United States Supreme Court Case Law

No.

8682.

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Credit

Bureau

of

San

Diego,

Inc., a corporation, _J. B.

McLees

and

Ernest

W.

Dort,

Appellants,

vs.

Vincent

Petrasich

and

Peter

A.

Kuglis,

doing

busi-ness as

Star

Fisheries,

and

Nat

Rogan,

Collector of Internal

Revenue,

Appellees.

MEMORANDUM

FOR

NAT

ROGAN,

COLLECTOR.

Ben

Harrison,

United

States Attorney,

Francis

C.

Whelan,

Assistant

United

States Attorney,

376

Pacific Electric Bldg.,

Los

Angeles, Calif.,

Attorney^BM

(ftg#|rtjr.

DEC

1 .1

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Parker&BairdCompany,LawPrinters,LosAngeles.

TOPICAL

INDEX.

PAGE

Memorandum

for Nat Rogan, Collector 3

Statement 4

Position of the Collector 6

Conclusion 8

TABLE

OF AUTHORITIES

CITED.

PAGE

Credit Bureau of San Diego v. Rogan, Collector (S. D. Cal.), decided August 26, 1936, Equity No. A-121 6

Revenue Act of 1926, Sec. 114(e) 6, 7

No.

8682.

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Qlourt

nf

Appeals

Jffor tlj^ JJtntlj Qltrrutt.

Credit

Bureau

of

San

Diego,

Inc., a corporation, _J. B.

McLees

and

Ernest

W.

Dort,

Appellants,

vs.

Vincent

Petrasich

and

Peter

A.

Kuglis,

doing

busi-ness as

Star

Fisheries,

and

Nat

Rogan,

Collector of Internal Revenue,

Appellees.

MEMORANDUM

FOR

NAT

ROGAN,

COLLECTOR.

This

is

an

appeal taken

from

the interlocutory order

and

decree of the District

Court

of the

United

States in

and

for the

Southern

District of California, Southern Division, denying appellants' motions to dissolve a

restrain-ing order

and

to dismiss this suit in interpleader.

The

original bill of interpleader [R. 4-9]

was

supple-mented by an

order to

show

cause

and

restraining order [R. 10-11]

by which

the appellants

and

the Collector are restrained

and

enjoined

from

enforcinga final

money

judg-ment

obtained

by

the Credit

Bureau

in the Superior

Court

of the State of California against Petrasich

and

Kuglis.

A

motion

to dismiss the original bill

was

granted [R. 14-15], but this order of dismissal

was

subsequently

vacated to permit Petrasich

and

Kuglisto filetheir

amended

petition for interpleader. [R. 18-26.] Appellants' motions

to dismiss the

amended

bill

and

to dissolve the restraining order

were

denied [R. 31]

and

thereupon the order for interpleader

was

made. [R. 32-33.]

STATEMENT.

The

petition for interpleader in the cause

below

is based

upon

the following facts:

Vincent Petrasich

and

Peter

A.

Kuglis, doing business

in

San

Diego, California, as Star Fisheries, entered into

a transaction with one Luis

M.

Salazar

wherein

they

became

indebted to

him

in the

sum

involved in this pro-ceeding. Credit

Bureau

of

San

Diego, Incorporated,

com-menced an

action in the Superior

Court

of the State of California against Petrasich

and

Kuglis to obtain a

money

judgment

upon an open

account purported to

have

been assigned to it

by

one

A.

A.

Parades

for lobsters alleged

to have been sold

by

him

to Petrasich

and

Kuglis. [R. 18-20.]

Parades

is the brother-in-law of Salazar

and

during the time involved herein

was

employed by

him

in

the

United

States. [R. 18-19.] Final

judgment

was

ob-tained in the state court

by

the Credit

Bureau on

March

2, 1937. [R. 20.]

Luis

M.

Salazar is a citizen of the Republic of Mexico, although for a long time prior to these proceedings he resided in the State of California

and

during that time

owned

and

conducted a business in

San

Diego, California, of importing lobsters

and

fish

from Mexico

and

selling

such products in southern California. [R. 19.] In 1933

an

indictment

was

returned in the District

Court

of the

United

States for the

Southern

District of California against Salazar

on

account of his failure to report

and pay

Federal

income

taxes then

due

and owing

to the

United

States. [R. 19.]

Nat

Rogan

is the duly authorized, qualified

and

acting Collector of Internal

Revenue

for the Southern District

of California. [R. 19.]

During

the

pendency

of the action

in the state court

and

prior to the final

judgment

obtained

by

the Credit

Bureau

therein [R. 20], the

United

States,

through

the Collector,

on

or about

August

27, 1936, served

on

Petrasich

and

Kuglis a notice of levy,

warrant

for

distraint

and

notice of seizure of all property, rights to

property,

moneys, and/or

credits then in their possession

and

belonging to Salazar

and

wife jointly

and

severally, to be applied in

payment

of the taxes then due

and

owing

by

them

in the

amount

of $84,863.02. [R. 9.]

