United States v. Championship Sports, Inc.
| Decision Date | 08 March 1968 |
| Docket Number | No. 62 Civ. 3936.,62 Civ. 3936. |
| Citation | 284 F. Supp. 501 |
| Parties | UNITED STATES of America, Plaintiff, v. CHAMPIONSHIP SPORTS, INC., a New York corporation, Championship Sports, Inc., an Illinois corporation, Championship Sports, Inc., a Massachusetts corporation, Graff, Reiner & Smith Enterprises, Inc., a Nevada corporation, Charles Liston and Floyd Patterson, Defendants. |
| Court | U.S. District Court — Southern District of New York |
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Robert M. Morgenthau, U. S. Atty. Southern District of New York, for plaintiff; Irwin B. Robbins, Asst. U. S. Atty., John J. McCarthy, Atty., Dept. of Justice, of counsel.
Bruno Schachner, New York City, for Championship Sports, Inc., a New York corporation, Championship Sports, Inc., an Illinois corporation, Championship Sports, Inc., a Massachusetts corporation, defendants.
Nierenberg, Glixon, Zeif & Weinstein, New York City, for defendant Floyd Patterson; Gerard Nierenberg, Saul Weinstein, New York City, of counsel.
H. Donald Busch, New York City, for defendant Charles Liston.
The United States of America, plaintiff in the above-entitled action, moves under Rule 12, Fed.R.Civ.P., to dismiss the respective counterclaims of defendants Championship Sports, Inc., a New York corporation ("CSI NY"), Championship Sports, Inc., an Illinois corporation ("CSI Ill") and Championship Sports, Inc., a Massachusetts corporation ("CSI Mass") upon the ground of lack of jurisdiction. The United States also moves under Rule 56, Fed.R.Civ.P., for summary judgment dismissing the counterclaims of defendants Charles Liston and Floyd Patterson. Patterson, in turn, moves for summary judgment in his favor on his counterclaim against the United States. Finally, the CSI defendants move to dismiss the cross-claim of Patterson for lack of jurisdiction and to sever the cross-claim of Liston.
The complaint of plaintiff, United States of America, filed November 30, 1962, grows out of the promotion by defendants CSI NY of the championship boxing match on September 25, 1962 between Floyd Patterson and Charles Liston pursuant to certain contracts between Patterson, Liston and the CSI defendants. The complaint alleges in substance:
(1) Termination of CSI NY's taxable year on September 25, 1962 under IRC § 6851; determination of its tax liability; demand for payment; and non-payment;
(2) Levy under IRC § 6331 on the ancillary receipts from the fight to satisfy an assessment, now abated, against Graff, Reiner & Smith Enterprises, Inc.;
(3) A demand that this court declare the seized funds to be the property of CSI NY and foreclose on those funds the lien of the United States which encumbers the property of CSI NY.
On December 31, 1962, all parties, except Liston, entered into a stipulation, the pertinent parts of which appear later in this opinion. By stipulation of January 30, 1963, Liston agreed to be bound by the stipulation of December 31, 1962.
On June 20, 1963, the Internal Revenue Service received income tax returns from CSI NY and CSI Mass for the fiscal year ending May 31, 1963. According to the affidavit of counsel for the United States, the Internal Revenue Service received no income tax return for fiscal year 1963 from CSI Ill and counsel for CSI Ill is unable to state that any return was filed.
On or about August 12, 1966, the District Director of Internal Revenue issued notices of deficiency to CSI NY and CSI Mass. Thereafter, on or about November 7, 1966, CSI NY and CSI Mass filed petitions in the Tax Court of the United States asking for redetermination of the deficiencies asserted in the notices of deficiency.
By notice of motion filed October 3, 1967, the three CSI defendants moved to dismiss (on consent) Graff, Reiner & Smith Enterprises, Inc. as a defendant, to dismiss the cross-claim of Patterson, to sever the cross-claim of Liston, and for leave to file an amended answer. By order filed October 27, 1967, this court dismissed Graff, Reiner & Smith Enterprises, Inc. as a defendant and granted leave to file an amended answer. The amended answer, containing the counterclaims which are the object of plaintiff's motion to dismiss, was filed on November 9, 1967.
COUNTERCLAIMS OF CSI NY and CSI ILL.
It is well-settled law that a suit for refund of taxes must be based on a claim previously filed with the Commissioner. Rogan v. Ferry, 154 F.2d 974 (9th Cir. 1946); Zeeman v. United States, 275 F.Supp. 235 (S.D.N.Y.1967).
