B-170969, DEC 28, 1970, 50 COMP GEN 441

B-170969: Dec 28, 1970

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WHOSE INITIALS WERE SIMILAR TO THE WIFE'S. IS FOR DETERMINATION BY FEDERAL AND NOT STATE LAW IN THE INTEREST OF UNIFORMITY. " RECLAMATION PROCEEDINGS AGAINST THE BANK ARE NOT REQUIRED SINCE A JOINT INCOME TAX IS TREATED AS THE RETURN OF A SINGLE INDIVIDUAL AND PAYMENT TO THE HUSBAND AS ONE OF THE JOINT OBLIGEES EXTINGUISHED THE LIABILITY OF THE GOVERNMENT FOR THE TAX OVERPAYMENT. THE OWNERSHIP RIGHTS OF THE SPOUSES ARE FOR DETERMINATION BY LOCAL LAW IN AN APPROPRIATE PROCEEDINGS. 1970: REFERENCE IS MADE TO A LETTER OF SEPTEMBER 14. THIS MATTER WAS INITIALLY REFERRED TO THE GENERAL ACCOUNTING OFFICE BY THE CHECK CLAIMS DIVISION. A JOINT FEDERAL INCOME TAX RETURN FOR THE YEAR 1965 WAS FILED BY FRANK L.

B-170969, DEC 28, 1970, 50 COMP GEN 441

CHECKS - ENDORSEMENT - OTHER THAN PAYEE - TAX REFUND THE LIABILITY FOR THE PROCEEDS OF AN INCOME TAX REFUND CHECK BEARING ONLY THE INITIALS OF HUSBAND AND WIFE STILL MARRIED BUT SEPARATED AT THE TIME OF ENDORSEMENT BY THE HUSBAND AND DEPOSITED IN A JOINT ACCOUNT WITH HIS MOTHER, WHOSE INITIALS WERE SIMILAR TO THE WIFE'S, IS FOR DETERMINATION BY FEDERAL AND NOT STATE LAW IN THE INTEREST OF UNIFORMITY. ALTHOUGH THE USE OF THE INITIALS DID NOT FACILITATE THE FORGERY AND ORDINARILY THE CASHING BANK WOULD BE REQUIRED TO REFUND ONE HALF OF THE CHECK, AS IN THE "SAME NAME CASES," RECLAMATION PROCEEDINGS AGAINST THE BANK ARE NOT REQUIRED SINCE A JOINT INCOME TAX IS TREATED AS THE RETURN OF A SINGLE INDIVIDUAL AND PAYMENT TO THE HUSBAND AS ONE OF THE JOINT OBLIGEES EXTINGUISHED THE LIABILITY OF THE GOVERNMENT FOR THE TAX OVERPAYMENT, AND THE OWNERSHIP RIGHTS OF THE SPOUSES ARE FOR DETERMINATION BY LOCAL LAW IN AN APPROPRIATE PROCEEDINGS.

TO THE COMMISSIONER OF INTERNAL REVENUE, DEPARTMENT OF THE TREASURY, DECEMBER 28, 1970:

REFERENCE IS MADE TO A LETTER OF SEPTEMBER 14, 1970, FROM THE CHIEF COUNSEL, INTERNAL REVENUE SERVICE, REQUESTING RECONSIDERATION OF OUR CLAIMS DIVISION SETTLEMENT OF APRIL 22, 1970, TO THE DISTRICT DIRECTOR OF INTERNAL REVENUE, LOS ANGELES, CALIFORNIA, WHICH AUTHORIZED PAYMENT TO MARIE LEAVENWORTH OF $241.70, REPRESENTING ONE-HALF OF THE AMOUNT OF AN INCOME TAX REFUND CHECK ISSUED TO F. L. & M. LEAVENWORTH ON NOVEMBER 2, 1966. THE LETTER STATES THAT THE CHIEF COUNSEL HAS INSTRUCTED YOUR WESTERN REGION SERVICE CENTER NOT TO MAKE PAYMENT UNTIL HE HAS RESOLVED THE QUESTION OF WHETHER THE UNITED STATES HAS BEEN ABSOLVED OF LIABILITY.

