N. H. FIRE INS. CO. v. SCANLON
Legal provision: 28 U.S.C. 2463
Argument of Jack Hart
Chief Justice Earl Warren: Number 339, New Hampshire Fire Insurance Company, Petitioner versus Scanlon, District Director of Internal Revenue, et al.
Mr. Jack Hart: Mr. Chief Justice, may it please the Court.
This case comes here by way of certiorari to the Court of Appeals for the Second Circuit.
The question presented involves the construction of a statute.
The statute is a short one, consisting of five lines and is printed on page one of petitioner's brief.
It's Section 2463 of the Judicial Code which reads as follows, “All property taken or detained under any revenue law of the United States shall not be repleviable, but shall be deemed to be in the custody of the law and subject only to the orders and decrees of the Courts of the United States having jurisdiction thereof."
The question presented is whether under that statute, statute the District Courts had jurisdiction in a summary proceeding instituted by petitioner in order to show cause to determine the claim of a non-taxpayer that his property has been seized and satisfied the tax obligation of a nun.
The District Court for the Southern District of New York, expressly declining to follow the Third Circuit, held that the District Courts had no such jurisdiction and dismissed the petition.
The Court of Appeals for the Second Circuit affirmed in one sentence upon the opinion below.
In this Court, the respondent suggests that the case might be remanded to the Southern District without prejudice to the petitioners requesting that the Court treat the petition as a complaint and that the action then proceed in accordance for the Federal Rules of Civil Procedures.
That suggestion of course is no concession at all because in the current posture of this case, the major issue is whether we are required to proceed in accordance with the Federal Rules of Civil Procedure, but whether we have a right would obtain the article quarters of the Court with respect to the time for answer, the time for pretrial proceedings, the time for trial.
The facts in the instant case maybe briefly stated.
The petitioner, New Hampshire Fire Insurance Company, among other things, is engaged in the business of issuing surety bonds.
In 1956, the petitioner issued a surety bond on behalf of a contractor, Acme Cassa Incorporated which had entered into a contract of the City of New York for the construction of a playground.
During the course of the work which involved a contract to delinquent taxpayer of $356,000, Acme Cassa became financially unable to continue with the work.
The City of New York as obligee, thereupon called upon the petitioner here to complete the work and pay the unpaid bills of Acme Cassa.
This, the petitioner did.
In the meantime, Acme Cassa had become a delinquent taxpayer and the United States filed notices of tax levies with the City of New York.
There came a time then when the City of New York had available for payment some $68,000 and this money was in the form of a warrant to the order of this petitioner.
At that time, the petitioner had expanded some $83,000 in completing the work and in paying unpaid bills.
The Government had a tax lien in the amount of some $35,000.
In New York State, the law is the very well established than in these circumstances.
The surety is obligated to the position of the obligee, in this case the city, and that therefore, the money is payable directly to the surety and accordingly the Government's tax lien, which applied only to the property of the anointed taxpayer has no applicability of law at all.
Plainly, we don't deal with the question of priority because the property never goes to Acme Cassa, the delinquent taxpayer.
In the District Court, the judge said that we were required to bring a plenary procedure.
Nobody has said against to whom we are supposed to bring a plenary proceeding and it is submitted to this Court that we are not dealing with the ordinary types of case where you have a plaintiff and defendant.
The party difficult to pinpoint in this case is the defendant.
The history of the statute, its express language, its evident purpose all make it clear that this property when improperly seized by a person who happens to be a tax collector, but who of course is merely an individual tortfeasor when he seizes the property of a non-taxpayer.
That tax as we say very clearly put the property in the custody of the Court subject to the orders and decrees of that Court.
And for that reason, what we are engaged in doing here is making an application to the Court to return the property.
Justice William J. Brennan: May I ask Mr. Hart, as of what date in reference to the filing of the federal tax lien did the surety as you put it, definitely (Inaudible) of the contract?
Mr. Jack Hart: The surety came in I think after the filing of the tax lien.
Mr. Justice Brennan, I would say that the -- in our view, the date of the filing of the Government's tax lien is of no significance.
It is of no significance because we are not concerned to the question of priority.
The contention is and the law in New York is so well established as not to be in doubt that in these circumstances, the delinquent taxpayer never gets the property right to any of the contract balances and the money goes directly from the City of New York to the surety.
We therefore don't fight for money which belongs to the delinquent taxpayer in any sense.
Justice William J. Brennan: Well, if the -- if that time of the filing of the federal tax liens that you had not yet stepped in use of a contract, to whom did the city at the time of the filing of tax liens owed them?
Mr. Jack Hart: Well, if there are no money would be loaned.
We are talking here about progress payments of the -- in the usual way.
There will be a lump sum contract price with prohibitions or payments during the progress of the work as per requisitions made by the contractor in accordance with the terms of a contract.
If he fails to perform, then obviously he would not be entitled to get paid.
Essentially, that would be the reasoning behind which -- on the basis of which came the conclusion that the surety becomes subrogated to the position of the owner cutting out the contractor altogether.
He had no right to get the money because he failed to perform.
Justice William J. Brennan: Well, did (Inaudible) also arise after the filing of the tax liens?
Mr. Jack Hart: In this case, I believe it did.
I repeat that the -- the term of the filing I think everybody would recognize, in this case had recognized would be insignificant.
The -- there has been no issue raised about the merits of this controversy.
Nobody has been required to take a position about the right of the surety, but the law in New York is so well established that I don't think anybody would raise any question about the law being what I have stated it would be and namely the very reason that subrogated for the position of the owner.
Justice William J. Brennan: Well, then you mean this case comes to us, virtually you and the Government and the other side in agreement that the property did belong to the surety at the time that --
Mr. Jack Hart: Yes, well, the -- the surety thing subrogated for the position of the owner and its right of subrogation depending on whether it has in fact expanded the money.
