Iraci v. Scanlon
Decision Date | 12 December 1961 |
Docket Number | No. 61-C-187.,61-C-187. |
Citation | 202 F. Supp. 42 |
Parties | Louis F. IRACI and Angelo J. Paliotto, Plaintiffs, v. Thomas E. SCANLON, Director of Internal Revenue, First District, Brooklyn, New York, and United States of America, Defendants. |
Court | U.S. District Court — Eastern District of New York |
Walter T. Kohn, New York City, for plaintiffs.
Joseph P. Hoey, U. S. Atty., for Eastern Dist. of New York, Brooklyn, N. Y., Robert L. Handros, Washington, D. C., of counsel, for defendants.
The defendant moves pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, 28 U.S.C., to dismiss the amended complaint on the ground that the Court lacks jurisdiction over the subject matter, and the failure to state a claim upon which relief can be granted.
The amended complaint states that DuBois Concrete Products Corporation (DuBois) owed withholding and employment taxes from April 1, 1953 to December 31, 1954. Plaintiffs were officers but neither "* * * was in charge of the duty of preparing and filing employment tax, withholding and other employment taxes on behalf of `DuBois'. * * *" On February 21, 1957, defendant made a 100% penalty assessment against plaintiffs pursuant to 26 U.S.C. § 2707(a) (d) of the Internal Revenue Code of 1939, and § 6672 of the Internal Revenue Code of 1954. The claim further states that between October 1952 and December 1954, DuBois was the prime subcontractor for Hudson Contracting Corporation (Hudson), general contractor for the construction of a roadway, pursuant to a contract with the Department of Public Works of the State of New York. Further, that during this period, Hudson was in complete control of the management of the affairs of DuBois; that Hudson actually withheld and retained the moneys upon which the claimed tax liability against the plaintiffs arises; and that litigation is presently pending and undetermined in the State court concerning the moneys so claimed to be withheld and retained by Hudson.
Plaintiffs seek declaratory judgment nullifying and voiding the assessments, vacating and setting aside tax liens and enjoining the defendant from attempting collection of the same.
The question presented by this application is whether this is a claim brought "* * * for the purpose of restraining the assessment or collection of any tax * * *" in violation of 26 U.S.C. § 7421.1
The broad right given the Government to collect taxes imposed without hindrance or delay stems from the obvious need of the Government for money to carry on its functions. Cadwalader v. Sturgess, C.C.A.1924, 297 F. 73. The statute originally enacted from which 26 U.S.C. § 7421(a) is derived was the Act of March 2, 1867, 14 Stat. 475, which became R.S. § 3224. The original enactment was expository of the general rule that a suit would not lie to restrain the collection of a tax upon the sole ground of its illegality. Miller v. Standard Nut Margarine Co., 284 U.S. 498, 509, 52 S.Ct. 260, 76 L.Ed. 422. The Courts have held that this enactment did not oust the Court from it historic equity jurisdiction to protect the citizen who was not liable to the Government and whose property was in danger of seizure and sale by the taxing authorities. Shelton v. Gill, C.A.N.C.1953, 202 F.2d 503.
In Miller v. Standard Nut Margarine Co., supra, the Court stated, at page 509 of 284 U.S., at page 263 of 52 S.Ct. as follows:
The defendant asserted a liability against the plaintiffs pursuant to § 2707 (a) and (d) of the Internal Revenue Code of 1939.2 The liability provided by the section is not a tax liability as such but rather a penalty (as the section is captioned) for the willful evasion. The penalty under § 2707(a) is not described as a tax but directs that the penalty assessed shall be "* * * collected in the same manner as taxes are assessed and collected."
If the statement of the claim is taken as true, it would further appear that the plaintiffs are not such persons "* * * who as such officer, employee, or member is under a duty to perform the act," as required by paragraph (d) of § 2707; nor are the plaintiffs such persons as are "* * * required to collect, truthfully account for, and pay over any tax imposed * * *." as described by § 6672 of the Internal Revenue Code of 1954.3
The factual situation in Botta v. Scanlon, 2 Cir., 288 F.2d 504 (1961) appears to be similar to the material facts set forth in the complaint. The Court of Appeals of this Circuit, reviewing the language of § 6672 to determine the intent of the section, said the following at page 506:
The opinion further restates a principle stated by the Court of Appeals in National Foundry Co. of New York v. Director of Internal Revenue, 2 CR IR, 1956, 229 F.2d 149, 151, that where the tax is clearly illegal or where other special circumstances of an unusual character are present, the plaintiff may appeal to the equity jurisdiction of this Court.
See also Adler v. Nicholas, 10th Cir. 1948, 166 F.2d 674, 678, and Communist Party, U.S.A. v. Moysey, D.C.S.D.N.Y. 1956, 141 F.Supp. 332, cited with approval in Botta v. Scanlon, supra.
Motion is denied. Settle order on two days notice.
Application by defendant for leave to reargue decision dated December 12, 1961. Plaintiff has...
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Iraci v. Scanlon
...on the sufficiency of the complaint when it was attacked on motion made pursuant to Rule 12(b) of the Federal Rules of Civil Procedure (202 F.Supp. 42) and the reargument of the determination (opinion dated January 30, 1962—202 F.Supp. Another Judge of this Court again passed on related que......
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Hudak v. United States
...that the Court finds persuasive supporting the "complete defense." Hudak refers to the district court decision in Iraci v. Scanlon, 202 F. Supp. 42 (E.D.N.Y. 1961), adhered to onreargument, 61-C-187, 1962 WL 13062 (E.D.N.Y. Jan. 30, 1962). The Court seriously questions whether the Iraci dis......