Commercial Credit Corporation v. Schwartz

• Decision Date: 05 November 1954
• Docket Number: No. 2784.,2784.
• Citation: 126 F. Supp. 728
• Parties: COMMERCIAL CREDIT CORPORATION, Plaintiff, v. Phil SCHWARTZ, et al., Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

126 F. Supp. 728

COMMERCIAL CREDIT CORPORATION, Plaintiff, v. Phil SCHWARTZ, et al., Defendants.

No. 2784.

United States District Court, E. D. Arkansas, W. D.

November 5, 1954.

Talley & Owen, and William L. Blair, Little Rock, Ark., for movants.

Osro Cobb, U. S. Atty., and J. C. Acchione, Asst. U. S. Atty., Little Rock, Ark., for respondent.

LEMLEY, District Judge.

This cause comes on for hearing upon the motion of Phil Schwartz and Mable Lee Schwartz, his wife, defendants herein, for leave to file an amended answer, which motion is opposed by the United States, a party defendant in this action; said motion has been submitted upon written briefs.

The plaintiff, Commercial Credit Corporation, commenced this action in the Chancery Court of Pulaski County, Arkansas, to foreclose a real estate mortgage and a chattel mortgage executed in its favor by the defendant, Schwartz, and to establish the priority of the liens of said mortgages with relation to certain other liens on the mortgaged property, including a first mortgage held by the Commercial National Bank of Little Rock and certain tax liens claimed by the United States. Numerous parties, including the Government,¹ were made defendants, and the Government removed the case here as provided by 28 U.S.C.A. § 1444. After removal the real estate involved in the case was sold by agreement, and the first lien of the Commercial National Bank was discharged in full; a substantial surplus remained after satisfying the Bank's claim, and this surplus is now on deposit in the registry of this Court where it will remain until such time as the Court is able to determine how it should be distributed among the various lienholders.

The Government's claim to the fund here is based in part upon a lien for unpaid income taxes alleged to be due from Mr. and Mrs. Schwartz for the year 1948, the alleged deficiency amounting to approximately $8,000. An examination of the motion under consideration and of the proposed amended answer reveals that the movants are attempting to attack the validity of the assessment upon which the Government's lien is based on the ground that the Commissioner of Internal Revenue in computing their income tax for that year erroneously treated as income certain moneys which were not in fact such. It is conceded by the movants that they have not paid the tax alleged to be due and, of course, they have not demanded any refund thereof, as required by 26 U.S.C.A. § 3772(a), nor have they applied to the Tax Court for any relief from the assessment in question.

In passing upon this motion it should be kept in mind that the movants are not seeking merely to remove a lien from the fund which now stands in the place of their property; the Government's lien for unpaid taxes is one thing, and the assessment upon which such lien is based is quite a different thing. What the movants are attempting to do by their proposed amendment is to secure a judicial review of the Commissioner's assessment without exhausting the administrative remedies which have been provided by Congress, and this, of course, may not be done. When the assessment of which they complain was made, the movants could have pursued either of two courses. They could have paid the tax alleged to have been due and then claimed a refund thereof, which would have involved a further administrative consideration of their contentions; or they could have applied to the Tax Court for relief from said assessment. But they followed neither...