# Brief for Petitioner — New Hampshire Fire Insurance v. Scanlon > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386409_0242%3A4 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for Petitioner - **Published:** January 1, 1960 - **Citation:** 362 U.S. 404 ## Text Supreme “Court, U.S; Pte i te OBL 23 1959 JAMS R, | ii? 3, Clee “Supreme Court of the Buited States OcTORER TERM, 1959 No. 339 ay et oNEW HAMPSHIRE FIRE INSUR. ANCE CO., Petitioner, s US. SC. ANL OX DISTRICT DIREC TOR OF INTERN. AL. REVENUE, et at., Respondents. . | On Wrre oF CERTIORARI TO THE UNITED SFATES COURT OF APPEALS FOR THE SECOND-CIRCUIT » BRIEF FOR PETITIONER ad Jack Hart Myron’ ENGEUMAN 10 East 40th Street New York 16,N. Yo 0 Counsel for Petitioner — New Hampshire Fire. Insurance Co. \ Ree fi uae UNDEN : = ; tx PAGE r Ipiniotis- Bek WY Se ate reved \e padudes Cn "Jurisdiction rae Ns are Sep ee ea . eer ee me Question Presented | ee ; eee et es ret een = eet ] | Statenwnt ‘of the Case be seas ee. ee re é ARGU MENY Rice ee ee ieee ee att eee Ayes ae 4 The eae Stat es District Courts Have Jurisdiction urder 28 UOS. ©. ¥ 2463 to Determine in a Sui > marys Proceedmy “the: Rights to Property Im- properly Detained under the MMlegec Authority of thy Revenue Taw a aa) ee eS we aaa Sos e CASES IN THE Court or? \erears ror rite Tire. TG a erated ee oe ea en eek Bee CASES INTHE Court or \ereAts foR THEE: SECOND - RAMOUOE: Soteet a on te es ach ep ape eee eer meee eee fr 82 See eee eee eee eens Aiea Soa aes a oo. + CASES CITED. s 3 . e , 7 . Pefarae€ ety alt \ GC i \ i iY ae 4 a Pes 2d 39 ( 1958 ) oe = Central Republis Bank and Trast Co, v. Caldwell, 38 ‘ oP Fe AEs etc7 wee ae (a GW, Peas Daleks eee Ve » Padelity €> Grerranty ( om Pay V2 Triborough Bridge = Lathovity. 20; Nav. SL LOR : es Midelity De posit Company view City’ Housing” : Litharay. 4p! fe, 2d M2. (2d Cir, 1957): FSP ar peeel oa Jt tt, or PAGE | Gobir Importing Co anv. Unite ds States, 2%2 U. Ss. 344 (1931) Goldman V. meric av Dealers Serv tee, 135 °F. 2d 398 ae . (24 Cir, 1943) : & 2.5 Ae Se Oe eS Oe. 6. 6 66 264 6. Ce ee OO 68 In re Behrens, 39 F. 24 Sool ¢ 2d Ci ir. 1930) ° Deca Aas Se Krippendorg ©. Hyde, NOLES, 270. (ARR4) 22s. 10 i:rsa, tne: % Dintic Ay 234+ ¥. 2 17%, 180 t 1930), Sl teen i . Massachusetts Ronding (> Jisuranc : Company \. j N.Y’, 239 F; Mae 35 620 Cw. 1958) ol ee co Rafiact lev. Granger, 196 F. 2d20 | 3d Ci ir. 1052) ee Roth nsies v. Clim ay 110 F.2d. 590) ( |) ee eon 7 ' Seattle pr ree iation of Credit Pree v. 28. +9 Cie. -... 1957) 240 fy 5 Sie ere es re ae ak laubel- Scott- Kitsmiller he X. Fox, 64 tp 426 ; ae (1924). en Gettea Mee Orta seabed exalts cxcet cn 10 Cnited Stale Vv. re mven, AO F’2d 393 (2d Cir. 1930) ee Cnited States vo Hiland: 223 FQ 118 (Ath Cir. 1955 Pica Opinions Below ' The opinion of the Court of Appeals (R/17). is reported at 267 F. 2d°941. The opinion of the.District our (R..14) is = at 172 F. Supp. $92, | te | Jurisdiction c The judgment bt the Court of Appeals was entered on June 2 £2,.1959 (R. 17).° The petition for certiorari was - filed on August 22, 1959 and waS-granted on November 9, 1959. The jurisdiction of this Court’ is invoked and rests on 28 USS. C, § 1254( I). Question Presented. a: ve Do the United States District Courts have jurisdic- tion under 28 U. S. ©. $2463 to determine, in a. : summary proceeding instituted: by order to show cause and petition, the rights-to. property improperly * detained under the. alleged authority of the revenuc laws. ae 2 The Statute involved is 28 UL S.C. $2463. which provides: 7 F nls . Waar Rot ; oe §$ 2463.) Property taken under revenue law not repleviable. | Miata Peta ian - All property taken or-detained under any revenue. law. of the United States shall not be repleviable, but. . shall be deemed to bein the custody. of the law and subject only to the orders and decrees of the courts oy “ot the United States hi Wing jurisdiction thereof. \“ ' Statement of ‘the Case The petition (R. 4-9) alleges that a construction con- tract was: entered into between Acme.Cassa;y Inc., a con-. ‘tractor, and the City \of New. York.” .