There are perhaps in some cases whether the city under the circumstances would have had the right to whip all the money from the contractor, and then there's no doubt about that when the contractor has failed to perform.
There could be questions of fact.
For example, if the surety had expended only $20,000 and the amount payable was $40,000, its right to subrogation would extend to the extent of $20,000 and not 40.
Justice William J. Brennan: Well, is there right such issue here?
Mr. Jack Hart: No, sir.
The surety -- the issue hasn't been raised.
The only issue raised in the State is meant that we are applied to institute an action in proceeding by filing a complaint under the Federal Rules of Civil Procedure giving a defendant 20 days in which to answer.
Justice William J. Brennan: And this even on the premise that in fact that the contractor's business -- no property of the contractor but only the surety code.
Mr. Jack Hart: Yes.
Justice William J. Brennan: Even on that premise the -- should you civilly suit by rather than summary suit?
Mr. Jack Hart: There are plenary suits but nobody says against whom and there isn't any findings (Voice overlap) yes.
Justice William J. Brennan: That's what the contention is?
Mr. Jack Hart: Yes sir.
Justice William J. Brennan: Although it's your money, you can't resort and no claim belongs to the contractor.
You can't resort to the summary procedure but must institute some kind of plenary suit against somebody.
Mr. Jack Hart: Well, I must say with respect to that that the respondent has not been required to take a position in the posture of this case as to whether it concedes, he concedes or denies that the money belong to the surety because he had attacked the jurisdiction of the Court and has not been required to respond to the factual allegations of the petitioner.
Justice Potter Stewart: Isn't that really the point that the questions, the issues that the subjects of Mr. Justice Brennan's questions have not yet been reached, is it, and then you don't know if there any -- if there --
Mr. Jack Hart: It's actually so, Mr. Justice Stewart, yes.
We've been dismissed.
Now, 2463 has an interesting history which I can briefly allude to.
It was first passed in 1833 in response to South Carolina Ordinance of Nullification.
The South Carolina didn't like the Tariff Act which had been passed and -- passed some state laws, Duty of Tariff Act is -- Tariff Act fact should not apply in South Carolina.
Congress then passed a rather lengthy statute making numerous provisions to deal with that situation in South Carolina and 2463 and almost the exact words it has today was incorporated in that statute.
Many of the sections of that statute and we think on this point as perhaps with some moneys, the respondent in its brief has begged the question here referred to what would be the case if tax collector acting properly under the Tariff Act did what he did.
We think it's plain that 2463 the section with which we are here dealing must be read by including after the second word back in the statute the additional word improper.
Section 2463 specifically deals only with cases where a person who happens to be a District Director seizes or detains the property of a non-taxpayer justifying his conduct on the ground that he is a District Director, but the revenues laws do not apply to non-taxpayers and we are dealing here I might say in all of you with the case we would have if the district director so seized the automobile of Mr. A to satisfy the tax obligations of Mr. B and we are dealing now with the question of who gets possession of the automobile when this dispute arises and whatever has been decided and what are the rights of Mr. A with respect to retrieving his property?
It seems evident from that point of view that the District Director is not defending that in the case because unless we had 2463, we have difficulty in saying on what basis we could get him into a federal court.
Normally, there would be no diversity present and there was not in present case.
And since the charge against him is merely that he is an individual tortfeasee, the case against him, whatever it happened to be, would not arise under any federal law.
Further, it seems clear that the District Director does not claim that the property is his.
That's the very last thing he would claim and it seems perfectly plain that he would not even in his personal capacity contend that he had a right to the possession of the property.
For example, suppose that in this case which has now been pending a year, Mr. Scanlon had resigned from his office as District Director.
What would have happened to the automobile?
Certainly, he would have not kept it.
Now South Carolina, in 1833, provided that way a property was seized by federal officials, the federal officials would be guilty of a crime under South Carolina law and in reacting to that, Congress passed statute protecting its revenue and prevent -- protecting its officials by providing there questions which arose should be tried in the federal courts.
That was where the seizures were made under the Revenue order.
2463 deals with the case of what happens with property seized when there is no authority for seizing.
Where do you put it?
It seems evident and we'd have no question, I say in all humility, whether if all we did was read the language at 2463, it says clearly, “That property is to be deemed to be in the custody of the law.”
It seems to be plainly that place to put.
Now, if that is so, then we don't have a cause of action where a plaintiff and defendant proceeding under the Federal Rules of Civil Procedure, but to accept the suggestion made by the respondent's brief, we are in fact applying to the Court.
They say we are really making a motion rather than proceeding by petition and we have no objection to that.
If an application to a court is a motion that is what we are doing.
We are applying through the Court which has the custody of this property to return it to us.
Justice Charles E. Whittaker: May I ask you, on what basis you assert that the Court had custody of this property?
Mr. Jack Hart: On the basis of the express language that of Section 2463.
Justice Charles E. Whittaker: I read it to say that the property should be in the custody of the law.
Mr. Jack Hart: The several cases which have dealt with this have made no distinction between the custody of the law and the custody of the courts --
Justice Charles E. Whittaker: Now --
Mr. Jack Hart: -- by taking it – I am sorry, sir.
Taking it as being ambiguous and looking for its meaning, the property would have to be in some place.
We insist here that we are not dealing with a Director of Internal Revenue or a tax collector or with the United States.
If we have as an adversary either the United States or a collector of Internal Revenue, then we have conceded we must loose.
Our entire case is based on the contention that being an non taxpayer, we do not come within the coverage of the tax laws and that therefore, if somebody takes my property and I'm non taxpayer, it is interesting what should move from his -- first thing into my house in the middle of the night burglarizing the same and then defending on the ground that he also happens to be a District Director.
We don't have that problem because District Director is an honest man and proceeds with honest intentions.
