Plaintiffs appeal from an order dissolving a preliminary injunction and dismissing the amended complaint wherein plaintiffs seek a declaration that title to certain machinery is in the plaintiff Giles E. Bullock. E. C. Coyle, Jr,, District Director of Internal Revenue, was the only defendant served. He moved by motion for summary judgment to dismiss the complaint upon the grounds that the court lacked jurisdiction of the action and that, there being no genuine issues as to material facts, defendant was entitled to judgment as a matter of law. The court below held that actions with respect to federal taxes were expressly excepted from the provisions of the Declaratory Judgment Act, 28 U.S.C. § 2201, and that jurisdiction could not be founded upon 28 U.S.C. §§ 1340 or 2463. Accordingly, the court dismissed the complaint (D.C., 198 F.Supp. 627). Appellate jurisdiction is based upon 28 U. S.C. § 1291. '
The facts as disclosed by the complaint and affidavits are in substance:
On November 11, 1959, defendants to satisfy an adjudicated tax liability of plaintiffs of $101,263.32 sold real estate
Defendants’ answer challenged the jurisdiction of the court (1) because the declaratory judgment statute specifically excepts controversies “with respect to Federal taxes” (28 U.S.C. § 2201); (2) because the action seeks to restrain “the assessment or collection” of a tax (26 U. S.C. § 7421); and (3) because the action seeks to restrain agents of the United States in the discharge of their official duties. The court below held that there was no jurisdiction to hear plaintiffs’ complaint and that any claim to jurisdiction under 28 U.S.C. § 1340 or § 2463 “must be ‘with respect to federal taxes’ ” and, hence, within the exception contained in § 2201. The controversy here is not over the amount of any tax. Neither plaintiffs nor the Company contest the tax. Because there is no diversity, the court below held that if the action is not with respect to federal taxes, there is no jurisdiction “because there is no other basis”.
Section 1340 (28 U.S.C.) gives to district courts “original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue * * * ” This section relates to taxes, argue defendants, which brings the action back again within the exception of Section 2201. The law, however, frequently does not follow the narrow path of pure logic and seldom can indulge itself in the academic certainties of syllogistic reasoning. Nor can reference be made to the provisions of any one section without the probability arising of having to reconcile it with some other section or decisional law apparently in conflict. And so here.
The conclusion to be gleaned from the many decisions dealing with the problem presented is succinctly stated in the “Law of Federal Income Taxation” (9 Mertens § 49.224) and is that “Courts have granted declaratory judgments, however, in suits in which the plaintiff has charged that his property may be taken to discharge the tax liability of another * * * ” To reach this conclusion, a straight path cannot be trod. Along the path has been placed a hurdle such as is found in Section 7421 which prohibits the maintenance of any suit to restrain the collection of any tax. This hurdle, however, can be by-passed by adhering to Raffaele v. Granger, 3 Cir., 1952, 196 F.2d 620, 623, wherein the court said, “This court and others have consistently held that Section 3653(a) of Title 26 [§ 7421(a)] does not prevent judicial interposition to prevent a Collector from taking the property of one person to satisfy the tax obligation of another. Rothensies v. Ullman, 3 Cir., 1940, 110 F.2d 590; Glenn v. American Surety Co., 6 Cir., 1947, 160 F.2d 977; Long v. Rasmussen, [9 Cir.] D.C.Mont. 1922, 281 F. 236.”
Probably the most cited case in this field is Long v. Rasmussen, Collector of Internal Revenue, et al., 9 Cir., 1922, 281 F. 236, 238. There the Collector seized the plaintiff’s property for the tax owed . by another. The court had no difficulty with the statute against restraint of tax collection (26 U.S.C. § 7421) holding that it applied only to taxpayers but then said, “They [the revenue laws] relate to taxpayers, and not to nontaxpayers. The latter are without their scope. No procedure is prescribed for nontaxpayers, and no attempt is made to annul any of their rights and remedies in due course of law.” If the case were not under the revenue laws, how jurisdiction was obtained in the absence of diversity is not explained except that the court believed that it was not improbable that the predecessor section (R.S. § 934) of section 2463 “contemplates the instant case.” However, federal jurisdiction must be found under some statute. Only after it exists, is it then possible to invoice the theory that the jurisdictional exclusion of the summary judgment remedy of section 2201 is limited to actual controversies with respect to tax liabil-Dy-
A seizure of property and its sale by a District Director of Internal Revenue is an act “arising under [an Act] * * * of Congress providing for internal revenue” (Section 1340). Of necessity, he is acting within the framework of the revenue laws. This section would appear to provide a broad jurisdictional base which is not annulled by the narrower limitations of the declaratory judgment section. Sections 1340 and 2463 singly or in combination have throughout the years satisfied the federal courts’ jurisdictional requirements in cases in which a non-taxpayer seeks to prevent his property from being seized and sold to pay the tax obligation of another. This is the very situation presented here because Giles E. Bullock, vis-a-vis the Brown Company, is a non-taxpayer,
To set forth jn fuj] the facts of the many cases accepting jurisdiction would serve little purpose. The principle has been stated succinctly in Fine Fashions, Inc. v. Moe, D.C.S.D.N.Y., 1959, 172 F.Supp. 547:
“It is well-settled that when property belonging to A is levied upon to satisfy the tax obligation of B, A is not without remedy but may seek redress in the federal courts.”
^ „ ,, , Dealmg with the power of the court !° entertain a declaratory judgment court Tomlinson v. Smith, 7 Cir., 1942, 128 F.2d 808, said:
^ “What we have said concerning Die jurisdiction of the court to issue a restraining order is, as we view Die matter, determinative of its jurisdiction to declare the rights of Die parties relative thereto. It is unreasonable to think that a court with authority to issue a restraining order is without power to declare Die rights of the parties in connecD°n therewith.”
Other cases relating to jurisdiction are. Botta v. Scanlon, 2 Cir., 1961, 288 F.2d 504 (Action against District Director of Internal Revenue to have assessment declared void and to enjoin. Jurisdiction upheld; 26 U.S.C. § 7421, no bar); United States v. Coson, 9 Cir., 1961, 286 F.2d 453 (Action against United States by plaintiff claiming to be the owner of property against which a tax lien had been filed for taxes owed by another; jurisdiction upheld under 28 U.S.C. § 1340 and § 2410); Stuart v. Willis, 9 Cir., 1957, 244 F.2d 925 (“the power of the Collector never extends beyond the rights of the taxpayer upon
Nothing said in Jolles Foundation v. Moysey, 2 Cir., 1957, 250 F.2d 166, is to the contrary. There the question related to the tax liability of the Foundation. By a declaratory judgment action, the taxpayer sought to change its taxable status. The issue was “with respect to Federal taxes” and the exception of Section 2201, therefore, applied.
Upon the trial, the sole issue to be determined will be whether title to the machinery and fixtures is in Giles E. Bullock or E. C. Brown Company. If in Bullock, the proceeds of the sale in the hands of the District Director should be applied to the Bullock tax liability; if in the Company, to its tax liability. Jurisdiction rests upon sections 1340 and 2463 and does not come within the exception of section 2201. That exception sufficiently serves its purpose if limited to controversies involving tax liabilities of parties qua taxpayers and if not construed as foreclosing declaratory judgment relief to persons claiming an interest in property levied upon to satisfy the tax obligations of another. Accordingly, the order is reversed and the case remanded so that upon the trial the issue of title and the proper application of the proceeds may be determined.
The judgment is reversed and the case is remanded to the District Court.