U.S. v. Weintraub

• Decision Date: 19 December 1979
• Docket Number: No. 77-3273,77-3273
• Citation: 613 F.2d 612
• Parties: 80-1 USTC P 9172 UNITED STATES of America, Plaintiff-Appellee, v. Morris WEINTRAUB, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 612

613 F.2d 612

80-1 USTC P 9172

UNITED STATES of America, Plaintiff-Appellee, v. Morris WEINTRAUB, Defendant-Appellant.

No. 77-3273.

United States Court of Appeals Sixth Circuit.

Argued June 7, 1979.

Decided Dec. 19, 1979.

William C. Oldfield, Cobb, Combs & Oldfield, Covington, Ky., for defendant-appellant.

Griffin Bell, Atty. Gen. of United States, Myron C. Baum, Gilbert Andrews, Tax Div., App. Section, Donald R. Anderson, Crombie J. D. Garrett, Michael J. Roach, Dept. of Justice, Washington, D. C., Gerald F. Kaminski, Asst. U. S. Atty., Cincinnati, Ohio, for plaintiff-appellee.

Before CELEBREZZE, KEITH and MERRITT, Circuit Judges.

CELEBREZZE, Circuit Judge.

This appeal concerns the rule Nullum tempus occurrit regi the sovereign is exempt from the consequences of laches and the operation of statutes of limitations. The rule is of ancient origin and, while its original rationale of royal prerogative no longer holds sway, the maxim remains vital based upon the public policy of preserving public rights and revenues from the neglect of public officers. This principle causes us to affirm a civil tax judgment in favor of the United States in the face of an argument that the action was time-barred.

I.

The facts involved in this cause are somewhat complicated but can be fairly distilled as follows. Defendant-appellant, Morris Weintraub, is a Kentucky attorney. In 1959 appellant and his brother, Erving Weintraub, obtained interests in two parcels of real estate in Arizona, which they hoped to resell at a profit. ¹ They had difficulty making the scheduled payments for this land. Among other means employed to shore up their financing, in 1960 appellant and his brother borrowed $135,000 from Frank Andrews, a client of appellant, and made a required payment. ²

Loans had previously been received from two other individuals, Messrs. Chalfen and Hecht, who secured their loans by having partial interests in both parcels assigned to them. ³ Despite several extensions of time appellant and his brother were still unable to make the payments on the parcels or otherwise dispose of them, so in 1961 further loans were obtained from Chalfen and Hecht. ⁴ In exchange Chalfen and Hecht obtained a complete assignment of all interests in both parcels. ⁵ Other than a payment in 1961 on the note to Andrews, ⁶ no other payments were made by appellant or his brother. In May 1962 appellant and his brother were sued in Arizona state court by Chalfen and Hecht. Pursuant to the settlement of that lawsuit in November 1962, appellant and his brother executed a deed and assignment of all their interests in the two real estate parcels to Chalfen and Hecht. ⁷

On May 2, 1963, the Internal Revenue Service (IRS) assessed wagering taxes in the amount of $688,734 against Frank Andrews. On May 3, 1963, the IRS served appellant with a notice of levy on the property of Andrews (and others), pursuant to Internal Revenue Code § 6332, ⁸ which requires third persons in possession of a taxpayer's property or property rights subject to levy upon which a levy has been made to surrender such to the IRS. Appellant replied in August 1963 to the final demand for surrender of the amount he owed to Andrews by writing on the final demand: "Nothing due or owed by me to Any of above at time of service on 5/2/63 or now." (App. 695).

The next action taken against appellant was in April 1964, when appellant was indicted for willfully failing to honor the notice of levy and two counts of making false statements to the IRS. Appellant was acquitted on all three counts after trial in September 1965.

No further action was taken by the IRS vis-a-vis appellant until the filing of the complaint in the instant case in January 1976. This action was brought pursuant to § 6332(c) to enforce the personal liability of appellant for failure to honor the notice of levy served upon him in May 1963. ⁹ Appellant moved for summary judgment in the district court arguing, Inter alia, that the suit was barred by laches and the statute of limitations. This motion was denied without opinion. At trial, the sole issue for the jury to determine was whether appellant was, in fact, indebted to Andrews on May 3, 1963, when he was served with the notice of levy. The jury found that appellant was so indebted ¹⁰ and found in favor of the government in the amount of $120,760. ¹¹ See 77-2 U.S.T.C. P 9576 (S.D.Ohio 1977).

