Court Opinion

ID: 9458287
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:47:11.285104+00
Date Added: 2024-06-11T17:35:42.008157
License: Public Domain

JOHN R. BROWN, Chief Judge
(dissenting) :
The Court concludes that the tax collecting power of the Federal Government has been effectively thwarted by a private contractual arrangement between a taxpayer and his insurance company. Primarily because of the opinion’s carefully reasoned and articulate analysis of the problem, that result is admittedly very persuasive. Nevertheless, I am convinced that it is not the result which Congress intended and which a proper construction of § 6332(b) should entail.
Initially we should remember that the derivation of statutory meaning is not an abstract lexicographical exercise, no matter how clear and unambiguous the written manifestation of the legislature’s collective will.1 “Examples are legion where literalness in statutory language is out of harmony * * * with an Act taken as an organic whole.” Oestereich v. Selective Service System, 1968, 393 U.S. 233, 238, 89 S.Ct. 414, 417, 21 L.Ed.2d 402, 406. What might otherwise be a perfectly reasonable, common-sense interpretation of superficially *214plain language must be rejected when adopting it would frustrate or defeat the obvious Congressional purpose which the statute was designed to effectuate. Perry v. Commerce Loan Co., 1966, 383 U.S. 392, 399-400, 86 S.Ct. 852, 856, 15 L.Ed.2d 827, 833; Markham v. Cabell, 1945, 326 U.S. 404, 409, 66 S.Ct. 193, 195, 90 L.Ed. 165, 168. Here the consequence of a literal reading is to nullify the law.
If the Court’s interpretation is correct there appear to be at least three situa-ions in which the Government will be unable to collect from the insurance company because of intervening events arising during the 90-day grace period following service of the notice of levy, two of which are wholly within Taxpayer’s control: (i) when the policyholder dies, (ii) when he assigns the policy to someone else, and (iii) when he purposefully allows the policy to lapse knowing that from the viewpoint of his beneficiaries substantially the same protection is available through paid up or extended insurance. In none of these events will he be entitled to the advance of all or any portion of the policy’s cash loan value on the 90th day. This result is particularly anomalous because one of the purposes served by the 90-day period is to provide taxpayers with an opportunity “to continue the policy in force by transferring it to either a beneficiary or someone else who pays the subsequent premiums and interest on policy loans, including those loans resulting from the Government levy.” S.Rep.No.1708, 89th Cong., 2d Sess. (1966-2 Cum.Bul. at 888). It hardly seems plausible to suppose that Congress has also provided a taxpayer with a gratuitous 90-day option to defeat the Government’s lien altogether by means of a unilateral action wholly within his own control. “No rule of construction necessitates our acceptance of an interpretation resulting in patently absurd consequences.” United States v. Brown, 1948, 333 U.S. 18, 27, 68 S.Ct. 376, 381, 92 L.Ed. 442, 449.
Moreover, even if we are somehow compelled to discover ambiguity in § 6332(b) in order to avert the disaster of a literalistic construction, I believe we can find an abundance of it. Paragraph (2) provides: “Such levy shall be deemed to be satisfied if such organization pays over to the Secretary or his delegate the amount which the person against whom the tax is assessed could have had advanced to him by such organization on the date prescribed in paragraph (1) for the satisfaction of such levy.” The problem is, what does the italicized language modify? If the statute is syntactically flawless, as the Court assumes, the reference is to the word “amount,” so that the sentence means “the amount which * * * could have [been] advanced * * * on the date prescribed in paragraph (1).” However, if this language refers to the word “pays” and merely reaffirms the time for the satisfaction of the levy, the sentence should read as follows : “Such levy shall be deemed to be satisfied if such organization, on the date prescribed in paragraph (1) for the satisfaction of such levy, pays over to the Secretary or his delegate the amount which the person against whom the tax is assessed could have had advanced to him by such organization.”
Given these two alternatives we should adopt the second one, since paragraph (1) states that a levy constitutes “the exercise of the right of the person against whom the tax is assessed to the advance of such amount,” while § 6331(b) provides that “a levy shall extend * * * to property possessed and obligations existing at the time thereof” (emphasis added). If the Court’s interpretation were correct, this language — as applied to a levy under § 6332(b) — must be construed to mean “ * * * to property possessed and obligations existing 90 days after service of the notice of levy.” Apart from the inconsistency resulting from the implicit assumption that Congress has prescribed two fundamentally different kinds of levies — those immediately operative and those having only prospective effect — it is almost inconceivable to suggest that here the Government has exercised a nonexistent right *215and levied against a nonexistent obligation. Since the service of the notice of levy amounted to an exercise of the taxpayer’s right to payment of the cash loan value under the terms of the policy, the value on the date of service should be controlling, notwithstanding the fact that the insurance company’s obligation to pay that amount is generally to be deferred for 90 days.2
Even if the Court is correct in asserting that the Government’s levy extends only to that amount which the taxpayer could have had advanced to him on the 90th day, there is no reason to conclude that he was entitled to nothing. The policy surely had some economic value. Cf. Commissioner of Internal Revenue v. Chase Manhattan Bank, 5 Cir., 1958, 259 F.2d 231, cert. denied, 1959, 359 U.S. 913, 79 S.Ct. 589, 3 L.Ed.2d 575. This would also include the policy’s entire cash loan value at that time if he had reinstated the original whole life policy by paying the overdue premium. The fact that the premium was not actually paid is irrelevant.
In any event the question here is simply whether a taxpayer — by volitional, unilateral acts — may successfully avoid satisfaction of a pre-existing Federal income tax liability by exchanging a particular property interest which has already been appropriated for the use of the United States Treasury for another kind of property interest having substantial, if not equivalent, value, but not realizable except on the contingency of death. I would hold that he may not.

. “There is, of course, no more persuasive evidence of the purpose of a statute than the words by which the legislature undertook to give expression to its wishes. Often these words are sufficient in and of themselves to determine the purpose of the legislation. In such cases we have followed their plain meaning. * * * Frequently, however, even when the plain meaning did not produce absurd results but merely an unreasonable one ‘plainly at variance with the policy of the legislation as a whole’ this Court' has followed that purpose, rather than the literal words.” United States v. American Trucking Associations, 1940, 310 U.S. 534, 543, 60 S.Ct. 1059, 1063, 84 L.Ed. 1345, 1350-[1351] (footnotes omitted).

. The legislative history of § 6332(b) clearly states that “where the Government levies on the cash loan values of the contract, the insurance company generally must pay this cash loan value over to the Government 90 days after the levy.” S. Rep. 1708, supra, 1966-2 Cum.Bul. at 888. Moreover, Temporary Treas.Reg. § 400.3-1 (b) (1) (ii) provides that “no event during the 90-day period subsequent to the date of service of the notice of levy shall release the cash loan value from the effect of the levy. For example, the termination of the policy by the taxpayer or by the death of the insured during such 90-day period shall not release the levy.” Of course, the regulation is invalid if it is inconsistent with the terms of the statute. But under the circumstances here it should be controlling. Bingler v. Johnson, 1969, 394 U.S. 741, 750, 89 S.Ct. 1439, 1445, 22 L.Ed.2d 695, 703704; Commissioner of Internal Revenue v. South Texas Lumber Co., 1948, 333 U.S. 496, 501, 68 S.Ct. 695, 698, 92 L.Ed. 831, 836.