Equitable Life Assur. Soc. v. Moore, Equity No. 640-D

• Decision Date: 02 October 1939
• Docket Number: Civil No. 25-D,46-D.,Equity No. 640-D
• Citation: 29 F. Supp. 179
• Parties: EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES v. MOORE et al. DRAKE et al. v. DALLMAN, Collector of Internal Revenue, et al. ILLINOIS JOINT STOCK LAND BANK OF MONTICELLO v. MOORE et al.
• Court: U.S. District Court — Eastern District of Illinois

29 F. Supp. 179

EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES v. MOORE et al.

DRAKE et al. v. DALLMAN, Collector of Internal Revenue, et al.

ILLINOIS JOINT STOCK LAND BANK OF MONTICELLO v. MOORE et al.

Equity No. 640-D; Civil Nos. 25-D, 46-D.

District Court, E. D. Illinois.

October 2, 1939.

COPYRIGHT MATERIAL OMITTED

Green & Palmer, of Urbana, Ill., for plaintiff.

LeForgee, Samuels & Miller, of Decatur, Ill., and Allen, Dalbey & Foreman and Arthur Roe, U. S. Atty., all of Danville, Ill., for defendants.

No. 25-D:

Thompson, White & Ingram, of Sullivan, Ill., and C. E. Corbett, of Monticello, Ill., for plaintiffs.

Arthur Roe, U. S. Atty., of Danville, Ill., for defendants.

No. 46-D:

Robt. P. Shonkwiler, of Monticello, Ill., for plaintiff.

Thomas J. Kastel, of Springfield, Ill., for receiver of Moore State Bank.

Thompson, White & Ingram, of Sullivan, Ill., for Trenchard & Drake.

Arthur Roe, U. S. Atty., of Danville, Ill., for the United States.

LINDLEY, District Judge.

In view of the common questions involved, I shall dispose of all three causes in one memorandum.

In each, the United States seeks to establish against all other parties in interest priority of its asserted lien for income taxes assessed against Allen F. Moore for the year 1926. In the first, Equitable Life Assurance Society v. Moore, et al., Equity No. 640-D, foreclosure of a mortgage in this court resulted in a decree in favor of the mortgagee, March 8, 1935, wherein the court found and decreed that the taxpayer owed the United States $5,723.52 with interest, for which it had a lien upon the mortgaged premises and the rents and profits thereof, subordinate, however, to the lien of the mortgagee. The Continental Illinois National Bank & Trust Company was a party defendant in the cause and the decree found and decreed that its interest, if any it had, was subsequent and subject to the lien of the mortgagee. However, the decree made no disposition of the question of priority between the Government and the Continental Illinois National Bank & Trust Company. A receiver was appointed and in due course filed his final report, from which it appears that, after satisfying the mortgage and accounting for the rents and profits, there remains in his hands a substantial surplus, which should be delivered to such of the parties as the court shall direct. The proper distribution of that surplus is one of the questions now confronting us. The United States claims a lien thereon prior to the rights of the Continental Bank and prior to the claim of Drake, originally as receiver and now as shareholders' agent of the First National Bank of Monticello, Illinois. Drake, in the capacity mentioned, has filed a claim of lien upon the surplus based upon a judgment obtained in the Circuit Court of Piatt County March 30, 1935, against Moore in the sum of $6,492.41. A part of the judgment has been satisfied by sale of certain property described in cause 25-D. This lien, Drake asserts, is superior both to the claim of the Government and the claim of the Continental Bank. The latter's claim of title is based upon a deed and an assignment dated December 4, 1936, whereby Moore assigned to the bank all of his interest in all funds that might come into the hands of the receiver.

In cause 25-D, Drake, in the capacity aforementioned, seeks to enjoin the Collector of Internal Revenue from enforcing the alleged tax lien against property which it has previously sold under execution upon its judgment for $6,492.41. The evidence shows that the judgment was recovered by Drake on March 30, 1935; that execution immediately issued thereon and that sale was had of the premises described; that on March 8, 1933, the Collector filed his notice of tax lien in the Recorder's Office of Piatt County, Illinois; that subsequent to the sale under execution followed by deed from the sheriff, on or about December 22, 1938, the Collector posted notice of sale of the same premises for distraint for the payment of the assessment above mentioned. Drake claims that no lien exists because the period allowed for making assessment had expired. He seeks a decree clearing and quieting his title of the asserted claim of the United States.

