Petition — Silverman v. United States
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Supreme Court, U.S.
FILED
80-804 NOV 18 1980
MICHAEL RODAK, JR., CLERK
IN THE
Supreme Court of the United States
October Term, 1980
DoROTHY SILVERMAN, Administratrix, Estate of FRED R.
SILVERMAN, Deceased,
Petitioner,
VS.
UNITED STATES OF AMERICA,
Respondent.
Petition for Writ of Certiorari to the United States
Court of Appeals for the Ninth Circuit.
FALCONE AND FALCONE,
By A. V. FALCONE,
416 West Eighth Street,
Suite 910,
Los Angeles, Calif. 90014,
(213) 627-7104,
Attorney for Petitioner.
Parker & Son, Inc., Law Printers, Los Angeles. Phone 724-6622
Supreme Court of the United States
October Term, 1980
DOROTHY SILVERMAN, Administratrix, Estate of FRED R.
SILVERMAN, Deceased,
Petitioner,
vs.
UNITED STATES OF AMERICA,
Respondent.
Petition for Writ of Certiorari to the United States
Court of Appeals for the Ninth Circuit.
Questions Presented.
Dorothy K. Silverman, Administratrix of the Estate of
Fred R. Silverman, Deceased,’ respectfully prays that a writ
of certiorari issue to review the judgment of the United
States Court of Appeals for the Ninth Circuit entered in the
above Appeal on June 16, 1980 (Appendix B), after peti-
tioner’s timely Petition for Rehearing En Banc was denied
on August 21, 1980 (Appendix C).
References to the record will be abbreviated.’
The key and general question and issue to be determined
is the construction and application of the federal statutes of
limitation on federal estate taxes in decedents’ estates in all
the states and particularly in California and all other states
'Los Angeles Superior Court No. P 472745.
*It is a 3 volume Clerk’s Transcript. References will be I-R and
II-R to the opinion — Op; to respondent’s opening brief on appeal
— Ob; to petitioner’s brief — RB; to the Appendix — Ap., followed
by page numbers.
7 >
having similar probate law. First impression points and
clarification are critically involved.
In this case, the California estate has been pending since
1963, respondent has had full knowledge and Special Notice
(it requested) of all proceedings therein; it made its as-
sessment for estate taxes in 1964 (26 U.S.C. 86501(a)), but
neither levied nor filed ‘‘a proceeding in court’”’ to collect
the taxes within 6 years from the assessment (26 U.S.C.
§6502(a)(1)). It did not file such action until December 6,
1976, in this case, more than 12 years after the assessment,
although respondent finally admitted (after years it con-
tended otherwise), and although the Court of Appeal holds,
respondent could have filed the action ‘‘immediateiy’’ after
the assessment.
The Court of Appeals holds, in the first such construction
of the federal statutes of limitation:
That although 26 U.S.C. §6502(a)(1) provides, disjunc-
tively, that the ‘‘tax may be collected by levy or by a pro-
ceeding in court, but only if the levy is made or the pro-
ceeding begun — (1) within six years after the assessment
of the tax or the period fixed by a written agreement of
extension’”* and although 26 U.S.C. 6503(a) provides,
again disjunctively, ‘‘the running of the period of limitations
provided in 6501 or 6502 on the making of assessments or
the collection by levy or a proceeding in court . . . shall
be suspended for the period during which the Secretary or
his delegate is prohibited from making the assessment or
from collecting by levy or a proceeding in court.’’ (emphasis
added) and although 26 U.S.C. 6503(b) provides that the
‘‘period of limitations on collection after assessment pre-
scribed in Section 6502 shall be suspended for the period
the assets of the taxpayer are in the control or custody of
the court in any proceeding before any court of the United
States, or of any State, or of the District of Columbia, and
*That means a civil action in a court of general jurisdiction.
“There was no such agreement.
ry
iil
for 6 months thereafter and for 6 months thereafter’’
(emphasis added):
The Court holds the statute of limitation is completely
suspended as long as respondent is prohibited from doing
both, i.e., from levying as well as filing an action, and
although it could have filed the action immediately after
assessment, unless it could also levy the suspension con-
tinues.
It said ‘‘Both must be available before it can be said that
collection procedures are unhindered’ (Ap. 10).
First, that is diametrically opposed to respondent's
contentions made in the District Court.”
The Court’s construction was substantially influenced,
if not based, upon the Court’s consideration and interpre-
tation of how the Secretary and his delegates consider and
apply 6503(b).
Respondent's position not only in the instance noted, but
its other explicit concessions in the record (after years of
consultation and research on the matter as to which it should
have been well versed) is contrary to the Court’s construc-
tion.
The assessment was timely made November 27, 1964;
the 6 years under 6502(a)(1) expired November 26, 1970.
6503 is an entire section with subparagraphs (a) through
(g). 6503(a) provides for suspension of the limitation period
in 6501° (assessment) and 6502 (collection by levy or suit)
It stated on its motion for summary judgment its clear statutory duty
regarding the collection of taxes, (I-R 59, Il 20-25) ‘‘the basic purpose
of the statute of limitations is to require the government to act pursuant
to its assessment within the 6 - year period. The Government must
either attempt to reduce the property subject to the general lien of
Section 6321 of the Internal Revenue Code (26 U.S.C. $6321) to its
possession by means of its levy powers, or it must proceed in a court
to collect the tax’’ (emphasis added).
°6501(a) provides the assessment shall be made within 3 years after
the return (706) is filed.
-%
+3
iV
only when the assessment or the levy or the suit are pro-
hibited. This is logically related to 6503(b) and it is sus-
pended while the taxpayer’s assets are ‘‘in the control or
custody’’ of a court. It is implicit in the last clause that is
because the nature of the control or custody is such the
assessment or the levy cannot be made or a suit filed.
Implicit in the ‘‘control or custody’’ of 6503(b) is that
it be of such a nature that the assets cannot be reached and
that includes by suit. If they can be reached by suit, then
it is not that obstructive control or custody.
The general importance of the matter is apparent from
its universal application of all decedents’ estates.’
A more synoptic statement of the questions involved is
most difficult in view of the broad scope of respondent’s
contentions, and the variety of factors which are determi-
native of two important points.
Those two points are, first, the California Probate Court
in California decedents’ estates, generally, does not have
such ‘‘control or custody’’ as to obstruct or prohibit civil
actions based upon post-death obligations (federal estate
taxes are such) or the imposition of a variety of liens and
levies; (2) federal taxes, including estate taxes, are the
creatures of federal law and all substantive and remedial
rights involved are exclusively determined by federal law;
federal law regarding federal estate taxes is supreme, and
is not affected by any state law as to procedure (United
States v. Summerlin (1940) 310 U.S. 414); exemption of
property from federal taxes is determined exclusively by
federal law (United States v. Mitchell (1971) 403 U.S. 190);
the only property exempt from federal taxes is property so
declared exempt by federal statute (26 U.S.C. §6334(a)
There is the universal policy that such estates should be closed
expeditiously for the benefit of the survivors for obvious reasons. How-
ever, respondent considers the policy in bankruptcy of the financial
rehabilitation of the bankrupt of an importance which allegedly does
not exist in probate proceedings (OB 33).
through (c)); assets in a decedent's estate are not listed as
exempt property by federal law.
Also necessarily involved, because of respondent’s com-
plete misstatement of it, is the California law regarding
decedent’s estates and its relation to and effect on federal
estate taxes.
Most importantly involved is the special status of the
estate in this case, in that on March 12, 1968, petitioner
recovered judgment in equity adjudicating her the owner
of all the property.”
The District Court, upon the record, determined that the
estate in this case did not involve such ‘‘control or custody”’
in court as to prohibit either suit or levy and respondent
could have sued or levied within the six years.
Among the omissions in the opinion, the Court did not
decide the issue of whether there was such ‘‘control or
custody’’; or whether levy could be made within the six
years; it was completely silent as to the special status of this
estate under the equity judgment.
Respondent insisted that its claim for the taxes filed in
the estate was the ‘‘commencement of a proceeding in
court’’ which tolled the six year statute of limitations. Cal-
ifornia law is that federal estate taxes do not come within
the California probate creditor's claim procedure; that said
procedure only requires claims based upon decedent's life-
time obligations; that federal estate taxes are not such.
Instead of so stating, thereby giving a clear guideline as
to all future federal estate taxes regarding California probate
estates, the opinion concludes that filing the claim did not
‘commence a proceeding in court, but did not state that no
such claim was necessary and did not come within the
California creditor's claims statutes.
*The judgment effectively ‘‘removed"’ all the property from the usual
probate estate proceeding. Probate estates involve testacy, intestacy,
testamentary and some inter-vivos trusts. None of them existed in the
estate ajter the equity judgment.
vi
That leaves a clear implication to future parties such
claims are required and will lead to repetition of the history
of this case.
This Court’s consideration of this case will establish a
landmark guideline for the benefit of all decedents’ estates
as well as respondent.
On July 24, 1975, respondent’s counsel, Gregory A.
Robinson, appeared on a hearing in the estate in which the
Court announced orally an order and direction to petitioner
(repeated in its written order of July 28, 1975) by which
she was ‘*. . . instructed and authorized to take whatever
action may be necessary to oppose the claim of the United
States Government for taxes against this estate.’’ (I-R
127-9.)
Parties.
They are petitioner, who was defendant-appellee and
respondent, who was plaintiff-appellant.
Vii
TABLE OF CONTENTS
Page
Questions Presented ...............sccccscsccescesesceseecaes i
PN 2 ices. supethl idnatsvasatovddonsknunderseuuGeheacsonsess vi
Opinions Below .............cscscssecenesesencseecscseseeesees l
I kei ailoses ocadened (navedbasledcnunauccdsanece l
RE DONO oi. occ cesdeusesssancccdesensonssecoabons stunt’ l
Statement Of the Case .........cccccscoscccccccccocessccesencs |
1. Relevant Background ..............ccccccccccsesceees l
2. Respondent’s Knowledge of All Estate
PROOOIGUIEE os occ can ccccsscsncccccdncstecersocssoncave 3
(oe) 4, | een pEErErererrrrrre tire rr rys 5
TR IED isin seca cssacnesdscsceciccsccenscesenss 5
ATQUMENE ......c0cceccccccccscccscccrsccesceccsencoescosssccees 6
1. Respondent’s contention regarding its claim
NE A TE OUND as) ccs scoscisscnsasnveasscesesss 7
2. Respondent’s argument regarding the statute
EID fons Lie inthosnvanes svnvacteniavus seues 10
3. Federal Law governs Federal Taxes ........... 14
A. FUR CUI ins enesidcecasecarsersscessctensscuses 16
COMING sks son tk chteds dacenbcnteeitebnaresussniaanbastians 20
INDEX TO APPENDICES
Appendix A. Opinion of the Court of Appeal for the
De COIIEE ia iiicocvncecicutheenesiastacaches App. pp. 1
Appendix B. That Court’s Judgment .................++ 13
Appendix C. That Court’s Order Denying Petition for
Rehearing En Bane .............cccccccccccsscecessessvese 14
Appendix D. Relevant United States Code Sections
CHOCO SEHOESHEESHSHEHEHESSEEHEHEHSHEHHSHEHSHEHHEHEHEHEHEHHHHEHHHEHHHEHEHEHHEHHEHHEHSHHHEHEHeeHee
Vili
Page
Appendix E. Relevant G.C.M. Cited by Respondent
COU TOR CANS OF PN isis snc ss ccectceatsncondnovecseyes 20
Appendix F. Relevant Treasury Regulations Cited by
Respondent and the Court of Appeal .................. 22
1X
TABLE OF AUTHORITIES
Cases Page
United States Supreme Court:
Aquilino v. United States (1960) 363 U.S. 509 ........ 16
Bowers v. New York & Albany Co. (1927) 273 U.S.
el sis dw cdietsiine saad sdbsecesdecnce 14, 20
Markham v. Allen (1945) 326 U.S. 490 ................. 14
Rock Island A & L Rd. v. United States (1920) 254
A hE iy Sc vodanossdaeseesTévccesebscane 6
United States v. Mitchell (1971) 403 U.S. 190 .........
