United States v. OMAR, SA

• Decision Date: 14 November 1962
• Citation: 210 F. Supp. 773
• Parties: UNITED STATES of America, Plaintiff, v. OMAR, S.A., a Uruguayan Corporation, Lazard Freres & Co., Lehman Brothers, Belgian-American Banking Corp., Belgian-American Bank & Trust Co., First National City Bank of New York and First National City Trust Co., Defendants.
• Court: U.S. District Court — Southern District of New York

210 F. Supp. 773

UNITED STATES of America, Plaintiff, v. OMAR, S.A., a Uruguayan Corporation, Lazard Freres & Co., Lehman Brothers, Belgian-American Banking Corp., Belgian-American Bank & Trust Co., First National City Bank of New York and First National City Trust Co., Defendants.

United States District Court S. D. New York.

November 14, 1962.

Vincent L. Broderick, U. S. Atty. Southern District of New York, Morton L. Ginsberg, Asst. U. S. Atty., of counsel, for plaintiff.

Sullivan & Cromwell, New York City, for Belgian-American Banking Corp. and Belgian-American Bank & Trust Co.

Shearman & Sterling, New York City, Henry Harfield, New York City, of counsel, for First Nat. City Bank and First Nat. City Trust Co.

DAWSON, District Judge.

This is a motion for a preliminary injunction to restrain the defendants Lazard Freres & Co., Lehman Brothers, Belgian-American Banking Corp., Belgian-American Bank & Trust Co., First National City Bank of New York and First National City Trust Co. from selling, transferring, pledging, encumbering, disposing of or distributing any property or rights to property of defendant taxpayer Omar, S.A. A temporary restraining order was issued against the defendants on October 31, 1962, pursuant to Rule 65(b) of the Federal Rules of Civil Procedure.

It appears from the complaint and affidavits in support of the motion that a corporate income tax deficiency totaling $19,269,156.87 has been assessed against the defendant Omar, a Uruguayan corporation. It further appears that this assessment is secured by a federal tax lien upon all property and rights to property of the defendant taxpayer.

The plaintiff claims that the principal assets of the defendant corporation consist of sums, credits, stocks and bonds which are now held by the defendant banks and brokerage houses, or by their agents, branches, or nominees both within and without the United States. The plaintiff claims that disposition of the aforementioned assets might make its lawful rights therein unenforceable and that it would be irreparably injured by removal of any such assets outside the power of the court.

The affidavits of the plaintiff show an intent to liquidate, and in fact, substantial liquidations of the defendant Omar's accounts within the United States and transfer of the proceeds outside of the territorial jurisdiction have occurred. It therefore appears that there is a clear and present danger that plaintiff may be unable to recover upon defendant Omar's tax liability.

Section 7402(a) 26 U.S.C. § 7402 of the Internal Revenue Code, pursuant to which the Government's claim is brought, provides that the court shall issue such writs and orders as are appropriate to enforce the internal revenue laws. The court has the power, under Rule 65 of the Federal Rules of Civil Procedure, to grant a preliminary injunction and such power is discretionary. American Visuals Corp. v. Holland, 219 F.2d 223, 224 (2d Cir., 1955), and cases cited therein.

The court is given the equitable power to issue a preliminary injunction so as to prevent irreparable injury pending the determination of an action. Ohio Oil Co. v. Conway, 279 U.S. 813, 49 S. Ct. 256, 73 L.Ed. 972 (1928). In the instant case if the United States is successful in establishing defendant Omar's tax liability it will be needlessly injured if recovery is prevented by further removal of defendant's assets from the jurisdiction of the court. Such injury clearly authorizes the court to exercise its equitable power. United States v. Ross, 302 F.2d 831 (2d Cir., 1962).

The defendant First National City Bank does not oppose the application of the injunction domestically, but argues that it should not be made applicable to its foreign branches. The crux of defendant's arguments is that the court has no power over property held or payable in branch banks outside the United States. This argument, though possibly well founded, is not entirely to the point, since an injunction does not operate in rem. While it is true that the court may have no...