THIS MATTER WAS INITIALLY REFERRED TO THE GENERAL ACCOUNTING OFFICE BY THE CHECK CLAIMS DIVISION, TREASURER OF THE UNITED STATES, ON DECEMBER 28, 1967. THE RECORD BEFORE US SHOWS THE FOLLOWING CHRONOLOGY OF EVENTS. APRIL 1966, A JOINT FEDERAL INCOME TAX RETURN FOR THE YEAR 1965 WAS FILED BY FRANK L. AND MARIE LEAVENWORTH, HUSBAND AND WIFE, WHO WERE RESIDENTS OF CALIFORNIA. IN AUGUST 1966 THE PARTIES SEPARATED. ON NOVEMBER 2, 1966, A REFUND CHECK IN THE AMOUNT OF $483.40 WAS ISSUED TO THE ORDER OF F. L. & M. LEAVENWORTH AND, ON INSTRUCTIONS FROM THE HUSBAND, WAS MAILED TO HIS MOTHER'S ADDRESS IN LONG BEACH, CALIFORNIA. FRANK L. LEAVENWORTH ADMITS THAT HE RECEIVED THE CHECK AND ENDORSED IT IN THE NAMES OF BOTH PAYEES, AND DEPOSITED IT IN A JOINT ACCOUNT WITH HIS MOTHER, WHICH HE OPENED ON NOVEMBER 14, 1966, AT THE FARMERS AND MERCHANTS BANK OF LONG BEACH, CALIFORNIA, IN THE NAMES OF "FRANK L. OR M. A. LEAVENWORTH." HE STATES THAT HE USED THE CHECK PROCEEDS TO PAY JOINT DEBTS OF THE MARRIAGE, INCURRED WHILE HE AND HIS WIFE WERE LIVING TOGETHER.

ALTHOUGH DIVORCE PROCEEDINGS HAD BEEN STARTED AND A SHOW CAUSE HEARING HAD BEEN HELD, THE PARTIES WERE STILL MARRIED AT THE TIME WHEN THE CHECK WAS ISSUED AND NEGOTIATED.

IN FEBRUARY 1967, MARIE LEAVENWORTH NOTIFIED INTERNAL REVENUE SERVICE THAT SHE HAD NOT RECEIVED THE REFUND CHECK AND HAD NOT ENDORSED IT OR AUTHORIZED ITS ENDORSEMENT. SUBSEQUENTLY, SHE FILED A CLAIM FOR $241.70, ONE-HALF OF THE REFUND CHECK. SHE DISPUTED HER HUSBAND'S STATEMENTS THAT HE HAD PAID ANY BILLS ON HER BEHALF AND ASKED THAT HE BE CHARGED WITH FORGERY. THE UNITED STATES ATTORNEY, HOWEVER, DECLINED TO TAKE ACTION AGAINST HIM.

THE RECORD FURTHER SHOWS THAT THE FARMERS AND MERCHANTS BANK REFUSED THE TREASURER'S REQUEST FOR REFUND OF $241.70, ONE-HALF OF THE AMOUNT OF THE CHECK, ON THE GROUND THAT THERE WAS NOTHING ON THE FACE OF THE CHECK TO PLACE THE BANK ON NOTICE OF THE LACK OF ENTITLEMENT OF M. A. LEAVENWORTH, THE MOTHER OF CO-PAYEE FRANK L. LEAVENWORTH. IN REPLY TO A SUBSEQUENT DEMAND FOR REFUND, THE BANK STATED THAT "THE GOVERNMENT WAS REMISS BY USING ONLY INITIALS INSTEAD OF FULL NAMES TO PROTECT THEMSELVES." THE TREASURER'S CHECK CLAIMS DIVISION THEN ADVISED US, ON JANUARY 6, 1970, OF ITS BELIEF THAT THE BANK HAD OBTAINED TITLE TO THE CHECK ON THE BASIS OF THE GENUINE ENDORSEMENT OF F. L. LEAVENWORTH AND AN AUTHORIZED ENDORSEMENT IN THE NAME OF THE BANK'S DEPOSITOR, M. LEAVENWORTH, AND IT ADDED THAT "HAD THE CHECK BEEN PROPERLY DRAWN IN THE NAME OF MARIE LEAVENWORTH, SOME BASIS MAY HAVE EXISTED FOR ENFORCING OUR DEMAND; AND WE REGARD THIS VITAL OMISSION AS BEING THE PROXIMATE CAUSE OF THE PROBLEM, AND DETERMINATIVE OF THE RIGHTS OF THE PARTIES." ACCORDINGLY, IN THE VIEW OF THE SPECIAL ASSISTANT TREASURER, CHECK CLAIMS DIVISION, THE FACTS DID NOT JUSTIFY REFERRING THE CASE TO THE ATTORNEY GENERAL FOR LITIGATION AGAINST THE BANK, AND THE FILE WAS RESUBMITTED TO OUR CLAIMS DIVISION FOR FURTHER CONSIDERATION OF MARIE LEAVENWORTH'S CLAIM.

