Appendix — SAICI v. United States

Supreme

Court, U. S.

EIVED

JUL 30 1980

No. 80-106 "MICHAEL! RODAK, Jn, cueex

Le

IN THE

Supreme Cowt of the United States

OCTOBER TERM, 1980

SAICI,

Petitioner,

V.

UNITED STATES OF AMERICA,

Respondent.

SUPPLEMENTAL APPENDIX

SO —E—————>—$—$—<£<£_£_$_—_——>=—*—>_&—£{—~>K&_&—e—y EE

SAMUEL GOTTLIEB

Attorney for Petitioner

122 EAST 42ND STREET

New YORK, NEw YORK 10017

(212) 697-3440

COUNSEL PRESS, INC., 55 West 42nd Street, New York, N.Y. 10036 @ (212) 391-6622

OPINION OF JUDGE DUFFY

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA, :

Plaintiff,

-against-

LEONE BOSURGI and EMILIO 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.

APPEARANCES :

HON. ROBERT B. FISKE, JR.

United States Attorney for the

Southern District of New York

Attorney for Plaintiff

Of Counsel: Frederick P. Schaffer

Assistant United States

HERTZOG, CALAMARI & GLEASON

Attorneys for Defendant

Chemical Bank

Of Counsel: Peter E. Calamari, Esq.

71 Civ. 928 (KID)

OPINION

Attorney

GAINSBURG, GOTTLIEB, LEVITAN & COLE

Attorneys for Defendant

Sociedad Anonima de Inversiones

Comerciales e Industriales

BENEDICT GINSBERG, ESQ.

Defendant, Pro Se

Attorneys for Defendants

Leone Bosurgi and Emilio Bosurgi

KEVIN THOMAS DUFFY, D.J,.:

This case has a long and

tortured history, much of which is set

forth in United States v. Bosurgi,

530 F.2d 1105, 1112 (2d Cir. 1976). The

suit was originally commenced by the

United States against Leone and Emilio

Bosurgi (hereinafter collectively

referred to as the "Bosurgis" or "the

Bosurgi brothers"), individually and

as Executors of the Estate of Adriana

Bosurgi and against Chemical Bank, as

the Statutory Executor of the Estate

of Adriana Bosurgi to recover estate

taxes allegedly due upon the Estate of

Adriana Bosurgi. Apparently, the only

assets located within the United States

to pay these estate taxes were those

represented by a custodian account in

the name of Adriana Bosurgi managed by

=@3-

Chemical Bank. When she died, the

account was transferred to the names

of her two sons, Leone and Emilio.

Shortly thereafter, Benedict Ginsberg

was retained as the Bosurgi brothers'

attorney to bring suit in New York

State Supreme Court against the bank

for damages caused by its alleged

mismanagement of the custodian account.

That action was settled in September,

1970 by the bank's promise to pay the

Bosurgis $215,000.

Thereafter, in 1971, the

instant suit for taxes assessed against

the Bosurgi estate was instituted and

an order entered restraining the bank

and the Bosurgis from transferring the

funds. The order was later modified to

permit Ginsberg, as custodian of the

$215,000, to invest in certificates of

nthe

deposit. Benedict Ginsberg and the

Estate of Adriana Bosurgi were added

as defendants by Chemical Bank's answer.

During the pendency of this

sciden and despite the Southern

District's custody of the $215,000,

Sociedad Anonima de Inversiones

Comerciales e Industriales (hereinafter

referred to as "SAICI") brought suit

in the Supreme Court, New York County

against the Bosurgis and Ginsberg.

Based on a December 10, 1954 financing

agreement between Adriana Bosurgi, the

Bosurgi brothers and SAICI, the latter

claimed ownership of the fund in the

federal court's custody.

In response to SAICI's sum-

mary judgment motion in the State Court,

Ginsberg filed an October 12, 1973 affi-

davit indicating that the Bosurgis

conceded the existence of the December

10th agreement and, consequently,

could not oppose SAICI's motion. He

did, however, oppose the motion only

insofar as he sought an order requiring

payment of his $78,491 fee.

Although unopposed, SAICI's

motion was denied by the New York

Supreme Court because the federal court

had jurisdiction over the res. On

appeal the Appellate Division, Second

Department, reversed, granting SAICI's

request for summary judgment. In so

doing, the Court stated that the

federal government's tax lien on the

fund would not’ be effected.

Relying heavily on the

decision of the Appellate Division, I

later granted SAICI's motion for

summary judgment in the federal action.

~~

United States v. Bosurgi, 389 F.Supp.

1088 (S.D.N.Y. 1975). The Court of

Appeals disagreed and directed that

the matter proceed to trial.

It is imperative to note

that in reversing the grant of summary

judgment, the Court of Appeals

expressly held that the decision of

the Appellate Division was not binding

on the parties in the federal action.

Indeed, the Court reasoned that

Since the federal court first assumed

jurisdiction over the $215,000 fund, the

ownership of which is in dispute, economy

of judicial resources and avoidance of

conflicting results would not appear to be

served by giving controlling effect to the

later adjudication of another court which

did not have control over the fund. How-

ever, we need not resolve that issue; even

if due regard is accorded to the state

court's adjudication, see Commissioner v.

Bosch, 387 U.S. 456, 87 S.Ct. 1/76, 16 L.Ed.

