Court Opinion

ID: 6925423
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:18:35.823432+00
Date Added: 2024-06-11T09:08:32.379265
License: Public Domain

HAYS, Circuit Judge
(dissenting).
In his learned opinion my brother Moore has almost completely lost sight -of what it is that we are asked to review. The extensive dissertation on the nature and characteristics of attachable or lienable property under New York law is an admirable display of my colleague’s well known erudition and of his customary careful and exhaustive research. But it has little if anything to do with the case in hand.
The order appealed from was issued by the district court under the authority of § 7402(a) of the Internal Revenue Code of 1954 which provides:
“The district courts of the United States at the instance of the United States shall have such jurisdiction to make and issue in civil actions, writs .and orders of injunction, and of ne exeat república, orders appointing receivers, and such other orders and processes, and to render such judgments and decrees as may be necessary or appropriate for the enforcement of the internal revenue laws. The remedies hereby provided are in addition to and not exclusive of any and all other remedies of the United States in such courts or otherwise to enforce such laws.”
The order of the district court does not purport to establish or enforce any lien on any property or to direct the payment of any sums whatever. It is a simple order, confined to a direction to the appellant (and certain others) to keep the property of the taxpayer which they now hold. The order reads:
“Ordered, that pending the determination of this action or until further order of this Court, the defendants, Lazard Freres & Co., Lehman Brothers, Belgian-American Banking Corp. and First National City Bank of New York, or any of them, be and they are hereby restrained from selling, transferring, pledging, encumbering, disposing of, or distributing any property or rights to property of Omar, S.A., including, but not limited to, any sums, credits, stock, or bonds or any interest, dividends, or other earnings thereon now held for or for the account of the said Omar, S.A., by them’ or by any of their branches, agents, or nominees whether located within the United States or not and whether their branches, agents, or nominees are located within the United States or not.”
The record indicates that the district court was completely justified in issuing the injunction. In May 1962 counsel for taxpayer told government representatives that if the government should attempt to establish tax liability, taxpayer would liquidate its holdings in the United States. Later one of taxpayer’s directors came to the United States and began a systematic liquidation of those holdings. By October 31,1962, when the Commissioner assessed jeopardy assessments totalling $19,300,000, taxpayer had already transferred at least $2,300,000 out of the country.
The order is merely a preliminary injunction to prevent further dissipation of taxpayer’s assets. The district court did not determine, nor was there any occasion for its determining, whether the government’s lien attached to all the property immobilized by the order, or what part of such property the government would be able to get possession of in the later stages of this proceeding or in some other proceeding.
There is no doubt that the district court, having in personam jurisdiction over appellant, had the power to issue its order. Indeed appellant does not deny such power except with respect to property of the taxpayer held by appellant’s foreign branches. The district court has the power to order the appellant over whom it has personal jurisdiction to act or to refrain from acting both within and without the territorial jurisdiction of the court. United States v. Ross, 302 F.2d *26831 (2d Cir., 1962). It is of no consequence, as the majority believes, that the court does not have jurisdiction over Omar. The court’s jurisdiction is not in any sense jurisdiction over the res, it is jurisdiction over the person of the appellant.
The present issue as to property of the taxpayer which is held by appellant’s foreign branches is not, as the majority believes, whether that property can be recovered in the pending proceeding. The only issue is whether appellant has power to carry out the order of the court with respect to that property. It is clear that appellant has that power (First National City Bank v. Internal Revenue Service, 271 F.2d 616 (2d Cir., 1959), cert. denied 361 U.S. 948, 80 S.Ct. 402, 4 L.Ed.2d 381 (1960)), and indeed appellant does not deny that it could prevent its foreign branches from releasing property to the taxpayer.
Appellant cannot at this stage be permitted to argue that, although it does not deny that it could effectively prevent its foreign branches from paying out money to the taxpayer, it cannot be required to do so because the government may not be able to recover that money in the present suit. Neither the district court nor this court can or should decide on the present record that the government has no recourse by which it could ever recover the property which the government seeks to protect from dissipation. Even if it should be granted that in the present proceeding the government could not recover property of the taxpayer held by a foreign branch, is this court now prepared to hold, for example, that there is no possibility that a receiver appointed under the authority of § 7402(a) would be able to proceed against taxpayer’s property under any circumstances or anywhere other than New York? The majority’s reference to the absence of a tax treaty with Uruguay is irrelevant since not only is the absence of such a treaty not dispositive, but there is nothing in the record before us to show that foreign branches of appellant other than that in Montevideo do not hold property of the-taxpayer.
The result of the present decision is a. wholly unwarranted limitation on the government’s power to preserve property of delinquent taxpayers from dissipation-pending proceedings to recover that property. With respect I must dissent.