As found in United States
v. O'Dell
Section 3710, I. R. C.
"(A) * * * Any person in possession of property, or rights
to
property, subject to
distraint, upon which a levy
has been made, shall,
upon demand by the collector or deputy collector making such levy,
surrender such property or rights to such collector or deputy, unless
such property or right is, at the time of such demand, subject to an
attachment or execution under any judicial process.
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IRC section 3710 of the 1939
code is now IRC section 6332 of the current code.
TITLE 26 - INTERNAL
REVENUE CODE
Subtitle F - Procedure and Administration
CHAPTER 64 - COLLECTION
Subchapter D - Seizure of Property for Collection of Taxes
PART II - LEVY
Sec. 6332. Surrender of property subject to levy
(a) Requirement
Except as otherwise provided in this section, any person in possession
of (or obligated with respect to) property or rights to property subject to levy upon which a levy has
been made shall, upon demand of the Secretary, surrender such
property or rights (or discharge such obligation) to the Secretary,
except such part of the property or rights as is, at the time of such
demand, subject to an attachment or execution under any judicial
process.
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Please observe the
underscored phrases. "Property subject to
distraint" was changed to read "property subject to levy".
Distraint and levy are synonymous.
Please observe that in order
to trigger the application of the requirements of section 6332, an actual levy MUST have been made.
TITLE 26 - INTERNAL
REVENUE CODE
Subtitle F - Procedure and Administration
CHAPTER 64 - COLLECTION
Subchapter D - Seizure of Property for Collection of Taxes
PART II - LEVY
Sec. 6331. Levy and distraint
(b) Seizure and sale of
property
The term "levy" as used in this
title includes the power of distraint
and seizure by any means.
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So "property subject to levy"
means "property subject to distraint"
and "property subject to seizure".
United States v. O'Dell
(cont.)
Section 3710 requires the surrender of property or rights to property (1) subject to distraint;
(2) upon which a levy has been made; (3)
unless such property is subject to an attachment or execution under
judicial process. This section is new, having been enacted
in 1926,
Act of Feb. 26, 1926, section 1114(e) and (f), 44 Stat. 117; but the
provision authorizing the Collector after failure or refusal of the
taxpayer to pay taxes due, to levy upon his property or property rights
(section 3692) dates from 1866.
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The requirement to surrender
property has three conditions that MUST be met before there is a legal
duty to surrender such property.
- The property MUST be subject to distraint (levy;
seizure);
- The property MUST have a levy actually made upon it;
- The property must not be 'claimed' by a prior
judicial process.
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Section 3692 of the 1939 IRC
is now contained IRC section's 6331(a), 6331(b), and 6334(c).
For the purposes of this web
page, property subject to distraint means property not exempt from
seizure under IRC section 6334, Property exempt from seizure.
United States v. O'Dell
(cont.)
As pointed out in United States v. Metropolitan Life Ins. Co., the procedure for
distraint authorized under section 28 of the Revenue act of
1864, was in
substance like that of Section 3692 except that nothing was said about
a levy. In 1866, Congress, among other
changes, provided that a levy was required to be made "upon all
property and rights to property * * * belonging to" the taxpayer.
The provision authorizing levy is unchanged in the statute applicable
here (section 3692). Thus Congress
enacted section 3710 with knowledge that for some sixty years levy had
been authorized in these cases. In section 3710, which provides a
method of forcing a third person to surrender property of the taxpayer
for the payment of the taxes due, Congress not only required that the property surrendered should have been
levied upon , but emphasized this provision by
making the allowance for costs and interest contained in subsection (b)
run "from the date of such levy."
The property involved here falls within the classes of property subject to distraint,
section 3690, and is not subject to an attachment or execution; but the
record fails to show that levy has been made.
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The procedure for levy IS the procedure for seizure IS the procedure for distraint.
Property to be surrendered
in an act of seizure is property that has a bona
fide levy upon it.
A bona
fide levy requires procedures to have been scrupulously
adhered
to. As
noted in the last sentence above, no levy was made upon the property
involved in this case because proper procedure was not followed.
