The opinion of the court was delivered by: WORTENDYKE
WORTENDYKE, District Judge:
After a reargument of this matter, on August 17, 1970, this Court amends and modifies its original Opinion, dated June 19, 1970, to hold that the Referee did not have jurisdiction to determine the tax liability of Jean Richmond. Such portions of the original opinion to the contrary of this ruling are rescinded.
This controversy arose as a result of a proof of claim in bankruptcy submitted by the United States for income taxes in the sum of $418,869.73 for the years 1965 and 1966 of which the Referee allowed $62,093.10.
The United States filed proof of claims for income taxes for the years in question in the bankruptcy action pertaining to the taxpayer, Theodore J. Richmond. The proof of claim was for $418,869.73. The bankrupt's wife, Jean Richmond, did not file a bankruptcy petition and was not adjudicated a bankrupt in this action. The Government also made jeopardy assessments against bank accounts held solely in the name of Jean Richmond for the same amount as the proof of claim in bankruptcy. Jean Richmond, the wife, did not challenge her assessment in the Tax Court. However, a motion was made by the bankrupt to expunge the tax claim of the United States, and upon the hearing on the matter, Mrs. Richmond petitioned the Referee to allow her to be made a party to the determination of the amount of tax due, on the grounds that she had filed a joint return with the bankrupt. That petition was granted over the objections of the United States. The Referee, in his opinion, determined the tax liability to be $62,093.10. The order itself did not purport to apply to Mrs. Richmond, and the United States chose not to appeal the ruling setting forth the bankrupt's tax liability. Subsequent to the original order issued herein, the Referee issued a supplementary order (dated December 31, 1969) declaring that the order setting up the tax liability of the bankrupt also applied to Jean Richmond, and ordered the United States to accept payment from her in full settlement of their joint tax liability. The order of December 31, also ordered the Internal Revenue Service to lift the jeopardy assessments on Mrs. Richmond's bank accounts, although no determination was ever made by the Court that these accounts were part of the bankrupt estate or were fraudulently conveyed out of the bankrupt estate. Moreover, a compromise was made whereby Mrs. Richmond paid over $35,000.00 and certain property to the trustee and the issue of ownership of Mrs. Richmond's personal funds was never reached. Referee's Certificate of Review, Page 3, Line 2. The Internal Revenue Service refused to accept the payment from Mrs. Richmond in settlement of the full tax liability on the joint return, and also refused to lift the jeopardy assessments as ordered by the Referee, on the grounds that the Referee lacked jurisdiction over the issue of Mrs. Richmond's tax liability, and also over Mrs. Richmond personally. It is this order of December 31, which the United States now seeks to set aside.
This Court must decide whether a referee in bankruptcy has jurisdiction to determine the validity of jeopardy assessments for federal taxes against a party not adjudged a bankrupt, simply because that party filed a joint tax return with the bankrupt.
Section 2 (a) (6) of the Bankruptcy Act allows the Referee in bankruptcy to:
"Bring in and substitute additional persons or parties in proceedings under this title when necessary for the complete determination of a matter in controversy."
When the bankrupt's wife, who was herself not a bankrupt, was brought into the proceeding to determine her tax liability, the proceeding as to her was not a proceeding under the Bankruptcy Act, as the Referee had no jurisdiction to determine this type of controversy between third parties.
The United States concedes that third parties who are neither claimants nor petitioners can be brought in by the Referee in certain circumstances, those circumstances being where the additional parties are needed to help determine an orderly disposition of the bankruptcy estate. Matter of Burton Coal Co., 126 F.2d 447 (C.A. 7, 1942); In Re International Power Securities Corp., 170 F.2d 399 (C.A. 3, 1948). The facts of the case at bar, however, do not come within those circumstances. In fact, all that is involved here is a dispute between third parties, which in no way affects the equitable distribution of the bankruptcy estate.
The main test in considering whether or not to bring in any third party is whether the status of the trustee or any creditor in relation to the estate of the bankrupt is shown to be in any way directly affected by the controversy raised by the third party.
In Nixon v. Michaels, 38 F.2d 420 (C.A. 7, 1942), 423, the Court stated:
"It is true that persons not parties to the bankruptcy proceedings may usually intervene or be brought in, when necessary to protect their rights in or to a res in the bankruptcy court. * * *"
"But, leaving out of consideration preferential and fraudulent transfers, unless there is involved a res in the possession of the bankruptcy court, and in which res as a part of the bankrupt estate third parties claim rights, the bankruptcy court has no jurisdiction to allow such third parties to come into the bankruptcy court merely to litigate therein rights even against parties to the bankruptcy ...