United States on certiorari. (Int.Rev.Code § 7482). The procedure for relief in the Tax Court is defined with the utmost precision and the time when its decision becomes final is spelled out in meticulous detail by the statute. (Int.Rev.Code § 7481).
These are the two remedies which Congress has provided for the taxpayer in addition to the detailed administrative remedies within the Internal Revenue Service itself. The Supreme Court long ago described the general tax framework as 'a system of corrective justice intended to be complete * * *'. Snyder v. Marks, 109 U.S. 189, 194, 3 S. Ct. 157, 160, 27 L. Ed. 901 (1883). More recently, the Court declared its unwillingness to 'sacrifice the harmony of our carefully structured twentieth century system of tax litigation * * *'. Flora v. United States, 362 U.S. 145, 176, 80 S. Ct. 630, 647, 4 L. Ed. 2d 623 (1960).
Congress itself has clearly expressed its intention to make these remedies exclusive by specifically providing that, except pending notice of deficiency and petition to the Tax Court, 'no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court'. (Int.Rev.Code § 7421). This provision codifies the common law rule against the use of injunctions to restrain the assessment or collection of taxes.
Congress has also provided that once a taxpayer has sought relief in the Tax Court he may not bring suit in any court for the recovery of any part of the tax, except to enforce a final decision of the Tax Court.
(Int.Rev.Code § 6512(a)). In adopting the Federal Declaratory Judgments Act Congress specifically excepted from its provisions those controversies which relate to federal taxes. (28 U.S.C. § 2201).
The taxpayer argues, however, that a new remedy has been afforded by § 2410(a) of the Judicial Code. (28 U.S.C. § 2410(a)). By this provision the Government has consented to be sued 'in any civil action or suit in any district court, or in any State court having jurisdiction of the subject matter, to quiet title to or for the foreclosure of a mortgage or other lien upon real or personal property on which the United States has or claims a mortgage or other lien.' It was not until 1942 that the remedy of quieting title was added to the statute which theretofore had dealt only with the foreclosure of a mortgage or other lien on property on which the United States had or claimed a mortgage or other lien. The purpose of the amendment, as clearly stated in the House and Senate reports, 'is to permit the United States to be made a party defendant in cases involving foreclosure of mortgages or liens on personal property
and to provide a method to clear real estate titles of questionable or valueless Government liens.'
Its passage was recommended by Attorney General Jackson in order to protect good faith purchasers of real estate and foreclosing mortgagees.
The question whether the Government's consent to be sued, given by § 2410(a), extends to an attack upon the merits of the tax assessment itself has been considered in a number of cases. It was clearly met in Pipola v. Chicco, 169 F.Supp. 229 (S.D.N.Y.1959), where the court held that its purpose was not to permit a collateral attack on the tax assessment, but rather to waive the Government's immunity from suit so as to permit the courts to determine the relative position of the Government lien on property as against other lienors. In such proceedings the courts are necessarily required to determine whether a lien is validly filed or is entitled to payment as against other liens. But, as Judge Weinfeld said, '(permitting inquiry into) the validity of a lien, depending upon compliance or noncompliance with statutory requirements, or the priority of a lien validly filed is quire a far cry from permitting a third party
to attack the tax assessment upon which a properly filed lien is based.' (p. 232). The Court of Appeals for the Second Circuit affirmed on appeal ( Pipola v. Chicco, 274 F.2d 909 (1960)) but later, in United States v. O'Connor, 291 F.2d 520 (1961), overruled its decision.
The O'Connor case was not a proceeding under § 2410(a), but involved § 7403 of the Internal Revenue Code, which deals with actions by the United States to enforce tax liens, in which the merits of the claim are clearly involved. The Government admitted that it had erroneously argued in Pipola that the validity of an assessment could not be questioned by the taxpayer in a suit under § 7403. The discussion of the subject in O'Connor was in a strict sense advisory, for the actual point of the decision was the impropriety of the appointment of the same person as receiver and special master. (See p. 526). I believe O'Connor is correct in its conclusion that the merits of the assessment are still open to attack by the taxpayer when confronted with a suit under § 7403 by the Government to enforce collection, a conclusion which would not apply if there had already been a judicial or Tax Court determination of the question.
This, however, is a far different matter from what was actually involved in Pipola, a proceeding under § 2410(a) to remove the cloud of a tax lien on title to property. I believe the District Court's opinion in Pipola has survived as the correct interpretation of § 2410, since O'Connor overruled only an erroneous premise for the Court of Appeals' conclusion in Pipola.
I am strengthened in this by an additional consideration. Section 7403 is part of the Internal Revenue Code, whereas § 2410(a) is part of the Judicial Code and deals with all forms of liens, and not tax liens alone. Hence to construe § 2410(a) as permitting attack upon the validity of an assessment
on which a tax lien is founded would be to presume a congressional intention widely at variance with well accepted notions of the finality of judgments and their immunity from collateral attack. Such an intention is not to be attributed to Congress. It would, moreover, be utterly unjustified in the light of the legislative history which shows that the purpose of § 2410(a) was to afford a means of completely adjudicating priorities of liens and their validity against specific property where the United States is one of the lienholders but could not be joined without its consent.
