LOCATION: Dry Docks at Reed, WV
DOCKET NO.: 339
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Second Circuit
CITATION: 362 US 404 (1960)
ARGUED: Mar 22, 1960
DECIDED: Apr 25, 1960
Facts of the case
Media for Hew Hampshire Fire Insurance Company v. Scanlon
Audio Transcription for Oral Argument - March 22, 1960 in Hew Hampshire Fire Insurance Company v. Scanlon
Number 339, New Hampshire Fire Insurance Company, Petitioner versus Scanlon, District Director of Internal Revenue, et al.
Mr. Chief Justice, may it please the Court.
This case comes here by way of certiorari to the Court of Appeals for the Second Circuit.
The question presented involves the construction of a statute.
The statute is a short one, consisting of five lines and is printed on page one of petitioner's brief.
It's Section 2463 of the Judicial Code which reads as follows, “All property taken or detained under any revenue law of the United States shall not be repleviable, but shall be deemed to be in the custody of the law and subject only to the orders and decrees of the Courts of the United States having jurisdiction thereof."
The question presented is whether under that statute, statute the District Courts had jurisdiction in a summary proceeding instituted by petitioner in order to show cause to determine the claim of a non-taxpayer that his property has been seized and satisfied the tax obligation of a nun.
The District Court for the Southern District of New York, expressly declining to follow the Third Circuit, held that the District Courts had no such jurisdiction and dismissed the petition.
The Court of Appeals for the Second Circuit affirmed in one sentence upon the opinion below.
In this Court, the respondent suggests that the case might be remanded to the Southern District without prejudice to the petitioners requesting that the Court treat the petition as a complaint and that the action then proceed in accordance for the Federal Rules of Civil Procedures.
That suggestion of course is no concession at all because in the current posture of this case, the major issue is whether we are required to proceed in accordance with the Federal Rules of Civil Procedure, but whether we have a right would obtain the article quarters of the Court with respect to the time for answer, the time for pretrial proceedings, the time for trial.
The facts in the instant case maybe briefly stated.
The petitioner, New Hampshire Fire Insurance Company, among other things, is engaged in the business of issuing surety bonds.
In 1956, the petitioner issued a surety bond on behalf of a contractor, Acme Cassa Incorporated which had entered into a contract of the City of New York for the construction of a playground.
During the course of the work which involved a contract to delinquent taxpayer of $356,000, Acme Cassa became financially unable to continue with the work.
The City of New York as obligee, thereupon called upon the petitioner here to complete the work and pay the unpaid bills of Acme Cassa.
This, the petitioner did.
In the meantime, Acme Cassa had become a delinquent taxpayer and the United States filed notices of tax levies with the City of New York.
There came a time then when the City of New York had available for payment some $68,000 and this money was in the form of a warrant to the order of this petitioner.
At that time, the petitioner had expanded some $83,000 in completing the work and in paying unpaid bills.
The Government had a tax lien in the amount of some $35,000.
In New York State, the law is the very well established than in these circumstances.
The surety is obligated to the position of the obligee, in this case the city, and that therefore, the money is payable directly to the surety and accordingly the Government's tax lien, which applied only to the property of the anointed taxpayer has no applicability of law at all.
Plainly, we don't deal with the question of priority because the property never goes to Acme Cassa, the delinquent taxpayer.
In the District Court, the judge said that we were required to bring a plenary procedure.
Nobody has said against to whom we are supposed to bring a plenary proceeding and it is submitted to this Court that we are not dealing with the ordinary types of case where you have a plaintiff and defendant.
The party difficult to pinpoint in this case is the defendant.
The history of the statute, its express language, its evident purpose all make it clear that this property when improperly seized by a person who happens to be a tax collector, but who of course is merely an individual tortfeasor when he seizes the property of a non-taxpayer.
That tax as we say very clearly put the property in the custody of the Court subject to the orders and decrees of that Court.