The opinion of the court was delivered by: MARSH
This is an action authorized by the Commissioner of Internal Revenue and directed by the Attorney General of the United States to enforce a tax lien against the wages of C. J. Newhard, a delinquent taxpayer. The complaint was filed October 8, 1953 and served October 13, 1953 on Newhard, the taxpayer, then an employee of Fayette County, Pennsylvania, and on the Treasurer of Fayette County.
Upon the taxpayer's motion to dismiss, the plaintiff was ordered to join as additional defendants the County of Fayette, the County Commissioners and the County Controller. D.C., 15 F.R.D. 348. On March 26, 1954, the plaintiff by an amended complaint complied with this order. The amended complaint was served the same day on all the defendants. This time
the County and its fiscal officers joined with the taxpayer in moving for a dismissal on the grounds: (1) that the amended complaint fails to state a claim against defendants upon which relief can be granted; (2) that the County and its officers are agents of the Commonwealth of Pennsylvania and as such are not subject to service of process attempting to garnish the wages of one of the employees of the County; (3) that 'the action is ancillary and not based upon a matter before the court on original jurisdiction'; (4) that the court has no jurisdiction over the wages of an employee of the County of Fayette, Pennsylvania.
They argue in the motion that the County is a state agency, and that its fiscal officers not only do not have legal power to pay Newhard's salary to the United States by way of garnishment, but also that the latter has not commenced an original action in this court against Newhard for collection of its taxes.
On August 20, 1954, the plaintiff filed a motion for summary judgment. Attached thereto was an affidavit of the District Director of Internal Revenue asserting that according to the official records of the Internal Revenue Service, C. J. Newhard d/b/a Personality Beauty Shoppe became indebted to the plaintiff for various withholding and social security taxes, penalty and interest, totaling $ 1,824.85.
Other relevant facts pertaining to the assessment of these taxes were set forth.
Plaintiff also filed a request for admissions of facts upon the County officers under Rule 36, Fed.R.Civ.P., 28 U.S.C.A., which facts are deemed to be admitted because not denied within the period designated in the request.
Without withdrawing the motion to dismiss, all the defendants, by their respective counsel, filed an amended answer containing certain admissions and reasserting the arguments aforesaid.
The undisputed facts show: That Newhard owed social security and withholding taxes, penalties and interest in the sum of $ 1,824.85; that the assessment list covering Newhard's 1949 taxes was received by the Collector on March 22, 1950, and that notice and demand upon him was made on March 24, 1950; that for his 1950 taxes the assessment list was received by the Collector on January 11, 1951, and notice and demand made January 12, 1951. On February 28, 1953, a notice of tax lien on all property or rights to property of C. J. Newhard, to secure the payment of the amounts assessed, together with interest, was filed in the office of the Prothonotary of Fayette County at Uniontown, Pennsylvania.
Newhard was employed by the County of Fayette as an appraiser in the Office for the Assessment and Revision of Taxes and earned $ 150 for each of the three two-week periods: June 1-15, 1953; July 1-15, 1953; October 1-15, 1953. Deductions from the gross earnings amounted to $ 90.46, leaving a total balance due Newhard for these periods of $ 359.54.
We gather that the County Treasurer did not deliver to Newhard the warrants by which he could have collected his wages because certain levies and demands had been made by the Collector upon the County Treasurer at some time or times before the wages accrued. It appears that the County still holds the wages and held an undetermined portion thereof at the time the original complaint was served upon its Treasurer.
The plaintiff expressly denies that it is attempting to secure a penalty judgment against the County Treasurer of the County pursuant to § 3710(b), 26 U.S.C.A., but asserts that it is trying to enforce its lien by civil action pursuant to § 3678, 26 U.S.C.A. Hence the facts concerning the validity of the levy or levies are irrelevant. But those levies and demands may have served to freeze Newhard's wages in the possession of the County until the complaint brought pursuant to § 3678 was served, which effect does not seem to be prohibited or illegal. See Givan v. Cripe, 7 Cir., 1951, 187 F.2d 225.
Although not argued pro or con, it should be determined in limine whether because of the sovereign character of the parties, this court has jurisdiction to entertain this action. In effect, this action by the United States to garnish wages in the hands of a county is, as claimed by defendants, equivalent to an action brought against a state by the United States; counties in Pennsylvania are quasi-municipal corporations and branches of the state government. Garr v. Fuls, 1926, 286 Pa. 137, 145, 133 A. 150, 153. As defendants point out, a private garnishor universally cannot succeed in garnishing wages in the hands of a public garnishee because fundamentally such an action is repugnant to the immunity of the sovereign from suit without its consent.
But when the United States takes the place of the garnishor, jurisdiction of a district court over such an action against a state has been upheld. United States v. Graham, D.C.S.D.Cal.1951, 96 F.Supp. 318, affirmed sub nom. State of California v. United States, 9 Cir., 1952, 195 F.2d 530, certiorari denied 1952, 344 U.S. 831, 73 S. Ct. 36, 97 L. Ed. 647.
The immunity of the state has been surrendered by its membership in the Union under the constitutional plan for judicial settlement of controversies between a state and the United States. See Principality of Monaco v. Mississippi, 1934, 292 U.S. 313, 329, 54 S. Ct. 745, 78 L. Ed. 1282. We can see no essential difference between a direct suit by the United States against a state to enforce a property right
and a suit under § 3678 by the United States against a county -- a branch of the state -- as garnishee, to enforce a federal tax lien against the accrued wages owing to a delinquent taxpayer by a county. It is our opinion that the County of Fayette has no constitutional immunity from such an action and this district court has jurisdiction to adjudicate it.
Passing, then, to the merits, in their brief defendants categorically state that this action should be dismissed because the 'Statute of Congress which created the liability against the Defendant, C. J. Newhard, does not give the Plaintiff the right to proceed for collection in the manner here attempted.' Plaintiff's footnote reply is not very explicit: we doubt that § 1635(d) and § 2707 of the Internal Revenue Code, which it cites, are applicable to this action. The provisions of § 1635 expressly do not apply to any tax imposed prior to 1951 (the taxes here were for 1949 and 1950) and § 2707 provides for collection of penalties for willful failure to pay.
However, it seems to us that perhaps § 3312, not cited, as it existed in the Code prior to its amendment in 1950, 54 Stat. 1008, together with §§ 1627 and 1430 of the Code, disclose a congressional ...