Justice Charles E. Whittaker: You're seeking an adjudication that you're not a taxpayer and that the funds here being held are your funds and it was being held to the tax debt to somebody else improperly.
Mr. Jack Hart: Yes, sir.
Justice Charles E. Whittaker: Now then, how do you buy writing a letter to the Court or file a motion with the Court initiate proceedings that result in the Court's acquisition of jurisdiction over the person of the defendant?
Mr. Jack Hart: The Court does not get jurisdiction over the person of the defendant by our filing a petition.
Due process requires simply be notified just as it requires in this case the City of New York and the contractor to be notified.
And in one of the interested parties, quite take a different position on the substance of our complaint.
But as a non-taxpayer, if we are right and if this posture of the case, the allegations of our petition must assumed to be, right, then it is our property which has been seized without any warrant, without any judicial sanction which normally would permit us to bring the tortfeasor who happens to be a District Director into a state court.
As a matter of fact, there wouldn't seem to be any basis for suing him in a federal court.
It doesn't seem to be a basis for the federal jurisdiction to sue a tortfeasor who happens to be the District Director but who has not acted as an agent of the United States.
Justice Charles E. Whittaker: What do -- tell me, do the Federal Rules allow the initiation of a proceeding against a defendant and the requirement of his return and answer otherwise and upon 20 days allowed for the rules?
Mr. Jack Hart: No, sir.
But the Federal Rules of Civil Procedure refer to the ordinary civil litigations and if this were a case where we're suing the District Director, then there would be no doubt that the Federal Rules would apply.
Justice Charles E. Whittaker: Now, if there were jurisdictions over some raised or some already pending case in the Court, then any notice in the form -- reasonable notice to some other person in an ancillary or a dependent proceeding would that Court in due process would be sufficient to bring that person in, wouldn't it?
Mr. Jack Hart: Yes, sir.
Justice Charles E. Whittaker: That's what is in this case?
Mr. Jack Hart: No, sir.
Justice Charles E. Whittaker: I don't understand.
Mr. Jack Hart: Well, if I may take your very illustration, suppose that Mr. Scanlon the District Director in this case having seized our property then resigned, and was no longer the District Director, who would be the defendant in our suit.
Whom do we sue?
We have no issue with the Untied States of America because we now know there are many taxes and they don't claim that we are delinquent taxpayer.
We therefore have no issue with the District Director because to the extent that he is the District Director, he is acting within the scope of his authority.
If he is, and then we would concede that this proceeding could not be sustained.
We don't have a lawsuit against anybody, but dealing with the situation reflected in the statute passed for the protection of the United States in order to balance out or on the one hand, the extraordinary power of the tax authorities to collect administratively and the right of a decree non taxpayer to get his property back, this statute says in such a case we'll put the property into the custody of the law.
Any privilege that the Court has and say you have now cut this property because the statute puts it there and we ask you to return it to us.
Who is entitled to notice then?
Those people who the due process tells us who are entitled the notice.
In this case, the District Director, the City of New York and the contractor, nobody else could seem to have any -- the District Director as a fact of the matter of cause appears by the attorneys for the United States America because if he in fact was a District Director or to put it in other way, if indeed he was acting within the authority of the tax laws, then of course the property goes to the United States of America.
But if he was not so doing, then the United States has no interest in this proceeding, the District Director is not involved and an individual will happens to be a District Director is given notice because he is the one who purported to act under the authority of a Revenue Law.
The point we submit is made clearer by considering what we have been relegated to do.
We are told to institute a plenary proceeding.
We don't know what the kind of judgment the Court – courts entered since we take it a verdict that Mr. Scanlon in this case would not claim that the custody of this property is in him except as a custodian for the Court.
The respondent suggests that custody of the law, Mr. Justice Whittaker means that the custody of the collector is being protected against process from other courts.
Protected to be sure as long as he is the custodian for the District Court where the property is located.
For example, suppose that the District Director was concededly a dishonest person, and suppose then that he had seized negotiable securities depending -- warning to non taxpayer and suppose then that he were directed to turn them over by the District Court but said no Section 2463 says that my custody has been protected.
Undoubtedly, the Court does not have physical custody of the property, but we think that it has constructive custody of the property.
We say squarely that from the 2463, we do indeed make a motion to the Court in whose custody the property was placed to return it and to return it in summary fashion, meaning by that at the time limitation is set forth in the Federal Rules of Civil Procedures do not apply.
And frankly, we are at great difficulty to understand why the Government which is the real party and interest on the other side should have the slightest detection to this.
We deal with the question of power and not of discretion.
If coming-in in this motion procedure, it is a term that the Government needs time to ascertain the facts to present its own no position, on our theory and on what we submit here there is noting to prevent the District Judge from saying in my discretion, I (Inaudible) that this, the respondent shall have 20 days in which no answer or two months in which to conduct these oral depositions.
There's nothing to prevent that, but if the money belongs to the treasury, then one would think, it ought to be covered in (Inaudible) and that the Government should be happy to have the opportunity to accomplish that.
If not, then as often happens, delays occur which sometimes result in a denial of justice.
Justice Felix Frankfurter: I -- I understand that you derive your power here from the implications of 2463, is that right?
Mr. Jack Hart: Yes, sir.
Justice Felix Frankfurter: And I wonder if you would make a comment on the discussion of the problem of summary recovery of that property that is involved here of the opinion in the Taubel-Scott-Kitzmiller?
Have you suggest -- dealt with that case?
Mr. Jack Hart: Well, I --
Justice Felix Frankfurter: In the discussion of Justice Brandeis in that case?
That -- that Taubel is (Inaudible) to the general requirements of the plenary suits and that the exception must be manifested by -- for the specific legislation as I get out of that case.