BY SETTLEMENT DATED APRIL 22, 1970, THE CLAIMS DIVISION AGREED WITH THE SPECIAL ASSISTANT TREASURER THAT THERE WAS NO BASIS FOR RECLAMATION AGAINST THE BANK "SINCE THE CHECK WAS NEGOTIATED BY THE PERSONS WHOSE INITIALS ARE THE SAME AS SHOWN ON THE FACE OF THE CHECK *** ." FURTHERMORE, THE CLAIMS DIVISION ADVISED THE DISTRICT DIRECTOR OF INTERNAL REVENUE, LOS ANGELES, CALIFORNIA, THAT BECAUSE "THE PROXIMATE CAUSE OF THE ERRONEOUS NEGOTIATION OF THE ITEM WAS THE FAILURE OF THE ISSUING OFFICE TO DRAW THE CHECK IN THE FULL NAMES OF THE INTENDED PAYEES, FRANK L. AND MARIE LEAVENWORTH, AND THERE IS NO INDICATION THAT MARIE LEAVENWORTH, CO- PAYEE, WAS AT FAULT IN THE MATTER, YOU ARE AUTHORIZED TO MAKE SETTLEMENT WITH MARIE LEAVENWORTH FOR $241.70, ONE HALF OF THE AMOUNT OF THE CHECK." AS PREVIOUSLY NOTED, THE CHIEF COUNSEL HAS REQUESTED OUR REVIEW OF THIS DETERMINATION.

THE FIRST QUESTIONS TO BE CONSIDERED ARE WHETHER THE CHECK WAS PROPERLY DRAWN AND WHETHER THE INDORSEE BANK IS RELIEVED OF LIABILITY TO THE UNITED STATES. IT IS CLEAR THAT THESE QUESTIONS ARE GOVERNED BY FEDERAL LAW RATHER THAN STATE LAW. IN CLEAR FIELD TRUST COMPANY V UNITED STATES, 318 U.S. 363 (1943), THE SUPREME COURT HELD THAT THE RIGHTS AND DUTIES OF THE GOVERNMENT ON THE COMMERCIAL PAPER IT ISSUES ARE GOVERNED BY FEDERAL RATHER THAN LOCAL LAW AND THAT, IN THE ABSENCE OF AN ACT OF CONGRESS, THE FEDERAL COURTS MUST FASHION THE GOVERNING RULES. THE REASONING OF THE COURT WAS AS FOLLOWS (ID. AT 367):

THE ISSUANCE OF COMMERCIAL PAPER BY THE UNITED STATES IS ON A VAST SCALE AND TRANSACTIONS IN THAT PAPER FROM ISSUANCE TO PAYMENT WILL COMMONLY OCCUR IN SEVERAL STATES. THE APPLICATION OF STATE LAW, EVEN WITHOUT THE CONFLICT OF LAWS RULES OF THE FORUM, WOULD SUBJECT THE RIGHTS AND DUTIES OF THE UNITED STATES TO EXCEPTIONAL UNCERTAINTY. IT WOULD LEAD TO GREAT DIVERSITY IN RESULTS BY MAKING IDENTICAL TRANSACTIONS SUBJECT TO THE VAGARIES OF THE LAWS OF THE SEVERAL STATES. THE DESIRABILITY OF A UNIFORM RULE IS PLAIN. ***

THE NEED FOR UNIFORMITY IS EQUALLY APPLICABLE TO THE ADMINISTRATION OF THE INTERNAL REVENUE LAWS AND SPECIFICALLY TO THE ISSUANCE OF INCOME TAX REFUND CHECKS. THE DUTY AND LIABILITY OF THE UNITED STATES SHOULD BE THE SAME REGARDLESS OF THE LOCATION OF THE TAXPAYER.