Te Ln Ls oe ws acinus bhderees seuee ses iv, 8, 14
United States v. Summerlin (1940) 310 U.S. 414 ......
ksaaies ns chen OMe Fee
United States Courts of Appeals:
Gallivan v. Jones (9 CA) 102 F. 423 .............20..000: 12
Hobert v. Penrose (1930) 31 F.2d 577 ................... 6
Hoye v. United States (9 CA 1960) 277 F.2d
ce ck ccekeicdénivpeneeseves 15, 16, 18
McAuley v. United States (9 CA 1975) 525 F.2d
el cc ssakpabendcoesecevnsecoqscnes 7, 18
Seattle Association of Credit Men v. United States (9
ee ND se cncecsescdiceesecsooneescces 16
United States v. Besase (Ohio 1970) 373 F.2d 120.... 15
United States v. Heffron (9 CA 1947) 158 F.2d 657,
ee I ceccweeeeednbenadseoscee 15
United States v. Overman (9 CA 1970) 424 F.2d
aude ondviedeaess 15, 16
United States v. Peoples Trust & Savings Co. (7 CA
TE Sond d cin addtdbesbenncinesevacere cies 14, 15
United States v. Saxe (1 CA 1958) 251 F.2d 316...... 10
Federal Supplement Reporter:
United States v. Cameron Construction Co. (N.Y. 1965)
Pini din the nbea VBvkks a ncabbvclddebteadadeaie send 15
United States v. McCann (Cal. 1966) 259 FS 632 ..... 7
United States v. Mosolowitz (1967) 269 FS 12......... 14
United States v. Vibradamp Corp. (Cal. 1966) 257 FS
OW Risin dks cA AMAA Aad aS A bain ibaghbadacsiGoedh yttséiwkcasiect 20
United States Tax Court:
United States v. Augsberger (1978) 78-1 U.S.T.C. par.
A, CF oka Rist rcdderdabeesscidclecibasteestas 18
California Supreme Court:
Berger v. O’Hearn (1953) 41 C.2d 729, 264 P.2d 10
disectpoignsnd ovenchviedsavecesienbebpesvocteys Mabnrnseteriases 10
PAs vs winncvbndebiddeorasetwonvedadnindesisbeatngrnssionupeds 13
aha Wen secaverebalpscadctdsassentanthdhetipleeyhiadscaueans pyrene 13
p bbtek Lan cbidins Ge bbibatakbdce sh dadalaCaviecdsssnubeséaapaalan 11
Rolls, Estate of (1924) 193 C. 594, 226 P. 608 ........ 14
Times-Mirror Co. v. Superior Court (1935) 3 C.2d 309,
Oe Adee BOE enki vbndiedd ngt vada dovdidect iiidexenseteati 14
Waterland v. Superior Court (1940) 15 C.2d 34, 98 P.2d
BEF iin cnddicavenscdantdh fy icalaricceusstepeaeeebebeks 3
Page
California Courts of Appeal:
Smith Estate of (1953) 122 CA.2d 216, 264 P.2d 638
Pee cecleh ove cs, sb eee ie ced maepeetete 9
Mears v. Jeffry (1947) 80 CA.2d 610, 188 P.2d 294
sSbeb Diab a enthaochecncesy clea nehGnemuiads sicepesboneawaauen 11
Silverman v. Union Bank (1971) 21 CA.3d 357, 98 CR
TE SRS PROS 4 8 13) 0 TENE ENN Ae NECN Fy 7 3, 13, 14
Other State Courts:
Feinberg, Matter of (1966) 18 N.Y.2d 490, 223 N.E.2d
DU ic ays Rc AV OAK s 5. 0pc donakbtaabanes expences see 7,9, 10, 18
Statutes
United States Code:
as MMI. <5 shina da Chk avadeuireas cde th Vous tndes csemuase ili
Me Ua ED ic siirdadaac ce ndoevnasicccsqinetei 1,8, 15
RE aR aocicaw vnc aesqbtbedesdcusvacteevvcncdcsuneasas l
26 U.S.C. 6334(a) through (Cc) ................. iv, v, 1, 15
Bee I A I sos cate Guicah ath avod¥sbavccencussseaevans iii, 19
Be a EY Sas Sledececcdaécandsckeoeccnes: ii, iii, 1, 19
Fo en RO Ree Ors CRON eee Pere ili, 19
See, MICE vita sn cvshshidvocsasebenkocs ii, ili, |, 6
PE I oc iidod ds cdvccuacansasabaaesaacniiedes 8, 19
EE ask PY ce cccehatid giednncedscesncecgurbenmaie iii, 1, 19
BR Aes TILED auicnds nas'ovinwsdndauiede teascepebans ft
Se ie Aes; SEED issn saccpnccch eimadhdeuanpenbeneds ii, 1, 19
y Bip A oe. | ii, iii, iv, 1, 7, 17, 18
BE tn EE iia cvavestocdedcnadgousnvkn (pbeabiebas ete iii
By Ge ED «5 ss cn dadkabbicnspacnandesonciunenpdnene iii
ee hhh veadtdcveddacodecbsanasvaneseenecatans ili
Be EE aide SUMED ic vchasen da tetheessvcuhdnnah cnctabaveteats lil
Be te, TIED ars dsdivecicadnsiecssespcencehiqasindiintand ill
EN cnc etcccckasipubcissseaptacesteden Roa Pa l
IIE, WD codes bo in ndnehacuamcbeindsebidson til l
II cocicti Ml inks rs scblee cadence socesaacnne l
SL INET ns von aiebeneadihbkibindsbhbdaasbandidepenes I
NEGA SEED :b.1.6; ds. ada cniinkponthecnescnsnstbeibesmedl l
SUITS, WEES GAZA Comping boacsensescebianceuanetbabberenctnd l
III: MINI. os cnc nod cecs scensqneocbanmboiehesduiedmndenal l
California Codes:
Se Oe ee FOIE IID cc cvccccccccccndecccwecececiios 10
Coomreemen Prmmate Cats BEL. E ........ccccccccscccccccccsce 3
California Probate Code 707 ..........0..cccceccccccsccses )
IND NUN REED FING LD ccccccccecccniscsscccnccccece 9
EE ID CEE PII sccntcvcccéscccbcnccsccocdssces 9
California Probate Code 950 .............ccccccccccccceeees 15
California Poobate Cote 9746 ccciiicceciiccnciiicceccccctes 20
Rules
Supreme Court Rules:
OD Cee a. sc naeenreneneentsiekeesessaen’ l
California Rules of Court:
I ich Mee eee iik a tee ina sckuchddeduebbuanis 3
Text Books
20 Cal.Jur.2d §§11-14, pp. 35-41-0020... cece 12
RT CTA. BUF chivas cacceebaincsecdiesioustebadeces 12
ae CL IA: TOP iin sda i cescccetsiliniectpeecineens 10
Be OD nie kc ckivaicandecinscussentbandean 13
Be rE PG I RE Sic kcdcccndesiectacsccotdd 12
24 Cal.Jur.3d §100, p. 196, fn. 4 ........... eee. 11, 13
xiii
Page
2A Cal. Jur.3d $$100-109 ..........ccrecesvencsscccecsesoeens 12
24 Cal.Jur.3d §101, pp. 196-7 .........:eceeeeneeeeeeeeees 11
25 Cal.Jur.3d §§60-61, pp. 131-4 .........c cece eeeee eee es 12
25 Cal.Jur.3d §609, p. 56, m. 7 ......cceceeeeeeeeeneeeenes 8
Fk IY ve isch csevesshosniacdiudsganssvecsersins 9, 10
BE Ce UN oes inch puvcacevsivavenstossssgvaeenes 9, 10
1 Condee, Probate Practice, §745, p. 471, n. 2 ........ 12
1 Condee, Probate Practice, §745, p. 472, n. 17 ....... 8
1 Condee, Probate Practice, §794, p. 519 ............0+: 12
2 Condee, Probate Practice, §1287, p. 230-1 ........... 8
Miscellaneous
G.C.M. 9991, XI-1, Cum. Bull. 135 .......... 7, App. 20
Treasury Regulations on Procedure and Administration
(1954 Code) (26 C.F.R.) §301.6331-1(3) ..... App. 22
Treasury Regulations on Procedure and Administration
(1954 Code) (26 C.F.R.) $301.6503(b)-1 ............-
iw, peeee
Opinions Below.
The District Court did not write an opinion. It entered
Summary Judgment for petitioner. (I-R 254).
The opinion of the Court of Appeals (Appendix A) is
reported in 621 F.2d 961.'
Jurisdiction.
This Court’s jurisdiction is invoked under 28 U.S.C.A.
§1254(1). This petition is timely filed pursuant to 28
U.S.C.A. §2101(c) and this Court’s Rule 20,4, i.e., within
90 days after the denial of the timely Petition for Rehearing
on August 21, 1980.
Jurisdiction of the Court of Appeals is based on 28
U.S.C.A. $1291; that of the District Court in the first in-
stance is based upon 28 U.S.C.A. §§1340, 1345; 26
U.S.C.A. §§7401, 7401(a) (III-R Supp 271).
Statutes Involved.
Directly involved on the appeal and in the opinion of the
Court of Appeals are 26 U.S.C.A. §6324(a)(1), $6334(a)
through (c), §6501(a); §6502(a)(1), §6503(a) (b).”
Statement of the Case.
1. Relevant Background:
Petitioner and decedent were married November 10, 1932
until his death on August 18, 1963. On December 16, 1943,
they executed a contract to make irrevocable wills leaving
all their property (ail community) to each other and ap-
pointing each other executor and executrix without bond.
They made such wills, and petitioner relied on said contract
and wills. However, decedent went to the trust department
‘It reversed the judgment and remanded to determine whether under
the opinion respondent **is entitled to prevail’ (App. 4).
°*The same are set out in Appendix D, including all $6334 and all
$6503.
iw’, jae
of the Union Bank regarding a new will, was referred to
an attorney he had never met and never saw since, and
executed a new will dated May 2, 1958. It did not leave
all the estate to her, but only part (the other to his sisters
and nieces); it did not appoint petitioner executrix, but the
bank as executor; the estate consisted principally of Union
Bank stock, traded over the counter; the will created a tes-
tamentary trust (never effective) with the bank as trustee
and ‘‘froze’’ the stock for 5 years. The bank petitioned to
probate the will and for its appointment as executor. Before
the hearing, it was informed of the contract but consistently
refused to recognize it. The will was admitted and executor
appointed on September 27, 1963. The assets consisted of
10,000 shares of the bank stock at $79.79 per share at death
and in excess of $100,000 cash, all in decedent’s name. On
February 7, 1964, a dividend of 2,000 shares was received.
