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Timestamp: 2019-04-18 21:40:15+00:00

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Reference Material - For Information Only!
Court cases concerning Notice of Levy" (Form 668-W.
Below are a few cases from personal file. Hope it helps.
Results: The bank took the funds anyway but taking Ken Evans advice after a year the funds were returned and I have heard nothing since! Once again, Thanks Ken.
The following is part of the decision, verbatim, in the case of Peggie and Bill Williamson v. Boulder Dam Credit Union and "Bill" William G. Ference, Justice Court - Boulder Township, Case No. 97A017, filed May 19, 1998.
Apparently, on the basis of a "Notice of Levy" (Form 668-W), the Credit Union turned Williams' property over to the IRS in the amount of $1,110.87. Williams sued and won. Hopefully the details of this case will be helpful to others who may face similar unlawful actions by financial institutions.
Plaintiffs brought suit against the BOULDER DAM CredIT UNION (hereafter "Credit Union") for inappropriately turning over money in Plaintiffs' credit union accounts to the Internal Revenue Service (IRS) without court order, without legal obligation and without Plaintiffs' permission. No evidence was presented to show that Defendant Ference was in any way personally involved in this action and consequently he is dismissed in his individual capacity from this action.
Plaintiffs had entrusted their funds to the BOULDER DAM CredIT UNION, a financial institute licensed under the laws of the State of Nevada. As such, the Credit Union had a fiduciary relationship with the plaintiffs and a resulting higher, fiduciary, responsibility over the funds they with which they have been entrusted.
Notwithstanding this fiduciary duty, when served with a "notice of levy" from the IRS, the Credit Union sent the funds in the plaintiffs' account to the IRS. This was done even though the Plaintiffs had objected to the procedures followed by the IRS and did so via sworn affidavit delivered to the Credit Union.
The Credit Union did not necessarily need to make a dispositive decision as to the merits of Plaintiffs' objections but the Credit Union should not have released the Plaintiffs' funds without considering their depositors objections and as a result of that investigation possibly even inter-pleading the funds if necessary to protect itself from the competing claims for the Plaintiffs' funds.
At any rate, the Credit Union owed its highest duty to it's depositors with whom it has a contractual and fiduciary duty. In the instant situation, The BOULDER DAM CredIT UNION breached that duty, to the injury of the plaintiffs'. This injury included loss of $289.04 and $577.89 (total $866.93) taken from Plaintiffs' accounts together with return check fees and late fees of $243.94.
The Credit Unions claim of immunity is misplaced. Per statute (26 U.S.C. section 6332 (e) and case law cited by Defendant, a bank is provided immunity if it honors an IRS levy. However, in the instant case Credit Union was merely sent a "Notice of Levy"; consequently, the law providing for immunity when releasing funds pursuant to a "Levy" is not applicable.
costs incurred and prejudgment interest.
This paragraph describes a mere statement or Notice of Claim. Nothing alleged to have been done amounts to a levy, which reqiures that the property be brought into legal custody through seizure, actual constructive, levy being "an absolute appropriation in law of the property levied upon." Rio Grande R Co. v ~Gomila, 132 US 478, 10 S. Ct. 155 33 L.Ed. 400; In re Weinger, Bergman and Co., D.C> 126 F 875 877; Smith v. Packard, 7th Cir., 98 F. 793. Levy is not effected by mere notice. Hollister v. Goodale, 8 conn. 332, 21 Am. Dec. 674; Meyer v. Missouri Glas Co., 65 Ark. 286, 45 S.W.. 1062, 67 Am. St. Rep. 927; Jones v. Howard, 99 Ga. 451, 27 S.E. 765, 59 Am. St rep. 231. Section 3692 does not prescribe any procedure for accomplishing a levy upon a bank account. The method followed in the cases is that the issuing warrants of distraint, making the bank a party and serving with the Notice of Levy copy of the warrants of distraint and notice of lien. Cf. Commonwealth Bank v. U.S., 6th Cir.,115 F2d 327; U.S. v. Bank of the United States, D.C> 5 F Supp. 942, 944, No warrants of distriant were issued here.
The cases relied on by the government as supporting recovery under section 3710 arise in the main out of situation where a bank has been sued, or joined as a party to an action claiming a bank deposit. No such procedure was followed in this case. Moreover, it does not appear the notice and demand were served upon the person liable to pay the taxes, mainly the Howie Company, in accordance with sections 3670 and 3690. This being the case, query, whether the property rights to property were within the meaning of section 3710 "subject to distraint," for under section 3690 the right to collect taxes by distriant and sale arises only after notice and demand.
