United States v. Winnett, 11492.
| Decision Date | 15 December 1947 |
| Docket Number | No. 11492.,11492. |
| Citation | 165 F.2d 149 |
| Parties | UNITED STATES v. WINNETT. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Theron L. Caudle, Asst. Atty. Gen., Sewall Key, A F. Prescott, Courtnay C. Hamilton, and Fred E. Youngman, Sp. Assts. to Atty. Gen., and James M. Carter, U. S. Atty., E. H. Mitchell, Asst. U. S. Atty., and Eugene Harpole, Sp. Atty., Bureau of Internal Revenue, all of Los Angeles, Cal., for appellant.
MacFarlane, Schaefer & Haun and Dempsey, Thayer, Deibert & Kumler, all of Los Angeles, Cal., for appellee.
Before MATHEWS, STEPHENS, and ORR, Circuit Judges.
Appellee Winnett borrowed money from one Summers1 and executed a note therefor in the sum of $60,000. Later, Summers borrowed money from a bank, executed notes and Winnett endorsed them with the understanding, both oral and written, that in the event Summers defaulted in any or all of the payments to become due on her notes, and Winnett was called upon to make payment, the amount so paid by him could be set off against any amounts due or to become due on the $60,000 note. This agreement was reduced to writing on May 26, 1938, and on the same day an endorsement was made on said $60,000 note making it subject to the agreement.
On May 17, 1939 Winnett was notified that Summers had defaulted on her notes to the extent of $27,233.66. Winnett paid said sum to the bank and the notes were endorsed over to him.
On February 16, 1939 the Collector of Internal Revenue received an assessment list containing an assessment against Summers. Notices of federal tax lien were filed the following day. On March 22, 1939 the Collector served upon appellee a notice of levy on all property in his possession belonging to Summers. It will be noted that the payment to the bank by Winnett of the amounts by which Summers had defaulted was subsequent to the lien of the United States resulting from the levy made by the Collector.
The District Court found that on January 1, 1939 Summers was insolvent; that on February 17, 1939 the United States had a valid and subsisting lien on the property of Summers; that said lien was enforceable against Winnett only as to the unpaid balance on the $60,000 note after deducting the amount of the claimed off-sets. The District Court found the sum of $6,466.64 plus interest due the United States, this being the value of the property or property rights which Summers could have enforced against Winnett.
Appellant's main contentions are: That since Winnett's right to offset was a contingent right on February 16, 1939, the date of the lien secured by the United States, and since no offset had been made or could be made on that date, its tax lien attached to the entire unpaid balance of the $60,000 note, and that apart from its lien the United States had a priority in the property of Summers upon her insolvency under § 3466, R.S., 31 U.S.C.A. § 191, and that this priority precluded any subsequent offset.2 We do not agree. Summers' interest in the $60,000 note had been subjected, by oral contract, as early as the year 1935, to Winnett's contingent right of set-off and his interest was made the subject of written agreement and endorsement upon the note on May 26, 1938. These writings served as a notice of the limitation of Summers' interest in the note to all who might subsequently take the note, either as purchaser for value or for a pre-existing debt. One choosing to reach this chose-in-action belonging to Summers by attachment or garnishment could acquire no greater right against Winnett than that possessed by Summers.3 This would hold true even though the sovereign initiated the proceeding. Under §§ 3672 and 3710(a) of the Internal Revenue Code, 26 U.S.C.A.Int.Rev. Code, §§ 3672, 3710(a), the rights of the Collector do not extend beyond those of the taxpayer whose right to property is sought to be levied upon.4 Winnett had a right of set-off of the amount he was contingently liable for as an endorser of the Summers notes in 1935 prior to the United States asserted lien and priority and the Government is legally required to recognize that right.
The determination of what constituted the property of Summers on ...
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