Bank of Nevada v. United States, 15541.
| Decision Date | 07 February 1958 |
| Docket Number | No. 15541.,15541. |
| Parties | BANK OF NEVADA, Appellant, v. UNITED STATES of America, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Milton W. Keefer, B. Mahlon Brown, Las Vegas, Nev., for appellant.
Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, Charles B. E. Freeman, A. F. Prescott, Sheldon I. Fink, Attys., Dept. of Justice, Washington, D. C., Franklin P. R. Rittenhouse, U. S. Atty., Las Vegas, Nev., for appellee.
Before STEPHENS, Chief Judge, and LEMMON and HAMLEY, Circuit Judges.
While the Internal Revenue Code of 1954 "contains a variety of important changes in the estate and gift tax areas",1 it has left untouched the well established principle that the amount of an unpaid tax "shall be a lien in favor of the United States upon all property and rights to property"2 of the delinquent taxpayer.
No government worthy of the name will permit itself to be rendered incapable of collecting the public fisc.
At any rate, in this respect at least, the United States Government has not been left impotent.
The facts as found by the Court below were entirely stipulated. They may be summarized as follows — with especial regard to the chronology, since time-sequence is important here:
On November 15, 1954, certain Withholding and Federal Insurance Contributions Act taxes for the calendar year 1954 in the amount of $804.50 were assessed against J. D. Bentley of Las Vegas, Nevada, hereinafter referred to as the taxpayer. On the following day, the taxpayer was notified of this assessment and demand was made upon him to pay it, but he has refused to do so.
On January 12, 1955, a notice of tax lien pertaining to this assessment was filed with the County Recorder of Clark County, Nevada.
On February 28, 1955, and on August 31, 1954, the taxpayer submitted financial statements to the appellant. Each statement read in part as follows:
Emphasis supplied.
On March 1, 1955, certain Federal excise taxes for the calendar year 1954 amounting to $187.51 were assessed against the taxpayer, and on that same date the taxpayer was notified of this assessment. Demand was made upon him to pay it, but he has refused to do so.
On April 16, 1955, the taxpayer and his wife, Doris L. Bentley, borrowed $2,000 from the appellant and executed a promissory note in favor of the appellant for that amount.
On May 31, 1955, the taxpayer submitted to the appellant another financial statement, containing the same provision relating to the appellant's right of set-off that has been quoted supra.
On June 10, 1955, the taxpayer had on deposit in an account with the appellant "the sum of not less than $878.16". At 1:45 p. m. on that day, the appellee, through one of its collection officers, served a "Notice of Levy" upon the appellant by delivering it to E. K. Phillips, the assistant cashier. This Notice of Levy covered both of the assessments referred to above.
On that same day, A. M. Smith, vice president and manager of the appellant's First and Fremont Branch, wrote to the appellee's collection officer as follows:
The "unsecured indebtedness" referred to in the above letter was the balance of the note for $2,000, referred to above, which balance, at the time of the levy, amounted to approximately $1,500. The appellant exercised its "claimed" right of setoff subsequently to 1:45 p. m. on June 10, 1955, the precise time at which the appellee's collection officer delivered the Notice of Levy to the appellant's assistant cashier. The appellant concedes that it exercised its right of setoff "thereafter".
On June 13, 1955, a notice of Federal tax lien pertaining to the assessment of Federal excise taxes was filed in the office of the County Recorder of Clark County, Nevada.
On June 14, 1955, the appellee's collection officer served a final demand upon the appellant's vice president and manager of its First and Fremont Branch.
On September 28, 1955, the appellee filed suit in the Court below to recover from the appellant the sum of $878.16, with interest and costs. As we have seen, that sum represented the amount which the taxpayer had on deposit with the appellant on June 10, 1955.
The case was submitted upon a stipulation of facts, together with attached exhibits.
The District Court held that the appellee's "tax liens are paramount and valid liens", and that the appellee was entitled to judgment as prayed for.
On March 29, 1957, the District Court handed down a judgment accordingly.
On April 5, 1957, the Notice of Appeal was filed.
The appellant's argument may be summarized as follows:
The trial court erred in "ignoring the established principle that the bank has a general lien or right of setoff against the deposits of the depositor for the indebtedness of the depositor to the bank".
The Court erred in finding that the promissory note was not a demand note and due immediately upon delivery.
There was no property of the depositor-taxpayer in the possession of the appellant subject to the tax lien.
The right of set-off in the appellant was paramount to the appellee's tax lien.
The pertinent sections of the Internal Revenue Code of 1954 are the following:
At the outset, what appears to be a basic misconception of the appellant should be cleared up. In its main brief, the appellant cites a number of state decisions to the effect, inter alia, that a party in the appellant's position "has a general lien or right of set off against the deposits of the depositor for the indebtedness of the depositor to the bank"; and that there is a right to set off enjoyed by a bank "by virtue of a specific agreement with its depositor", and that only the sum left, "after deducting the debits...
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