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PENETRYN INTL., INC. v. UNITED STATES

March 19, 1975

Penetryn International, Inc., Plaintiff
v.
United States of America, Defendant


Fisher, District Judge.


The opinion of the court was delivered by: FISHER

This is defendant's motion for summary judgment brought in an action which purportedly arises under 26 U.S.C.A. Section 7426, civil actions by persons other than taxpayers.

 Marine Midland thereafter assigned its security interest in the collateral to the plaintiff on January 8, 1973. Notice of this assignment, as well, was filed with the office of the Secretary of State of New Jersey.

 On December 30, 1971 Cen-Trific received $34,599.84 as payment on an account and/or on a contract right for the sale and installment of equipment. These proceeds were placed in the trustee account of Cen-Trific's attorneys. At present, $12,000 remains in this account owing to Cen-Trific Air Products.

 Plaintiff asserts that on February 13, 1973, the Department of the Treasury, Internal Revenue Service, served upon the attorneys for Cen-Trific Air Products a Notice of Levy pursuant to Chapter 64, Internal Revenue Code, directed to the $12,000 then being held for Cen-Trific for its failure to pay federal withholding FICA and FUTA taxes for 1970, 1971 and 1972. Although it is not clear what relief plaintiff desires, it appears to urge this court to declare that it has priority to these monies over the claim advanced by the Government.

 Defendant, however, contends that there have been numerous notices of assessments and demands for payment, commencing on June 26, 1970 and running through January 11, 1973. Notices of liens were generally filed shortly thereafter, but the taxpayer made no attempt to pay the delinquent taxes. (Notices of tax liens were filed August 20, 1971 through May 3, 1973).

 Therefore, the Government asks that the court determine that any claim of the plaintiff be deemed secondary to the claim of the United States for federal taxes, noting that it levied upon funds due the taxpayer in the possession of its attorneys on July 17, 1972 and February 13, 1973.

 Plaintiff commenced this action on November 1, 1973 alleging jurisdiction under 26 U.S.C.A. Section 7426 and claiming priority under 26 U.S.C.A. Section 6323.

 The Government now moves for summary judgment on the basis that neither section is applicable. Defendant argues in support of this assertion, that the statute of limitations precludes this suit to the extent of sums demanded by levy made more than nine months prior to commencement of this action. The applicable statute, 26 U.S.C.A. Section 6532, reads as follows:

 (c) Suits by persons other than taxpayers. --

 
(1) General rule. -- Except as provided by paragraph (2), no suit or proceeding under Section 7426 shall be begun after the expiration of 9 months from the date of the levy or agreement giving rise to such action.

 Since the Government's levy of July 17, 1972 was made more than nine months before filing of this suit, defendant contends that plaintiff's claim of wrongful levy is not timely as to $10,594.02, the amount demanded as of that date. However, a second levy was made on February 13, 1973 for a total amount of $11,151.49, representing a cumulative demand for all monies owed. Plaintiff contends that the effect of the cumulative demand is to negate the defense of the statute of limitations by reactivating the Government's claim for the total amount due, not merely the amount due subsequent to the first levy of July 17, 1972.

 Although research reveals no case directly on point, an analogy may be made to a similar situation in order to resolve this issue. In a suit by taxpayers for a refund, it was held that where a second claim for refund was filed before the original rejection and served no purpose but to formalize adaptation [adoption] of a theory already expressed to the IRS and under consideration by it, and there were no irregularities in the first notice of disallowance of claim, the second notice did not revoke the first and ...


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