*1 CHAMBERS, Before HAMLEY and ELY, Judges. Circuit HAMLEY, Judge: Circuit brought The United States this action to foreclose tax liens the cash sur- render pol- value of two life insurance taxpayer, icies owned Ernest Kovacs, at the time of the latter’s death January 13, 1962. The defendants are Bankers National Life Insurance Company, which issued the mother of the iswho primary pol- under each icy, legal and Edith Adams of Bette Lee Kovacs and Kovacs, contingent beneficiaries under Mrs. Kovacs filed a motion to dismiss that Edith *2 Kovacs, beneficiary named of life Adams as administratrix of another in- Kovacs, policy surance in of Ernest is an indis- the face of amount pensable denied, $500,000. party. This motion was whereupon Kovacs answer filed an Mrs. July 1962, September, In and the Gov- indispensable party issue which the agreements ernment entered into certain again raised, and dismissal was was with Edith Adams Kovacs as administra- sought grounds of on the additional trix, capacity. and in her also individual estoppel. Mrs. Kovacs also waiver and agreements purchased Under she adjudication pro- for an that asked per- from the real and estate certain policies insurance are her ceeds sonal free and clear tax that and agreements liens. These that thereon; right, title, interest proceeds purchases of these requiring and for an order Bankers Life against separate not the earlier proceeds Mary pay Kovacs. Kovacs, against tax of Ernest but company and The insurance Edith Adams joint the later income tax liabilities of Kovacs, as ad litem for the Ernest Kovacs and Edith Adams Kovacs disclaiming any children, filed answers years through for the result was that of Edith summary capacity Adams Kovacs in her individual moved for Government judgment granting depleted prayed was reduced and the estate was the relief complaint. grant- of monies would otherwise This have in its motion was payment appeal. ed Mrs. Kovacs then took available and this separate earlier tax of decedent. first summarize the essential We December, 1962, Mary ques- In Kovacs com- consideration proceedings Angeles presented. menced are tions Superior removal of Court Edith purchased 1951, In Ernest Kovacs two Adams Kovacs as administratrix on the policies of life insurance from Bankers wrongfully latter had $30,000 Life in the face amounts of neglected mismanaged, wasted $20,000. primary beneficiary Mary estate. Kovacs contended Kovacs, Mary policy each the con- duty has a the administratrix tingent are Lee and beneficiaries Bette from the assets of the estate what- taxpayer. children owing against ever Prior to the death of the payment from decedent. made filed tax this the estate the lien and other in the total has asserted the cash surrender sum, $232,861.94. amount Of this Mary policies in which Ko- $132,838.21 Government claimed that was vacs is named will be dis- owing separately Kovacs, $90,369.07 from charged. owing jointly from and Edith Kovacs was initially This action was dismissed wife, $9,654.66 his Adams court, the state trial but that decision was owing separately from Adams was Edith 19, May In reversed on re Kovacs’ Estate, 308, Cal.App.2d CaLRptr. January on at died Kovacs In the further which time the two referred judgment state trial court a was entered had a combined cash surrender above ad- on October favorable $7,402.92. Edith Adams Kovacs judg- appeal An from that ministratrix. appointed of her hus- was pending. is now The Government filed band’s estate. supplemental on We called for briefs estate for the balances due claim in the question disposition appraised whether liens. The estate was the tax appeal us should be held before $1,966,472.88. There was additional now at abeyance tenancy having pending final joint determination a value respec- proceeding. In thir of the state $124,000, Edith Adams Kovacs was Supreme depart parties supplemental both chooses tive briefs obliged delay disposition pronouncement, to fol this we are asked us not request. appeal. low Bess its rationale. to their case and We accede principal contention The estate of the deceased Kovacs’ appeal the cash surrender insolvent at the time the Gov- sought question, of ernment to foreclose its lien. value of the two *3 beneficiary, may primary showing There ever, no she is the such here. How- which finding nothing opin- that the not be a there taken without taxpayer’s insolvency that the is insolvent or ion indicates the estate taxpayer’s pre- remedies has exhausted its the estate is condition Government against a estate, right be or that it would cedent to the to the Government’s fore- proceed to the estate. close tax lien useless on the cash surrender the the The claim the Government impose does cash value these To surrender condition would ac- a upon transferee not rest cord less the Government a status than 6901(a) Revenue Internal section the that of a secured creditor. This would pred- (Code). contrary underlying purpose Nor it 1954 Code of to the insolvency. taxpayer’s upon Also, icated the section of the Code. to re- upon tax quire pick rests claim Government’s out only the tax- the all liens payer, foreclose those liens which will for under sections hardship par- create least on third the ties, impose Code. and 6322 of the would a considerable burden process. of on the revenue collection to the cash This lien attaches by hardship resulting any the foreclosure owned life insurance taxpayer of tax liens of a taxpayer, provided after the death he has reserved right change so much to re- stems not from the Government’s beneficiaries or taxpayer at the action as from the failure of the surrender value ceive the cash discharge liability. Unit- his tax It was held in time lien arose. Bess, 51, 78 S.Ct. ed 1054, U.S. Appellant that, argues any case, that in such L.Ed.2d event, no liens attached to the death, taxpayer’s Ernest Kovacs since a lien does not attach pass with burdened to the delinquent under section 6321 until the in the amount of the federal “neglects taxpayer or refuses policy. cash value of same after demand.” indicate The Government now seeks enforce unpaid after assessment of though may lien and do so even January 6, 1961, was made may there adequate be other payments were made toward total purposes. there is all tax liability. Appellant asserts that these here, an element is not of unfairness payments, by three were made of which cognizable one which is lien en- taxpayer prior to his and two death suit, forcement but must be with in dealt estate, made from his pending state referred to prove neglect that there has been above. required by refusal section 6321. argues
Appellant payments, however, sound that the All ness appraised taxpayer’s liability of the Bess rule be re should light year the case facts of 1956. As for assessment for seeming inequity at bar and the has there been no reduction will result if allowed either the or the estate, regard lien. foreclose its The view that with 1957 lia- requisite neg- bility insured’s cash there been the surrender value ends at his thus death lect and refusal. Since extinguishing any flatly year tax liens was far excess 1957 is rejected by Court in Until Bess. of the insur- the cash surrender value anee there is no to consider need validity
further the of the Government’s unpaid taxes of 1956. See
Bess v. United 357 U.S.
In view of what is said is not the estate indispensable party ap and it
propriate to decide case the basis summary judgment.
aof motion for Judge (con-
CHAMBERS, Circuit
curring) : foregoing simply
I concur in the be- my requires
cause I oath me to do think reason, And,
so. the same I assume
Judge Hamley opinion has written the Judge Ely has concurred. facie, if, looks
Prima as within the govern- permitted
limits of discretion statutes, injus- the relevant being tice is done McGUIRE, President, Jo
James as seph Diovisalvo, Secretary-Treasurer Teamsters, Gasoline, Coal, Fuel Oil Chauffeurs, Oil Burner Installation Maintenance, Helpers Servicemen and City Vicinity, Nassau New York Counties, York, Y. N. Suffolk New Local Union No. affiliated with Teamsters, International Brotherhood of Helpers Chauffeurs, Warehousemen America, Plaintiffs-Appellees, COMPANY, &
HUMBLE OIL REFINING Defendant-Appellant. 205, Docket
No. Second Circuit.
Argued Nov.
Decided