Seattle Association of Credit Men v. United States

• Decision Date: 07 February 1957
• Docket Number: No. 15042,15042
• Parties: SEATTLE ASSOCIATION OF CREDIT MEN, a corporation, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

240 F.2d 906 (1957)

SEATTLE ASSOCIATION OF CREDIT MEN, a corporation, Appellant, v. UNITED STATES of America, Appellee.

No. 15042

United States Court of Appeals Ninth Circuit.

February 7, 1957.

Croson, Johnson & Wheelon, Willard Hatch, Seattle, Wash., for appellant.

Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, A. F. Prescott, S. Dee Hanson, Sheldon Fine, Attys., Dept. of Justice, Washington, D. C., Charles P. Moriarty, U. S. Atty., Edward J. McCormick, Jr., Asst. U. S. Atty., Seattle, Wash., for appellee.

Before BONE, LEMMON and HAMLEY, Circuit Judges.

HAMLEY, Circuit Judge.

Seattle Association of Credit Men brought this action against the United States to quiet title to certain funds. The district court dismissed the action for want of jurisdiction. Plaintiff appeals, raising the jurisdictional issue as the only question for our consideration.

The facts to be considered in determining that question may be briefly stated. In 1952, Western Appliance Co., Inc., became unable to pay its bills in the ordinary course of business. The company, therefore, on July 1, 1952, gave appellant, as trustee for Western's unsecured creditors, a promissory note in the sum of $22,000. The note was secured by a chattel mortgage and by an assignment of Western's accounts receivable.

On June 2, 1953, Western, then insolvent, gave appellant a bill of sale to the assets covered by the mortgage. Appellant sold these assets and planned to distribute the proceeds among Western's creditors. On June 15, 1953, however, before this distribution could be made, the District Director of Internal Revenue levied on these funds. The purpose of the levy was to collect withholding and employment taxes in the sum of $1,632.29, due and owing by Western.

Three days later, the district director made a similar levy upon funds held by the University Branch, National Bank of Commerce, Seattle. These funds had been derived from payments made under certain conditional sales contracts which Western had left with the bank for collection. The bank had been instructed to pay these funds to appellant, for distribution to Western's creditors, but was unable to do so because of the levy.

On October 5, 1954, appellant filed an action against the district director, to enjoin enforcement of these levies. The complaint was dismissed on April 29, 1955, on the ground that injunctive relief was prohibited by 26 U.S.C.A. § 7421 (a). Seattle Ass'n of Credit Men v. Frank, D.C.W.D.Wash., 134 F.Supp. 439.

Appellant then filed an amended complaint joining the United States as a defendant, and asking as alternative relief, that its title to the funds be quieted, pursuant to 28 U.S.C.A. § 2410. When the defendants filed a motion to dismiss the amended complaint, appellant filed a notice of dismissal of that action "without prejudice."

Three days later, on August 19, 1955, appellant filed the present action. The identical facts and grievances are alleged as in the previous action. The only relief sought in the new action, however, is that appellant's title to the funds be quieted and that the cloud on his title, occasioned by the tax levies, be removed. Jurisdiction was asserted exclusively under 28 U.S.C.A. § 2410(a).¹

Granting a motion to dismiss, the district court held that the consent by the United States to be sued, referred to in § 2410, is limited to situations involving judicial sales.

We are of the view that the consent to sue the United States, conferred by § 2410, is not limited to judicial sales, and does include quiet title actions such as this.² This section, however, does not confer jurisdiction upon district courts to entertain quiet title actions. As we pointed out in Wells v. Long, 9 Cir., 162 F.2d 842, at page 844, the limited purpose of § 2410 is to waive sovereign immunity from suit, and "presupposes that the court in which such suit is pending or brought has jurisdiction thereof on grounds independent of the statute."

In its opening brief in this court, appellant relies not alone upon § 2410 to establish jurisdiction, but also cites 28 U.S.C.A. §§ 1340, 1346(a) (2), and 2463. In its reply brief, appellant moves for leave to amend its complaint to include in its jurisdictional statement a reference to these additional statutes.

It is provided in 28 U.S.C.A. § 1653 that defective allegations of jurisdiction may be amended, upon terms, in either the trial or appellate court. We accordingly grant leave to amend the complaint in the manner requested, and will regard the complaint as so amended.

One of the newly-cited statutes relied upon by appellant as establishing jurisdiction is 28 U.S.C.A. § 2463.³ Under this statute, property "taken" or "detained" under any revenue law of the United States is deemed to be in the custody of the law and subject to the orders and decrees of the courts of the United States having jurisdiction thereof.

The levies in question were made pursuant to the authority conferred upon the district director by 26 U.S.C.A. § 6331 (formerly 26 U.S.C.A. (I.R.C.1939) § 3690), which is a revenue law of the United States. There is no doubt that the funds affected by these levies have been "detained." One who is in possession of property upon which a levy has been made must hold it (except in certain cases not here relevant) subject to the demand of the district director. 26 U.S. C.A. § 6332. The court of the United States having "jurisdiction" of such property is the district court serving the geographical area wherein the property is situated. Raffaele v. Granger, 3 Cir., 196 F.2d 620. The funds here in question are situated within the geographical area served by the district court in which this action was instituted. It therefore appears that all of the requirements of 28 U.S.C.A. § 2463 have been met in this case, and that the district court wherein this suit was begun had jurisdiction to entertain this suit.⁴

It is true that in the only cas...