Petitioner had no funds at all; no bank account; all the assets
were in the possession of the bank; no estate income was
ever distributed to petitioner during the executor’s tenure.
She was compelled to obtain a limited family allowance in
1964. She was militantly opposed in that and all proceedings
by the other heirs and the executor (who should always be
completely impartial). Petitioner filed two actions in the Los
Angeles Superior Court, one to quiet title to the stock and
the other for quasi-specific performance of the contract,
against the executor, as such, and the other heirs. All mil-
itantly opposed her. On March 12, 1968, she recovered an
equity judgment, mentioned supra.”
*The judgment adjudicated the contract valid, the will in violation
of it and of no force or effect against her as to its dispositive provisions,
but effective as to the appointment of the executor; it took under the
contract and not the will; the executor held all the property for her
under a constructive trust and all to be distributed to her under the
contract and not the will.
Se
Neither the executor nor the other heirs appealed, and the
judgment became final as to them 60 days after its entry."
Petitioner appealed only from that portion of the judgment
which failed to enforce the part of the contract as to her
appointment as executrix. Pending the appeal, she petitioned
for removal of the bank and her appointment as executrix
and the court so ordered on June 27, 1969. Under the equity
judgment she owns the assets individually. On her appoint-
ment as administratrix, she became the ‘‘trustee’’ of the
constructive trust in place of the executor and the interests
of the ‘‘trustees’’ and ‘‘beneficiary’’ vested in her.
On appeal,” the court affirmed with a pragmatic decision
that the appeal ‘*. . . as a practical matter, deals solely with
the fees paid or yet to be paid for services rendered by the
hank as executor and its attorney prior to its resignation”’
(emphasis added).°
At petitioner’s request, the assets were deposited in a
depositary account (Pr. Code 541.1).
2. Respondent’s Knowledge of All Estate Proceedings:
As noted, on October 20, 1965, respondent filed a Re-
quest for Special Notice of all estate proceedings; it admitted
it received all of them (I-R 50).
These included the Order of June 27, 1969 appointing
petitioner administratrix; Order of August 28, 1969 making
partial distribution of one-half the stock and $50,000 cash
to the petitioner individually, order of June 1, 1972 trans-
‘California Rules of Court, Rule 2(a).
‘Silverman v. Union Bank (1971) 21 CA.3d 357, 98 CR 332. Of
special interest to lawyers, judges and law professors, is the unprece-
dent adjudication of a contract as completely valid but failure to enforce
it completely, although within equity jurisdiction.
***Resignation’’ is incorrect. Faced with the petition to remove it,
the executor offered its qualified resignation which was ineffective
(Waterland v. Superior Court, 15 C.2d 34, 98 P.2d 211).
lied
ferring $35,000 to petitioner’s account; the executor’s and
its attorney’s accounts and petitioner’s objections, which
led to the order of May 16, 1973 awarding a total of
$54,300.60 to the executor and its attorney principally for
extraordinary services rendered on their behalf and most of
which was rendered after their removal (contrary to settled
law and the limited period fixed on her said appeal) and
90% of ordinary statutory commissions and fees to them on
(the erroneous basis the estate was 1/10 from closing!) Also
included was the order awarding the executor’s former at-
torney $2,250 for services rendered regarding the said dis-
missed appeal (after his removal and on his own benefit.)
Also petitioner’s petition (for instructions as to closing the
estate) heard on July 24, 1975, attended by petitioner, her
business advisor and her attorney, and Robinson for respon-
dent. Robinson heard the oral order to oppose the taxes.
Respondent was always familiar with the estate and the
executor’s banking activities, the performance of his stock
which decreased from $79 per share at death to about $25
at one time.
After the hearing on July 24, 1975, said persons conferred
in the hallway.’
Petitioner's attorney discussed the statute of limitations, requested
resolution, inquired whether it could be stipulated if petitioner paid
under protest on the basis of a claim for refund she would not be
jeopardized to raise the statute of limitations defense; Robinson stated
he would determine it but suggested the preferable solution would be
for respondent to sue; petitioner referred to the taxpayers’ inability to
file for declaratory relief or other action; he stated the 706 was based
on then facts and figures and if finally determined the taxes were not
barred, the 706 would be amended and supplemented to include all
subsequent deductions; Robinson stated that would be done when
respondent sued; however, William J. James, respondent's attorney in
the District Court, stated he would oppose that. There have been sub-
sequent orders for funds with special notices to respondent.
ies
3. The Pleadings:
These were petitioner’s original and amended complaints*
and petitioner’s answer to the amended complaint.”
4. The Proceedings:
As noted, they were all pleading and motion proceedings,
ending in petitioner's summary judgment (I-R 56-II 255)
The District Court, as partially noted supra, determined
that to continue the suspension ‘‘during the pendency of a
state probate proceeding could allow the United States an
unreasonably long time in which to collect its taxes — in
this case, for example, perhaps over 20 years’’. (II-R 246)
The estate has been pending for more than 17 years,
cannot be closed pending this tax controversy.
' There were for years considerable communications be-
tween counsel, petitioner’s attorney urging resolution of the
issue of the statute of limitations.”
“The only difference was in the amount of the assessment. It alleged
assessment, filing of claims for the taxes in the estate and ‘‘at all times
since the assessments . . . the assets . . . have been in the custody and
control of the Superior Court.’’ (I-R 1-8)
*It traversed material allegations of the complaint and alleged five
affirmative defenses: 1, no claim stated; 2, the 10 year statute of lim-
itations; 3, the 6 year statute of limitation; 4, equitable factors and
estoppel (not laches); 5, if finally determined the action was not barred,
request to amend and supplement the 706 to include subsequent de-
ductions and credit. (I-R 9-16).
These included the conference on January 30, 1974 when respon-
dent's attorneys stated if the taxes were not paid by February 24, 1974,
respondent would sue. Nine letters from April 29, 1974 to December
30, 1975 in which respondent argued its claim had been approved by
the probate court. It persisted in this contention, but finally admitted
its claim had not been approved. (I-R 36-37) Petitioner's attorney,
wrote Robinson on March 25, May 29, December 14, December 30,
1975 concerned about resolution. The December 14 letter stated ‘‘the
government has had years to proceed and it has been months since you
advice it would proceed.'’ The December 30 letter stated ‘‘I’ve ex-
pressed my opinion several times regarding the Government's delay
and disregard of my client's rights in the administration of the estate’’.
24 days short of one year later this action was filed.
Respondents answered interrogatories, that it had no record of ap-
pearances on its behalf (although acknowledging receipt of Special
Notices) including Robinson's appearance on July 24, 1975, noted
supra. Yet the correspondence between counsel referred to that ap-
pearance and the order of July 28, 1975 stated it.
pe a.
Argument.
This case was decided and is reviewable on the record
before the District Court.
The opinion was based upon serious errors of fact of
record and of the applicable law, including complete silence
regarding, and omission of, determinative facts as well as
serious questions of law fully submitted.
These were specified in petitioner’s Petition for Rehearing
En Banc. These will be noted in consideration of the opinion
infra. However, noted here for focus, this case involves the
most extreme dilatory tactics by appellant (RB 1-7), its
knowledge of all proceedings in the estate (RB 7-10), its
change of position (and conflicting statements) as to the
facts of record and the applicable law, including regarding
federal estate taxes, of which it is and should be correctly
informed (RB 10-13); the history of extreme unfairness ana
injustice to the petitioner, the widow, including the relevant
conduct of the executor and respondent (RB 4-13), the eq-
uity judgment, petitioner’s affirmative defenses, and peti-
tioner’s submission as an issue the standard of conduct in
litigation equally applicable to the government as well as
to individuals and lay entities (RB 12).
In that regard, petitioner submitted, “‘Men must turn
square corners when they deal with the government.’’ Jus-
tice Holmes in Rock Island A & L Rd v. U.S. (1920) 254
U.S. 141, 3 and ‘‘If men must turn square corners, when
they deal with the government, the government ought to
turn square corners when dealing with its citizens.’’ Hobert
v. Penrose (1930) 38 F.2d 577, 81.
Appellant raised two principal points on appeal: 1, filing
its claim with the estate commenced a ‘proceeding in court’’
on October 20, 1965 and was within the 6 year statute
(6502(a)(1)); 2, the 6-year statute was suspended because
the assets of the estate were ‘‘in the control or custody’’ of
ce, AO
the court and said suspension began with the assessment
and continues to the end of the administration of the estate.
The last statement is incomplete since 6503(b) states the
suspension is during the time of the ‘‘control or custody’’
of the court, and 6 months thereafter. According to respon-
dent, that would mean six months after a decedent's estate
was closed.
No estate could be closed under such construction since
after being closed, the addition of the 6 months thereafter
is meaningless.
Respondent has repeatedly contended that ‘‘control or
custody’’ under 6503(b) runs from the beginning of the
estate proceedings to their close. It did so unsuccessfully
in various cases including McAuley v. United States (CA
1975) 525 F.2d 1108; United States v. Verlinsky (9 CA
1972) 459 F.2d 1085; United States v. McCann (Cal. 1966)
259 F.S. 632. (bankruptcy cases)
1. Respondent’s contention regarding its claim filed in
the estate.
It made various extensive contentions regarding the al-
leged California probate creditors’ claim procedure, com-
pletely incorrect, despite petitioner’s repeated submission
of the correct law, despite the fact that the correct law is
easily ascertainable by reading the California Probate Code
and its annotated cases. /ts own GCM (Ap 20) indicated
otherwise.
The substance of respondent’s contention was: claims for
federal taxes were required to be filed in California dece-
dents’ estates; although its claim was not filed within the
statutory six months it was still in time since the California
claims statute of limitation did not govern federal estate
taxes, correctly citing United States v. Summerlin, supra,
(involving a Florida probate) and the Matter of Feinberg
(1966) 18 N.Y.2d 490, 223 N.E.2d 780 (involving a New
York probate); that the government is not controlled by
ASA a
limitation time for filing; respondent first contended it had
been approved, but later admitted it had never been ap-
proved; that there was no California general statute of lim-
itations on the obligation to pay taxes; that it complied with
6502(a).
Respondent cited numerous California and federal cases
and miscited various California texts, omitting critical par-
agraphs contrary to its position, all of which petitioner di-
gested in the RB. All of respondent’s complex presentation
was completely incorrect and completely irrelevant.
Petitioner has always contended and contends that
respondent has not been helped or hindered by the Cali-
fornia probate creditors’ claim procedure; that it is in-
applicable, that respondent is exclusively governed regard-
ing the federal estate taxes by federal statutes only; that so
governed, respondent is barred.
The claims required to be filed in California decedents’
estates are claims based upon decedent's lifetime obliga-
tions. 1 Condee, Probate Practice, Sect. 745 p. 742 n. 17,
hereinafter 1 Condee.
