Campbell v. Bagley

• Decision Date: 15 March 1960
• Docket Number: No. 17854.,17854.
• Citation: 276 F.2d 28
• Parties: Ellis CAMPBELL, Jr. and Chester Usry, District Directors, Internal Revenue Service, Appellants, v. Lema Parker BAGLEY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

276 F.2d 28 (1960)

Ellis CAMPBELL, Jr. and Chester Usry, District Directors, Internal Revenue Service, Appellants, v. Lema Parker BAGLEY, Appellee.

No. 17854.

United States Court of Appeals Fifth Circuit.

March 15, 1960.

Meyer Rothwacks, Atty., Rita E. Hauser, Fred E. Youngman, Dept. of Justice, Washington, D. C., T. Fitzhugh Wilson, U. S. Atty., Shreveport, La., Lee A. Jackson, A. F. Prescott, Dept. of Justice, Washington, D. C., Charles K. Rice, Asst. Atty. Gen., for appellants.

Malcolm E. Lafargue, Shreveport, La., for appellee.

Before JONES, BROWN and WISDOM, Circuit Judges.

JONES, Circuit Judge.

In this case the appellants, one the District Director of the Internal Revenue Service of Texas and the other the District Director of the Internal Revenue Service of Louisiana, are claiming a lien, and a priority of lien, and the right to enforce a lien on personal property, incident to the collection of tax revenue owing to the United States. The appellee, Lema Parker Bagley, is a widow whose husband died in 1953. There are three Bagley children. C. H. Bagley is the oldest. At all times here material he lived at Waskom, in Harrison County, Texas, just west of the Texas-Louisiana boundary. The next of the children is John E., who lived in Shreveport, Louisiana, as did his mother. Shreveport is in Caddo Parish, which lies east of and adjoining Harrison County, Texas. The third son, Gary Bagley, was not a participant in the activities out of which this litigation arose. The appellee's husband had been in the oil well drilling business. At the time of his father's death, C. H. Bagley was living in Texas and was in the oil well servicing business. John Bagley took over the operation of the father's business. Mrs. Bagley was without business experience and John Bagley undertook the management of her business affairs. Neither John Bagley nor his mother had anything to do with the business of C. H. Bagley.

At various times in 1954 and 1955 Mrs. Bagley made loans to C. H. Bagley. These loans aggregated $19,500. C. H. Bagley then owned four drilling or well servicing rigs, all of which were mortgaged. In October of 1957, C. H. Bagley sold all of the well servicing rigs and equipment except that involved in this case and with a portion of the proceeds paid off the mortgage indebtedness on the rig and equipment here involved. On December 19, 1957, C. H. Bagley executed a chattel mortgage in the amount of $20,000 to his mother. This mortgage was given at the request of John Bagley who gave a mortgage to his mother about the same time as security for loans made by her to him. The mortgage of C. H. Bagley to his mother covered the remaining drilling rig and equipment owned by him. The rig and equipment was then located partly in Winn Parish, Louisiana, and partly in Union Parish, Louisiana. The mortgage was recorded in Caddo Parish on January 2, 1958, and in Winn Parish on April 17, 1958. C. H. Bagley's insurance was cancelled. He found himself out of business. By arrangement with John Bagley who acted for the mother, C. H. Bagley gave a bill of sale, on April 22, 1958, to his mother of the mortgaged rig and equipment, all of which was then in Winn Parish, Louisiana. "The sale of the rig and equipment" was, as stated in the district court's findings, "C. H. Bagley's method of repaying her what he had borrowed from her." C. H. Bagley has not attempted to use or exercise any control over the rig and equipment since the execution of the instrument of transfer. The bill of sale was recorded on April 22, 1958, in Winn Parish, where all of the property described in the mortgage and the bill of sale was then physically present. The rig and equipment was then used for about a week by John Bagley.

