U.S. v. Hansel

• Decision Date: 14 March 1998
• Docket Number: No. 96-CV-775.,96-CV-775.
• Citation: 999 F.Supp. 694
• Parties: UNITED STATES of America, Plaintiff, v. Sheldon G. HANSEL, Christy Hansel, Grant Hansel, Shelley Hansel and Eunice Hansel, Defendants.
• Court: U.S. District Court — Northern District of New York

999 F.Supp. 694

UNITED STATES of America, Plaintiff, v. Sheldon G. HANSEL, Christy Hansel, Grant Hansel, Shelley Hansel and Eunice Hansel, Defendants.

No. 96-CV-775.

United States District Court, N.D. New York.

March 14, 1998.

COPYRIGHT MATERIAL OMITTED

Thomas J. Maroney, U.S. Atty. for Northern District of New York, Albany, NY, for plaintiff; Glenn J. Melcher, Trial Attorney, Tax Div., Washington, DC, of counsel.

Sheldon G. Hansel, West Winfield, NY, pro se.

Christy Hansel, Shell, WY, pro se.

Grant Hansel, Burlington, VT, pro se.

Shelley Hansel, Niagara Falls, NY, pro se.

Eunice Hansel, West Winfield, NY pro se.

MEMORANDUM, DECISION & ORDER

McAVOY, Chief Judge.

Plaintiff United States ("the Government") brought this action, pursuant to 26 U.S.C. §§ 7401 and 7403, to: 1) reduce to judgment tax assessments made against Sheldon G. Hansel; 2) set aside fraudulent transfers by Sheldon G. Hansel to the other four named defendants; and 3) obtain judgments against Christy Hansel, Grant Hansel, Shelley Hansel and Eunice Hansel in amounts equal to the value of certain shares of stock conveyed to them, plus dividends, profits, and increases in value of the stock.

The Government now moves: (1) to amend the Complaint to add Hope Hansel as a defendant; and (2) for summary judgment.

I. Background

A. Facts

The following facts are set forth in the Government's Local Rule 7.1(f) Statement, which defendants do not dispute. See N.D.N.Y.L.R. 7.1(f) ("All material facts set forth in the statement served by the moving party shall be deemed admitted unless controverted by the statement served by the opposing party."). In 1983, the Internal Revenue Service ("IRS") began an examination of the federal income tax liabilities of Sheldon and Hope Hansel for the tax years 1980 and 1981. In connection with this investigation, Sheldon and Hope signed a form 872, "Consent to Extend the Time to Assess Tax." Govt. Ex. 1. The consent, signed December 17, 1983, provided that the amount of any federal income tax due on any of Sheldon or Hope's returns for the tax year 1980 may be assessed at any time before December 31, 1984.

On June 25, 1985, the IRS sent Sheldon and Hope a Notice of Deficiency for the 1980 and 1981 tax years, alleging deficiencies of $70,691.00 for 1980 and $86,603.00 for 1981. Govt. Ex. 4 at 2. The IRS also assessed interest and penalties on the deficiencies. Id. On September 23, 1985, Sheldon and Hope filed a petition with the United States Tax Court for a redetermination of the tax liabilities set forth in the Notice of Deficiency. Govt. Ex. 5. The Tax Court rendered its decision January 23, 1991, determining deficiencies as to Sheldon Hansel of $20,909.00 for 1980 and $53,030 .00 for 1981. Govt. Ex. 6. The Tax Court determined no deficiencies as to Hope Hansel.

In accordance with the Tax Court's decision, the IRS on March 8, 1991 assessed audit deficiencies against Sheldon Hansel of $73,939.00 plus interest and penalties, bringing the total assessment to $222,007.21. Govt. Exs. 7-8.

In April of 1984, Sheldon and Hope incorporated Hanwinsel Farms, Inc. ("Hanwinsel"), naming themselves and Kent Hansel as directors. See Govt. Exs. 9-10. Soon thereafter, Sheldon and Hope transferred their interest in their farm (including their land, residence and chattel) to Hanwinsel, each receiving half of Hanwinsel's stock (100 shares) in return. Sheldon Hansel Dep. at 10-11; Hope Hansel Dep. at 4-5.

Sheldon Hansel later transferred all of his Hanwinsel stock to his children, Christy, Grant and Shelley, and his mother Eunice. Christy was born in 1973, Grant in 1975 and Shelley in 1978. On January 2, 1987, Sheldon transferred 15 shares of Hanwinsel stock each to Christy, Grant and Shelley. Sheldon Hansel Dep. at 65, 69-70; Govt. Ex. 13. On October 5, 1989, Sheldon transferred 25 shares of Hanwinsel stock to Eunice, and 10 shares each to Christy, Grant and Shelley. Id. Sheldon testified at his deposition that the only consideration he received in return from the children was their labor. Sheldon Hansel Dep. at 69. He further testified he gave his mother the stock in repayment of a debt, the amount of which he could recall only as being "under $40,000." Id. at 71. At the time of the 1987 and 1989 transfers, Sheldon Hansel's personal assets, in his estimation, totaled no more than $25,000-30,000. Id. at 15-21.