Repospondent cited numerous sections of 25 Cal.Jur.3d
indicating its study of them, including section 609 (covering
the time for presenting or filing claims in general). Signif-
icantly, respondent did not cite or quote the following: **Nor
does the statute apply in the case of the claim of the United
States for taxes.’’ (p. 56 n. 7)
This is obvious from the nature of the federal estate tax.
It is not a debt of decedent because it does not arise during
his lifetime. It can only arise on his death. The special estate
lien is created at the time of death. 26 U.S.C. §6324(a)(1)."'
''That tax is not an inheritance tax, nor a property tax. It is a tax on
the transfer of property, i.e., the vesting of title on death by operation
of law to the person entitled to the ownership. /t is an excise tax. United
States v. Mitchell, supra. It is ‘‘a tax on the interest which have shifted,
an excise on a transfer of an estate on death of the owner. It does take
the survivor's property to pay the tax.’’ 2 Condee Sec 1287 pp. 230-1.
pen Yai
Accordingly, the claim for the federal estate tax is not
a claim provided to be filed in California decedents’ estates.
Respondent made extensive argument assuming the claim
was required to be filed in the estate. As noted, all that
argument was irrelevant.
Even as to claims which are required to be filed respon-
dent’s argument was wrong.
The claim which is required by statute to be filed in
California estates (Pr C 707, 707.5) do not include any
federal taxes) had to be filed within six months from the
date of first publication of notice to creditors, i.e., within
six months from October 1, 1964.
If not filed within that time ‘‘it is barred forever.’’ The
bar cannot be waived. If the judge allows it, it is reversible
error. The representative and the court are duty bound to
raise the statute of limitations. Pr C 708; Estate of Smith,
122 CA.2d 216, 264 P.2d 638. That is why the order of
July 28, 1975.
The late filing of a required claim deprives the probate
court of jurisdiction. It cannot act. This was recognized in
United States v. Summerlin, supra.
However, the fact that the California probate court is
without jurisdiction does not affect the government from
enforcing its federal estate taxes under federal law. United
States v. Summerlin supra; Matter of Feinberg, supra.
Respondent's contention that filing the claim constituted
‘‘a proceeding in court’’ is incorrect. First, because its
federal estate taxes were not a claim required to be filed
and therefore were without the California statutory pro-
cedure; second, even as to required claims (claims based
upon decedent's lifetime obligations), filing the claim does
not commence ‘‘a proceeding in court.’
Again, regarding respondent’s conduct, it cited numerous
sections of 25 Cal.Jur.3d including 665, but not 664, which
Pare Y | ean
was on the opposite facing page and readily visible in read-
ing 665."
Berger explained, 41 C.2d 734, 264 P.2d 13, that CCP
350 provides ‘‘an action is commenced, within the meaning
of this title, when the complaint is filed.’’ ‘‘the probate
court has no jurisdiction of an action on a claim.’’ 20
Cal.Jur.2d §29, p. 49. Similar provisions were similarly
determined in Matter of Feinberg, supra, and in United
States v. Saxe (1 CA, 1958) 261 F.2d 316 (involving Illinois
probate). '”
2. Respondent’s argument regarding the statute of lim-
itations:
Respondent’s argument was extensive, changed its con-
tentions and position and was uncertain, inconsistent and
conflicting regarding the federal estate taxes.
To make a disciplined analysis of it, petitioner will con-
sider it fully in the following sequence.
Prefatorily, respondent’s argument relates to the factor
of ‘‘control or custody’’ of the court, and assumes that it
existed, of a nature and to an extent that it obstructed levy
and suit (originally), but faced with the fact that it filed the
action in 1976, whereas it could have filed it in 1964, it
sought to emphasize the alleged unavailability of levy.
"Section 664 reads: ‘‘The mere filing of a claim against a decedent's
estate with the probate court does not amount to the commencement
of an action on the claim within the meaning of the statute of limitation
in view of the statutory provision that an action is commenced when
a complaint is filed. Presentment of the claim is merely a demand of
the estate as such, preliminary to and a predicate for action if the claim
is rejected.’’ Citing CCP 350 and Berger v. O’Hearn, 41 Cal.2d 729,
264 P.2d 10.
"Feinberg stated, 223 N.E.2d 780, 4, ‘Similarly, when local rules
vide that a notice of claim, without more, will not bring the matter
into court, filing such a notice for unpaid federal taxes has failed to
save the claim from being barred (see United States v. Saxe, 261 F.2d
316, supra)’’.
However, as noted, it did not contend that unless both
remedies were available, the statute was tolled. As noted
and quoted supra, it stated the statute of limitations required
it ‘to act pursuant to its assessment within the 6-year pe-
riod’’ and that it ‘‘must either attempt’’ to levy or to sue.
(I-R 59, lines 20-25).
Respondent also stated ‘‘the duty of the United States in
regards to ‘‘beginning a proceeding”’ in California is com-
pletely met by the filing of its proof of claim.’’ (emphasis
added.) (II-R 177 ll 23-5)
Respondent contended the probate court has obstructive
‘control or custody’’ because it allegedly has exclusive
possession and exclusive right to determine distribution,
i.e., what property goes to whom.
That is incorrect. The probate court does not convey title
by its distribution. Its decree merely evidences the fact that
title has passed by operation of law at the time of death,
not because of or through administration of the estate.'*
As noted, the federal estate tax is on the transfer of prop-
erty to the transferee on death and is payable on that property
by the transferee. The representative and the heir are per-
sonally liable. That interest of the heir, in all decedents’
estates, is subject to reach, including by imposition of
liens.'°
'**“It is elementary that a decree of distribution does not convey title
to the assets of an estate.’’ The authority cited here continues that title
vests on death subject to the representative administering for the purpose
of paying debts, expenses of administration and other charges. ‘‘How-
ever, such control of the property by the probate court is not the
equivalent of exclusive jurisdiction over it, to the exclusion of any
jurisdiction thereover by other courts in proper actions. Mears v. Jeffry,
80 CA.2d 610, 188 P.2d 294.” 24 Cal.Jur.3d, p. 196, fn. 4 (emphasis
added).
'**The Superior Court sitting in probate does not possess exclusive
jurisdiction over certain matters that concern an heir’s interest in the
estate . . . an heir’s interest in the estate can be impressed in an action
in the Superior Court not sitting in probate, with a lien to secure an
obligation to support, even though the estate is still being administered
...' 24 Cal.Jur.3d §101 p. 197; Reed v. Hayward, 23 C.2d 336, 144
P.2d 561.
ekah Pie
There are numerous actions against estates (their repre-
sentatives) regarding title and possession to property in-
cluding foreclosure of mechanic’s, mortgage and other
liens. 1 Condee Sec. 745 pp. 471-2; 24 Cal.Jur.3d, §100-
109.
Respondent’s argument misstated the nature of a dece-
dent’s estate. It is not a legal entity “‘but is merely a name
to indicate the sum total of the assets and liabilitics of a
decedent . . . it is not a corporation . . . it cannot sue or
be sued.’’’®
It is not a citizen of any state. Gallivan v. Jones (9 CA)
102 F. 423.
Respondent also misstated the nature of probate
administration, ‘‘Generally, ‘administration’ means
management of a decedent’s estate by an executor or ad-
ministrator’’. 20 Cal.Jur.2d §12, p. 36; 24 Cal.Jur.3d §74,
p. 151; 1 Condee Sec. 794, p. 519.
Respondent also misstated the nature and status of
probate proceedings. They are special in nature; they are
not actions at law either under the constitution or code. 20
Cal.Jur.2d §12, p. 36; 24 Cal.Jur.3d §74, pp. 151-2.
It also misstated, as partially noted, probate jurisdiction.
The probate court as such has no jurisdiction over any
actions. Proceedings, intra-probate administration are
not actions.
Respondent stated that probate jurisdiction was exclusive.
It is not.
This is submitted apparent because of the limited, special,
almost ministerial procedures in probate. The representa-
tive’s possession is merely ministerial, he has no property
interest, he is an officer of the court without any ‘‘sovereign
20 Cal.Jur.2d §11-14, pp. 35-41; 25 Cal.Jur.3d §60-61, pp.
131-4; 1 Condee Sec. 794, p. 59.
a
power’’; he is a mere ‘‘stakeholder’’ and acts under instruc-
tions. 24 Cal.Jur.3d §88, p. 169.
The probate court’s ‘‘control and custody’’ of property
is also merely procedurai to direct the representative to
marshal the assets, determine liabilities and manage the
estate.
At no time is title vested in anyone but those entitled to
receive it by operation of law. The court has no officer who
has title to it as in bankruptcy (in which a trustee has title)
and in receiverships (in which many receiverships have
statutory title).
Nor is the probate court, nor the representative, vested
with ‘‘immunity’’ such as in bankruptcy and receivership
which block litigation against the estate.
There is no time during the administration of a decedent’s
estate when an action cannot be maintained against a rep-
resentative for obligations and for causes of action arising
after death without any prerequisite to such action and with
no obstruction. The only qualification for litigation against
the representative relates to decedent’s lifetime obligations
as to which the claim procedure applies.
By its very nature, probate jurisdiction is not exclusive
except only in the intra-procedural matters.
‘**. . , the court’s jurisdiction over the assets is not ex-
clusive for all purposes, so as to deprive other courts of any
jurisdiction thereover in proper actions . . .”’ 24 Cal.Jur.3d
§100, p. 196.
Actions for quasi-specific performance of contracts to
make testamentary provision are in equity not in probate.
Such was petitioner’s action which resulted in the equity
judgment. Equity determines by such judgment ownership
of the property.'’
"Silverman v. Union Bank, supra, Brown v. Superior Court, 34
C.2d 559, 65, 212 P.2d 878, 82; Ludwicki v. Guerin, 57 C.2d 127,
30, 17 CR 823, 25.
yeas) oa
‘‘Courts of equity will interfere in the administration of
estates where the powers of the courts of probate and their
modes of procedure preclude them from doing complete
justice, and then only for the purpose of rendering indis-
pensable aid to courts of probate remitting their decrees to
that court to be carried into effect.’’ Estate of Rolls, 193
C.594, 99, 226 P. 608, 10.
Equity has plenary jurisdiction and its decrees are en-
forceable by whatever means equity is required to devise
for that purpose. It is not bound by precedence. Equity
tailor-makes remedy. The Times-Mirror Co. v. Superior
Court, 3 C.2d 309, 31, 44 P.2d 547, 57.
This applies particularly to federal district courts which
have equity jurisdiction regarding federal tax. Markham v.
Alien, 326 U.S. 490. United States v. Peoples Trust and
Savings Co. (7 CA 1938) 97 F.2d 731.
If the California equity court can, as it did in Silverman
v. Union Bank, adjudicate ownership of the property and
separate it from the ‘‘probate’’ administration, federal
courts can do so, with the additional supremacy of the
federal laws on federal estate taxes.
If, as noted, California liens can be imposed on interests
in estates, the more so federal tax liens in view of their
supremacy.
3. Federal Law governs Federal Taxes:
As noted, federal law exclusively governs federal taxes.
United States v. Mitchell, supra.
Federal tax laws ‘‘are to be interpreted liberally in favor
of the taxpayer.’’ Bowers v. New York & Albany Co.
(1927) 273 U.S. 346.
