Wechsler v. Home Savings & Loan Ass'n

California Court of Appeal Apr 22, 1976 No. Civ. No. 47744Published

Before: Beach

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Holding. A financial institution that surrenders property to the IRS in response to a tax levy is discharged from liability to the delinquent taxpayer, even if the property was not actually owned by the taxpayer, because the Internal Revenue Code does not require the holder to investigate or determine the true ownership of the property before complying.

Issues

Does a tax levy under 26 U.S.C. § 6332 require a property holder to determine if the property is truly subject to levy before surrendering it to the IRS?
Is a property holder who surrenders funds to the IRS pursuant to a levy immune from liability to the delinquent taxpayer for that surrender?

Disposition. affirmed

Quotations verified verbatim against the opinion

“Does the levy by the IRS pursuant to United States Revenue Code section 6332 require the holder of the funds levied upon to determine whether or not the property levied upon is truly “subject'’ to such levy as a matter of law?”

“In our view it does not and we affirm the judgment.”

“If no such investigation is made and the holder turns over the property to the Internal Revenue Service, although the holder might be liable to the true owners of the property, the holder will not be liable to the delinquent taxpayer.”

Opinion

BEACH, J. Alvin Wechsler sued defendant Home Savings and Loan Association (Home) and other defendants on various legal theories based on the alleged wrongful delivery by Home to the Internal Revenue Service (IRS) of trust accounts for which Wechsler was the trustee.1 Home denied the allegations in the complaint and alleged six affirmative defenses, including laches, estoppel, and the bar of title 26, Internal Revenue Code section 6332. Home’s motion for summary judgment, based on its notice, points and authorities, declarations, and all “pleadings, records and papers on file . . .”, was granted by the trial court. Wechsler appeals from the summaiy judgment.

Facts:

The essential facts are not disputed. Disregarding for the moment appellant’s legal conclusions, we recite the facts as stated by appellaát and supported by the record. Alvin Wechsler was the trustee of trusts executed in about 1950; in his declaration he asserted he has no right, title, or interest thereto. He opened two savings accounts at Home in January 1971. One account was designated “Alvin Wechsler, Trustee, Trust No. 1,” and the other account was designated “Alvin Wechsler, Trustee, Trust No. 4.” After Home turned over the funds in the trust accounts to the IRS, appellant made a demand upon the IRS for return of those funds on the grounds that they belonged to the designated trust and that he had no right, title, or interest in them. In about July of 1971 the funds were returned by the IRS.

[566]On February 8, 1971, respondent was served with a notice of levy by the IRS; appellant Alvin Wechsler was listed as a delinquent taxpayer. The IRS claimed a lien “on all property or right to property, real or personal, now owned or subsequently acquired” by Wechsler until the tax had been satisfied. The notice of levy stated that taxpayer owed $32,726.34. A note on the notice of levy stated “This levy attaches to any right, title or interest which Alvin Wechsler may have in the Alvin Wechsler, Trustee Accounts No. 04-142505-9, 04-142506-7, and the Joseph Family Trust, Herbert Laskin, Trustee, Account No. 04-144346-6. Also, this levy attaches to any and all accounts which Alvin Wechsler may have with Home.” A page of excerpts from the Internal Revenue Code accompanied the notice. Section 6332 (Surrender of Property Subject to Levy), section 6334 (Property Exempt from Levy), and section 6343 (Authority to Release Levy and Return Property) were quoted to respondent.

Wechsler v. Home Savings & Loan Ass'n

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