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KARNO-SMITH CO. v. MALONEY

DISTRICT COURT, D. NEW JERSEY


August 14, 1939

KARNO-SMITH CO.
v.
MALONEY, Collector of Internal Revenue

The opinion of the court was delivered by: FORMAN

FORMAN, District Judge.

The facts in this case, as given below, were stipulated, and the case was tried without a jury.

On October 21, 1931, the plaintiff, general contractor, entered into a contract with the State House Commission acting for the State of New Jersey for the construction of boulevards and approaches to the State House Addition and War Memorial Building at Trenton, New Jersey. On November 16, 1931, the plaintiff entered into a contract with the New Jersey Brick and Supply Co., Inc., to furnish and deliver all granite for the undertaking. The New Jersey Brick and Supply Co., Inc., in turn, purchased the granite from the Cold Spring Granite Co. The granite so purchased actually went into the operation.

 Pursuant to the provision of the Statute of New Jersey, entitled, "An Act to protect persons performing labor or furnishing materials for the construction, alteration or repair of public works", approved Feb. 16, 1918 (N.J.Laws of 1918, page 203 [N.J.S.A. 2:60-207 et seq.]), plaintiff, as general contractor, gave a bond conditioned, among other things, for the payment by all subcontractors for all materials furnished in the construction of said public works.

  The New Jersey Brick and Supply Co., Inc., failed to pay its account with the Cold Spring Granite Co. for the material used in this public work, and, on September 3, 1932, the Cold Spring Granite Co. notified Karno-Smith Co. by letter that there was a balance due it from the New Jersey Brick and Supply Co., Inc., and that Karno-Smith Co. should hold said fund until further advice from it. At the time of the completion of the construction, Karno-Smith Co. had on hand $5,456.26 as the unpaid balance due under its contract with the New Jersey Brick and Supply Co., Inc.

 Now, the New Jersey Brick and Supply Co., Inc., also owed the United States Government money for income tax for the year 1930, and on February 28, 1932, a warrant for distraint was served upon the New Jersey Brick Co. for the balance of its 1930 tax. This warrant remained unsatisfied, and on September 10, 1932, a notice of tax lien was recorded in the office of the Clerk of Mercer County, New Jersey, which disclosed that the New Jersey Brick and Supply Co. hereinafter called the taxpayer, was indebted to the United States in the sum of $1,145.67 for Income Taxes for the year 1930.

 On September 12, 1932, the defendant's predecessor in office served a notice upon the plaintiff in the following language:

 "Notice of Levy on Bank Deposits

 "United States of America,

 "First Collection District

 "State of New Jersey

 "To Karno-Smith Company,

 (Name of bank with which taxpayer has money on deposit)

 "At Trenton, N.J.

 "You are hereby notified that there is now due, owing, and unpaid from New Jersey Brick & Supply Company, Inc., Hunt Bldg., Trenton, N.J., to the United States of America the sum of One Thousand, One Hundred, Forty-five Dollars and Sixty-seven Cents Tax, Interest at 1% per month began 9-15-31 dollars ($1145.67) as and for an internal revenue tax.

 "You are further notified that all property and rights to property now in your possession and belonging to the aforesaid New Jersey Brick & Supply Company, Inc., and all sums of money owing from you to the said New Jersey Brick & Supply Company, Inc., are hereby seized and levied upon for the payment of the aforesaid tax, together with penalties and interest, and demand is hereby made upon you for the sum of One Thousand, One Hundred, Forty-five Dollars and Sixty-seven Cents Tax, Interest at 1% per month began 9-15-31 dollars ($1145.67) of the amount now owing from you to the said New Jersey Brick & Supply Company, Inc., for such lesser sum as you may be indebted to him, to be applied in payment of the said tax liability.

 "Dated at Camden, N.J., this 10th day of September, 1932.

 "E. L. Sturgess,

 "Collector of Internal Revenue."

 On that date, the Vice-President of the plaintiff acknowledged receipt of the above notice, known as Form #668-A.

 The taxpayer had likewise failed to pay its income taxes for the year 1931, and on February 18, 1933, a warrant for distraint for income taxes for that year, in the sum of $739.93, was served upon the taxpayer.

 Notice of the lien of these taxes was likewise recorded in the office of the Clerk of Mercer County, New Jersey, on the same day.

 On February 21, 1933, a Form #668-A was served upon the plaintiff for these taxes, similar to the service of September 12, 1932, demanding the said sum of $739.93 from the plaintiff. The receipt of this notice was acknowledged on the said February 21, 1933, by the assistant secretary of the plaintiff. The plaintiff failed to comply with the notices and demands served upon its officers, and on September 18, 1933, another notice of level and demand on Form #668-C was served upon the vice-president of the plaintiff for the 1930 tax in the sum of $1,145.67, and on the same date, a similar notice and demand was served upon the assistant secretary of the plaintiff for the 1931 tax of $739.93. On February 27, 1934, the plaintiff paid, pursuant to these demands, the sum of $2,415.55 which was made up as follows: Warrant for distraint No. 24,767 for the year 1930, balance of tax $1,145.67 Interest at 1% per month 370.65 Warrant for distraint No. 25,453 for the year 1931, balance of tax 739.93 Interest at 1% per month 150.90 Filing and recording two Federal tax liens 4.20 Discharging two Federal tax liens 4.20 $2,415.55

19390814

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