United States v. National Bank of Commerce

Roy, Ruby, and Neva Reeves owed joint accounts with the Arkansas-based National Bank of Commerce (bank) (defendant). Roy had an unrestricted right to withdraw the money in the accounts, and the bank was required to honor any Roy withdrawal request up to the accounts’ full amounts. To collect on Roy’s tax debt, for which Ruby and Neva were not responsible, the Internal Revenue Service (IRS) issued a notice of levy to the bank pursuant to Internal Revenue Code (code) §§ 6331 and 6332 regarding Roy’s property or property right in the bank’s custody. The bank refused to comply with the levy, contending that it did not know how much of the money in the accounts belonged to Roy and how much belonged to Ruby or Neva. The United States sued the bank to enforce the levy. The district court dismissed the United States’ complaint. The court of appeals affirmed, ruling that (1) under Arkansas’s creditors’-rights law, Roy did not own property or property rights in the joint accounts, and (2) an IRS levy was not intended to be used against jointly owned property or property in the name of third parties. The court of appeals acknowledged that code § 7426 permitted a claimant to seized property to bring a civil action against the United States for the property’s return or payment of the property’s sale proceeds, but it opined that § 7426 was meant to protect third parties from inadvertent seizure and did not reflect the propriety of levying against joint property. The United States appealed.