It would seem to require not much exposition to demonstrate that when the sovereign establishes any priority in his favor, and imposes certain conditions upon the enforcement of that right it is required to comply within the conditions which it has laid down. Since no levy was made upon the funds involved, one of the jurisdictional prerequisite for the application of section 3710 is lacking, and the complaint was rightfully dismissed. Cf. U.S. v Aetna Life Insurance co of Hartford Conn. D.C.,46 F Supp. 30, 37. [Emphasis added].
The governments power to levy on and seize property for tax collection is one of the small number of "extraordinary situations" in which the government may seize property without providing the opportunity for a prior judicial hearing. [Citations omitted.] This power to proceed on a 'pay first, litigate later" basis is justified by the government's need to make tax collection expeditious. [T]axes are the life blood of government, and their prompt and certain availability an imperious need.
That no individual or public officer can sell, and convey a good title to, the land of another, unless authorized to do so by express law, is one of those self-evident propositions to which the mind assents, without hesitation; and that the person invested with such a power must pursue with precision the course prescribed by law, or his act is invalid, is a principle which has been repeatedly recognized in this court. Thacher v. Powell, 19 U.S (6 Wheat.) 119, 125, 5 L. Ed, 221 (1821). Thus, "[t]he general rule is that strict compliance with statutory provisions is required to validate tax sales." Johnson v. Gartian, 470 F2d., 1104, 1106 (4h Cir.) (Absent ratification by the taxpayer, sale is voidable where IRS has failed to comply with Section 6335), cert. denied, 414 U.S. 865, 94 S. Ct. 122, 38 L.Ed 2d.85 (1973); See also Reece v. Scogins, 506 F. 2d 967, 970-71 (5th Cir. 1975) (" Section 6335 permitting the sale at public auction of a taxpayer's land to satisfy a tax deficiency must br strictly construed"); cf Fuentes v. Shevin, 407 U.S. 91, 92 S. Ct. at 2000 (a prerequisite for summary seizure of property is that " the state has kept strict control over its monopoly of legitimate force" by, inter alia, providing standards in a narrowly drawn statute). In keeping with these principles, we have ruled that the government's sale of property after giving only one days public notice instead of the ten days required by sections 3693 (b) and (c) of the 1939 Code was invalid. See Margiotta v. U.S., 21 F2d. 518, 522 (2d Cir. 1954) (short public notice was one of several "substantial defect[s]").
A stickler for enforcing the statutory notice it is entitled to receive, the government should be no less punctilious with respect to the statutory notice it is required to give.
The IRS did nothing more than send "a notice of levy" when the Plaintiffs pointed out the deficiency in the procedure for seizure of their money to their financial institution no efforts were made by the financial institution to require strict compliance of the Internal Revenue Code or otherwise investigate this matter further.
In other words, the Plaintiffs' concerns stated to the BOULDER DAM CredIT UNION merited investigation on the part of the fiduciary and received none.
The IRS sent a Notice of Levy to attach my retirement pay. The letter I am mailing Monday is attached. Please give me advise if you think I am missing something or heading in the Wrong direction.
Sorry to hear about what is going on. You might want to change the last sentence to say something like: "Should you turn over any funds not entitled to be turned over you will be violating my "due process" rights as guaranteed to me under the Constitutions of the United States of America and the State of Michigan and laws made thereunder." And if you can cite a few laws and portions of the Constitutions which would come into play here, it would be nice. In addition you might want to cite a few of the cases you mentioned as the ruling case law on the subject. In addition you might mention that they do have an option to put the funds in trust until they have a court order while at the same time making sure that you have access to the funds.
The following info I found on the Net which may be something you would want to incorporate.
(2) competent waiver of your fundamental Right to due process or law with reasonable deadline (e.g. 30 days), beyond which the doctrine of estoppel by acquiescence will prevail. For the proper legal theory, read up on "Equitable Estoppel". Your account with the offending bank is governed by rules of equity, because you have a contract with that bank to perform fiduciary services for you. Their contract with you cannot authorize unlawful conduct on their part -- ever!!
When bank fails to produce both documents, you must then testify to their default by preparing and executing an AFFIDAVIT OF DEFAULT, executed pursuant to 28 U.S.C. 1746(1).
These documents will then provide you with the essentials to file for relief from your local county court, pursuant to the International Covenant on Civil and Political Rights, enacted with explicit reservations by Congress. It is these Reservations which grant original jurisdiction over this subject matter to county courts. Treaties are supreme Law, pursuant to the supremacy clause.
