United States v. Spreckels

• Decision Date: 21 July 1943
• Docket Number: No. 3970.,3970.
• Court: U.S. District Court — Northern District of California
• Parties: UNITED STATES v. SPRECKELS et al.

50 F. Supp. 789

UNITED STATES v. SPRECKELS et al.

No. 3970.

District Court, N. D. California, S. D.

July 21, 1943.

Frank J. Hennessy, U. S. Atty., and Thos. C. Lynch, Asst. U. S. Atty., both of San Francisco, Cal., for plaintiff.

Keyes & Erskine, of San Francisco, Cal., for defendant Bank of America Nat. Trust & Savings Ass'n.

ST. SURE, District Judge.

The Government sues in equity, under § 3678 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 3678, to enforce certain liens upon property of Rudolph Spreckels for balance of income taxes due for the year 1928 in the amount of $603,179.41 plus interest. The Collector of Internal Revenue made due demand upon the taxpayer for payment, but no payments have been made on that balance.

On August 7, 1934, the Collector reported a notice of lien for taxes in the recorders' offices of Kings, Shasta and Kern counties, and the City and County of San Francisco; and in the clerks' offices of the United States District Court, Northern District of California, Northern and Southern Divisions, and of the Northern Division of the Southern District of California. During August of 1934 notices of lien and levy were served upon a number of corporations and associations in which the taxpayer held stock.

On November 22, 1934, the taxpayer agreed in writing to waive the statutory period for collection of the aforementioned balance, and the time for collection was extended to December 31, 1935. This suit was filed on December 30, 1935, one day before the expiration of the time specified in the waiver. A copy of the complaint and subpoena were served on the taxpayer and returned and filed on April 2, 1936. The other defendants named were served in October of 1940.

The defendant Bank of America National Trust & Savings Association, hereinafter called the bank, asserts an interest adverse to the claim of the Government, under a judgment against the taxpayer in the sum of $923,031.90 obtained by its assignee on June 3, 1936. A transcript of the judgment was recorded in Kings county on October 10, 1936, in the City and County of San Francisco on October 28, 1936, and in San Mateo county on November 14, 1936. The bank had execution issued upon the judgment and obtained title to various properties belonging to the taxpayer, on which the Government claims it has a prior lien.

Defendant bank contends that the statute of limitations ran as to it because of the failure of the Government to serve it with the complaint and subpoena until October of 1940, and that therefore any lien the Government might claim to property in its hands expired.

The modern Federal rule is that an action in equity is commenced by the filing of a complaint with the bona fide intent to prosecute the suit diligently, provided there is no unreasonable delay in the issuance or service of the subpoena. United States v. Hardy, 4 Cir., 74 F.2d 841; United States v. Miller, C.C., 164 F. 444; Linn & Lane Timber Company v. United States, 236 U.S. 574, 35 S.Ct. 440, 59 L.Ed. 725. It would seem that a delay of four years and ten months in serving a defendant who was during that period available for service at all times is unreasonable on its face. The suit cannot therefore be deemed to have been commenced as to the bank as of the date of its filing.

The argument of counsel for the Government that the delay was due to laches on the part of its officers and that the doctrine of laches is not applicable to the United States, is not tenable. The United States as well as a private individual is bound by statutes of limitation, and it may allow its rights to lapse as well by failing to issue and serve process within a reasonable time, as by failing to file an action within the statutory period.

The Government claims that there is no statute of limitations applicable to this...