Opinion
47436.
SUBMITTED SEPTEMBER 14, 1972.
DECIDED SEPTEMBER 28, 1972.
Action on note. DeKalb State Court. Before Judge Smith.
Frank Lawson, Norman H. Fudge, Stone Stone, Noah J. Stone, for appellant.
Morris, Redfern Butler, C. David Butler, Norman Estes Smith, for appellees.
1. (a) Where there has been a levy and seizure of a Federal tax lien on a note, indebtedness or other intangible, and — notice of the levy is served upon the debtor, there has been effected a virtual transfer of ownership, or an assignment thereof by operation of law, to the Government of the United States.
(b) An opinion by a lay witness as to the legal effect of a levy, seizure and the giving of notice binds no one, particularly when no confidential relationship existed.
(c) A witness may, within the ambit of Code § 38-1708, express his own opinion, but under no circumstances (except as stated in Overnite Transportation Co. v. Hart, 126 Ga. App. 566 (1) ( 191 S.E.2d 308)) may he testify as to what the intent, purpose or contemplation of another may have been in a given situation. If his own opinion, intent or purpose appears to have been contrary to the plain terms of a statute, or the construction thereof by appellate courts, it is not admissible, for all parties are bound by the statute, as thus construed.
2. A garnishment proceeding instituted in a common law court of the State after the levy, seizure and service of notice cannot change the status of the indebtedness and does not afford to the garnishing creditor any lien or rights against it.
3. After levy, seizure and service of notice on the debtor the holder of the note or indebtedness could not maintain an action thereon against the debtor, and the rights of a garnishing creditor can rise no higher than those of the holder of the note or indebtedness. If the holder of the note could not sue and recover thereon, a garnishing creditor cannot reach it.
4. The issue formed on a traverse to a garnishee's answer to the summons is whether he was, at the time of the service of the summons or between that time and the making of answer, indebted to the defendant. Where, before service of the summons, a levy, seizure and service of notice upon the debtor-garnishee was effected under a Federal tax lien, there had been such a transfer of ownership of the note and indebtedness levied upon as to authorize the debtor or maker to answer not indebted in making answer to the summons of garnishment.
5. Garnishment is a proceeding at law; it is not an equitable proceeding, and it is controlled by the strict terms of the statute, particularly when it is pending in a common law court where affirmative equitable relief is not available.
6. Where there has been a levy and seizure of a note and the indebtedness represented thereby, a subsequent sale thereof divests all right, title and interest therein which had been held by the delinquent taxpayer and it passes to the purchaser at the sale.
7. Where garnishing creditors, or their representative, attend a public sale of property on which a federal tax lien has been levied, fail to submit any bid thereon, and no equitable proceedings have been interposed, they are in no position to complain that they may have lost an opportunity to satisfy their claims out of the indebtedness which may have exceeded in amount the tax claims levied.
8. The price received upon a public sale, openly and fairly held and after lawful advertisement and notice, is prima facie the fair market value of the property sold. Inadequacy in price does not, alone, afford a basis for attacking the sale; it must have been coupled with fraud, collusion, mistake, or the like, and the attack could be made only in equity.
SUBMITTED SEPTEMBER 14, 1972 — DECIDED SEPTEMBER 28, 1972.
Hugh H. Summer sold a lot to KBM Data Systems, and a part of the consideration for his doing so was that he would receive 50,000 shares of its stock and that KBM would obtain a loan for him from EAP Finance, Inc., in the sum of $150,000, bearing interest at 8 percent, payable annually, with the principal due three years from the date thereof and to be secured by the shares of KBM stock. The loan was obtained, and on March 28, 1969, Summer executed his note to EAP Finance for $150,000, receiving the full amount in cash. The 50,000 shares of KBM stock were attached as collateral. The note was transferred to Trust Company of Georgia by EAP Finance, and by Trust Company of Georgia to KBM Data Systems. The first year's interest of $12,000 was paid March 27, 1970.
KBM suffered financial reverses, and appellees, some fifteen in number, secured judgments against it totaling $33,706.44. Withholding taxes from the salaries and wages of officers and employees of KBM were not remitted, and U.S. Internal Revenue agents levied upon and seized the note November 30, 1970. The note was the only asset of significant value which KBM then held.
