U.S. v. National Bank of Commerce, 83-1218

• Decision Date: 31 January 1984
• Docket Number: No. 83-1218,83-1218
• Citation: 726 F.2d 1292
• Parties: 84-1 USTC P 9191 UNITED STATES of America, Appellant, v. NATIONAL BANK OF COMMERCE, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1292

726 F.2d 1292

84-1 USTC P 9191

UNITED STATES of America, Appellant, v. NATIONAL BANK OF COMMERCE, Appellee.

No. 83-1218.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 15, 1983.

Decided Jan. 31, 1984.

Terry F. Wynne, Bridges, Young, Matthews, Holmes & Drake, Pine Bluff, Ark., for appellee.

Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, William S. Estabrook, John A. Dudeck, Jr., Attys., Tax Div., Dept. of Justice, Washington, D.C., for appellant; George W. Proctor, U.S. Atty., Little Rock, Ark., of counsel.

Before BRIGHT, ARNOLD and FAGG, Circuit Judges.

ARNOLD, Circuit Judge.

The United States claims that one Roy J. Reeves has not paid all of his income tax for the year 1977. There are two bank accounts in the National Bank of Commerce of Pine Bluff, Arkansas, in the names of "Roy Reeves or Ruby Reeves or Neva R. Reeves." The government served a notice of levy on the bank, demanding that enough of the accounts to satisfy the taxpayer's obligation be paid over to it. The bank, protesting that it did not know how much of the account belonged to Roy, as opposed to Ruby or Neva, refused. The government then brought this action under Section 6332(c)(1) of the Internal Revenue Code of 1954, 26 U.S.C. Sec. 6332(c)(1) (1976), seeking judgment against the bank "in [its] ... own person and estate" for the amount of taxes it claimed Roy owed. The District Court ¹ held for the bank on summary judgment. United States v. National Bank of Commerce, 554 F.Supp. 110 (E.D.Ark.1982). It held that the Due Process Clause of the Fifth Amendment requires the government, when serving a Section 6331 notice of levy on a bank account bearing names of persons other than the delinquent taxpayer, to notify the other ostensible owners of the account, and give them a chance to show how much of the account they own. Otherwise, the levy statutes would deprive the other owners of their property without due process of law.

We do not reach the constitutional questions decided by the District Court. In fact, we have a duty not to reach them if the statutes themselves, interpreted aright, in fact give adequate protection to the non-taxpayers' property rights. The only appellate case in point, United States v. Stock Yards Bank of Louisville, 231 F.2d 628 (6th Cir.1956), holds that the government cannot succeed without proving the actual value of the delinquent taxpayer's interest in jointly owned property. We follow Stock Yards Bank, which reached its result as a matter of statutory construction, not due process, and affirm the District Court's judgment on that ground.

I.

The facts are stipulated. When the complaint was filed, Roy J. Reeves owed $856.61 in income tax for the year 1977. ² On June 10, 1980, there were in the National Bank of Commerce a checking account and a savings account in the names of "Roy Reeves or Ruby Reeves or Neva R. Reeves." The balance in the checking account was $321.66, and the balance in the savings account was $1,241.60. Any one of the three parties, Roy, Ruby, or Neva R., was authorized to withdraw money from the accounts. We do not know who owned the money before it was deposited, nor do we know in what proportion the accounts are owned. The government and the bank, in fact, have agreed that "[n]o further evidence as to the ownership of the monies in the subject bank accounts will be submitted." Supplement to Stipulation of Facts, Designated Record (D.R.) 13. The government's notice of levy, as amended on June 26, 1980, demanded that the bank pay over to it the $856.61 owed by Roy. The bank refused. The government brought this action on September 28, 1981, and the District Court granted the bank's motion for summary judgment on December 16, 1982.

II.

Under Section 6331(a) of the 1954 Code,

If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary [of the Treasury] to collect such tax ... by levy upon all property and rights to property ... belonging to such person or on which there is a lien provided in this chapter for the payment of such tax.

Property on which such a lien exists is described in Section 6321:

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount ... shall be a lien in favor of the United States upon all property or rights to property, whether real or personal, belonging to such person.

