United States v. Bleasby

Decision Date18 July 1957
Docket NumberCiv. A. No. 494-56.
Citation153 F. Supp. 724
PartiesUNITED STATES of America, Plaintiff, v. Charles B. BLEASBY, Nelson F. Stamler, County of Bergen, and the Board of Chosen Freeholders of the County of Bergen, Defendants.
CourtU.S. District Court — District of New Jersey

Chester A. Weidenburner, U. S. Atty., Newark, N. J., by Charles H. Hoens, Asst. U. S. Atty., Newark, N. J., for plaintiff.

Milton T. Lasher, Hackensack, N. J., for defendants.

SMITH, District Judge.

This is a civil action in which the plaintiff seeks to enforce a federal tax lien against certain funds which came into the possession and custody of the defendants under circumstances hereinafter outlined. The action is before the Court on a stipulation of facts. The question presented for determination is one of law, to wit, the relative priority of a federal tax lien and the statutory right acquired by the defendants, particularly the County of Bergen, under the laws of this State.

Statutes

The claim of the plaintiff to a prior lien is predicated on the pertinent provision of Section 3670 of Title 26 U.S.C., 26 U.S.C.A. § 3670. This section reads as follows:

"If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, penalty, additional amount, or addition to such tax, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person."

Section 3671 of Title 26 U.S.C., 26 U.S.C.A. § 3671, which is also applicable, reads as follows:

"Unless another date is specifically fixed by law, the lien shall arise at the time the assessment list was received by the collector and shall continue until the liability for such amount is satisfied or becomes unenforceable by reason of lapse of time."

The right to the fund here asserted by the defendants, except Nelson F. Stamler, is predicated on the pertinent provisions of the New Jersey Statute, N.J.S.A. 2A: 152-7 to 2A:152-10, inclusive. These are quoted in the appendix hereto annexed.

Facts

It appears from the stipulation of facts that prior to October 23, 1950 criminal proceedings against one Leo Link, alias J. W. Donaldson, the taxpayer, were instituted by the law enforcement officials of the County of Cumberland, where Link and others were charged by indictment with conspiracy to violate the gambling laws of the State, and particularly N.J.S.A. 2:135-3, now N.J.S.A. 2A:112-3. These proceedings were pending when, on October 23, 1950, certain law enforcement officials, under the supervision of the defendant Nelson F. Stamler, then a Deputy Attorney General, under the authority of a search warrant issued by the Honorable J. Wallace Leyden, a judge of the Superior Court, made a search of the residence of Link, located in Teaneck, Bergen County, New Jersey. While on the premises they discovered and seized currency in the amount of $127,000, the fund here in question. The seizure was made under the authority vested in the said officials by the pertinent provisions of the State law. See Appendix. The date of the seizure, to wit, October 23, 1950, is crucial because of the claim of the defendants, except Stamler, that their title in the fund became absolute upon its seizure.

Thereafter, criminal proceedings against Link were initiated in Bergen County, where he was charged by indictment with a violation of the gambling laws of the State, and particularly N.J.S.A. 2:135-3, now N.J.S.A. 2A:112-3. The said indictment was returned by the Grand Jury on May 31, 1951. Link was arraigned in due course, and, on June 20, 1952, after the retraction of his former plea of "not guilty," entered a plea of "non vult" to the charges contained in the said indictment. A final judgment was entered by the Court on June 26, 1952, when Link was sentenced.

It should be noted that the fund theretofore held by Stamler was deposited by him with one A. Theodore Holmes, then the County Treasurer of Bergen County, on June 12, 1952, prior to Link's entry of his plea of "non vult." Thereafter, on June 18, 1952, the fund was lodged in a safe deposit box in the Peoples Trust Company of Bergen County, a bank selected by the Board of Chosen Freeholders. It should be noted further that the present County Treasurer of Bergen County is one Charles B. Bleasby, joined herein as a defendant.

Thereafter, on April 20, 1953, the criminal proceedings against Link having been concluded in the manner aforesaid, the said Holmes, acting in his capacity as County Treasurer, instituted a proceeding under the express provisions of the statute, N.J.S.A. 2A:152-9, in the Superior Court of New Jersey. The Director of Internal Revenue was joined as a party but he, represented by counsel, appeared specially and objected to the jurisdiction of the Court; thereafter he did not participate in the proceedings. A final order was entered in the proceedings on September 18, 1953; this order declared the fund contraband and directed its forfeiture to the County of Bergen. The judgment was affirmed by the Supreme Court of New Jersey, State v. Link, 14 N.J. 446, 102 A.2d 609. The judgment of forfeiture did not affect the rights of the plaintiff, and there is no contention here that it did.

The order entered in the Superior Court is not before this Court. However, a pertinent recital therein contained is quoted in the opinion of the Court in the case of State v. Link, supra, 102 A.2d at page 613. The recital reads as follows:

"The proof seems to indicate that if it is anybody's money it is Link's money, and it was money used either as the proceeds of or in connection with, set apart and segregated, as part of his gambling operations in this county, Cumberland County and Passaic County, and I think the conclusion is inevitable then that the money is forfeited to the sole use of the County of Bergen."