Notice of the levy and seizure was given by Internal Revenue to Summer, the maker of the note, to KBM, and Falls College and Quick-Print as KBM trade names, the holder of the note, and to EAP Finance, the payee named therein. The notice required that payments (to the extent of the tax liability) on the indebtedness thus levied on be made to Internal Revenue Service.
The second year's interest having become due March 28, 1971, and not having been paid to KBM or to Internal Revenue, KBM gave notice on June 14, 1971, to Summer of its election, under terms of the note, to accelerate the entire unpaid balance and to bind him for the payment of attorney's fees. Suit was then brought on the note against him by KBM in the State Court of DeKalb County. Summer filed a defense on the ground that since the note had been levied upon and seized by Internal Revenue, thus effecting a transfer to it, KBM had no right of action. The suit was dismissed without prejudice.
The appellees, as judgment creditors, filed garnishment proceedings in the State Court of DeKalb County and had summons served on Summer June 25, 1971, and on August 18, 1971, he answered, asserting that he was not indebted to KBM Data Systems in any amount, and had no property belonging to it. The answer was traversed, and the following facts were stipulated.
After due advertisement and notice Internal Revenue sold the note at auction to the highest bidder. Attending the sale were representatives of KBM, Summer and appellees. The representative of Internal Revenue announced that the note was being sold "as is, where is, and without recourse on the United States," and that the minimum bid that would be accepted would be $46,515.84, which represented the principal, interest and costs on the delinquent taxes owing by KBM. An attorney for Summer entered a bid in that sum and all others present expressly declined to bid. The note was then knocked off to Charles P. Bagley as attorney for Hugh H. Summer, and a certificate of sale was executed to him as provided in 26 U.S.C. §§ 6338 (a) and 6339 (a) (1) (2).
The whole of the note and indebtedness was sold — not a part only. The sale was made pursuant to 26 U.S.C. § 6335.
§ 6338. (a) Certificate of sale. — "In the case of property sold as provided in § 6335, the Secretary or his delegate shall give to the purchaser a certificate of sale upon payment in full of the purchase price. In the case of real property, such certificate shall set forth the real property purchased, for whose taxes the same was sold, the name of the purchaser, and the price paid therefor."
§ 6339 (a) (1) (2). "(a) Certificate of sale of property other than real property. — In all cases of sale pursuant to § 6335 of property (other than real property), the certificate of such sale — (1) As evidence. — Shall be prima facie evidence of the right of the officer to make such sale, and conclusive evidence of the regularity of his proceedings in making the sale; and (2) As conveyances. — Shall transfer to the purchaser all right, title, and interest of the party delinquent in and to the property sold."
The garnishors moved for summary judgment on the basis of the above, together with an affidavit from D. M. Fitzpatrick (the representative of Internal Revenue who had caused the levy, seizure and sale of the note to be made), that KBM had not negotiated the note to Internal Revenue by way of endorsement, but had transferred possession at the time of seizure, and that absolute ownership of the note by Internal Revenue was not contemplated to have resulted either by the taxpayer, KBM, or by Internal Revenue, and that KBM had been entitled to redeem the note by paying the amount of the tax, with interest and costs, at any time prior to the sale. The garnishee also moved for summary judgment, and after consideration of the motions, pleadings and supporting evidence the court entered a judgment sustaining the traverse of the garnishors, finding the garnishee to have been indebted to KBM for the difference in the amount he had bid at the tax sale and the amount of the note. The court then entered final judgment for the garnishors in the amount of their judgments, and denied the motion of the garnishee. Garnishee, Summer, appeals and enumerates all rulings as error.
The question raised in all enumerations of error is whether the sale of the note and its purchase by Summer, under the circumstances and facts above recited, had the effect of passing to Summer title to the whole of the indebtedness represented by the note. Collateral questions raised are whether the levy and seizure of the note amounted to a transfer of it from KBM to Internal Revenue, and hence whether the assertion in the answer of the garnishee that he was not indebted to KBM was true, and, even if not, whether the subsequent sale divested KBM of all right, title and interest in the note; whether the fortunes of the garnishing creditors followed those of their debtor, who was, at the time of levy and seizure, the holder of the note; and whether service of the summons of garnishment after levy and seizure but before the sale afforded to the garnishing creditors an enforceable lien against the note which could survive its sale.
