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United States v. McNicol

United States Court of Appeals, First Circuit

July 15, 2016

UNITED STATES OF AMERICA, Plaintiff, Appellee,
MARCI McNICOL, a/k/a MARCI REITANO, individually, Defendant, Appellee. ESTATE OF ROBERT REITANO and MARCI McNICOL, as Executrix of the ESTATE OF ROBERT REITANO, Defendants.


          James E. Hoyt, with whom Hoyt Legal, LLC was on brief, for appellant.

          Curtis C. Pett, Attorney, Tax Division, United States Department of Justice, with whom Caroline D. Ciraolo, Acting Assistant Attorney General, Richard Farber, Attorney, Tax Division, and Carmen M. Ortiz, United States Attorney, were on brief, for appellee.

          Before Thompson, Selya and Kayatta, Circuit Judges.

          SELYA, Circuit Judge.

         This appeal requires us to construe and apply 31 U.S.C. § 3713 (commonly known as the federal priority statute). We conclude that the statute says what it means and means what it says. Since the court below accorded the statute its plain meaning and applied it in that manner, we affirm that court's entry of judgment in favor of the United States.

         I. BACKGROUND

         We start with a sketch of the factual background and travel of the case. Robert Reitano died in July of 2002, survived by his wife (appellant Marci McNicol) and four minor children. At the time of his death, Reitano owed over $340, 000 in unpaid federal income tax liabilities. Since these liabilities exceeded the value of his estate, the estate was insolvent.

         The assets of the estate consisted almost entirely of stock in two corporations: Sophia Gale, Inc. (100% owned by Reitano's estate) and RR Fishing Corp. (50% owned by Reitano's estate and 50% owned by the appellant). Each corporation owned a fishing vessel as its sole asset, and the value of the stock in each corporation was coextensive with the value of that vessel.

         On July 30, 2002 - shortly after Reitano's death - the appellant transferred the Sophia Gale shares to herself. The appellant was appointed executrix of Reitano's estate in January of the following year and, on April 11, she transferred the RR shares to herself. These share transfers were effected without consideration and, when the appellant effected them, she was admittedly aware of Reitano's unpaid tax debts.

         Later in 2003, the Internal Revenue Service (IRS) completed its assessment of taxes, penalties, and interest owed by Reitano's estate. That assessment totaled $342, 538.93. The IRS contacted the appellant about this debt and, in October of 2003, formally submitted a probate claim.

         Nothing was paid, and in November of 2006, the IRS again contacted the appellant. The parties attempted to resolve the matter, but negotiations stalled: in 2008, the appellant told the IRS that she would no longer cooperate. The IRS countered by serving the appellant with a formal notice of potential liability under the federal priority statute. See 31 U.S.C. § 3713(b).

         In due course, the government repaired to the United States District Court for the District of Massachusetts and sued Reitano's estate and the appellant, both individually and in her capacity as executrix of the estate. Its two-count complaint sought both to reduce to judgment the estate's unpaid federal tax liability and to secure judgment against the appellant, personally, for transferring assets of the estate to herself without first paying the estate's federal tax debts.

         After some preliminary skirmishing (not relevant here), the parties cross-moved for summary judgment. The district court granted the government's motion and denied the appellant's cross- motion. The claim against the estate and against the appellant as executrix was essentially uncontested: no one challenged the government's assessment of the amount owed. The claim against the appellant, in her individual capacity, was contested. With respect to that claim, the district court concluded that the appellant was liable up to the value of the transferred assets.

         The appellant moved for reconsideration of the award against her in her individual capacity. The district court summarily denied that motion and thereafter entered a judgment holding the estate and the appellant as executrix liable for $351, 218.98, and holding the appellant, individually, liable for $125, 938.[1] This timely appeal followed. In it, the appellant challenges only the district court's ...

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