Appellant's defense at trial was simply that he was not indebted to Andrews on May 3, 1963, and thus was not then in possession of any of Andrews' property or property rights. This would have absolved appellant of liability for refusal to honor the notice of levy. He admitted that he received the $135,000 loan from Andrews in 1960. But he contended that he had satisfied that debt in May 1962 by transferring to Andrews a 77% Interest in the two Arizona land parcels. As evidence of this appellant pointed to two documents dated May 1962. The first was labelled "Assignment" and purported to transfer the 77% Interest from appellant and his brother to Andrews. The second was labelled "Agreement and Assignment" and purported to embody an agreement between appellant, his brother and Andrews that Andrews would accept the 77% Interest in the Arizona land in satisfaction of the $135,000 loan.

The government successfully argued, however, that these documents were not what they purported to be. The "Assignment," which had a place for both appellant's and his brother's signatures, was signed only by appellant in May 1962. (App. 548). The "Agreement and Assignment," which had a place for appellant's, his brother's and Andrews' signature, was signed only by appellant and Andrews in May 1962. ¹² (App. 549-50). Thus, the documents were ineffective to transfer any interest in the realty to Andrews in May 1962 since the necessary signature of appellant's brother was missing on each. ¹³ While appellant's brother did eventually sign copies of both documents, (App. 488-90), it is conceded by appellant that this did not occur until May or June 1963, after the notice of levy had been served on appellant, and that the documents were back-dated to May 1962 by appellant's brother at appellant's request. ¹⁴ Thus, the documents were still ineffectual to transfer any interest to Andrews in May 1962 or anytime before May 3, 1963. ¹⁵

Other evidence submitted by the government attested to the ersatz nature of the "Assignment" and "Agreement and Assignment." In a letter to Chalfen in April 1963, eleven months after appellant allegedly satisfied his debt to Andrews, appellant wrote: "As you know, I borrowed $135,000.00 from Frank Andrews and if it takes the rest of my life to repay him, I will just have to do it." (App. 687). And in May 1963, just after the notice of levy was served on appellant, he wrote the following to his brother:

Here are 3 things:

1. * * *

2. NOTICE OF LEVY served on my Friday. . However, you will recall that Andrews notified us he had transferred the note to MIKE MAZZARO, a relative of his who lives near Pittsburgh. That was some time ago . . . you can't recall, but it was done. This in case an IRS agent happens to call on you. In other words Andrews has no further interest in the note his relative Mazzaro owns it. I inform you because they may serve you as the note was signed by both of us, so you will know. I was afraid of this right along as I kept telling you. But I think it is O.K.

3. NOTICE OF FEDERAL TAX LIEN, etc. which you will note the original is being filed in Maricopa County, but I talked to you on phone about this.

RETURN THESE AT ONCE TO ME. AT ONCE.

TEAR UP THESE NOTES, PLEASE . . . as soon as you read them . . . don't leave lay around house.

Erv, please, get me back those papers from Bellemack if he has them. He indicates you have. You think I have been handing you a line, but you can see that what I have been telling you is so . . . return these enclosed to me, and then get those papers and mail back to me separately, or if will be there Friday, have ready for me and I will take back with me . . .

THIS IS SERIOUS. . . .

TEAR THIS UP WHEN FINISHED READING.

(App. 692-93. Errors in Original.) ¹⁶

Appellant's instructions to have this communication destroyed obviously were not followed and equally obvious is the letter's import. Other documentary evidence submitted by the government also was inconsistent with appellant's contention that he had satisfied his debt to Andrews by May 3, 1963. ¹⁷

The government further argued at trial that the alleged May 1962 assignment of the land to Andrews was impossible because appellant had no interest in either parcel at that time which he could have assigned. Both parcels had been completely assigned to Chalfen and Hecht by 1961. While appellant argued that these assignments were in the nature of a security interest or mortgage to secure Chalfen's and Hecht's loans, the government pointed to documentary evidence which indicated that the transfer to them was absolute and in satisfaction of their loans. (App. 635; 637; 656). This was confirmed by the settlement of the 1962 lawsuit which yielded a complete transfer by appellant and his brother of all interests in the two parcels to Chalfen and Hecht. ¹⁸ (App. 666-70). Indeed, it is implausible that appellant and his brother actually transferred a 77% Interest in the real estate to Andrews in May 1962 in light of their settlement agreement in November 1962 to transfer a 100% Interest in the same real estate to Chalfen and Hecht.

We find there was substantial evidence to support the jury's verdict. The evidence more than sufficed to allow the jury to conclude that appellant was indebted to Andrews on May 3, 1963. Appellant's contention that the verdict was "contrary to and not supported by the evidence" is wholly without merit. ¹⁹

II.

The principal contention raised by appellant before this court is that this action was time-barred by both laches and the statute of...