1. (a) That the levy and seizure of the note with service of notice on the debtor amounted to a "virtual" transfer, or was tantamount to a transfer of ownership to Internal Revenue, seems to have been settled in United States v. Eiland, 223 F.2d 118, 121, where it was asserted that "the service of such notice results in what is virtually a transfer to the government of the indebtedness, or the amount thereof necessary to pay the tax, so that payment to the government pursuant to the levy and notice is a complete defense to the debtor against any action brought against him on account of the debt." And in United States v. Sullivan, 333 F.2d 100, 116, it was held that a "Statutory levy is substantially broader in scope than anything known to the common law, and it is applicable to intangible as well as tangible property. See Glass City Bank of Jeanette, Pa. v. United States, [ 326 U.S. 265 ( 66 SC 109, 90 LE 56)]. When validly invoked, it effects a seizure of the delinquent's property tantamount to a transferal of ownership. See United States v. Eiland, 223 F.2d 118, 121." It accomplishes "at least ... an assignment [by the delinquent taxpayer] to the United States by operation of law." Cherry Valley Homes, Inc. v. United States, 255 F.2d 706, 707.
Choses in action are not subject to seizure and sale under executions based upon ordinary judgments unless made so by statute. Fidelity Deposit Co. v. Exchange Bk. of Macon, 100 Ga. 619 (2) ( 28 S.E. 393); Tow v. Evans, 194 Ga. 160, 163 ( 20 S.E.2d 922). See Code §§ 39-113, 109A-8-317. There is, of course, authority for the levy and seizure here under 26 U.S.C. §§ 6331 and 6334 and the levy did not proceed under an execution based upon an ordinary judgment.
(b) If the affidavit of Mr. Fitzpatrick expresses an opinion to the contrary, it is one as to the legal effect of what occurred and binds no one ( Swofford v. Glaze, 207 Ga. 532, 535 ( 63 S.E.2d 342)), no confidential relationship existing. Dixon v. Dixon, 211 Ga. 557, 563 ( 87 S.E.2d 369); Beckmann v. Atlantic Ref. Co., 53 Ga. App. 671 (2) ( 187 S.E. 158).
Opinion evidence is not permissible as a basis for the grant of summary judgment, though it may be used in opposition. Harrison v. Tuggle, 225 Ga. 211 (2) ( 167 S.E.2d 395).
(c) Insofar as the affidavit states the intent as to whether Internal Revenue should acquire ownership of the note by virtue of the levy, seizure and notice, Mr. Fitzpatrick could in no circumstances do more than state his own intent. "A witness can not state his mere conclusion that others than himself knew a fact." Bush Hattaway v. McCarty Co., 127 Ga. 308 (6) ( 56 S.E. 430, 9 AC 240). Nor can he state what the desires of others may have been. Slaughter v. Heath, 127 Ga. 747 (6) ( 57 S.E. 69, 27 LRA (NS) 1). And see Srochi v. Kamensky, 121 Ga. App. 518, 522 ( 174 S.E.2d 263); Mullinax v. Turner, 83 Ga. App. 1, 5 ( 62 S.E.2d 398). "A witness will not be permitted to prove the opinions of others on any question." Sullivan v. Hughly, 32 Ga. 316 (1). He may state his own opinion, within the ambit of Code § 38-1708, but he can not testify as to what opinion may be held by others, except as stated in Overnite Transportation Co. v. Hart, 126 Ga. App. 566 (1), supra, and in like manner and for similar reasons he may state what his own intent may have been in a particular situation, but he can not testify what intent others may have had. "[A] witness may testify as to his own intent or purpose ( Nichols v. Ward, 27 Ga. App. 501 (2) ( 108 S.E. 832); Alexander v. State, 118 Ga. 26 (4) ( 44 S.E. 851)); but not that of another ( Carey v. Moore, 119 Ga. 92 (1) ( 45 S.E. 998)); nor can he state the purpose of an unambiguous contract which clearly reveals its purpose. Willingham v. Sterling Cycle Works, 113 Ga. 953 (1) ( 39 S.E. 314); Harris Mitchell v. Amoskeag Lbr. Co., 97 Ga. 465, 469 ( 25 S.E. 519)." Thomas v. State of Ga., 95 Ga. App. 699, 708 ( 99 S.E.2d 242). Since he may not state the purpose of an unambiguous contract, neither may he state a purpose or an intended result of a levy, seizure and notice which purpose or intended result is contrary to the provisions of a plain statute, or constructions thereof which have been made by the courts. Only facts which are within the personal knowledge of the witness and which "would be admissible in the evidence" may be considered on a motion for summary judgment, or in opposition thereto. Code Ann. § 81A-156 (e), CPA § 56 (e). Testimony by Mr. Fitzpatrick of what the intent or contemplation of KBM or of Internal Revenue had been had no probative value, and testimony as to what his intent or contemplation had been was not admissible in this context. Cf. Adams v. Eatherly Hdw. Co., 78 Ga. 485 (1a) ( 3 S.E. 430).