However, federal tax liens are entirely statutory and pro-
visions for their collections are to be strictly followed ac-
cording to federal law. United States v. Mosolowitz (1967)
269 F.S. 12.
oon, ee
As noted, 26 U.S.C. 6334(a) through (c) exclusively
define what property is exempt from federal taxes. All other
property is subject to them.
Pr C 950 provides for the order of payment (1) expenses
of administration, (2) funeral expenses, (3) expenses of last
illness, (4) family allowance, (5) debts having preference
by the laws of the United States, (6) through (8) are irrel-
evant.
There is no conflict between the two jurisdictions since
6324(a)(1), the special estate lien, expressly provides that
lien will be on the gross estate except that part used for
payment of charges against the estate and expenses of its
administration.
The Federal District Court has jurisdiction, including in
equity, and the state law ‘‘cannot limit or deprive’ it. United
States v. People’s Trust & Savings Co. supra; Markham v.
United States, supra.
‘*Should the Government fail to bring suit against a tax-
payer within the six years after assessment allowed by 6502,
the Government is thereafter barred from foreclosing a tax
lien on the property of the taxpayer.’’ United States v.
Besase (Ohio 1970) 373 F.2d 120.
The levy remedy has been seriously misstated and erro-
neously considered by respondent and in the opinion.
That remedy is initiated by a notice of levy which con-
stitutes a constructive seizure. United States v. Cameron
Construction Company, et al. (N.Y. 1965) 246 FS 859.
Levies for federal taxes supersede all state legislation re-
garding the property subjected to the levy; the federal law
is “‘supreme’’. Hoye v. United States (9 CA 1960) 277 F.2d
116.
The state exemption statutes do not bind the United States.
United States v. Heffron (9 CA) 158 F.2d 657. cert. den.
(1947) 331 U.S. 831; United States v. Overman (9 CA
1970) 424 F.2d 1142, 6. ‘**. . . the United States has not
se ee
looked to state law to decide how to enforce federal tax
liens.’’ United States v. Overman, supra, 424 F.2d 1146.
In Hoye, the notice of levy was served on the Los Angeles
Controller for federal taxes on a public employee whose
wages were exempted and protected by state law. The Con-
troller sued to quash the levy. He failed.
There is no difference in federal taxes regarding their
enforcement; if levies can be made on wages, they can be
made upon any property, ‘‘whether real or personal, tangible
or intangible.’’ Seattle Association of Credit Men v. United
States (9 CA 1957) 240 F.2d 906.
Federal levies are ‘‘self-executed.’’ Hoye v. United
States, supra, 277 F.2d 119.
United States v. Overman, supra, cited, in support of its
holding noted supra, Aquilino v. United States (1960) 363
U.S. 509, 12-14.
4. The Opinion.
It is silent regarding, and omitted, determinative facts
and it failed to decide serious issues of law including
whether or not there was ‘‘custody or control’’ so as to toll
the statute of limitations; it did not decide that a levy could
not be made (i.e., a notice or levy could not be served upon
the representative, petitioner, who in this case by the equity
judgment was the adjudicated owner and primarily liable
in any event).
Most seriously, both as to the levy phase and the con-
struction that the disjunctive provisions of the statutes of
limitations are to be read conjunctively, the Court assumed
those were the interpretations and constructions by the Sec-
retary and his delegates.
The irony is that the Court speculates upon the Secretary’s
speculation and non-judicial judgment regarding those
matters.
For example, the committee reports, referred to, specu-
late that the reasons for suspension during ‘‘control or cus-
ee |, ee
tody”’ in a court in other situations, ‘‘perhaps’’ may apply
to estates. This is an ipse dixit. There is no analysis, no
standard for determining the state law regarding estates.
GMC is merely a counsel’s opinion. Further, it supports
petitioner in its relevant portion. A further example, the
T.R. regarding 6503(b) considered in the Opinion (Ap. 10)
that 6503(b) is suspended only when ‘‘all or substantially
all of the assets of the taxpayer are in the control or custody
of a court.’’ The statute makes no such standard. What is
‘“substantial’’ and who decides it? Assuming respondent’s
sole objective is the collection of taxes, then, in this ex-
ercise, all that should be required is an amount to pay the
tax.
However, that speculative process is completely contra-
dicted by what respondent, after years considering the mat-
ter, conceded of record. Some of those concessions have
been noted. It stated that it was required to act on its as-
sessment with the six year period and it ‘‘must either levy
or sue — not both. Also, that it was its duty to begin a
proceeding in court. It also admitted that it did not contend
that it could not have enforced collection of the tax prior
to the filing of the action in this case. Note, that it did not
limit ‘‘collection’’ to either remedy. Further, (OB 27 fn.
2) it stated it was not prevented from ‘‘obtaining a judgment
establishing that taxes are due and owing, and obtaining
payment of the judgment by having a probate court give it
full faith and credit.’’
The issue is most serious and of first impression, and is
universally applicable. The Court has held in various cases
the availability of property to federal levies for federal taxes
and the supremacy of the latter. Although it does not ex-
pressly so state, by compelling inference, it holds that cannot
be done regarding estates. That is incorrect. The more so
as to the estate in this case.
The Court’s reliance upon the administrative interpreta-
tions raises them to the dignity of legislation and permits
ae Ye
executive (administrative) legislation in the place of and
inconsistent with regular legislation.
Despite its apparent reliance upon and the adoption of
what it construes to be the administrative construction, it
remains uncertain and confused and expresses it as follows:
‘‘Presumably,’’ as to the purpose of 6503(b); “‘Congress
perhaps then believed that the ‘custody and control’ of courts
in those instances was sufficiently different . . . No expla-
nation for the exception was given however.”’
Despite the elaborate and extensive semantics, the fact
is that respondent levied regarding decedent's estates in
Matter of Feinberg, supra, and in the United States v.
Augsberger (1978) 78-1, U.S.T.C. Par. 9339 pp. 83-783-
4.
Petitioner respectfully disagrees with the Court's treat-
ment of Hoye v. United States (Ap 9) and McCauley v.
United States, supra. (Ap 10) It states that Hoye did not
hold that a federal levy ‘‘would supersede state probate
proceedings.’’ That is true only because probate proceedings
were not involved. Property was involved and it makes no
difference where property is located; it is subject to federal
taxes unless exempt under federal law. The Court stated
that the Controller was ‘‘a person’’, and it knew of no case
holding a probate court to be ‘‘a person.’’ The Court’s point
is obscure. It is fundamental and disclosed supra, that the
probate court is not the target, nor the ‘‘estate’’ (which is
not an entity), that all proceedings on post-death obligations
are directed to the representative and the transferee (peti-
tioner). There are express federal statutes for recovery of
taxes from those ‘‘persons’’.
In its treatment of McCauley (Ap. 11-12), it refers to the
‘‘spirit’’ of that case. Petitioner discussed it in her brief.
It is a simple case, i.e., how long the bankruptcy court’s
‘‘custody and control’’ continued. Respondent, typically,
contended the suspension was from the beginning to the end
of the bankrupt’s estate. The Court correctly held it was
aes | rin
only during the period the trustee had title, i.e. , first meeting
of creditors. That demonstrates the kind of ‘‘control or
custody’’, i.e., title. As noted, in decedent’s estate, no one
but the heir (transferee) has title, at the instant of death by
operation of law and not through the estate.
As to its construction of the statute of limitation:
6502(a) provides for suspension during the prohibition
form three actions: 1, making the assessment; 2, making
the levy; 3, filing suit. The Court’s construction should
include all three. The disjunctive or not only relates to levy
and suit, but also to assessment. To be consistent, the Court
should then make the statute read prohibited from making
the assessment and a levy and a suit. The use of the dis-
junctive in 6503(a) related to the disjunctive in 6502(a),
each as a separate remedy and not conjunctive. The two
statutes are inter-related, one fixing the period, the other
providing for its suspension. It would be inconsistent that
6502 provides for alternative remedies, i.e., levy or suit,
separately and disjunctively and 6503 to siamese them only
for the purpose of suspension.
The Court’s construction of 6503 would make 6501(a)
(assessments) read (since included in 6503(a)) instead of
being made within three years, it would not have to be made
until the estate was closed and then six months thereafter
and then three years. It would make 6502(a) read the tax
could be collected by levy or suit after the closing of the
estate plus six months plus six years. It would make 6503(a)
read the suspension during the entire period of the estate,
plus six months, after it was closed, plus six years. It would
make 6503(a) read ‘‘is prohibited from making the assess-
ment and from collecting by levy and a proceeding in
Court.”’
That would eliminate all statute of limitations since sus-
pension would be through the entire estate proceedings plus
six months, plus six years and would nullify any reason and
sense to 6501, 6502 and 6503.
a a
Pr C 974 provides for the payment of tax by the repre-
sentative before final distribution. It would be impossible
to close any estate under that construction.
United States v. Vibradamp Corp. (Cal. 1966) 257 FS
934 involved the government’s inactivity regarding a con-
tract claim until after the estate was closed and then its
attempt to reach the individual representative. It was un-
successful. It is cited for the following (p. 935) ‘‘It requires
little imagination to visualize the extent to which the validity
of such a doctrine would impair the closing of probate estates
throughout the country.”’
The Court in United States v. Woodmansee (9 CA 1978)
578 F.2d 1302, approached construction differently, i.e.,
‘*. . . under these particular facts, equity dictates the 10
year limitation period to apply’’ (in favor of the taxpayer).
Although Bowers v. New York & Albany Co. (1927)
273 U.S. 346 was cited by petitioner, the Opinion is silent
regarding it.”
Conclusion.
There was not the ‘‘control or custody’’ which suspends
the statute. This is so as to all decedents’ estates. The more
so this estate in view of the equity judgment.
It is submitted apparent that respondent eventually real-
ized its inactivity and elected its remedy, i.e., by suit.
***The clause in controversy is ‘no suit or proceeding for the col-
lection of any such taxes . . . shall be begun, after the expiration of
five years after the date when such return was filed.’ The court said
there were two methods to compel payment, one a suit which was
judicial, the other distraint which was executive. ‘‘Proceeding’’ was
used in both and was not synonymous. *‘The purpose of the enactment
was to fix a time beyond which steps to enforce collection might not
be initiated. The repose intended would not be attained if suits only
were barred, leaving the collector free at any time to proceed by dis-
traint. In fact, distraint is much more frequently resorted to than is suit
for the collection of taxes. The mischiefs to be remedied by setting a
time limit against distraint are the same as those eliminated by bar
against suit . . .’’ (emphasis added).
yet. | ee
Realizing it was barred, it sought to avoid it by the argument
that filing its claim ‘‘commenced a proceeding in court.”’
Its seasoned opinion and statement was that it had the duty
to act within six years on the assessment by either levy or
suit.
The claim is barred and therefore the remedy for its col-
lection. ‘‘. . . the lien sought to be foreclosed is only an
incident for the claim for taxes it secures; and that, the claim
for taxes is barred, the lien falls with it.’’ United States v.
Stone (5 CA 1958) 257 F.2d 685, 7.
The federal statutes of limitations involved are the sov-
ereign’s self-imposed limitations on its greatest power (“‘the
power to tax is the power to destroy’’) and a protection of
taxpayers.