\ condition to. the | making of the contraet was the furnishing of performance -and payment surety bonds by the contractor. The petitioner, » New Hampshire Fire Insurance Company, as surety, exe- cuted these bonds, on behalf of \eme Cassa, Ine... as prin- cipal, in favor of the City,of New York, as obligee. After commencement of performance of the contract. e | Acme Cassa, Inc. became financially unable to continue per- formance or to pay its stibeontractors and suppliers of labor and’ material. Petitioner, as surety, financed completi ion of the contract and, made payments to unpaid subcontrac tors, laborers and suppliers. ‘As of November 25, 1958 these payments totalled $82,990.17 tte fete Ma bet Since January 7, 1958, the City of New York has had - available for delivery to’ petitioner, a warrant in the amount ot $68,015. 50. Another avarrant for the final contract: pay ment-in the’ amount of $35.9. 30.20 will’ be issued by the City of New Y ork in the future.* The available w arrant has not , been delivered to petitioner because of certain notices OL lien.and notices of levy served upon the City of New York by Respondent Scanlon, District. Director of Internal Rey- ehue. These notices of liens and levies. arise out-of unpaid . taxes, tot alling $39,004.67 ‘as of January 21, 1959, claimed to be due from the contrac tor. Acme Cassa. Ine. Respond-. ent Scanlon’ consented te. the. payment te, the: surety of S28, 515. 30 from the $68,015.50 warrant. : | v *$36,132.93 was issued and delivered to petitioner saith conserit a Respondent on October 7, 1950. after the fling of thy petition , ° , \ ° . ; °¢ . , ae . "In its petition to the DistrietCourt thé petitioner herein claimed (1) that under the Jaw of the Siaie vt New: York, it is subrog: ited tu the ights of the City of New York, its obligee, tothe unpaidcontract balance and that, as subrogee. it is entitled to the contract balance in question against any “claims or the Government based’ on, unpaid taxes of its principal: and (2) that 28. U.S. C. § 2403 place’ its prop: erty which has been impraperly, det ained by the District. Director of Internal Revenue “in the custody of .the law” and that the District Court’ must render an- appropriate order, or. decree refuting to the disposition of the property. Upon the petition the District Court issued am: order directing res Acme Cassa, Ine. 7 notices of levy should ‘not be quashed (R. 2). Only Re- apondent Scanlon appeared in opposition to the petition. S61 (2d Cir. 19304) and Goldman y Imerican Dealers Service, [35 F/ 2d 398 (2d Cir. 1943), ‘dismissed the: pey htion, holding that tlic District Court had-no jurisdiction ; ina summary proceeding to adjudicate: rights to the prop- , erty even theugh the property was placed by statiite in the custody ot the Jaw. ‘The applicability of Section: 2403 Wis not in question, the District Court saying :"*** 1 will assume that the - funds, have been dét ained within the meaning: of Section 2463. (ct. Seattle’ eI ssociation of Credit ae nv lS (SC 'r, 1057) 240 EF, 2d B00)". | Ube ( ‘ourt at Appeals tor the. Second Circuit aftirmed, n a per curiam opinion reading as follows : ' . , —. “Upon, the opinion of Judge. Cashin, D.C. D. ~ ONS Y.. April 16; 1959. 