], in which it was held that the several states
cannot carve out homestead exemptions from the effect of federal income
tax liens; that the Congress of the United States created such federal
tax liens, and they cannot be affected by state legislatures without the
consent of Congress; and that it is basic that United States courts have
the last word in federal tax matters. The court cited in support of
these propositions United States v. Acri, 348 U. S. 211, 75 S.
Ct. 239, 99 L. Ed. 264 [55-1 USTC ¶9138]; United States v. Snyder,
149 U. S. 210, 13 S. Ct. 846, 37 L. Ed. 705; United States v.
Heffron, 158 F. 2d 657 (9 Cir.) [47-1 USTC ¶9194].
Bldg. Ass'n v. Spofford, 221
549, 59 So. 2d 880, this court had occasion to consider Paragraph 4 of
Section 2 of Article 11 of the Louisiana Constitution, which provides
that the homestead exemption is not applicable to debts for taxes or
assessments. In that case it was definitely and emphatically stated that
the word "taxes" as there used embraced no other type of taxes
than those assessed directly against the homestead property. The court
in that case was dealing only with taxes levied and assessed by the
state, for the question there was whether the word "taxes" in
Article 11, Section 2, Paragraph 4, included excise taxes levied by the
state and due by the one claiming the homestead exemption. The court
held that a debt for excise taxes was not a debt to which the homestead
exemption did not apply. Here, however, we are dealing with income taxes
levied by the
government, and under the federal authorities set out above we think the
trial judge properly ordered these income taxes paid.
We also think he properly
ordered the amount due under the lumber company judgment paid from the
$4,000.00, for it was shown that this was a debt for materials incurred
in repairing or improving the homestead. See
Const. of 1921, Art. 11, Sec. 2, Par. 2.
After payment of these two
debts there remained for Thomas under his homestead exemption only
$768.04, and as this amount was paid to Thomas by the clerk of court, he
has no cause for complaint.
To give Thomas his full
homestead exemption we should have to disregard the principle of law
that among creditors mortgages, whether conventional, legal or judicial,
take rank in the order in which they are recorded. In other words, we
should have to manipulate the mortgages so as not to pay them in
accordance with their rank, and, as said in Bank of Erath v.
Broussard, supra, "* * * Such a procedure would take away from
prior mortgages which enjoy no homestead waiver their right to be paid
out of such excess in preference to subsequent mortgages which enjoy
such waivers, and hence could not be tolerated for a moment".
Appellant Thomas also
claims that the clerk did not distribute the fund deposited in the
registry of the court in accordance with the judgment rendered in the
concursus proceeding. The clerk disbursed the the fund in accordance
with our opinion and in accordance with the judgment of the district
court, and appellant Thomas was entitled to receive from this fund only
the amount with he did receive.
Melba L. Harvey, the owner
of the judicial mortgage under which the property was seized, has
answered the appeal claiming that the district court erred in ordering
paid to the clerk of court $73.00 incurred in what he says was a rule
instituted by him to have the amount of L. A. Picou's attorney's fees
reduced from $2,500.00 to the amount ordered paid by the trial judge. We
do not find in the record any rule instituted by
for this purpose. However, there was a proceeding instituted by L. A.
Picou in which he sought to be paid the 10 per cent attorney's fees
provided in the seizing creditor's judgment. This proceeding was a part
of the concursus proceeding itself, and L. A. Picou was recognized to be
entitled to the 10 per cent attorney's fees set forth in the
judgment. Consequently costs of this proceeding were properly taxes as
costs by the trial judge and ordered paid to the clerk of court.
For the reasons assigned
the judgment appealed from is affirmed, appellant to pay all costs of
There is a mathematical or clerical error in this figure; the sum
ordered paid to Thomas should have been $768.04. This error, however, is
There remained in the fund deposited in court after payment of costs
$7,584.45. Consequently, after the homestead exemption of $4,000.00 was
deducted, there remained in this fund $3,584.45.
In the amount to be paid
there is included $332.25 representing the 10 per cent attorney's fees
due L. A. Picou, which the trial judge ordered paid directly to Mr.
Rosalie Bedami, Plaintiff v. Laurie W. Tomlinson,
Director of Internal Revenue of Florida, and his lawful agents and
District Court for the Southern District of Florida,
Division, Civil. No. 2344-T, January 25, 1954
Injunctive relief: Sale of homestead property.--Where taxpayer
sought temporary and permanent injunctions against the Director of
Internal Revenue to restrain the levy and sale of her homestead property
in aid of the collection of income taxes and penalties, it was held that
the maintenance of such a suit is specifically barred by Code Sec. 3653,
since taxpayer had adequate legal remedies. Director's motion to dismiss
Property subject to lien:
property in Florida.--Homestead laws of the State of
, constitutional or statutory, must yield to Federal statutes
authorizing the seizure and sale of real estate to satisfy unpaid income
taxes when sufficient personalty is not found. BACK REFERENCES: Code
Secs. 3670 and 54FED ¶3707 at 54FED ¶544 CCH 1765.159, 54FED ¶1766T.153.