THE CLEAR FIELD TRUST COMPANY DECISION ALSO HELD THAT PRESENTATION OF A GOVERNMENT CHECK TO THE UNITED STATES FOR PAYMENT WITH AN EXPRESS GUARANTEE OF PRIOR ENDORSEMENTS AMOUNTED TO A WARRANTY OF THE GENUINENESS OF THE SIGNATURE OF THE PAYEE, WHICH IS BREACHED WHEN THE SIGNATURE IS FORGED, THUS GIVING THE GOVERNMENT THE RIGHT TO RECOVER FROM THE GUARANTOR (ID. AT 368-369). SEE NATIONAL METROPOLITAN BANK V UNITED STATES, 323 U.S. 454 (1944); UNITED STATES V PEOPLE'S NATIONAL BANK OF CHICAGO, 249 F. 2D 637 (7TH CIR. 1957). MOREOVER, IN FULTON NATIONAL BANK V UNITED STATES, 197 F. 2D 763, 764 (5TH CIR. 1952), IT WAS HELD THAT A PERSON WITH THE SAME NAME AS THE PAYEE, WHO ACCIDENTALLY OR WRONGFULLY COMES INTO POSSESSION OF A CHECK, OBTAINS NO TITLE TO IT, AND THE CASHING BANK WAS LIABLE TO THE UNITED STATES FOR PAYMENT ON THE FORGERY.

UNDER THE PRINCIPLES OF THE FOREGOING CASES, A PRIMA FACIE CASE IS MADE FOR RECLAMATION BY THE TREASURER AGAINST FARMERS AND MERCHANTS BANK BECAUSE THE BANK RECEIVED PAYMENT ON THE LEAVENWORTH CHECK FROM THE GOVERNMENT ON A FORGED ENDORSEMENT. HOWEVER, THE BANK HAS AVAILABLE THE DEFENSE THAT THE GOVERNMENT AS DRAWER IS REQUIRED TO BEAR THE LOSS IF ITS NEGLIGENCE FACILITATES THE FORGERY. 10 C.J.S. BILLS AND NOTES, SEC 494, P. 1090. BOTH THE SPECIAL ASSISTANT TREASURER AND OUR CLAIMS DIVISION AGREED WITH THE BANK THAT THE ISSUANCE OF THE CHECK WITH THE INITIALS RATHER THAN THE FULL NAMES OF THE PAYEES FACILITATED THE ERRONEOUS NEGOTIATION AND RENDERED THE BANK FREE OF LIABILITY FOR ACCEPTING THE FORGED ENDORSEMENT.

INCOME TAX REFUND CHECKS HAVE BEEN FOR MANY YEARS DRAWN TO PAYEES IDENTIFIED ONLY BY THEIR INITIALS AND LAST NAMES. ALTHOUGH THE USE OF INITIALS MAY HAVE FACILITATED THE FORGERY HERE AND USE OF THE FULL NAMES OF PAYEES WOULD PROBABLY LESSEN THE CHANCE OF ERRONEOUS NEGOTIATIONS, NEVERTHELESS, IN THE ABSENCE OF A COURT DECISION TO THE CONTRARY, WE ARE UNABLE TO CONCLUDE THAT THE USE OF INITIALS RATHER THAN FULL NAMES CONSTITUTED NEGLIGENCE OR THAT SUCH USE OF INITIALS WAS THE PROXIMATE CAUSE OF THE ERRONEOUS NEGOTIATION IN THE CASE BEFORE US. THE ENDORSEMENT OF THE WIFE'S NAME WAS MADE WITHOUT HER AUTHORITY AND WAS A FORGERY FOR WHICH THE CASHING BANK ORDINARILY WOULD BE REQUIRED TO MAKE REFUND TO THE GOVERNMENT, JUST AS IN THE "SAME NAME" CASES. HOWEVER, IN THE VIEW THAT WE TAKE THIS CLAIM, AS SET FORTH BELOW, WE AGREE THAT IT IS NOT NECESSARY TO PURSUE RECLAMATION PROCEEDINGS AGAINST THE BANK.

