Bartell v. Riddell

• Decision Date: 05 February 1962
• Docket Number: Civ. No. 1286-61.
• Citation: 202 F. Supp. 70
• Court: U.S. District Court — Southern District of California
• Parties: Charles B. BARTELL, Plaintiff, v. Robert A. RIDDELL, Norman Rosenberg, and Parkview Hospital, a California corporation, Defendants.

202 F. Supp. 70

Charles B. BARTELL, Plaintiff, v. Robert A. RIDDELL, Norman Rosenberg, and Parkview Hospital, a California corporation, Defendants.

Civ. No. 1286-61.

United States District Court S. D. California, Central Division.

February 5, 1962

Jack E. Hildreth, Los Angeles, Cal., for plaintiff.

Seymour B. Pearlman, Los Angeles, Cal., for defendant Norman Rosenberg.

Charles J. Katz, Los Angeles, Cal., for defendant Parkview Hospital.

Francis C. Whelan, U. S. Atty., Robert H. Wyshak, Asst. U. S. Atty., Chief, Tax Division, Los Angeles, Cal., for defendant Robert A. Riddell.

THURMOND CLARKE, District Judge.

This matter is before the court for consideration of plaintiff's application for preliminary injunction and defendants' motions to dissolve the temporary restraining order issued herein and dismiss the complaint. The court concludes that plaintiff's application for preliminary injunction should be granted and that defendants' motions are not well taken and will therefore be denied.

The complaint alleges the following facts which, for the purposes of these proceedings, the court assumes to be true: Several years ago, defendant Riddell and the Internal Revenue Service filed a lien and seized 100 shares of stock of defendant Parkview Hospital, representing one third of the stock in said corporation, from one Dr. Furnish, in order to satisfy said individual's tax liability. Subsequently, pursuant to 26 U.S.C. §§ 6331 and 6332 defendant Riddell offered said stock for public sale; however, this sale was postponed due to an injunction issued on behalf of Dr. Furnish's former wife. Thereafter, defendant Riddell succeeded in having said injunction and proceedings dismissed.

Shortly prior to July 31, 1961, defendant Riddell published a notice of sale of the aforesaid stock. Sale was set for July 31, 1961; by the terms of the offer, the sale was to be conducted by sealed bid and required a 20% payment of the bid offer to be made at the time the bid was tendered. On July 31, 1961, plaintiff tendered his sealed bid in the amount of $42,550. Plaintiff's was the highest bid and his bid was accepted, together with a cashier's check for 20% of the bid price, or $8,510.00. By the terms of the offer, plaintiff was required to pay the balance of the purchase price within 30 days. Prior to the expiration of said period, plaintiff tendered the sum of $34,040 as the balance of the purchase price and tender was refused in writing on behalf of defendant Riddell. An authorized agent of said defendant alleged that refusal of the tender was based on the ground that a formal written notice of the sale, as required by 26 U.S.C. § 6335, had not been given to the taxpayer, Dr. Furnish, and there might be a defect in the title passed from the government to the plaintiff. Notwithstanding this possible defect, plaintiff again demanded that defendant Riddell issue certificate of sale pursuant to 26 U.S.C. §§ 6331 and 6332, which demand was refused.

Thereafter, plaintiff procured a waiver of notice from Dr. Furnish, supported by a consideration of $4,000. The terms of the waiver were communicated to defendant Riddell. On several subsequent occasions, plaintiff demanded that defendant Riddell issue his certificate of sale, which defendant Riddell refused to do.

On September 21, 1961, defendant Riddell published notice of another sale of the aforesaid stock, and set the same for October 2, 1961, at 10:00 A.M. On September 26, 1961, plaintiff protested to defendant Riddell and again demanded issuance of his certificate of sale. On September 28, 1961, plaintiff further protested the sale and requested that the sale be postponed, pursuant to 26 U.S.C. §§ 6331 and 6332, in order to enable plaintiff to seek injunctive relief from this court. An agent of defendant Riddell informed plaintiff that the sale could be continued administratively and that in the event the sale was to be held plaintiff would be notified in time to seek said relief.

Defendant Riddell failed to notify plaintiff that the sale was to be held until the late hours of Friday, September 29, 1961, making it impossible for plaintiff to seek injunctive relief at that time. On October 2, 1961, plaintiff and his attorney appeared at the sale and declared to all interested persons, including defendant Rosenberg, that plaintiff was the true owner of the stock and that no title thereto could be conveyed at the second sale. Notwithstanding plaintiff's protests and announcement, defendant Riddell continued the sale and purported to sell the stock in issue to defendant Rosenberg for the sum of $65,010. Thereafter, defendant Riddell accepted from defendant Rosenberg 20% of the bid price, pursuant to the terms of the sale.

Defendant Riddell has refused and still refuses to issue certificate of sale of the stock to plaintiff. Unless restrained, said defendant will issue said certificate of sale to defendant Rosenberg.

