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United States v. Goldberg

decided: August 3, 1965.

UNITED STATES OF AMERICA
v.
MORRIS C. GOLDBERG, ETC., ET AL. NORTH CAROLINA NATIONAL BANK, SUCCESSOR BY CONSOLIDATION TO SECURITY NATIONAL BANK OF GREENSBORO, INDENTURE TRUSTEE, GREENSBORO, NORTH CAROLINA, APPELLANT



McLaughlin, Forman and Ganey, Circuit Judges.

Author: Forman

FORMAN, Circuit Judge.

North Carolina National Bank (Bank) as successor Trustee*fn1 was the holder of an Indenture of Mortgage, dated September 1, 1955, made by the Pennsylvania Laundry Company (Laundry), a corporation of the State of Pennsylvania, to secure an issue of first mortgage and collateral trust bonds. The indenture covered the real estate and personal property of Laundry in Philadelphia, Pennsylvania. In addition Laundry assigned to Trustee a note of $1,500,000 made by Gold-Tex Fabrics Corporation (Gold-Tex), a North Carolina corporation operating a denim mill in York County, South Carolina which note in turn was secured by a first mortgage on the real and personal property of Gold-Tex.

On Laundry's default with $600,000 principal allegedly still due, Bank filed a suit on March 2, 1964 in the Court of Common Pleas of York County, South Carolina to foreclose its mortgage on the real and personal property of Gold-Tex. Laundry and the United States were also made party defendants.

The Bank also started a proceeding in the Common Pleas Court of Philadelphia County on April 14, 1964 to foreclose its mortgage on the real and personal property of Laundry. All defendants in both suits were duly served.

On March 27, 1964, on petition of the United States, Bank's foreclosure proceeding was removed from the York County, South Carolina Court to the United States District Court for the Western District of South Carolina. The United States answered and cross claimed in the removal suit asking that its tax claims be declared senior to all claims except the Bank's mortgage and that its liens be foreclosed against the property of Gold-Tex.

On May 22, 1964 the United States filed a complaint in the United States District Court for the Eastern District of Pennsylvania seeking relief against Morris C. Goldberg under Sections 7401, 7402 and 7403 of the Internal Revenue Code of 1954. Joined or later added as defendants were 15 Goldberg controlled corporations, including Laundry and Gold-Tex, with properties located in Pennsylvania, New Jersey, New York and South Carolina.

The complaint alleged, among other things, that Goldberg and each of the defendant corporations had filed false tax returns and that taxes and penalties had been assessed and filed as liens against their properties, the aggregate amount of which ran into millions of dollars. It sought foreclosure of tax levies and to subject the properties of certain defendants to the payment of taxes.The appointment of receivers was requested to aid in enforcing the tax liens and among the reasons advanced for the appointment of receivers was that Bank might cause a forced sale of Laundry's assets under its foreclosure at a sacrifice price detrimental to all interests concerned.

On June 8, 1964, on order of the United States District Court for the Eastern District of Pennsylvania, Receivers were appointed. The order enjoined any interference with the possession by the Receivers of any property subject to the receivership except that Bank was specifically granted permission to prosecute its mortgage foreclosure proceedings in the United States District Court for the Western District of South Carolina. On June 12, 1964 an order was filed amending the order of June 8 by adding other parties as defendants.

On June 18, 1964 the United States District Court for the Western District of South Carolina entered an order with the consents of the United States, Gold-Tex, and the Bank, to the appointment of a special master to take testimony and file a report recommending the procedure to be followed in foreclosure of Gold-Tex's property. A hearing was scheduled for July 10, 1964. However, before this hearing date, on motion of the Receivers and the United States and without notice to Bank, the United States District Court for the Eastern District of Pennsylvania, on June 26, 1964, amended its order of June 8 by deleting the permission to Bank to prosecute its foreclosure suit against the property of Gold-Tex in the federal court of South Carolina.

On receiving notice of the entry of the above order Bank applied to the Eastern Pennsylvania District Court to amend it to permit the foreclosure suit in the United States District Court for the Western District of South Carolina to proceed. On July 8 a hearing was held but the amendment to the order was declined, the court suggesting that Bank file a written motion seeking the amendment. Such a motion was filed on July 17, 1964. The motion was argued on July 29, 1964 and the District Court reserved its decision.

While the matter was under advisement, on August 7, 1964, Bank filed notices of appeal of the orders of the United States District Court for the Eastern District of Pennsylvania of June 8, 12, and 26, 1964. On August 31, 1964 a memorandum opinion was filed by the United States District Court for the Eastern District of Pennsylvania holding that it could not act on Bank's motions since it was without jurisdiction to amend the orders after the notice appealing them had been filed.*fn2

The Receivers contend that Section 7403*fn3 of the Internal Revenue Code of 1954 gives the United States District Court for the Eastern District of Pennsylvania exclusive jurisdiction in this case to exercise a mandatory duty to adjudicate all claims and liens on all property of the taxpayers; to restrain all actions in any courts which interfere with the statutory duties imposed upon it and that property upon which foreclosure proceedings have been instituted prior to the action by the United States is not excepted.

Alternatively the Receivers argue that since, as they view this case, jurisdiction of the state courts and the federal court is not concurrent and the subject matter in litigation in one is not within the cognizance of the other the date of actual possession of the res determines the priority of jurisdiction. In each of the state actions, they submit, only a mortgage ...


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