author: FAIRCHILD, Circuit Judge.

text:
    Barry L. CONRAD, Plaintiff-Appellant, v. DELTA AIR LINES, INC. and Air Line Pilots Association, International, Defendants-Appellees.
    No. 72-1643.
    United States Court of Appeals, Seventh Circuit.
    Argued May 30, 1973.
    Decided April 12, 1974.

      David P. List, Henry L. Mason, III, Chicago, 111., for plaintiff-appellant.
    Irving M. Friedman, James P. Dorr, Chicago, 111., Robert S. Harkey, Atlanta, Ga., Robert S. Savelson, New York City, for defendants-appellees.
    Before FAIRCHILD and SPRECHER, Circuit Judges, and REYNOLDS, District Judge.

       District Judge John W. Reynolds of the Eastern District of Wisconsin is sitting by designation.

   FAIRCHILD, Circuit Judge.

Plaintiff Conrad, a former Delta, Air Lines pilot, has appealed from a summary judgment in favor of defendants Delta and the pilots’ bargaining representative, the Air Line Pilots Association (ALPA). Delta had requested Conrad’s resignation. He claims this was an unlawful discharge and that ALPA breached its duty of fair representation. The complaint sought declaratory relief, back pay, and reinstatement.

Plaintiff’s original complaint, filed February 23, 1971, stated that Delta hired plaintiff as a pilot on August 15, 1969; he thereby became a member of the bargaining unit represented by ALPA, and an apprentice member of ALPA. There was a collective bargaining agreement between Delta and ALPA. Sections 32 and 33 prohibit dismissal without a specified procedure of investigation and hearing, but section 32(c)(2) provided that “Nothing in this Agreement shall extend the right of investigation and hearing to a pilot during his first twelve (12) months of service.” Section 28 provided that “Each pilot except a captain shall be on probation for a period not to exceed the first twelve (12) months of his aggregate service as a line pilot of the Company.”

On July 17, 1970, while plaintiff was still on probation, Delta requested his resignation under threat of discharge and plaintiff resigned. We shall treat the termination as a discharge, as plaintiff claims. On September 29, 1970, plaintiff requested that ALPA represent him in a grievance proceeding under the collective bargaining agreement, and ALPA refused. On November 12, 1970, plaintiff asked Delta for a hearing under the agreement, but Delta refused. Both Delta and ALPA relied on section 32(c)(2) to justify denying plaintiff an investigation and hearing before' discharge. Plaintiff also averred that he has no recourse before a board of adjustment because such board was established by an agreement dated February 5, 1970 and the agreement limited the board to disputes submitted by Delta or ALPA. In fact the paragraph defining jurisdiction of the board clearly is broad enough to include plaintiff’s dispute. Plaintiff, in arguing that he would be barred from bringing his claim individually, relies on another allegedly limiting paragraph which says the board “shall consider” a dispute submitted by officers of ALPA or Delta. Thus there is an area of ambiguity.

The complaint asserted that sections 32 and 33 of the collective bargaining agreement and the limiting paragraph in the February 5, 1970 agreement “are contrary to 45 U.S.C. §§ 182, 184, and 152.”

In the course of discovery, plaintiff obtained copies of documents in Delta’s file concerning plaintiff. Thereafter plaintiff obtained leave to amend and on January 3, 1972 added a paragraph to his complaint stating that the discharge was in violation of 45 U.S.C. § 152 because Delta was motivated in discharging him by his activity as a member of ALPA.

Thus plaintiff ultimately made two assaults on the validity of his discharge. In his original complaint, he claimed that the discharge was unlawful because he had not been accorded the right to investigation and hearing. In the amendment to his complaint he claimed that the discharge was unlawful under 45 U. S.C. § 152, Fourth, because it achieved a denial of or interference with his right to join a union of his choice. He also claimed that ALPA’s failure to assist him, at least with his initial claim, was a breach of its duty of fair representation.

It will be convenient to consider the two grounds of assault separately.