We are thus left to the rulings of the courts as to the legal effect of the action taken.
2. The garnishment intervening between the levy, seizure and service of notice and the sale could not and did not in any wise affect the status arising from the levy and service of notice. "[N]o creditor could have acquired any rights ... with respect to a debt on which the United States had already made a levy and served a notice, the effect of which was to transfer the right to receive payment of the debt to the United States." United States v. Eiland, 223 F.2d 118, 123. Consequently, we must conclude that service of the summons of garnishment on Summer after the levy, seizure and service of notice by Internal Revenue afforded to the garnishing creditors no intervening lien or right to have or receive payment from the proceeds of the sale where the whole of the note and indebtedness were sold and it brought no more than the amount of the government's tax claim with interest and costs. Even if the garnishment could be said to have afforded an intervening lien it was divested by the sale. 26 U.S.C. § 6339 (c).
3. The rights of a garnishing creditor rise no higher than those of the defendant in fi. fa. What one cannot recover himself cannot be recovered by garnishment against him. Bates Co. v. Forsyth, 69 Ga. 365. A garnishing plaintiff's position is no better than that of the debtor. "If the defendant himself, suing the garnishee, could not get a judgment against him, the garnishing plaintiff can not get a judgment against the garnishee. The creditor may stand in his debtor's shoes by means of garnishment, but he gains no additional privileges." Singer Sewing Machine Co. v. Southern Grocery Co., 2 Ga. App. 545, 548 ( 59 S.E. 473). Where a fund was held by a trustee for the garnishee we held that it could not be reached by garnishment against the trustee. Foster v. Southern Bell Tel. c. Co., 85 Ga. App. 504 ( 69 S.E.2d 644). It cannot be gainsaid that under 26 U.S.C. § 6339 the sale of the note divested KBM of all right, title or interest that it had in the note and the indebtedness represented thereby. It could not sue or recover thereon, and the garnishing creditors have no better rights or standing. Cf. Hiatt v. Edwards, 52 Ga. App. 152, 156 ( 182 S.E. 634).
4. "The issue formed on a traverse to an answer of a garnishee is whether or not the garnishee was indebted to or had assets of the defendant between the time of the service of the summons of garnishment and the time of the answer by the garnishee. Aiken v. Smith, 68 Ga. App. 538, 542 ( 23 S.E.2d 584)." Adair-Levert, Inc. v. Atlanta Envelope Co., 70 Ga. App. 685 ( 29 S.E.2d 323).
Since the levy, seizure and service of notice was "tantamount to a transferal of ownership" of the note and indebtedness from KBM to Internal Revenue, it must follow that the trial court erred in sustaining the traverse of the garnishee's answer that he was not indebted to KBM at the time the summons was served upon him, or at any time afterward up to the time of making answer. If he had answered otherwise he might well have subjected himself to a double payment — to the garnishing creditor and to Internal Revenue.
