The opinion of the court was delivered by: Parsons, District Judge.
These are three tax refund actions to recover about $67,000 in
income taxes alleged to have been erroneously assessed against,
and collected from, the estate of Arthur S. Hansen, for the years
1955 through 1958.
Case No. 64 C 2145 is brought by the decedent's widow, Alice C.
Pettengill, as Administratrix of his estate, to recover the
entire $67,000 allegedly due the estate. Case No. 64 C 2143 is a
claim by the widow, individually, to recover a one-third share
(as one of three heirs sharing equally) of any overpayment of
taxes by the estate. Count Three of Case No. 64 C 2144 is a claim
by the decedent's daughter, Rae Hansen Kendrick, also to recover
her one-third share. (The other daughter, Karen Hansen Lotz, a
resident of Florida, has filed a similar action there to recover
the remaining one-third share). The widow also sues individually
in Case No. 64 C 2143, Count I, to recover taxes paid out of her
own money under a joint income tax return for the year 1955,
which she filed on behalf of herself and the estate.
The United States has moved to dismiss the above claims on
various grounds. The cases have been consolidated for pretrial
purposes, pursuant to Rule 42(a) of the Federal Rules of Civil
Procedure, and are presently before the Court for ruling on
Taking as true the allegations of the complaint, as they must
be in ruling upon a motion to dismiss, it appears, among other
things, that the decedent, Arthur S. Hansen, owned and operated
an actuarial service business. On January 28, 1955, he died. His
widow, Alice, was appointed Administratrix of his estate on
February 7, 1955, by the Probate Court of Lake County, Illinois.
During the administration of the estate, the widow, as
Administratrix, filed income tax returns required of fiduciaries
for the years 1955 through 1958. She paid taxes assessed
thereunder. For the year 1955, she filed a joint income tax
return on behalf of herself and the decedent. Taxes on this
return were paid out of her own funds. On April 14, 1959, she
filed claims for refund, individually and as Administratrix, with
the Commissioner of Internal Revenue. Nine days later, the estate
was closed, when its assets (including the claims for refund)
were distributed to the heirs and Alice was discharged as
Administratrix. Subsequently, the claims for refund were
disallowed. Recently, the instant cases were commenced, just a
short time before the running of the statute of limitations would
bar bringing these actions.
The Government seeks dismissal of the suit brought by Alice C.
Pettengill, as Administratrix of the estate, on the grounds: (1)
That Alice lacks capacity to sue on behalf of the estate for a
tax refund due the estate once it has been closed and she has
been discharged, and (2) that the estate is no longer a real
party in interest, since any claims for refund passed from the
estate to the heirs by operation of law upon the final settlement
of accounts and distribution of the assets of the estate.
It is unnecessary to distinguish between defendant's two
contentions on this matter in view of plaintiff's own
acknowledgment, in her complaint and subsequently in her briefs,
that the claims for refund were among the assets of the estate
which vested in, and were distributed to, the three heirs in
equal shares at the time the Administratrix' final account was
approved and the estate closed.
The final distribution of the assets of the estate constituted
an assignment by operation of law, which is not proscribed by the
anti-assignment statute, 31 U.S.C. § 203. Erwin v. United States,
97 U.S. 392, 24 L.Ed. 1065 (1878); United States v. Aetna
Casualty & Surety Co., 338 U.S. 366, 70 S.Ct. 207, 94 L.Ed. 171
(1949); Kinney-Lindstrom Foundation v. United States, 186 F. Supp. 133
(N.D. Iowa (1960)) (executor cannot assign tax refund claim
while estate is still open and executor is still serving). Upon
distribution, the estate lost any interest in the claims for
refund. Despite the logic, simplicity, economy, convenience to
all parties and to the Court, and general desirability of having
the Administratrix of an estate bring a single action for refund
of taxes, it is equally logical and desirable that the legal
representative of an estate act while under local law that estate
is still in existence. Any exception to this rule would destroy
fundamental law relating to decedents' estates.
The estate is no longer a sufficient legal entity to be a real
party in interest here, and therefore cannot have attributed to
it a standing to sue. If the estate were reopened by the Lake
County Court, I, thereafter, could recognize its legal
representative. That, however, is not the situation here.
Accordingly, defendant's motion to dismiss Case No. 64 C 2145
must be, and the same hereby is, allowed.
Defendant also seeks dismissal of the alternative individual
refund claims of two heirs, who here seek to pursue the same
course that has been set by a third heir, who has brought an
individual refund action in a Florida District Court.
The Government contends that where claims for refund of income
taxes paid by an estate have been distributed to the heirs, the
heirs may not maintain separate actions for their respective
shares, but, rather, they are all required to join, as
indispensable parties, in a single action. Many practical
administrative considerations justify this contention.
At the same time, the heirs might have brought their individual
claims in one forum, to be tried by one jury, were it not for a
venue provision. Section 1402 of Title 28 precludes the filing of
a tax refund action in a district in which plaintiff is a
nonresident. Many practical administrative considerations justify
this provision. Accordingly, the Florida heir could not have sued
in this district. A still further procedural obstacle would
prevent transfer of the Florida action to this Court, no matter
how convenient this forum might be. Hoffman v. Blaski,
363 U.S. 335, 80 S.Ct. 1084, 4 L.Ed.2d 1254 ...