SIMS v. UNITED STATES

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Argument of Fred H. Caplan

Chief Justice Earl Warren: Number 88, Edgar B. Sims versus United States of America.

Mr. Caplan.

Mr. Fred H. Caplan: Mr. Chief Justice, may it please the Court.

This case is here on a writ of certiorari to the United States Court of Appeals for the Fourth Circuit.

The petitioner, Edgar B. Sims, who was the auditor of the State of West Virginia, has been subjected to personal liability under the penal provisions of Section 6332 of the Internal Revenue Code.

Now, to better clarify the facts of this case, I respectfully direct the Court's attention to Sections 6331 and 6332 of the Internal Revenue Code which may be found in the petitioner's brief in the appendix on pages 1A or A1 and A2.

Section 6331 of the Code authorizes the Secretary the -- that is the Secretary of the Treasurer to collect delinquent taxes by levy upon all the property of the taxpayer.

Section 6332 provides for the surrender of that property, and there is a penalty provision in that section.

Because this entire case is based upon this particular section, I ask the Court's indulgence while I quote briefly from Section 6332.

It is stated therein in subsection (a) under requirement, “Any person in possession of or obligated with respect to property or rights to property subject to levy upon which a levy has been made shall, upon demand of the Secretary or his delegate, surrender such property or rights or discharge such obligation to the Secretary or his delegate.”

In (b) of that section entitled “Penalty for violation,” it stated, “Any person who fails or refuses as required by subsection (a) any property or rights to property, subject to levy, upon demand by the Secretary or his delegate, shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered.”

Now, the issue, the principle issue here at this time is whether this petitioner should be held personally liable for the consequences of his acts performed in the line of his official duties as auditor of the State of West Virginia.

There are, of course, many sub questions which must be discussed and answered.

It is the contention of the petitioner here this morning that the State is not a person, nor is this petitioner a person within the contemplation of Section 6332 and that he could not therefore be held personally and individually liable under the terms and provisions of that section.

It is further contended here by the petitioner that the broad general rule of law that a public officer should not be held personally liable for the consequences of his acts when performed in the official line of duties -- of his duties as such public officer.

Now, the lower courts --

Justice John M. Harlan: The petition here is one of statutory construction or (Inaudible)

Mr. Fred H. Caplan: Your Honor, it is my thought that the primary question here is of statutory construction.

Yes, sir.

The United States District Court for the Southern District of West Virginia held in effect that this petitioner and the State were included in the term person and therefore, entered a judgment against him.

The Court of Appeals for the Fourth Circuit affirmed this judgment.

And this Court granted certiorari thereafter.

The facts of this case are not complicated.

There was no hearing, they are stipulated and are found in the record.

But the fact show that certain state employees on the State of West Virginia were engaged in endeavors entirely separate on the part from their state employment.

That apparently was during the after-hours from such employment in -- well, it isn't shown in the record to clarify.

It appeared that certain state employees had engaged in catering services and that sort of thing after hours during the evening time.

That they gain -- earned incomes due to such outside employment and that they did not, apparently pay any federal income tax on this income so earned.

This is mentioned expressly for the purpose to show that no taxes on any income earned in their state employment is involved here.

That of course was withheld in accordance with law and was submitted to the Internal Revenue.

Justice Charles E. Whittaker: Can I ask by whom that one (Inaudible)

Mr. Fred H. Caplan: That --

Justice Charles E. Whittaker: (Inaudible)

Mr. Fred H. Caplan: That is withheld by the auditor under a statute of the State.

Yes, sir.

Justice John M. Harlan: Do you think Mr. Sims in that situation is subject to the provision of the statute?

(Inaudible)

Mr. Fred H. Caplan: I believe that -- that the auditor of the state would be subjected.

Yes, sir.

Justice John M. Harlan: (Inaudible)

Mr. Fred H. Caplan: I think -- I think that is --

Justice John M. Harlan: (Inaudible)

Mr. Fred H. Caplan: I think that is in the pertinent consideration, Your Honor, yes.

Chief Justice Earl Warren: Is there any language in the statute that you -- you lean on to come to that conclusion?

Mr. Fred H. Caplan: In the --

Chief Justice Earl Warren: To make the distinction between what it must withhold if it was --

Mr. Fred H. Caplan: Do you refer, Your Honor, to the state statute or --

Chief Justice Earl Warren: No, this statute.

The statute you've been reading.

How do you conclude -- is there language saying that in one instance, he -- he must withhold and in the other he -- he need not.

Mr. Fred H. Caplan: I know of no such language which would distinguish this except that this is -- and I haven't considered that particularly for the reason that this is a statute having to do with delinquent taxes for the non-payment of delinquent taxes and a levy served pursuant to the failure to pay.

The question of withholding tax has never been raised, that I know of.

It has been withheld as a matter of course.

And I do not, Your Honor know of any language which would make that distinction here.

Now, I stated these employees having failed to pay their income -- such income tax after demands were made and after their contingent failure to pay.

A levy as provided in Section 6331 was served upon the State of West Virginia demanding that any wages due the taxpayer be turned over to the director of the district -- District Director of Internal Revenue.

Now, these levies were addressed to the State of West Virginia as the person in possession of the property and so forth.

And in every instance were served upon Edgar B. Sims, Auditor of the State of West Virginia.

Now, Mr. Sims, after receiving or being served with such levies consulted with the Attorney General of the State and we do not, Your Honors, as may have been indicated, we do not rely upon that as justifying the action of the auditor.

We do not rely on the fact that he -- because he consulted with the Attorney General that he is justified.

But we do believe that it shows his sincerity and his honest desire to determine this question.

And after so consulting and exercising the discretion, he believed with -- he was entitled to exercise, he refused to honor the levies and did pay the money over to the -- the wages due this -- the tax payers, two such tax payers.

Justice John M. Harlan: (Inaudible)

Mr. Fred H. Caplan: No, Your Honor there was not.

Chief Justice Earl Warren: May I ask -- ask and as you -- at the outset of your argument, you made a distinction in that -- these delinquent taxes for -- for on income from activities disassociated from the State.

May I ask if you make any -- do make any distinction between the right of -- of the auditor to pay them their salaries, not withstanding a lien.

If the lien was on failure to pay income on their taxes on their -- on their salaries.

Mr. Fred H. Caplan: You mean the salaries earned in state employment?

Chief Justice Earl Warren: Yes, earned in state employment and -- as distinguished from these catering services that you were speaking of.

You -- you mentioned that factor in your argument that these were not -- was not on salaries earned from a State.

Do you make any distinction between the two?

Mr. Fred H. Caplan: Yes sir, I see in this --

Chief Justice Earl Warren: So, the -- the State Auditor could withhold or -- or could refuse to withhold for the Government the wages that were paid even though they were delinquent to the Government on their salaries.

Mr. Fred H. Caplan: That -- that Your Honor, I don't believe are owned by reason of the fact of a state statute which are specifically authorized.

Chief Justice Earl Warren: When -- yes, well, let's talk just about the federal statutes.

Do you make no distinction between the two?

Mr. Fred H. Caplan: Now, I don't -- I'm not sure, Your Honor, but I -- but I quite follow you.

I want to be sure.

Now, you make --

Chief Justice Earl Warren: You -- you said at the outset that this -- this man with others was in the catering business and that the taxes due or due on his income from that catering business and that it was not -- the taxes were not due on any moneys earned from the State.

Now, what I want to know is, do you make a distinction in the power of the -- of the State Auditor to ignore the -- the lien in these two cases?

Mr. Fred H. Caplan: The -- I -- I see no distinction there, Your Honor.

I believe that the law merely, there in the section involved merely pertains to delinquent taxes.

Chief Justice Earl Warren: Yes.

