U.S. v. Silverman
| Citation | 621 F.2d 961 |
| Decision Date | 16 June 1980 |
| Docket Number | No. 78-2169,78-2169 |
| Parties | 80-2 USTC P 13,360 UNITED STATES of America, Plaintiff-Appellant, v. Dorothy SILVERMAN, Administratrix, Estate of Fred R. Silverman, Deceased, Defendant-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Libero Marinelli, Jr., Dept. of Justice, Washington, D. C., for plaintiff-appellant.
A. V. Falcone, Los Angeles, Cal., for defendant-appellee.
Appeal from the United States District Court for the Central District of California.
Before CHAMBERS, SNEED and ALARCON, Circuit Judges.
This case involves a somewhat obscure, but nonetheless important, area lying at a junction of the federal law fixing the manner in which the United States collects estate taxes and the state law governing the probate of decedents' estates. While our resolution of the issues presented by this case does not elate us, we derive some satisfaction from our belief that it is required by Congress.
The United States seeks to reduce its estate tax assessment to judgment. It failed in the district court, which granted summary judgment against it and in favor of the appellee, administratrix of the estate of Fred R. Silverman. The district court concluded that collection by the United States of its properly assessed tax was barred by the lapse of more than six years between the assessment and this suit. In reaching this result the district court applied section 6502(a) of the Internal Revenue Code, 1 and found that under the facts, the United States had not within six years after the assessment either levied on the property of the Estate or "commenced a proceeding in court." It also concluded that the running of the six year limitation period was not suspended while the assets of the decedent were subject to probate. As a consequence, in its view the United States obtained no benefit from section 6503(b) of the Code. I.R.C. § 6503(b). 2
While we agree that the United States had not within the six year period "commenced a proceeding in court," we disagree with the view that section 6503(b) provides no benefit. As we see it, section 6503(b) suspends the running of the six year period so long as all or substantially all of the assets of the decedent are subject to the control or custody of the probate court.
Therefore, we reverse the judgment of the district court and remand this case to it to determine whether under the principles this opinion enunciates the United States is entitled to prevail in its effort to reduce its assessments to judgment.
Our jurisdiction rests on 28 U.S.C. § 1291 (1976).
The United States insists that by filing its claim in 1965 and 1966 it began "a proceeding in court" well within six years after its assessment. If this is correct, section 6502(a) provides no bar to its collection of the tax.
This is an issue that has been before a number of courts, state as well as federal, with conflicting results. 4 We agree with the court in United States v. Saxe, 261 F.2d 316, 319 (1st Cir. 1958), when it pointed out that, while what constitutes "a proceeding in court" presents a question of federal law, the proper answer turns on the "nature, function and effect" of filing a claim under the relevant local law which in the case before us is that of California. We believe California law quite clearly indicates that it would be improper to characterize for purposes of federal tax law the filing of a claim against an estate subject to probate as the commencement of a "proceeding in court."
We reach this conclusion on the basis of the manner in which the Probate Code of California treats the filing of a claim against the probate estate for purposes of applying its own statutes of limitation. Generally speaking, under California law the statute of limitation applicable to the type of claim being made is not tolled by filing a claim. Thus, section 714, Cal.Probate Code (West 1956), provides, inter alia, that upon rejection of a claim by the executor or administrator "the holder must bring suit in the proper court against the executor or administrator, within three months after the date of service of such notice if the claim is then due, or, if not, within two months after it becomes due; otherwise the claim shall be forever barred." This section, a so-called "nonclaim" statute, limits the otherwise generally applicable statute of limitation but does not extend it. See Barclay v. Blackinton, 127 Cal. 189, 193, 59 P. 834 (1899); Berger v. O'Hearn, 41 Cal.2d 729, 733, 264 P.2d 10 (1953); Zapata v. Meyers, 41 Cal.App.3d 268, 271, 115 Cal.Rptr. 854 (1974). The short period of this "nonclaim" statute operates independently of the statute generally applicable to the type claim involved. Moreover, it is filing the suit on the claim in the proper court, not the filing of the claim in probate proceedings, that marks the terminal date of the period, the duration of which will determine whether the claim is barred either by the "nonclaims" statute or the statute otherwise generally applicable.
Whatever doubt there may be about the inability of filing a claim in probate proceedings to suspend the running of California's generally applicable statutes of limitation was put to rest by the decision of the Supreme Court of California in Berger v. O'Hearn, 41 Cal.2d 729, 264 P.2d 10 (1952). In that case, as in the case before us, a claim against the estate was filed within the period provided by the generally applicable statute but no action was taken by the administratrix or the probate court with respect to the claim. Subsequent to the expiration of the period of time provided by the generally applicable statute of limitation the claimant brought suit on the claim against the estate. The suit was barred, the California Supreme Court held notwithstanding the fact that the claim was filed within the applicable period and that the claim was not rejected until approximately two months before the suit was brought. 5 Filing the claim, even when joined with a failure to act on the claim until shortly before suit was filed, did not suspend the running of the generally applicable statute.
Given this structure of the California probate law we see no reason why filing a claim in a California probate proceeding should be characterized as "a proceeding in court" for purposes of section 6502(a). To so characterize the filing of a claim would impart to it a significance not accorded it by local probate law. Our conclusion, therefore, is the same as that reached in United States v. Saxe, supra, after its analysis of Massachusetts probate law.
The second issue we confront is more difficult. The district court, in holding that the United States could derive no benefit from section 6503(b) of the Internal Revenue Code, said:
"To allow § 6502(a) to be suspended during the pendency of a state probate proceeding could allow the United States an unreasonably long time in which to collect its taxes in this case, for example, perhaps over 20 years. Moreover, the collection efforts of the United States are not hindered by a pending probate proceeding in California since a federal estate tax claim has priority in such a proceeding, see Cal.Prob.Code § 950(1); Witkin Summary of California law, Wills and Probate § 444 at 5886, and since the United States may always proceed by levy pursuant to 26 U.S.C. § 6331 et seq., a proceeding by levy would supercede any state probate proceeding. See Hoye v. United States, 277 F.2d 116, 119 (9th Cir. 1960).
Were we to agree entirely with the thrust of these observations, we also would hold the claim of the United States barred by the limitation provisions of section 6502(a). We do not so agree, however.
To begin with, we must accord significance to the amendment of section 6503(b) of the Internal Revenue Code by the Federal Tax Lien Act of 1966 which deleted the preexisting exceptions to the suspension of the running of limitations applicable to an estate of a decedent or an incompetent. See H.R.Rep.No. 1884, 89th Cong., 2d Sess. 22-23 (1966), U.S.Code Cong. & Admin.News 1966, p. 3722; S.Rep.No. 1708, 89th Cong., 2d Sess. 24, U.S.Code Cong. & Admin.News 1966, p. 3722 (1966). Presumably the general purpose of section 6503(b) is to eliminate any necessity on the part of the Treasury to attempt to seize property in the "control or custody" of a court in order to protect its tax claims. See H.R.Rep.No. 1337, 83d Cong., 2d Sess. 107, A415 (1954), U.S.Code Cong. & Admin.News 1954, p. 4025; S.Rep.No. 1622, 83d Cong., 2d Sess. 585, U.S.Code Cong. & Admin.News 1954, p. 4025 (1954). By providing originally for an exception applicable to the estate of a decedent or incompetent Congress perhaps then believed that the "custody and control" of courts in those instances was sufficiently different to make unnecessary the suspension. No explanation for the exception was given, however. In any event, it was removed in 1966. In doing so the Committee Reports of both the House...
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