1. Discharge of a probationary pilot without prior investigation and hearing.

Plaintiff’s theory on this point is elusive. The collective bargaining agreement clearly provides that the right, spelled out in the agreement, not to be dismissed without investigation and hearing, is not enjoyed by probationary pilots. Plaintiff suggests no basis for an interpretation of the agreement which would entitle a probationary pilot to that right. He seems almost to concede that the difference in treatment, in this regard, between pilots with less than one year’s service and those with one year or more does not cause the agreement to be in violation of the Railway Labor Act.

In the absence of a statute or an agreement, an employer may discharge his employee for cause or without cause, and the Act does not limit the employer’s right to discharge to instances involving cause. Russ v. Southern Ry. Co., 334 F.2d 224, 228 (6th Cir., 1964), cert, denied, 379 U.S. 991, 85 S.Ct. 699, 13 L.Ed.2d 611. In our case the employer has agreed to limit its freedom to discharge a pilot who has served one year or more, but plaintiff is not in that class.

The conditioning of an employee’s right not to be discharged without a hearing on his having a certain period of service is not arbitrary nor irrational. The rationality of an employer’s having greater freedom to discharge during a probationary or testing period seems obvious. It is not the type of hostile discrimination against a group of employees which would lie beyond the proper scope of a collective bargaining agreement. Steele v. Louisville & Nashville R. R. Co., 323 U.S. 192, 200, 65 S.Ct. 226, 89 L.Ed. 173 (1944) ; Ford Motor Co. v. Huffman, 345 U.S. 330, 73 S.Ct. 681, 97 L.Ed. 1048 (1953).

Plaintiff’s original complaint, and the grievance on which he asked ALPA to represent him, embraced only the claim that Delta could not discharge him without the investigation and hearing described in the collective bargaining agreement. Now that, after discovery of Delta’s files, he is asserting that he was discharged for activity as a union member, he. attempts to argue that the fact of such motivation makes section 32(c)(2) of the collective bargaining agreement unlawful. We are unable to follow the argument. If in fact Delta acted with that motivation, the discharge was unlawful with or without an opportunity for a hearing, and the fact that one probationary pilot was unlawfully discharged would have no bearing on the validity of the portion of the agreement which excludes probationary pilots from the guaranty of a hearing.

To the extent the effect of the collective bargaining agreement is properly before us, we conclude as a matter of law that there is no merit to plaintiff’s claim that his discharge was improper because he was denied investigation and hearing.

Although the complaint alleged that ALPA refused to represent plaintiff, it acknowledged ALPA's reliance on section 32(c)(2) of the collective bargaining agreement and neither averred nor even suggested that ALPA acted in bad faith in such reliance. See Williams v. General Foods Corp., 492 F.2d 399 (7th Cir., 1974). At the time of plaintiff’s request for representation, plaintiff did not know and there is nothing to suggest that ALPA knew of any of the facts on which the claim of an anti-union discriminatory discharge is now based.

To the extent plaintiff relied on the collective bargaining agreement in claiming that his discharge was unlawful, he must litigate the dispute before the appropriate adjustment board, Andrews v. Louisville & Nashville R. Co., 406 U.S. 320, 325, 92 S.Ct. 1562, 32 L.Ed.2d 95 (1972), at least unless he has demonstrated circumstances under which submission to the board would be wholly futile. Glover v. St. Louis-S. F. R. Co., 393 U.S. 324, 330, 89 S.Ct. 548, 21 L.Ed.2d 519 (1969). We agree with the district court that plaintiff was not entitled to rely on his own construction of the terms of the agreement creating the board, which he says would bar his submission of a dispute as an individual, without proof that the board applies the same construction. To the extent that he was required to take his claim against Delta before the board, its merits are not before us, but we are called upon to consider its merits to the extent that they bear upon the question of the good faith of ALPA in refusing to represent him. At least as to the grievance as plaintiff originally conceived of it, his claim against ALPA has no merit.