Mr. Fred H. Caplan: After the auditor, Mr. Sims, had refused to honor these levies.

The United States Government instituted a suit against the Auditor of the State and against Mr. Sims individually.

Wherein, it sought to impose the penalty contained in Section 6332 (b) of the Internal Revenue Code.

Upon the petitioner's motion to dismiss in this suit instituted in the District Court for the Southern District to West Virginia, the auditor was dismissed as a party by the Court, but the action was maintained against Mr. Sims in his individual capacity.

I will state it here, we believe at this point that the principle issue is whether Mr. Sims is -- should be held individually and personally liable under the penal provisions of Section 6332 (b) and under the circumstances of this case.

The first point which we desired to make before this Court concerns the meaning of the term person as used in the statutes here involved.

As stated, we contend that the term person as used in Section 6332 (b) of the Internal Revenue Code does not include a State.

We believe that it is most pertinent to the consideration of this entire question that in the language of this section whether it'd be 6332 (a), (b), or (c).

Nowhere therein is the term State mentioned nor an officer or employee thereof, while other persons and entities are mentioned.

It is necessary of course to consider then what the term person means and includes as used in this section.

We turn to subsection (c) of 6332 and we find the definition of 'person'.

Person there, and we acknowledge that the term is -- includes.

It is stated that the term “person” includes an officer or employee of a corporation.

A -- and a member or employee of a partnership who has such officer or employee has possession of the property and so forth.

Now, in 26 or in the Internal Revenue Code at Section 7701, definitions are contained there of terms for the terms used anywhere throughout the Internal Revenue Code.

The term “person” is there again and generally defined.

Now, that section states that the term “person” shall be construed to mean and include an individual, a trust and estate, that's E-S-T-A-T-E, a partnership, association, company or corporation.

Justice Hugo L. Black: That's not quoted in your brief, isn't it?

Mr. Fred H. Caplan: Yes, Your Honor.

Justice Hugo L. Black: Yes, I found it --

Mr. Fred H. Caplan: But it is cited --

Justice Hugo L. Black: -- but I couldn't find 7701.

Mr. Fred H. Caplan: I'm sorry, Your Honor, I may -- I currently -- I have it cited on -- on several places or (Voice Overlap) --

Justice Hugo L. Black: That's all right, it already here.

Mr. Fred H. Caplan: I don't know but I have it quoted.

I have it quoted on page 6, the part that I have read.

Justice Hugo L. Black: Page 6?

Mr. Fred H. Caplan: Page 6 of our brief.

Yes, Your Honor.

Justice Hugo L. Black: Yes, thank you.

Mr. Fred H. Caplan: As stated it's noted therein, in considering both of these definitions that nowhere is the State, nor an officer or employee thereof included.

And this latter Section 7701 pertains to the term “person” wherever used throughout the entire Internal Revenue Code unless otherwise specifically indicated.

Now, we contend Your Honors that the language here stating person, stating individual, stating trust, estate, partnership, association, company, and officers or employees thereof is clear and that the language is clear and unambiguous and therefore, is not in need of interpretation or addition.

There is no necessity of construction of this because there is a covered list and the State is not included in that covered list.

Justice John M. Harlan: Well, a person, that that definition (Inaudible)

Mr. Fred H. Caplan: No, Your Honor, I --

Justice John M. Harlan: No, that -- as you've mentioned.

Mr. Fred H. Caplan: The -- in 7701, individual is mentioned, Your Honor.

Justice John M. Harlan: Oh, I'm sorry.

Mr. Fred H. Caplan: We believe that the language of such statute should be read as it is and should not be construed to mean what an administrator or even a Court thinks that Congress intended for it to mean.

Now, both of the District Court and the Court of Appeals readily acknowledged that neither the State nor an officer employee thereof was mentioned in these sections.

And in fact, they expressed some concern about it.

I quote from the memorandum of opinion of the District Court for the Southern District of West Virginia which may be found in the transcript of record on page 26, and I will quote briefly.

And the Court said in relation to the -- to the fact that the term -- that word “state” is not included in the term “person”.

He said, “Well, I am somewhat disturbed by the provisions of Section 6332 (c), defining a person and that it does not mention officers or employees of a State.

I think that there might be a valid argument that in not mentioning them, they were intended to be excluded.

But that would lead, as I view it, to a very illogical and unreasonable result.”

Those are the words of the United States District Court and it is quite apparent that the Court of Appeals affirmed that view.

Now, this Court, this Honorable Court has very forcefully commented on that sort of reasoning.

In Crooks versus Harrelson in page -- in 282 United States which is mentioned in our brief at page -- pages 7 and 8, the Court in very forceful language stated that great caution must be exercised in rejecting the literal meaning of a statute in favor of a construction in harmony with a supposed spirit and purpose thereof.

And, in so many words, the Court had this to say, I will not -- of course burden the Court with a quote of the entire section in my brief.

That the Court said that, “Laws enacted with good intention when put to the test frequently and to the surprise of the lawmaker himself, turn out to be mischievous, absurd or otherwise objectionable.

But in such case, the remedy lies with the lawmaking authority and not with the Courts.”

I submit to Your Honors that the same reasoning applies in the instant case, should the Court have read words into the statute merely because of a supposed absurdity.

If the statute is absurd, is it not up to Congress to correct the statute.

Now, we believe as we stated, that the State is not included in this term “person”.

But we further know that there are several factors which must be considered in determining that.

One of course, is the legislative history of the section involve, that is again Section 6332.

We submit to Your Honors that an examination of the legislative history fails to reveal that Congress intended for its provisions to relate to a State.

The Internal Revenue Code has been revised many times over a period of many years.

I think of three in particular, back as far as 1926, 1939, and the last great overhaul as you may call it, in 1954.

Although it was amended and revised many times, the -- basically, the same language has been retained in relation to the statutes here involved.

Justice William J. Brennan: Now, Assistant Attorney General, in your State, the general creditors of state employees have some process by which they can have the debts collected from employee salaries?

Mr. Fred H. Caplan: Yes, Your Honor.

By constitutional amendment in the 1930's, they suggest the execution was permitted.

Justice William J. Brennan: Although -- although -- do your state statutes exclude Uncle Sam as a creditor?

Mr. Fred H. Caplan: No, sir.

Justice William J. Brennan: Entitled to rest on those statutes?

Mr. Fred H. Caplan: No, Your Honor.

And we would be very happy for the Government to exercise its authority under those statutes and proceed by -- suggest the execution.

It certainly --

Justice William J. Brennan: You mean -- you mean that this might have been recovered in that way?

Mr. Fred H. Caplan: Yes, Your Honor.

Justice Tom C. Clark: He has to bring a suit.

Mr. Fred H. Caplan: He would have to bring a suit and obtain a judgment and of course, comply with the constitutional provision and the state statutes which -- which do permit that.

Yes, sir.

Justice Tom C. Clark: You say there has been no change in the code, what about the regulations?

How long -- the -- they have a regulation on the state salaries, do they not, the Treasury?

Mr. Fred H. Caplan: Treasury regulation?

Yes, sir -- Your Honor, there is.

Justice Tom C. Clark: How long has it been enforced?

Mr. Fred H. Caplan: I am not certain.

I believe it -- I -- I wouldn't want to say I think it is 1955, some -- somewhere along there.

Justice William O. Douglas: It is because they're (Inaudible) ruling prior to that.

Mr. Fred H. Caplan: Prior to that, I believe, Your Honor, there was a ruling that state salaries were not subjected, although I do not believe that it was a Treasury regulation.

I think it was a -- an internal revenue regulation or some -- some other such regulation other than treasury.

Justice William J. Brennan: In respect to those state procedures for these tax demands, would they presently be available to the United States?

