of the right thereby conferred upon the Collector, viz, (1) the existence of property or rights to property in a delinquent taxpayer, (2) the possession of such property or rights to property by the person of whom demand therefor is made by the Collector, and (3) that such property or rights to property are legally subject to distraint.'
The Court found that the taxpayer had property rights in the policy legally subject to distraint, but held that the insurer was not liable for the penalty because the policy had not been surrendered by the insured. The Court in Penn Mutual was concerned solely with the question of the insurer's liability for a penalty under Sec. 3710(b) in the absence of a showing by the plaintiff that the insurer was in possession of a property right of the insured which could be reached without the latter's performance of a condition precedent to its realization. See United States v. Aetna Life Ins. Co. of Hartford, Conn., D.C.Conn.1942, 46 F.Supp. 30, 35, in which it was held that the Government's case did not fall within Section 3710, because that section was not in pari materia with the lien statute, Section 3670, and that 'Section 3710 is confined to cases involving only taxpayer's property which is 'subject to distraint." The same reasoning distinguishes United States v. Metropolitan Life Ins. Co., 2 Cir., 1942, 130 F.2d 149.
In the present case the jury has already found that a property right existed in the taxpayer-insured on June 6, 1947 in the Massachusetts Mutual policies. Such a property right may be levied upon. Indeed, it may be reached even after the taxpayer-insured has died and the proceeds of a policy have been paid to the beneficiary. United States v. Bess, 1958, 357 U.S. 51, 78 S. Ct. 1054, 2 L. Ed. 2d 1135. However, unlike the Penn Mutual case, supra, this Court is not concerned with the question whether the possession by the insurer of the insured's right to property is such as Sec. 3710(a) requires as a prerequisite to the imposition of a penalty under Sec. 3710(b). We are dealing here with a lien, pursuant to 26 U.S.C. 6321 (formerly Sec. 3670 of the 1939 Code) which attaches to all taxpayer's property and rights to property, real or personal. The jury having found a property right in the defendant-insured Wilson a lien attached pursuant to 26 U.S.C. 6321, and, as was stated in United States v. Metropolitan Life Ins. Co., 4 Cir., 256 F.2d 17, 23, 'When the insured's interest in the policies is subjected to the tax lien under this proceeding, this amounts to a seizure of such interest by the United States ( Miller v. United States, 11 Wall. 268, 297, 20 L. Ed. 135); and the United States by virtue of such seizure, may exercise any right which the insured might have exercised under the policies; including the election to take the cash surrender value.' See also United States v. Trout, D.C.S.D.Cal.1942, 46 F.Supp. 484, 485. The case of United States v. Burgo, 3 Cir., 1949, 175 F.2d 196 is distinguishable because of its finding that there was no property interest in the taxpayer-insured to which the Government's lien could attach, thus the complaints against the insurance companies were properly dismissed.
The defendant insurance companies will be directed to pay to the United States of America the amount of the cash surrender value accrued on and since January 6, 1947 upon the insurance policies referred to in the complaint; and the defendants Anthony J. J. A. Wilson, as insured, and Hedwig C. Wilson, as beneficiary, will be directed to execute and deliver to the insurers such documents as, by the terms of the respective policies, each insurer is entitled to receive as a condition precedent to the payment of the cash surrender value of its policies.
An appropriate order may be presented in conformity with the views herein-above expressed.
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