United States v. Coson

• Decision Date: 23 January 1961
• Docket Number: No. 16517.,16517.
• Citation: 286 F.2d 453
• Parties: UNITED STATES of America, Appellant, v. James R. COSON, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

286 F.2d 453 (1961)

UNITED STATES of America, Appellant, v. James R. COSON, Appellee.

No. 16517.

United States Court of Appeals Ninth Circuit.

January 23, 1961.

Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, A. F. Prescott, Kenneth E. Levin, Attys., Dept. of Justice, Washington, D. C., Laughlin E. Waters, U. S. Atty., Edward R. McHale, Asst. U. S. Atty., Los Angeles, Cal., for appellant.

Wadsworth, Fraser & McClung, Los Angeles, Cal., for appellee.

Before CHAMBERS, Chief Judge, POPE, Circuit Judge, and KILKENNY, District Judge.

POPE, Circuit Judge.

Coson, as plaintiff, filed his complaint in the court below alleging that he was the owner of certain described real property in Los Angeles County, California; that the defendant United States claimed an interest in and to that property by virtue of its filing on November 15, 1955, in the office of the County Recorder of that County, of a notice of federal tax lien No. 42005, for Federal Withholding taxes, Federal Insurance Contributions Act taxes for the second and third quarters of 1955, and Federal Excise Cabaret taxes for the months of July and August, 1955, amounting, altogether, to the sum of $133,691.80. He alleged that the Government's claim of lien was invalid for two reasons: first, because plaintiff had never been a general partner in Moulin Rouge (the partnership which operated the hotel and gambling establishment at Las Vegas, Nevada, whose operation gave rise to the taxes referred to); and second, for the reason that the defendant had never demanded that plaintiff pay the taxes referred to or any portion thereof as required by Title 26 U.S.C. § 3670.¹

Plaintiff prayed for judgment that he was the owner of the property; that the defendant had no right, title, or interest in or to it or any part thereof; and that the notice of federal tax lien be cancelled and defendant enjoined from claiming any interest in the property under that lien.²

The complaint, as filed, based the jurisdiction of the district court upon Title 28 U.S.C. § 2410. In his brief plaintiff asks leave to amend to allege jurisdiction under Title 28 U.S.C. § 1340.

The court found and concluded that the Government has no lien for the taxes asserted in the notice of tax lien and judgment was ordered that it be declared that the United States has no lien for the taxes asserted in the notice of federal tax lien filed as against the property described in the complaint, and ordering that the United States refrain from any further assertion of such a lien based on the assessments which it made in 1955 "of Bisno, Rubin, and the Moulin Rouge."

Upon this appeal the principal attack made by the Government upon the judgment below is through its contention that the trial court was without jurisdiction to entertain the action. As previously noted, the complaint predicated jurisdiction upon the provisions of Title 28 U.S.C. § 2410. Subdivisions (a) and (b) of that section are set forth in the margin.³

The trial court, relying upon the decisions of this court in Seattle Association of Credit Men v. United States, 240 F.2d 906, and Wells v. Long, 162 F.2d 842, held that the effect of § 2410 is only a waiver of sovereign immunity and does not operate to confer jurisdiction upon a federal court to entertain such a suit as this. The trial court proceeded, however, to hold that it had jurisdiction of the action by virtue of § 1340 of Title 28 which provides: "The district courts shall have original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue, or revenue from imports or tonnage except matters within the jurisdiction of the Customs Court."

The appellant asserts that § 1340 will not support jurisdiction in this case for several reasons: first, that the suit is not one arising under an act of Congress providing for internal revenue. In support of this contention it cites Johnston v. Earle, 9 Cir., 245 F.2d 793. That was a case in which two officers of the Internal Revenue Bureau were sued for alleged tortious seizure and conversion to their own use of a tractor belonging to the plaintiff. This court held that § 1340 did not support the claimed jurisdiction since the recovery sought was solely for tortious conversion, a state tort, by one citizen of the state against other citizens of the same state. There was no claim for the return of federal taxes alleged to have been wrongfully assessed. We think that case is not in point here where the complaint puts in issue the validity of a claimed federal tax lien. In our view, as stated in United States v. Brosnan, 363 U.S. 237, 241, 80 S.Ct. 1108, 1111, 4 L.Ed.2d 1192, "such liens form part of the machinery for the collection of federal taxes", and we think therefore that the Act of Congress which provided for such liens, was an Act of Congress "providing for internal revenue."

