Opinion ID: 526983
Heading Depth: 2
Heading Rank: 2

Heading: The Beers and Ahrensfeldt Proceeding

Text: 10 Promptly after receiving the government's letter, Beers and Ahrensfeldt filed their own petition in surrogate's court, under the caption of Karr's rescission petition, seeking (1) an order requiring payment to them of the escrow fund, and (2) an injunction restraining the government from taking any further action to collect Pikna's back taxes out of the escrow fund. The theory underlying their petition, as explained in the present proceedings, is that they had created the fund by opposing Karr's petition and were thus entitled to have a constructive trust imposed upon it for their benefit. Beers/Ahrensfeldt sought and obtained from the surrogate's court an ex parte temporary restraining order (TRO) enjoining the government from commencing any action in any other court to claim the escrow funds and from removing the action to federal court. 11 The government moved in the Appellate Division of the Supreme Court to set aside the TRO, contending that the surrogate's court (1) lacked the power to interfere with the government's exercise of rights conferred upon it by federal law--i.e., the right to foreclose on tax liens and the right to remove actions brought against it in state court to federal court, and (2) lacked jurisdiction over the dispute between Beers/Ahrensfeldt and the United States because the dispute has nothing to do with the underlying estate proceeding. The Appellate Division modified the TRO to permit the government to remove the proceeding to federal court, noting that the state court could not forbid removal permitted by federal statutes. 12 The government removed the proceeding to federal court, characterizing the Beers/Ahrensfeldt petition as a claim under 26 U.S.C. Sec. 7426(a)(1) (1982) that the Internal Revenue Service (IRS) had wrongfully levied on the escrow fund, a claim under 28 U.S.C. Sec. 2410 (1982) for enforcement of their own lien against the fund, and an attempt to enjoin IRS from foreclosing its tax lien. The government asserted that removal was proper under 28 U.S.C. Secs. 1441(a), 1441(b), 1442(a)(1), and 1444 (1982). Thereafter, Beers and Ahrensfeldt withdrew their requests for injunctive relief against the government, one of the bases for removal, and they moved for a remand to state court. 13 In an endorsed memorandum dated May 18, 1988, the district court granted the motion to remand on the ground that the proceeding had been removed improvidently and without jurisdiction. The court noted that [o]ne may argue, as did the government, that the surrogate's court lacks jurisdiction to resolve the competing claims of the government and Beers/Ahrensfeldt, but stated that 14 the record is clear that the government's involvement occurred as an incident of the administration of the estate and not as a civil action of which the district courts have original jurisdiction founded on a claim or right arising under the ... laws of the United States. 28 U.S.C. Sec. 1441(b). Nor is a claim asserted against the government, the claim for injunctive relief having been withdrawn.... Although as far as the government is concerned a similar purpose might have been served by a civil action under 28 U.S.C. Sec. 2410, that does not convert the ancillary proceeding in the Surrogate's Court into a removable action to quiet title or to foreclose a lien.