While KBM had a right under 26 U.S.C. § 6337 (a) to redeem the note by paying to Internal Revenue the full amount of the taxes, interest and costs up to the time of sale, it had not done so at any time between the service of the summons of garnishment and the making of answer by the garnishee, and indeed did not do so at any time prior to the sale. It is possible that the judgment creditors likewise might have redeemed the note by making payment in behalf of KBM, but they did not. This alternative, however, has obvious problems and pitfalls, practical and legal, a consideration of which probably convinced the garnishing creditors that they should not. After the levy KBM's interest or right under the note was a mere contingency, having no ascertainable value, and which, after the sale completely expired had no value. It could not be subjected by garnishment or other in rem proceedings. Camp v. Aetna Life Ins. Co., 220 Ga. 832 ( 142 S.E.2d 248).
26 U.S.C. § 6337 (a) Before sale. — "Any person whose property has been levied upon shall have the right to pay the amount due, together with the expenses of the proceeding, if any, to the Secretary or his delegate at any time prior to the sale thereof, and upon such payment the Secretary or his delegate shall restore such property to him, and all further proceedings in connection with the levy on such property shall cease from the time of such payment."
E.g., would the payment be a voluntary one? See Code § 20-1007; Hill v. Shaw, 62 Ga. App. 757 (1) ( 9 S.E.2d 850); Mitchell County v. Phillips, 152 Ga. 787 (2, 4) ( 111 S.E. 374). The payment would release the note back to KBM — not to the creditors. What would be the position of these creditors if, having paid the Government's claim, KBM were adjudged a bankrupt, voluntary or involuntary, with attendant claims for wages, taxes due to the State, county and city, other judgment creditors, etc.?
5. Garnishment is a proceeding at law. It is not in equity, and it must be measured by the strict terms of the statute. The courts have no right to enlarge this purely statutory remedy or to hold under it property which is not made subject to the process. Rager v. Maxon Shirt Co., 210 Ga. 408 (1) ( 80 S.E.2d 183); Few v. Pou, 32 Ga. App. 620 (2) ( 124 S.E. 372). This is especially true when the proceeding is pending or is tried in courts with only common law jurisdiction, where affirmative equitable relief is not available. Southern Flour c. Co. v. Northern Pacific R. Co., 127 Ga. 626 (1) ( 56 S.E. 742, 9 LRA (NS) 853, 119 ASR 356, 9 AC 437); Woodruff v. McDonald Furn. Co., 96 Ga. 86, 88 ( 23 S.E. 195). Whether some equitable remedy may have been available to these creditors after the levy and seizure of the note is a matter not raised or before us. We do note, however, that the Internal Revenue Service accomplished the levy, seizure and sale in strict compliance with the law, and equity follows the law. Code § 37-103; Savannah Steam Rice Mill Co. v. Hull, 103 Ga. 831 ( 30 S.E. 952); McConnell v. Floyd County, 164 Ga. 177 (9) ( 137 S.E. 919); Lewis v. Bd. of Ed. of Lowndes County, 183 Ga. 687 (1) ( 189 S.E. 233). "Where, therefore, a plaintiff in garnishment in a city court would not be entitled to recover against the garnishee, under his traverse of the garnishee's answer, except by the application of a purely equitable rule applicable only in equitable proceedings or money rules, the plaintiff cannot prevail." Few v. Pou, supra, p. 625.
That Summer may have been a stockholder in KBM does not require a different result or conclusion. A stockholder and the corporation are separate entities. Commonwealth United Corp. v. Rothberg, 221 Ga. 175, 176 ( 143 S.E.2d 741). Nothing in this record indicates that he has used the corporation to perpetrate a fraud, or as a subterfuge to work an injustice, or that he could have done so. It does not appear that he was an officer or a majority stockholder; the contrary appears. He was not in control of it. There is thus no "corporate veil" to pierce. Farmers Warehouse v. Collins, 220 Ga. 141 (2) ( 137 S.E.2d 619), citing Fletcher, Cyc. Corps., Vol. 1, § 41.1, p. 169; Condenser Serv. c. Co. v. Brunswick Port Authority, 87 Ga. App. 469, 474 ( 74 S.E.2d 398); Schwob Mfg. Co. v. Huiet, 69 Ga. App. 285 ( 25 S.E.2d 149).
