Sonitz v. United States

• Decision Date: 20 September 1963
• Docket Number: Civ. A. No. 758-62.
• Citation: 221 F. Supp. 762
• Parties: Elsie B. SONITZ and Madeline Basile, Plaintiffs, v. The UNITED STATES of America, Arthur G. Darling and Skeffington, Haskins and Robottom, Defendants.
• Court: U.S. District Court — District of New Jersey

221 F. Supp. 762

Elsie B. SONITZ and Madeline Basile, Plaintiffs, v. The UNITED STATES of America, Arthur G. Darling and Skeffington, Haskins and Robottom, Defendants.

Civ. A. No. 758-62.

United States District Court D. New Jersey.

September 20, 1963.

Charles M. Grosman, Newark, N. J., for plaintiff Elsie B. Sonitz; Aro G. Gabriel, Union City, N. J., for plaintiff Madeline Basile (William F. Kolbe and Leo C. Duersten, Foley, Capwell, Foley & Kolbe, Racine, Wis., of counsel), for both plaintiffs.

David M. Satz, Jr., U. S. Atty., Newark, N. J., by Vincent J. Commisa, Asst. U. S. Atty., for the United States; Louis F. Oberdorfer, Asst. Atty. Gen., Fred B. Ugast and Arnold Miller, Dept. of Justice, Washington, D. C., of counsel.

Haskins, Robottom & Hack, by Guy H. Haskins, Jr., Bloomfield, N. J., for defendants, Arthur G. Darling and Skeffington, Haskins and Robottom.

AUGELLI, District Judge.

This action is brought under 28 U.S. C.A. §§ 1340, 2410 and 2463, and involves the validity of certain tax assessments made against plaintiffs.

According to the complaint, plaintiffs, Elsie B. Sonitz and Madeline Basile, were the daughter and wife, respectively, of one Joseph Basile, who is now deceased. On April 20, 1955, Joseph Basile paid $17,850.00 for a residential property located at 222 Watchung Avenue, Bloomfield, New Jersey, and had said property conveyed by warranty deed to plaintiffs as joint tenants.

On April 14, 1961, the Commissioner of Internal Revenue assessed certain taxes, penalties and interest against Joseph Basile, following a determination thereof made by the United States Tax Court on March 17, 1961. Basile died on June 22, 1961. Thereafter, on July 26, 1962, plaintiffs contracted to sell the property at 222 Watchung Avenue, by warranty deed, free and clear of all encumbrances, to defendant Arthur G. Darling, for $23,000.00, title to pass on September 17, 1962. On September 14, 1962, the Internal Revenue Service, having learned of the contemplated sale, served plaintiffs with notices that each of them was liable to the United States of America as a transferee of the assets of Joseph Basile, and that jeopardy assessments ($16,925.00 in the case of Elsie B. Sonitz and $24,513.02 in the case of Madeline Basile) had been made against them. Pursuant to the action thus taken, defendant United States of America claimed to have valid tax liens which attached to all of plaintiffs' properties, including 222 Watchung Avenue, as of September 14, 1962, and demanded the entire proceeds of the sale of said property. Upon plaintiffs' offer of delivery of a warranty deed to Darling, the purchase price was paid to defendant law firm of Skeffington, Haskins and Robottom, attorneys for Darling, as escrowee, and Darling took possession of the premises.

Plaintiffs contend that the assessments made on September 14, 1962 are barred by the one year statute of limitations imposed by section 6901(c) (1) of the Internal Revenue Code of 1954, 26 U.S.C. A. § 6901(c) (1), and that therefore any liens arising thereunder on any of their properties are invalid. They also deny that Joseph Basile was insolvent when he made any transfers of property to them or that he was rendered insolvent by such transfers so as to subject them to liability under section 6901 of the Code.

The principal relief sought by plaintiffs is that the September 14, 1962 assessments against plaintiffs be declared invalid, and the liens thereunder ineffective; that the United States of America be found to have no interest in or claim upon the realty at 222 Watchung Avenue, or the proceeds from its sale, or any other property of plaintiffs by virtue of the September 14, 1962 assessments; that the law firm of Skeffington, Haskins and Robottom be ordered to pay the proceeds of the sale to plaintiffs; and that the United States of America be ordered to expunge and remove all liens and repay to plaintiffs any amounts of money or other property seized or collected by virtue of said liens.

The United States of America has moved to dismiss the complaint on the grounds that the complaint fails to state a claim upon which relief may be granted; that the suit is prohibited by 28 U.S.C.A. § 2201, in that it is a suit seeking a declaratory judgment with respect to federal taxes; that the United States has not waived its sovereign immunity in this suit which seeks, under 28 U.S. C.A. § 2410, to inquire into the merits of the assessment underlying the lien sought to be expunged; that the suit is prohibited by 26 U.S.C.A. § 7421, in that it is an action seeking injunctive relief in restraining the assessment or collection of a tax; and that the suit is prohibited by 26 U.S.C.A. § 7422, as being a suit for refund.

The Court has jurisdiction over the subject matter of this action under 28 U.S.C.A. § 1340, relating to suits arising under the internal revenue laws. In the Court's opinion, this suit is not one for a declaratory judgment, nor for an injunction, nor for a refund. Essentially it is an action to expunge Government tax liens, and thereby quiet title to property of the plaintiffs. The Government raises the issue as to whether it has waived its sovereign immunity in this case. The resolution of this issue depends on the Court's construction of 28 U.S.C.A. § 2410(a), which provides that the United States consents, under prescribed conditions, to be

"* * * named a party in any civil action or suit in any district court * * * to quiet title to * * * real or personal property on which the United States has or claims a * * * lien."

The Government contends that in a suit to quiet title under this section, only the procedural defects of the lien sought to be expunged can be examined by the Court; and that the merits of the assessment underlying the lien, including procedural defects in such assessment, are not a proper subject of inquiry. In support of its argument, the Government relies primarily on the case of Pipola v. Chicco, 274 F.2d 909 (2 Cir., 1960).

The issue of whether a suit to...