Yoke v. Mazzello

• Decision Date: 03 February 1953
• Docket Number: No. 6497.,6497.
• Citation: 202 F.2d 508
• Parties: YOKE, Collector of Internal Revenue, v. MAZZELLO et al.
• Court: U.S. Court of Appeals — Fourth Circuit

202 F.2d 508 (1953)

YOKE, Collector of Internal Revenue, v. MAZZELLO et al.

No. 6497.

United States Court of Appeals Fourth Circuit.

Argued November 14, 1952.

Decided February 3, 1953.

George F. Lynch, Sp. Asst. to the Atty. Gen. (Charles S. Lyon, Acting Asst. Atty. Gen., Ellis N. Slack, Robert N. Anderson and Maryhelen Wigle, Sp. Assts. to the Atty. Gen., and A. Garnett Thompson, U. S. Atty., Charleston, W. Va., on the brief), for appellant.

Joseph Luchini, Beckley, W. Va. (Carl Sanders, Beckley, W. Va., on the brief), for appellees.

Before SOPER and DOBIE, Circuit Judges, and BARKSDALE, District Judge.

SOPER, Circuit Judge.

This appeal is taken from an order of the District Court overruling the Collector's motion to dismiss taxpayers' complaint which sought an injunction against the collection of a jeopardy assessment for income taxes for taxable years 1943 to 1950 inclusive, totaling $8,748.65 plus fraud penalties in the amount of $5,973.36. The complaint alleged the following pertinent facts:

Luigi Mazzello is 73 years of age and Chiara, his wife, is 62. Late in 1941 Chiara was deeded a piece of land in Beckley, West Virginia, fronting on a main highway, and in 1942 she completed construction of a two-story building on the lot, consisting of dwelling quarters and a large storeroom. Late in 1942 taxpayers moved into the dwelling quarters and shortly thereafter Chiara leased the store to one John Dicicuccio, who began to operate a restaurant and beer parlor on the premises in January, 1943, under the name "The Blue Star" after obtaining the requisite licenses in his name from federal, state, and county authorities. Dicicuccio operated the establishment until about June 30, 1946, and during this time the taxpayers had no interest in the enterprise except that their daughter worked for Dicicuccio for a time as an employee. See Mazzella v. Yoke, D. C., S.D.W.Va., 70 F.Supp. 462, in which the District Court enjoined the collection from the taxpayers of cabaret taxes which accrued during Dicicuccio's tenancy.

From July 1, 1946, when Dicicuccio gave up the premises, until July, 1950, Luigi Mazzello operated "The Blue Star" and paid taxes on all income earned during that period. From July, 1950 to July, 1951, the business was run by taxpayers' son-in-law, and at the date of the complaint was run by Chiara Mazzello, her husband being physically unable to do so.

On January 29, 1952, the taxpayers received notice from the Collector advising them of jeopardy assessments for alleged deficiencies for the years 1943 to 1950, and making demand for immediate payment, and stating that if payment was not made within ten days a warrant of distraint would be issued. A similar notice was received on February 19, 1952. Thereafter, on March 10, 1952, a warrant of distraint for each of the years in question was issued and placed in the hands of the Deputy Collector to be levied upon the property of the taxpayers.

On March 11, 1952, the taxpayers filed a bond to stay the collection of the alleged deficiency in a sum double the amount of the assessment with personal sureties owning unencumbered real estate of a value in excess of $36,000; but the Collector "arbitrarily and capriciously" refused to accept the bond, stating that the surety on the bond was not satisfactory, and that under the policy of his office for many years the only acceptable bond was the delivery of personal property having a fair market value of at least the amount required in the bond, or a surety bond from a recognized bonding company in an amount equal to not less than double the assessment. In explanation the Collector said that personal bonds had been found to be insecure in so many cases that they were no longer accepted.

The taxpayers further alleged that they had no assets with which to pay the taxes except the property described above and other real estate, worth in all $18,000, and that if the distraint should be executed they would be ruined financially since they would lose their home, their business and their life savings, and would not be restored to their present condition by a successful suit for refund of the tax.

They further claimed that the assessments of tax on income earned from January 1, 1943 to July 1, 1946 should have been made against John Dicicuccio, who was the owner of "The Blue Star", and the recipient of the income during that period; and said that the Collector had improperly charged them with fraud in order that his claim for taxes should not be partially barred by the five year statute of limitations.

The two questions which are brought to our attention on this appeal are whether the circumstances of the case are so exceptional and extraordinary as to warrant the issuance of the injunction despite the prohibition contained in § 3653 of the Internal Revenue Code, 26 U.S.C.A., and whether the Collector was justified in refusing to accept the bond with personal sureties offered by the taxpayer. Section 3653(a) provides that no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court, except where a petition has been filed for the redetermination of a deficiency of income tax under Section 272(a); or a deficiency in estate tax under Section 871(a); or a deficiency in a gift tax under Section 1012(a) of the Internal Revenue Code. The terms of the statute taken literally would control the decision, but it has been construed by the courts to admit of exceptions other than those specified, and injunctions to stay the collection of taxes have been granted under special and extraordinary circumstances which were deemed sufficient to...