Mr. Fred H. Caplan: Yes, Your Honor.

Justice William J. Brennan: To these very obligations?

Justice Tom C. Clark: If the employee is still there, and if they don't?

Mr. Fred H. Caplan: If the employees are still there.

Justice William J. Brennan: Well, that's why -- I meant, are they still (Inaudible) --

Mr. Fred H. Caplan: Oh, I really don't know, Your Honor.

Sorry.

Justice Charles E. Whittaker: (Inaudible)

Mr. Fred H. Caplan: Yes, Your Honor.

Justice Charles E. Whittaker: (Inaudible)

Mr. Fred H. Caplan: Under -- under our statutes, Your Honor.

It would be served on the auditor.

Justice Charles E. Whittaker: Now, the important business that are here, would be relief against him.

Is that personally or to discuss it with (Inaudible)

Mr. Fred H. Caplan: I know of no --

Justice Charles E. Whittaker: Of course, it must be completed.

Is he then a person in possession or obligated with respect to these wages.

Mr. Fred H. Caplan: You're speaking, Your Honor, under the federal statute, under the language.

Justice Charles E. Whittaker: (Inaudible) suppose they sued on this tax deterrent the Government and (Inaudible) and execution.

This thing in (Inaudible), you'd have to take it as (Inaudible) as to these words served on (Inaudible)

Now, then, he declines to answer the judge, he just refuses to obey.

What relief does the Government have then?

Is he a person then in possession of the property or obligated to (Inaudible) to these wagers so that a personal judgment will be taken against him right into the state proceedings?

Mr. Fred H. Caplan: I believe he is, Your Honor, by virtue of the state statute which specifically authorizes and -- and designates him as the person to be served with and he suggest the execution.

And I believe that he would be subject to a personal suit under the law then, if there were a judgment and if there were the necessary suggesti execution proceedings.

Justice Charles E. Whittaker: (Inaudible) or the distribution as to that terms?

Mr. Fred H. Caplan: I believe he would, Your Honor, under --

Justice William O. Douglas: Under the federal statute.

Mr. Fred H. Caplan: -- under those circumstances.

Justice William O. Douglas: Under the federal statute.

Mr. Fred H. Caplan: I don't believe that the federal statute would be involved in the instance, Your Honor.

Justice Charles E. Whittaker: But he could be allowed as a person to be in that matter unless he refused that necessity.

Unless he were obligated by the statute.

The words, not the language defining that under the statute.

Mr. Fred H. Caplan: I believe, Your Honor, that by virtue of the state statute, he is obligated with respect to when there is a suggestive execution proceeding.

Justice William J. Brennan: What's that meaning you're using?

Mr. Fred H. Caplan: Pardon me?

Justice William J. Brennan: What --

Mr. Fred H. Caplan: Suggest the --

Justice William J. Brennan: How do you spell that?

Mr. Fred H. Caplan: -- for granting error.

Suggesti execution.

Justice Hugo L. Black: Suggesti.

Justice William J. Brennan: Suggesti?

It's just a new term to me --

Mr. Fred H. Caplan: Yes.

Justice William J. Brennan: -- I haven't heard that.

Mr. Fred H. Caplan: Well, that is comparable to --

Justice William J. Brennan: Garnish --

Mr. Fred H. Caplan: -- garnishment.

I should have used perhaps the word garnishment, although our statute does specifically refer to suggesti execution.

Justice Tom C. Clark: He didn't respondent suggesti proceeding, he would be personally liable then, wouldn't he?

Mr. Fred H. Caplan: I believe he would under the --

Justice Tom C. Clark: Assuming the State owes the money.

Mr. Fred H. Caplan: I believe he would, Your Honor, under the -- under the state law.

Justice Charles E. Whittaker: Could then that possibly (Inaudible) asked is the Government's contention here.

And Judge Hoeveler holds (Inaudible) was a person in the selection or obligated to the perspective which these (Inaudible) West Virginia to dissolved employees at the time (Inaudible).

Mr. Fred H. Caplan: Well, Your Honor, that -- I can only say to that, that we do not agree that the State has been -- is -- is included in the language of the statute, in the term “person”.

And not being included would not be touched at all by the proceeding.

That the auditor in the case of a suggesti execution, for example, or in the case of a state matter, we cannot deny and we do not deny that the auditor is the one upon whom an attachment or garnishment shall be served.

And that it is -- is his obligation to pay out on a warrant for state moneys on a requisition.

In that respect, there have been numerous, which we will relate to later, mandamus actions against the auditor.

In every instance, however, of which I am cognizant, the suit has been against the auditor for the -- to force him to honor a requisition for the payment of state moneys.

There has never been, so far as I've been able to determine, any attempt to sue him personally.

It has always been a question of the -- of -- of the expenditure of state moneys.

Justice Charles E. Whittaker: (Inaudible) is that what it is?

Mr. Fred H. Caplan: Yes, sir.

Justice Charles E. Whittaker: Payable by the State.

But here we have a deal to hold him liable presently because he is in possession for obligation with respect to (Inaudible)

Mr. Fred H. Caplan: And we -- we believe that it is different.

And, of course, in this instance, we are now concerned with Mr. Sims as an individual.

And, of course, as an individual, we say and we say this in all sincerity that Mr. Sims, as an individual, was not and could not have been in possession of or obligated with respect to the taxpayers' wages.

Justice Charles E. Whittaker: Let me ask you if, I may, one more question (Inaudible).

Suppose that a judge (Inaudible) was served by the Government upon the treasure of the West Virginia Railroad Company seeking to tax money as action through the Government by its employees, federal employees but the employer of the railroad just simply ignored, is he personally liable?

Mr. Fred H. Caplan: Yes, Your Honor.

I believe that he --

Justice Charles E. Whittaker: -- of the railroad, is he personally liable?

Mr. Fred H. Caplan: I believe that he is personally liable under the language of the -- of the section involved here that he would be an officer or employee of a corporation.

Justice Charles E. Whittaker: Yes, but he says he'd be the person in possession of or obligated with respect to it.

That's what I want to know.

Mr. Fred H. Caplan: The -- the case -- your case of the officer of a corporation, I would say, is definitely liable under the language of the statute because he is definitely covered in the definition and would be brought within the language.

We believe that the -- the auditor of the State is not within the language of the statute and would not therefore be covered by the statute.

In other words, the -- the distinction of course is, and we make a distinction between an officer of a state and an officer of a corporation.

And we believe that there -- that it is a valid distinction.

Justice Hugo L. Black: Why do you say that the officer by this corporation to be individually allowed or one that -- that is -- the corporation which he worked?

Mr. Fred H. Caplan: Because, Your Honor --

Justice Hugo L. Black: (Voice Overlap) --

Mr. Fred H. Caplan: -- of -- excuse me.

Justice Hugo L. Black: That's all right.

Mr. Fred H. Caplan: Because, Your Honor, of the language of the statute wherein an officer of a corporation is specifically provided as a person, is specifically defined -- defined as a person.

In other words, Section 6332 (c) defines a --

Justice Charles E. Whittaker: (Voice Overlap) --

Mr. Fred H. Caplan: -- excuse me.

Justice Charles E. Whittaker: (Inaudible) not all persons are liable.

Only those who are in possession of or obligated with respect to new wages, isn't that right?

Mr. Fred H. Caplan: Yes, Your Honor.

Justice Charles E. Whittaker: The fact in -- that this Auditor of the West Virginia Railroad Company is a person (Inaudible) doesn't it?

He must be a person --

Mr. Fred H. Caplan: If --

Justice Charles E. Whittaker: -- in possession of this (Inaudible)

Mr. Fred H. Caplan: Yes, Your Honor.