2. Claim that plaintiff was discharged on account of his union activity.

During discovery a number of reports and memoranda concerning plaintiff, including some which led up to his discharge, were made known to plaintiff. They included a number of favorable comments by captains on his performance on flights; accompanied by a satisfactory rating; a few adverse comments, accompanied by an unsatisfactory rating; adverse comment on his “freely” representing himself as a “Leftist Activist;” and mention of his complaints of ill health. A report to a vice president of Delta, dated July 17, 1970, by a flight operations manager, referred to review of written and verbal reports, and summarized as follows:

“More than a few crew members claimed that he professed to being a leftist-activist. His political views regarding his country, and flag were diverse to those generally accepted by loyal citizens, and this dialog generally took place en route when attention to flight duties is required. He left his duty station while a S/O as many as three times in a 2% hour flight for other than operational reasons. As a DC-9 F/O, his performance was reported as unsatisfactory by one Captain in a written report, and several others came to me with verbal reports (reluctant to write the report) of ability and technique not consist [e]nt with Delta standards. I talked with Conrad early last winter regarding his attitude and conduct while on duty, and suggested that he up-grade to DC-9 F/O (this so that I might further evaluate him during the probationary period.) Conrad has flown as DC-9 reserve F/O since April with a succession of different Captains and for varying lengths of time. I have contacted all of these people and my considered opinion is that this man is not the type professionally or emotionally that would make a good Delta employee. His over-activity with the local council as an apprentice member of ALPA, coupled with inquir[i]es regarding company files to our secretary lead to the conclusion that potential trouble will be avoided by acceptance of his resignation.”

The last sentence allegedly evidences the anti-union motivation of the discharge.

On defendants’ motion for summary judgment, plaintiff presented no affidavits and relied on the manager’s memo. Delta supported the motion with an affidavit by the manager stating that the reference to over-activity “was included merely as an example of Mr. Conrad's tendency to be unusually outspoken and was not included because of any objection to his membership or participation in ALPA;” and that the purpose in seeking plaintiff’s resignation was not to discourage the right to join a labor organization. Delta also submitted the affidavit of the president of Delta who stated that in reviewing plaintiff’s discharge, he neither understood nor intended it to be for the purpose of discouraging labor organizing. The district court held that “plaintiff’s evidence as to the issue of his discharge for union activity is so insubstantial that it would not justify submission of the case to a jury,” and accordingly granted summary judgment for Delta.

Summary judgment is appropriate only where “there is no genuine issue as to any material fact.” F.R.Civ. P., Rule 56(c). Cases in which the underlying issue is one of motivation, intent, or some other subjective fact are particularly inappropriate for summary judgment, as are those in which the issues turn on the credibility of the affiants. See Moore’s Federal Practice 1156.17 [41-1].

Delta’s affidavits fell short of demonstrating, in the face of the reference to union activity in the manager’s memo, that there is no genuine issue as to a material fact. A claim of discharge in violation of § 152 raises the question of the employer’s motivation. Anti-union motivation invalidates even a disfcharge which could be justified on independent grounds. See, e. g., N. L. R. B. v. Fairview Hospital, 443 F.2d 1217, 1219 (7th Cir., 1971). Motive or intent are not subject to direct proof, but must be inferred from other facts. Cf. Elgin, Joliet & Eastern R. Co. v. Burley, 325 U.S. 711, 65 S.Ct. 1282, 89 L.Ed. 1886 (1945). If improper motive could reasonably be inferred from facts before the court, sworn denials of such intentions do not remove the issue from the case so as to entitle the party to judgment. See Cross v. United States, 336 F.2d 431, 433 (2d Cir., 1964).

Delta would explain away the reference to union activity in the manager’s report as an unfortunate choice of an example “to illustrate plaintiff’s personality traits which he did not feel to be consistent with those of a good employee and a good pilot.” We consider the proper interpretation of the report in this regard and the weight to be given it to be a matter for the trier of the fact. As to the claim of anti-union motivation, summary judgment was erroneous.

The parties appear to agree that this claim which rests upon a charge that Delta violated the statute, 45 U.S.C. § 152, is not committed to the exclusive jurisdiction of the adjustment board, but is within the jurisdiction of the district court. See Brotherhood of Railway Trainmen v. Howard, 343 U.S. 768, 72 S.Ct. 1022, 96 L.Ed. 1283 (1952); Brotherhood of Railway Trainmen v. Smith, 251 F.2d 282 (6th Cir., 1958). We do not understand that Andrews v. Louisville & Nashville R. Co., supra, 406 U.S. p. 324, 92 S.Ct. 1565, holds otherwise. It is clear that the dispute in Andrews stemmed “from differing interpretations of the collective-bargaining agreement,” whereas the claim here involved is that the Act was violated.

