Court Opinion

ID: 9460726
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:58:41.945497+00
Date Added: 2024-06-11T17:36:44.805626
License: Public Domain

GIBBONS, Circuit Judge
(dissenting) :
I agree with the majority that the order appealed from is not appealable as a final order under 28 U.S.C. § 1291. But it is, in my view, appealable under 28 U.S.C. § 1292(a), since it is functionally identical with an injunction against transfer or the appointment of a pendente lite receiver.
In the complaint the United States seeks to foreclose a tax lien on securities and seeks no other relief. The assessment giving rise to the alleged lien became final long ago. If the defendant appears in personam there is at least a question whether a defense going to the validity or amount of the assessment may be asserted. See United States v. O’Connor, 291 F.2d 520, 526-28 (2d Cir. 1961) overruling Pipola v. Chicco, 274 F.2d 909 (2d Cir. 1960); cf. Quinn v. Hook, 231 F.Supp. 718 (E.D.Pa.1964), aff’d per curiam, 341 F.2d 920 (3d Cir. 1965); Cooper Agency, Inc. v. McLeod, 235 F.Supp. 276, 284 (E.D.S.C.1964), aff’d per curiam, 348 F.2d 919 (4th Cir. 1965). No general appearance has been made to date. The assessment is presumptively valid. Since the market value of the stock is less than the assessment, there may well be a default. Thus the only determination likely to be made in the litigation is that the federal lien attaches to the sequestered securities ahead of other lien claims and can be foreclosed in Delaware. The dispute is over priority of liens. The action is in rem rather than quasi in rem since its sole object is foreclosure of an alleged lien.
The lien of the United States for unpaid estate taxes is a creature of federal law. 26 U.S.C. § 6324. Unlike the income tax lien, 26 U.S.C. § 6323, the estate tax lien is effective without the filing of notice from the date of the decedent’s death even against subsequent purchasers. Detroit Bank v. United States, 317 U.S. 329, 63 S.Ct. 297, 87 L.Ed. 304 (1942); Michigan v. United States, 317 U.S. 338, 63 S.Ct. 302, 87 L.Ed. 312 (1942). The Internal Reve*851nue Code, 26 U.S.C. § 2104(a), defines shares of stock of a domestic corporation owned and held by a nonresident not a citizen as property within the United States. The Code does not with respect to estate tax say where in the United States is the situs of such shares.1 But Article 11(f) of the Convention Between the United States of America and Canada for the Avoidance of Double Taxation on the Estate of Deceased Persons, February 17, 1961, 13 U.S. Treaties 382, establishes the situs of such shares at the place of incorporation of the issuer. Thus venue in the foreclosure action, brought pursuant to 26 U.S.C. § 7403, was properly in Delaware.
But calling the order a “sequestration” order, as if this were merely an in personam action and an effort to compel a general appearance, is an oversimplification. A general appearance is not only unlikely, but the government really does not seek one. As the district court said:
“To prevent a transfer of the U.S. Steel stock from the Estate’s name, the United States concurrently moved for, and was granted, a sequestration order by this Court under authority of 10 Del.C. § 366.” United States v. Sinclair, 347 F.Supp. 1129, 1133 (D.Del.1972) (emphasis added).
If the United States had, on the authority of 26 U.S.C. § 7403(d), obtained the appointment of a receiver, the order would be appealable under 28 U.S.C. § 1292(a) (2). See United States v. O’Connor, supra, 291 F.2d at 523. If the court had called the order an injunction against transfer it would be appeal-able under 28 U.S.C. § 1292(a)(1). An order which to me looks, feels, and smells like pendente lite relief in the nature of a receivership or an injunction in aid of foreclosure should be appealable as such regardless of the labels Delaware State practice would attach to it. I would reach the merits of the appellant’s allegation respecting the conflicting claims of the United States and Canadian taxing authorities. Otherwise, if there is no general appearance, the possibility of relitigation in another forum respecting situs of the stock will remain. See United States v. First National City Bank, 379 U.S. 378, 85 S.Ct. 528, 13 L.Ed.2d 365 (1965).

. Compare § 2104(a) with 26 U.S.C. § 6323(f) (2) dealing with situs of securities for other tax purposes.