Distraint proceedings: Injunctive relief and motion to dismiss:
Irrelevancy of supporting evidence.--On a motion allowed to dismiss,
with prejudice, a suit for injunctive relief against the sale of
taxpayer's homestead, the Director is not entitled to introduce
certified copies of taxpayer's income tax returns and other documents as
evidence. Questions of fact are raised by answer and a motion for
summary judgment, but they cannot be presented on a motion to dismiss,
the grounds for which must be found within the four corners of
Talton A. Branch, John D.
, for plaintiff. James L. Guilmartin, United States Attorney, for
SIMPSON, District Judge:
Plaintiff's complaint seeks
temporary and permanent injunctions against the defendant Director,
restraining the levy and sale of the plaintiff's homestead property, in
aid of the collection of income taxes and penalties assessed against the
plaintiff and her husband for the eight years, 1944 to 1951, inclusive.
Barred by Statute]
The maintenance of a suit
for the purpose of restraining the collection of any tax is specifically
barred by Section 3653, Title 26, U. S. Code. The plaintiff has adequate
Additionally, see the
holding of the
Court of Appeals, Fifth Circuit, in Shambaugh v. Scofield, 132
Fed. (2d) 345 [42-2 USTC ¶9826]; holding that homestead laws of the
State of Taxes, constitutional or statutory, must yield to Federal
Statutes authorizing the seizure and sale of real estate to satisfy
unpaid income taxes when sufficient personalty is not found. The
homestead exemption laws and constitutional provisions are similar in
substance to those of
An order dismissing the
complaint, without leave to amend, and with prejudice, is accordingly
Dismissing Complaint, and Final Judgment of Dismissal With Prejudice
[Proofs Not Allowed]
This cause was this date
argued and submitted by counsel for the respective parties, on the
motion to dismiss (filed May 11, 1953) of the defendant Director of
Internal Revenue. At said hearing defendant's counsel sought to have
introduced and considered by the Court certified copies of the joint
income tax return for the calendar year 1950 filed jointly by the
plaintiff and her husband Angelo Bedami, and certified copies of waiver
of restrictions on assessment and collection of deficiency in tax and
acceptance of over-assessment for the years 1944, 1945, 1946, 1947,
1948, 1949, 1950 and 1951, filed jointly by the plaintiff and her
husband with the defendant Director of Internal Revenue. Upon the
objection of plaintiff's counsel, these documents are not received and
are not considered by the Court in the entry of this order. They present
questions of fact, which the defendant would have to raise by answer and
motion for summary judgment, and cannot be presented in aid of his
motion to dismiss, the grounds for which must be found within the four
corners of the plaintiff's complaint.
Upon consideration, it is
ORDERED and ADJUDGED that
the defendants' said motion to dismiss be and the same is hereby granted
without leave to the plaintiff to amend her complaint, and said
complaint and this cause be and the same are hereby dismissed with
United States of America, Plaintiff v. Kenneth C.
Tressler; Theresa Tressler; Leta P. Fuerstein; The Estate of W. J.
Reynolds, Sr.; May Reynolds; C. E. Houchin; Pringle Tractor Co. Inc.;
James L. Ralphs, Inc.; Corrine Talbot; Quality Press, Ltd.; L. J. Allen;
Mrs. George W. Fink; Beatric Farina; Earl O. Schnetz; J. S. Butler; The
California State Board of Equalization; State of California Department
of Employment; Defendants
S. District Court, So.
, No. Div., No. 2646 ND, 1/31/66
[1954 Code Secs. 6321-6323]
homestead exemption: Priority.--Government's tax lien was superior
homestead exemption and trust deed liens in property of the delinquent
taxpayers. Since the deeds of trust were not executed by the taxpayer
husband, the homestead executed by the taxpayer wife for the joint
benefit of her and her husband was a bar to the deeds of trust. The
homestead was not, however, a bar to the tax claim.
Manuel L. Real, United
States Attorney, Loyal E. Keir, Robert T. Jones, Assistant United States
Attorneys, 808 U. S. Courthouse, Los Angeles, Calif., for plaintiff.
Thomas B. Conway, Griffin, Conway & Jones, 1008 12th St., Modesto,
Calif., William Meux, 605 Security Bank Bldg., Fresno, Calif., for
Reynolds; S. Everett Phillips, Security Bank Bldg., 1060 Fulton Mall,
Fresno, Calif., for L. Cook, defendants.