With respect to plaintiff’s claim that ALPA violated its duty to give him fair representation, the complaint does not allege that he requested representation on his claim that the discharge was unlawful because motivated by his union activity. Of course ALPA became aware of that claim when plaintiff amended his complaint. There is no suggestion that the facts on which it was based were known to ALPA at any earlier time.

As has already been mentioned, there is no allegation in the complaint that ALPA acted in bad faith in refusing representation, and the amendment added no such allegation. In the absence of a claim by plaintiff that he requested representation at that stage, it would seem extraordinary to impose on ALPA, a defendant in plaintiff’s action, the duty of offering him representation on a new claim first discovered during the pendency of the action. Accordingly, while we are unable to agree with the district court that Delta was entitled to summary judgment, we conclude that the judgment in favor of ALPA should be affirmed, without prejudice, of course, to plaintiff’s right to make a new demand on ALPA and thus impose on ALPA the duty of making a decision in good faith whether to represent plaintiff with respect to his present claim against Delta.

Insofar as the judgment appealed from is in favor of ALPA, it is affirmed. Insofar as it is in favor of Delta, it is reversed and the cause is remanded for further proceedings consistent with this opinion. Plaintiff may recover his costs on appeal from Delta, and ALPA from plaintiff.

      . Two grounds of jurisdiction stated in the complaint were federal question, 28 U.S.C. § 1331, and commerce regulation, 28 U.S.C. § 1337.


source: Caselaw Access Project

author: LUMBARD, Circuit Judge: FRIENDLY, Circuit Judge

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK, Defendant and Third-Party Plaintiff-Appellant, v. Charles S. SMITH, Third-Party Defendant.
    Nos. 472, 473, Dockets 73-2300, 73-2301.
    United States Court of Appeals, Second Circuit.
    Argued Feb. 19, 1974.
    Decided March 27, 1974.
    Friendly, Circuit Judge, filed dissenting opinion.

      David P. Land, Asst. U. S. Atty. (Paul J. Curran, U.' S. Atty., S: D. N. Y., on the brief), for appellee.
    Harry Gurahian, New York City, for appellant.
    Sullivan & Cromwell, David M. Hug-gin, and H. Rodgin Cohen, New York City, on the brief, amicus curiae for New York Clearing House Assn.
    Before LUMBARD, FRIENDLY and TIMBERS, Circuit Judges.
   LUMBARD, Circuit Judge:

This appeal concerns the duty of a bank to comply with a levy upon the checking account of one of its customers imposed by the Interrial Revenue Service (IRS) under the authority given it by the Internal Revenue Code of 1954, as amended by the Federal Tax Lien Act of 1966, Pub.L. No. 89-719, 80 Stat. 1125. The Sterling National Bank and Trust Company of New York appeals from an order entered on June 5, 1973, in the Southern District of New York which granted the United States’ motion for summary judgment and imposed a penalty of $1,889.82 on the bank for not complying with a tax levy of the Internal Revenue Service. 360 F.Supp. 917 (S.D.N.Y.1973).

I.

On February 13, 1970, the IRS made an income tax assessment and demand for payment against Charles S. Smith and his wife, jointly and severally, in the amount of $8,211.38 for the year 1968. Thereafter, Smith borrowed $6,097.32 from the Sterling Bank on June 23, 1970, giving in turn a promissory note. Under the terms of the note, the bank had a “continuing lien and/or right of set-off” for the amount due on the note, whether matured or unma-tured, against any balance that Smith had in his accounts at the bank, which the bank could exercise at its option without giving Smith any notice. Subsequently on August 14, 1970, the IRS made a second assessment and demand for $6,475.20 in back taxes due from the Smiths for the year 1969. Pursuant to Int.Rev.Code of 1954, §§ 6321-6323, the IRS filed notices of its liens concerning the two assessments with the Register of New York County on November 5, 1970, and March 3, 1971, respectively.

