United States v. Gershon Tannenbaum, Sarah Tannenbaum, M&T Mortg. Corp.
| Decision Date | 10 August 2016 |
| Docket Number | 12-CV-5305 (SLT) (RML) |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. GERSHON TANNENBAUM, SARAH TANNENBAUM, M&T MORTGAGE CORPORATION, assignee to Greater New York Savings Bank, JPMORGAN CHASE, successor to Chemical Bank, DAVID SHELDON, NEW YORK STATE DEPARTMENT OF TAXATION & FINANCE, UNITED STATES SECURITIES AND EXCHANGE COMMISSION, THE BANK OF NEW YORK MELLON, in its capacity as Collateral Agent and Custodian, CITY OF NEW YORK PARKING VIOLATIONS BUREAU, and CITY OF NEW YORK DEPARTMENT OF ENVIRONMENTAL PROTECTION, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Plaintiff, the United States of America, brings this action under 26 U.S.C. §§ 7402(a) and 7403 to satisfy Defendant Gershon Tannenbaum's outstanding federal tax liabilities. Plaintiff seeks a Court Order that it has valid tax and judgment liens on all of Mr. Tannenbaum's property, and that the liens can be enforced by foreclosing on the property located at 927 51st Street, Brooklyn, New York (the "Home"), selling it, and splitting the sales proceeds equally between Mr. Tannebaum's creditors and the co-owner of the Home, Mr. Tannenbaum's wife, Defendant Sarah Tannenbaum.
Currently before the Court are Plaintiff's motion for summary judgment, Sarah Tannenbaum's opposition and cross-motion for summary judgment, and a cross-motion for summary judgment from Defendant David Sheldon, a private citizen who secured a money judgment against Mr. Tannenbaum and other non-parties in a civil suit in the District of Kansas. For the reasons set forth below, Plaintiff's summary judgment motion is granted in its entirety and Sarah Tannenbaum's and David Sheldon's cross-motions for summary judgment are denied.
The facts listed below are uncontested. Gershon and Sarah Tannenbaum have owned the Home, which is located in Kings County, since 1977. (U.S.'s L.R. 56.1(a) Statement ("U.S. Moving L.R. 56.1(a) Statement") ¶ 14, Ex. C, ECF No. 40-1.) They were married when they purchased the Home. (Id.) From 1987 through 1996 and 2002 through 2004, Gershon Tannenbaum was delinquent in paying his federal income taxes. (U.S. Moving L.R. 56.1(a) Statement ¶¶ 1, 3; Aff. of Debt ¶¶ 3, 4, ECF No. 40-2.) He continued to be delinquent despite being notified by Plaintiff of his unpaid taxes, penalties, and interest on May 19, June 16, and June 30, 1997, February 9, 1998, May 9, 2005, and June 26 and July 3, 2006. (U.S. Moving L.R. 56.1(a) Statement ¶¶ 4, 5; Aff. of Debt ¶¶ 5, 6.)
On August 4, 1995, Gershon and Sarah Tannenbaum were indicted for conspiracy to defraud or to commit an offense against the United States under 18 U.S.C. § 371, and for fraud and false statements under § 7206 of the Internal Revenue Code ("IRC").1 (Indictment, United States v. Tannenbaum, 95-cr-695 (E.D.N.Y.); Memo. of David Sheldon in Opp. to Sarah Tannenbaum's Cross-Mot. for Summ. J. and in Support of David Sheldon's Cross-Mot. for Summ. J., Ex. R and S.) Gershon Tannenbaum subsequently pleaded guilty to the charge under 18 U.S.C. § 371. (95-cr-695, ECF Nos. 38, 42, 43.) The charge against him under 26 U.S.C. § 7206 was dropped. He was sentenced to 12 months and one day in jail, two years of supervised release, and a $25,000 fine. (Id. at ECF Nos. 81, 82.) A condition of his supervised release was that he had to "comply with any final civil judgment for such further amounts, if any,of back taxes owed to the IRS." (Id. at ECF No. 82) By the time of his sentencing in December 1997, Plaintiff had three assessments notifying him of his outstanding tax liabilities. His prison term was scheduled to begin in January 1998. (Id.) Sarah Tannenbaum entered into a deferred prosecution agreement with the United States, and all charges against her were dropped. (95-cr-695, ECF Nos. 44, 87.)
On March 4, 1998, Plaintiff filed Notices of Federal Tax Liens ("NFTLs") against Gershon Tannenbaum with the City of New York Register in Kings County, New York ("Kings County Register's office"), for the tax years ending December 31, 1987, through December 31, 1995. (U.S. Moving L. R. 56.1(a) Statement ¶ 6; Aff. of Debt ¶ 7.) These NFTLs were refiled on May 24, 2007. (Id.) On April 14, 1998, another NFTL was filed against him with the Kings County Register's office, and subsequently refiled on May 24, 2007, for the tax year ending December 31, 1996. (U.S. Moving L. R. 56.1(a) Statement ¶ 7; Aff. of Debt ¶ 8.)