On January 25, 1995, Eunice transferred 8 shares of Hanwinsel stock each to Christy, Grant and Shelley, and one share to Hope. Govt. Ex. 13. Eunice received nothing from her grandchildren or daughter-in-law in consideration for the stock. Christy Hansel Dep. at 26-27; Grant Hansel Dep. at 30-34; Shelley Hansel Dep. at 7.

B. Procedural History

The Government commenced this action in June of 1996 seeking: (1) a judgment against Sheldon Hansel for assessed federal income tax liabilities for the years 1980 and 1981 in the amount $222,007.21 plus interest; (2) a declaration that federal tax liens have attached to all of Sheldon Hansel's property and rights to property, including the Hanwinsel stock; (3) foreclosure of the outstanding tax liens that have attached to the Hanwinsel stock and distribution of the proceeds to the Government to be applied toward satisfaction of Sheldon's tax liabilities; and (4) a judgment against Eunice, Christy, Grant and Shelley Hansel, in an amount equal to the fair market value of the Hanwinsel stock conveyed to them, plus dividends, profits and increases in value of the shares of stock conveyed, minus the amount ultimately recovered by the Government from the foreclosure and sale of the stock.

Defendants moved to dismiss the Complaint in February of 1997. In that motion, defendants averred Eunice Hansel died in 1995. The motion was denied by decision and order entered April 11, 1997, and the Court granted the Government leave to substitute Eunice Hansel's executor within 90 days. It did not do so. Accordingly, this action is dismissed in its entirety against Eunice Hansel.

The Government now moves to amend the Complaint to add Hope Hansel as a defendant, and for summary judgment against the current defendants.

II. Discussion

A. The Government's Motion to Amend

Rule 15(a) generally governs the amendment of complaints, but in the case of proposed amendments where new defendants are to be added, Rule 21 governs. Joseph v. House, 353 F.Supp. 367, 371 (E.D.Va.), aff'd, 482 F.2d 575 (4th Cir.1973); Pacific Gas & Elec. Co. v. Fibreboard Products, Inc., 116 F.Supp. 377, 382-83 (N.D.Cal.1953). Rule 21 states that a party may be added to an action "at any stage of the action and on such terms as are just." Addition of parties under Rule 21 is guided by the same liberal standard as a motion to amend under Rule 15. Fair Housing Development Fund Corp. v. Burke, 55 F.R.D. 414, 419 (E.D.N.Y.1972). Rule 21 is "intended to permit the bringing in of a person, who through inadvertence, mistake or for some other reason, had not been made a party and whose presence as a party is later found necessary or desirable." United States v. Commercial Bank of North America, 31 F.R.D. 133, 135 (S.D.N.Y.1962) (internal quotations omitted). Furthermore, Rule 21 must be read in conjunction with Rules 18, 19 and 20. Id. 31 F.R.D. at 135.

Rule 20 states that "[a]ll persons... may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction or occurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action." Fed.R.Civ.P. 20(a). The Government bases its motion to add Hope Hansel as a defendant on two grounds: (1) that because of Eunice's transfer of one share of stock to Hope, Hope claims an interest in the property against which the Government seeks to enforce its tax lien; and (2) the Government seeks a judgment against Hope as a fraudulent transferee of Hanwinsel stock from Eunice Hansel.

On these bases, the amendment will be allowed. The Government avers, and defendants do not dispute, that it became aware of the one-share transfer from Eunice to Hope only after Hope's deposition on November 19, 1997. Though the Government waited until January 30, 1998 to make the present motion, nothing the in the record indicates bad faith or intentional delay. "`Mere delay ... absent a showing of bad faith or undue prejudice, does not provide a basis for a district court to deny the right to amend.'" Block v. First Blood Associates, 988 F.2d 344, 350 (2d Cir.1993) (quoting State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir.1981)).

Moreover, neither the current defendants nor Hope Hansel herself will be prejudiced by the amendment. She obviously has been well aware of both the existence and the subject matter of this litigation since it outset. The Government already has taken her deposition. Furthermore, once the Government properly serves Hope Hansel, she will have an opportunity to respond to the allegations in the Complaint, and the Court will be receptive to any arguments of merit she may have in favor of any discovery she may need.

Defendants argue that the Government's allegations of fraudulent transfer are flawed. That general contention is discussed in detail infra.

For all of the foregoing reasons, the Government's motion to amend the Complaint to add Hope Hansel as a defendant is GRANTED, and the Government is directed to serve a summons and Complaint on her within 30 days of receipt of this order.

B. The Government's Motion for Summary Judgment

1. Standard for Summary Judgment

The Government next moves for summary judgment against all current defendants. Under Fed.R.Civ.P. 56(c), if there is "no genuine issue as to any material fact ... the moving party is entitled to a judgment as a matter of law ... where the record taken as a whole could not lead a rational trier of fact to find for the...