CROCKER, District Judge:
The above-entitled case
came on for trial before the court on December 10, 1965; the Government
was represented by Robert T. Jones, Assistant United States Attorney;
Defendant Leta P. Fuerstein was represented by S. Everett Phillips,
Esq.; Defendants Williams J. Reynolds, Jr., Administrator of the Estate
of W. J. Reynolds, Sr., and May Reynolds, were represented by William C.
In this action the
Government seeks to foreclose tax liens on certain property to pay taxes
of Kennth C. Tressler and Theresa Tressler. The property in question was
the separate property of Theresa Tressler which she homesteaded on March
22, 1951, the
"that my husband K. C.
Tressler is the head of a family; that he has not made any declaration
of homestead and I therefore make this declaration for the joint benefit
of myself and my said husband;"
On May 8, 1952, Theresa
Tressler executed a note secured by a deed of trust on said property in
favor of W. J. Reynolds and May Reynolds. However, her husband K. C.
Tressler didn't execute this note or deed of trust.
On May 19, 1952, Theresa
Tressler executed a note secured by a deed of trust on said property in
favor of Leta P. Fuerstein. K. C. Tressler did not execute this note and
deed of trust.
Default has been taken
against all other defendants claiming an interest in the property.
The question of the
priority of the above-mentioned deeds of trust, homestead interest and
tax lien was submitted with written authorities.
The Government contends
that its claim under tax lien is prior to the answering defendants under
their deeds of trust because the homestead does not bar the Government, U.
S. v. Heffron [47-1 USTC ¶9194], 158 F. 2d 657, but does bar the
The defendants contend that
the homestead is not a bar because California Civil Code §1241.3
provides that a homestead is subject to execution in satisfaction of
judgments obtained "On debts secured by encumbrances on the
premises executed and acknowledged by husband and wife, by a
claimant of a married person's separate homestead, or by an unmarried
However, the deeds of trust
were not executed and acknowledged by the husband as required by this
section and by Duncan v. Curry, 124 Cal. 106.
This homestead is not a
married person's separate homestead as defined by California Civil Code
Sections 1300-1304, but by its terms is a homestead for the joint
benefit of the husband out of the wife's separate property. By this
homestead Mrs. Tressler gave her husband an interest in her property
which protects him not only from his creditors but also from his wife as
well. The wife could not convey or encumber it without his signature
(Cal. Civ. Code §1242), and she cannot partition the property, Kaupe
v. Kaupe, 131
App. 2d 511.
Thus, while the deeds of
trust are valid, they cannot be enforced against the valid homestead and
the Government has first priority and may foreclose its valid tax lien
against the property described in the complaint and sell it by judicial
or revenue sale.
The proceeds should go
first, to satisfy the tax lien of the United States; second, to the
Tresslers up to the amount of their homestead exemption; third, to the
Estate of W. J. Reynolds, Sr., and May Reynolds, for the balance due on
the original note; fourth, to Leta P. Cook, sued as Leta P. Fuerstein,
for the balance due on her note and deed of trust; and fifth, to the
Estate of W. J. Reynolds, Sr., and May Reynolds for advances made on
their note and deed of trust.
Counsel for plaintiff is
directed to prepare and lodge findings of fact, conclusions of law and
form of judgment in accordance with Local Rule 7.
The clerk of this court is
directed to serve copies of this order by
mail upon the attorneys for the parties appearing in this cause.
of Fact and Conclusions of Law
This action having come on
regularly for trial on December 10, 1965, at 10:00 A. M., before the
Honorable Myron Crocker, United States District Judge for the Southern
District of California, Northern Division; Manuel L. Real, United States
Attorney for the Southern District of California, Loyal E. Keir,
Assistant United States Attorney, Chief, Tax Division, and Robert T.
Jones, Assistant United States Attorney, appearing for the plaintiff;
William C. Meux, Esq., appearing for W. J. Reynolds, Jr., Administrator
of the Estate of W. J. Reynolds, Sr. and for May Reynolds; S. Everett
Phillips, Esq., appearing for Leta P. Fuerstein; and evidence both oral
and documentary having been received by the Court; and the action having
been briefed and argued; and the Court having duly considered same, now
orders findings of fact and conclusions of law as follows:
I. This is an action to
foreclose federal tax liens against defendants and taxpayers Kenneth C.
Tressler and Theresa Tressler pursuant to the provisions of Section 7402
and 7403 of the Internal Revenue Code of 1954. [26 U. S. C.]
II. On May 26, 1961, the
District Director of Internal Revenue, a delegate of the Secretary of
the Treasury, made an assessment against the defendant-taxpayers Kennth
C. Tressler and Theresa Tressler for individual income taxes, penalties,
and interest to May 26, 1961 for the tax year 1956 in the total amount
III. Notice of and demand
for payment of the above-described tax assessment was served on the
defendant-taxpayers Kenneth C. Tressler and Theresa Tressler on May 26,
IV. There is presently due
and owing from the defendant-taxpayers, Kenneth C. Tressler and Theresa
Tressler, on the said tax assessment, the sum of $3,349.19, plus
interest thereon according to law, which amount the defendant-taxpayers
have neglected, failed, or refused to pay on demand.
