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United States v. Bosurgi

decided: January 29, 1976.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLANT,
v.
LEONE BOSURGI AND EMILLO BOSURGI, AS EXECUTORS OF THE ESTATE OF ADRIANA BOSURGI, DECEASED, CHEMICAL BANK, AS STATUTORY EXECUTOR OF THE ESTATE OF ADRIANA BOSURGI, DECEASED, LEONE BOSURGI AND EMILIO BOSURGI, SOCIEDAD ANONIMA DE INVERSIONES COMERCIALES E INDUSTRIALES, AND BENEDICT GINSBERG, DEFENDANTS-APPELLEES, AND ESTATE OF ADRIANA BOSURGI, DECEASED, AND W. SANDERSON & SONS, ADDITIONAL DEFENDANTS TO AMENDED COUNTERCLAIM AND AMENDED CROSS-CLAIM FOR INTERPLEADER, AND CHEMICAL BANK, THIRD-PARTY PLAINTIFF, V. LEONE BOSURGI AND EMILIO BOSURGI, INDIVIDUALLY, AS EXECUTORS OF THE ESTATE OF ADRIANA BOSURGI, DECEASED, AS TRUSTEES OF A TRUST FOR THE BENEFIT OF SOCIEDAD ANONIMA DE INVERSIONES COMERCIALES E INDUSTRIALES AND AS AGENTS OF W. SANDERSON & SONS, ESTATE OF ADRIANA BOSURGI, DECEASED, SOCIEDAD ANONIMA DE INVERSIONES COMERCIALES E INDUSTRIALES, AND W. SANDERSON & SONS, THIRD-PARTY DEFENDANTS



Appeals in an action by the government for recovery of estate taxes from orders of the United States District Court for the Southern District of New York, Kevin T. Duffy, Judge (1) granting defendants' motion for summary judgment dismissing the government's complaint; (2) staying the government from proceeding with depositions and documentary discovery of certain defendants; and (3) denying the government's motion for summary judgment against the defendant Sociedad Anonima De Inversiones Comerciales E. Industriales. The orders granting summary judgment in favor of the defendants and staying pretrial discovery are reversed. The denial of the government's motion for summary judgment is affirmed. The case is remanded for further proceedings.

Kaufman, Chief Judge, Anderson and Mansfield, Circuit Judges.

Author: Mansfield

MANSFIELD, Circuit Judge:

The government brought this action against Leone Bosurgi and Emilio Bosurgi, individually and as executors of the estate of Adriana Bosurgi, and against the Chemical Bank as statutory executor of the estate of Adriana Bosurgi, to recover estate taxes allegedly due upon the estate of Adriana Bosurgi, and it now appeals from orders of the United States District Court for the Southern District of New York, Kevin T. Duffy, Judge (1) granting the motions of two later-added defendants, Sociedad Anonima De Inversiones Comerciales E Industriales ("SAICI") and Benedict Ginsberg, and of the Chemical Bank for summary judgment dismissing the government's complaint; (2) staying the government from proceeding with depositions and documentary discovery of Ginsberg and of SAICI; and (3) denying the government's motion for summary judgment in its favor against SAICI. We reverse the orders granting summary judgment in favor of the defendants and staying discovery. The denial of the government's motion for summary judgment in its favor is affirmed. The case is remanded for further proceedings consistent with this opinion.

On March 27, 1963, Adriana Bosurgi, an Italian citizen and non-resident alien of the United States, died the registered owner of a custodian account in her name with the Chemical Bank of New York which contained securities having a fair market value in excess of $1,000,000. Following her death, the account was transferred to her two sons, Leone and Emilio, Italian citizens and non-resident aliens of the United States. Upon succeeding to their mother's account, the sons entered into a custodian account agreement with the Chemical Bank with reference to the securities transferred to them from their mother's account. In 1966 the Bosurgi brothers (hereinafter referred to as "the Bosurgis") retained Benedict Ginsberg, Esq., a New York attorney, to bring suit in the Supreme Court, New York County, against the bank for damages caused by its alleged mismanagement of the custodian account owned by them. This action was settled in September 1970 by the bank's promise to pay them $215,000.

On March 2, 1971, the government, invoking jurisdiction under 26 U.S.C. § 7402(a),*fn1 brought the present action in the Southern District of New York against the Bosurgis and the Chemical Bank for $666,780 in taxes assessed against the Bosurgi estate, claiming that the brothers and the bank were liable pursuant to 26 U.S.C. §§ 2002, 2101(a), 2104(a), 2106(a), 2203, and 6901(a)(1)(A)(ii),*fn2 and seeking to foreclose on the $215,000 derived from the Bosurgi-Chemical Bank settlement. On the same date the district court in an order signed by Judge Marvin E. Frankel restrained the bank and the Bosurgis from transferring the funds. This order was modified on March 18, 1971, by Judge Bonsal, who authorized Ginsberg as custodian to invest the $215,000 in certificates of deposit, subject to the court's earlier restraint on transfer. On April 21, 1971, we affirmed this latter order.

In its answer to the government's complaint the bank added the estate of Adriana Bosurgi and Benedict Ginsberg as defendants, the latter because he claimed $78,491 in attorney's fees for representation in the Bosurgis' state court action against the bank. Jurisdiction was obtained over the Bosurgis by service of the complaint on Ginsberg as their agent and by substituted service.