United States v. O'Dell
(cont.)
The stipulation covering levy is as follows:
"That one Giles Kavanagh, the duly
appointed, qualified and acting Collector of Internal Revenue
for the District of Michigan, on September 8, 1941, as said Collector, gave
written notice to the defendant LeRoy E. O'Dell that the tax assessment
... totalling $1,336.84, including interest thereon, were unpaid and
due and further notified the defendant that all property, rights to
property, moneys, credits and/or bank deposits then in his possession
or under his control and belonging to said Howie Company, and all sums
of money owing from the defendant to said Howie Company, were seized
and levied upon for the payment of said taxes, together with the
penalties and interest, and demand was made upon the defendant for the
sum of $1,336.84, or such lesser sum as he was indebted to said Howie
Company, to be applied in payment of said tax liabilities."
This
paragraph describes a mere statement of notice of claim. Nothing alleged to have been done amounts
to a levy, which requires that the property be brought into
legal custody through seizure, actual or constructive, levy being "an absolute appropriation in
law of the property levied upon." Rio Grande R. Co. v.
Gomila; In re Weinger, Bergman & Co.; Smith v. Packard. Levy is not effected
by mere notice. Hollister v. Goodale; Meyer v. Missouri
Glass Co.; Jones v. Howard.
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The Collector (IRS) gave
written NOTICE of levy to a
third party demanding the second party's property. Such NOTICE of
levy was "a
mere statement of notice of claim." Such "mere
statement of notice of claim" does NOT amount to a levy. A
levy is "an absolute appropriation in
law of the property levied upon."
What then, is "an absolute appropriation in law of the
property levied upon"?
United States v. O'Dell
(cont.)
Section
3692 [present
6332]
does not prescribe any procedure for accomplishing a levy upon a
bank account. The method
followed in the cases is that of
issuing
warrants of distraint, making
the bank a party, and serving with the
notice of levy copy of the warrants
of distraint and notice of
lien.
Cf. Commonwealth Bank v. United States, 6 Cir., 115 F.2d 327; United
States v. Bank of United States, D. C., 5 F.Supp. 942, 944. No warrants
of distraint were issued here.
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A "warrant of distraint" otherwise
known as a court order, is
required to effect levy.
United States v. O'Dell
(cont.)
The cases relied upon by the Government as supporting recovery under
section 3710 arise in the main out of situations where a bank has been
sued, or joined as a party to
an action claiming a bank
deposit. No
such procedure was followed in this case. |
"No such" [levy] "procedure was followed in this case":
The bank was not sued, nor joined as a party to a legal action to bring
legal control of the property (money) in question under control of the
government.
A bank that gives up your
money absent a valid levy is violating its fiduciary duties to
you. A valid levy REQUIRES as court order.
United States v. O'Dell
(cont.)
Moreover, it does not appear that notice
and demand were served upon the person liable to pay the taxes,
namely, the Howie Company, in accordance with section 3670 and
3690. This being the case, query, whether the property or rights
to property were within the meaning of section 3710 "subject to
distraint," for under section 3690 the right to collect taxes by
distraint and sale arises only after notice
and demand.
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A notice is NOT a demand unless the demand is made on the notice. "This is your notice and demand"
would fill the bill.
United States v. O'Dell
(cont.)
It would seem to not require much exposition to demonstrate that when
the sovereign establishes any priority in its favor, and imposes
certain conditions upon enforcement of that right, it is required to
comply with the conditions it has laid down. Since no levy was made upon the funds
involved, one of the jurisdictional prerequisites for the application
of section 3710 is lacking, and the complaint was rightly
dismissed. Cf. United States v. AEtna Life Ins. Co. of Hartford,
Conn.
Judgement is affirmed.
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In summary: No levy is
"made" unless accompanied by court order.
Therefore: NO PRIVATE
PROPERTY WITHOUT A COURT ORDER. Anything else is a
violation of
due process.
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