THE CHIEF COUNSEL'S LETTER FURTHER STATES THAT, WITH REGARD TO JOINT RETURNS PERMITTED UNDER SECTION 6013 OF THE INTERNAL REVENUE CODE OF 1954, "IT HAS LONG BEEN THE POSITION OF THE INTERNAL REVENUE SERVICE THAT THE HUSBAND AND WIFE JOINTLY AND SEVERALLY REPRESENT THE PERSON WHO MADE ANY OVERPAYMENT IN TAX, AND, THEREFORE, THAT A REFUND OR CREDIT TO EITHER PERSON WILL EXTINGUISH THE LIABILITY OF THE UNITED STATES FOR THE OVERPAYMENT." HE CONCLUDES THAT THE WIFE'S CLAIM AGAINST THE GOVERNMENT HAS BEEN SATISFIED BY PAYMENT TO THE HUSBAND, ONE OF THE JOINT AND SEVERAL TAXPAYERS.

A JOINT INCOME TAX RETURN REPRESENTS A SINGLE TAX UNIT AND IS TREATED AS THE RETURN OF A SINGLE INDIVIDUAL. HELVERING V JANNEY, 311 U.S. 189 (1940); TAFT V HELVERING, 311 U.S. 195 (1940). IN THE EVENT OF OVERPAYMENT, THE INTERNAL REVENUE SERVICE HAS RULED THAT BOTH THE HUSBAND AND WIFE REPRESENT THE PERSON WHO MADE THE OVERPAYMENT WITHIN THE MEANING OF SECTION 6042 OF THE CODE AND, THEREFORE, THAT THE AMOUNT OF SUCH OVERPAYMENT MAY BE CREDITED AGAINST THE SEPARATE TAX LIABILITY OF EITHER SPOUSE FOR A PRIOR YEAR. REVENUE RULING 56-92, MARCH 12, 1956. COMPARE, HOWEVER, MARAGON V UNITED STATES, 139 CT. CL. 544, 153 F. SUPP. 365 (CT. CL. 1957). SIMILARLY, IN MATTER OF ILLINGSWORTH, 56 2 U.S.T.C. PAR. 10,004, 51 AM. FED. TAX R. 1512 (D. ORE. 1956), THE COURT REJECTED THE WIFE'S CLAIM THAT SHE HAD BECOME ENTITLED TO ONE HALF OF THE TAX REFUND CHECK UPON FILING THE JOINT RETURN. THE COURT NOTED THAT THE GOVERNMENT IN MAKING A TAX REFUND MAKES NO ATTEMPT TO DETERMINE WHAT PART OF THE REFUND SHOULD BELONG TO THE HUSBAND AND WHAT PART TO THE WIFE, BUT LEAVES IT TO THE RECIPIENTS TO DECIDE HOW THE REFUND SHALL BE DIVIDED OR USED. THE COURT, THEREFORE, LOOKED TO THE EARNINGS OF THE PARTIES AND, SINCE THE HUSBAND HAD ALL OF THE INCOME AND WITHHOLDING AND THE WIFE HAD NONE, THE HUSBAND'S TRUSTEE IN BANKRUPTCY WAS HELD ENTITLED TO THE ENTIRE REFUND.

IN ACCORD IS THE DECISION OF THE NEW JERSEY PROBATE COURT, CAMDEN COUNTY, IN IN RE CARSON, 199 A. 2D 407 (1964). THE WIDOW CLAIMED PART OWNERSHIP OF THE TAX REFUND UNDER SECTION 6013 OF THE INTERNAL REVENUE CODE, BUT THE COURT POINTED OUT THAT THE PURPOSE OF SECTION 6013 WAS TO EQUALIZE THE TAX BURDEN FOR MARRIED PERSONS IN ALL STATES, WHETHER COMMUNITY PROPERTY OR NOT, AND THAT IT WAS NOT INTENDED TO DEAL WITH OWNERSHIP RIGHTS BETWEEN TAXPAYERS, BUT CONCERNED ITSELF WITH THE EFFICIENT AND ORDERLY COLLECTION OF FEDERAL TAXES. SINCE ALL OF THE INCOME AND WITHHOLDING WERE THE HUSBAND'S THE REFUND BELONGED TO HIS ESTATE AND NOT TO HIS WIDOW. THE OPINION CONCLUDED (ID. AT 410):