Certainly that self-limitation, based on fundamental jus-
tice declared by the sovereign, has been and will be frus-
trated by respondent’s conduct, approved by the opinion,
indefinitely, brought to termination only if and when respon-
dent decides. .
The opinion’s construction gives respondent unlimited
whim to deliberate (or indifferent) inactivity and permits it
to ‘‘toy’’, in a cynical tactic, with taxpayers by failing or
refusing to act within the statutory. (i.e. as respondent con-
ceded, contrary to the opinion, to do its duty to either sue
or /evy within the 6 years.)
It could have sued or levied within the 6 years. It sued
in 1976 and admits, and the opinion holds, it could have
sued in 1964 (and received payment). It did not. Why not?
According to the opinion the statute has still not run, the
estate cannot be closed!
Petitioner most urgently and respectfully prays that this
Court grant certiorari in this case.
Respectfully submitted,
FALCONE AND FALCONE,
By: A. V. FALCONE,
Attorney for Petitioner.
mista
APPENDIX A.
Opinion of the United States Court of Appeals
for the Ninth Circuit.
United States of America, Plaintiff-Appellant, v. Dorothy
Silverman, Administratrix, Estate of Fred R. Silverman,
Deceased, Defendant-Appellee. No. 78-2169.
United States Court of Appeals, Ninth Circuit. June 16,
1980.
Rehearing Denied Aug. 21, 1980.
The United States sought to reduce an estate tax assess-
ment to judgment, but the United States District Court for
the Central District of California, Laughlin E. Waters, J.,
granted summary judgment against the Government and in
favor of the administratrix of the estate of the decedent. The
Court of Appeals, Sneed, Circuit Judge, held that: (1) what
constitutes ‘‘a proceeding in court’’ within internal revenue
statute allowing collection of tax by ‘‘a proceeding in court”’
if begun within six years after assessment presents question
of federal law, but answer turns on uiature, function and
effect of filing claim under relevant local law; (2) in view
of manner in which California Probate Code treats filing of
claim against probate estate for purposes of applying Cal-
ifornia’s own statutes of limitation, United States did not
by filing claim against probate estate in California begin
‘‘a proceeding in court’’ within the federal statute; (3)
United States could have initiated suit to obtain judgment
against administratrix immediately after assessment of estate
taxes, but such ability did not render inapplicable suspension
provided by the federal statute; and (4) both commencement
of suit and levying on property ought to be available before
it can be said that collection procedures are unhindered, for
purposes of suspension of limitation, but suspension should
not exist when bar to levy is insubstantial, and presence of
assets of decedent, substantial in value in relation to total
value of decedent’s estate, not subject to custody and control
-*
-%
of
of probate court will preclude suspension of running of
federal limitation period.
Reversed and remanded.
Libero Marinelli, Jr., Dept. of Justice, Washington,
D. C., for plaintiff-appellant.
A. V. Falcone, Los Angeles, Cal., for defendant-
appellee.
Appeal from the United States District Court for the
Central District of California.
Before CHAMBERS, SNEED and ALARCON, Circuit
Judges.
SNEED, Circuit Judge:
This case involves a somewhat obscure, but nonetheless
important, area lying at a junction of the federal law fixing
the manner in which the United States collects estate taxes
and the state law governing the probate of decedents’ estates.
While our resolution of the issues presented by this case
does not elate us, we derive some satisfaction from our
belief that it is required by Congress.
The United States seeks to reduce its estate tax assessment
to judgment. It failed in the district court, which granted
summary judgment against it and in favor of the appellee,
administratrix of the estate of Fred R. Silverman. The dis-
trict court concluded that collection by the United States of
its properly assessed tax was barred by the lapse of more
than six years between the assessment and this suit. In
reaching this result the district court applied section 6502(a)
ae ROS
of the Internal Revenue Code,' and found that under the
facts, the United States had not within six years after the
assessment either levied on the property of the Estate or
**commenced a proceeding in court.’’ It also concluded that
the running of the six year limitation period was not sus-
pended while the assets of the decedent were subject to
probate. As a consequence, in its view the United States
obtained no benefit from section 6503(b) of the Code. I.R.C.
§ 6503(b).”
While we agree that the United States had not within the
six year period ‘‘commenced a proceeding in court,’’ we
disagree with the view that section 6503(b) provides no
benefit. As we see it, section 6503(b) suspends the running
of the six year period so long as all or substantially all of
the assets of the decedent are subject to the control or
custody of the probate court.
‘Section 6502(a) provides:
Collection after assessment
(a) Length of period.—Where the assessment of any tax im-
posed by this title has been made within the period of limitation
properly applicable thereto, such tax may be collected by levy
or by a proceeding in court, but only if the levy is made or the
proceeding begun—
(1) within 6 years after the assessment of the tax, or
(2) prior to the expiration of any period for collection agreed
upon in writing by the Secretary or his delegate and the taxpayer
before the expiration of such 6-year period (or, if there is a release
of levy under section 6343 after such 6-year period, then before
such release). The period so agreed upon may be extended by
subsequent agreements in writing made before the expiration of
the period previously agreed upon. The period provided by levy
shall not be extended or curtailed by reason of a judgment against
the taxpayer. I.R.C. § 6502(a).
*Section 6503(b) provides:
Suspension of running of period of limitation
(b) Assets of taxpayer in control or custody of court.—The
period of limitations on collection after assessment prescribed in
section 6502 shall be suspended for the period the assets of the
taxpayer are in the control or custody of the court in any pro-
ceeding before any court of the United States or of any State or
of the District of Columbia, and for 6 months thereafter. I.R.C.
§ 6503(b).
sory Cb
Therefore, we reverse the judgment of the district court
and remand this case to it to determine whether under the
principles this opinion enunciates the United States is en-
titled to prevail in its effort to reduce its assessments to
judgment.
Our jurisdiction rests on 28 U.S.C. § 1291 (1976).
I
FACTS
: The relevant facts, as revealed by the record, are quite
simple. Fred R. Silverman died on August 18, 1963, and
his will was admitted to probate in the Superior Court of
the State of California for the County of Los Angeles on
September 27, 1963. On November 4, 1964, the executor
filed a federal estate tax return, and on November 27, 1964,
an estate tax assessment was made. On October 20, 1965
and October 18, 1966, the government filed proofs of claim
in the Superior Court for unpaid taxes in the amount of
$50,026.30, plus unassessed interest and other statutory
additions.’ This claim was not approved by either the ad-
ministratrix or probate judge and has not been paid. The
United States commenced the present action to reduce its
claim to judgment on December 6, 1976. The administra-
trix, on instructions by the probate court, resisted on the
basis of section 6502(a). Probate proceedings have not been
concluded.
II
EFFECT OF FILING CLAIM
The United States insists that by filing its claim in 1965
and 1966 it began ‘‘a proceeding in court’’ well within six
years after its assessment. If this is correct, section 6502(a)
provides no bar to its collection of the tax.
‘The estate tax assessment was made in the amount of $89,547.11.
Partial payments by the estate have since reduced that liability to
$50,026.30, plus unassessed interest and other statutory additions.
Tee ee er nee
dal bin
This is an issue that has been before a number of courts,
state as well as federal, with conflicting results.‘ We agree
with the court in United States v. Saxe, 261 F.2d 316, 319
(1st Cir. 1958), when it pointed out that, while what con-
stitutes ‘‘a proceeding in court’’ presents a question of fed-
eral law, the proper answer turns on the ‘‘nature, function
and effect’’ of filing a claim under the relevant local law
which in the case before us is that of California. We believe
California law quite clearly indicates that it would be im-
proper to characterize for purposes of federal tax law the
filing of a claim against an estate subject to probate as the
commencement of a ‘‘proceeding in court.’’
We reach this conclusion on the basis of the manner in
which the Probate Code of California treats the filing of a
claim against the probate estate for purposes of applying its
own statutes of limitation. Generally speaking, under Cal-
ifornia law the statute of limitation applicable to the type
of claim being made is not tolled by filing a claim. Thus,
section 714, Cal.Probate Code (West 1956), provides, inter
alia, that upon rejection of a claim by the executor or ad-
minstrator ‘‘the holder must bring suit in the proper court
against the executor or administrator, within three months
after the date of service of such notice if the claim is then
due, or, if not, within two months after it becomes due;
otherwise the claim shall be forever barred.’’ This section,
a so-called ‘‘nonclaim’’ statute, limits the otherwise gen-
erally applicable statute of limitation but does not extend
it. See Barclay v. Blackinton, 127 Cal. 189, 193, 59 P. 834
(1899); Berger v. O’ Hearn, 41 Cal.2d 729, 733, 264 P.2d
10 (1953); Zapata v. Meyers, 41 Cal.App.3d 268, 271, 115
Cal.Rptr. 854 (1974). The short period of this ‘‘nonclaim’”’
“See, e.g., In re Estate of Feinberg, 18 N.Y .2d 499, 277 N.Y.S.2d
249, 254, 233 N.E.2d 780, 783 (1966); United States v. American
Casualty Co., 238 F.Supp. 36 (W.D.Ky. 1964); United States v. Et-
telson, 159 F.2d 193 (7th Cir. 1947); United States v. First National
Bank, 54 F.Supp. 351 (N.D.Ohio 1943).
7%
ai.
statute operates independently of the statute generally ap-
plicable to the type claim involved. Moreover, it is filing
the suit on the claim in the proper court, not the filing of
the claim in probate proceedings, that marks the terminal
date of the period, the duration of which will determine
whether the claim is barred either by the ‘‘nonclaims”” stat-
ute or the statute otherwise generally applicable.
Whatever doubt there may be about the inability of filing
a Claim in probate proceedings to suspend the running of
California’s generally applicable statutes of limitation was
put to rest by the decision of the Supreme Court of California
in Berger v. O’ Hearn, 41 Cal.2d 729, 264 P.2d 10 (1952).
In that case, as in the case before us, a claim against the
estate was filed within the period provided by the generally
applicable statute but no action was taken by the adminis-
tratrix or the probate court with respect to the claim. Sub-
sequent to the expiration of the period of time provided by
the generally applicable statute of limitation the claimant
brought suit on the claim against the estate. The suit was
barred, the California Supreme Court held, notwithstanding
the fact that the claim was filed within the applicable period
and that the claim was not rejected until approximately two
months before the suit was brought.° Filing the claim, even
when joined with a failure to act on the claim until shortly
*Though the generally applicable statute of limitation has a long time
to run on actions, probate statutes generally require that claims be filed
within a short time known as the nonclaim period. The representative
is thus given an opportunity to quickly determine the obligations against
the estate and the method of satisfying those obligations. See generally
Satterfield v. Garmire, 65 Cal.2d 638, 641, 56 Cal.Rptr. 102, 422
P.2d 990 (1967); Rupp v. Kahn, 246 Cal.App.2d 188, 193, 55 Cal. Rptr.
108 (1966). In California, the period within which claims must be
is four months after the first publication notice to creditors. Cal.Prob.
Code § 700. A claim timely filed may be acted upon after the period
expires. Cal.Prob.Code § 712. With to a claim presented to the
representative but not acted on fi y, the claimant at his option
may, after 10 days, treat the inaction as a rejection and commence an
action on the claim. /d. The absence of an election to treat inaction as
a rejection prevents the operation of section 714.
7%
ce, ee
before suit was filed, did not suspend the running of the
generally applicable statute.
