The opinion of the court was delivered by: GERRY
It must be noted at the outset that the government's complaint claims only a special estate tax lien under 26, Section 6324(a)(1). Accordingly, the defendants' arguments that the government is not entitled to a general tax lien under Section 6321 for failure to comply with the notice requirements of 6323(a) and (f) are not directly applicable to this action.
The statutory prerequisits of the general tax lien, however, provide a useful comparison for those of the special estate tax lien. The general, or assessment, tax lien is created by Section 6321 and it is applicable for any tax for which demand has been made and payment neglected or refused. By contrast, the special lien of Section 6324(a)(1) is imposed only for federal estate taxes.
Section 6323 details the prerequisits for validity and priority of the general tax lien against certain persons, including purchasers. And Section 6322 defines the period of the general lien as follows: (1), it arises at the time the assessment is made, and, (2), it continues until the amount assessed, (A) is satisfied or, (B) becomes unenforceable by reason of lapse of time. The latter phrase refers to the code's limitation Sections, 6501 and 2. 6501(a) states the general rule for limitations on assessments, and I quote
"Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed. And no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period."
6502(a) further provides that following timely assessment of the tax, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun, (1), within 6 years after the assessment of tax, or, (2), pursuant to a written agreement providing for a longer payment period. The special estate tax lien differs from the general tax lien in several important respects. Section 6324(a)(1) reads, and I quote:
"Unless the estate tax imposed by chapter 11 is sooner paid in full, or becomes unenforceable by reason of lapse of time, it shall be a lien upon the gross estate of the decedent for ten years from the date of death, except that such part of the gross estate as is used for the payment of charges against the estate and expenses of its administration allowed by any court having jurisdiction thereof, shall be divested of such lien."
Unlike the general tax lien of Section 6321, the special estate tax lien is imposed on the gross estate of the decedent. That part of the gross estate used for the payment of charges and administration expenses may be divested of the liens. Subsection 2 further defines the liabilities of transferees and others. Moreover, the special estate tax lien arises immediately at the date of death without assessment. Detroit Bank v. U.S., 317 U.S., 329. From that point the tax shall be a lien for ten years. By the terms of the statute, the ten-year lien period may be shortened if the estate tax is, (1), sooner paid in full, or, (2), becomes unenforceable by reason of lapse of time. Obviously, the lien may be extinguished by full satisfaction of the obligation. The second phrase was added as a part of the Tax Lien Act of 1966 and will be further discussed by the court.
Here it is sufficient to note that defendants' contention is not based on the construction of that second phrase; that is to say, they do not say that the special lien here has become unenforceable by reason of lapse of time. Rather, the immediate question posed by the moving parties concerns the construction of the phrase "shall be a lien for ten years from the date of death". Defendants argue that the ten-year provision is an absolute durational requirement, and that a 6324(a)(1) lien cannot be enforced beyond that date not withstanding the filing of the foreclosure action within the ten-year period. The government argues that section 6324(A)(6) simply establishes a ten-year statute of limitations for the special estate tax lien. The defendants rely entirely on the opinion in United States v. Cleavenger, 517 F.2d, 230, a decision of the United States Court of Appeals for the Seventh Circuit in 1975. The majority there noted that neither the legislative history nor the decided cases were of much help in deciding the question. The majority noted that there were several cases, including Detroit. Bank, which had handed down decisions enforcing the special lien more than ten years after the decedent's death. It observed that the question had not been raised for consideration, however.
The court then cited a New York State case which apparently held, without analysis, that the special tax lien expired once and for all at the ten-year mark. The Cleavenger majority then found that, (1), the special lien attaching at death and without assessment is a "back up freezing provision" to aid in the collection of estate taxes; and, (2), without final expiration of the lien at ten years, "there would be no assurance whatsoever from the passage of time, since foreclosure litigation could easily strech into the second decade; and, (3), that use of the general assessment lien should be more than adequate for the government's collection purposes; and, (4), the plain language of section 6324 called for final expiration at the ten-year period; and lastly, that statutory durational liens are not unknown. And this is analogized to the statutory judgment lien which expires by its own terms at the end of the designated period.
This court cannot agree with the reasoning of the Court of Appeals of the Seventh Circuit in Cleavenger. In the first place, application of the Cleavenger rule would by implication overturn the decision, in this court's judgment, in Detroit Bank itself, and in a number of other cases whose procedural history is indistinguishable from this action. See U.S. v. Estate of Novack, 74-23 U.S.T.C., paragraph 13,013, involving the southern district of New York in 1974. U.S. v. Crukshank, 48 F.2d 352, also out of the southern district of New York. More to the point, however, acceptance of defendant's argument would only reward the dilatory taxpayer-litigant at the expense of the government, for under that rationale even though suit had been timely commenced only those special liens would be ultimately enforced in actions which had progressed to full judgment, and presumably through appeal as well, before the magic ten-year mark appeared. This court cannot impute to congress an intent to make the availability of a remedy dependent not on the timely action of the government in filing suit, but on the progress of the court's own calendar. We are not persuaded by the Cleavenger majority's reasoning that the special lien is only a "back up freezing provision," and that assessment and collection by use of the general tax lien should obviously be adequate. That argument ignores the fact that congress has provided an independent, separate special lien for the estate tax in section 6324, that such lien attaches without assessment and that the provision has long been recognized by the courts. Neither is it helpful to compare the special estate tax lien to statutory judgment liens of fixed duration. As the dissent in Cleavenger noted, even judgment liens ordinarily may be renewed by application of the judgment creditor. And they do not expire during the pendency of suit to enforce them.
Finally, the Cleavenger majority seemed distressed by the relatively lengthy term of the special lien and its concededly unfortunate effects on a transferee. Congress, of course, has chosen the ten-year period. Moreover, as the government points out, the prospective purchaser may demand any of several proofs that the property is not subject to a special lien, including certificates of abatement or discharge.
The Cleavenger majority noted that there is little legislative history to illuminate the congressional intent for section 6324. What little history there is, however, seems to undercut defendant's argument: again section 5324(a)(1) provides that the special lien shall be for ten years, unless paid in full or becomes unenforceable by reason of lapse of time. The second phrase was added in 1966. It is precisely the same phrase used in 26 U.S. Code, section 6322 to define the period of the general tax lien. As noted in that context, the reference is clearly to section 6501 and 6502(a) setting forth the limitation periods for assessment and collection. The Senate Report on the 1966 amendments notes that the phrase was added to section 6324(a)(1), "to make it clear that these special liens are to terminate before the expiration of the ten years at any time the estate tax liability becomes unenforceable by reason of the running of the statute of limitations on collection." This of the underlying estate tax liability, usually a 6-year period after assessment.
This, again, is a clear reference to the general limitation provisions of 6502(a). Reference is somewhat confusing in the context of 6324(a)(1), however, since the supreme court had long previously determined that the Special estate tax lien attaches immediately at the date of death, and without assessment, this in Detroit Bank. The language of the statute on which the court relied in making that determination have not been since changed; neither has the ten-year period been altered. Indeed, the senate report does not contemplate a change in operation of section 5324(a)(1) by this amendment. It simply states that the additional phrase ...