Justice Charles E. Whittaker: (Inaudible)

Mr. Fred H. Caplan: I -- I understood before you to say that he was the treasurer and I assumed that he was in possession of or obligated with respect to --

Justice Charles E. Whittaker: (Inaudible)

Mr. Fred H. Caplan: If he is the person in possession of or obligated with respect to, I say that the statute specifically covers him.

Justice Charles E. Whittaker: (Inaudible) what is it?

Justice Felix Frankfurter: Does in possession have a technical meaning or a colloquial meaning?

The fellow actually has money to be -- which he's to pay over to somebody else.

Mr. Fred H. Caplan: I believe that in -- in view of the language used, that it may have a -- a literal meaning.

Justice Felix Frankfurter: I mean, the word “possession” in full --

Mr. Fred H. Caplan: The word --

Justice Felix Frankfurter: -- has all sorts of meaning.

For instance, in the law in criminal law, whether -- whether it's lost and you're embezzled with terms and all sorts of refined distinctions.

Now, does the term “in possession” here involve those nice distinctions that we know of in the law of larceny for instance.

Or does it mean -- what ordinary -- the natural meaning that jumps into your mind when you read “in possession”?

If I have money to be paid or to be distributed, I don't know, I suppose our marshal distributes checks to the various people who work under this roof.

Is he in possession of all those moneys, would you say?

I'm not now considering whether he would be a person in -- in your standards, but would he be in possession?

Mr. Fred H. Caplan: At best in constructive possession, I would say no in view of the further language here where it is stated in or obligated with respect to.

Justice Felix Frankfurter: Well, isn't he obligated if -- if the marshal has the checks for all the employees of this building, isn't he obligated in respect to, to pay it over with?

Mr. Fred H. Caplan: Yes, Your Honor.

Justice Felix Frankfurter: I suppose you can get mandamus for him on -- to pay it over.

Mr. Fred H. Caplan: I would think so.

Justice Felix Frankfurter: Is he in possession in a colloquial sense or does “in possession” here have some very fine and refined -- I suggest the law of larceny is full of nice distinctions.

Now, do we have to worry about that here?

Mr. Fred H. Caplan: I don't believe we do, Your Honor, in view of the full language of that where it says in possession of or obligated with respect to.

Justice Felix Frankfurter: That means he's got the things which belonged to somebody else.

Mr. Fred H. Caplan: He has it whether it's constructive or actual.

Justice Felix Frankfurter: Well --

Mr. Fred H. Caplan: And he is --

Justice Felix Frankfurter: -- if he has the checks, that's really actual, isn't it?

Mr. Fred H. Caplan: That's actual.

Justice Felix Frankfurter: He got the piece of a paper.

Justice Charles E. Whittaker: (Inaudible)

Mr. Fred H. Caplan: In further discussion of the legislative history, I call the attention to the -- of the Court to the 1954 amendment of the internal revenue law wherein the law was passed basically in the same language that had formally been contained, except that in Section 6331 thereof, it provided specifically, that how this levy may be served on the officers, elected officers and employees of the Federal Government and the District of Columbia.

Whatever the reason for that necessity to include the Federal Government expressly, we say that as for the same reason, the State should have been included and the employees thereof so included so that there could have been no question.

We see of no reason why the Congress could not at that time have included State or state employees if it had so desired.

Justice Hugo L. Black: Are you claiming that neither the State nor the official is a person within the meaning of the statute?

Mr. Fred H. Caplan: Yes, Your Honor.

Justice Hugo L. Black: But you say that the State can be sued for this particular thing if he's paid it out wrongfully?

The auditors paid it out wrongfully?

Mr. Fred H. Caplan: If -- no, I didn't say that, Your Honor.

I -- I believe the -- if the auditor refused to pay, there has been, of course, a mandamus available to force payment of that.

Justice Hugo L. Black: Suppose he paid it out before they could get one, would the State be liable?

Mr. Fred H. Caplan: It is my thought that that would go to -- to the entire question of whether or not a public official is liable.

And I -- I believe that the State would be liable under that.

Although, the State cannot be sued in the ordinary circumstances in West Virginia, but the State would be liable, I believe.

And if, of course, the auditor had done something fraudulently or illegally, then of course, he would be personally liable, I would think.

Justice Hugo L. Black: Well, what is the -- what would be the result of your arguments, should he accept, so far as the Government claims against State, their concern for taxes where the Government seeks to hold the state liable for its wages due the employee.

Mr. Fred H. Caplan: What would be the result --

Justice Hugo L. Black: What would be the result --

Mr. Fred H. Caplan: -- if -- if the State --

Justice Hugo L. Black: -- if your argument should be accepted?

Mr. Fred H. Caplan: If the auditor refused to pay over withholding taxes?

Justice Hugo L. Black: Suppose your argument would be accepted that these federal -- these two statutes, for this statute, does not apply to the State or to any of its officials.

Does the Government have any remedy to run a garnishment except, as you say, first to file a suit?

Mr. Fred H. Caplan: No.

I know of no remedy we'd have other than to file a suit.

Unless, we would say that under the specific West Virginia statute, the auditor is expressly included and expressly designated as the -- the person to handle this withholding taxes and would definitely be the custodian of those taxes.

Justice Hugo L. Black: What I'm getting at, are you claiming the Federal Government has no remedy at all here or it has just pursued the wrong remedy?

Mr. Fred H. Caplan: The -- the Federal Government certainly has a remedy through the ordinary course of law bringing suit and obtaining a judgment.

Justice William O. Douglas: I believe (Voice Overlap) from your statement that the -- the it isn't the case in every State, is it?

Mr. Fred H. Caplan: I don't know, Your Honor.

Justice Felix Frankfurter: You mean a remedy against the taxpayers, against the -- those who owed the taxes.

Mr. Fred H. Caplan: Yes.

Justice Hugo L. Black: Then --

Mr. Fred H. Caplan: Oh, your speaking, Your Honor, of a -- of a remedy against the State?

Justice Hugo L. Black: Yes.

Justice Felix Frankfurter: The answer -- your answer is no, isn't that right?

Justice Hugo L. Black: Whether -- whether they want to collect it by something like a garnishment?

Whether you call it that or something else.

Mr. Fred H. Caplan: I know of no suit against the State itself.

I haven't considered that.

The only thing I'd consider, of course, is a -- as in the suit against the delinquent taxpayer.

I don't know the --

Justice Hugo L. Black: Well, I'm just trying to find out if it's your position and may be it's right.

If your position is accepted that the Government cannot run a garnish, but to get a lien until it first files a suit and then gets the lien on the controlling state law.

Mr. Fred H. Caplan: I don't know, Your Honor.

The only thing that I considered there in -- involving the State would go into this question of whether or not a State is a person under the --

Justice Hugo L. Black: Well, that's --

Mr. Fred H. Caplan: -- statute.

Justice Hugo L. Black: -- some kind of (Voice Overlap) -- what -- what are the consequences of that, if you're right?

You -- you claim that the Federal Government has no right to get a lien by notifying him under this because the State is not a person.

Mr. Fred H. Caplan: Yes, Your Honor.

Justice Hugo L. Black: And I assume you're relying on statements that have been made a number of times that unless the State specifically included?

It shouldn't be read into statute.

Mr. Fred H. Caplan: Yes, Your Honor.

Justice Hugo L. Black: And the result would be then that the Government has no -- can get no lien insofar as something like a garnishment is concerned, in order to protect itself from a payment by the State, wages to a delinquent taxpayer.

Mr. Fred H. Caplan: I believe that is our position, Your Honor, yes.

