Knoch, Senior Circuit Judge, Cummings and Pell, Circuit Judges.
The United States brought this action to foreclose federal tax liens against six parcels of real estate allegedly owned by the taxpayer Homer Pittman.*fn1 The district court ordered the liens foreclosed and the property sold to satisfy the tax claim. The taxpayer appeals contending that the tax has been satisfied by a prior levy on one of the six parcels. The issue presented is whether there was a levy effective to satisfy the tax.
Certain facts are not subject to dispute on this appeal. Pittman's income tax liability to the United States was $34,085.25 plus interest. Assessments of such taxes and demands for their payment were legally made on September 23, 1960, and August 5, 1966. See Internal Revenue Code of 1954, 26 U.S.C. § 6303(a). Upon such assessment and Pittman's failure to pay the tax, a lien arose in favor of the United States on any interest which Pittman had in the six parcels of land described in the complaint. See 26 U.S.C. § 6321. Notices of such liens were duly and timely filed in the places provided by law. See 26 U.S.C. § 6323(a). While Pittman had been the owner of all six parcels of land, legal title to the parcels had been transferred to various nominees. Pittman was experiencing credit difficulties and the purpose of such transfers was to avoid attachment of liens and to facilitate the making of loans with the property as collateral.
The particular dispute before us revolves around certain actions taken by the Government with respect to one of the six parcels, identified as Parcel No. 6. Prior to December 10, 1964, legal title to Parcel No. 6 was in the name of one A. C. Niesen, Jr., as nominee of Pittman. On December 9, 1964, Internal Revenue Service Officer Lyden*fn2 served a Notice of Levy upon Niesen informing him of Pittman's tax indebtedness and of the fact that a lien had attached to all property belonging to Pittman by virtue of his failure to satisfy the indebtedness upon demand. The Notice of Levy continued:
" . . . you are further notified that all property . . . now in your possession and belonging to this taxpayer . . . [is] hereby levied upon and seized for satisfaction of the aforesaid tax, . . . and demand is hereby made upon you for the amount. . . . Checks or money orders should be made payable to Internal Revenue Service."
On December 10, 1964, Niesen conveyed Parcel No. 6 to the Milwaukee District Director of the Internal Revenue Service by a quitclaim deed delivered to Officer Lyden. The deed was subsequently recorded by another revenue officer.
The Government asserts that the issue before us is the narrow one of whether the receipt of the quitclaim deed constituted an administrative levy. As the factual situation appears to us, while we agree that the question is presented as to whether a levy was made, we cannot accept the narrowing circumscription to the deed transaction alone.
After taking the deed to Parcel No. 6, Revenue Officer Lyden maintained insurance on the property until his retirement on April 30, 1968. It appears, although the record is not entirely clear, that the Service through Lyden solicited tenants for eight houses located on Parcel No. 6 as they became vacant. Lyden testified, "During the period I managed the property, there were some vacancies." It is also clear that the I.R.S. through Lyden served levies on the tenants occupying the houses. Lyden notified the tenants that they should pay their rent to the Internal Revenue Service and to no one else. He collected rents and turned the amounts received over to I.R.S. until his retirement. Pittman asserts he received written notice not to collect any further rent. Lyden testified that he gave no such notice to Pittman but that Pittman did get a copy of the levy. There is evidence that following December 10, 1964, Pittman refused to accept rent from at least one tenant who offered it to him.
It appears from the record that the rental payments, admittedly collected by the Government, were credited to tax liabilities of Pittman. No receipts were introduced into evidence but exhibits marked, "Certificate of Assessments and Payments" would seem to indicate that substantially all of the payments were credited not to Pittman's income tax liability but to his withholding tax (Social Security) liability, an account unrelated to the present dispute.
The Government claims it was seizing only the rentals and not the property itself--the fruit but not the tree. However, their disposition of the fruit would seem to suggest the dispositive right of the owner of the tree. Unless the Government owned the tree, it is difficult to see how it took upon itself diverting the produce to a purpose other than for which it was supposedly taken.
Following December 10, 1964, the property deteriorated. Some of the houses burned down and others were vandalized when they were allowed to remain open and vacant. All but one of them were eventually burned down or condemned by local authorities. Pittman claims that the value of Parcel No. 6 has fallen from over $60,000.00 to approximately $3,000.00.
Some fifteen months after the Service took the deed to Parcel No. 6 and assumed the prerogatives of ownership outlined above, and after much of the deterioration had taken place, the Service through a regional counsel wrote to Pittman advising him that the District Director had taken the deed to the property "to clarify the record title thereof . . . [but] . . . recognizes that you [Pittman] are equitable owner of this real estate." The letter then "[recommended] that you take whatever action you deem appropriate to maintain the value of the property and prevent waste." Transmitted with the letter was a real estate tax bill. The letter noted that the assessed value of the buildings appeared "greatly excessive" and advised Pittman to "take whatever action you deem appropriate."
The letter contained no reference to the control or management that the Government had been theretofore exercising over the property. The two hands of the Government seemed to be quite unaware of the activities of each other. Lyden disclaimed all knowledge of the letter and, as indicated, if the regional ...