In Illinois Joint Stock Land Bank v. Moore, Civil 46-D, plaintiff bank filed a bill of interpleader against Moore, Drake, Collector of Internal Revenue, United States of America, Trenchard and Albers, Receiver of the Moore State Bank of Monticello, Illinois, in which it averred that Moore was the owner July 9, 1927, of 250 shares of the stock of plaintiff corporation; 50 of the shares being represented by certificate No. 87, 70 by certificate No. 131, and 130 by certificate 155; that plaintiff is in process of liquidation; that three dividends to shareholders of record of 20 per cent each, aggregating 60 per cent, have been paid to all stockholders except to Moore.

Plaintiff has $15,000 on hand rightfully applicable to dividends upon the 250 shares. It avers that the part of this fund applicable to 180 shares is claimed by Albers as receiver of the Moore State Bank; that Trenchard claims the dividends upon 70 shares held by him as collateral for a loan; that the Government asserts a lien upon the fund to the extent of its alleged tax lien as aforesaid; that Drake as receiver claims a lien upon the dividends to the extent of its unpaid balance due on its judgment lien and that plaintiff holds the money merely as a stake-holder. It has brought the fund into court and seeks a decree adjudging the respective rights and priorities of the parties therein and thereto.

Thus, in each of the three causes, the United States is relying upon a claim of priority to the full extent of its unpaid tax demand and the question arises first in 640-D as to whether the United States, the Continental Bank or Drake, as shareholders' agent of a national bank, shall prevail. In 46-D, the question is whether the United States shall prevail in its claim of prior lien upon the dividends payable upon the stock held by the Moore State Bank or whether the claims of Trenchard, Albers as receiver and Drake as shareholders' agent are superior thereto. Closely interwoven with these is the prayer in 25-D that the Collector of Internal Revenue's claim shall be decreed void as a lien upon the title of Drake by virtue of sheriff's deed received upon execution sale.

Most of the facts are beyond dispute. The Commissioner of Internal Revenue issued a certificate of assessment of additional income taxes against Moore for the year 1926 on February 14, 1931, and caused it to be filed of record in the office of the Recorder of Deeds in Piatt County, Illinois, on March 8, 1933, and in the office of the Clerk of the United States District Court for the Eastern District of Illinois, on March 9, 1933. Moore executed a waiver of limitation of time within which the assessment might be collected, on December 2, 1936, which extended the period of collection to December 31, 1938. At various times in the years of 1936, 1937 and 1938, he made offers in compromise, each providing that the time within which the assessment might be collected should be extended until a year following the rejection of the offers. As a consequence the Government claims that the period within which the assessment might be collected has been extended to September 30, 1939. Upon these facts the Government asserts that it has a lien upon the funds in the hands of the receiver in the foreclosure case, upon the real estate previously sold and bid in by Drake and upon the dividends payable upon the stock in the Illinois Joint Stock Land Bank owned originally by Moore and assigned by him to Trenchard and the Moore State Bank.

Trenchard loaned $7,000 to Moore on March 4, 1937, and as security for payment of the same, Moore assigned and delivered to him, certificate for 70 shares of stock of the Joint Stock Land Bank. Trenchard gave no notice of the assignment to the Joint Stock Land Bank prior to October, 1937, but he insists that title to the stock passed to him by the assignment of Moore, superior to the claims of all others.

Albers' claim is founded upon a note for $25,000 executed by Moore and delivered to the Moore State Bank on May 14, 1928. At that time Moore delivered to the bank as collateral certificates for 180 shares of said stock assigned in blank. The bank gave the Joint Stock Land Bank no notice of its assignment of the stock prior to November, 1937, but its receiver insists that by the assignment, it received complete title to the stock as against the Government and all other persons.

The Continental Illinois National Bank & Trust Company claims, as against Drake and the Government, that it is entitled to receive the funds held by the receiver in the foreclosure case because it has received from Moore a deed and an assignment of all his right, title and interest in the funds in the hands of said receiver. This assignment, the Continental Bank says, is superior to the claims of the Government and of Drake.

I shall first dispose of the defense of the statute of limitations, which each of the claimants other than the United States sets up against the asserted lien of the latter.

Section 1560, Title 26 U.S.C., 26 U.S.C. A. § 1560, provides that the Government shall have a lien for unpaid income taxes upon all the property real and personal of the taxpayer; Section 1561 that the lien shall arise at the time the assessment list is received by the collector and continue until discharged or unenforceable because of lapse of time; Section 1562 that it shall not be valid as against any purchaser or lien creditor until notice has been filed by the collector, in accord with the law of the state in which the property is situated; Section 276 that, where the assessment has been properly made, the tax may be collected only if begun (1) within six years after the assessment, or (2) prior to the expiration of any extension of the...