IN CONCLUSION, IT IS THE FINDING OF THIS COURT THAT THE OWNERSHIP RIGHTS TO THE OVERPAYMENT OF FEDERAL INCOME TAXES WERE NOT CHANGED BY THE MERE FILING OF A JOINT RETURN BY THE EXECUTOR AND THE WIDOW OF THE DECEASED. THE LOCAL LAW OF PERSONAL PROPERTY CLEARLY APPLIED AND NO EVIDENCE HAS BEEN PRESENTED BEFORE THIS COURT WHICH WOULD CONTRADICT THE ASSERTIONS AND PROOF THAT SOLE OWNERSHIP OF THE OVERPAID FUNDS RESTED IN THE DECEASED *** AND SUBSEQUENTLY IN HIS ESTATE ON HIS DEMISE.

THE FOREGOING CASES DEMONSTRATE THAT ONE SPOUSE DOES NOT BECOME ENTITLED TO ANY SPECIFIC PART OF THE TAX REFUND MERELY BY VIRTUE OF THE FILING OF A JOINT RETURN. THE RESPECTIVE OWNERSHIP RIGHTS OF THE SPOUSES IN A JOINT TAX REFUND ARE LEFT TO THE PARTIES THEMSELVES AND, IN THE EVENT OF A DISPUTE, ARE TO BE DETERMINED BY LOCAL LAW IN AN APPROPRIATE PROCEEDING. AS THE CHIEF COUNSEL'S LETTER INDICATES, THE GOVERNMENT IS RARELY, IF EVER, IN A POSITION TO JUDGE THE RESPECTIVE RIGHTS OF JOINT TAXPAYERS; THAT IS A MATTER OF STATE LAW AND DEPENDENT UPON FACTS NOT KNOWN TO THE INTERNAL REVENUE SERVICE. IN THE PRESENT CASE, FOR INSTANCE, WE HAVE NO INFORMATION AS TO WHETHER THE HUSBAND OR THE WIFE OR BOTH EARNED THE INCOME SHOWN ON THE JOINT RETURN, OR AS TO THE EFFECT ON THEIR RIGHTS OF A SEPARATION AGREEMENT OR A DIVORCE DECREE, IF ANY.

A HUSBAND AND WIFE FILING A JOINT RETURN ARE JOINTLY AND SEVERALLY LIABLE FOR ANY TAX DUE, AND THEY ARE JOINT OBLIGEES OF ANY REFUND DUE. ALTHOUGH WE HAVE NOT FOUND ANY FEDERAL CASES DIRECTLY IN POINT, THE GENERAL RULE IS WELL SETTLED THAT PAYMENT TO ONE JOINT OBLIGEE EXTINGUISHES THE DEBTOR'S ENTIRE LIABILITY (COBER V CONNOLLY, 128 P. 2D 519, 142 A.L.R. 367 (CAL. 1942); 2 WILLISTON ON CONTRACTS, 3RD ED., SEC 343; RESTATEMENT OF CONTRACTS, SEC 130) AND THAT PAYMENT TO ONE OF SEVERAL JOINT PAYEES ON A NEGOTIABLE INSTRUMENT DISCHARGES THE ENTIRE CLAIM (10 C.J.S. BILLS AND NOTES, SECS 194, 455; 142 A.L.R. 371). THESE RULES WERE APPLIED IN DEWEY V METROPOLITAN LIFE INS. CO., 152 N.E. 82 (MASS. 1926), TO DISCHARGE LIABILITY ON A CHECK PAYABLE TO JOINT PAYEES EVEN THOUGH THE ENDORSEMENT OF ONE OF THE PAYEES WAS NOT GENUINE AND THE OTHER PAYEE RECEIVED PAYMENT, AND DESPITE THE PROVISION OF MASSACHUSETTS LAW (NEGOTIABLE INSTRUMENTS LAW, SEC 41) THAT ALL PAYEES MUST ENDORSE. CF. BELLO V UNION TRUST COMPANY, 267 F. 2D 190 (5TH CIR. 1959); AND MCELROY V LYNCH, 232 S.W. 2D 507 (MO. 1950). WE SHALL ASSUME FOR PURPOSES OF THIS DECISION THAT A FEDERAL COURT WOULD FOLLOW THE ABOVE-MENTIONED GENERAL RULES IF PRESENTED WITH A SPOUSE'S SUIT AGAINST THE GOVERNMENT FOR A SHARE OF A JOINT INCOME TAX REFUND. ACCORDINGLY, WE FIND THAT THE NEGOTIATION OF THE REFUND CHECK BY FRANK LEAVENWORTH AND HIS RECEIPT OF THE PROCEEDS OF THE CHECK CONSTITUTED PAYMENT BY THE GOVERNMENT TO THE SINGLE TAX UNIT WHICH DISCHARGED THE UNITED STATES FROM LIABILITY FOR THE OVERPAYMENT OF TAXES TO BOTH MR. AND MRS. LEAVENWORTH. ANY RECOURSE THAT MRS. LEAVENWORTH MAY HAVE IS AGAINST HER HUSBAND AND NOT AGAINST THE UNITED STATES.

