On Appeal from the United States District Court for the Western District of Pennsylvania. D.C. No. 89-01632
Before: Mansmann, Hutchinson, and Rosenn, Circuit Judges
This appeal presents a set of unique circumstances which call into question the timeliness of the Government notice of levy upon the funds and IRA accounts of a delinquent taxpayer, and the competing rights of an alleged holder in due course to payment of checks drawn by a bank in closing out the accounts. Taxpayer Dante Gill maintained several IRA bank accounts with First Federal Savings and Loan Association of Pittsburgh (First Federal or the Bank).*fn1 The Government served notice of levy on First Federal at around the same time Gill closed her accounts and received two bank checks in return. Gill subsequently endorsed the two checks over to Lisa Caputo. When First Federal stopped payment on the checks and informed Gill that it intended to comply with the levy, Caputo came forward claiming rights to the funds as a holder in due course of the bank checks. In response, First Federal brought the present interpleader action, naming Gill, Caputo, and the Government as defendants.
The United States District Court for the Western District of Pennsylvania ruled that the Government was entitled to the interplead fund because the levy occurred prior to Caputo's receipt of the two checks. Caputo appeals, contending that there are genuine issues of material fact as to whether Gill closed her accounts after the Government served the levy notice and whether Caputo is a holder in due course. Because we agree with Caputo that these two genuine material issues of fact are unresolved, we vacate the order of the district court and remand for proceedings consistent with this opinion.
Between the years 1977 and 1984, the Internal Revenue Service (IRS) assessed taxes and penalties against Gill, and in 1985 and 1986 it recorded five tax liens aggregating in excess of $10.5 million against her in Allegheny County, Pennsylvania. According to the affidavit of IRS Revenue Officer Jacob G. Pifer, Gill met with him on March 28, 1989 to discuss the nature and extent of her assets so that the IRS could collect the delinquent taxes owed. During the meeting, Gill disclosed that she maintained IRA accounts at First Federal. After the meeting, Pifer prepared a notice of levy directed to First Federal demanding all of Gill's property or rights to property.
On the same day, IRS Revenue Officer Darryl Davis served the notice of levy on First Federal. His affidavit states that while in the lobby of First Federal, he recognized Gill standing in the reception area. He informed the receptionist that he was present to serve the notice of levy and she directed him to Kim Himmelreich, a legal department employee one floor above, on whom he served the notice of levy. The affidavit of IRA department employee, Donald Nemchick, avers that upon service of the levy, the legal department promptly telephoned the IRA department to inform it of the levy on Gill's account. However, the IRA department had just closed Gill's accounts and issued two "bank checks" payable to her in the amount of $97,153.94 and $15,151.64.*fn2 Before Gill had an opportunity to exit the Bank, Nemchick and another bank employee intercepted her and attempted to retrieve the two checks from Gill, but she refused to surrender them. Nemchick thereupon informed Gill that the Bank would stop payment on both checks.
Subsequently, Gill endorsed and delivered the two checks to Caputo. First Federal acknowledged that the Pittsburgh National Bank presented the checks to it for payment on behalf of Caputo and that it dishonored them. The Bank wrote to Gill notifying her that it intended to remit the funds in question to the IRS pursuant to the levy. Caputo's attorney responded by letter stating that the accounts were not subject to levy and instructed First Federal to honor the checks it had issued to Gill. Shortly thereafter, Caputo instituted a suit against First Federal in the Court of Common Pleas of Allegheny County, claiming that as a holder in due course of the bank checks, the Bank was liable to her for their payment.
Met with these competing claims, First Federal filed this action in interpleader against Gill, Caputo, and the Government. First Federal asserted that it had no interest in the monies in dispute, but was a mere stakeholder exposed to double liability and the expense of litigating conflicting claims in the dual forums. It sought an order: restraining each defendant from instituting any actions against First Federal for recovery of the amounts in controversy; requiring the defendants to interplead and settle among themselves their rights to the sums; discharging First Federal from all liability in the case; and granting First Federal its costs and attorney fees.*fn3
The Government filed a motion to dismiss First Federal's complaint for failure to state a cause of action. Prior to argument on the motion, First Federal obtained a default judgment against Gill for failure to plead or otherwise defend. At argument, the Government and First Federal reported that they expected to be able to resolve the motion amicably. Shortly thereafter, the district court granted First Federal's motion for a temporary order restraining Gill and Caputo from instituting or prosecuting any proceedings affecting the property or obligations involved in the interpleader action, specifically the claim Caputo had filed against First Federal in state court.
Caputo filed an answer to the interpleader complaint and included a new matter and counterclaim against First Federal. The new matter asserted that Gill endorsed the two drafts over to Caputo in payment for horse training and caretaking wages. Caputo alleged that she deposited the checks into her bank account at the Pittsburgh National Bank and then invested the total proceeds in the purchase of securities with a brokerage firm. She further alleged that her bank notified her and the brokerage firm that First Federal had stopped payment on the checks at which time the brokerage firm reversed the security purchases, sold the securities, and charged Caputo's account with commissions and other ...