Hubbard Inv. Co. v. Brast, 3271.
| Decision Date | 13 June 1932 |
| Docket Number | No. 3271.,3271. |
| Parties | HUBBARD INV. CO. v. BRAST et al. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Hubbard & Hubbard and Nelson C. Hubbard, all of Wheeling, W. Va., for appellant.
Arthur Arnold, U. S. Atty., of Parkersburg, W. Va., and William C. Howard, Asst. U. S. Atty., of Wheeling, W. Va., for appellees Brast and Sears.
Before PARKER and NORTHCOTT, Circuit Judges, and WAY, District Judge.
This suit was instituted in the court below to enjoin the collector of internal revenue of the United States for the collection district of West Virginia from selling under warrant of distraint a certain interest in real estate to which complainant claimed that it was equitably entitled. Complainant was the Hubbard Investment Company, a West Virginia corporation, which was organized in December, 1924, by one Nelson C. Hubbard, who owned all of its capital stock. The distraint complained of was made to enforce the collection of federal income and profits taxes assessed against Hubbard. The property upon which the distraint was levied was a one-sixth interest in real estate held by trustees in trust for Hubbard, the allegation being that this interest was in reality the property of the investment company. Plaintiff obtained a temporary restraining order enjoining the sale of the property by the collector; but upon final hearing this restraining order was dissolved, injunction was denied, and a final decree was entered dismissing the bill. From this decree complainant has appealed.
The case was heard upon the bill, the answer, and the deposition of Hubbard. The bill alleges that the investment company was organized by Hubbard; that he has at all times been the equitable owner of all of its capital stock; that on December 31, 1924, he transferred to it practically all of his intangible property in consideration of its assumption of his indebtedness to banks and the issuance to him of its capital stock; that the interest in the real estate upon which distraint was levied is property of the investment company; that, while the deed of trust names Hubbard as the owner of this interest, it was drawn by counsel who did not understand the situation and was signed by Hubbard as a matter of convenience to avoid rewriting and re-execution by other parties; that the purchase of the property was financed by a loan for which a stock certificate of the investment company was pledged as collateral and that sundry installments of interest on the loan and a $500 assessment were paid by checks drawn against its funds; that both Hubbard and the investment company have financial obligations which they are unable to meet; that the latter is entitled to apply the property distrained in satisfaction of its obligations; that the collector has levied distraint against the property; and that, unless he is restrained, he will sell same for the enforcement of the taxes assessed against Hubbard. The answer of the collector admits the distraint and the intention to sell the property levied on for the purpose of collecting taxes of Hubbard. It avers, however, that Hubbard is the equitable owner of the property and denies that the investment company has any interest therein.
The only evidence offered in support of the allegations of the bill was the deposition of Hubbard. He testified that he was president of the investment company and since its organization had conducted all of its affairs, stating that he had formed it as a private holding company for his investments, thinking that this would be a convenience during his lifetime and would simplify the handling of his estate in case of death. He stated further that the investment company took over all of his intangible property on December 31, 1924, assuming the payment of his indebtedness at banks and issuing to him all of its capital stock; but he gave no details as to the value of the property transferred, as to the amount of the indebtedness assumed or as to any payments by the corporation on account of the indebtedness. With respect to the acquisition of the trust property, he stated that the investment company had financed the purchase by the use of a stock certificate and that it had paid certain relatively small installments of interest and an assessment of $500. He produced the checks covering the interest payments and the assessment, but did not produce the note given for the money to make the initial payment and did not remember whether it had been signed by the investment company or...
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...suits to protect property of a non-taxpayer which the Government has seized to satisfy a taxpayer's liability. See Hubbard Investment Co. v. Brast, 4 Cir., 59 F.2d 709, 710; Adler v. Nicholas, 10 Cir., 166 F.2d 674. The court denied the motion to dismiss until it could determine whether the......
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