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YANNICELLI v. NASH

October 31, 1972

Michael YANNICELLI, Plaintiff,
v.
Roland H. NASH, Jr., District Director of Internal Revenue for the State of New Jersey, Defendant


Coolahan, Chief Judge.


The opinion of the court was delivered by: COOLAHAN

The plaintiff in this action, Michael Yannicelli, seeks to suppress a jeopardy assessment lien and levy for unpaid gambling taxes placed upon money illegally seized by the United States. The suit raises several significant issues of law concerning the Internal Revenue Service (IRS) and its jeopardy assessment procedures.

 STATEMENT OF FACTS

 On June 9, 1971 Michael Yannicelli was arrested by United States Marshals at Newark Airport on charges of assaulting a federal officer, 18 U.S.C.A. § 111, and traveling in interstate commerce with intent to distribute gambling proceeds, 18 U.S.C.A. § 1952. Contemporaneous with the arrest, the Marshals seized $58,930 discovered within Yannicelli's suitcase. On July 6, 1971 the District Director of the Manhattan District of the IRS made a jeopardy assessment, pursuant to Section 6861 of the Internal Revenue Code of 1954 (I.R.C.), against Yannicelli for unpaid federal income taxes for the year 1969. On the same day the IRS District Director for the State of New Jersey served a Notice of Levy on the United States Marshal, Newark, New Jersey, then in possession of Yannicelli's money, in the amount of $58,930.

 Sometime after August 25, 1971 Yannicelli received a letter from the IRS dated August 18, 1971. This "deficiency notice" stated that the IRS had determined that Yannicelli had realized unreported additional taxable income from "gambling operations" in 1969 in the amount of $90,800. *fn1" It also informed him that a "jeopardy assessment" had been made against him to the extent of $58,930, and that he could contest this determination by filing a petition within 90 days with the Tax Court.

 On August 25, 1971, prior to receiving the formal tax deficiency and jeopardy assessment notice, Yannicelli filed a complaint in this Court to set aside the July 6th tax lien and levy.

 During this period a criminal action was brought before this Court involving Yannicelli, United States v. Michael Yannicelli, Criminal No. 468-71. In the course of the criminal proceeding a motion was made to suppress evidence and was granted under Rule 41(e) of the Federal Rules of Criminal Procedure (F.R.C.P.). On October 8, 1971 this Court directed that all of the items illegally seized from Yannicelli on June 9, 1971 be returned to him, with the exception of the cash so seized, on which a tax lien had been placed by the United States.

 Yannicelli now brings a civil action before this Court for the release and return of his money, claiming that the jeopardy assessment lien and levy was an "illegal forfeiture" in violation of his Fourth and Fifth Amendment rights.

 Plaintiff has also filed a suit in the United States Tax Court seeking a refund and redetermination of the 1969 deficiency assessment. That suit is presently awaiting trial.

 JURISDICTION

 I

 Plaintiff's suit poses several intricate jurisdictional, statutory, and constitutional questions. The first issue to be considered is whether the pending action in the Tax Court entirely deprives this Court of jurisdiction.

 Normally a taxpayer may petition the Tax Court for a redetermination of a deficiency after notice of the deficiency is given. This stays collection of the tax until the decision of the Tax Court becomes final. If the collection is undertaken earlier, it may be enjoined by a proceeding in the proper court. I.R.C. § 6213(a). However, the statutory restriction upon collection of the tax does not apply to jeopardy assessments, which may not be stayed unless a bond is filed. I.R.C. § 6863(a); United States v. Clinton, 232 F. Supp. 957 (D.C.N.Y.1964). The record before the Court does not indicate that the plaintiff has filed a stay bond. Neither does the record indicate that plaintiff has sought an administrative abatement of the jeopardy assessment. *fn2"

 In general, once a taxpayer seeks relief in the Tax Court he may not bring suit in any court for the recovery of any part of the tax, except to enforce a final decision of the Tax Court. I.R.C. § 6512(a). Consequently, any decision concerning plaintiff's ultimate federal tax liability status for 1969 is an issue properly within the jurisdiction of the Tax Court to decide. However, the plaintiff in this action does not bring an ordinary tax refund suit before the Court, nor does he question the tax deficiency assessment as such. In limiting his challenge to the legality of the method in which a jeopardy assessment was enforced against him, in alleged violation of his Fourth and Fifth Amendment rights, the Court feels that it is not precluded by the pending Tax Court action from reviewing this issue.

