Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

HARTWICK COLLEGE v. UNITED STATES

May 31, 1984

HARTWICK COLLEGE, AURELIA OSBORN FOX MEMORIAL HOSPITAL SOCIETY, and RAILROAD AND LOCAL MEN's CHRISTIAN ASSOCIATION OF ONEONTA, Plaintiffs, v UNITED STATES OF AMERICA, Defendant.


The opinion of the court was delivered by: MCCURN

NEAL P. McCURN, D.J.

MEMORANDUM-DECISION & ORDER

 This is an action by four residuary beneficiaries under the Last Will and Testament of Jessie S. Dewar to recover an overpayment of income taxes by the estate for the estate's taxable year ending April 30, 1977. The residuary beneficiaries, all of which are chartable organizations, contend that the entire amount of income earned by the estate qualified for the deduction provided by section 642(c)(2) of the Internal Revenue Code, 26 U.S.C. § 642(c)(2), which states, in pertinent part:

 § 642. Special rules for credits and deductions.

 . . . .

 (c) Deduction for amounts paid or permanently set aside for a charitable purpose.

 . . . .

 (2) . . . In the case of an estate . . . there shall also be allowed as a deduction in computing its taxable income any amount of the gross income, without limitation, which pursuant to the terms of the governing instrument is, during the taxable year, permanently set aside for [specified charitable purposes].

 After oral argument on the parties' cross-motions for summary judgment, the court ruled from the bench in favor of the plaintiffs, and an Order was entered on March 15, 1984. Although no Memorandum-Decision accompanied the Order, the substance of the court's opinion, as expressed from the bench, was that the residuary clause conveyed the testatrix" intent to permanently set aside the estate income for charitable purposes; that in the circumstance presented here, where the charitable residuary beneficiaries would have received some of the income but for the imposition of an income tax, such income should be deemed "permanently set aside for charitable purposes within the meaning of section 642(c)(2).

 The government now moves the court to reconsider its Order granting plaintiffs summary judgment, primarily on the ground that the plaintiffs should be collaterally estopped from arguing their entitlement to a deduction under section 642(c)(2) due to a prior adverse determination on that issue by the Surrogate's Court of Otsego County, New York.

 I.

 The Surrogate's Court Order arose out of a proceeding commenced by the co-executors of the Estate of Jessie Dewar in November of 1978 for a judicial settlement of accounts. The charitable residuary beneficiaries -- who are the plaintiffs here -- filed objections and contended that the co-executors failed to claim the charitable deduction that the estate was entitled to under 26 U.S.C. § 642(c)(2), thereby improperly overpaying taxes on the estate income for 1977. In a lengthy opinion issued December 29, 1978, Hon. Robert A. Harlem, Surrogate, addressed the question of the availability of a deduction under § 642(c)(2), in order to determine whether the co-executors should be surcharged or directed to file amended returns. Relying largely on the fact that the Dewar Will provided for taxes to be paid before a residuary estate could be computed, and that this instance such payment resulted in the unavailability of funds for the residuary estate, the Surrogate concluded that the income earned by the estate in 1977 was not "permanently set aside" for a charitable organization within the meaning of § 642(c)(2), and it was therefore not imporper for the co-executors to decline to claim the deduction. His determination was qualified, however, by his statement that:

 It is appreciated that the jurisdiction of this Court does not extend to determinations made concerning the federal taxability of an estate's assets or income, and it is not intended hereby to either create a precedent or impose the will of the court upon subjects over whom the court has not jurisdiction. Decision at 16.

 The first question presented by this motion is whether plaintiffs are now precluded from asserting their right to a § 642(c)(2) deduction in this federal court action to recover an overpayment of income taxes.

 As the Supreme Court explained in United States v. Mendoza, 464 U.S. 154, 104 S. Ct. 568, 571, 78 L. Ed. 2d 379 (1984);

 Under the judicially-developed doctrine of collateral estoppel, once a court has decided an issue of fact or law necessary to its judgment, that decision is conslusive in a subsequent suit based on a different cause of action involving a party to the prior litigation. Montana v. United States, 440 U.S. 147, 153, 59 L. Ed. 2d 210, 99 S. Ct. 970 (1979).

 The doctrine is frequently invoked defensively, "to prevent a plaintiff from relitigating an issue the plaintiff has previously litigated unsuccessfully in another action against the same or a different party. Id. at 572 n.4, citing Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.4, 58 L. Ed. 2d 552, 99 S. Ct. 645 (1979).

 The court agrees with the government that the general statement of the doctrine of collateral estoppel embraces the circumstances presented here. The Surrogate's Court decided that the income earned by the estate was not "permanently set aside" for charitable purposes within the meaning of § 642(c)(2); that decision on an issue of law was necessary to the court's judgment with regard to ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.