Mr. Jack Hart: Well, Mr. Justice Frankfurter, I would say that we are submitting to this Court that the history of 2463 --
Justice Felix Frankfurter: (Inaudible) explicitly that will require to that --
Mr. Jack Hart: Expressed language.
Justice Felix Frankfurter: -- or having in purpose.
Mr. Jack Hart: We'll -- we'll put together leave no alternatives in logic to what we are here submit.
There is no deferment for us to sue.
Nobody has this property if the Court hasn't got it and in an appropriate case, the District Director, if not a tortfeasor, well, if not a civil tortfeasor, if he is going to keep the property and insist that he has a proprietary interest in it, it might approach a criminal situation.
He doesn't claim it.
The United States doesn't claim it.
The dispute --
Justice Felix Frankfurter: He might claim it ex officio.
Mr. Jack Hart: Well, if he claims it as ex officio, if I -- if I get the solution --
Justice Felix Frankfurter: But I mean, he might claim that's not stolen or the Court pleaded that he might say this is a (Inaudible).
Mr. Jack Hart: Exactly so.
Justice Felix Frankfurter: (Inaudible) state keepers as well.
Mr. Jack Hart: Yes, we're not personally.
What happens if he resigns, what happens to the property?
What does he doing?
Now, where is his obligation set forth?
Justice Felix Frankfurter: I know the difficulty of substitution -- substitutive party that if he resigns, he is fit to be getting to an action of where he got to resigning their offices.
Mr. Jack Hart: Well, the District Director has a pretty powerful weapon in being able to proceed administratively to seize property.
He is entitled to have it, but it is fraught with these and if he seizes property which a citizen claims was improperly seized because I am not a taxpayer, then it hardly seem to depend --
Justice Felix Frankfurter: But those are contested questions, aren't they, Mr. Hart?
Mr. Jack Hart: Oh, yes.
Justice Felix Frankfurter: What happens that maybe they clear, you maybe -- he may be extra zealous or he maybe extra careful or he – you say we'll find it out in the -- some legal action?
Mr. Jack Hart: They -- they may will be sir contested questions and power before us is if they are contested which we assume they are, how are you trying to manage?
Justice Felix Frankfurter: Well, I -- the reason I put the case to you is because the characteristic detail in the -- Mr. Justice Brandeis in that opinion for the Court said this if the impression that you want a good deal before we will allow such an action.
Now I'm not overstating the case, am I?
Mr. Jack Hart: No, sir and I would agree with that and I say we have a good deal present.
Indeed we can hardly -- we think an alternative is not available.
Chief Justice Earl Warren: Mr. Roberts.
Argument of Richard M. Roberts
Mr. Richard M. Roberts: Mr. Chief Justice and members of the Court.
This case is essentially a case presenting the question of a procedure to be followed where a District Director has allegedly seized property (Inaudible) to a non taxpayer, that is non taxpayer foreign to the assessment that he is trying to collect.
Rule one of Federal Rules of Civil Procedures provides that these rules govern the procedure in the United States District Courts in all suits of a civil nature where the cognizance is always cases at law or in equity with the exception stated in Rule 81.
As I understand it, there's no allegation here that the exceptions of Rule 81 are applicable.
Rule 2 provides that there shall be one form of action to be known as a civil action.
Now, if a party believes that the civil action that he has brought is too slow to give him an adequate remedy, he has other proceedings under the rules that he may take.
He may under rule 65 of the same injunctive relief that the case should more consider that facts that were presented to the Court warrant and show that relief.
If he feels that there's honestly no issue of fact as the petitioner feels here, then after the expiration of 20 days from the filing of his compliant, he may move for summary judgment.
Now, as the Court well knows, prior to the formulation of the Federal Rules of Civil Procedures, the procedures that were followed in the District Court were to say the least un-uniform.
A litigant might be thrown out because he did not complied with certain rules of procedure adopted in that particular State in which the District Court happens to be sitting.
Now, we submit that there's no reason to favor under the rules a person in the position of this petition who is in effect getting his day in the Court advanced over another litigant who is claiming possibly in a conversion case that someone has this money illegal and by making that litigant take his normal day in the Court by allowing this litigant come in and move ahead by a show cause order is disrupting what we feel to be the purpose of the Federal Rules of Civil Procedure which was to provide a uniform procedure of the Federal District Courts.
Now, Section 2463 is almost a verbatim reenactment of the parts of Section 2 of the Act of March 2, 1833 which as petitioner's counsel pointed out was an Act to -- to get around the nullification ordinance that South Carolina had enacted.
Now petitioner's counsel would have the Court read into the provisions of that Section as well as the Section as it now stands properly -- property illegally seized.
I don't believe there's any warrant reading into the present -- the predecessor for the present statute that turns the very purpose of the Act of 1883 or 1833, rather of 1833, was to retain in the District Director custody of property that he had legally seized for duties that were attachable to property being imported into the United States.
The State of South Carolina by its nullification ordinance, a decree that such duties were illegal, yes, but they were not illegal and they were legally seized properties that were seized to pay those duties.
The State of South Carolina didn't like that and it passed this nullification ordinance which would allow certain acts to be done.
One, it allowed for replugging to be applicable.
It would take the possession of his property that had been seized by the collector out of his hands.
It made him subject to a penalty of twice the value of whatever property he had taken.
Now, we submit that there's no reason to read into that section, the phrase that he now requests to be read in there that it only applicable to the property that was illegally seized.
We feel that it is applicable to all property.
Now, even though this property by that section is made subject to the orders of the District Court and decrees to the District Court, it provided that the property shall be very irreparable.
Now, the writ of replevin would only test possessions.
It wouldn't test owner -- ownership to property, but now instead of the writ of replevin being applicable, petitioner would have you hold that you can go in on a summary proceeding and determine title to property whereas Congress had said the District Courts could not entertain a writ of replevin.