 II

 As a general rule suits involving federal taxes must be maintained against the United States, and not against individual Government employees who have no personal liability or interest regarding the federal tax revenues. Yet plaintiff's complaint names Roland H. Nash, Jr., IRS District Director for the State of New Jersey, as defendant in this action. In determining whether the United States is the proper party defendant in this action the Court is obliged to consider "the issues presented and the effect of the judgment which can be entered in response to those issues." Jones v. Tower Production Co., 138 F.2d 675, 677 (10 Cir. 1943).

 The plaintiff claims that the IRS District Director in New Jersey placed an unlawful tax lien and levy on his money. (The IRS District Director in Manhattan made the actual jeopardy assessment determination). However, the money in question has for all intents and purposes become part of the United States Treasury. Since a judgment in plaintiff's favor would directly affect the interests of the United States, the United States should have been designated the party defendant in this action. The courts have consistently held that the United States is an indispensable party to any action to remove or cancel an income tax lien. Jones v. Tower Production Co., supra ; Seff v. Machiz, 246 F. Supp. 823 (D.Md.1965); Czieslik v. Burnet, 57 F.2d 715 (E.D.N.Y.1932).

 Nevertheless, under the liberal spirit of the Federal Rules of Civil Procedure, the Court does not feel that plaintiff's failure to properly designate the United States as the party defendant in this action is fatal to the complaint. The Court will view the action as being directed against the United States, and will regard IRS District Director Nash as only the nominal party of record.

 III

 Under the rule of sovereign immunity, a suit against the United States is barred unless the United States specifically waives its immunity by statute and consents to be sued. Larson v. Foreign Domestic Corp., 337 U.S. 682, 69 S. Ct. 1457, 93 L. Ed. 1628 (1949); Moore Ice Cream Co. v. Rose, 289 U.S. 373, 53 S. Ct. 620, 77 L. Ed. 1265 (1932). Consequently, this Court can hear plaintiff's action only if there is an appropriate federal statute indicating a waiver of sovereign immunity and conferring the necessary subject matter jurisdiction.

 Under 28 U.S.C.A. § 1340 the District Courts have original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue. Although the statute is only a grant of general jurisdiction, and not a waiver by the United States of its sovereign immunity, it does authorize proceedings in which the United States waives its immunity under some other statutory provision(s). Quinn v. Hook, 231 F. Supp. 718 (D.C.Pa. 1964), aff'd., 341 F.2d 920 (3 Cir. 1965); Broadwell v. United States, 234 F. Supp. 17 (D.C.N.C. 1964), aff'd., 343 F.2d 470 (4 Cir. 1965), cert. denied, 382 U.S. 825, 86 S. Ct. 57, 15 L. Ed. 2d 70 (1965).

 Since the plaintiff attacks the legality of the tax collection process, his suit would initially appear to invoke the provisions of 28 U.S.C.A. § 1346(a) (1). Under this statute the District Courts have original jurisdiction, concurrent with the Court of Claims, over "Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws. . . ." However, before a taxpayer can sue the Government under § 1346 he must first comply with several procedural prerequisites.

 I.R.C. § 7422(a) provides that "No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary or his delegate." The record before the Court does not indicate that the plaintiff has filed an administrative claim for refund (Form #843). The taxpayer has the burden of proving that the refund claim has been timely filed. United States v. Rochelle, 363 F.2d 225 (5 Cir. 1966); 10 Mertens, Federal Income Taxation, § 58A.06 (1964 ed.). The fact that the plaintiff in this suit has filed a claim for a refund and redetermination of the deficiency assessment with the Tax Court, under I.R.C. § ...


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