Document: 44 L.Ed.2d 201 95 S.Ct. 1728 421 U.S. 330 Craig PHELPS, Receiver in Bankruptcy, Petitioner,v.UNITED STATES. No. 74—121. Argued April 16, 1975. Decided May 19, Syllabus After the Internal Revenue Service (IRS) had made federal tax assessments against a company and failed to pay taxes after formal demand, transferred its assets an assignee for benefit of creditors, who converted into cash. The IRS then filed notice lien respecting served levy on assignee, did not, however, comply with IRS's payment demand. was thereafter adjudicated bankrupt petitioner receiver bankruptcy application Referee order requiring turn over cash proceeds. opposed ground that court lacked jurisdiction subject matter because United States entitled possession proceeds held by bankrupt's assignee. rejected contention, holding assignment passed inalienable title District Court upheld Referee. Appeals reversed. Held: States, serving taxpayer's valid took constructive custody assignee's possession, neither nor as could assert claim those receiver's recourse is limited plenary suit under § 23 Bankruptcy Act. Pp. 333-337. 7 Cir., 495 F.2d 1283, affirmed. Dennis E. Quaid, Chicago, Ill., petitioner. Keith A. Jones, Washington, D.C., respondent. Mr. Justice BRENNAN delivered opinion Court. 1 Between March June 1971 amount $140,831.59 Chicagoland Ideel Cleaners, Inc. Instead, 28, 1971, creditors. promptly approximately $38,000. On August 25, March-June office Recorder Deeds Cook County, same day stated hands 'are hereby levied upon seized satisfaction' taxes, 'and demand you (proceeds).' September 14, involuntary petition Chicagoland. Phelps appointed bankruptcy. 2 Petitioner receiver, October not complied payment, $38,000 from sale Chicagoland's assets. '(t)his lacks moneys now (the) bankrupt. . .' 'the assignee' therefore nullity ..' accordingly entered directing 'surrender to' 'all sums his Northern Illinois, review behalf IRS, approved Referee's turnover order. Seventh Circuit 1283 (1974). held: 'Since property resided (petitioner) summarily adjudicate controversy without Government's consent. have suit. We respectfully decline follow contrary (of Ninth Circuit) In re General Wood Products Corp., 483 975 (9th Cir. 1973).' F.2d, at 1285—1286. granted certiorari resolve conflict between Courts Appeals, 419 1068, 651, 42 663 (1974).1 agree affirm judgment.2 3 * claims no interest Circuit, 975, 976 (1973), circumstance, more, subjected court's summary enter Corp. relied statement Taubel-Scott-Kitzmiller Co. v. Fox, 264 U.S 426, 432—433, 396, 398—399, 68 L.Ed. 770 (1924), 'exists where some other person makes it.' That reliance misplaced. read context facts case applied only nonadverse third it agent bona fide adverse claimant. Taubel itself been given proceedings avoid created judgment state sheriff possessed creditor, he creditor consented adjudication court. Similarly, this claimant has 4 custodial relationship thereby reduced States' possession. Neither circumstance. For when assessment favor attached rights property, whether real or personal, belonging (the taxpayer).' 26 U.S.C. 6321. lien.3 sale.4 See Sheppard Taylor, 5 Pet. 675, 710, 8 269 (1831); Loeber Leininger, 175 Ill. 484, 51 N.E. 703 (1898). '(T)he reattaches thing whatever substituted it. owner holder, whose wrongfully displaced, may wherever they can distinctly trace them.' supra, Pet., 710.5 were authorized means collecting him. Title 6331(a) provides: '(I)f any liable neglects refuses within 10 days shall be lawful Secretary collect such all which there (tax) .'; '(t)he term 'levy' includes power distraint seizure means.' 6331(b). Treasury Regulations, CRF 301.6331—1(a)(1) (1974), provide '(l)evy levy,' gave right Pittman, 449 623, 627 (CA7 1971). 6332(a) requires must surrender Government, become tax, 6332(c). With surrender, duty owed taxpayer extinguished. 6332(d). 6 Thus, following actual 'where assertedly bankrupt, but others prior holder jurisdiction.' J. Moore & R. Oglebay, Collier 23.06(3), pp. 506.2—506.3 (14th ed. 1975);6 Cline Kaplan, 323 97, 65 155, 89 97 (1944); Galbraith Vallely, 256 46, 41 415, 823 (1921). Act, 11 46. supra. argues, necessary remove liens subordinate priority accorded them 67c(3) Act.7 argument merit. Eiland, 223 118 (CA4 1955); Rosenblum 300 843 (CA1 1962). Section bearing question jurisdiction; relates already determined part estate. Here we are concerned effect levy. Historically, service sufficient seize debt, Miller Wall. 268, 297, 20 135 (1871), equivalent seizure. See, e.g., Sims 359 108, 79 641, 667 (1959). levy, therefore, full legal receiver. Petitioner's final contention general restriction altered enactment 1938 2a(21) 11(a)(21), grants courts '(r)equire assignees creditors deliver their control This provision, designed 'clarif(y) (bankruptcy) court.' S.Rep.No.1916, 75th Cong., 3d Sess., 12 (1938), 'simply declaratory law,' 2.78(3), p. 390.26. Under law, holds 'a mere naked bailee retain trustee bankruptcy.' McCrum, 214 F. 207, 209 (CA2 1914). custodian Valley, supra.8 9 Affirmed. grant questions presented petition: '1. 'Whether incorrectly based Code 1954 violation priorities established Act?' '2. Whether Notice Levy subsequent States?' '3. before consent States?" There significant difference result suit: 'The proceeding merely relative formality respective procedures. consequence administration Where government expenses wage claims. (s) 107(c)(3). contrast, if turnover, brought estate able defeat government's underlying proceeding, i.e., refund. sound, administrative outright.' Brief 19. unfiled persons except purchasers, holders security interests, mechanic's lienors, 6323(a). concedes fall these categories. Government does contend followed good-faith purchasers 14 n. 5. As indicated 3, invalid purchasers. Bess, 357 51, 78 1054, 1135 (1958), contrary. Bess effected during insured's life value insurance policy death beneficiary value. limitation recognized lifetime realized larger thus greater 'property' 'rights property' ab initio. Id., 55—56, S.Ct., 1057—1058. may, 99, 156, (1944). refused case. 107(c)(3), provides pertinent part: 'Every personal accompanied postponed debts specified clauses (1) (2) subdivision (a) section 104 title. 64 104, '(a) priority, advance dividends paid out estates, costs ., wages commissions, exceed $600 each claimant, earned three months date commencement due workmen, servants, clerks, traveling, city salesmen also relies 70a(8) 110(a)(8). vests 'with filing creditors.' Even 1, conveyed 14. event, prebankruptcy displaced Chicagoland, inapplicable.

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