Justice Felix Frankfurter: Mr. Roberts, before you proceed with the replevin thought, would you indicate what was embraced, what was accomplished by subject only to the order to decrees of the Courts in dealing with the 1833 statute.
What was had in mind for that provision?
Mr. Richard M. Roberts: I beg your pardon Mr. Justice?
Justice Felix Frankfurter: I just want to know, to what -- for what purposes that authorization if it maybe so called was put in subject only to the orders and decrees of the Courts of the Unites States shall be accepted, shall be deemed to be on the custody and subject only to the order of the -- dedication arise under the -- before we get to the modern form of the progentive statute.
To what kind of situation was this authorization of the -- to the Court to issue order and decree reference to the property?
Mr. Richard M. Roberts: I believe that it would have reference to the case where prior to this time.
Justice Felix Frankfurter: By the what?
Mr. Richard M. Roberts: Prior to the time of the enacting of this Section.
Justice Felix Frankfurter: 1833?
Mr. Richard M. Roberts: In 1833.
If another court, say a state court had taken jurisdiction could envision a writ of attachment prior to judgment that this means that it should only be the subject to the orders of the District Court but no court would have any power to enter a decree or order affecting this property that had been seized by the then collector of revenue.
Justice Felix Frankfurter: Do you mean that --
Mr. Richard M. Roberts: Collector of the custodies.
Justice Felix Frankfurter: On your -- on your suppositions you in that a prior judgment which is a matter of committee ought to be respected by the federal courts.
The District of -- the Federal District Court or the Circuit Court would have lead to let the property go out of its custody, is that it?
Mr. Richard M. Roberts: No.
I don't believe that the property had been seized after this Act that any state court couldn't have any order.
Justice Felix Frankfurter: I know it couldn't but -- I understand that, but it could go to the U.S.C., United States Court and ask that Court to release the property within its custody, is that it?
Mr. Richard M. Roberts: I don't understand that the -- that should go to the state court to the federal court.
Justice Felix Frankfurter: I'm thinking enlightenment.
I want to know up to what situations would be applicable the power of the Court having a custody of property not referable to anybody else to what situation would this empowering second half of that sentence apply but shall be subject – there is a negative and there is a positive.
If it's in the custody of property taken or detained under any running laws should not be reprievable but shall be deemed to be in the custody of the law and subject -- it shall not be reprievable.
That's the -- that's the prohibition.
That's the proscription.
Mr. Richard M. Roberts: Yes.
Justice Felix Frankfurter: And there's an authorization, it shall be subject to orderly decree of the Courts of the United States.
Now, what I want to know is to what would such an order, a decree be directed of property into the custody of the United States Court.
Mr. Richard M. Roberts: Well, it would be recited this would give, this district court jurisdiction over this property.
Justice Felix Frankfurter: To do what?
Mr. Richard M. Roberts: To order a return to the petitioner, if it's rightfully his Your Honor.
Justice Felix Frankfurter: Well, I thought that would be that, only asking.
Mr. Richard M. Roberts: Now, that's what he is asking.
Justice William O. Douglas: You've been saying --
Mr. Richard M. Roberts: But we say we should --
Justice William O. Douglas: You were set on a plenary suit.
Mr. Richard M. Roberts: Yes, Your Honor.
Justice Charles E. Whittaker: Isn't that all that's involved here?
Mr. Richard M. Roberts: Yes, it is Your Honor.
Justice Charles E. Whittaker: But it doesn't say anything about plenary or summary.
Mr. Richard M. Roberts: No, it does not.
But we do not believe that there is any authority for the Court to have some rejurisdiction.
Justice Felix Frankfurter: Well, but the authorization to surrender isn't qualified by anything in the language.
Now, what is there outside of the language that we such a gloss -- put such gloss on it?
Mr. Richard M. Roberts: I'm not sure that I understand your question.
Justice Felix Frankfurter: Well, I'm afraid I can't make it clear.
As I read it, the Court can issue an order.
It doesn't say anything about plenary or summary or anything else.
The Court issues all sorts of orders, Court issues, orders, petitions in the Second Circuit dealing with officers of courts.
Now, wherein is the limitation in this statute to plenary orders, orders powering the plenary suit as against order powering a summary suit?
Mr. Richard M. Roberts: I don't think it's in the statute.
Justice Felix Frankfurter: Where do you get it from?
Mr. Richard M. Roberts: From Rules of Civil Procedure, Your Honor, that authorizing --
Justice Felix Frankfurter: But that didn't say anything about it.
That merely says that if the general suits brought under the Rules of Civil Procedure.
Is there a specific statute dealing with property, that unusual thing, property into the custody of a Court and why do we have the inclusive statute?
I'm not saying it is.
I'm trying to find out.
Mr. Richard M. Roberts: I don't believe it is property in the custody of the Court.
It's subject to the orders of the Court in custody of the law.
Justice Felix Frankfurter: In custody of the law?
Mr. Richard M. Roberts: Yes, but not in custody of the Court, Your Honor.
If it were in custody of the Court --
Justice Felix Frankfurter: Do you mean if -- if it could be claimed on, that (Inaudible), that --
Mr. Richard M. Roberts: No, I do not mean that, Your Honor.
I mean that it's not in the custody of the Court for this reason.
If it were, then the District Director could do nothing with that property without going to the Court and getting a court order where he had legally seized the property.
If this section puts it in the custody of the Court, then he cannot take that property and apply it to the taxpayer's taxes or sell it in the pry of the closed proceeds to the taxpayer's taxes because if it's in the custody of the Court by the very nature of the term, the Court is the only power that can dispose of that property and deal with that property.
Justice Felix Frankfurter: Well then your answer means that if the -- if property were in the custody of the Court and that restricted and technical and intelligible sense, then the Court couldn't make summary disposition.
Mr. Richard M. Roberts: If it's in the custody of the Court, yes, Your Honor.