If the bank tries to introduce either document AFTER your reasonable deadline, you can use estoppel to bar admission of either document into evidence. If the bank requests an extension of your deadline, be sure to grant every reasonable request (but not more than 3 such requests), so as to show good faith and to cement your case in granite.
Your court action can go with several procedures, but I would begin with a petition for ORDER authorizing depositions; then you will take the depositions of all people who received your CONSTRUCTIVE NOTICE AND DEMAND. You will then ask only questions to which you already have the answers, e.g. did you receive such-and-such CONSTRUCTIVE NOTICE? Did you respond? Etc. Your judge may want to deny your request for depositions, and order their testimony at trial instead; go with such and ORDER, because it doesn't really make any difference how you obtain confirmation of their failure to produce these key documents.
The really smart way to conserve judicial resources, AND get the result you want, is to move the court for summary judgment, right after the court rules in favor of your estoppel motion barring discovery of the requested documents after your deadline.
I presume you are proceeding inside the state zone.
Under sections of Internal Revenue Code providing for collection of taxes by levy and distraint , a mere notice of levy is not tantamount to an effective levy upon and distraint of all sums of money due from debtors of bankrupts, in absence of warrant of distraint. 26 U.S.C.A. � 3690, 3692, 3710(a).
Under sections of Internal Revenue Code providing for collection of taxes by distraint and sale, and for levy upon property and rights of property belonging to delinquent taxpayer, an actual or construc�tive seizure is essential to a valid levy and distraint, and where subject matter is an account receivable or chose in action, seizure may be effected by a levy and the service of a warrant of distraint upon the debtor. 26 U.S.C.A. �� 3690, 3692, 3710(a).
In re HOLDSWORTH et al.
Proceeding upon petition of trustee In bankruptcy for adjudication that certain tax liens in favor of United States were invalid, for injunction against their enforcement and for turnover order requiring certain debtors of bankrupts to pay to trustee debts allegedly due and payable. The referee denied re1ief, and petitioner filed petition for review. The District Court, Smith, J., held that evidence was insufficient to support determination that conditions precedent to creation of statutory liens, as prescribed by Internal Revenue Code, were met, a determination essential to conclusion that tax liens were existent and valid, and hence referee's conclusion to effect that valid liens existed was erroneous.
Provisions of Internal Revenue Code creating a statutory lien for taxes in favor of United States are unambiguous and must be literally construed. 26 U.S.C.A. �� 3670, 3671.
Receipt by Collector of Internal Revenue of an assessment list certified by Com�missioner of Internal Revenue, and demand for payment by collector and neglect or refusal of taxpayer to pay, are conditions precedent to creation of statutory lien for taxes in favor of United States, and lien arises only upon fulfillment of such conditions. 26 U.S.C.A. �� 61, 3640, 3641, 3670, 3671.
In proceeding upon petition of trustee in bankruptcy for adjudication that certain tax liens in favor of United States were invalid, evidence was insufficient to support determination that conditions precedent to creation of statutory lien, prescribed by Internal Revenue Code, had been met, a determination essential to conclusion that tax liens were existent and valid, and referee's conclusion to effect that valid liens existed was erroneous. 26 U.S.C.A. �� 61,3640, 3641, 3670, 3671.
Sections of Internal Revenue Code providing for collection of taxes by distraint and sale of goods, chattels or effects of person delinquent, and for levy upon property belonging to such person, are not in pari materia with sections creating statutory lien for taxes in favor of United States. 26 U.S.C.A. �� 3670, 3671, 3690, 3692.
In proceeding upon petition of trustee in bankruptcy for adjudication that certain tax liens in favor of United States were invalid, evidence was insufficient to support a determination that conditions precedent to an effective levy and distraint, as set forth in Internal Revenue Code, had been met, a determination essential to conclusion that there was an effective levy and distraint. 26 U.S.C.A. �� 3690, 3692.
Under sections of Internal Revenue Code providing for collection of taxes by distraint and sale, and for levy upon property and rights of property belonging to delinquent taxpayer , an actual or constructive seizure is essential to a valid levy and distraint, and where subject matter is an account receivable or chose in action, seizure may be effected by a levy and the serv�ice of a warrant of distraint upon the debtor. 26 U.S.C.A. �� 3690, 3692, 3710(a).
