United States v. Sawyer
| Decision Date | 02 June 1965 |
| Docket Number | Civ. A. No. 63-504-F. |
| Citation | 243 F. Supp. 462 |
| Parties | UNITED STATES of America, Plaintiff, v. Lester T. SAWYER et al., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
W. Arthur Garrity, Jr., U. S. Atty., Frances C. Kissell, William F. Looney, Jr., Asst. U. S. Attys., Thomas R. Manning, Atty., Dept. of Justice, for plaintiff.
Tiffin & Tiffin, Kenneth C. Tiffin, Boston, Mass., for defendant A. C. Sawyer.
L. T. Sawyer, pro se. (also for Diadem, Inc.)
James A. Crotty, Richard G. Crotty, Vaughan, Esty, Crotty & Mason, Worcester, Mass., for defendant Worcester County Nat. Bank.
Willard I. Shattuck, Jr., for Whirla-Whip, Co.
Edwin E. Kaarela, Fitchburg, Mass., for Fitchburg Fed. Savings & Loan Assn.
James F. Coburn, Jr., Leominster, Mass., for defendant Wm. L. Hauger.
Richard Comerford, Leominster, Mass., pro se. (also for defendant Wachusett Finance Corp.).
Mirick, O'Connell, DeMallie & Lougee, Worcester, Mass., for Town of Princeton.
This is an action by the United States to foreclose certain tax liens on the properties of Lester T. Sawyer, Alice C. Sawyer, and Diadem, Inc. Certain other parties have been joined as defendants because they claim interests in these properties. Most of the relevant facts have been stipulated and the court adopts as its findings the statements of fact set forth in the stipulations on file.
There remain for decision questions arising from defendants' contention that there has been no valid assessment of the taxes claimed by the United States, and that as to some of these properties the lien of the United States should be discharged because in view of the value of the properties and the amount of the prior claims nothing could be realized by the United States from a foreclosure sale. Certain parties also ask rulings as to the priority of certain claims in the distribution of the proceeds from any foreclosure sale which may be ordered.
Defendants argue that from 1954 to 1958 their books were inspected on six separate occasions by three different agents of the Internal Revenue Service, that there was no notification by the Secretary that additional inspection was necessary, that these repeated inspections violated 26 U.S.C.A. § 7605(b) and consequently the deficiency assessments resulting from these inspections should be held invalid. Even assuming, which is not clear from the evidence, that these visits of the agents constituted separate inspections rather than a continuation of a single investigation, and assuming also (which is also unsettled, compare Reineman v. United States, 7 Cir., 301 F.2d 267 with Philip Mangone Co., Inc. v. United States, Ct.Cl., 54 F.2d 168) that the remedy for violation of § 7605(b) is to hold the resulting assessment invalid, defendants' argument must fail for a more basic reason. The tax deficiencies which government seeks to collect in this proceeding have been determined in proceedings between these taxpayers and the United States in the Tax Court. Taxpayers in those proceedings could have raised this challenge to the validity of the assessments involved. The decision of the Tax Court is res judicata and defendants cannot here litigate the validity of the assessment of the taxes which the Tax Court has found to be due. Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 68 S.Ct. 715, 92 L.Ed. 898; Erickson v. United States, Ct.Cl., 309 F. 2d 760.
There is due to the Worcester County National Bank a total of $87,154.71, consisting of obligations of Lester and Alice Sawyer in the amount of $76,154.71 and of obligations of Diadem, Inc. in the amount of $11,000. Certain real estate owned by the Sawyers is mortgaged to the bank to secure their obligations and 100 shares of the common stock of Wachusett Finance Corporation owned by Lester T. Sawyer is pledged to the bank to secure the obligations of Diadem, Inc. These properties are also subject to tax liens but the interest of the bank is prior to that of the United States.
It is the contention of taxpayers here and of the bank that the value of all of these properties is insufficient to satisfy the prior claim of the bank. Of course, if this is so, a sale of these properties by order of the court would produce no benefit for the government and there would be merit to taxpayers' suggestion that the government's liens should be discharged and the prior lien holder left to realize what benefit it can from its security.
Taxpayers have presented evidence as to the value of the specific items of property involved. The Wachusett Finance Corporation stock is not traded on the market, but an expert on the stocks of such corporations testified that in his opinion it would be possible to negotiate a sale of these 100 shares for $10,000. As to the real estate,...
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United States v. Wynshaw
...see Moyer v. Mathas, 458 F.2d 431, 434-35 (5th Cir. 1972); Roberts v. United States, 423 F.Supp. 1314 (C.D.Cal.1976); United States v. Sawyer, 243 F.Supp. 462 (D.Mass.1965). The first question, then, is whether the Tax Court's decision was a final judgment on the merits. As noted previously......