United States v. Capital Sav. Ass'n

• Decision Date: 27 July 1983
• Docket Number: Civ. No. H 80-692.
• Citation: 576 F. Supp. 790
• Parties: UNITED STATES of America, Plaintiff, v. CAPITAL SAVINGS ASSOCIATION, Successor to First State Savings Association, Defendant.
• Court: U.S. District Court — Northern District of Indiana

576 F. Supp. 790

UNITED STATES of America, Plaintiff, v. CAPITAL SAVINGS ASSOCIATION, Successor to First State Savings Association, Defendant.

Civ. No. H 80-692.

United States District Court, N.D. Indiana, Hammond Division.

July 27, 1983.

Charles B. Miller, Asst. U.S. Atty., Hammond, Ind., T. Kazan Ray, Tax Div., Dept. of Justice, Washington, D.C., for United States.

James A. Holcomb, Lucas, Clifford & Holcomb, Merrillville, Ind., for defendant.

David Capp, Cohen & Thiros, Merrillville, Ind., for third party defendant.

MEMORANDUM, OPINION and ORDER

MOODY, District Judge.

This cause came on for trial without intervention of a jury upon Plaintiff's Complaint and the Defendant's Answer and affirmative defenses only on the 23rd day of May, 1983, and the Court, having heard and considered the evidence, finds the facts and states the conclusions of law as follows:

FINDINGS OF FACT

1. The Defendant, Capital Savings Association, formerly known as First State Savings Association, is a savings and loan association having its principal offices at 100 West Ridge Road, Gary, Indiana.

2. That on November 16, 1978 Pete Bianco a/k/a Peter J. Bianco owed delinquent income taxes to the United States

government for the years 1968 through 1971. That this tax liability was his alone and that his wife, Mary T. Bianco, had been granted "innocent spouse" status.

3. On November 16, 1978 David M. Moss, a Revenue Agent with the Internal Revenue Service, served a "Notice of Levy" upon the defendant at its offices at 100 West Ridge Road, Gary, Indiana, requiring the defendant to pay over to the Internal Revenue Service any property or rights to property belonging to the taxpayer, Peter J. Bianco. The Revenue Officer indicated that only those funds belonging to Peter J. Bianco were to be turned over pursuant to the Notice of Levy.

4. That on said date and at the time of the serving of the Notice of Levy there existed a savings account at First State Savings Association, now known as Capital Savings Association, Account No. B-495 in the joint names of Pete Bianco and Mary T. Bianco which account was opened on July 16, 1975 and which was rolled over from a previous account that the parties held in joint names, and which prior to that time belonged to Mary Bianco alone.

5. That on the same date, namely, November 16, 1978, one of the attorneys for the Defendant discussed with the Revenue Agent in charge of the collection the subject of Indiana law with respect to ownership of joint savings accounts, the procedures for determining same and inquired as to his or the authority of the IRS for levying upon a joint account when the liability is only that of one taxpayer rather than the joint tenants. The Revenue agent indicated that he would look into the question and get back to her in that regard.

6. That at no time from November 16, 1978 through April 25, 1979 did the Internal Revenue Service or any of its agents or employees ever furnish to the defendant or its attorneys, as requested, any authority for its levying on a joint savings account to satisfy the tax deficiency of one of the signators only to that joint account.

7. Further, on November 16, 1978, and after discussing the matter with defendant's counsel, the Revenue officer informed John Sikora, President of Capital Savings Association, that he did not expect payment that day but rather he should put a hold on the account until the Internal Revenue Service could determine exactly which portion or how much of the account should be paid over to the Internal Revenue Service in satisfaction of the levy.

8. On January 26, 1979, Mary Bianco, wishing to purchase a new home, entered Capital Savings Association for the purpose of obtaining a mortgage until such time as she could sell her home. John Sikora informed her that it was impossible to obtain a mortgage in the three to five day period which she indicated. Sikora then suggested to Mrs. Bianco that she withdraw the money from her savings account, No. B-495, and replace that money once her present home had been sold. It was at this time that Mr. Sikora informed Mrs. Bianco of the levy against the account and once again placed a call to the attorneys for Capital Savings Association indicating that Mrs. Bianco wanted to withdraw the funds from the savings account upon which the levy had been placed.