This factual determination that the seized fund had been the property of Link was sustained by the Supreme Court of New Jersey on the record before it. The judgment must therefore be regarded as determinative of the issue of ownership.

It should be noted that on June 24, 1952, prior to the initiation of proceedings by the County Treasurer, a civil action was commenced in the Superior Court of New Jersey by one Louise Schanals, who therein asserted ownership of the fund. This action was against the County Treasurer, apparently in his official capacity. The jury returned a verdict of "no cause for action," and upon this verdict a judgment in favor of the County Treasurer was entered. There were apparently no other claimants to the fund.

After the seizure of the fund on October 23, 1950, and before its ultimate forfeiture to the County of Bergen on September 18, 1953, the Commissioner of Internal Revenue initiated proceedings to perfect the federal tax lien established by Section 3670 of Title 26 U.S.C.A., supra. A jeopardy assessment for past due income taxes in the total sum of $175,228.06 was made against Link, the taxpayer, and filed with the Collector of Internal Revenue on October 27, 1950. The lien of the plaintiff was thus perfected and became effective as of that date. Section 3671, Title 26 U.S.C.A., supra. A notice thereof and demand for payment were duly served upon Link on the same date. Pursuant to the provisions of Section 3672 of Title 26 U.S.C.A., a "Notice of Federal Tax Lien" was duly filed in the office of the Register of Deeds, Bergen County, New Jersey, on October 27, 1950. A "Notice of Levy and Warrant of Distraint" was duly served upon the defendant Stamler on the same date.

Thereafter, on June 16, 1952, after the fund was deposited with the then County Treasurer, a "Notice of Levy and Warrant of Distraint" was served upon one Anthony Budin, Deputy County Treasurer of the County of Bergen. This was followed on June 24, 1952, by the service upon the said Budin of a final "Notice and Demand." This "Notice and Demand" was not honored and the forfeiture proceedings hereinabove referred to were thereafter instituted notwithstanding the said "Notice and Demand."

The plaintiff commenced an action in this court to enforce its federal tax lien on January 7, 1953. There were joined as defendants in the said action Leo Link, the taxpayer, his wife, Louise Schanals and A. Theodore Holmes, the County Treasurer of Bergen County. This action was dismissed, except as to the defendant Leo Link. A final judgment was entered against Link on March 12, 1957. It was therein adjudged that he was indebted to the United States for past due taxes in the sum of $164,050.05, together with interest thereon in the amount of $55,981.38. It was further adjudged "that the United States has had at all times since October 27, 1950, valid and subsisting liens under Section 3670 of the 1939 Internal Revenue Code for the sum of $220,031.43 upon all property belonging to the defendant, Leo Link, or property in which he has an interest." The present action was commenced on June 26, 1956.

Discussion

The relative priority of the federal tax lien and the statutory right acquired by the defendants must be determined under the general rule that "the first in time is the first in right." United States v. City of New Britain, 347 U.S. 81, 85, 74 S.Ct. 367, 370, 98 L.Ed. 520.

The defendants here contend that they acquired absolute title to the fund upon its seizure by the law enforcement officials on October 23, 1950, approximately four days before the plaintiff perfected its lien. They rely primarily upon the case of Spagnuolo v. Bonnet, 16 N.J. 546, 109 A.2d 623, in which the Supreme Court of New Jersey, on facts similar to those in the present case, sustained, as between the federal tax lien and the statutory right of the county, the claim to priority there made by the county. It is therein held, 109 A.2d at page 630: "Where a forfeiture is absolute under the statute, as it is here, the...

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3 cases
  • State of New Jersey v. Moriarity
    • United States
    • U.S. District Court — District of New Jersey
    • March 31, 1967
    ...2A:152-7 et seq., which describes an in rem proceeding. United States v. Bleasby, 257 F.2d 278, 280 (3rd Cir. 1962), reversing 153 F.Supp. 724 (D.N.J., 1957).14 But this is not decisive. Unlike removal under Section 1441, the requisite jurisdictional facts for removal under Section 1442(a) ......
  • United States v. Mayor & City Council of Baltimore
    • United States
    • U.S. District Court — District of Maryland
    • June 1, 1976
    ...& Savings Bank, 340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53 (1950), is not in point." Id. at 631. Several years later, in United States v. Bleasby, 153 F.Supp. 724 (D.N.J.1957), the district judge refused to follow Spagnuolo. He concluded that the principle upon which Spagnuolo was decided had b......
  • United States v. Bleasby
    • United States
    • U.S. Court of Appeals — Third Circuit
    • June 25, 1958
    ...in the New Jersey court. The District Court held that the claim of the United States prevailed over the claim of the county. D.C.D.N.J.1957, 153 F.Supp. 724. The county has appealed. The Supreme Court has gone very far in sustaining the priority of United States tax liens over antecedent li......

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