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UNITED STATES v. MAZZARA

February 8, 1982

UNITED STATES of America, Plaintiff,
v.
James R. MAZZARA and Ruth D. Mazzara, Defendants



The opinion of the court was delivered by: SAROKIN

This matter is before the court on motion of plaintiff United States for partial summary judgment against defendants Dr. James Mazzara and his wife, Ruth Mazzara.

Dr. James Mazzara, a surgeon, is a chronically delinquent taxpayer. His unpaid assessments from 1968 through 1978 are alleged to be in excess of $ 165,000.

 Because Dr. Mazzara's tax obligations were seriously in arrears, the government, in 1973, forced the sale of Dr. Mazzara's interest in the house owned jointly by the doctor and his wife. At the sale, Mrs. Mazzara purchased her husband's interest for $ 5,000, thereby acquiring the property in her name only. Later in 1973, the Mazzaras sold the house, realizing about $ 45,000 from the sale. Using the proceeds obtained from the sale of the house, the Mazzaras, about one year later, purchased the current residence. Title to the house was taken in Mrs. Mazzara's name only, but the mortgage was executed in the joint names of Dr. and Mrs. Mazzara.

 Mrs. Mazzara admits that from 1967 through 1978, she had no independent source of income and that she relied on her husband to provide all living expenses. From 1972 through 1978, Dr. Mazzara transferred substantial sums of money to his wife. These monies were allegedly transferred because Ruth Mazzara was a better manager of finances than was her husband. Mrs. Mazzara claims that all monies received by her were applied to the support of the family, to the mortgage and maintenance of the house, to satisfy debts incurred in the course of Dr. Mazzara's business and to extinguish part of Dr. Mazzara's tax liability.

 The United States seeks to reduce to judgment Dr. Mazzara's tax liability for the years 1968 through 1972 and 1974 through 1978. Dr. Mazzara's taxes for 1973 have already been paid by Mrs. Mazzara with funds given to her by her husband. In addition to seeking a judgment against Dr. Mazzara, the government seeks to hold Mrs. Mazzara liable as a fraudulent transferee for an amount which is the lesser of Dr. Mazzara's tax liability for the years 1968 through 1977, or the amount of the transfers made by the doctor to his wife. Because the transfers ceased in 1978, the United States is not attempting to hold Mrs. Mazzara liable for her husband's 1978 taxes.

 The government does, however, seek to sell the Mazzara residence and apply Dr. Mazzara's portion of the proceeds to his indebtedness. The government contends that Mrs. Mazzara not only used her husband's money to make payments on the mortgage and maintain the house, but also that she used his money to purchase his interest in her name at the distraint sale. Because Dr. Mazzara has an interest in the current residence and is indebted to the government, the Internal Revenue Service placed a nominee lien on the residence in September 1978, in the name of Ruth Mazzara. Although Mrs. Mazzara denies that she used Dr. Mazzara's money to purchase his interest in the old house, she has not indicated the source of the money for the purchase.

 The defendant argues that the United States is not entitled to summary judgment against Dr. Mazzara because it has not established the accuracy of its claim for interest and penalties, nor has it explained its method of calculation. Defendant also argues that plaintiff is not entitled to summary judgment against Mrs. Mazzara because the transfers were made to her to satisfy Dr. Mazzara's continuing obligation of support to his family and thus constituted a satisfaction of an antecedent debt, which is not a prohibited transaction under New Jersey's fraudulent conveyance statute.

 Defendant further contends that Mrs. Mazzara, as manager of her husband's funds, was an agent for him and thus was entitled to pay her husband's debts without thereby becoming a fraudulent transferee. In addition, defendant contends that the government delayed in pursuing its claim against Mrs. Mazzara and, therefore, is now barred by laches. Defendant also maintains that although the government knew or should have known of the transfers in 1972, it nevertheless allowed them to continue so that Mrs. Mazzara's liability would increase substantially. Thus, defendant contends, the government has unclean hands and should not be permitted to pursue its equitable claim.

 Finally, Mrs. Mazzara seeks to prohibit the sale of the house. She argues that even if title is held jointly by herself and her husband, the government cannot order a sale of the property, because it is held by the entirety and because she owes nothing to the government.

 DISCUSSION OF THE LAW

 Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment shall be granted if the record discloses that there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Defendants do not deny that Dr. Mazzara's tax payments are in arrears; only the amount of his liability is in dispute. The plaintiff has filed with the court an affidavit, signed by an officer of the Internal Revenue Service, which details Dr. Mazzara's total tax liability, including interest and penalties. This affidavit is entitled to a presumption of correctness, Psaty v. United States, 442 F.2d 1154, 1159 (3d Cir. 1971), and unless the defendant places into the record evidence of an error in the computation, the defendant will not survive a motion for summary judgment. Here, the defendant has failed to demonstrate any problem with the methodology used by the IRS in its computation of Dr. Mazzara's total tax liability. Defendant only contends that the burden is upon the government to establish the accuracy of its claim for unpaid tax assessments. This contention is erroneous. Id. Therefore, the court will enter judgment against Dr. James Mazzara, in the amount of $ 270,982.87 for his unpaid tax liabilities, including penalties and interest, for the years 1968 through 1972, and 1974 through 1978. The court will also enter judgment against Dr. Mazzara for penalties accruing at the rate of $ 249.44 monthly beginning on June 16, 1981, together with interest on the total unpaid liability of $ 52.94 per day from June 12, 1981.

 The court must next determine whether Mrs. Mazzara is liable to the government as a fraudulent transferee of her husband's funds. This determination is controlled by state law. Commissioner v. Stern, 357 U.S. 39, 78 S. Ct. 1047, 2 L. Ed. 2d 1126 (1958).

 Fraudulent conveyances are prohibited in New Jersey by statute:

 
Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is ...

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