Plaintiff further alleges that he is the owner and entitled to possession of the certificate of stock evidencing a one-third interest in the defendant Parkview Hospital upon the payment of $42,550, which sum plaintiff tenders to defendant Riddell by means of the complaint. It is further alleged that the failure of defendant Riddell to deliver the certificate cannot be remedied by an action at law since the stock at issue is the only such stock available.

Finally, the complaint states that defendants Rosenberg and Parkview Hospital claim adverse interests in the stock.

The relief requested is: (1) that defendant Riddell be ordered to issue certificate of sale for the stock to plaintiff, upon payment by plaintiff of $42,550; (2) that defendant Riddell be enjoined from issuing certificate of sale to anyone other than plaintiff; and (3) that plaintiff's title to the stock be quieted as against defendants Rosenberg and Parkview Hospital.

Jurisdiction is claimed on the basis of 28 U.S.C. § 41(5) (now 28 U.S.C. § 1340) and 28 U.S.C. § 2410, and the complaint alleges that the ground upon which this court's jurisdiction depends is the fact that defendant Riddell, the District Director of Internal Revenue Service for this District, is the duly authorized, appointed and acting agent of the United States.

Defendants' motions are based on the following contentions: (1) that this court has no jurisdiction of the subject matter of this action under any of the statutes cited by plaintiff and particularly in view of 26 U.S.C. § 7421, prohibiting injunctive proceedings to restrain the collection of a tax; and (2) that the complaint fails to state a claim upon which relief can be granted in that, the notice requirements of 26 U.S.C. § 6335 not having been complied with, the July 31, 1961 sale was void and could not convey any rights to plaintiff.

I. THE COURT HAS JURISDICTION OF THE SUBJECT MATTER OF THIS ACTION.

The nature of this action is, essentially, to determine the question of title to certain shares of stock, seized and sold by the government under the tax laws of the United States to satisfy the tax liabilities of a taxpayer not here involved, as between plaintiff and conflicting claimants and, incidentally, for injunctive relief as against the Director of Internal Revenue. The court is of the opinion that jurisdiction in such a case may be predicated on 28 U.S.C. § 1340¹ (formerly 28 U.S.C. § 41(5)) and 28 U.S.C. § 2463,² and that the United States, or its duly authorized agent, has consented to become a party to an action of this type by virtue of 28 U.S.C. § 2410.³

It is well settled in this Circuit that 28 U.S.C. § 2410 does not, of itself, confer jurisdiction upon the district courts, but, rather, presupposes the existence of some independent ground of federal jurisdiction. (Wells v. Long, 162 F.2d 842, 844 (9 Cir. 1947); Seattle Association of Credit Men v. United States, 240 F.2d 906, 908 (9 Cir. 1957); United States v. Coson, 286 F.2d 453, 455 (9 Cir. 1961); Gerth v. United States, 132 F.Supp. 894, 896 (D.C.S.D.Cal. 1955); Coson v. United States, 169 F. Supp. 671, 672-673 (D.C.S.D.Cal.1958); Jones v. United States, 179 F.Supp. 456, 458 (D.C.S.D.Cal.1959).) Where, however, an independent basis of federal jurisdiction exists, Section 2410 constitutes a waiver of sovereign immunity by the United States and a consent to be sued in quiet title actions arising out of tax sales. (Seattle Association of Credit Men v. United States, supra; Gerth v. United States, supra.) This is such an action. The fact that the District Director of Internal Revenue, Robert A. Riddell, and not the United States, has been named as defendant in this action does not undermine the applicability of Section 2410. The complaint clearly sets forth allegations to the effect that defendant Riddell acted in this matter as the duly authorized agent of the United States. The United States is the real party in interest and by Section 2410 has consented to be sued. (Adler v. Nicholas, 166 F.2d 674, 679-680 (10 Cir. 1948); see also Gerth v. United States, supra, 132 F.Supp. at page 897.)

28 U.S.C. § 2463, on the other hand, does not presuppose an independent ground of federal jurisdiction but is itself a grant of jurisdiction in an appropriate case. (Seattle Association of Credit Men v. United States, supra, 240 F.2d 906, 909 (9 Cir. 1957); Gerth v. United States, supra, 132 F.Supp. 894, 896 (D.C.S.D.Cal.1955); see, also, Stuart v. Chinese Chamber of Commerce of Phoenix, 168 F.2d 709, 712 (9 Cir. 1948).) Where property is "taken or detained" under any revenue law, the District Court within whose district the property is located has jurisdiction to decide claims of title and to award possession of the seized property to the rightful owner. (Stuart v. Chinese Chamber of Commerce of Phoenix, supra; Seattle Association of Credit Men v. United States, supra; Gerth v. United States, supra.) In the case at bar, as in Stuart v. Chinese Chamber of Commerce, supra, Seattle Association of Credit Men v....