Given this structure of the California probate law we see
no reason why filing a claim in a California probate pro-
ceeding should be characterized as ‘‘a proceeding in court’’
for purposes of section 6502(a). To so characterize the filing
of a claim would impart to it a significance not accorded
it by local probate law. Our conclusion, therefore, is the
same as that reached in United States v. Saxe, supra, after
its analysis of Massachusetts probate law.
Ill
SUSPENSION OF THE LIMITATION
PERIOD
The second issue we confront is more difficult. The dis-
trict court, in holding that the United States could derive
no benefit from section 6503(b) of the Internal Revenue
Code, said:
‘*To allow § 6502(a) to be suspended during the pen-
dency of a state probate proceeding could allow the
United States an unreasonably long time in which to
collect its taxes—in this case, for example, perhaps
over 20 years. Moreover, the collection efforts of the
United States are not hindered by a pending probate
proceeding in California since a federal estate tax claim
has priority in such a proceeding, see Cal.Prob.Code
§ 950(1); Witkin Summary of California law, Wills and
Probate § 444 at 5886, and since the United States may
always proceed by levy pursuant to 26 U.S.C. § 6331
et seq., a proceeding by levy would supercede any state
probate proceeding. See Hoye v. United States, 277
F.2d 116, 119 (9th Cir. 1960).
Were we to agree entirely with the thrust of these obser-
vations, we also would hold the claim of the United States
barred by the limitation provisions of section 6502(a). We
do not so agree, however.
oe ee
To begin with, we must accord significance to the amend-
ment of section 6503(b) of the Internal Revenue Code by
the Federal Tax Lien Act of 1966 which deleted the preex-
isting exceptions to the suspension of the running of limi-
tations applicable to an estate of a decedent or an incom-
petent. See H.R.Rep.No. 1884, 89th Cong., 2d Sess.
22-23 (1966), U.S.Code Cong. & Admin.News 1966, p.
3722; S.Rep.No. 1708, 89th Cong., 2d Sess. 24, U.S.Code
Cong. & Admin.News 1966, p. 3722 (1966). Presumably
the general purpose of section 6503(b) is to eliminate any
necessity on the part of the Treasury to attempt to seize
property in the ‘‘control or custody’’ of a court in order to
protect its tax claims. See H.R.Rep.No. 1337, 83d Cong.,
2d Sess. 107, A415 (1954), U.S.Code Cong. & Admin.News
1954, p. 4025; S.Rep.No. 1622, 83d Cong., 2d Sess. 585,
U.S.Code Cong. & Admin.News 1954, p. 4025 (1954). By
providing originally for an exception applicable to the estate
of a decedent or incompetent Congress perhaps then be-
lieved that the ‘‘custody and control’’ of courts in those
instances was sufficiently different to make unnecessary the
suspension. No explanation for the exception was given,
however. In any event, it was removed in 1966. In doing
so the Committee Reports of both the House and Senate
recognized that ‘‘administrative collection procedures’’
were not available in the case of an estate of a decedent or
incompetent and that the running of the period of limitations
should be suspended in those instances as in all other cases
in which the assets of the taxpayer are in the ‘‘control and
custody of the court.’’
This recognition by Congress of the unavailability of ad-
ministrative collection procedures in the case of an estate
of a decedent is consistent with the longstanding position
of the Treasury that it may not levy on assets of a decedent’s
estate while in the custody of the probate court. See G.C.M.
van Wen
9991, X1-1 C.B. 135, 137 (1932). It is also consistent with
the decision of the Supreme Court of the United States in
Markham v. Allen, 320 U.S. 490, 66 S.Ct. 296, 90 L.Ed.
256 (1946). In holding that the Alien Property Custodian
could bring suit in federal district court to obtain his share
of a decedent’s estate then in the course of probate admin-
istration, the Supreme Court carefully pointed out that the
judgment of the district court left ‘‘undisturbed the orderly
administration of decedent’s estate in the state probate
court.’’ Id. at 495, 66 S.Ct. at 495. The Court concluded
that to entertain the Custodian’s suit did not mean that the
district court was exercising probate jurisdiction nor would
it amount to ‘‘an interference with property in the possession
or custody of a state court.’’ Jd. Any judgment obtained by
the Custodian, of course, would have to be accorded full
faith and credit by the probate court.
It follows that each of the three branches of the federal
- government has evidenced concern about the need to avoid
undue interference with the probate of decedents’ estates
by state courts. The elimination of the exception applicable
to estates of decedents and incompetents by the 1966 Act
further reduces the necessity of interference. We cannot
ignore this action by Congress.
It follows that in this case the district court erred in stating
that a levy by the United States pursuant to section 6331
‘‘would supercede state probate proceedings.’’ Nor does
Hoye v. United States, supra, so hold. It merely held that
the Controller of the City of Los Angeles was a ‘‘person’’
within the meaning of section 6332 of the Code of whom
the Secretary could demand the surrender of property subject
to levy. We know of no decision that has held a state probate
court to be such a “‘person’’ nor are we prepared to so hold.
Therefore, while we recognize that the United States
could have initiated this suit to obtain a judgment against
the administratrix of Silverman’s estate immediately after
ates,
the assessment of estate taxes, we nonetheless hold that this
ability does not render the suspension of the running of
limitations provided by section 6503(b) inapplicable. The
Internal Revenue Code provisions dealing with the limita-
tions provisions applicable to collection of taxes do not
distinguish in a relevant manner between bringing suit and
levying on property.® Both must be available before it can
be said that collection procedures are unhindered.
The suspension should not exist when the bar to levy is
insubstantial, however. This is recognized by applicable
regulations which provide that the section 6503(b) suspen-
sion is applicable only when ‘‘all or substantially all of the
assets of a taxpayer are in the control or custody of the
court.’’ Treas.Reg. § 301.6503(b)-1, T.D. 7121, 1972-2
C.B. 411, 412 (italics added). The presence of assets of the
decedent, substantial in value in relation to the total value
of the decedent’s estate, not subject to the custody and
control of the probate court precludes suspension of the
running of the section 6502(a) period. The presence of sub-
stantial assets may be attributable to their passage from the
Section 6502(a) provides that a tax ‘‘may be collected by levy or
by a proceeding in court, but only if the levy is made or the proceeding
begun (1) within 6 years after the assessment of the tax.’’ The com-
mencement of a proceeding in court or a levy within the period satisfies
the statute. Either method may be employed. Section 6503(a)(1) sus-
pends the limitation period ‘‘for the period during which the Secretary
or his delegate is prohibited . . . from collecting by levy or a proceeding
in court.’’ I.R.C. § 6503(a)(1). The suspension occurs when either levy
or proceeding in court is prohibited. Had section 6503(a)(1) been stated
conjunctively, rather than alternatively, a strong argument could be
made that a prohibition against a levy would not suspend limitations
so long as a proceeding in court could be brought. However, no such
argument properly lies under the present language of section 6503(a)(1).
This being the case, the phrase ‘‘the period of limitations on collection
after assessment’’ (italics added), employed in section 6503(b), should
be interpreted to embrace collection by either levy or court proceeding.
Should either be barred by the fact that the assets are in control or
custody of the court the suspension should operate. In this manner
sections 6503(a)(1) and (b) are made consistent.
decedent by means other than his last will or partial distri-
butions by executor or administrator.
Our holding is not inconsistent with what we believe is
the spirit of McAuley v. United States, 525 F.2d 1108 (9th
Cir. 1975). In McAuley we refused to read section 6503(b)
to require a suspension of the running of the statute of
limitations during the entire period of the bankruptcy pro-
ceeding because of the inevitable presence of property ex-
empt from bankruptcy long before the termination of bank-
ruptcy proceedings. Under these circumstances it could not
be said that the Treasury’s efforts to collect the taxes was
hindered from the beginning to end of bankruptcy proceed-
ings. By recognizing that the suspension is either initially
precluded or lifted, as the case may be, by the presence of
substantial assets not subject to probate, we also utilize the
existence of hindrance or no in interpreting section 6503(b).
This we believe reflects the spirit of McAuley.
We acknowledge that McAuley rejected, as we do not,
the principle of having section 6503(b) suspension turn on
whether all or substantially all the taxpayer’s assets were
subject to control and custody of a court. Special circum-
stances unique to bankruptcy proceedings justified this re-
jection in McAuley. We held that suspension ‘‘until six
months after the date of the first creditors meeting, and for
an additional six months thereafter as provided by section
6503(b)’’ accomplished the purpose of the section and
avoided the necessity of making suspension turn on a
difficult question of fact. /d. at 1114.
We cannot avoid this necessity in the case of a decedent’s
estate. There exists no property owned by the decedent at
the date of his death exempt from death duties. Whether the
property passed by will or otherwise only pertains to the
extent to which his estate is subject to the control and cus-
tody of the probate court. Also a bankrupt survives bank-
ruptcy; a decedent never endures the probate of his own
estate. The bankrupt, as McAuley pointed out, thus can
ea ane
acquire assets subsequent to bankruptcy from which the
Treasury may be able to recover its taxes. A decedent, of
course, cannot acquire post-death assets.
In McAuley we were concerned with the ability of the
section 6503(b) suspension to extend the period of limita-
tions applicable to collection of taxes for an unreasonable
length of time. We are also concerned in this case. However,
the features that distinguish the probate estate from that of
bankruptcy and the clear mandate of Congress require our
holding. What is needed is a means fair to the United States
by which the executor or administrator unilaterally could
lift the suspension prior to distribution of a substantial por-
tion of the assets. It is the task of Congress, rather than the
courts, to devise the technique, however.
Reversed and Remanded.
-_
Pay | ae
APPENDIX B.
Judgment.
United States Court of Appeals For the Ninth Circuit.
United States of America, Plaintiff-Appellant, vs. Dor-
othy Silverman, Administratrix, Estate of Fred R. Silver-
man, Deceased, Defendant-Appellee. No. 78-2169, DC#
Cv 76-3763 LEW.
APPEAL from the United States District Court for the
Central District of California.
THIS CAUSE came on to be heard on the Transcript of
the Record from the United States District Court
for the Central District of California and was duly
submitted.
ON CONSIDERATION WHEREOF, It is now here or-
dered and adjudged by this Court, that the judgment of the
said District Court in this Cause be, and hereby is reversed
and remanded.
Filed and entered June 16, 1980.
*?
hh Ba
APPENDIX C.
Order Denying Petition for Rehearing En Banc.
United States Court of Appeals for the Ninth Circuit.
United States of America, Plaintiff-Appellant, v. Dorothy
Silverman, Administratrix, Estate of Fred R. Silverman,
Deceased. Defendant-Appellee. No. 78-2169.
FILED: Aug. 21, 1980.
Before: CHAMBERS, SNEED and ALARCON, Circuit
Judges.
The panel as constituted in the above case has voted to
deny the petition for rehearing and to reject the suggestion
for rehearing en banc.
The full court has been advised of the suggestion for en
banc rehearing, and no judge of the court has requested a
vote on the suggestion for rehearing en banc. Fed. R. App.
P. 35(b).
The petition for rehearing is denied and the suggestion
for a rehearing en banc is rejected.
=e |
APPENDIX D.
Relevant United States Code Sections of Record in the
District Court and Court of Appeals.
