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PETTENGILL v. UNITED STATES

February 16, 1966

ALICE C. PETTENGILL, PLAINTIFF,
v.
UNITED STATES OF AMERICA, DEFENDANT. RAE HANSEN KENDRICK, PLAINTIFF, V. UNITED STATES OF AMERICA, DEFENDANT. ALICE C. PETTENGILL, ADMINISTRATRIX, ETC., PLAINTIFF, V. UNITED STATES OF AMERICA, DEFENDANT.



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.

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 defendant's motions.

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.

I.

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.

II.

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 ...


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