After

the

judgment

was

obtained

by

the Credit

Bureau

in the state court [R. 20], Petrasich

and

Kuglis deposited wdth the Clerk of the

United

States District Court the

sum

of $1,025.77, being the entire

amount

involved in this pro-ceeding, at the

same

time filing a bill for interpleader,

interpleading the Credit

Bureau

with the Collector,

re-questing the District

Court

to determine, settle

and

litigate

the respective claims of each in the

sum

so deposited.

[R. 7-8.]

A

motion

to dismiss the original bill

was

granted [R. 14-15], but subsequently

was

vacated to per-mit Petrasich

and

Kuglis to file

an

amended

bill. [R. 17.]

From

the interlocutory order

and

decree of the District

Court denying

appellants' motions to dissolve the

restrain-ing order

and

to dismiss the

amended

bill of interpleader, this appeal is taken. [R. 34-38.]

—

6—

POSITION

OF

THE

COLLECTOR.

Although

the Collector is

named

as one of the appellees,

there is no reason for

him

to attempt either to sustain or challenge the order of interpleader

on

appeal. Regardless of the outcome, the claim of the

United

States in the

fund

involved herein will not be materially affected.

If the order

and

decree of the court below is sustained, the

Government's

right to the

fund

can be determined

and

disposed of in the current litigation.

The

United

States can then be

brought

in as a necessary party

and

a

cross-bill in interpleader could be filed to preserve its right

to the fund. If the order

and

decree of the court

below

is reversed, the

United

States can then proceed to enforce

its lien by appropriate proceedings

under

Section

1114

(e) of the

Revenue Act

of

1926

and

Section

802

of the

Reve-nue

Act

of 1936. Either course

would

adequately protect the interest of the

Government

in this matter.

The

facts in the instant case are

somewhat

similar to

those in the case of Credit

Bureau

of

San

Diego

v.

Rogan,

Collector (S. D. Gal), decided

August

26, 1936,

Equity

No. A-121, not officially reported, involving the tax

Habil-ity of the

same

taxpayer, Luis

M.

Salazar. Gredit Bureau, as assignee of Parades, agent

and

brother-in-law of

Sala-zar, obtained a

judgment

against one of Salazar's debtors, namely, one Joseph J. Gamillo. Ernest

W.

Dort, sheriff

of

San Diego

Gounty, State of Galifornia, levied

an

execu-tion under that

judgment and

obtained possession of the

fund

in controversy.

Nat

Rogan,

Collector, filed a lien

—

7—

for distraint

on

the sheriff

demanding

payment

of the

fund

in his possession to satisfy the taxes of Salazar.

The

above

suit

was

instituted

by

the Credit

Bureau

against the Collector seeking to invalidate the

Government's

lien

and

to enjoin the Collector

from

interfering with the duties of

the sheriff.

The

court

found

that the

fund

levied

upon

by

the sheriff

under

the

judgment

obtained by the Credit

Bureau was

the property of Salazar,

which

was

subject to

the lien of the

United

States

Government

for unpaid taxes

and

that this

fund

was

not the property of Parades.

The

court concluded as a matter of law that the Credit

Bureau

had no

right, title, or interest in the

fund

and

judgment

was

accordingly rendered in favor of the

Col-lector.

In the instant case, Petrasich

and

Kuglis did not wait for the sheriff to levy

an

execution under the

judgment

obtained

by

the Credit Bureau, but instituted the

inter-pleader suit

which

presents the

same

question in so far as the

Government

is concerned, namely,

whether

the

fund

involved herein is the property of Salazar

and

thus subject

to the

Government's

lien

and

distraint warrant.

As

stated

hereinbefore, it is immaterial

from

the

Government's

standpoint

whether

this question is litigated in this suit or

in

an

independent proceeding to enforce the liens

which

already

have

been filed in behalf of the United States.

Ample

authority is provided for an independent

pro-ceeding to enforce liens for taxes

by

Section 1114 (e) of the

Revenue

Act

of

1926 and by

Section

802

of the

Reve-nue Act

of

1936

amending

Section

3207

(a) of the Revised

CONCLUSION.

For

the foregoing reason, the Collector is not appearing

in support of or in opposition to the order

and

decree of the court below. Regardless of the outcome, the

Govern-ment's claim to the

fund

involved herein has been fully

preserved.

Respectfully submitted,

Ben

Harrison,

United

States Attorney,

Francis

C.

Whelan,

Assistant

United

States Attorney,

Attorneys

for Collector.