Opinion
Civ. No. 6260 Phx.
May 26, 1967.
Dykes, Selden, Bayham Fike, by Edward E. Selden, Phoenix, Ariz., for plaintiffs.
Richard C. Gormley, Asst. U.S. Atty., Phoenix, Ariz., for defendants.
JUDGMENT AND ORDER
This is an action under Section 7426(a) and (b)(1) of the Internal Revenue Code of 1954, seeking relief from an alleged improper levy made by the Director of Internal Revenue for the District of Arizona. The facts are not in dispute.
As a result of a business enterprise, the plaintiff Jim Prater failed to pay certain Federal excise taxes for the fiscal years 1964 and 1965 in the approximate sum of $1737.06. These taxes were payable by the said plaintiff individually.
On February 9, 1966, Jim Prater married the plaintiff Evelyn Prater. On January 16, 1967, a notice of levy was served on the Reliance Truck Company, the employer of the plaintiff Jim Prater. This notice was served with a notation that it was attaching one-half of the community income of the plaintiff-husband. Subsequent to this levy, Reliance Truck Company paid the sum of $72.68 to the Internal Revenue Service.
On or about January 17, 1967, a notice of levy was served on one H. C. Charlie Evins, with the same notation that it was attaching one-half of the community income of the plaintiff-husband. On or about January 23, 1967, a check in the sum of $61.96 was received from Mr. Evins by the Internal Revenue Service in response to the levy.
On or about February 14, 1967, the plaintiffs, as a marital community, brought this suit. The plaintiffs alleged that the levies made upon their community property were illegal for the reason that, under the laws of the State of Arizona, community property cannot be taken or divided to satisfy a separate debt of either spouse. The matter is presently before the Court on the motion of the defendant United States to dismiss the complaint and the cross-motion of the plaintiffs for summary judgment against the United States of America for the sums obtained by it by virtue of the levies on the Reliance Truck Company and H. C. Charlie Evins.
Arizona Revised Statute, § 25-216, subsec. B provides as follows:
"The community property of the husband and wife is liable for the community debts contracted by the husband during marriage unless specifically excepted by law."
Arizona courts have held that community property is not susceptible to liability for pre-marital debts of either spouse. Forsythe v. Paschal, 34 Ariz. 380, 271 P. 865 (1953); Barr v. Petzhold, 77 Ariz. 399, 273 P.2d 161 (1954).
Earnings of either spouse during marriage constitute community property. Shaw v. Greer, 67 Ariz. 223, 194 P.2d 430 (1948).
The Supreme Court of Arizona, however, has observed a distinction in the area of pre-marital obligations by differentiating contractual obligations and obligations arising by operation of law. In the case of Gardner v. Gardner, 95 Ariz. 202, 388 P.2d 417 (1964), the Supreme Court of Arizona considered the question whether the husband's alimony debt from a prior marriage could be allowed from the community property of his present marriage. The Court allowed such payment based on the distinction between an alimony obligation and a contracted debt, as well as on grounds of public policy.
In Ogelsby v. Poage, 45 Ariz. 23, 40 P.2d 90 (1935), the court had under consideration a question of what property of honorably discharged soldiers is exempt from taxation as provided for by the Arizona constitution. The court in that case allowed that the wife's share of the community property involved was subject to taxation. There does not appear to be a reported decision in this District on the precise point in question. Arizona has recognized the similarity of its community property laws with those of the State of Washington. In Cosper v. Valley National Bank, 28 Ariz. 373, at page 379, 237 P. 175 (1925), the court stated that the Arizona community property statutes are more analogous to the State of Washington than to any other.
In the case of Draper v. United States, 243 F. Supp. 563 (D.C.W.D. Washington 1965), the Federal District Court was faced with a complaint to quiet title to community funds levied on to satisfy assessment against wife for income taxes on premarital earnings and to quash the tax levy. The court in that case dismissed the complaint on the basis that state law allowed exceptions to the general rule of immunity on the basis of public policy, and that such an exception was needed in the case of public taxation. This Court is persuaded by the logic of that decision and therefore determines this matter in accord with it.
The complaint will be dismissed with prejudice and without costs. Counsel for the defendant will prepare an order in compliance herewith for presentation to the Court.