United States v. Cardaci

• Decision Date: 29 October 2013
• Docket Number: Civil No. 12-5402 (JBS/AMD)
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. GARY S. CARDACI, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

UNITED STATES OF AMERICA, Plaintiff, v. GARY S. CARDACI, et al., Defendants.

Civil No. 12-5402 (JBS/AMD)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

Dated: October 29, 2013

HON. JEROME B. SIMANDLE

OPINION

APPEARANCES:

Yonatan Gelblum, Esq.

Claire H. Taylor, Esq.

U.S. DEPARTMENT OF JUSTICE

Tax Division

Ben Franklin Station

Washington, DC 20044

Attorneys for Plaintiff

Anthony P. Monzo, Esq.

Andrew D. Catanese, Esq.

Paul Kapish, Esq.

MONZO CATANESE P.C.

Cape May Court House, NJ 08210

Attorneys for Defendants

SIMANDLE, Chief Judge:

I. Introduction

The United States government brings this action to reduce to judgment federal tax assessments against Defendant Gary S. Cardaci, who failed to pay over more than $80,000 in taxes withheld from the wages of his employees at the Holly Beach Construction Company. Pursuant to 26 U.S.C. §§ 6321 & 7403, thegovernment seeks to foreclose a federal tax lien on real property owned by Mr. Cardaci and his wife, Defendant Beverly M. Cardaci, as tenants by the entirety, and force a sale of the marital home and surrounding property. The government seeks summary judgment [Docket Item 27] against the Cardacis and a default judgment against two Defendants who have potential claims to the real property but who have failed to appear in this action, Defendants Ed Wood Custom Drywall, Inc., and Tri-County Building Supplies, Inc. The Cardacis oppose summary judgment and cross-move for summary judgment [Docket Item 33] on the grounds that (1) the assessment procedure was defective and (2) the district court should use its discretion, as set forth in United States v. Rodgers, 461 U.S. 677 (1983), not to force the sale of the marital home.

For the reasons explained below, because the government has adduced proof that the proper procedure was followed and the tax assessments were timely, the Court will enter an Order reducing the lien to judgment. The Court also will enter default judgment against Defendants Ed Wood Custom Drywall and Tri-County Building Supplies.

The key inquiry for the Court is whether the equities present in this case militate against a forced sale of the Cardaci's marital home. As discussed below, this Court has limited discretion, pursuant to 26 U.S.C. § 7403(a) and theRodgers precedent, to decline to order a forced sale of the marital home when the tax lien in question pertains to only one spouse. The existing record raises a significant question that the forced sale should not be allowed in this instance. However, the present record is incomplete and lacking in essential facts necessary to award summary judgment to either party. Therefore, the Court will deny in part without prejudice both the government's motion for summary judgment and the cross-motion for summary judgment. The determination whether to permit forced sale of the Cardaci marital domicile in execution of the judgment against Defendant Gary S. Cardaci must await a final hearing.

II. Background

Most of the material facts are not in dispute. Defendant Gary S. Cardaci admits that he was responsible for withholding, collecting and paying over payroll taxes withheld from the wages of employees of Holly Beach Construction Company, and Mr. Cardaci willfully failed to do so. (Statement of Material Facts ("SMF") [Docket Item 27] ¶ 1.) During the period from the first quarter of 2000 through the first quarter of 2001, Mr. Cardaci failed to pay over approximately $49,600, and now is liable for penalties in excess of $80,000, plus interest, under 26 U.S.C. §§ 6672 & 6621.¹ (SMF ¶ 2; Consent Order [Docket Item 28].)

According to the government, assessments for the penalties were made on September 2, 2002. (Pl. Exs. 101-105 [Docket Items 27-4 at 4, 27-5 at 3, 27-6 at 3, 27-7 at 3, 27-8 at 3].) As proof, the government produces a "Certificate of Assessments, Payments, and Other Specified Matters," known as Form 4340, for each penalty assessed. (Id.) Defendants admit that the Forms 4340 show assessments were made on September 2, 2002, but Plaintiffs contend they were not provided a Form 23C, a summary record of assessment signed by an assessment officer, as required by 26 C.F.R. § 301.6203-1, and that the first correspondence they received from the government showing a civil penalty was dated October 27, 2003. (Pl. Resp. to SMF ¶ 3; Pl. Ex. 106 [Docket Item 27-9] ¶ 13.)

Mr. Cardaci, and his wife, Beverly M. Cardaci, own as tenants by the entirety real property located at 424 Breakwater Road ("the property") in Cape May, N.J. (SMF ¶ 4; Cardaci cert. [Docket Item 38-1] ¶ 5.) The Cardacis have lived on the property for 34 years, and currently live there with their two adult sons, their daughter-in-law, and their 18-month-old grandson.² (Cardacicert. ¶¶ 5, 10.) The government acknowledges that Mrs. Cardaci was not involved in, or responsible for, the tax penalties incurred by Mr. Cardaci. (Id. ¶ 7; SMF ¶¶ 1-2.)