Justice Felix Frankfurter: But the Government of the United States can bring an original action in this Court if West Virginia pays over to a delinquent taxpayer moneys or in from the delinquent tax paid to United States in aknowledge of that tax, pays over to him moneys which if it haven't paid over, it have would have gone to the Treasury because then there's a question of whether this Court would entertain that suit or would say, bring that suit in the state courts, we did in the -- the jury's actions.

That remedy goes to the Government.

Mr. Fred H. Caplan: Yes, Your Honor.

I think so, to bring the suit against the --

Justice Felix Frankfurter: The State itself.

Mr. Fred H. Caplan: Yes.

Justice Felix Frankfurter: As in the original action and then we decide whether it's the kind of thing that we retain or shall --

Mr. Fred H. Caplan: If --

Justice Felix Frankfurter: -- I meant, why don't you bring this suit for a little few dollars, or many few dollars in State Court of West Virginia.

Justice Hugo L. Black: I wonder if that could be done, if the tax law, the federal tax law is invalid in providing a lien for wages.

It's just not applicable to a state, I wonder -- maybe it's -- I have thought about that but I'm just wondering if you don't undercut that kind of right to the Government to.

Justice Felix Frankfurter: You don't say the statute is invalid, you're say it doesn't apply --

Mr. Fred H. Caplan: I say that it doesn't --

Justice Felix Frankfurter: -- or in fact legislated.

Mr. Fred H. Caplan: I say that it doesn't apply.

Justice Hugo L. Black: Invalid so far as the State.

Mr. Fred H. Caplan: So far as the state is concerned.

Yes, sir.

Justice Hugo L. Black: Inapplicable, maybe, it's a better word.

Mr. Fred H. Caplan: Inapplicable to the State.

Justice Hugo L. Black: Yes.

Justice Tom C. Clark: You couldn't file a suit against the State unless the Congress amend the law (Inaudible)

So you couldn't file a suit here.

You (Inaudible)

Justice Felix Frankfurter: Well, the suit wouldn't be under this statute.

Mr. Fred H. Caplan: Well, if -- yes, if --

Justice Felix Frankfurter: -- it would be a general -- a general original action by the Government of the United States against the State for money owing to it on quasi contractually and that it prevented by taking over money which belonged to United States with delinquent taxes.

Mr. Fred H. Caplan: Oh, that is my thought that it would be more -- more of a general suit, not under that statute.

Justice Hugo L. Black: But there'd be no lien.

Justice Felix Frankfurter: No, no.

Justice Hugo L. Black: No lien so there could be no liability --

Mr. Fred H. Caplan: Well, that -- there would just be a question --

Justice Hugo L. Black: -- accruing against the State, I assume, until it file a suit and get a judgment.

Mr. Fred H. Caplan: I would think that it would be a general suit for a wrong committed by the State against the Federal Government and --

Justice Charles E. Whittaker: Well, what is the wrong to this (Inaudible)

Mr. Fred H. Caplan: If --

Justice Charles E. Whittaker: (Inaudible)

Mr. Fred H. Caplan: If we were speaking of delinquent taxes, Your Honor.

Justice Charles E. Whittaker: (Inaudible)

Mr. Fred H. Caplan: Well, we --

Justice Charles E. Whittaker: (Inaudible)

Mr. Fred H. Caplan: We may find ourselves in a curious situation, Your Honor, and that we have not claimed that a lien for taxes does not attach.

We may find some difficulty in a method of -- of enforcing that lien, but I believe that we do not claim that the lien does not -- does not attach on -- on moneys earned by state employees wherever earned, that lien would attach.

But under the penalty provisions here involved, we -- we just take the position that the State is not included in the term “person” and that the liability does not attach.

Justice William O. Douglas: What do you (Inaudible) 2632 subdivision (a) applies but not subdivision (b).

You say that not the auditor is the person in possession but not a person then with the meaning of 6332 (b), is that right?

Mr. Fred H. Caplan: Well, Your Honor, I don't -- I don't believe that --

Justice William O. Douglas: I thought you -- I thought you said lien attached.

Mr. Fred H. Caplan: Well, a lien under Section 6321, perhaps, the -- the general lien statute for -- for delinquent taxes which is on page 81 of our brief.

Now, a further consideration here is the congressional intent of the -- at the time of the enactment and we believe that such congressional intent should be determined as of the time of the enactment and not by the influence by later development.

And if a later development necessitates a change, then it should be brought about by a congressional action and not by interpretation.

This of course, being one of the very principle reasons for a -- for the frequent meetings of Congress.

Now, this -- this language which is -- is contained in the present section, was in this section in 1926.

And at that time, the Federal Government did not even look to state employees for income taxes.

But the same language was there and the definitions were the same.

So we believe that that is indicative of the congressional intent failing to show that States or employees thereof were included.

Now, in relation to this question, let us look briefly to the notice of levy which was served in this case.

And we note that the notice of levy was served upon the State as the person in possession of the property and so forth of the taxpayer.

Justice Charles E. Whittaker: Upon the State.

Mr. Fred H. Caplan: Upon the State.

It was addressed to the State of West Virginia as the person.

It must be remembered again that the State, the word “state” is not included in the statute.

The state has been said to be sui generis or as discussed or defined in Black's Law Dictionary as one of its own kind, or the only one of its kind, or peculiar.

It is a separate and distinct entity.

The state is different from any other entity and of necessity must be afforded separate and different treatment.

Now, certainly in common usage, the term “person” does not include the sovereign state.

Now, we realize fully well that there are exceptions to this and that the courts have on occasion and in many occasions, declared the state to be a person.

Now, the Government has cited several cases in its brief such as South Carolina versus United States, and Georgia versus -- Georgia versus Evans, Ohio versus Helvering.

And we submit to Your Honors that these cases are distinguishable from the case at bar, and that in those cases and in practically all of the cases cited, the State has been performing a proprietary function rather than a Governmental function.

In Ohio versus Helvering, for example, it was a case of the Federal Government imposing a tax.

And I believe this was an injunction suit by the State to prevent the Federal Government from imposing us to pay tax on the State's activity of selling spirituous liquors.

Now, in that case, the Court held that the State was a person because it was engaged in business in competition with the general public.

And when it sheds its cloak of -- its governmental cloak for that of a proprietor, it sheds any immunity which it may have had of this nature.

Justice Felix Frankfurter: Don't you think in all the conscience to hold that South Carolina was the first, and under the taxing law, required -- what shall I say, more courageous interpretation than to hold -- because that was an adverse ruling against South Carolina, wasn't it?

It imposed a tax, it imposed -- it levied something to the disadvantage of South Carolina against South Carolina.

Here, the question is whether a ministerial officer should pay whole what -- in good conscience belongs to the United States.

That's all there is to this, isn't it?

Mr. Fred H. Caplan: I respectfully disagree with the --

Justice Felix Frankfurter: By minimizing --

Mr. Fred H. Caplan: -- term “ministerial officer”.

Yes, sir.

Justice Felix Frankfurter: Well, could -- could be all state officials mandamus your auditor to pay them salaries due to them?

Mr. Fred H. Caplan: Yes, sir.

Justice Felix Frankfurter: Well, that's my definition of a ministerial officer.

Mr. Fred H. Caplan: There --

Justice Charles E. Whittaker: (Inaudible) could the state officers of your state mandamus the state officers to pay the salaries or is it merely to mandamus to honor all that (Inaudible)

Mr. Fred H. Caplan: The effect -- well, it is to honor a requisition for the expenditure of state moneys.

That has been --

Justice Felix Frankfurter: Because I'm assuming the state -- I'm assuming his salary is fixed.

I'm assuming there's no controversy that he is -- be jury officer.

I'm assuming that the salary is due.

And I'm making all other assumptions that leave nothing to be done but to hand over the check from the auditor to the state official.