On June 9, 1971, the IRS served the bank with a notice of levy which informed it that Smith was indebted to the United States in the amount of $15,531.25 in back taxes and statutory additions and which directed the bank to remit to IRS al.l of Smith’s property which it held. At that time Smith’s checking account had a balance of $5,132.36. Prior to the service of the levy, the bank had not restricted Smith’s right to draw upon his account, and Smith had not fallen behind in his installment payments on the loan.

The bank did not remit the funds as requested and on June 18, 1971, the IRS served on the bank a final demand to turn over the funds in Smith’s account. On July 2, the bank, exercising its alleged right of setoff under the terms of the June 23, 1970, loan, deducted from the funds in Smith’s checking account the $3,779.64 which was still outstanding on the loan and turned over to the IRS the balance of $1,352.72. On August 5, the IRS wrote the bank a letter which stated that the IRS had a right to the entire amount in the account and .demanded the remaining $3,779.64. When the bank did not comply with this demand, the United States instituted this action against the bank to recover the $3,779.64, a statutory penalty of 50% of that amount under Int.Rev.Code of 1954, § 6332(c)(1), and interest and costs. The claim for the $3,779.64 was rendered moot when Smith died and his estate subsequently paid his tax indebtedness with interest in full. The government, however, continued its suit to recover the statutory penalty of $1,889.64 on the ground that the bank did not have reasonable cause when it refused to comply with the tax levy. Judge Palmi-eri granted judgment for the government, and the bank appeals.

II.

Section 6332(a) of the Internal Revenue Code of 1954 provides (with an exception not relevant here) that “any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which levy has been made” shall upon demand by the Internal Revenue Service surrender such properties and rights to the Service unless such property or rights are subject to attachment or execution under any judicial process at the time of the demand. Section 6332(c)(2) provides that any person who fails to surrender property to the IRS without reasonable cause is subject to a penalty of 50% of the amount demanded.

Three defenses are asserted here on the bank’s behalf: (1) the bank held no property of Smith at the time of the levy other than the $1,352.72 it turned over; (2) the bank’s right of setoff gave it a lien priority over the government’s tax lien; (3) and, in any event, no penalty should be imposed because the bank was acting with reasonable cause. We have previously held that a person served with a tax levy has only two defenses for a failure to comply with the demand, which are either that the person is not in possession of the taxpayer’s property or the property is subject to a prior judicial attachment or execution. United States v. Manufacturers Trust Co., 198 F.2d 366, 369 (2d Cir. 1952). See also Bank of Nevada v. United States, 251 F.2d 820, 824 (9th Cir. 1957), cert, denied, 356 U.S. 938, 78 S.Ct. 780, 2 L.Ed.2d 813 (1958); United States v. Bank of America National Trust & Savings Association, 229 F. Supp. 906, 909 (S.D.Cal.1964), aff’d per curiam, 345 F.2d 624 (9th Cir.), cert, denied, 382 U.S. 927, 86 S.Ct. 316, 15 L.Ed.2d 340 (1965). Therefore, the defense of lien priority is not before us. Concerning the other two defenses, we hold that the bank did hold property of Smith’s which it was obligated to turn over to the IRS, but that since the legal question was novel it should not have been penalized for its failure to comply.

The question of whether the bank held property or a right to property of Smith is one of state law, in this case New York’s. Aquilino v. United States, 363 U.S. 509, 80 S.Ct. 1277, 4 L.Ed.2d 1365 (1960). It is maintained that the bank had no property of Smith other than the $1,352.72 turned over since the bank had a right to set off against the checking account any unpaid balance on the loan. Therefore, it is argued, at any one moment only the balance of the checking account funds over any unpaid obligations is property of the taxpayer held by the bank. In support. of this proposition § 151 of the New York Debtor and Creditor Law, McKinney’s Consol.Laws, c. 12, is cited. That provision provides in part that upon “the issuance of a warrant attachment against any of the property” of a creditor, the debtor may set off and apply the property against the creditor’s indebtedness to him. Cases are also cited that have allowed banks to offset other obligations from accounts. See, e. g., Kress v. Central Trust Co. of Rochester, 246 App. Div. 76, 283 N.Y.S. 467 (1935), aff’d mem., 272 N.Y. 629, 5 N.E.2d 365 (1936).