Justice Felix Frankfurter: Now it probably is in the hands of the custody in bankruptcy, in the custody of law and custody of the Court.
Mr. Richard M. Roberts: Leave us in the custody of the Court, Your Honor.
Justice Felix Frankfurter: But is there a specific provision dealing with summary dispositions.
Mr. Richard M. Roberts: Yes, but he must -- but he must go to the Court and get approval to self.
Justice Felix Frankfurter: Yes, he must get all that.
I mean, in fact, the (Inaudible) there is this right for which the petitioner is contending in this case, is that right?
Mr. Richard M. Roberts: By the Bankruptcy Act --
Justice Felix Frankfurter: By the Bankruptcy Act.
I -- is that in a very specific terms?
Mr. Richard M. Roberts: I'm afraid I cannot answer that, Your Honor.
It has certain specific terms, yes.
Justice Felix Frankfurter: Now, before going -- when the 19 -- from 1833 down to whatever it was 1930, there was no federal procedure, Rules of Federal Procedure, was it?
Mr. Richard M. Roberts: That is correct.
Justice Felix Frankfurter: Now, what was the situation?
Is there any material dealing with a cognate problem to the one now before the Court under the Act of 1833 before it became embodied, even the revised statutes or any of U.S. codes?
Mr. Richard M. Roberts: No, Your Honor.
Justice Felix Frankfurter: There is no --
Mr. Richard M. Roberts: This case is -- the Raffaele case in the Third Circuit that uses this section of the code as giving the Court jurisdiction, in giving it custody in the Court subject to the summary orders of the Court.
That's the first time in over a hundred years that the Court had found that that section gave a jurisdiction for this problem.
Justice Felix Frankfurter: In other words, the Third Circuit read it as unqualified.
My question put it to you is namely since we have a subject only for the orders in decrees of the Court, it can issue any order it pleases.
Mr. Richard M. Roberts: Yes, sir.
That case was presented on the injunction basis however and the petitioner here is asked who he would sue upon a reaction.
The Government concedes that he may sue the District Director and I would like to read from a recent decision of the Fifth Circuit dated March 15, 1960, Campbell and Usry.
Justice Felix Frankfurter: Campbell what?
Mr. Richard M. Roberts: Campbell and Usry, U-S-R-Y, there are two District Directors.
Justice Felix Frankfurter: Yes, two.
Mr. Richard M. Roberts: Versus Bagley, B-A-G-L-E-Y, number 17854.
Justice Felix Frankfurter: The Fifth Circuit in what date?
Mr. Richard M. Roberts: Fifth Circuit date March 15, 1960.
Justice Felix Frankfurter: March 15 or 16?
Mr. Richard M. Roberts: 15.
Justice Felix Frankfurter: 15.
Mr. Richard M. Roberts: 1960.
Justice Felix Frankfurter: Court of Appeals?
Is that at the Court of Appeals?
Mr. Richard M. Roberts: That's the Circuit Court of the Appeals in which they state --
Justice William J. Brennan: What is the number?
Mr. Richard M. Roberts: Number 17854 in which they state as to the first proposition this Court has recently said, quote, and they are quoting from the previous opinion of this, there is no longer any doubt but what where a District Director of Internal Revenue has levied upon the property belonging to one person in order to satisfy the tax liability of another, the true owner may obtain from the U.S. District Court an injunction against the District Director to prevent the sale of such property and that if the owner is not the taxpayer involved, such relief is not prohibited by 26 U.S.C.A 7421.
Now, the Government admits that this is outside the prohibition contained in the Revenue Code Section 7421 which prohibits injunction suits to restrain the collection or the assessment of taxes.
We concede that where we are grabbing another person's property that injunctive relief is properly granted against the District Director.
Justice Hugo L. Black: Under what Section?
Mr. Richard M. Roberts: Under the general equity powers of the Court, Your Honor.
The Section prohibits injunctions but we say that the Internal Revenue Code only applies to taxpayers.
Justice Hugo L. Black: You say the Government has consented to have that kind of suit (Inaudible)
Mr. Richard M. Roberts: We concede to that.
Yes, Your Honor.
Justice Hugo L. Black: Where they consented?
Where is the consent?
Mr. Richard M. Roberts: Well, as this Court pointed out in the Maule which – where the case they were discussing from Maule Industries Inc, that's the case they were holding from in this opinion.
They point out that the Revenue Code only applies to taxpayers and that the prohibition contained in the Revenue Code against the injunctive relief would only apply to one in the position of a taxpayer and would not apply to one in the petitioner's position here where he says he is not the taxpayer whose money we're attempting to take.
Justice John M. Harlan: What's the name of that case Mr. Roberts?
Mr. Richard M. Roberts: Maul, M-A-U-L --
Justice John M. Harlan: No, I meant the one that's the same.
Mr. Richard M. Roberts: Fifth circuit.
Justice John M. Harlan: Fifth circuit?
Mr. Richard M. Roberts: Fifth Circuit case is Campbell and Usry, U-S-R-Y versus Bagley, B-A-G-L-E-Y.
Justice John M. Harlan: Thank you.
Justice William J. Brennan: Mr. Roberts, is there some particular reason why the Government's is insistent on a plenary suit --
Mr. Richard M. Roberts: Your Honor, yes.
While we admit for the purposes of this argument that the New York law is well settled, that the property that is being levied upon or at least that the city says we've levied upon is the property of this taxpayer.
We also want to get the facts of just what like when did the breach of the contract occur?
What payments were there made before or after the filing the notice of leave?
Now, the Federal Rules of Civil Procedure recognized that when you're dealing with the Government that the Government does not and cannot act as fast as the normal litigant.