4 KF. “Supp. (392). the. order is affirmed.” wdents Scanlon, the City of New Y ork and ° ‘show cause why. the above mentioned * The-Distriet Court, relying’ upon Inve Behrens, 39 F. PA . s _ 7e ARGUMENT eae 4h The United States District Courts . Have Jurisdiction under 280.8. €. § 2463 to.Determine in a Summary Proceeding 2 Rights to Property Improperly Detained under the Alleged Authority of the Revenue Laws. & ; ‘ The: soles question presented to this Court is whether “a party, whrose pre perty. has be ‘en impre " erly detained under the purported curt he TILY of the révenue laws of the United States to .satisty the tax Tabilitvvot another, may have his claim to the property adjudiedted j iN’a summary pre ceeding. Petitioner does not complain of action by the tb nited States, buteer action by Respondent Scanlon in his Personal capacity, Tn short, petitioner alleges that it is not a delin- quent taxpayer and that Scaplon plunty is acting outside athe seopetof his autharity in seizing petitioner's property to Satisty the tax lialsilits of another: that the seizure, theretore, ‘constitutes oC trespass which, in the absence of Section 2463. could be speedily redre ssed in ai state court; and that Sectian 2463. while ousting the state courts Tio jurisdiction. places the seized property a the custody ot the law’) so that the Federal court Way sumnin wily remedy” the wrong inflicted upon the injured petitioner, The differences hetweem stummary proceedings and plen: iry suits have heen set terth in Central Republic Bank “and Trust Ca, v. Caldzvell (BN FE 20 721, 731-32 ¢8th Cir. 1932); “The arain characteristic differences between a sim inary proceeding and a plenary suit are: Uhe-fornier Is based upon petition, and proceeds Witit vt fothial pleadings; the litter proces “ds apon rorinal ple; dings. rs the former, the necessary parties are etted in by ‘Th le inter seslins history of Section 2463, first enacted in 1833. to meet the problems created by South. Carolina's Ordinance of Nulliti- cation appears nn TX Gale & Seat on, Register of Debates in Congress "244 et seq (1833 | 8 ee gee eee “st order to show cause; in the latter, formal summons brings in the parties other than the plaintiff. In the former, short time notice of hearing is fixed by the court: im the latter, time for pleading and hearing is fixed by statute’ or by rute of court. In the former, the hearing is quite generally upon affidavits; in the latter, examinationsof witnesses is the usual method. [n the former, the hearing is sometimes eX parte: >in the latter, a. full hearing is had. “It is apparent. that the differences are largely preiaed Father than, substantive.” ' « Due process. of course, must be satisfied by ‘proper notice to the parties with opportunity. to answer and be heard. Petitioner does not contend that Scanlon should not “be afforded an opportunity: to dispute petitioner's claim on: the facts and a That Responde nt Scanlon’s actions in serving the notices of liens and levies constituted a detention within the mean- ing of 22U.S.C.8 2463 is not open to serious question. .t “owas “assumed” by the District Court (R. 15) and Scanlon did not contend to the contrary.*, In addition to Seattle: A ssociatioit of Credit Men v. United States, 240 F. 2d 906, (9th Cir. 1937), cited-in the ‘District Court's opinion, the ~ “Phird and Fdurth, Cireitits appear to be in accord that the’ - service of a notice of levy effects a “detention” within the meaning of Section 2403. Raffacle v. Granger, 196 F. 24d. - 620 (3d Cir. 1952 ).. United State vv. Edland, 223 F.2d 118 (4th Cir, 1955). | — aw, *Similarly the allegations ot the spetition concerning Xe ‘wo Hamp- shire’s claim th: to \ 1s subrogated to the rights of the City have not heen questioned. ‘tonder New York law, it Js clear that a completing _ surety which pays Jaber: +s.tnd material mento complete a contract is emitled, as subrogee, to any unpaid contract balance as against any claims af the goverm nent based_on unpaid taxes of the principal. Mossachusetts Bond: ng o> insurance Company. NV. V., 259 F. 2d 33 — (2d Cir. 1958); Fidelity « & Deposit Company v. N. Y. City Housing Authority, 241 F.2d 142 (2d Cir. 1957 ), leina ¢ ‘asualty Colv. &. S., tN. Y. 2d 639 ¢1938 %, Fidelity cy Guaranty Company Vv. Triboraugh. Bridge Authority,.297 NX. Y..31 (1957 6 2 ¢« . . a * CASES IN THE COURT OF APPEALS © , FOR THE THIRD CIRCUIT The problem: presented to this Court arose. before the Court of Appeals tor the Vhird Cireuit in Ruffaele “Granger, 196 FL 2d 620 (1952). In