9. Upon being informed of the levy, Mrs. Bianco indicated to Mr. Sikora that the money in Account No. B-495 was her money, a claim which she maintains in this litigation and of which she had previously informed the Internal Revenue Service through her attorney.

10. That upon receiving the inquiry from the defendant concerning the request of Mary Bianco to withdraw the funds from the account in question, the attorneys for the defendant attempted to reach the Revenue agent and others at the Internal Revenue Service concerning this action, but were unsuccessful in their attempts. Unable to reach the Revenue Agent in charge and not having heard from him on January 29, 1979, and not having any word from the Internal Revenue Service or any of its agents or employees concerning the ownership question of the account or what specific funds, if any, were to be turned over to the Internal Revenue Service, Mary Bianco was allowed to withdraw the sum of $18,518.21 from Account No. B-495 on January 29, 1979.

11. Those funds were then used as payment for the home in which Mary Bianco and Peter Bianco presently reside and which was purchased shortly after the withdrawal of funds from the account in question on January 29, 1979.

12. On April 24, 1979, the Revenue agent contacted the attorneys for the defendant inquiring as to whether or not the funds in the account had been released and the following day, April 25, 1979, served a Final Demand upon the defendant.

13. From November 16, 1978 until April 25, 1979 the only action taken by the Internal Revenue Service to determine ownership interest in the account in question was to serve a summons upon First State Savings Association through which summons they obtained the signature card for the account and the card showing the transactions with respect to the account, namely, deposits, withdrawals and adding of dividends or interest.

14. That the signature card for the account in question contains the following language:

It is agreed by the signatory parties with each other and by the parties with you that any funds placed in or added to the account by any one of the parties are and shall be conclusively intended to be a gift and delivery at that time of such funds to the other signatory party or parties to the extent of his or their pro rata interest in the account. (Emphasis in original).

15. While the taxpayer, Peter Bianco, was in the service during the early '40s in World War II, Mary Bianco worked at U.S. Steel in Gary, Indiana and lived with her mother, saving all of her money. This money was deposited in the predecessor account to the one in question. After Peter Bianco returned from the service, Peter and Mary Bianco entered into the restaurant business at which they both worked seven days a week, a minimum of 12 hours a day.

16. After returning home from the service, Peter Bianco began losing money by way of betting or gambling and an agreement was reached between he and Mary Bianco that he would turn over all of his money to her. She cashed his paychecks, gave him an allowance, paid all the household bills, purchased the food and clothing and ran the entire household while he was employed.

17. From that time to the present, Mary Bianco handled all of the family finances; did all the banking; made all deposits in Account No. B-495; made all withdrawals in that account; did all the saving; and was the only one to deal with the savings account at First State Savings Association.

18. That Mary Bianco had complete control over the monies and the checks once turned over to her and further at all relevant times had control and possession of the pass book to savings Account No. B-495 and its predecessor accounts.

19. At the time that Peter Bianco turned over his checks and monies to Mary Bianco it was not his intention to make a gift of those sums to her at that time and prior to her depositing any of those sums in savings account No. B-495 or its predecessors. Rather, the agreement was a matter of convenience.

20. That at no time did Peter Bianco make any deposits or withdrawals to Account No. B-495 or any other account within the knowledge of First State Savings Association and Mr. Sikora never saw Peter Bianco transacting business in First State Savings Association.

21. That based upon Mary Bianco's handling of and dealing with the accounts and monies placed into and withdrawn from the accounts and further based upon statements made by Mary Bianco both immediately prior to withdrawal on January 26th and for the time she was a depositor, the defendant reasonably believed that the funds in Account No. B-495, belonged to Mary Bianco and not Peter Bianco.

22. That based upon the evidence, or reasonable inferences that can be drawn therefrom and under the circumstances with which it was confronted, the Defendant, First State Savings Association, had reasonable cause to release the funds in Account No. B-495 to Mary Bianco and to refuse to surrender such funds to the Government.

23. That Mary Bianco and Peter Bianco each owned one-half of the funds in the bank account at issue at the time of the levy.

24. That at the time of the levy, the bank account at issue contained a balance of $18,665.57.

CONCLUSIONS OF LAW and DISCUSSION

The Government brought this case against Capital Savings Association, successor to First State Savings Association (Capital) to recover money withdrawn from a joint savings account held by Capital in the names of Peter and Mary Bianco. The Government served a notice of levy on Capital on November 16, 1978 in relation to any "property or rights to...