Newman v. Santander Bank, N.A.
| Decision Date | 09 July 2021 |
| Docket Number | Civil Action No. 20-10632-FDS |
| Citation | 548 F.Supp.3d 237 |
| Parties | Marshall F. NEWMAN, AS he is TRUSTEE OF the ANGELO C. TODESCA, JR. FAMILY TRUST II, Plaintiff, v. SANTANDER BANK, N.A., and United States of America, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Richard Joyce, Patrick J. Galasso, Newman & Newman, P.C., Boston, MA, for Plaintiff.
Patrick S. Tracey, Bowditch & Dewey LLP, Boston, MA, Jacob A. Tosti, Bowditch & Dewey, LLP, Framingham, MA, for Defendants.
MEMORANDUM AND ORDER ON DEFENDANT'S MOTION FOR JUDGEMNT ON THE PLEADINGS AND PLAINTIFF'S MOTION FOR LEAVE TO DISMISS COUNTS ONE THROUGH THREE
This action arises out of levies issued by the Internal Revenue Service upon a trust. The United States, through the IRS, issued two levies upon Santander Bank, N.A., identifying the taxpayer as a beneficiary of the trust of which plaintiff is trustee. After Santander transferred the amount of funds identified in the levies from the trust into a suspense account, plaintiff brought suit against the bank and the United States.
Defendant Santander Bank, N.A., has moved for judgment on the pleadings. Plaintiff has also moved for leave to dismiss Counts One through Three of the second amended complaint, which are all of the claims against Santander. For the following reasons, defendant Santander's motion for judgment on the pleadings will be granted and plaintiff's motion for leave to dismiss Counts One through Three will be denied as moot.
Marshall F. Newman is the Trustee of the Angelo C. Todesca, Jr. Family Trust II (the "Trust"). (Second Amended Complaint ("SAC") ¶ 2). The Trust directs the Trustee to divide the Trust assets into two subtrusts—one for the benefit of Albert M. Todesca (Subtrust A) and one for the benefit of Paul A. Todesca (Subtrust B). (Id. ¶¶ 8-9). The Trust maintained two bank accounts with defendant Santander Bank, N.A., entitled "Angelo C. Todesca, Jr. Family Trust II, Marshall F. Newman, Trustee," with a combined balance of approximately $800,000. (Id. ¶ 14).
In January 2020, the IRS served a Notice of Levy upon Santander, asserting a levy in the amount of $322,620.90 and identifying the taxpayer as "Albert M. Todesca, as Beneficiary of the Angelo C. Todesca, Jr. Family Trust II (Subtrust A)." (Id. ¶ 22). On January 22, 2020, Santander transferred the amount of the levy from the trust into a suspense account. (Id. ¶ 71).
On February 10, 2020, Santander received a letter from Newman claiming that the levy was improper. (Id. ¶ 26). In response, Santander told Newman that it would hold the funds in question until it received further instructions from the parties or a court. (Id. ¶¶ 29-32).
On March 9, 2020, Santander received a Final Demand for Payment of the levy from the IRS. (Id. ¶ 36). In accordance with that demand, Santander informed Newman on March 23, 2020, that it was obligated by statute to relinquish the funds to the IRS. (Id. ¶¶ 39, 41). Shortly thereafter, Newman obtained a temporary restraining order in Massachusetts Superior Court prohibiting Santander from releasing the funds. (Id. ¶ 71).
On July 16, 2020, the IRS served a second Notice of Levy upon Santander, asserting a levy in the amount of $56,954.42 and identifying the same taxpayer. (Id. ¶ 44). Santander again transferred the amount of the levy from the trust into a suspense account. (Id. ¶¶ 45, 72).
On September 11, 2020, Santander filed an assented-to motion for leave to deposit the funds into a court registry, which this Court granted on September 24, 2020. Thereafter, Santander provided two checks in the amounts of $322,620.90 and $56,954.42 to the Court, both of which were deposited into the Registry of the Court on October 14, 2020. (Def. Mem. at 5).
On March 24, 2020, Newman filed this action in Massachusetts Superior Court. On March 30, 2020, Santander removed the action to this Court, alleging federal-question jurisdiction under 28 U.S.C. § 1331. On April 3, 2020, the United States filed an additional Notice of Removal with the Court, alleging that it was the real party in interest against which the action was brought. On May 29, 2020, Newman filed a First Amended Complaint adding the United States as a defendant. On October 2, 2020, he filed a Second Amended Complaint. The SAC alleges four counts: breach of contract against Santander (Count 1); conversion against Santander (Count 2); a violation of Mass. Gen. Laws. ch. 93A against Santander (Count 3); and a claim of wrongful levy against the United States (Count 4). (SAC ¶¶ 48-76).