Section 7422(a) of the Internal Revenue Code of 1954 states in its pertinent part as follows:
"No suit or proceeding shall be maintained in any court for the recovery of any * * * tax alleged to have been erroneously * * * collected, * * * until a claim for refund or credit has been duly filed with the Secretary or his delegate * * *."
Failure to file a claim is, therefore, a fundamental defect in jurisdiction of the district court and it may not proceed to hear such suit.
Apparently, CSI NY contends that its return for the fiscal year ending May 31, 1963 constituted such a claim. Actually, the return in question contained nothing but the word "inactive" spread vertically along the columns set aside for the recording of gross income and deductions and a "O" in item 32 entitled "Credits." Moreover, Treas.Reg. § 301.6402-3 states, in pertinent part, as follows:
No election of refund or credit, as above required, was made by the taxpayer; nothing is marked in item 35 which calls upon the taxpayer to "Enter amount of line 34 over payment you want: Credited on 1963 estimated tax or Refunded." Thus, the tax return of CSI NY for the fiscal year ending May 31, 1963 was not a claim for refund and it cannot be construed to constitute such a claim for refund.
The statement of counsel that "I know of my own knowledge that the Government was at all times familiar with the basis for the claim * * *" (affidavit of Bruno Schachner, sworn to January 22, 1968) is not sufficient to show that an informal claim was filed or that the Commissioner waived the requirement of filing a claim. Indeed, there has been no proof that any informal notice was given to or treated by the Commissioner as an informal claim for refund. If CSI NY's tax return was intended to be such a notice, it was clearly misleading. United States v. Kales, 314 U.S. 186, 62 S.Ct. 214, 86 L.Ed. 132 (1941); Rock v. United States, S.D.N.Y., January 24, 1968, 279 F.Supp. 96. Thus, CSI NY has filed neither a formal nor an informal claim for refund. CSI Ill has not been shown even to have filed a tax return for the fiscal year ending May 31, 1963, and, a fortiorari, has not filed a refund claim. Consequently, the counterclaims of CSI NY, paragraphs 14-21, and of CSI Ill, paragraphs 22-29, must be dismissed for lack of jurisdiction under Section 7422 (a). It is, therefore, unnecessary to reach the issues raised under Section 7422(e) in regard to these two counterclaims.
FOURTH COUNTERCLAIM OF CSI MASS.
Unlike CSI NY and CSI Ill, CSI Mass did submit a claim for refund in its tax return filed June 20, 1963. However, after receiving a notice of deficiency dated August 12, 1966, CSI Mass filed a petition with the Tax Court on November 7, 1966 requesting redetermination of the asserted deficiency for the fiscal year ending May 31, 1963. As a result, the government moves under IRC § 7422 (e) to dismiss this counterclaim of CSI Mass for a refund for lack of jurisdiction. Section 7422(e) provides in pertinent part as follows:
"* * * If the taxpayer files a petition with the Tax Court, the district court or the Court of Claims, as the case may be, shall lose jurisdiction of taxpayer's suit to whatever extent jurisdiction is acquired by the Tax Court of the subject matter of taxpayer's suit for refund. * * *"
CSI Mass seeks to avoid the effect of Section 7422(e) by claiming that its tax liability has been paid, that no deficiency exists and, therefore, that despite its petition the Tax Court cannot acquire jurisdiction, citing McConkey v. Commissioner of Internal Revenue, 199 F.2d 892 (4th Cir. 1952), cert. denied, 345 U.S. 924, 73 S.Ct. 782, 97 L.Ed. 1355 (1953), and Bendheim v. Commissioner of Internal Revenue, 214 F.2d 26 (2nd Cir. 1954). CSI Mass alleges that the monies seized were its property and that the seizure, in effect, constituted a payment by it of its tax liability for the fiscal year ending May 31, 1963. Consequently, it claims a refund to the extent this "payment" exceeds its tax liability for the year. Counsel for CSI Mass bases this contention on the stipulation of December 31, 1962 and on IRC § 6342(a).
Counsel's argument, though ingenious, in fact lacks the support it claims. The stipulation of December 31, 1962 merely states that the ancillary receipts (the seized property) are "the income and property of the defendant Championship Sports, Inc. (`C.S.I.')." This stipulation does not specify which of the CSI defendants, as against each other, owns the ancillary receipts. Indeed, one of the prayers of the complaint is that this court determine the proper owner of the fund. Thus, CSI Mass cannot...
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