"[A]ny person in possession of ... property or rights to property subject to levy upon which a levy has been made shall, upon demand of the Secretary, surrender such property or rights ... to the Secretary." Section 6332(a). And if he "fails or refuses" to do so, he "shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of taxes for the collection of which such levy has been made ...." Section 6332(c)(1).

The government's position is simple. The bank had possession of rights to property belonging to the taxpayer. (Or, more accurately, the bank owed the taxpayer money. Only a banker has money in a bank. The depositors are creditors of the bank.) The bank failed to surrender these rights in response to a levy. It is therefore personally liable to the United States for the amount in the accounts, but not in excess of the amount owed in taxes. If someone else, Ruby or Neva, also had an interest in the account, their remedy is to sue the government for wrongful levy under Section 7426(a)(1), which gives an action to "any person," other than the taxpayer, "who claims an interest in ... property and that such property was wrongly levied upon ...."

We think analysis will be aided by approaching the issue in two stages. First, what property or property rights of Roy Reeves did the bank have in its possession? Second, what obligation does the statute impose on the bank with respect to that property? The first question depends on state law, see Aquilino v. United States, 363 U.S. 509, 512-14, 80 S.Ct. 1277, 1279-80, 4 L.Ed.2d 1365 (1960), the second on federal law.

A.

Two Arkansas statutes are relevant. Ark.Stat.Ann. Sec. 67-521 (1980) ³ provides that when a deposit is made

in the names of two or more persons and in form to be paid to any of the persons so named, such deposit ... shall become the property of such persons as joint tenants, and the same ... may be paid to any of said persons. Such payment and the receipt or acquittance of the one to whom such payment is made shall be a valid and sufficient release and discharge of said bank for all payments made on account of such deposit prior to the receipt by said bank of notice in writing signed by any one of said joint tenants not to pay such deposit in accordance with the terms thereof.

And Ark.Stat.Ann. Sec. 67-552 (1980), amended by 1983 Ark. Acts No. 843, Sec. 1, provides, in pertinent part, as follows:

67-552. Accounts and certificates of deposit in two or more names.--Checking accounts and saving accounts may be opened and certificates of deposit may be issued by any banking institution with the names of two or more persons, either minor or adult, or a combination of minor and adult, and such checking accounts, savings accounts and certificates of deposits may be held:

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(d) If an account is opened or a certificate of deposit is purchased in the name of two (2) or more persons, whether as joint tenants, tenants by the entirety, tenants in common, or otherwise, a banking institution shall pay withdrawal requests, accept pledges of the same, and otherwise deal in any manner with the account or certificate of deposit upon the direction of any one (1) of the persons named therein, whether the other persons named in said account or certificate of deposit be living or not; unless one (1) of such persons named therein shall by written instructions delivered to the banking institution designate that the signature of more than one (1) person shall be required to deal with such account or certificate of depost [deposit].

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(h) The person to whom such account or certificate of deposit is issued may pledge, withdraw or receive payment and any such payment made by the banking institution shall be a complete discharge as to the amount paid.

The deposit agreement or signature card is not in the record. We do not even know whether the three Reeveses whose names are on the account are related by blood or marriage. All we know is that the account is in the names of Roy or Ruby or Neva. One might think that Section 67-521, quoted above, means that Roy, Ruby, and Neva are joint tenants, and that each of them therefore owns one-third of the account, with right of survivorship upon the death of either or both of the others. But the statute has not been so construed. Black v. Black, 199 Ark. 609, 135 S.W.2d 837 (1940), holds that the statute was

passed for the protection of the bank in which the deposit was made .... The statute effects no investiture of title as between the depositors themselves, but only relieves the bank of the responsibility and duty of making inquiry as to the respective interests of the depositors in the deposit until one of the joint tenants shall give notice in writing that the joint ownership has been dissolved.

199 Ark. at 617, 135 S.W.2d at 841. Accord, McGuire v. Benton State Bank, 232 Ark. 1008, 1012, 342 S.W.2d 77, 79 (1961).

Thus, Roy could have withdrawn any amount he wished from the account and used it to pay his debts, including federal income taxes, and his co-owners would have had no lawful complaint against the bank. But they might have had a claim against Roy for conversion. The rights of the co-owners inter sese are not determined by the cited Arkansas statutes. Those rights depend on the intention of whoever deposited the money, or on whatever agreement, if any, might have been made among the co-owners, or on some other...