6. What was the effect of the sale? The certificate, issued under 26 U.S.C. § 6339 is "Conclusive evidence of the regularity of [the] proceedings in making the sale; and, shall transfer to the purchaser all right, title, and interest of the party delinquent in and to the property sold." The certificate also discharges the property sold from all liens or encumbrances over which the lien of the United States was superior. 26 U.S.C. § 6339 (c).
The whole of the indebtedness represented by the note was sold — not a part only. Thus, the sale vested in Summer title to the note and the indebtedness represented thereby. KBM was completely divested of any right to or interest therein. There is no provision of law for any redemption of the property after the sale. If one wholly a stranger to the situation had purchased at the sale Summer would have been liable to him, but not to the garnishing creditors. If the garnishing creditors had bought the note at the sale, he would have been liable to them for the full amount due thereunder. This may have been their best remedy. But since Summer bought the note himself he is not now legally obligated to pay it. Cf. Code § 85-710; Swinson v. Shurling, 162 Ga. 604 ( 134 S.E. 613).
There is provision for the redemption of realty under 26 U.S.C. § 6338, but none as to any other type of property. See Lowe v. City of Atlanta, 221 Ga. 477 ( 145 S.E.2d 534).
A moral obligation alone, if one exists, is not enforceable. Brazell v. Hearn, 33 Ga. App. 490 ( 127 S.E. 479). It may supply the consideration for new promise, Code § 20-303, but no new promise appears to have been made. Cf. Davis Co. v. Morgan, 117 Ga. 504, 506, 507 ( 43 S.E. 732, 61 LRA 148, 97 ASR 171).
"The purchaser at the sale acquires just the title which the defendant had, — no more, no less." Wall Lumber Co. v. Lott-Lewis Co., 5 Ga. App. 604 ( 63 S.E. 637). Liens inferior to that under which the levy and sale were made are divested from the property sold. Cf. Allen v. Lott-Lewis Co., 8 Ga. App. 313 ( 68 S.E. 1073). See Dixie Plywood Co. of Atlanta v. Brown, 223 Ga. 254 ( 154 S.E.2d 250), where it was held that the sale conveyed all of the right, title and interest which the delinquent taxpayer held in the property at the time the government's lien attached. Here the lien attached at the time of the levy, seizure and service of notice.
7. At the sale representatives of KBM and of the garnishing creditors were present. There is in the record a transcript of what occurred, and it appears that the representative of Internal Revenue announced that the note would be sold "as is, where is, and without any recourse against the United States," informed those present that the minimum bid that would be accepted was $46,515.84, and that the only bid submitted was that of Summer. Specific inquiry was made to the representatives of both KBM and the garnishing creditors as to whether they or either of them wished to submit bids, and each answered that they did not. Cf. Bearden v. General Motors Accept. Corp., 122 Ga. App. 180 ( 176 S.E.2d 652). There was no protest of the sale, and no equitable proceedings interposed to protect whatever interest they may have had or claimed to have in the note. They are now estopped to assert any claim against Summer.
A protest likely would have been useless under 26 U.S.C. § 6339.
8. The price received upon the public sale was prima facie the value of the note. Bearden v. General Motors Accept. Corp., 122 Ga. App. 180, supra. There has been no valid attack made on the sale, and even if the price had been inadequate this alone would not suffice to set the sale aside; it would be necessary to show fraud, mistake, etc., and it could be done only in a court of equity. Croft v. Sorrell, 151 Ga. 92 (1) ( 106 S.E. 108). There is nothing in the record to indicate that the value of the note was greater than the amount for which it sold, and nothing to indicate that there was any fraud or collusion in the conduct of the sale. It was made openly, and all interested parties had a fair opportunity to bid. The certificate of sale, under 26 U.S.C. § 6339 is "conclusive evidence of the regularity of [the] proceedings in making the sale."
We conclude that there was no issue raised as to any material fact and the trial court erred in sustaining the traverse to the garnishee's answer, in granting summary and final judgment to the garnishing creditors, and in denying the garnishee's motion for summary judgment.
Judgment reversed with direction that judgment be entered for the garnishee, H. H. Summer. Deen and Clark, JJ., concur.