Court Opinion

ID: 9421647
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:59:12.018341+00
Date Added: 2024-06-11T17:22:31.136910
License: Public Domain

Mr. Justice Harlan,
whom Mr. Justice Burton joins,
concurring in part and dissenting in part.
Insofar as the Government’s action here rests on a theory of liability in equity for debts of another person, I agree with the Court that Mrs. Bess’ liability is to be determined by reference to state law and that consequently the Government cannot prevail on this basis since state law here imposes no liability. I think, however, that the Government fares no better by asserting a right to the cash surrender values of the policies by virtue of the statutory lien created by § 3670 of the Internal Revenue Code of 1939.
In my view the correct analysis of the surrender-value issue has been given in a Second Circuit case, United States v. Behrens, 230 F. 2d 504, which also involved the enforcement of federal tax liens asserted under § 3670. There Judge Learned Hand, although he felt constrained to apply the principles of an earlier Second Circuit case, Rowen v. Commissioner,* 215 F. 2d 641, and thereby held *61for the Government, observed in speaking for himself and Judge Medina:
“Considered strictly upon the basis of the legal rights created, the lien on the 'surrender values’ came to an end with Behrens’s death. The obligation of an insurer in a policy of life insurance is made up of a number of promises, of which one is to pay to the beneficiary the amount of the insurance — the 'proceeds’ — and another is to pay the 'surrender value’ to the insured upon his demand. The performances of these promises are not only separate, but inconsistent with each other: the payment of the 'surrender value’ cancels the promise to pay the 'proceeds’ and the promise to pay the 'proceeds’ assumes that the insured has not demanded and received the ‘surrender value.’ The premiums when paid become the property of the insurer and the insured has no interest in them, although it is true that in New York, as in most states, a life insurance company’s finances are regulated by statute in much detail in order to protect policyholders. ... It follows from what we have said that there is no logical escape from holding that the ‘surrender value’ comes to an end on the insured’s death, if we dispose of the controversy in accordance with the ordinary rules governing contracts.” 230 F. 2d, at 506-507.
Agreeing with this reasoning, I believe that although the cash surrender values of life insurance policies were here properly considered property of a taxpayer to which federal tax liens attached during the taxpayer’s life, these values cannot be deemed to exist after the taxpayer’s death. It follows that the lien terminated at the time of death. The “fund” theory of surrender values referred to in the cases cited in the Court’s opinion has in my view no application when it comes to determining the *62specific reach of a lien under § 3670. Accordingly, I would affirm the judgment of the Court of Appeals insofar as it denied the Government relief with respect to the proceeds of these policies above their surrender values, and reverse it insofar as it held the petitioner-respondent Bess liable to the extent of the surrender values.

In the Rowen case, when a member of the Court of Appeals for the Second Circuit, I subscribed to a holding that one in the position of the petitioner in Commissioner v. Stern, ante, p. 39, should be deemed a “. . . transferee of property of a taxpayer . . .” within the meaning of §311 (a) of the Internal Revenue Code of 1939 insofar as cash surrender values of life insurance policies were concerned. Further reflection however has led me to question the analysis in the Rowen decision on this score. In any event I do not view that decision, which was concerned with the interpretation to be accorded § 311, as necessarily having application to a case involving a federal tax lien.