On July 17, 2020, the United States filed counterclaims against Newman, Santander, and Albert M. Todesca. On March 23, 2021, the United States amended its counterclaims, which now allege two counts: a claim against Todesca to reduce income tax liabilities and trust fund recovery penalties to judgment (Count 1) and a claim to enforce the federal tax levy and/or liens against the Trust (Count 2).
On May 18, 2021, defendant Santander moved for judgment on the pleadings. On June 8, 2021, Newman filed a motion for leave to dismiss the claims against Santander.
A Rule 12(c) motion for judgment on the pleadings differs from a Rule 12(b)(6) motion to dismiss primarily because it is filed after the close of pleadings and "implicates the pleadings as a whole." Aponte-Torres v. Univ. of P.R. , 445 F.3d 50, 54-55 (1st Cir. 2006). But it is treated similarly. See id. at 54. To survive a motion for judgment on the pleadings, a complaint must state a claim that is plausible on its face. See Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). For a claim to be plausible, the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. at 555, 127 S.Ct. 1955 (internal citations omitted). "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ).
In determining whether a complaint satisfies that standard, a court must assume the truth of all well-pleaded facts and give the plaintiff the benefit of all reasonable inferences. See R.G. Fin. Corp. v. Vergara-Nuñez , 446 F.3d 178, 182 (1st Cir. 2006). Dismissal is appropriate if the complaint fails to set forth "factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory." Gagliardi v. Sullivan , 513 F.3d 301, 305 (1st Cir. 2008) (quoting Centro Medico del Turabo, Inc. v. Feliciano de Melecio , 406 F.3d 1, 6 (1st Cir. 2005) ).
Under Rule 41(a)(2), plaintiffs may voluntarily dismiss an action "by court order, on terms that the court considers proper." Fed. R. Civ. P. 41(a)(2). The rule permits plaintiffs to dismiss their case voluntarily, with court approval, as long as "no other party will be prejudiced." P.R. Mar. Shipping Auth. v. Leith , 668 F.2d 46, 50 (1st Cir. 1981). Although the "prospect of a subsequent lawsuit does not constitute ... prejudice, ... [a] plaintiff should not be permitted to force a defendant to incur substantial costs in litigating an action, and then simply dismiss his own case and compel the defendant to litigate a wholly new proceeding." Colón-Cabrera v. Esso Standard Oil Co. (P.R.), Inc. , 723 F.3d 82, 87-88 (1st Cir. 2013). In making the determination whether the defendant will be prejudiced, the court should consider "the defendant's effort and expense of preparation for trial, excessive delay and lack of diligence on the part of the plaintiff in prosecuting the action, insufficient explanation [of] the need to take a dismissal, and the fact that a motion for summary judgment has been filed by the defendant." Doe v. Urohealth Sys., Inc. , 216 F.3d 157, 160 (1st Cir. 2000) (quotation omitted).
Plaintiff's claims against Santander necessarily fail because, pursuant to the unambiguous dictates of the Internal Revenue Code, Santander is (1) legally obligated to comply with the two Notices of Levy it received from the IRS and (2) absolutely immunized from liability to any party—including plaintiff—for its compliance with the Notices of Levy.
"[A] bank served with a notice of levy has two, and only two, possible defenses for failure to comply with the demand: that it is not in possession of property of the taxpayer, or that the property is subject to a prior judicial attachment or execution." United States v. Nat'l Bank of Com. , 472 U.S. 713, 727, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985) ; see also 26 U.S.C. § 6332(a) (); Bean v. Gen. Elec. Co. , 593 F. Supp. 2d 306, 309 (D. Mass. 2009). Custodians of property who fail to comply with a Notice of Levy from the IRS become liable to the government for the sum in question and may incur further penalties. See 26 U.S.C. § 6332(d)(2) (); Haggert v. Hamlin , 25 F.3d 1037, 1994 WL 251067, at *2 (1st Cir. 1994) (unpublished). "Where the taxpayer's property levied upon is held by a third party, service of notice of the levy upon that third party ‘gives the IRS the right to all property levied upon and creates a custodial relationship between the...
To continue reading
Request your trial