In proceeding upon petition of trustee in bankruptcy for adjudication that certain tax liens in favor of United States were invalid, for injunction against their enforcement, and for turnover order requiring certain debtors of bankrupts to pay to trustee (Page 879) debts allegedly due and payable, debtor of bankrupts, who were joined as partial but who failed to enter an appearance or otherwise consent to summary jurisdiction of Court of Bankruptcy, were not subject to court's summary jurisdiction.
A hearing before the Court of Bankruptcy is summary, but it must be full and adequate if issues raised are to be justly decided on merits, and where issues are submitted on stipulation of facts, facts should be fully and adequately stated, and, if not so stated, stimulation of facts should be supplemented by competent and relevant evidence.
Feld & Breitner, Newark, N. J., for trustee.
William F. Tompkins, U. S. Atty., Newark , N. J., for Government.
This proceeding originated with a petition filed by the trustee in bankruptcy and an order to show cause entered thereon by the referee in bankruptcy. The prayers for relief were poorly drafted, but it sufficiently appears from the petition and the record now before the Court that the petitioner sought: first, an adjudication that certain tax liens in favor of the United States were invalid; second, an injunction against the enforcement of the tax liens by the Collector of Internal Revenue; and third, a turnover order requiring certain debtors of the bankrupts to pay to the trustee the debts allegedly due and payable. The referee, after hearing, denied the re�lief sought. The proceeding is now before this Court on a petition for review filed by the trustee.
The action of the referee was obviously predicated upon the conclusions: first, that the tax liens in favor of the United States were existent and valid; and second, that a mere notice of "Levy," served upon each of three debtors of the bankrupts, was tantamount to an effective levy upon and dis�traint of "all sums of money due" from the said debtors of the bankrupts. These conclusions were based solely on the meager facts contained in a Stipulation of Facts, which was deficient; several essen�tial facts were omitted from the stipulation and were not established by competent evidence. The facts before the referee do not support his conclusions.
[1, 2]These provisions of the Code are unambiguous and must be literally construed. When these provisions are thus construed it is clear that the conditions precedent to the creation of the statutory lien are: first, the receipt by the Collector of Internal Revenue of an assessment list certified by the Commissioner of Internal Revenue in accordance with Sections 61, 3640 and 3641 of the Internal Revenue Code, Title 26 U.S.C.A.; and second, a demand for payment by the Collector of Internal Revenue, and the neglect or re�fusal of the taxpayer to pay. Cf. Detroit Bank v. United States, 317 U.S. 329, 335, 63 S.Ct. 297, 87 L.Ed. 304; United States v. Reese, 7 Cir., 131 F.2d 466, 467; Citi�zens State Bank of Barstow, Tex. v. Vidal, 9 Cir., 114 F.2d 380, 384; Alac Kenzie v. United States, 9 Cir., 109 F.2d 540, 541, 542; Metropolitan Life Ins. Co. v. United States, 6 Cir., 107 F.2d 311, 313; Filipowicz V. Rothensies, D.C., 43 F.Supp. 619, 623. The lien arises only upon the fulfillment of these conditions.
 An examination of the record discloses no facts which will support a deter�mination that the conditions prescribed by the Code were met, a determination essen�tial to the conclusion that the tax liens (Page 880) were existent and valid. This conclusion of the referee was therefore erroneous.
 We may assume, although the record does not support the assumption, that the action taken by the Collector of Internal Revenue was pursuant to Sections 3690 and 3692 of the Internal Revenue Code, Title 26 U.S.C.A. Section 3690 provides: "If any person liable to pay any taxes neglects or refuses to pay the same within ten days after notice and demand, it shall be lawful for the collector * * * to collect the said taxes, * * *, by distraint and sale, in the manner provided in this subchapter, of the goods, chattels, or effects, including * * * evidences of debt, of the person delinquent as aforesaid." Sec�tion 3692 provides: "In case of neglect or refusal under section 3690, the collector may levy, * * *, upon all property and rights to property, * * *, belonging to such person, or on which the lien provid�ed in section 3670 exists, for the payment of the sum due, * * *." (Emphasis by the Court.) We note that these sections are not in pari materia with sections 3670 and 3671, supra.
 The right of the Collector of Internal Revenue to proceed under these sec�tions is conditioned upon: first, a notice to the taxpayer of his delinquency and a demand for payment; and second, the neglect or refusal of the taxpayer to pay "within ten days after notice and demand." The record is devoid of facts upon which to predicate a determination that these con�ditions were met, a determination essential to the conclusion that there was an effective levy and distraint. The conclusion that there was an effective levy and distraint is therefore erroneous.