We are not convinced by this argument. The cases cited deal only with the right of setoff, and not with whether the full amount in the account is “property” of the bank’s customer. The literal language of § 151 quoted above would indicate that the full amount in the account is the customer’s property. Under any realistic definition of “property” the full amount in Smith’s account was his property or his right to property. Until the bank acted to restrict his right to draw on the funds, Smith was entitled to write checks up to the full amount in the account. Clearly then all the funds in Smith’s checking account were his property at the time that the IRS served the bank with notice of levy. In similar circumstances, the Ninth Circuit has reached the same conclusion. Bank of Nevada v. United States, supra-, United States v. Bank of America National Trust & Savings Association, supra.

To support the bank’s position, two cases from the Southern District are cited. In United States v. Hampton Garment Co., 71-1 U.S. Tax Cas. fí 9357 (S. D.N.Y.1971), Hampton Garment owed money to a contractor. Under the terms of a collective bargaining agreement, Hampton was obligated to pay the wages of the contractor’s employees if the contractor defaulted in payment. The contractor did so default, but prior to notice of the default the IRS served notice of a tax levy on Hampton because of the contractor’s unpaid taxes. Judge Mansfield held that, unless Hampton agreed to pay the contractor all that was due it regardless of whether Hampton was obliged to pay the contractor’s workers, Hampton need only turn over the difference between the two obligations to the IRS.

The ease before us is clearly distinguishable from Hampton Garment. The thrust of that case is that the government can stand in no better position than the taxpayer whose property or right to property is being levied upon. See also United States v. Winnett, 165 F.2d 149 (9th Cir. 1947) ; Karno-Smith Co. v. Maloney, 112 F.2d 690 (3d Cir. 1940). Here Smith had full freedom to use the funds in his checking account until the bank acted to restrict his use. At any time up to when the IRS served its notice of levy, Smith could have written a check payable to the IRS for the balance of his account. Here the IRS was asserting no right to the funds in the checking account that Smith did not already have.

The second case cited for the bank’s position is United States v. Bank of United States, 5 F.Supp. 942 (S.D.N.Y. 1934). There the bank’s customer gave a demand note in return for a loan. The customer had a checking account at the bank which he regularly used for deposits and withdrawals. The government served notice of levy upon the customer’s account and the bank refused to honor it. The district court held that the government was entitled to nothing because the amount outstanding on the loan was greater than the amount in the checking account. The court reasoned that since the bank could have demanded payment on the note at any time, the right of the customer to withdraw funds from his account was really a “revocable license” which the bank could withdraw even after notice of a tax levy was served. 5 F.Supp. at 945. We think this decision completely ignores the reality of the situation. Until the bank acts to restrict the right of its customer to withdraw funds from his account, the bank is holding the customer’s property or his. right to property. Therefore, we hold that Sterling Bank had a duty to honor the tax levy upon the Smith’s checking account. To the extent that Bank of United States is contrary, to this holding, it is overruled.

III.

We now turn to the question of whether the 50% penalty of § 6332(c)(2) should be imposed on the bank for its failure to comply with the tax levy. No penalty can be imposed if the bank acted with “reasonable cause” in resisting the levy. A Senate report accompanying the Tax Lien Act of 1966 stated that “it is intended that a bona fide dispute over the amount owing to the taxpayer (by the property holder) or over the legal effectiveness of the levy itself is to constitute reasonable cause under this provision.” S.Rep.No.1708, 89th Cong., 2d Sess. (1966), in 3 [1966] U.S.Code Cong. & Admin.News pp. 3722, 3740.