In January 2000, Mr. Tannenbaum's mother bequeathed her condominium (the "Condo"), upon her death and the death of her husband, to Sarah Tannenbaum and Mr. Tannenbaum's sister. (U.S.' Resp. to Def. Sarah Tannenbaum's R. 56.1 Statement and Statement of Additional Undisputed Material Facts ("U.S. Resp. to Sarah Tannenbaum's R. 56.1 Statement") § II, ¶¶ 1, 2, ECF No. 45-1; Decl. of Stephanie Weiner Chernoff in Further Support of the U. S.' Mot. for Summ. J. ("Chernoff Reply Decl.") Ex. B at 3, ECF No. 45-2.) On December 18, 2002, after Gershon Tannenbaum's mother had died, he and his sister, in each sibling's capacity as "co-Executor" of their mother's will, conveyed title of the Condo to Sarah Tannenbaum and Mr. Tannenbaum's sister. The Condo is located "less than a mile" from the Home. (Id. at § II ¶ 4.)
Defendant David Sheldon filed suit in the District of Kansas against several defendants, including Mr. Tannenbaum ("Kansas Defendants"). Although Sheldon has not specified when he filed the lawsuit, based on publicly-available information, it existed in 1998 and he alleged violations of federal and state securities laws. Sheldon v. Vermonty, 31 F.Supp.2d 1287 (D. Kansas 1998). Sheldon retained an attorney to represent him on a contingency basis; Sheldon also agreed to pay the attorney "50% of any judgment...." (David Sheldon's L.R. 56.1(a) Statement, Ex. B at ¶¶ 2, 4, ECF No. 41.) Pursuant to a jury verdict for Sheldon, on November 8, 2002, the District of Kansas issued a Judgment awarding him over $38,722.89 in compensatory damages, $150,000 in punitive damages, $186,000 in attorneys' fees, $12,000 in costs, and other amounts, to be paid jointly and severally by the liable Kansas Defendants, which included Mr. Tannenbaum. Sheldon v. Vermonty, 237 F.Supp.2d 1270, 1283 (D. Kansas 2002) () The District of Kansas subsequently issued three amended judgments (collectively with the first Judgement, the "Kansas Judgments"), all of which are also based on "joint and several liability." (David Sheldon's L. R. 56.1(a) Statement ¶ 7, Ex. C at Amended Judgment in a Civil Case, Amendment to Amended Judgment in a Civil Case, Second Amendment to Amended Judgment in a Civil Case.)
On January 7, 2003, Sheldon filed an Abstract of Judgment of the November 8, 2002 Kansas Judgment with the Kings County Clerk's office. (David Sheldon's L. R. 56.1(a) Statement ¶ 6, Ex. I.) He subsequently filed an Abstract of Judgment for each of the amended judgments. (Id. at ¶ 7, Ex. J.)
On October 5, 2006, Plaintiff filed another NFTL against Gershon Tannenbaum with the Kings County Register's office for the tax year ending December 31, 2002. (U.S. Moving L.R.56.1(a) Statement ¶ 8, Aff. of Debt ¶ 9.) On November 3, 2006, another NFTL was filed against him for the tax years ending December 31, 2003 and 2004. (U.S. Moving L.R. 56.1(a) Statement ¶ 9, Aff. of Debt ¶ 10.)
On May 17, 2007, Plaintiff filed a complaint in this jurisdiction against Mr. Tannenbaum under § 7401 of the IRC "to reduce to judgment the assessed and unpaid federal income tax liabilities of Gershon Tannenbaum for the years ending December 31, 1987 through 1996, plus statutory accruals." (United States v. Gershon Tannenbaum, 07-cv-2038 (E.D.N.Y.).) The lawsuit concerned Mr. Tannenbaum's tax liabilities for the same time period at issue in the NFTLs that were filed in March and April of 1998 (the "1998 NFTLs") - the years ending 1987 through 1996. In October 2007, Plaintiff obtained a default judgment ("Default Judgment") in that lawsuit against Gershon Tannenbaum in the amount of $1,940,469.84 for his "assessments for federal income tax for years ending December 31, 1987 through December 31, 1996, plus interest from October 16, 2007." (Judgment, 07-cv-2038, ECF No. 6.) On December 27, 2007, Plaintiff filed a Notice of Abstract of Judgment for the Default Judgment with the New York City Department of Finance, Office of the City Register. (U.S. Moving L.R. 56.1(a) Statement ¶ 12, Ex. B.)
In August 2011, after Mr. Tannenbaum's mother's husband had died, ownership of the Condo passed to Sarah Tannenbaum and Mr. Tannenbaum's sister. (U.S. Resp. to Sarah Tannenbaum's R. 56.1 Statement § II ¶ 2.) In June 2012, Sarah Tannenbaum and Mr. Tannenbaum's sister sold the Condo for $700,000. (U.S. Resp. to Sarah Tannenbaum's R. 56.1 Statement § II ¶ 3; Chernoff Reply Decl., Ex. D at Real Property Transfer Report.) Sarah Tannenbaum received half of the sales proceeds, $350,000. (U.S. Memo. in Reply and Opp. to Sarah Tannenbaum Cross-Mot. for Summ. J. 8.) By the time of this sale, it had been 25 yearssince Gershon Tannenbaum had begun to accumulate tax liabilities, and approximately four years since Plaintiff had obtained the Default Judgment against him.
On October 23, 2012, Plaintiff filed this lawsuit pursuant to §§ 7401, 7402, and 7403 of the IRC. (Compl., ECF No. 1.) During a court conference, the attorneys for Plaintiff, the Tannenbaums, and Sheldon had initially agreed that no discovery was needed because there were no disputed issues of fact and that they would propose a briefing schedule for dispositive motions. However subsequently, on August 21, 2013, Magistrate Judge Robert M. Levy granted Plaintiff's request (ECF No. 24) to stay dispositive motion briefing in order to obtain discovery about Sarah...
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