2d 886 (1967), it would be only as valid as

its evidentiary base. We have not hesitated

to disregard state court judgments affecting

federal tax liability where the factual

questions involved were not contested in the

o Fa

state court, see Lowe V- Commissioner, 510

F.2d 479 (2d Cir.), cert. denied, 423 U.S.

827, 96 S.Ct. 44, 46 L-Ed.20 44, 44 U.S.L.W.

3201 (1975) or where a lower state court made

an erroneous application of state law, see

Chen OThechun v. Federal Reserve Bank, 442

er 460 (2d Ci

—mmary judgment in the state court action was

unopposed. The state court, basing its

ue eon on an attorney's hearsay affidavit

regarding the authenticity of the Bosurgi-

SAICI sonrespondence, did not have before it

she conflicting evidence submitted in the

Federal suit by the government, which was not

a party to the state court proceeding. The

account. Under the circumstances, the state

court's decision, even given proper regard,

cid not necessitate a federal grant of

summary judgment. (footnote omitted)

United States V- Bosurgi, 530 F.2d 1105,

1112 (2a Cir. 1976) .«

In the face of this holding by

the Second Circuit, SAICI still takes

the audacious position that it will not

in any way permit discovery with respect

to the factual issues which were remanded

to this Court for trial. In order to

prepare for trial, the United States has

=8=

continually attempted to obtain informa-

tion through the ordinary discovery pro-

cesses.

First, the government served

SAICI with interrogatories and a request

for documents on October 12, 1976. A

motion to compel answers thereto was

denied without prejudice to its renewal

after compliance with Rule 9(f) of the

general rules of this Court which

requires that the parties confer as to

these matters prior to making such

protective motions. The necessary

conference was held at which counsel

for SAICI promised to answer most of

the interrogatories and produce most of

the documents requested. On December 22,

1977, plaintiff again moved for an order

compelling answers to the interrogatories

and the documents requested. That motion

was referred to Margistrate Bernikow.

SAICI finally served and filed what

purported to be its answers to inter-

rogatories and requested documents. As

the government felt such answers were

"so incomplete as to be worthless", a

hearing was held before Magistrate

Bernikow on May 4, 1978, at which the

Magistrate directed that SAICI "answer

within thirty days, fully and completely,

the interrogatories as set forth."

On June 2, 1978 the plaintiff,

the United States, received SAICI's

answers to interrogatories. With the

exception of one affidavit, SAICI failed

to produce a single document requested

by the plaintiff and most of the answers

were deficient. The plaintiff renewed its

motion for sanctions under Rule 37 of the

Federal Rules and another hearing was held

a10=

before Magistrate Bernikow.

Thereafter, on October 23,

1978, Magistrate Bernikow filed a memo-

randum and order in which he found that

"[a] review of the answers to the inter-

rogatories show that they are

evasive, incomplete and unresponsive.

Moreover, with the exception of one

affidavit, no documents were produced

in response to the document request.”

The Magistrate further held that the

failure of SAICI had been wilfull and

precluded SAICI from offering into

evidence any of the documents indicating

the origin of its claim for the moneys

involved herein.

Meanwhile, a notice to take

the deposition of SAICI scheduled for

October 5, 1978 was served and filed, In

turn, SAICI sought an order directing an

immediate trial and for a stay of any

and all pretrial proceedings pending

such determination. By Memorandum

dated November 7, 1978, the protective

order and request for immediate trial

were denied. I ordered SAICI to appear

and testify at a properly noticed

deposition. Apparently, neither

counsel for the United States nor

counsel for SAICI learned of this order

until the end of May, 1979, On May 30,

1979, a new and proper notice to take

SAICI's deposition on June 25, 1979, was

served. By letter dated June 22, 1979,

SAICI's counsel advised that no repre-

sentative of SAICI would appear at the

deposition, Counsel also indicated that

the oalunia was based, in part, on the

fact that the Order of November 7, 1978,

had been entered prior to the time a

on) Den

reply memorandum had been filed in sup-

port of SAICI's motion for a protective

order. SAICI's counsel also requested

a conference in connection with this

matter.

On July 27, 1979 the plain-

tiff, the United States of America,

moved for "further sanctions" against

SAICI pursuant to Fed.R.Civ.P. 37 (b) (2)

and (ad). Thereafter, oral argument was

had in connection with this motion and

counsel for SAICI was given the

opportunity to reply to the motion in

writing. This was filed August 23,

1979.

SAICI continues to argue that

a State Court judgment against the

Bosurgis is binding upon the United

States and forecloses all discovery.

In view of the holding by the Circuit

mn] 3am

Court, there is absolutely no basis

to this argument. A secondary argument

advanced by SAICI is that the govern-

ment can obtain its State taxes from

other funds held by the Bosurgis or

from the Chemical Bank, There does not

appear to be any basis for this

argument since the Bosurgis apparently

have no assets located in this country.

As for Chemical Bank, release of the

assets would require a relitigation of

the ownership of the account held in

the name of Adriana Bosurgi, precisely

what SAICI is unwilling to permit in

this suit,

It is clear to this Court

that the position taken by SAICI

refusing to permit discovery is one

which will not change by the imposition

of further sanctions other than the

most drastic sanction. Accordingly,

the answer of SAICI is stricken in

its entirety and a default judgment

against SAICI will be entered on be-

half of the United States.

Settle judgment on five

days' notice.

(sgd.) KEVIN THOMAS DUFFY

0. Bs De Da

Dated: New York, New York

December 12, 1979