C. H. Bagley was indebted to the United States for taxes, mostly withholding taxes. He had made an arrangement to work out his tax delinquency by installment payments. He failed to perform his agreement and the Internal Revenue Service filed a notice of lien in Harrison County, Texas, on January 24, 1958, for withholding taxes owing by C. H. Bagley in an amount of somewhat in excess of forty-five hundred dollars. Another federal tax lien notice for the same items, and for some federal unemployment taxes amounting to about a hundred and fifty dollars, was filed in Winn Parish, Louisiana, on May 19, 1958. On May 6, 1958, a notice of levy was served on John Bagley and he paid $250 rental to the Government agent. On June 27, 1958, the appellants, acting under a warrant of distraint, seized and took custody of the rig and equipment which was then in Winn Parish, Louisiana, for the delinquent taxes of C. H. Bagley. Such are the facts upon which our controversy is predicated. For the most part the facts are uncontroverted. To the extent of disagreement the findings of the district court, in all instances, are supported by substantial evidence. Mrs. Bagley brought suit against the District Directors to enjoin the sale of the rig and equipment and seeking to have the warrant of distraint quashed. The defendants moved to dismiss. They first asserted that the suit is one to restrain the collection of taxes and as such is prohibited by 26 U.S.C.A. (I.R.C.1954) § 7421(a). They next contended that as they neither resided in nor had been served within the jurisdiction of the court, there was no power to grant the relief sought. The motion was denied. The defendants answered, admitting, denying or averring lack of knowledge of the allegations of the complaint. As a second defense in their answer the appellants again set up the fact of their residence outside of the judicial district of the court and the absence of service upon them in the district, and again said that the court had no jurisdiction to enter an injunction against them. Trial was had, judgment was given for Mrs. Bagley enjoining the District Directors from selling the property, and cancelling the tax liens as to the drilling rig and equipment. The District Directors appeal.

The first matter we consider is the effect of the filing of the notice of lien in Harrison County, Texas, as to the tangible personal property which was then physically located in Winn Parish, Louisiana. The statute gives the Government a lien¹ and provides,

"(a) Invalidity of lien without notice. — Except as otherwise provided in subsection (c), the lien imposed by section 6321 shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed by the Secretary or his delegate. —

"(1) Under state or territorial laws. — In the office designated by the law of the State or Territory in which the property subject to the lien is situated, whenever the State or Territory has by law designated an office within the State or Territory for the filing of such notice; * * *" 26 U.S.C.A. (I.R.C.1954) § 6323(a)(1).

The Government's position is that the situs of tangible personal property is that of the domicile of the owner. Commenting upon such doctrine, the Supreme Court has said:

"No general principles of law are better settled or more fundamental, than that the legislative power of every state extends to all property within its borders, and that only so far as the comity of that state allows can such property be affected by the law of any other state. The old rule, expressed in the maxim mobilia sequuntur personam, by which personal property was regarded as subject to the law of the owner\'s domicile, grew up in the Middle Ages, when movable property consisted chiefly of gold and jewels, which could be easily carried by the owner from place to place, or secreted in spots known only to himself. In modern times, since the great increase in amount and variety of personal property, not immediately connected with the person of the owner, that rule has yielded more and more to the lex situs, the law of the place where the property is kept and used. Green v. Van Buskirk, 5 Wall. 307 18 L.Ed. 599, and 7 Wall. 139 19 L.Ed. 109; Hervey v. Rhode Island Locomotive Works, 93 U.S. 664 23 L.Ed. 1003; Harkness v. Russell, 118 U.S. 663, 679 7 S.Ct. 51, 30 L.Ed. 285; Walworth v. Harris, 129 U.S. 355 9 S.Ct. 340, 32 L.Ed. 712; Story on Conflict of Laws, § 550; Wharton on Conflict of Laws, §§ 297-311. As observed by Mr. Justice Story, in his commentaries just cited, `although movables are for many purposes to be deemed to have no situs, except that of the domicile of the owner, yet, this being but a legal fiction, it yields, whenever it is necessary for the purpose of justice that the actual situs of the thing should be examined. A nation within whose territory any personal property is actually situate has an entire dominion over it while therein, in point of sovereignty and jurisdiction, as it has over immovable property situate there.\'" Pullman\'s Palace Car Co. v. Com. of Pennsylvania, 141 U.S. 18, 22, 11 S.Ct. 876, 877, 35 L.Ed. 613.

Again, discussing the situs of tangible personal property, the Supreme Court said:

"We submit that it is the law that, while the transfer of intangible personalty can be taxed at the domicile of the owner, either inter vivos or upon death, that is true only because of the fiction mobilia sequuntur personam. Originally this theory applied to tangibles as well as to intangibles, but it has long since passed away as to anything except intangibles. This, because fiction, must yield to fact. These tangible articles, pictures, furniture, household stores, cows, horses, agricultural implements, have a real, physical existence and necessarily have a situs as surely as buildings and lands have. Their situs is in New York and Massachusetts, not in Pennsylvania. Therefore, this tax cannot be sustained upon authority of the maxim mobilia sequuntur personam, either under the decisions of this Court or under the decisions of the Supreme Court of Pennsylvania." Frick v. Pennsylvania, 268 U.S. 473, 477, 45 S.Ct. 603, 69 L.Ed. 1058. See City Bank Farmers Trust Co.

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