It -- doesn't it then become merely a ministerial duty?

Mr. Fred H. Caplan: Then it would be a ministerial duty.

Justice Felix Frankfurter: Yes.

Mr. Fred H. Caplan: Now, the -- we have cited in our --

Justice Hugo L. Black: You mean -- you mean, after the check was gone and he got that check in his position, it's properly signed.

At that moment, he -- it became a ministerial duty.

Mr. Fred H. Caplan: Well, I don't know if he goes that far.

They -- they have in our State as a requisition which is presented to the auditor and when he refuses to honor that requisition a mandamus suit is -- has often been instituted.

Justice Hugo L. Black: (Inaudible)

Mr. Fred H. Caplan: If he had --

Justice Hugo L. Black: -- and has paid these people and (Inaudible)

Mr. Fred H. Caplan: He would -- could be subjected -- subjected to --

Justice Felix Frankfurter: And the answer to that would be, “I'm very sorry but a superior authority has told me to pay it over to the creditor of the claimants.”

Mr. Fred H. Caplan: Thereby, exercising his discretion under the West Virginia Code as to whether or not he should pay that money.

Justice Felix Frankfurter: Yes.

Justice Hugo L. Black: Well, I -- I assume your answer is that the superior authority couldn't claim it had superior authority because the Government had no lien on it, it didn't apply to your -- your case.

Mr. Fred H. Caplan: I say under the -- I -- I -- that is what we say the way the statute was written, Your Honor.

Justice Felix Frankfurter: Yes.

I understand that, but --

Mr. Fred H. Caplan: We say that the --

Justice Felix Frankfurter: -- but the question of whether that doesn't deal with the question whether this is a mandamus of a duty on the part of the order.

Of course it is not under -- if -- if the statute -- the United States statute doesn't require him to honor the demand of the Secretary of Treasury, then he doesn't have to honor.

But as to what the relation between the auditor and the state employee is -- is unaffected by whether or not Uncle Sam can get a lien against him.

I should think not only the checks are made out but he could be compelled to make all the checks.

Unless that's regarded as violation of the Thirteenth Amendment in involuntary servitude.

Mr. Fred H. Caplan: I believe that he could be compelled to if --

Justice Felix Frankfurter: Yes.

Justice Hugo L. Black: I gather you're going on another amendment that they can't -- state can't be sued in part, sounds like it.(Voice Overlap) --

Mr. Fred H. Caplan: Yes the state cannot be sued.

I have -- I have not said that, Your Honor.

I believe.

Justice Hugo L. Black: I thought that was attempt of yours but --

Justice Felix Frankfurter: But you disavowed that in answer to Justice Harlan's question from -- in the out set.

Mr. Fred H. Caplan: I don't say that the state cannot be sued.

I think it has been very well proved that can.

Justice Hugo L. Black: Finally, you say it can be sued.

Do you think as you have to consent?

Mr. Fred H. Caplan: As the States concerned?

Justice Hugo L. Black: Yes.

Mr. Fred H. Caplan: No, Your Honor.

Justice Hugo L. Black: You think it can be sued without a consent --

Mr. Fred H. Caplan: The Federal Government can sue it.

Justice Hugo L. Black: Where?

Mr. Fred H. Caplan: In a -- I believe a in a District Court or this Court has -- certainly has original jurisdiction.

Justice Hugo L. Black: Yes.

Mr. Fred H. Caplan: I see my time is about --

Justice Hugo L. Black: You know whether your -- you know whether your case has yet been written up in -- in (Inaudible)

Mr. Fred H. Caplan: No, Your Honor.

I merely would like to make a statement in relation --

Justice Felix Frankfurter: Mr. Caplan, may I interrupt?

I looked at your brief for the Government.

But we had a case a few years ago involving a -- was it West Virginia too?

The Compact, the Ohio Compact.

Remember that case?

(Inaudible) and --

Mr. Fred H. Caplan: I'm not familiar with it, Your Honor.

Justice Felix Frankfurter: -- I think it was (Inaudible) wasn't it?

Yes, where he -- wherein the claim was made, the claim was made that the piece of paper that was found purporting to be a compact exceeded the power of the officials under the Constitution of West Virginia to enter into such an agreement.

And the case came here and we found no difficulty in enjoining the -- was it the same gentleman.

How long has he been in office, Mr. Caplan?

Mr. Fred H. Caplan: Since 1932.

Justice Felix Frankfurter: Yes.

Mr. Fred H. Caplan: He has been in court many times.

Justice Felix Frankfurter: Yes.

Well --

Mr. Fred H. Caplan: And I might say in passing, Your Honor, if I may that Mr. Sims, while having been in court many times on mandamus proceedings, has prevailed -- and also prevailed in many cases as well as having many writs issued against him.

And I say from that that it shows that there is a discretionary duty on his part in expending state moneys.

That it is not generally a -- a ministerial duty and that that has a great bearing on this case as you will see --

Justice Felix Frankfurter: I'm not suggesting that it could always be mandamus.

I'm not suggesting that it could always be mandamus.

In that case, I don't know why, I haven't thought of it before.

Mr. Fred H. Caplan: I assume I --

Justice Felix Frankfurter: They wrote the opinion as a matter of fact.

In that case we -- we held that -- that he didn't have an excuse even though the Constitution of Delaware with West Virginia which we purported to construe at the time, I think as against his construction, divide into to pay over what it was obligated under the arraignment proceedings, I forgot what the first date was, Ohio and West Virginia and some other States.

Mr. Fred H. Caplan: Thank you.

Chief Justice Earl Warren: Ms. Graney.

Argument of Melva M. Graney

Ms Melva M. Graney: Mr. Chief Justice, if it please the Court.

I think it maybe said in general that the petitioners' position in this case is that the Government cannot garnish either way of a state employee except through the state garnishment procedure.

And of course, the lien and levy procedures set forth in Section 6321 and Section 6331, is a summary garnishment procedure.

That's what it amounts to.

The lien, the Government which attaches by the delinquent taxpayer refuses or fails to pay, is the equivalent of a court judgment.

And the notice of the levy is the equivalent of process -- court process.

The summary procedure which date way back to the 18th Century, I believe, in the internal revenue laws.

The particular section that we're concerned with here was first passed in 1926.

Until that time, the levy could not be enforced against the property of delinquent taxpayers if it were in the hands of third persons.

That's what --

Justice Felix Frankfurter: There's -- I want to know, there's an early case Ms. Graney, Cary and Curtis way back which allows administrative restraint for money going through that, is that still the law?

Ms Melva M. Graney: I don't know about that case --

Justice Felix Frankfurter: (Voice Overlap) I think.

Ms Melva M. Graney: -- but I do know that in 1926, a provision was specifically inserted in the revenue laws to permit the enforcement of levies when the property was held by third persons, and that is the statute.

It's substantially the same as the 1926 statute.

Now, the only reason all the requirements of the garnishment are present here as I think Mr. Caplan has conceded.

The only argument that's really being made is that the Government can't use the summary procedure, the summary garnishment procedure provided by federal statute because he argues that the State and the state officer are not persons within the meaning of the statute.

So, we get down to a pure question of statutory construction.

And the petitioner's position on that is directly contrary to the rule that's already established by decisions of this Court.

The argument is that the state is not included within the meaning of the word “person” unless it is expressly included.

The rule established by several decisions of this Court and principlely, cases relating to revenue measures, is that a state is included within the meaning of the word person, unless a contrary intent is indicated.

Now, no argument is made by the petitioner as to any contrary intent in this case, at least I -- it's difficult to discern any other than the fact that a state is involved and a state is a sovereign.

Actually, the sovereignty of the state is in no way affected by this notice of levy served upon the State Auditor.