Second, the appellant says that § 1340 "at most is only a general grant of jurisdiction which in order to be effective must be buttressed by some other specific grant of jurisdiction governing any given case." In support of that position the Government cites only First National Bank of Emlenton, Pa. v. United States, 3 Cir., 265 F.2d 297, 299. That case is not in point here for it held no more than that § 1340 did not accomplish a waiver of sovereign immunity. All that the court held was that a suit "against the United States is not maintainable unless the sovereign has consented to be sued in such an action"; that such consent was not contained in § 1340, and that it found no such consent in Title 28 U.S.C. § 1346 (a) (1, 2), or § 2463.

We find no fault with anything that was said in that case, but we think it is of no assistance here where the court below relies upon Title 28 U.S.C. § 2410 for the Government's consent to be sued. If therefore the action here is one within the class of cases defined in § 1340 and if it also is the type of case with respect to which sovereign immunity was waived by § 2410, we should find that the trial court had original jurisdiction to entertain it.

We proceed to inquire whether this action comes within the language of § 1340. The first problem is whether it meets the test referred to in Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 672, 70 S.Ct. 876, 879, 94 L.Ed. 1194, where it is stated that "It has been settled doctrine that where suit is brought in the federal courts upon the sole ground that the determination of the suit depends upon some question of a federal nature, it must appear, at the outset, from the declaration or the bill of the party suing, that the suit is of that character."

We think that the case of Hopkins v. Walker, 244 U.S. 486, 37 S.Ct. 711, 713, 61 L.Ed. 1270, sufficiently discloses that the instant case meets the test just referred to. That was a case in which the owners of a patented placer mining claim brought suit against defendants who had filed certificates of location of lode claims based upon alleged discoveries of lodes within the exterior boundaries of the placer claim. It was alleged that there were no known lodes within the placer at the time of the application for patent and that in any event the lode claims asserted were excessive in area. The bill in the district court predicated jurisdiction upon the suit being one arising under the laws of the United States and involving the requisite amount in controversy. The Court noted the rule above stated with respect to what the cause of action must disclose to the effect that such a case arises where the statement of plaintiff's cause of action "unaided by any anticipation or avoidance of defenses, discloses that it really and substantially involves a dispute or controversy respecting the validity, construction or effect of a law of Congress." It held that the action satisfied that requirement because "in both form and substance the bill is one to remove a particular cloud from the plaintiffs' title, as much so as if the purpose were to have a tax deed, a lease, or a mortgage adjudged invalid and cancelled. It hardly requires statement that in such cases the facts showing the plaintiffs' title and the existence and invalidity of the instrument or record sought to be eliminated as a cloud upon the title are essential parts of the plaintiff's cause of action."

Such is the case here. The complaint not only alleges the plaintiff's title and ownership, but it sets out the notice of federal tax lien filed by the United States and specifically alleges two reasons why that claim of lien is invalid. The action here is as clearly one to remove a particular cloud from plaintiff's title as was the one considered in Hopkins v. Walker, supra.

This poses a further question whether such a suit comes within the provisions of § 2410 of Title 28 (see footnote 3, supra), which grants permission to make the United States a party in a suit "to quiet title" to property on which the United States claims a lien.

It is plain that the words "quiet title" used in subdivision (a) in that section are not intended to refer to a suit to quiet title in the limited sense in which that term is sometimes used, (see the discussion in Hopkins v. Walker, supra, 244 U.S. at pages 490, 491, 37 S.Ct. at page 713), but that as used in the section here referred to it comprehends a suit to remove a cloud upon the title of a plaintiff. This is made plain both by the text and the history of the provision. Subdivision (b) of § 2410 makes it mandatory that "the complaint shall set forth with particularity the nature of the interest or lien of the United States." Plainly that stamps the action as one to remove a specific, particularly described, cloud upon the plaintiff's property. In a strictly limited type of suit to quiet title, such a particularization is never necessary. Not only does this language disclose that the words "quiet title" were used in a broad sense to cover a suit to remove a cloud on title but the legislative history...