III. Standard of review

A court shall grant summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A dispute is "genuine" if, based on the evidence in the record, a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" if it might affect the outcome of the suit. Id. The court will view evidence in the light most favorable to the non-moving party and "all justifiable inferences are to be drawn in [that party's] favor." Hunt v. Cromartie, 526 U.S. 541, 552 (1999).

When ruling on cross-motions for summary judgment, the court "must consider the motions independently . . . and view the evidence on each motion in the light most favorable to the party opposing the motion." United States v. Kramer, 644 F. Supp. 2d 479, 488 (D.N.J. 2008) (citing Williams v. Philadelphia Housing Auth., 834 F. Supp. 794, 797 (E.D. Pa. 1993), aff'd, 27 F.3d 560 (3d Cir. 1994), and Matsushita Elec. Indus. Co., Ltd. v. ZenithRadio Corp., 475 U.S. 547, 587 (1986)).

IV. Discussion

A. Government's motion for summary judgment & default judgment

i. Timeliness of this action

The government may bring a suit to collect unpaid taxes within 10 years of a timely assessment of the tax. 26 U.S.C. § 6502(a)(1). An assessment is timely if it is made within three years of the filing date of the related tax return. 26 U.S.C. § 6501(a).

The government contends that assessments for these tax penalties were made on September 2, 2002 -- within three years of the filing date of the related tax returns associated with the taxes that should have been withheld and paid over in 2000 and 2001. (Pl. Mot. Br. at 2.) Because this suit was filed on August 28, 2012 -- within 10 years of the assessments -- the government submits that the action is timely. (Id. at 3.)

Defendants counter that the "assessment requirements set forth in 26 C.F.R. § 301.6203-1 have not been provided." (Def. Opp'n at 2.) The regulation provides that the date of an assessment is the date on the summary record of assessment signed by an assessment officer. § 301.6203-1. The summary record must provide "identification of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment." § 301.6203-1. The summary record isalso known as Form 23C. See Tucker v. C.I.R. Serv., 506 F. App'x 166, 168 (3d Cir. 2012); In re Rosemiller, 188 B.R. 129, 138 (D.N.J. 1995). Defendants argue that the government "should provide the required proofs to enable the court to determine whether proper notice was provided and therefore, Plaintiff's request for summary judgment should be denied." (Def. Opp'n at 2.) For support, Defendants cite Brewer v. United States, 764 F. Supp. 309, 318 (S.D.N.Y. 1991), which they misidentify as a District of New Jersey case, in which the district court judge deferred consideration of a similar motion for summary judgment in order to give the government time "to determine whether Form 23C was completed" with respect to the properties at issue. (Def. Opp'n at 2.)

The Defendants do not raise a genuine issue of material fact to defeat partial summary judgment on the timeliness of the assessments and compliance with IRS regulations. Federal courts, including the Third Circuit, generally hold that

the IRS need not provide a taxpayer with a copy of the actual Summary Record of Assessment to fulfill its obligations to the taxpayer but may instead send a Form 4340, which creates a presumption that a Summary Record of Assessment, whether on Form 23C or RACS Report 006, was validly executed and certified.

Tucker, 506 F. App'x at 168-69 (internal quotation marks omitted) (quoting March v. IRS, 335 F.3d 1186, 1188 (10th Cir. 2003)); see also United States v. Zarra, 477 F. App'x 859, 860 n.2 (3d Cir. 2012) (holding that the Form 4340 is "presumptive proof of avalid assessment," and stating "[w]e reject the Zarras' argument that the Government was required to produce a summary record of assessment signed by an assessment officer in order to prove the date of assessment") (citing Geiselman v. United States, 961 F.2d 1, 6, (1st Cir. 1992)); United States v. Tanchak, No. 07-1475, 2009 WL 348270, at *4 (D.N.J. Feb. 5, 2009), aff'd, 351 F. App'x 729 (3d Cir. 2009) (stating that "to overcome the presumption of correctness [of the Form 4340], Defendant must present evidence beyond his self-serving statements, uncorroborated oral testimony, or tax returns demonstrating that Plaintiff's assessments are invalid," citing decisions in the Fourth, Fifth and Eleventh Circuits); In re Bosch, 154 B.R. 647, 651-52 (Bankr. M.D. Pa. 1993) (citing authority for the propositions that a valid assessment may be established by Form 4340 and that those forms are "routinely used in proving that tax assessments are made" and constitute "presumptive proof of a valid assessment"). The fact that a district court may have asked for additional proof of the date of assessment...