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UNITED STATES v. CLINTON

August 24, 1966

United States of America
v.
John Clinton, Margaret Clinton, State of New York Tax Commission, et al., Defendants


Cannella, District Judge.


The opinion of the court was delivered by: CANNELLA

CANNELLA, District Judge

This action was instituted on June 24, 1957 to foreclose a lien for unpaid taxes, due and owing from John and Margaret Clinton, against a fund in the amount of $23,545.17 held by the Police Property Clerk of the City of New York. The plaintiff claims the sum of $11,825.47 plus interest and penalties out of the fund. Judgment is hereby rendered for the plaintiff against all the defendants and it is ordered that defendant Rosetti, the Police Property Clerk, pay over to the United States Government out of the fund in question, an amount sufficient to pay the principal, interest and penalties due on account of the plaintiff's lien. It is further ordered that any sum remaining out of the fund after satisfaction of the plaintiff's lien is to be paid over to the defendant, State of New York Tax Commission, which has a claim for unpaid taxes against defendant John Clinton.

 This court has jurisdiction in this case by virtue of 26 U.S.C. § 7403, which provides for the bringing of a civil action to enforce a lien or to subject property to the payment of taxes due.

 This case was tried non-jury by the court on January 20, 1966.

 The court finds from the evidence adduced and the undisputed facts that on February 26, 1957, the defendant John Clinton was arrested by the New York City Police. Pursuant to a search warrant the police recovered monies, bank books and records leading to safe deposit boxes, whether in Clinton's name or someone else's, and as a result seized $313.00 from the person of John Clinton; $950.00 from the home of Rocco Monfredo; $14,500.00 from a safety box in the Long Island City Savings Bank in the names of John and Margaret Murray; and $8100.00 from a safety box in the Chase Manhattan Bank, in the name of Frank Vitarelli. The total fund of $23,863.00 was deposited with defendant Thomas E. Rosetti, Police Property Clerk, on March 11, 1957.

 On March 24, 1957, John Clinton was indicted for violation of Section 580 of the New York Penal Law and Sections 340 and 357 of the Banking Laws of New York. On April 25, 1957, he pleaded guilty to two counts of the indictment, both of which were misdemeanors.

 On March 28, 1957, an assessment for unpaid taxes was made by the District Director of Internal Revenue against John and Margaret Clinton. Notice of lien was duly filed with the Registrar of the City of New York, New York County, on March 29, 1957. A notice of levy was served upon the Police Property Clerk on March 29, 1957. On May 17, 1965, on the basis of the above mentioned assessment, a judgment was entered in the amount of $11,825.47, plus interest and penalties in the Tax Court. *fn1" The amount represents the taxes owing and due to the plaintiff from defendants John and Margaret Clinton.

 The New York State Tax Commission assessed unpaid taxes against defendant John Clinton in the amount of $55,190.50, plus interest and filed a warrant for such state taxes with the Clerk of the County of New York on April 1, 1957. The Commission thus also claims a lien on the fund in the possession of the Police Property Clerk.

 On April 8, 1957, Matthew H. Brandenburg, who was retained as counsel by the Clintons, served notice of attorney's lien on the Police Property Clerk.

 The Police Property Clerk refused to honor the levy served on him by the plaintiff. It was the Property Clerk's position that the money composing the fund was used in illegal activities and thus defendant John Clinton has no property in such fund, under New York law. He also claims that under Section 435-40 of the Administrative Code of the City of New York, title to the fund properly vests in the Police Property Clerk. It is the Property Clerk's further contention that the search warrant under which the fund was seized was validly issued and the seizure was lawful in every way.

 The plaintiff takes the position that the Property Clerk has no claim to said funds since his claim must rest on Section 435-40 of the Administrative Code of the City of New York, which is allegedly unconstitutional as a deprivation of the right to property without due process of law under the Fifth and Fourteenth Amendments to the United States Constitution. The plaintiff further contends that the fund properly belongs to defendant John Clinton and is not the proceeds of illegal activity on the part of John Clinton.

 The position of defendants John and Margaret Clinton is that the search warrant was improperly issued and executed and the Police Property Clerk has no claim to the fund in question since it was obtained through illegal search and seizure in violation of the Fourth and Fourteenth Amendments to the United States Constitution. They further contend, as does the plaintiff that the fund is theirs and not the proceeds of illegal activity, and that Section 435-40 of the Administrative Code of the City of New York is unconstitutional.

 A pivotal issue in this case is whether or not the fund held by the Police Property Clerk belongs to defendant John Clinton. For the plaintiff's federal tax lien to attach, it is necessary that the fund belong to defendant John Clinton. *fn2" 26 U.S.C. § 6331(a).

 As to the $313.00 taken from the person of defendant John Clinton, there arises a presumption that this money belongs to him. The burden is on the Police Property Clerk to rebut that presumption. United States v. Leuci, 160 F. Supp. 715 (E.D.N.Y. 1958); Norris v. Camp, 144 F.2d 1 (10th Cir. 1944). The Police Property Clerk introduced no evidence during the trial which rebutted the ...


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