[6, 7] It sufficiently appears from the Stipulation of Facts that a notice of "Levy" was served upon each of the three debtors of the bankrupts, and that thereafter, pursuant to Section 3710(a) of the Code, Title 26 U.S.C.A., a formal "Final Notice and Demand" was served upon each of them. We assume, in the absence of any stipula�tion to the contrary, that no other or fur�ther action was taken. We are of the opinion that in the absence of a warrant of distraint a mere notice of levy is not tantamount to an effective levy upon and distraint of "all sums of money due" from the said debtors of the bankrupts.United States v. O'Dell, 6 Cir., 160 F.2d 304, 30 Givan v. Cripe, 7 Cir., 187 F.2d 225, 228. An actual or constructive seizure is essential to a valid levy and distraint; where as here, the subject matter is an account receivable or chose in action, the may be effected by a levy and the service of a warrant of distraint upon the debtor. The reported cases would indicate that this was the usual practice followed by the Collector of Internal Revenue.
 The record discloses that the three debtors of the bankrupts were joined as parties to this proceeding but failed to enter an appearance or otherwise consent to the summary jurisdiction of the Court of Bankruptcy. We agree with the Referee's conclusion that under the circumstance they were not subject to the Court's summary jurisdiction. We would suggest, however, that if the debts are not disputed a multiplicity of actions might be avoided if the debtors would voluntarily enter their appearance in this proceeding. This would permit the determination of all the issues in a single action.
The matter will be remanded to the Referee in Bankruptcy with instructions to grant a rehearing. We direct the attention of the Referee in Bankruptcy to the applicable provisions of the Internal Revenue Code, supra, which arc determinative of the validity, scope and effect of both the liens and the distraints. We further direct his attention to the applicable provisions of the Bankruptcy Act, and particularly to Sections 67 and 70 thereof, 11 U.S.C.A. �� 107 and 110, which are determinative of the relative rights of the trustee and the Collector of Internal Revenue. See Collier on Bankruptcy, Vol. 4, pages 155 to 224, inclusive.
 We observe that this is another case in which there has been a regrettable waste of judicial time occasioned by the palpable inadequacy of the record made before the Referee in Bankruptcy. We have previously reminded attorneys that the issues which arise in the many collateral matters incident to the administration of a bankrupt estate should be fully and properly tried. A hearing before the Court of Bankruptcy is Summary but it must be full and adequate if the issues raised are to be justly decided on the merits. Where, as here, the issues are submitted on a stipulation of facts, the facts should be fully and adequately stated, and, if not so stated, the stipulation of facts should be supplemented by competent and relevant evidence.
I can find no statute which says that a mere notice shall constitute a "levy".
160 F.2d 304 UNITED STATES v. O'DELL.
[Kulway v. United States, 917 F 2d 729, 735 (2"' Cir, 1990)].
There are specific procedures that must be followed for a garnishment to be lawful unless one voluntarily consents.
which requires that the property be brought into legal custody through seizure, actual or constructive, levy being 'an absolute appropriation in law of the property levied upon.' Levy is not effected by mere notice. No warrants of distraint were issued here." We think the same is true in our case.So far as the petition shows, there was no seizure, but only a threat of seizure-the petition alleges that the Collector threatens to issue a warrant of distraint. As we interpret the facts, the notice of levy op�erated to freeze the assets of the taxpayer in the hands of the Bank, and no more.
A "levy" requires that property be brought into legal custody through seizure, actual or constructive, levy being an absolute appropriation in law of the property levied on, and mere notice of intent to levy is insufficient. United States v. O'Dell, 6 Cir., 1947, 160 F.2d 304, 307. Accord, In re Holdsworth, D.C.N.J.1953, 113 F.Supp. 878, 888; United States v. Aetna Life Ins. Co. of Hartford , Conn., D.C.Conn.1942, 146 F.Supp. 30, 37, in which Judge Hincks observed that he could "find no statute which says that a mere notice shall constitute a 'levy."' There are cases which hold 'that a warrant for dis�traint is necessary to constitute a levy. Givan v. Cripe, 7 Cir., 1951, 187 F.2d 225; United States v. O'Dell, supra. The Court of Appeals for the Third Circuit stated in its opinion, 221 F.2d at page 642, "These sections [26 U.S.C. �� 3690-3697] require that a levy by a deputy collector be accompanied by warrants of distraint." In re Brokol Manufacturing Co., supra.
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