Sonitz v. United States and Falik v. United States, supra note 11, hold that § 2410(a) should be construed to permit review of the merits of the assessment because such review is permissible when the taxpayer is the defendant in proceedings by the Government under § 7403. However, it is unreal to seek complete symmetry between proceedings by the Government and those against it, for this ignores the all-pervasive distinction that taxpayers are private citizens subject generally to suit, whereas the Government may be sued only with its consent. The Government, by invoking § 7403, removes its sovereign immunity from consideration, at least to the extent of its claim, whereas a taxpayer who institutes proceedings against the Government must show that his claim falls within the scope of the Government's consent to be sued, and § 2410(a) construed in harmony with its purpose consents only to suits to determine the priority and validity of liens.
It has been said
that the assessment should not be deemed conclusive in proceedings under 28 U.S.C. § 2410(a) because that section does not expressly state that in such proceedings the assessment 'shall be conclusively presumed to be valid', whereas by contrast § 7424 of the Internal Revenue Code, which authorizes civil actions to clear title to property of subordinate tax liens, expressly does so declare. Such distinctions in most circumstances can serve at best only as make-weights; and in the present instance the distinction is of no significance. In the first place, § 7424 is part of the Internal Revenue Code and subsection (b) in which the above quoted language appears provides that on the filing of an action thereunder 'the district court shall proceed to adjudicate the matters involved therein, in the same manner as in the case of civil actions * * * (brought by the United States to enforce tax liens) under section 7403.' Since § 7403 was construed to permit a defense on the merits of the assessment, this would have authorized review on the merits in cases under § 7424 unless some limitation was expressed. Hence it was specifically provided in § 7424(b) that 'for the purpose of such adjudication, the assessment of the tax upon which the lien of the United States is based shall be conclusively presumed to be valid.' There was no need for a provision in § 2410(a) that tax assessments underlying tax liens should be conclusively presumed to be valid because § 2410 does not incorporate by reference any other statutory provision which would authorize attack upon the judgment on which the lien is founded. Moreover, § 2410 is part of the Judicial Code, not the Internal Revenue Code; it does not deal exclusively with tax liens but with any and all liens in favor of the United States, and general common law principles would preclude collateral attack upon judgments underlying such liens.
Finally, above all other considerations, the facts here present a case in which the taxpayer invoked the jurisdiction of the Tax Court to set aside the deficiency determination. The Tax Court proceedings in this case have long since ended and the time for review by the Court of Appeals has long since expired. The Tax Court decision has thus become final under § 7481(1) of the Internal Revenue Code. To read § 2410(a) as authorizing an inquiry into the validity of the assessment and the liability for the tax would not only ignore the res judicata effect of Tax Court decisions
but would disregard the clear congressional provisions that review of a decision of the Tax Court may be had only in a United States Court of Appeals and that once the taxpayer has petitioned the Tax Court no suit to recover the tax may be instituted in any court. Such a construction of § 2410 would also vitiate the congressional purposes behind the prohibitions of declaratory and injunctive relief in federal tax controversies. The consent of the United States to be made a party in mortgage foreclosure and quiet title proceedings where government liens are involved does not uproot these well established principles.
Plaintiff's case is not aided by the claim that the Tax Court decision underlying the tax lien is invalid because the decedent was without mental capacity and unrepresented by a guardian at the time of the Tax Court hearing.
Mental incapacity, or insanity, renders a judgment voidable at the most but not void.
Hence the judgment of a court is not subject to collateral attack because of the insanity of the defendant (Restatement of Judgments § 78, Comment a, p. 350 (1942)), nor, as in the present case, because of the plaintiff's insanity. ( McCoy v. United States, 54 F.Supp. 960 (W.D.Ark.1944)). For such a ground the judgment must be attacked directly in the court in which it was entered and on such an application there must also be shown the existence of a meritorious defense.
These principles apply to a decision of the Tax Court, which, although an executive agency having only the jurisdiction and powers specifically granted by Congress,
exercises solely judicial functions.
Its decisions are subject to review by the Courts of Appeals and ultimately by the Supreme Court. Whatever may be the full extent of the differences between the Tax Court and those tribunals which are part of the judicial branch of the Government, it may not be doubted that a Tax Court hearing is an adversary proceeding. Its determination, therefore, is not subject to collateral attack in a fresh action in a district court to remove a cloud upon title.
Whether relief in any other form is available to the plaintiff, either in the Tax Court or in the Court of Appeals, is, of course, beyond the question presented to me. I am not unmindful of the unavailability to plaintiff of a direct attack in the Tax Court, since its limited statutory jurisdiction is exhausted once its decision has become final, and it lacks the inherent judicial power to vacate or reconsider its decision. Lasky v. Commissioner, 235 F.2d 97 (9th Cir. 1956), aff'd. per curiam, 352 U.S. 1027, 77 S. Ct. 594, 1 L. Ed. 2d 598 (1957). It may even be that plaintiff is without a remedy because of the need for an early conclusion to tax liability controversies, a situation which the Supreme Court envisaged in Bull v. United States, 295 U.S. 247, 260, 55 S. Ct. 695, 79 L. Ed. 1421 (1935). For the Court of Appeals may not have jurisdiction to review the Tax Court determination since there was no petition for review filed within three months of the Tax Court's decision. Lasky v. Commissioner, supra.
Certainly this Court, in an action in which the United States has not waived its sovereign immunity, may not embark on what is in effect the review of a decision of the Tax Court, a function clearly denied to a district court by 7482 of the Internal Revenue Code.
And now, June 30, 1964, plaintiff's motion to add the United States of America as a party defendant is granted. Defendants' motion to dismiss the complaint is granted.