that case a levy was: made on bank accounts standing in the name of a delinquent taxpayer dnd his innocent wifé A petition by the spottses praying thi tt the warrants of distraint be quashed was granted. The petition was based on the. Pennsylv ania law Which made the interests of the spouses in the accounts ‘inse] arable so-that the effect of the Collector's action was te take the property of the wife ‘to satisty the hie ibility of the husband. , The Court of Appeals, atter pointing out that the , nited “Statesshas ne pow er to take prépe rly from oe person te satisiy the tax ability of another, rejected the Collector’ ~ sontention that a plenary action was heeded. T he Court stated at page 623: 0. “Distrairit is a suminary, extra judicial remedy hav- Ing its origin in- the Commoen Taw: ‘There, attorm of self help, it consisted of seizure and holding Of personal property by individual action without inter- vention of legal process for the purpese of compelling payment of debt. Reliel of one aggrieved by the levy of distraint, at common Lew. was by an action ‘land, History of the English Law, Vol. 1, page. LP In our time: distraint, together with ‘t power of sale. has been made available to the Collector of Internal Revenue as a sanction for securing payment of taxes } which ie rsons liable have: refttsed or neglected to pay. But property taken or detained under any -revenue law, unlike pri yperty seized at comman law, is not repleviable. By Section 2403 of Title 28 of the. - United States Code, however, it is ‘deemed to be .in -the custody of the law’ and issubject to the ‘orders of replevin against the distrainor. Pollock & Mait-. eae. e and yin oi the court: Of the United Stites having jurisdiction theecat” *'* * Noreover, a plenary civil suit is not necessary to enable a court to exercise jurisdietion ovér property thus me custodia legis, * * * Quee due process has been satisiied by notige to the dnterest parties and opportunity Coie? heard, the court may proceed summarily to adjudicate the righttul- ness Ofescizure. Ct. nore Behrens supra, Gilliam . Parker, supra.” Sa . e In addition 1 Raffacle, the Court of Appeals tor the Third Circuit, in two other cases, has relied on Section 2463 - as a basis for granting summary reliel to-one whose property has been seized to pay the taxes of another. Ersa, Lite. ) Dudley, 234 F. 2d 178, 180 (1950) and Rothe ustes V. UE liman. O04, 2d 590 ( 1940). CASES-IN THE COURT OF APPEALS. FOR THE SECOND CIRCUIT The district court's opinion in the instant case, whic h was adopted by. the. Court of Appeals. based its decision that the court was avithout summary jurisdiction On twee. Second Circuit cases: Jin Ke Behrens, 39K. 2d 308 (2d Cir, 1930) aiid Goldman ve. cdimerican Dealer's Service, 135 FF. 2d. 398 (2d -Cir. 1943). We submit that both of these cases contirm and do not deny the summary jurisdic- tion of the District. Gourt. Jtach case acknowledges the summary jurisdiction, and deals only with the discretion éxercised. by the District Court in a pending summary pro: ceeding, In United. States v. Given, 40 EK. 2d 593 (2d Cir. 1930). the Second, Cirenit Court of Appeals detined its holding in the Behrens case as Hows : ae ; se arin sar “In Matter of Behrens. supra, we held that; when ‘claim adjudic ee, Se ae ee ss 9? a property so. detained 1s placed in the custody of the law and made subject tothe District ¢ court s orders and decrees. The District Court has thus heen invested with, the author: _ity to deal with such inmreperly scized or detained property’ ina summary proccediny. The order appealed from should be reversed and this mutter remanded to the Distriet Court ~ » so-that appropriate epee nes may be held and petitioner’ s 4 \ s . . a ” > Respect _ submitted. Jack Fa os Myron ENGEL MAN, | i: Counsel for ‘Petitioner 10 Teast 40th areet.*. ‘New ae 6N. YY. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386409_0242%3A4. Public record. Not legal advice.