Appeal from an order of the United States District Court for the Eastern District of New York, Hon. Walter Bruchhausen, J., denying defendants' motion, pursuant to Fed. R. Civ. P. 60(b)(6), to vacate a summary judgment in a tax case. Affirmed.
Friendly, Mulligan and Gurfein, Circuit Judges.
This is an appeal from an order of the United States District Court for the Eastern District of New York, Hon. Walter Bruchhausen, J., filed on October 6, 1975, denying the motion of defendants, pursuant to Fed. R. Civ. P. 60(b)(6), to vacate a summary judgment against them in favor of the United States in an action arising out of an alleged tax deficiency. We affirm.
The tax deficiency imposed here arose out of Salvatore Cirami's operation in the early 1960's of Air Freight Haulage Co., which was engaged in the business of supplying truck transportation service. Since Cirami operated the company as a sole proprietorship, the income and expenses of the business were reflected on his personal federal income tax returns, which he filed jointly with his then-wife. The returns for the years 1961-1963 inclusive were audited by the Internal Revenue Service, resulting in wholesale disallowances of claimed business expenses and deductions which allegedly were not substantiated.*fn1 Accordingly, on September 14, 1966 a statutory notice of deficiency reflecting the disallowances was sent by IRS to the Ciramis; the total tax deficiency assessed was $153,087.34, plus a penalty of $19,578.91. One week later Cirami's accountant, Louis N. DeStefano, wrote to the IRS's district director for New York protesting the IRS's determination of deficiency and requesting "an informal conference and/or a re-audit." In response DeStefano received an IRS form letter acknowledging receipt of his communication, and advising him that it would be given "proper consideration" and that he would be "advised as to the action taken at a later date." Appellants now claim that, in reliance upon this response, no petition was ever filed by them in the Tax Court, and apparently no further communication ensued. On March 3, 1967 a formal assessment was made by IRS against the appellants in the amounts set forth in the statutory notice of deficiency, plus interest.
On February 28, 1973, almost six years later, IRS instituted an action in the Eastern District of New York against appellants and their son James, in order to reduce the stated tax assessments to judgment, to set aside allegedly fraudulent conveyances of property made by Salvatore Cirami to his son, and for other ancillary relief. To defend the action the Ciramis retained the services of Peter R. Newman, Esq., of Syosset, New York, who was recommended by the Ciramis' accountant DeStefano and who himself (according to the government's attorney at oral argument of the appeal) was a former IRS agent. On March 20 Newman filed an answer on behalf of his clients; essentially the answer consisted of a general denial and a counterclaim for taxes "illegally and erroneously collected."*fn2
On December 28, 1973, the government moved forpartial summary judgment against the Ciramis, pursuant to Fed. R. Civ. P. 56;*fn3 the motion was supported by an affidavit from the IRS district director, setting forth the amounts assessed, and by a memorandum of law which attempted to demonstrate that the defendants' general denial contained in their answer did not overcome the presumptive correctness of the assessments made against them. No opposition to the motion was ever filed on defendants' behalf. As a result, Judge Bruchhausen granted partial summary judgment "in all respects" by order dated March 18, 1974; the order also stated that "copies hereof are being forwarded to the attorneys for the respective parties." Judgment was entered on June 12, 1974 against Salvatore and Margaret Cirami in the total amount of $270,792.43, plus interest from the date of entry. The judgment itself again noted that no opposition was filed to the government's motion for partial summary judgment. Notice of entry of judgment was filed on July 5.
Thereafter, appellants retained new counsel. According to his brief on this appeal, Salvatore Cirami substituted Carl Mione, Esq. as his counsel on August 28, 1974.*fn4 A notice of appearance for Margaret Cirami was filed on December 23, 1974 by the firm of Wagman, Cannon & Musoff; however, according to the government, that firm advised IRS on October 4, 1974 that it was representing Margaret Cirami.
On May 1, 1975, appellants, through their new attorneys, filed a motion pursuant to Fed. R. Civ. P. 60(b)(6) to vacate the partial summary judgment entered for the government.*fn5 In support of the motion, on July 1 appellants introduced records and papers of Air Freight Haulage Co., plus affidavits from two accountants (Bernard Zipern and Seymour Unterberg) who had audited the company's books during the years in question. These affidavits sought to explain some of the company's record-keeping procedures, and in one of them, accountant Unterberg said that his findings "indicate that, with minor exception, all of the business deductions claimed by Salvatore and Margaret Cirami on their joint 1961, 1962 and 1963 income tax returns are fully substantiated by the available books and records of Air Freight Haulage Co." In addition the notice of motion itself was accompanied by an affidavit of Salvatore Cirami, dated April 28, 1975, in which Cirami claimed that "it was not until my present attorney, Mr. Mione took possession of Mr. Newman's files in this matter did I know that the United States had taken summary judgment against my former wife Margaret and myself."
The government filed memoranda in opposition to appellants' motion to vacate the earlier judgment. On October 6, 1975, Judge Bruchhausen entered an order denying the motion, essentially on the grounds that appellants failed to meet the requirement of extraordinary circumstances necessary for relief under Rule 60(b)(6), and that appellants did not make their motion within a reasonable time, as is also required by the Rule.*fn6 This appeal followed.
Rule 60(b) of the Federal Rules of Civil Procedure permits a party to be relieved from a final judgment basically for the following reasons (corresponding to the subdivisions of the Rule): (1) "mistake, inadvertence, surprise, or excusable neglect"; (2) "newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b)"; (3) "fraud . . . misrepresentation, or other misconduct of an adverse party;" (4) "the judgment is void"; (5) "the judgment has been satisfied, released, or discharged . . ." or (6) "any other reason justifying relief from the operation of the judgment." The motion made below was pursuant to subdivision 6 of Rule 60(b) which while general in terms is properly applicable only upon a showing of "exceptional circumstances." Rinieri v. News Syndicate Co., 385 F.2d 818, 822 (2d Cir. 1967); Ackermann v. United States, 340 U.S. 193, 202, 95 L. Ed. 207, 71 S. Ct. 209 (1950).
The motion made below was based upon a three-page affidavit of Salvatore Cirami, sworn to on April 28, 1975, which in abbreviated form acknowledges that he operated the business described in the calendar years 1961, 1962 and 1963; that his business books and records were maintained by an accountant; that the receipts and business expenses of his business were reflected in his joint income tax return filed with the Internal Revenue Service and prepared by his accountant; that, on September 14, 1966 he was forwarded a letter from the District Director of Internal Revenue which, he has recently been advised, was a statutory notice of deficiency; that he gave the notice to his accountant DeStefano who advised that he would take appropriate action; that to the best ...