Relevant Sections of 26 USCA (West’s):
§6324. Special liens for estate and gift taxes
(a) Liens for estate tax.—Except as otherwise provided
in subsection (c)}—
(1) Upon gross estate.—Unless the estate tax im-
posed by chapter 11 is sooner paid in full, or becomes
unenforceable by reason of lapse of time, it shall be
a lien upon the gross estate of the decedent for 10 years
from the date of death, except that such part of the
gross estate as is used for the payment of charges
against the estate and expenses of its administration,
allowed by any court having jurisdiction thereof, shall
be divested of such lien.
§6334. Property exempt from levy
(a) Enumeration.—There shall be exempt from levy—
(1) Wearing apparel and school books.—Such
items of wearing apparel and such school books as are
necessary for the taxpayer or for members of his family;
(2) Fuel, provisions, furniture, and personal ef-
fects.—If the taxpayer is the head of a family, so much
of the fuel, provisions, furniture, and personal effects
in his household, and of the arms for personal use,
livestock, and poultry of the taxpayer, as does not
exceed $500 in value;
(3) Books and tools of a trade, business, or profes-
sion.—So many of the books and tools necessary for
the trade, business, or profession cf the taxpayer as do
not exceed in the aggregate $250 in value;
(4) Unemployment benefits.—Any amount
payable to an individual with respect to his unemploy-
ment (including any portion thereof payable with re-
spect to dependents) under an unemployment
en” ee
compensation law of the United States, of any State,
or of the District of Columbia or of the Commonwealth
of Puerto Rico. |
(5) Undelivered mail.—Mail, addressed to any
person, which has not been delivered to the addressee.
(6) Certain annuity and pension payments.—An-
nuity or pension payments under the Railroad Retire-
ment Act, benefits under the Railroad Unemployment
Insurance Act, special pension payments received by
a person whose name has been entered on the Army,
Navy, Air Force, and Coast Guard Medal of Honor
roll (38 U.S.C. 562), and annuities based on retired
or retainer pay under chapter 73 of title 10 of the United
States Code.
(7) Workmen’s compensation.—Any amount pay-
able to an individual as workmen’s compensation (in-
cluding any portion thereof payable with respect to
dependents) under a workmen’s compensation law of
the United States, any State, the District of Columbia,
or the Commenwealth of Puerto Rico.
(b) Appraisal.—The officer seizing property of the type
described in subsection (a) shall appraise and set aside to
the owner the amount of such property declared to be ex-
empt. If the taxpayer objects at the time of the seizure to
the valuation fixed by the officer making the seizure, the
Secretary or his delegate shall summon three disinterested
individuals who shall make the valuation.
(c) No other property exempt.—Notwithstanding any
other law of the United States, no property or rights to
property shall be exempt from levy other than the property
specifically made exempt by subsection (a). Aug. 16, 1954,
c. 736, 68A Stat. 784; Aug. 28, 1958, Pub.L. 85-840, Title
IV, § 406, 72 Stat. 1047; June 21, 1965, Pub.L.
89-44, Title VIII, § 812(a), 79 Stat. 170; Nov. 2, 1966,
Pub.L. 89-719, Title I, § 104(c), 80 Stat. 1137.
$6501. Limitations on assessment and collection
(a) General rule.—Except as otherwise provided in this
section, the amount of any tax imposed by this title shall
roe Ne
be assessed within 3 years after the return was filed (whether
or not such return was filed on or after the date prescribed)
or, if the tax is payable by stamp, at any time after such
tax became due and before the expiration of 3 years after
the date on which any part of such tax was paid, and no
proceeding in court without assessment for the collection
of such tax shall be begun after the expiration of such period.
§6502. Collection after assessment
(a) Length of period.—Where the assessment of any
tax imposed by this title has been made within the period
of limitation properly applicable thereto, such tax may be
collected by levy or by a proceeding in court, but only if
the levy is made or the proceeding begun—
(1) within 6 years after the assessment of the tax,
or
(2) prior to the expiration of any period for col-
lection agreed upon in writing by the Secretary or his
delegate and the taxpayer before the expiration of such
6-year period (or, if there is a release of levy under
section 6343 after such 6-year period, then before such
release).
The period so agreed upon may be extended by subsequent
agreements in writing made before the expiration of the
period previously agreed upon. The period provided by this
subsection during which a tax may be collected by levy
shall not be extended or curtailed by reason of a judgment
against the taxpayer.
$6503. Suspension of running of period of limitation
(a) Issuance of statutory notice of deficiency.—
(1) General rule.—The running of the period of
limitations provided in section 6501 or 6502 on the
making of assessments or the collection by levy or a
proceeding in court, in respect of any deficiency as
defined in section 6211 (relating to income, estate, and
pe) Wan
gift taxes), shall (after the mailing of a notice under
section 6212(a)) be suspended for the period during
which the Secretary or his delegate is prohibited from
making the assessment or from collecting by levy or
a proceeding in court (and in any event, if a proceeding
in respect of the deficiency is placed on the docket of
the Tax Court, until the decision of the Tax Court
becomes final), and for 60 days thereafter.
(2) Corporation joining in consolidated income tax
return.—If a notice under section 6212(a) in respect
of a deficiency in tax imposed by subtitle A for any
taxable year is mailed to a corporation, the suspension
of the running of the period of limitations provided in
paragraph (1) of this subsection shall apply in the case
of corporations with which such corporation made a
consolidated income tax return for such taxable year.
(b) Assets of taxpayer in control or custody of court.—
The period of limitations on collection after assessment pre-
scribed in section 6502 shall be suspended for the period
the assets of the taxpayer are in the control or custody of
the court in any proceeding before any court of the United
States or of any State or of the District of Columbia, and
for 6 months thereafter.
(c) Taxpayer outside United States.—The running of
the period of limitations on collection after assessment pre-
scribed in section 6502 shall be suspended for the period |
during which the taxpayer is outside the United States if
such period of absence is for a continuous period of at least
6 months. If the preceding sentence applies and at the time
of the taxpayer’s return to the United States the period of
limitations on collection after assessment prescribed in sec-
tion 6502 would expire before the expiration of 6 months
from the date of his return, such period shall not expire
before the expiration of such 6 months.
(d) Extensions of time for payment of estate tax.—The
running of the period of limitations for collection of any tax
a) ee
imposed by chapter 11 shall be suspended for the period of
any extension of time for payment granted under the pro-
visions of section 6161(a) (2) or (b) (2) or under the pro-
visions of section 6166.
(e) Certain powers of appointment.—The running of
the period of limitations for assessment or collection of any
tax imposed by chapter 11 shall be suspended in respect of
the estate of a decedent claiming a deduction under section
2055(b) (2) until 30 days after the expiration of the period
for assessment or collection of the tax imposed by chapter
11 on the estate of the surviving spouse.
(f) Extensions of time for payment of tax attributable
to recoveries of foreign expropriation losses.—The running
of the period of limitations for collection of the tax attrib-
utable to a recovery of a foreign expropriation loss (within
the meaning of section 6167(f)) shall be suspended for the
period of any extension of time for payment under subsec-
tion (a) or (b) of section 6167.
(g) Wrongful seizure of property of third party.—The
running of the period of limitations on collection after as-
sessment prescribed in section 6502 shall be suspended for
a period equal to the period from the date property (including
money) of a third party is wrongfully seized or received by
the Secretary or his delegate to the date the Secretary or his
delegate returns property pursuant to section 6343(b) or the
date on which a judgment secured pursuant to section 7426
with respect to such property becomes final, and for 30 days
thereafter. The running of the period of limitations on col-
lection after assessment shall be suspended under this sub-
section only with respect to the amount of such assessment
equal to the amount of money or the value of specific prop-
erty returned.
_/
2
APPENDIX E.
Relevant GCM 9991, X1-1 Cum. Bull 135, 137 (Cited
by Respondent to the Court of Appeals and Cited
in That Court’s Opinion).
Accordingly, the conclusions of this office concerning
the proper procedure against an administrator or executor
are as follows:
1. Liens for Federal taxes in such cases should be per-
fected at the earliest possible date. Whether such liens
should be made specific by compliance with the filing pro-
visions of Revised Statutes, section 3186(b), depends upon
the exigencies of the particular case, having due regard for
the embarrassment caused the administration of the estate
by such action.
2. In the ordinary case notice and demand should be
promptly served on the administrator or executor to prevent
distribution without notice. Such notice, as distinguished
from proof of claim in accordance with the State practice,
has two advantages, to wit:
(a) It makes it clear that the statutory limitation period
continues to run, as such notice does not constitute the
beginning of a suit or proceeding; whereas filing of proof
of claim with the person or court designated by the State
statutes may or may not be the beginning of a suit or pro-
ceeding to stay the statute.
(b) Since it does not amount to a suit or proceeding it
does not constitute an election to submit the question of a
State rather than a Federal court.
This general rule may be varied in the particular case by
filing proof of claim and presenting the question to the State
court in accordance with State probate procedure. However,
such departure from the general rule indicated requires strict
compliance with State procedure, and leaves the operation
of the Federal statute of limitations dependent upon whether
the action taken constitutes a suit or proceeding under State
law.
~ —
3. If the administrator or executor does not voluntarily
pay the tax upon notice and demand within the statutory
period of limitation, suit should be timely brought in a
Federal court. Execution on any judgment thus obtained
should not be attempted but the judgment claim, which is
binding on the probate court, should be filed as a claim with
the person designated to receive claims by the State probate
statutes.
C. M. Charest,
General Counsel, Bureau of Internal Revenue.
a, ,, Pam
APPENDIX F.
Relevant Treasury Regulations or Procedure and
Administration Cited by Respondent to the Court
of Appeals and Cited in That Court’s Opinion.
§301.6331-1 Levy and distraint.
* * *
(3) Bankruptcy or receivership cases. During a bank-
ruptcy proceeding or a receivership proceeding in either a
Federal or a State court, the assets of the taxpayer are in
general under the control of the court in which such pro-
ceeding is pending. Taxes cannot be collected by levy upon
assets in the custody of a court, whether or not such custody
is incident to a bankruptcy or receivership proceeding, ex-
cept where the proceeding has progressed to such a point
that the levy would not interfere with the work of the court
or where the court grants permission to levy. Any assets
which under applicable provisions of law are not under the
control of the court may be levied upon, for example, prop-
erty exempt from court custody under State law or the bank-
rupt’s earnings and property acquired after the date of bank-
ruptcy. However, levy upon such property is not mandatory
and the Government may rely upon payment of taxes in the
proceeding.
* * *
§301.6503(b)-1 Suspension of running of period of limi-
tation; assets of taxpayer in control or custody of court.
Where all or substantially all of the assets of a taxpayer
are in the control or custody of the court in any proceeding
before any court of the United States, or of any State of the
United States, or of the District of Columbia, the period of
limitations on collection after assessment prescribed in sec-
tion 6502 is suspended with respect to the outstanding
amount due on the assessment for the period such assets are
in the control or custody of the court, and for 6 months
thereafter. In the case of an estate of a dececent or an
ane, ee
incompetent, the period of limitations on collection is sus-
pended only for periods beginning after November 2, 1966,
during which assets are in the control or custody of a court,
and for 6 months thereafter.
ox * K
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.