400 F.2d 476 (5th Cir. 1968), 24440, Gefen v. United States

Docket Nº:24440.
Citation:400 F.2d 476
Party Name:Sidney J. GEFEN and Lois Gefen, Appellants, v. UNITED STATES of America, Appellee.
Case Date:August 29, 1968
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 476

400 F.2d 476 (5th Cir. 1968)

Sidney J. GEFEN and Lois Gefen, Appellants,


UNITED STATES of America, Appellee.

No. 24440.

United States Court of Appeals, Fifth Circuit.

Aug. 29, 1968

Rehearing Denied Sept. 24, 1968.

Joseph M. Glickstein, Jr., Jacksonville, Fla., for appellants.

Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, Harry Marselli, Loring W. Post, Robert I. Waxman, Attys., Dept. of Justice, Washington, D.C., Edward F. Boardman, U.S. Atty., Tampa, Fla., William N. Hamilton, Jr., Asst. U.S. Atty., Jacksonville, Fla., for appellee.

Before BELL, GOLDBERG and DYER, Circuit Judges.

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GOLDBERG, Circuit Judge:

The government seeks affirmance of a judgment against Sidney and Lois Gefen for Sideny Gefen's (hereinafter Gefen) willful failure on behalf of Georgia Shipbuilding Corporation (hereinafter Georgia Ship) to pay over certain withholding and F.I.C.A. tax liabilities. 26 U.S.C. §§ 6672 and 6671(b). 1 The District Court, 2 as part of its judgment, foreclosed the federal tax lien on any property of the taxpayers, specifically on the cash surrender value of a life insurance policy on Gefen's life with Lois Gefen as beneficiary. 26 U.S.C. §§ 6321 and 6322. 3 Gefen seeks reversal on two grounds. First, he asserts that the District Court' refusal to grant a jury trial transgressed his rights under the Seventh Amendment to the Constitution and under Rule 38 of the Federal Rules of Civil Procedure. 4 Second, he contends that the Court erred in finding him to have been a responsible corporate officer with a duty to pay such taxes and in finding that he willfully failed to pay the taxes. We reject both points on appeal and affirm.

I. Jury Trial in Tax Cases

In Damsky v. Zavatt, 2 Cir. 1961, 289 F.2d 46, the Second Circuit considered the same procedural issues that we face here. In that case Bernard and Olga Damsky, husband and wife, had been assessed for non-payment of income taxes during a period of several years. In addition, tax liens had been filed on property owned by Olga for all except three of the years in question. Following the Damsky's timely demand for a jury trial and the government's motion to strike such demand, the Honorable Joseph C. Zavatt, District Judge, issued a written opinion and order granting the government's motion in

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full. United States v. Damsky, E.D.N.Y. 1960, 187 F.Supp. 404. The Damskys sought a writ of mandamus directing Judge Zavatt to vacate that order. In an opinion laden with thorough and exegetic historical credentials, Judge Friendly granted the writ with respect to these claims asserted solely against Bernard Damsky (only the years for which no tax liens had been filed). Judge Clark dissented as to this part of the opinion but concurred in the remainder of the majority opinion, in which the Court refused to issue the writ with respect to the claims arising from foreclosure of the tax lien on Olga's property.

Our concern at bar is with that part of the majority opinion in Damsky which denied the taxpayer's right to a jury trial in the years of foreclosure. We quote Judge Friendly's foundational analysis in full:

'At the opposite extreme from the claims against Bernard just considered lies so much of the complaint as seeks to establish the validity of the tax liens against Ollie's real properties and the sale of the properties to satisfy them.

'Mr. Justice Story pointed out in Parsons v. Bedford, 1830, (28 U.S. 433) 3 Pet. 433, 446-447, 7 L.Ed. 732, that in view of the use of the phrase 'all cases in law and equity' in Article III of the Constitution and the historic practice 'that courts of equity use the trial by jury only in extraordinary cases, to inform the conscience of the court,' the natural conclusion from the reference to suits at common law in the Seventh Amendment is 'that this distinction was present to the minds of the framers of the amendment's and that they did not intend the amendment to apply to proceedings 'where equitable rights alone were recognized, and equitable remedies were administered.'

'Foreclosure of the mortgagor's equity of redemption was an established head of equity jurisdiction well before 1791, How v. Vigures, 1 Rep.Ch. 32, 21 E.R. 499 (1623); Emanuel College v. Evans, 1 Rep.Ch. 18, 21 E.R. 494 (1625); and this necessarily embraced the determination of the amount and validity of the mortgage debt. 1 Glenn, Mortgages (1943), 399-400. The more modern method of foreclosure through decree of sale, provided for United States tax liens by I.R.C. § 7403, is sufficiently akin to the historic equity practice to preclude successful contention for a right to jury trial with respect to the ascertainment of the amount of the tax lien as against taxpayer's property and enforcement of the lien by sale. See 5 Moore, Federal Practice (2d ed. 1951), pp. 81, 109. United States v. Malakie, D.C.E.D.N.Y. 1960, 188 F.Supp. 592.' 289 F.2d at 52-53.

In an equally scholarly analysis Judge Friendly upheld the right of the District Court to render a judgment against Olga personally for any deficiency which might have remained unsatisfied after judicial sale of the mortgaged premises. 289 F.2d at 54-55.

The District Court in the case at bar followed other district courts in denying a jury trial primarily on the basis of the Damsky decision. See United States v. Warren, W.D.N.C.1964, 235 F.Supp. 638 (which embellishes Damsky by interpreting the language of Section 7403(c) as a rejection of jury trials in tax foreclosures); United States v. Rentz, N.D. Iowa 1962, 213 F.Supp. 521. In accord, United States v. Malakie, E.D.N.Y.1960, 188 F.Supp. 592. See also Note, 46 Minn.L.Rev. 643 (1962) (an extensive and favorable review of the Damsky decision); Note, 110 U.Pa.L.Rev. 133 (1961) (a shorter review, also favorable); 5 Moore, Federal Practice P38.31(1) (1) at 34-35, and P38.38 (4) at 45, (1967 Supp.) (which briefly summarizes the Damsky decision without evaluative comment); 2B Barron and Holtzoff, Federal Practice and Procedure § 872 at 17, (Wright ed., 1967 Supp.) (a similar summary of the Damsky decision); James, Civil Procedure§ 8.11

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at 378 n. 4 (1965, also published in 1963 at 72 Yale L.J. 655, 691 n. 203) (which quotes Judge Clark's dissent objecting to the partial granting of a jury trial in Damsky and refers to it as 'a wise and temperate judicial appraisal of the problem'). We likewise agree that the historicity of foreclosure as a ward of equity is documented accurately in Judge Friendly's scholarly opinion. And although the classification of pre-1791 standards does not capture our unqualified enthusiasm, we follow Damsky until the Supreme Court...

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