The federal rules gives the Government 60 days to answer whereas the normal litigant gets 20 and I'd like to point out that this defendant here would get 60 days rather than 20 days to act because a provision of the Rules of Civil Procedure makes -- one of the rules makes a district director, former district director a officer of the Court within the term of that phrase in the rules giving the not also court of the -- also the United States within the rules giving that person 60 days to answer.
It also recognizes upon appeal.
The Government has 60 days to know note appeal whereas the time could try litigants was less.
We say we are entitled to the time that the rules give us in the case of this sort.
To get the facts together, if a summary proceeding could be handled on 24 hours notice, there would be no rules applicable whatsoever.
Justice William J. Brennan: Well, discovery, is that something -- one of the provisions of the civil rules that you're particularly interested in?
Mr. Richard M. Roberts: Discovery, any rule that would -- yes, discovery to get us the facts that wouldn't be applicable in the summary proceeding if unless the rest of the rules are applicable.
Justice William J. Brennan: Well, could not the trial judge and appropriate representations make any act applicable in the summary proceeding?
Mr. Richard M. Roberts: You could at his discretion but if I understand the petitioner's position is, he doesn't have to make any of them applicable and that he can disregard the Rules of Civil Procedure in a case like this.
Now, we would --
Justice William J. Brennan: That's just an -- your insistence is a practical one --
Mr. Richard M. Roberts: Yes.
Justice William J. Brennan: -- that no other presents the best side of the Government's claim if there is any at all, you have to have the advantages under the rules of the time limitation of discovering and the rest of it.
Mr. Richard M. Roberts: That's all we're asking.
Yes, Your Honor and as we do, we're entitled to.
Justice Potter Stewart: Mr. Roberts, I'm not quite clear as to what time of the lawsuit you suggest the petitioner should bring.
This is -- this is the time of the suit that you -- that I understand that's been (Inaudible).
This isn't an injunction against the sale of property would be appropriate here at all, would it, of the properties.
Mr. Richard M. Roberts: The injunct -- is not against the sale.
No, Your Honor.
But injunction suits have been issued to border the return of money.
Now as to the appropriate proceeding that he should bring, the different courts vary on what they recognize.
The Ninth Circuit has recognized that you could bring a 2410 proceeding in this type instance, in the case you've just had whether claiming the lead.
Almost in fact went barely before a levy has served, a notice of lien is filed so that the Government would be claiming the liens.
The Ninth Circuit has also upheld the use of a civil proceeding against the District Director for a money judgment in the tight situation where the money has been paid over already covered into the treasury.
Justice William J. Brennan: Well, the fact here is, the money -- not money but the obligation has not yet been paid by the City of New York, anyway.
That's -- that --
Mr. Richard M. Roberts: That is correct.
So that --
Justice William J. Brennan: Actually the collector has nothing except a notice of lien filed with the City of New York, I guess.
Mr. Richard M. Roberts: That is correct.
Justice William J. Brennan: Although I -- there has been some stipulation that the money has been paid and the bonds --
Mr. Richard M. Roberts: When he was paid into the clerk of the Court and (Inaudible) above our liens has been paid out which is really what was the alternative prayer relief in this case, the alternative prayer relief.
Justice Potter Stewart: Will the stipulation affect our problem here?
Mr. Richard M. Roberts: No.
Justice Potter Stewart: No.
It says if the money were still unpaid by the City of New York?
Mr. Richard M. Roberts: That is correct, sir.
Justice Potter Stewart: And nothing but a notice of lien?
Mr. Richard M. Roberts: Notice of lien filed notice of levy served on the session.
Justice William J. Brennan: Notice of levy by the collector?
Mr. Richard M. Roberts: By the collector served on the city.
Justice Potter Stewart: Now, where will the 2410 proceeding be brought?
Mr. Richard M. Roberts: Where would it be brought?
Justice Potter Stewart: To the state court of the federal court?
Mr. Richard M. Roberts: Federal court.
(Voice Overlap) only court that would have jurisdiction.
Justice William J. Brennan: Against the collector as a -- as a non official of the United States under the definition of official of United States, is that it?
Mr. Richard M. Roberts: Frankly, it could be brought against the United States.
I beg your pardon, it would have to be brought against the United States.
Justice William J. Brennan: Under 2410?
Mr. Richard M. Roberts: Under 2410.
Justice William J. Brennan: Yes.
Justice William O. Douglas: Well, I gather that you -- that you would conclude that if this suit had been brought, if a suit had been brought in (Inaudible) with the Rules of Civil Procedure then a motion for summary judgment might be entertained.
Mr. Richard M. Roberts: Yes, Your Honor.
If he feels there is no issue of fact as he does from his statement of New York law that he is entitled to this money he could file a motion for summary judgment.
But then 20 days after the commencement of his action although bit inconsistent, the rules are there giving a 60 days answer with allowing motion for summary judgment within 20 days but he could do it.
Justice William J. Brennan: But why if the Government came in with the kind of story you've just given us is the reason you want under the summary judgment section itself, there is authority in the Court to allow the recovery even.
Mr. Richard M. Roberts: Yes.
Justice William J. Brennan: The right -- the motion for summary judgment would get them anyway?
Mr. Richard M. Roberts: Well, if it would be on a legal issue there Your Honor, the motion for summary judgment, he -- he would be with no facts and dispute.
Justice William J. Brennan: Well, I know but you've indicated that if you could find out, you might find through our facts.
Mr. Richard M. Roberts: That is correct.
And I think we're entitled to find out whether there are facts and --
Justice William J. Brennan: Well, I suggest you could do that under the provision dealing with summary judgment now.
It would get very far if you were to make a kind of representation to the trial judge that you make us but you've got to find out what the respected dates are on the lien that was filed in relation to when the surety stepped in the shoes, the contact and all those things.
There is a provision on the summary judgment procedures I understand it, the discovery and those kind of things.
Mr. Richard M. Roberts: That is correct.