Since the facts were undisputed and there were eases within this circuit that supported the bank’s position, the issue here is whether a bona fide legal dispute over the amount that the bank owed the taxpayer is sufficient excuse for the bank’s failure to honor the levy. We have recently stated that a regional director of the National Labor Relations Board did not have the reasonable cause necessary to get a preliminary injunction under the National Labor Relations Act when it was clear that a court would not enforce an order of the Board finding that the conduct sought to be enjoined violated the Act. Danielson v. Joint Board of Coat, Suit & Allied Garment Workers’ Union, ILGWU, 494 F.2d 1230, (2d Cir. 1974). The clear holding of that case is that a non-frivolous, but erroneous, argument of law is not sufficient reasonable cause for obtaining a preliminary injunction under the National Labor Relations Act.

We see no reason to extend the interpretation given “reasonable cause” in the National Labor Relations Act to the same phrase in the Tax Lien Act! The same words can have different meanings in different statutes. The harm caused by a court granting a preliminary injunction against certain labor activity when it believes that activity does not violate the Labor Act is obvious. The question here is whether we should penalize the Sterling Bank for forcing the government to litigate an unsettled question of law. There is no reason to believe that Congress would wish to penalize the holder of the property levied upon for litigating a test case. Nor do we believe that failing to impose the 50% penalty in situations like this will detract from the congressional purpose of requiring compliance 'with tax liens. Only for purposes of this initial case did the Sterling Bank refuse to honor the tax levy with reasonable cause. It and other banks confronted with levies in similar circumstances after this decision cannot reasonably refuse to comply.

Accordingly, we affirm the district court’s order insofar as it held that Sterling Bank had a duty to comply with the IRS levy and we reverse the order insofar as it imposed the 50% penalty upon the bank. No costs.

FRIENDLY, Circuit Judge

(dissenting) :

I respectfully dissent.

In light of Judge Lumbard’s convincing demonstration that the Sterling National Bank was bound to honor the tax levy upon the entire amount of Smith’s checking account, I cannot agree that a national bank, fully warned (in the IRS’ August 5 letter) of the Service’s position, of the strong authorities therefor, and of its intention to enforce its position, can be said to have had “reasonable cause” to believe that the levy need be honored only for the excess of the account over the amount owed to the bank. In light of longstanding judicial recognition of the importance of the Government’s being able to collect the revenues swiftly and surely, see Murray’s Lessee v. Hoboken Land & Improvement Co., 59 U.S. (18 How.) 272, 15 L.Ed. 372 (1856), it seems to me even more essential in this area than in the context presented by Danielson v. Joint Board of Coat, Suit & Allied Garment Workers’ Union, ILGWU, 494 F.2d 1230, 1239-1245 (2 Cir. 1974), that “reasonable cause” should not be read to include a clearly erroneous view of the law, stubbornly adhered to after investigation should have disclosed the error. The majority’s ruling permits a bank to pay the Government whatever its lawyers say it should, with no risk beyond having to pay the balance if it turns out to be wrong. Surely the distinctions between this case and Hampton Garment, the antiquarian unreality of Judge Woolsey’s opinion in United States v. Bank of United States, 5 F.Supp. 942 (S.D.N.Y. 1934), and the force of the Ninth Circuit decisions, all so ably elucidated in the majority opinion, should not have escaped the notice of Sterling’s experienced counsel.

The majority says, quite properly, that no bank in the Second Circuit can ever again claim reasonable cause to act precisely as Sterling did, and the Government will scarcely founder through its failure to collect the $1,889.82 penalty here at issue. But lawyers will dream up other “reasons” why parties holding property belonging to a taxpayer should not pay this to the Government as § 6332(c) requires. I would not permit collection of the revenues to be delayed on first appearance of each such question in each jurisdiction where, as here, the question is not really close, the party had access to competent legal advice, temporary sacrifice of the funds and pursuit of other remedies against the Government would not represent any hardship, and the IRS proceeded deliberately and gave ample notice of its intention and the sound view of the law on which this was based.

I would affirm the judgment of the District Court.

      . As the district court noted, 360 F.Supp. at 922-923, there are other procedures to determine who has lien priority.

      . We do not think that United States v. Bank of Shelby, 68 F.2d 538 (5th Cir. 1934), is relevant here. It appears that the bank there might not have permitted the customer to withdraw funds from his ae-count. All the funds in the account had been derived from a loan on a note and by the time the notice of levy was served on the bank, the security for the note had been sold and the customer was insolvent.