In the meantime, on June 2, 1971, SAICI, although aware of the federal court action and the Southern District's custody of the $215,000, brought suit in the Supreme Court, New York County, against the Bosurgis and Ginsberg, claiming ownership of the fund in the federal court's custody by virtue of a financing agreement entered into on December 10, 1954, between SAICI, Adriana Bosurgi, and the Bosurgi brothers. On June 10, 1971, Ginsberg advised the state court that he had no authority to appear for the Bosurgis in that action. However, on July 14, 1971, he appeared in the action on behalf of the Bosurgis and himself. The Bosurgis filed an answer denying SAICI's allegation of ownership of the fund of $215,000. However, when SAICI on October 12, 1971, moved in the state court for summary judgment granting the relief demanded by it and consolidating the action with the Bosurgis' 1966 action against the bank, the Bosurgis, represented by Ginsberg, did not oppose these motions except insofar as Ginsberg sought an order requiring payment to him of the $78,491 he claimed as his fee.

SAICI's motion for summary judgment in its state court action was based principally on (1) what purported to be a December 10, 1954, trust agreement between it, Adriana Bosurgi, and the Bosurgi brothers, providing that in consideration of SAICI's financing of a plan for production by W. Sanderson & Sons of citrus by-products in Argentina, the financing would be repaid gradually through deposits of dollars or investments in a New York bank account to be maintained by Mrs. Bosurgi in a fiduciary capacity for SAICI, (2) purported letters from the Bosurgis to SAICI during the period 1955-1962 reporting to the latter with respect to the accounts between them, some of which refer to a fiduciary deposit with the Chemical Bank held by the Bosurgis for SAICI, and (3) a letter from Ginsberg to SAICI's counsel dated September 14, 1971, to the effect that his clients, the Bosurgi brothers, had authorized him to inform SAICI that the documents relied upon by SAICI were "true copies of the originals, and that they were duly executed by the persons whose signatures appear thereon."

While SAICI's motion was pending in the state court action, Ginsberg, in opposing discovery by the government of him in the federal action, submitted an affidavit dated October 12, 1973, to the effect that on August 12, 1971, he had been informed by the Bosurgis that they could not supply any information that would form a basis for opposition to SAICI's motion for summary judgment.*fn3 Notwithstanding the decision by the Bosurgis and Ginsberg not to oppose SAICI's state court claim of ownership, Justice Kapelman denied SAICI's motion because of the non-joinder of the United States as a party and the federal court's jurisdiction over the res, the $215,000 fund. Upon appeal the Appellate Division, First Department, on November 8, 1973, reversed Justice Kapelman's decision, pointing to the fact that the documentary evidence relied upon by SAICI was conceded by the Bosurgis and Ginsberg to be authentic and conclusively established that the fund with the bank represented a trust established under the December 10, 1954 agreement, leaving no genuine issue of fact. The court further stated that the result would not affect the federal government's tax lien on the fund.

In the meantime, SAICI having been unsuccessful in seeking to set aside service upon it of a complaint in the federal suit, Ginsberg and SAICI obtained from Judge Duffy a stay of the government's discovery of them in the federal action. SAICI and Ginsberg thereupon moved for summary judgment dismissing the government's complaint, relying principally upon the evidence which had persuaded the Appellate Division to reverse Justice Kapelman in the state court action.

The government opposed SAICI's motion and itself filed a motion for summary judgment in its favor. In support of its own motion and in opposition to that of SAICI and Ginsberg, the government introduced records of the Chemical Bank showing that on May 13, 1954, which was more than six months before the financing agreement relied upon by SAICI, Adriana Bosurgi had opened up the securities account with the Chemical Bank by a cash deposit of $400,000, entering into a Custodian Account Agreement, § 5 of which designated her as the "owner" of the account, which was accordingly registered in her name as owner. This registration continued until her death in 1963. The bank's records further showed that in April, 1963, her sons, as transferees of their mother's account, entered into a custodial agreement with the bank in which they impliedly represented themselves to be the owners by authorizing the bank as their agent to execute "all necessary certificates of ownership which may be required by the income tax regulations of the United States." The fund of $215,000 upon which the government seeks to foreclose in the federal action was derived from the Bosurgi account as the result of the brothers' settlement of their mismanagement claim against the bank.

On February 25, 1975, Judge Duffy granted the motions of SAICI and Ginsberg for summary judgment and denied the government's cross-motion for summary judgment. United States v. Bosurgi, 389 F. Supp. 1088 (S.D.N.Y.1975). His opinion rested heavily on the Appellate Division's decision which was predicated on Ginsberg's affidavit to the effect that the Bosurgis had conceded that the December 10, 1954, financing agreement and subsequent correspondence between SAICI and the Bosurgis were authentic and that the money on deposit with the Chemical Bank was held by the Bosurgis as trustees for the benefit of SAICI. The counter evidence offered by the United States was held by Judge Duffy not to be inconsistent with the existence of the December 10, 1954, trust agreement. Accordingly he concluded that the state court record and decision was entitled to ...


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