The opinion of the court was delivered by: AVIS
This case is before the court on final hearing, on bill and answer.
By the allegations of the bill, it appears that complainant was the owner of a mortgage, against certain property in this district, said mortgage being given by Anthony M. Ruffo, Jr., and wife. It further appears that this mortgage was foreclosed in the Court of Chancery of New Jersey, in which case the government was not a defendant, and the instant bill was filed to dispose of an internal revenue lien filed on behalf of the government, and subsequent to the lien of complainant-mortgagee.
The bill prays for a strict foreclosure, and counsel for complainant insists that such relief is authorized by the provisions of the Act of Congress of March 4, 1931, c. 515, 46 Stat. 1529 (28 USCA §§ 901-906).
So far as I am able to discover, there are only two statutes covering the question of removal of government liens.
The first statute adopted is known as R.S. § 3207, as amended by Act of February 26, 1926, c. 27, § 1127, 44 Stat. 123 (26 US CA § 136). This section in its original form provided for a sale of the real estate, and was an Act of July 20, 1868 (section 106 [15 Stat. 167]).
This statute provides a method for the enforcement of liens on real estate by bill to be filed by the Commissioner of Internal Revenue, and further provides that, in case of failure of the Commissioner to commence action: "Any person having a lien upon or any interest in such real estate, notice of which has been duly filed of record in the jurisdiction in which the real estate is located, prior to the filing of notice of the lien of the United States as provided by section 115 of this title, or any person purchasing the real estate at a sale to satisfy such prior lien or interest, may make written request to the Commissioner of Internal Revenue to direct the filing of a bill in chancery as provided in subdivision (a). * * *" 26 USCA § 136.
The act then states a method of procedure, requiring certain notices to the Commissioner, and further: "Upon the filing of such bill the district court shall proceed to adjudicate the matters involved therein, in the same manner as in the case of bills filed under subdivision (a) of this section." Id. § 136.
The act directs that, in the suit by the Commissioner, the District Court "in all cases where a claim or interest of the United States therein is established, shall decree a sale of such real estate, by the proper officer of the court, and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States." Id. § 136.
In the case of Sherwood v. United States (D.C.) 5 F.2d 991, it was held that the lien of the United States could be removed only by sale of the premises by the marshal at public auction.
That case was decided in the District Court for the Eastern District of New York, and describes the method of sale and the distribution of the proceeds.
It appears that the District Court of the Western District of Louisiana, in the case of Oden v. United States, 33 F.2d 553, made a decree canceling the government's lien, in an equity suit praying for such cancellation, and where it appeared that there was no equity over and above the incumbrance against the real estate, prior in lien to that of the government; and that in the District Court of Texas, Northern District, Dallas Division, in Minnesota Mut. Life Ins. Co. v. United States, 47 F.2d 942, the court removed the cloud of the government lien without a sale, upon the reasoning that "manifestly" a court of equity is not directed to do a useless and vain thing." Page 943 of 47 F.2d.
The doctrine that the United States can only be sued with its consent it settled. See cases cited under chapter 19 (28 USCA § 901). I am unable to see how either of the above courts could make the decrees, in the face of the direct provisions of the statute requiring a sale of real estate and distribution of the proceeds of sale.
The court in the latter case relied upon statements in the case of In re Hawkins Mortg. Co. (C.C.A. 7) 45 F.2d 937, 940, in which case the United States was not a party, and the doctrine there expressed ...