ALTHOUGH STATE LAW IS NOT CONTROLLING HERE, WE NOTE THAT UNDER CALIFORNIA LAW ALL PROPERTY ACQUIRED AFTER MARRIAGE BY EITHER HUSBAND OR WIFE OR BOTH IS COMMUNITY PROPERTY OVER WHICH THE HUSBAND HAS MANAGEMENT AND CONTROL, WITH LIKE ABSOLUTE POWER OF DISPOSITION, OTHER THAN TESTAMENTARY, AS HE HAS OF HIS SEPARATE ESTATE (DEERING'S CIVIL CODE ANNOTATED, SECS 164, 172); THAT WHEN A DIVORCE IS PENDING HIS POWER OVER COMMUNITY PROPERTY EXISTS UNTIL ENTRY OF A FINAL DECREE (VAI V BANK OF AMERICA, 364 P. 2D 247, 252 (1961)); THAT HE HAS THE RIGHT, WITHOUT HIS WIFE'S CONSENT, TO RELEASE A NOTE PAYABLE TO BOTH JOINTLY - IF COMMUNITY PROPERTY - (LOVETRO V STEERS, 234 C.A. 2D 461, 44 CAL. REPTR. 604 (1965)); AND THAT THE WIFE MAY APPLY TO A COURT OF EQUITY TO SAFEGUARD THE COMMUNITY PROPERTY AGAINST HER HUSBAND'S ABUSE OR FRAUD (WEINBERG V WEINBERG, 432 P. 2D 709 (CAL. 1967); 41 C.J.S. HUSBAND AND WIFE, SEC 506, P. 1076). WE ALSO NOTE THAT MRS. LEAVENWORTH WAS ADVISED BY A SPECIAL ASSISTANT TREASURER, TREASURY DEPARTMENT, ON OCTOBER 18, 1967, TO HAVE HER CLAIM TO THE PROCEEDS OF THE REFUND CHECK JUDICIALLY DETERMINED IN THE PENDING DIVORCE PROCEEDING, BUT THE RECORD DOES NOT INDICATE WHETHER THIS ADVICE WAS FOLLOWED.

IN LIGHT OF THE FOREGOING, WE AGREE THAT THE CLAIM OF MARIE LEAVENWORTH AGAINST THE UNITED STATES FOR ONE-HALF OF THE TAX REFUND RESULTING FROM THE JOINT RETURN HAS BEEN SATISFIED BY PAYMENT TO HER HUSBAND, AND HER CLAIM IS DENIED. YOU MAY, THEREFORE, INSTRUCT THE DISTRICT DIRECTOR OF INTERNAL REVENUE FOR LOS ANGELES TO DISREGARD THE AUTHORIZATION IN OUR CLAIMS DIVISION'S SETTLEMENT OF APRIL 22, 1970, AND TO ADVISE MRS. LEAVENWORTH THAT HER CLAIM HAS BEEN DENIED.