The State's only interest is to pay the accrued salary either to the employee or to the employee's account in such a way as to discharge the obligation of the state to pay compensation.

And of course that obligation would be discharged if Mr. Sims had honored the levis.

That is, the money would be paid over on the delinquent taxpayers' obligation to the Government.

So, there's no sovereign interest of the State involved here.

The State is in no different position from any other employer, as evidenced by the fact that the State West Virginia like the majority of other States, permits even private creditors to garnish either salaries of state employees through the court process, the normal garnishment procedure.

Now, on the question of construction of course, we think first of all that the word person as defined right in the code itself is --

Justice Potter Stewart: Before you proceed Ms. Graney, may I ask you one question.

You said there was no impairment of state sovereignty here.

Is there any showing, is there anything in the stipulation of facts or anywhere in the record thq1at this would be a -- a hardship or a burden upon the State, as a matter of difficult bookkeeping or additional manpower or anything like that?

Ms Melva M. Graney: No, Your Honor.

And I think the constitutional question is completely out of the case.

As a matter of fact, this Court has already held that the Government can require a state agency itself just like under the withholding tax for -- to collect a federal tax.

The Wilmette Park District case decided in 338 US is a case where a public corporation organized under the laws of Illinois to conduct a municipal bathing beach, refused to collect the admissions tax, the federal admissions tax.

The commissioner imposed penalties under a statute similar to this, every person.

And the penalties were paid, a suit for refund followed.

This Court held in that case that the state agency was required to collect a federal admissions tax, that after all, they're just a collecting agency.

And at the same time, the Court held that the state agency, the Park District was a person within the meaning of the penalty provision.

So, I don't think there's really any constitutional question involved here.

The Government can impose the duty to collect tax on private persons, that's settled by several decisions of the Court.

And can impose the tax directly upon the State for a non-governmental function.

Justice Felix Frankfurter: Well, the number of instances, Ms. Graney, which this Court have held that a state is a person, the Safety Appliance Act and so on.

The governing consideration is incorrectly, that's why I'm putting here the question.

Governing consideration has been that it applies unless if the -- if the purpose of the statute would be equally applicable to the State as an agent, as a -- as a legal personality as it would be to a private corporation and individuals.

Ms Melva M. Graney: Yes.

Justice Felix Frankfurter: It was -- has not been the approach in the cases.

Ms Melva M. Graney: Yes.

Yes, Your Honor.

Justice Felix Frankfurter: Now -- so that -- so that the burden really rests on West Virginia or any other State that the bar of this Court will say, there are reasons that would negative the purpose of that statute for the inclusion of the state as a person is that their way of putting the problem?

Ms Melva M. Graney: I think so.

I would also add that they have not sustained that burden.

Actually, there's no reason why the State should not be included in the word person here.

Well, in the first place, let me say that the -- the word person itself is defined in statute in the code, sufficiently broad enough to cover a state.

Justice Felix Frankfurter: You mean the general definition statute --

Ms Melva M. Graney: Yes.

Justice Felix Frankfurter: -- or the Revenue Code.

It's a matter of the Revenue Code.

Ms Melva M. Graney: Revenue Code.

Justice Felix Frankfurter: The Revenue Code includes the definition of person?

Ms Melva M. Graney: Yes.

Justice Felix Frankfurter: Would you mind giving it to us?

Ms Melva M. Graney: Section 7701, defines a person.

It's in a footnote in our brief.

Justice Felix Frankfurter: (Inaudible)

Justice Potter Stewart: What page?

Ms Melva M. Graney: Page 23 in the footnote.

Justice Hugo L. Black: This suit is not based on the idea that the state is a person and it's not against a state.

Ms Melva M. Graney: No, it's not against a state but we have assumed that an agent of the state could not be held personally liable unless the principle were also subject to the statute.

So, we have both questions.

Their argument primarily --

Justice Hugo L. Black: (Inaudible) statute is not a private state without applying the (Inaudible)

Ms Melva M. Graney: We think the statute applies to both.

And it could apply --

Justice Hugo L. Black: But you're only -- what you have sustained here is the idea that applies to the auditor --

Ms Melva M. Graney: Yes.

Justice Hugo L. Black: -- not that it applies to the State, applies to the auditor.

Ms Melva M. Graney: Well, perhaps we have to show that it also applies to the principle, because Mr. Sims possession and obligation was as an agent of the State.

But that creates no problem because we think the statute applies both to the principle -- the state as the principle and to Mr. Sims and the agent.

Now --

Justice Hugo L. Black: It's creates a little more problem to me for you to hold individually about it.

That's the whole state (Inaudible) and it seems to me that you have not preceded the state.

Ms Melva M. Graney: No, we have not preceded against the State.

But I think this is something Mr. Caplan was attempting to explain before with reference to our position and so on.

The word person -- now, for general purposes of the code, it's defined as a corporation, individuals and so on and so forth.

And the words includes and including are also stated -- that -- well, the same section of the code states that when those words are used in a definition, they shall not be deemed to exclude other things otherwise within the term -- meaning of the term defined.

So, the word person is comprehensive.

It can include a state and a state it is sometimes considered to be a person.

The question is, should it be excluded here.

Now, on the question of whether or not Mr. Sims should be held personally liable acting as an agent of the State, the very section that we're involved with here, Section 6332 provide in subsection (c) the term person as used in subsection (a).

That refers to possession and obligation.

Includes --

Justice Charles E. Whittaker: (Inaudible)

Ms Melva M. Graney: That's right.

The term person includes an officer or employee of a corporation or a member or employee of a partnership, who as such officer employee or member is under a duty to surrender the property or rights to property or to discharge the obligation.

In other words, the word is defined to cover people acting in a representative capacity.

Here, the agents of the state.

Justice Potter Stewart: Ms. Graney, you -- you do have to put it in other words simply because the statutes doesn't cover Mr. Sim's literal points, doesn't it?

Ms Melva M. Graney: No, specifically no.

Justice Potter Stewart: Yes.

Ms Melva M. Graney: But here again, the word includes, Your Honor, should not be taken to mean to exclude other things --

Justice Potter Stewart: An exclusive definition.

Ms Melva M. Graney: And of course --

Justice Potter Stewart: Because you're -- you're not of course -- you're not -- are you contending that a state is a corporation?

Ms Melva M. Graney: Not -- pardon?

Justice Potter Stewart: It's not your argument that a state is a corporation.

Ms Melva M. Graney: Oh, no, no.

No, it's just the statute is broad if there's any person and person itself is defined in such a way that that is as broad as it can be.

So, that a state necessarily comes within the meaning of the language.

That is just broad enough to include it.

Now, consistently, with the decisions of this Court, we would say that it should still be excluded provided there is some reason to exclude it but there is no reason.

Justice William J. Brennan: (Inaudible)

Ms Melva M. Graney: The pertinent Treasury Regulation, and that became effective January 1, 1955 --

Justice William J. Brennan: Although --

Ms Melva M. Graney: -- prior to the levies here.

Merely --

Justice William J. Brennan: Any reason why so long (Inaudible)

Ms Melva M. Graney: No, except that the Treasury likes to be specific.

Justice William J. Brennan: No, I just wondered, the statute would -- had been applicable many years before 1955, isn't it?

Ms Melva M. Graney: Yes, but I would also say that it did not become applicable to state employees until 1938 when this Court held that state employees were subject to the federal income tax.

Now, speaking of the administrative practice, the Treasury Regulation of course has been in effect now, almost four years or over three at least.

Normally, the Court would give some weight to that fact.

But in addition to that, the administrative practice of levying upon state employees' salaries for delinquent federal taxes, dates way back at least the 1943 as the court below pointed out in its opinion.

