The opinion of the court was delivered by: MEANERY
This matter is presently before this court on motions by defendants, John E. Manning, Collector of Internal Revenue, and United States of America, to dismiss the complaint filed herein, on the grounds that as to both defendants, this court is without jurisdiction of the subject matter of this suit; as to defendant Manning the complaint fails to state facts upon which any relief can be granted, and as to defendant, United States, this court is without jurisdiction since there has been no consent to be sued on the part of the government.
The action was instituted by plaintiffs to restrain and enjoin the enforcement of a distraint and levy upon certain funds presently in the possession of Federal Trust Company as surviving trustee under the Last Will and Testament of Philip C. Walsh, Jr., deceased.
The complaint makes the following pertinent allegations: Federal Trust Company, a corporation of the State of New Jersey, is the surviving trustee under the Last Will and Testament of Philip C. Walsh, Jr., who died in 1922 leaving a Last Will and Testament under which defendant, Federal Trust Company, and the testator's brother, William H. Walsh, were named as executors. Under the will of the decedent it was provided that net income from his estate should be paid to his wife, Mary E. Walsh, as long as she should not remarry. Mary Walsh is still living and has never remarried. William H. Walsh, one of the co-executors, died in 1932. Since that time the defendant, Federal Trust Company, has administered the trust as the surviving trustee.
On July 20, 1926, by an indenture dated the same day, made between Philip C. Walsh 3rd, William J. Walsh and Mary E. Walsh, as parties of the first part, and the plaintiffs as parties of the second part, Mary E. Walsh assigned to plaintiffs $ 3,000 of her income annually, any deficiency in one year to be made up in the next or succeeding years. The assignment was to pay the principal and interest upon a series of bonds executed by Mrs. Walsh's sons.
Due notice of the assignment was given Federal Trust Company as trustee, and, in accordance with the terms of the assignment, the trustee remitted to plaintiffs the sum of $ 3,000 annually until February 20, 1933, from which date no further payments have been made to plaintiffs. It is further alleged that during the period from 1933 to 1942 there was no net income and that under the terms of the assignment there accrued to plaintiffs by the end of 1942 the sum of $ 30,000. The complaint then alleges that in 1943 Federal Trust Company, as surviving trustee, received substantial income and after deducting its commissions and expenses, defendant Federal Trust Company held net income from the trust in the amount of $ 8,253.94, which sum, under the terms of the assignment, is alleged to be due and payable to plaintiffs.
An income tax claim against Mary E. Walsh in the amount of $ 2,429.95 was assessed for the year 1943 by John E. Manning, Collector of Internal Revenue, by reason of the income received by the trustee. That tax has not been paid and on October 16, 1946, a warrant was issued for distraint and subsequent levy was made upon the fund as monies belonging to Mary E. Walsh.
Federal Trust Company was thereafter notified that unless the tax was paid action would be taken to enforce the levy.
It is alleged finally that the monies in possession of Federal Trust Company as surviving trustee are the property and monies of the plaintiffs and not Mary E. Walsh and accordingly are not subject to distraint, levy or seizure for income taxes due and owing from Mary E. Walsh.
Motions are not before me to dismiss the complaint as to the defendant Manning on the grounds that this court is without jurisdiction of the subject matter of the suit and on the grounds that the complaint fails to state facts upon which relief can be granted against him. Motion on behalf of the United States asserts the reasons above and as an additional ground, asserts this court is without jurisdiction of defendant United States.
The first contention made by both moving defendants, that this Court is without jurisdiction of the subject matter of this suit, cannot be sustained.
Plaintiffs, in paragraph 4 of the complaint, specifically invoke the jurisdiction of this court on the fact that property of the plaintiffs has been taken or detained by defendant John E. Manning and by reason thereof and pursuant to section 934 of the Revised Statutes of the United States, 28 U.S.C.A. § 747,
the property which the plaintiffs claim belonged to them and not to the taxpayer is in custody of the law and is subject only to the orders and decrees of this court.
Defendants insist that this contention is without foundation and must fail in face of the very allegations of the complaint, wherein it is argued plaintiffs allege that unless the tax is paid 'the defendants will take action against (the fund in possession of Federal Trust Company) for the enforcement of the levy theretofore made.' In other words, say defendants, since the Collector of Internal Revenue has come into possession of nothing as a result of his levy, there can be nothing in custodia legis.
This argument is without force. Defendants overlook the fact that physical possession is not a necessary attribute to the putting of the property into the custody of the court. It would seem apparent that following the warrant of distraint the defendant Federal Trust Company was no longer free to dispose of the funds in its possession without order of this Court.
This view was expressed by the Circuit Court of Appeals for this circuit in Rothensies v. Ullman, 3 Cir., 110 F.2d 590, 591, a case similar to the one presently sub judice. In the Rothensies case a tax had been assessed against Ullma, after which a warrant of distraint issued against a joint deposit account of Ullman and his wife. On petition of Ullman and his wife the district court entered an order quashing the distraint on the ground they held the account as tenants by the entirety and such an estate under the laws of Pennsylvania ...