V. On July 11, 1961, a
Notice of Federal Tax Lien (Treasury form 668) in the amount of
$4,647.59, relating to the assessment described above, was filed with
Theresa Tressler is the owner of certain real property located at
1103 West Vessar Avenue
; a more particular description of which is:
East 65 feet of the North half of lot 16 of RAMONA ACRES, according to
the map thereof recorded in Book 7, Page 37 of Plats, on May 18, 1914 in
the office of the
of said County, EXCEPT the South 10 feet thereof.
Theresa Tressler, on March 2, 1951, executed a written Declaration of
Homestead for the joint benefit of herself and her husband covering the
real property described at paragraph VI above; said Declaration of
Homestead was recorded on March 22, 1951 with the
VIII. The other defendants
were named in this action because each of them asserts claims against
defendants Kenneth C. Tressler and/or Theresa Tressler, or against the
subject property referred to above.
IX. On September 7, 1965
defaults and default judgments were entered against the following named
defendants: Kenneth C. Tressler, Theresa Tressler, Pringle Tractor Co.,
Inc., James L. Ralphs, Inc., Corrine Talbot, Quality Press, Ltd., and J.
X. Disclaimers of any
right, title, or interest, in the subject property are on file by the
following named defendants: L. J. Allen, filed August 24, 1965; the C.
E. Houchin Estate and all beneficiaries thereof (sued herein as C. E.
Houchin), filed August 2, 1965; the State of California Department of
Employment and Board of Equalization, dated July 27, 1965; Beatric
Farina, filed August 18, 1965; and Earl O. Schnetz, filed May 27, 1965.
XI. Defendants the W. J.
Reynolds, Sr. Estate and May Reynolds assert an interest in this
property by virtue of two deeds of trust on the property described above
in favor of W. J. Reynolds and May Reynolds, which deeds of trust were
executed by Theresa Tressler on May 8, 1952, and recorded May 28, 1952.
However, these deeds of trust were not executed by Mr. Kenneth C.
XII. Defendant Leta Cook,
sued herein as Leta Fuerstein, asserts an interest in the proprety
described above by virtue of a deed of trust, the balance due with
principal upon which is $173.07, which deed was executed May 19, 1952
and recorded on May 28, 1952. This deed also was not executed by Kenneth
XIII. By stipulation filed
December 10, 1965 defendant Mrs. George W. Fink conceded the priority of
and the other answering defendants in the proceeds of the subject
I. This Court has
jurisdiction of this action by virtue of Sections 7402 and 7403 of the
Internal Revenue Code of 1954 [26
C.] and under Sections 1340 and 1345 of the Judicial Code. [28 U. S. C.]
II. Defendants and
taxpayers Kenneth C. and Theresa Tressler are indebted to the
for federal income taxes and interest thereon for the year 1956 in the
amount of $3,349.19, plus interest as provided by law.
III. Plaintiff is entitled
to foreclose its federal tax liens against defendants and taxpayers
Kenneth C. Tressler and Theresa Tressler. [26 U. S. C. Sections 7402 and
IV. Since the deeds of
trust in question were not executed and acknowledged by Kenneth C.
Tressler, husband of Theresa Tressler, the homestead executed by Theresa
Tressler for the joint benefit of herself and her husband is a bar to
the deeds of trust. [
Civ. Code §§ 1240 and 1241; Duncan v. Curry, 124
V. The homestead, however,
is not a bar to the tax claim of the
. [United States v. Heffron [47-1 USTC ¶9194], 158 F. 2d 657
(9th Cir. 1957).]
VI. Accordingly, while the
deeds of trust are valid, they cannot be enforced against a valid
homestead and the Government has first priority and may foreclose its
valid tax lien against the property described above, and may sell the
property by judicial or revenue sale.
VII. The proceeds of sale
of the subject property should go first, to satisfy the tax liens of the
United States; second, to the Tresslers up to the amount of their
homestead exemption; third, to the Estate of W. J. Reynolds, Sr., and
May Reynolds, for the balance due on the original note; fourth, to Leta
P. Cook, sued as Leta Fuerstein, for the balance due on her note and
deed of trust; and fifth, to the Estate of W. J. Reynolds, Sr., and May
Reynolds for advances made on their notes and deed of trust; and sixth,
to defendant Mrs. George W. Fink in the amount of her judgment claim.
Sarah M. Harris, Plaintiff-Appellant v.
United States of America
U. S. Court of Appeals, 5th Circuit, No. 84-1703, 764 F2d 1126, 7/8/85,
Affirming, 84-2 USTC ¶9715
[Code Secs. 6303, 6321 and 7403]