In -- on June 20, 1943 issue of the Wall Street Journal, there was an article stating that the United States is cracking down on New York workers who are evading their taxes.

That the Government has filed notices of levy with the state controller and that the state controller, unadvised of the Attorney General of the State, was honoring those levis.

That's over 15 years ago.

The practice has been consistent.

And I might say that the Internal Revenue service has advised that some information it has, it's believed that the vast majority of the State has complied or made other arrangements for the payment of the tax.

Justice Felix Frankfurter: Ms. Graney, could you please tell me why -- I think you do not make your problem more complicated than it needs to be, and -- and it could be specific.

Whether or not the auditor is personally liable, isn't the question with which we start, that's the question with which we end.

The question is whether an auditor comes within the terms of 6332 (a).

And that means -- is he a person?

He would certainly be a person.

Is he in possession of or obligated with respect to property?

And I just think on -- on the statement of the Attorney General, I don't mean to say -- say imply the Attorney General made any concession.

That simply cannot be recognized, that the Auditor of West Virginia being the conduit to which officials and employees of the State get their money, even in possession of the piece of the paper, checks if they pay full, checks assumed are due or is obligated with respect thereto because it could be mandamus.

And therefore, if -- if the auditor comes within (a), they seems to unless there's some reason why a person should be given the restrictive meaning.

These powers have a consequence.

Unless you say a State Auditor being between two fires, that of a state that of the United States, may pay the money to the -- to the Secretary.

But I should think the short answer to that is, it was always -- put the money versary of the court, and say here.

Uncle Sam and -- and the delinquent taxpayers fighting over this thing, I put this in the versary of the Court and I'm through with it.

So, I don't see why he's bothered by it, whether he's personally liable.

He isn't if he doesn't come within (a), I mean necessarily, is if he does come within (a).

Ms Melva M. Graney: That's right.

I think two points in that connection.

The argument with respect to (a), he says on the one hand that he is not in position of the property because he was not in possession of it as an individual.

Well, that's true.

But the statute makes him liable for his possession and obligation as an agent of the State.

Justice Potter Stewart: (Inaudible)

Ms Melva M. Graney: Yes.

But that applies to (a).

Justice Potter Stewart: Yes, but as -- therefore, your argue -- your argument intend on showing that the state as a person, does it not?

Ms Melva M. Graney: In the final analysis because --

Justice Felix Frankfurter: But I don't see why you say that.

Ms Melva M. Graney: Well now, I may say this.

We have assumed that and I don't think there's any particular problem with respect to it because it is covered.

But now, the South Carolina case stating the facts at 199 U.S., the dispensers or state liquor stores were held to be liable for the federal license tax on retail liquor dealers.

And in that case, the Court expressly recognized that they were acting only as agents of the State but it said, if the principle is not exempt, they are not either.

So, maybe we shouldn't worry about it.

Justice Felix Frankfurter: (Voice Overlap) perfectly in getting at it.

Justice Potter Stewart: But the argumentation in your brief depends, does it, on (Inaudible) a state as a person, within --

Ms Melva M. Graney: Yes.

On the assumption that the possession of Sims as auditor was that of the State.

Justice Potter Stewart: (Inaudible)

Ms Melva M. Graney: If -- as the state as a principle and of Sims as an agent.

Justice Felix Frankfurter: I'm sure I have great respect to your brief but I don't think I can raise res judicata.

Justice Potter Stewart: And that's also the argument (Inaudible)

Ms Melva M. Graney: Yes.

Justice Felix Frankfurter: Yes.

That's my difficulty.

Ms Melva M. Graney: But the whole point is whether we're arguing more than we have to.

Both the State and the state officer are covered within the statutes.[Laughs]

Justice Hugo L. Black: Covered, (Inaudible) a person, do you think he's in possession of the property?

Ms Melva M. Graney: He is -- the person who is obligated with respect to the accrued salaries of the delinquent taxpayers.

Justice Hugo L. Black: But do you think -- do you think he's the person who's in possession of the property -- of properties?

Ms Melva M. Graney: Well, you can put it that way.

But he doesn't have --

Justice Hugo L. Black: I'm not sure you can (Inaudible)

Ms Melva M. Graney: The statute also says “or obligated with respect to”.

Justice Hugo L. Black: (Voice Overlap) not obligated.

Does that mean a person who owes money or you think -- who owes him the money?

Ms Melva M. Graney: Principle.

Justice Hugo L. Black: The State of Virginia.

If that's to be read as applying only to the person who owes the money, how could you say that you could bring this action against the officials?

Ms Melva M. Graney: Well, I think the language in possession of or obligated with respect to is about as broad as it could be made in the circumstance of a statute of this nature.

Now, petitioner does not make any argument about this other than the fact that he wasn't obligated as an individual, that's his only argument.

Justice Hugo L. Black: Well, if -- if that means with reference (Inaudible) that suppose an agent is the person who owes the debt, he's liable in his pretty broad interpretation of the statute.

Ms Melva M. Graney: Well, I think that interpretation is required by the definition of a person contained in subsection (c) and it's defined for the purposes of subsection (a) as including a person acting in a representative capacity, who as such officer, employee or member is under a duty to surrender the property.

Justice Hugo L. Black: I don't -- I -- I don't think -- it seems to me like the statute (Inaudible) is on that property, isn't he?

With the actual property that the person has in possession, not a debt that he owes the State of the money.

Ms Melva M. Graney: Oh.

Justice Hugo L. Black: Of course, he doesn't have any money particularly in his possession.

This is a debt owing by (Inaudible) and it's owing by the State.

Ms Melva M. Graney: Any person in possession of or obligated with respect to property or rights to property.

The warrants which are issued by the State Auditor are the things that he uses to get his paycheck, rights to property.

Justice Hugo L. Black: Of course the paper wouldn't -- the paper wouldn't be enough.

I have to admit, sometimes I think money damages, pretty nearly properties.(Voice Overlap) --

Ms Melva M. Graney: The State Auditor doesn't issue the warrants, the employee doesn't get paid.

The State Auditor is the person who has control of the situation.

I think petitioner concede that.

There's just one point I'd like --

Justice Felix Frankfurter: I want to put it to you, obligated with respect to, obligated with respect to --

Ms Melva M. Graney: Property or properties.

Justice Felix Frankfurter: -- is not an actual phraseology to express if a man owes a debt.

Ms Melva M. Graney: That's --

Justice Felix Frankfurter: If I go off to -- to ascertain, he should lie for the next two years, and (Inaudible) of a big bank, (Inaudible) a big concern and leaves money with the bank as a dispersing agent to pay my employees in my absence.

They would be obligated with respect to but it isn't a phrase, it wouldn't mean that they are the primary credit -- creditors.

Ms Melva M. Graney: That's right.

Justice William J. Brennan: And then, I suppose (Inaudible) obligation to local office with respect to the payments for these moneys for the employees.

Ms Melva M. Graney: Yes, he is the proper officer.

There's no question about that.

Justice William J. Brennan: (Inaudible)

Ms Melva M. Graney: No, not as an individual, he's (Voice Overlap)

Justice William J. Brennan: But for these purposes, in the obligation with respect to --

Ms Melva M. Graney: We think so.

This --

Justice Potter Stewart: (Inaudible)

Ms Melva M. Graney: There's just one other point I'd like to make.

Actually, the -- the levy could have been released with Mr. Sims with simply made arrangements with the district director and the delinquent taxpayers.

Another way in which he could have evaded the personal liability was by simply holding the warrant and said, “I have them, I haven't paid them out.”

It would have required a suit by the Government but his personal liability would have only been technical because he still have the money be available for the payment of the tax liabilities.

Chief Justice Earl Warren: Very well.

We'll recess now.