We would be entitled to this discovery there too.
But if I understand correctly, the District Court would have the discretion even in the summary proceedings to allow us discovery, but it will only be discretion with the District Court.
Now, I would like to point out --
Justice Potter Stewart: Just before we leave this, I'm little (Inaudible) but I don't quite understand the kind of action that you're suggesting the petitioner should have brought.
Am I right in thinking that the declaratory judgment action would not be available here if it involves taxation, is that correct?
Mr. Richard M. Roberts: Would not be, yes.
Justice William J. Brennan: Would not be available.
What would -- what kind of an injunction here -- who are you trying to enjoin?
This -- this man doesn't have any money, the defendant, the collector, does he?
Mr. Richard M. Roberts: No, they are mandatory injunctions, they lift the notice of levy.
If that's proper, I would be alarmed about it as to what we have done here actually.
The notice of levy doesn't ask that the property of the New Hampshire Fire Insurance Company be paid to the United States.
The notice of levy is a simple piece of paper.
It sets out the name of the taxpayer the amount of taxes that are owed and the cause of tension to the party who is served upon the fund and we're demanding from them all property of the taxpayer and any rights to property that the taxpayer may have.
It was the conservativeness of the City of New York that caused the petitioner here not to get his money.
It wasn't really the action of the District Director in filing the notice of levy.
Justice William J. Brennan: You can't blame the City of New York.
Mr. Richard M. Roberts: Well, of course.
Justice William J. Brennan: (Inaudible) the same fund.
No -- no suggestion on the part of the city I take it to bring little (Inaudible)
Mr. Richard M. Roberts: They could do that and our procedure is to move to dismiss because there has been no grant of jurisdiction, no waiver of sovereign immunity can intervene in a case in which the District Director feels that there is any title or property of the taxpayer involved.
Now here from the opinion of Judge Cashing in the record, there is more money owed to this taxpayer than the petitioner claims.
So the levy is valid.
That's one reason why we don't -- would not want the levy quashed.
The levy is valid to a certain amount, to whatever the city has, it belongs to this taxpayer, our notice of levy is valid.
Justice Charles E. Whittaker: Aren't you talking about matters here that relate to the merits when your question is wholly and solely whether or not you are in the court on the plenary suit?
Mr. Richard M. Roberts: That is correct, Your Honor, but I would like to point out that because of that, we say there's no reason to read in to this statute any exception.
Now, we're not -- we don't want to tell the Court that never could there be a summary proceeding of property deemed in the custody of the Court.
If it's deemed to be in the custody of the Court --
Justice Charles E. Whittaker: Under what procedure -- under what circumstances is it your idea that summary process may issue, may have issue only in an ancillary or a dependent manner or may issue as the institution of a new or fresh lawsuit in a federal court?
Mr. Richard M. Roberts: We say it's an ancillary and dependent matter, Your Honor and that it held by the Third Circuit in Raffaele that this section gave the District Courts jurisdiction to summarily determine rights of the property that the courts inconsistently in the cases cited, has consistently found that the action was a dependent action, it wasn't a independent action.
It was an auxiliary and dependent action for the return of property.
And it wasn't until the Third Circuit in Raffaele saying that -- they said any court said should the Court could summarily determine property rights and rights to property under this section of the code.
We submit that the Circuit Court and the lower court were correct in this case and that they should be affirmed.
Justice Felix Frankfurter: May I ask one question before you sit down?
Why else should the federal -- the Rule of Federal Civil Procedure, the governing rule for that civil act, a civil court be intimidated rule of the mayor of the State, is that right?
Mr. Richard M. Roberts: Yes, Your Honor.
Justice Felix Frankfurter: Do I then understand that the predecessor act of the present 1833 statute that under that, whether you could or could not have a summary proceeding that a petitioner as against the federal act in such a decision that (Inaudible) would have depended on the local law and so as near as maybe, the nearest maybe for the Government.
Because otherwise, you would have to say that the Rule of Civil Procedure or -- then you would have to say that the Rules of Civil Procedure introduced a limiting factor as to the procedure allowable under the 1833 Act insofar of any state procedures adopted by the federal courts tipping in that State allows such state procedures, am I right about that?
Mr. Richard M. Roberts: Accepting the conclusion that the state court would have had summary jurisdiction over property, yes Your Honor.
I can think of no proceeding --
Justice Felix Frankfurter: Yes, (Inaudible) what is the yes?
Mr. Richard M. Roberts: You asked me as I understood your question, prior to the Rules of Civil Procedure, the District Court would have adopted whatever procedure had been in the state courts.
Justice Felix Frankfurter: Nearest maybe.
Mr. Richard M. Roberts: And if the state court had allowed a summary proceeding to determine property rights, then --
Justice Felix Frankfurter: A probable situation?
Mr. Richard M. Roberts: Yes.
And what we're saying then is that the rules would cut down on that right to a litigant.
As I understand, that was your question.
Justice Felix Frankfurter: Yes.
And your answer is yes, it could've.
Mr. Richard M. Roberts: It is yes if you -- if your assumption is correct that a state court had summary power over property, I don't know if any proceeding where the state court has summary power over property that is not considered in the custody of the Court.
It did under the old -- under the writ of replevin.
It could determine possession, but I'd like to point out that that was only possession, Your Honor and not title.
You still had the plenary action to determine the title.
Justice Charles E. Whittaker: Well, but you had in that case to bring the (Inaudible) into Court, isn't it?
Mr. Richard M. Roberts: Yes.
Justice Charles E. Whittaker: Under the writ?
Mr. Richard M. Roberts: Yes.
Justice Felix Frankfurter: That was my question.
What you're saying is a hypothetical question that have no practical application?
Mr. Richard M. Roberts: As I understand the law, it would have none, yes Your Honor.
Chief Justice Earl Warren: Very well.