United States v. Mr. Hamburg Bronx Corporation

Decision Date07 February 1964
Citation228 F. Supp. 115
PartiesUNITED STATES of America, Plaintiff, v. MR. HAMBURG BRONX CORPORATION, Fischer & Miller, Inc., Samuel H. Lipson, Receiver, Industrial Commissioner of the State of New York, City of New York, Defendants.
CourtU.S. District Court — Southern District of New York


Robert M. Morgenthau, U. S. Atty. for Southern Dist. of New York, for United States (Robert E. Kushner, Asst. U. S. Atty., of counsel).

Leo M. Anderson, Jr., Yonkers, N. Y., for Fischer & Miller, Inc.

Prime Bros. & Duffy, Yonkers, N. Y., for defendant Samuel H. Lipson, receiver (Francis J. Duffy, Yonkers, N. Y., of counsel).

Louis J. Lefkowitz, Atty. Gen. of State of New York, New York City, for Industrial Commissioner (Samuel Stern, Asst. Atty. Gen., of counsel).

LEIBELL, District Judge.

This is an action by the Federal Government to enforce certain tax liens which it has assessed and filed against the defendant, "Mr. Hamburg-Bronx Corporation", for social security and income taxes, withheld by that corporation from the wages of its employees under the provisions of the tax withholding statute, T. 26 U.S.C. § 3402, formerly § 1622, and for social security taxes due from Hamburg as the employer. The Hamburg corporation had failed to pay over to the Government the taxes it withheld from its employees and failed to pay its own share of the Federal Social Security tax.

"Mr. Hamburg-Bronx Corporation" hereinafter referred to as "Hamburg" was a New York corporation, which, during the period September 1954 to May 15, 1957, operated a restaurant in Bronx County at premises, No. 2468 Grand Concourse. Mr. Al Rader had leased the premises from the Edlar Realty Corporation under a lease dated July 1, 1954. The Edlar Realty Corporation was dissolved August 12, 1957, and the tenant's security was assigned by it to its successor, The Louis Calder Foundation. Al Rader, who was the principal stockholder and President of Hamburg, assigned the lease and the tenant's interest in the security to Hamburg, September 24, 1954.

In March 1957 Hamburg borrowed from a corporation known as "H. M. R. Enterprises, Inc." hereinafter referred to as "H. M. R.", a sum of money which Hamburg used to pay $17,000 of creditors' claims against Hamburg. For this loan H. M. R. received Hamburg's promissory note and the personal guaranties of Al Rader and similar guaranties from Ben Rader, his brother. H. M. R. also received certain chattel mortgages, later consolidated into one chattel mortgage for $22,000, on the restaurant equipment. The chattel mortgage was filed in Bronx County on March 22, 1957.

Since Hamburg was assignee of the lease of the restaurant premises, the lender, H. M. R., also took, as security for its loan, an assignment of the lease and of Hamburg's interest in the rent deposit or security which had been given by Hamburg to the owner-lessor in the sum of $4,125. H. M. R. also received as security for its loan an assignment of a deposit or security of $716.18 given by Hamburg to the Consolidated Edison Company, which presumably supplied light and heat to the restaurant premises.

In a scheme to put Hamburg's assets beyond the reach of its creditors, H. M. R. foreclosed its chattel mortgage and on a short notice of sale (less than 24 hours) bid in the mortgaged chattels for $100.00. On the same day H. M. R. sold its interest in the foreclosed property to a third corporation, "Mr. Hamburg-2468 Concourse Corporation", owned by the Raders, who controlled Hamburg. The third corporation also got the "rent security" and the Consolidated Edison "deposit".

The restaurant business was continued and operated by the third corporation with the old Hamburg employees and the equipment and food on hand. However, the third corporation also got into trouble financially and H. M. R., which had sold the business to the third corporation practically on credit, foreclosed the chattel mortgage in July 1958 and sold the chattels at public sale for $5,140.18.

Before discussing the steps taken by one of Hamburg's creditors, Fischer & Miller, Inc., to upset the fraudulent scheme in respect to the assets of Hamburg, and so that we may keep the chronological order clear, the following is a list of tax assessments of the Federal Government against Hamburg, the amount of each assessment, the amount outstanding, the dates of assessment, the dates Notice and Demands were issued, and the dates the notices of lien were filed (all as compiled from Exhibits 22, 23 and 24, and Exhibits 27 and 28 received in evidence at the trial of this action): —

                                                                   Notice &   Notice
                    Tax        Amount of     Amount     Date of    Demand    of Lien
                   Period     Assessment  Outstanding  Assessment  Issued     Filed*
                 3 Qtr. 55     $831.73      $356.73     12/23/55   1/20/56   5/9/56
                 4 Qtr. 55      700.11       700.11      3/ 8/56   4/3/56    5/9/56
                 4 Qtr. 56      483.51       483.51      3/22/57   3/28/57   5/13/58
                 1 Qtr. 57      434.23       434.23      5/23/57   6/13/57   5/13/58
                 2 Qtr. 57      288.41       288.41      8/30/57   9/5/57    5/13/58

Bronx County was the county in which the restaurant business was located and in which the Hamburg corporation had its office and was domiciled. It was the proper county in which to file the Government tax liens. Mintz v. Fischer, 19 A.D.2d 36, 38, 240 N.Y.S.2d 649, citing Severnoe Securities Corp. v. London & Lancashire Ins. Co. et al., (opinion by Judge Cardozo) 255 N.Y. 120, 123, 174 N.E. 299.

The Hamburg corporation had also failed to pay to the New York State Industrial Commission "unemployment taxes" due the State of New York. The Industrial Commissioner docketed in March, August and October 1957 warrants against Hamburg for unemployment taxes due the State of New York in the total sum of $1,244.88 and interest, for certain specified quarters of the year of employment involved. (Exs. D-1, D-2 and D-3).

Fischer & Miller, Inc., one of Hamburg's creditors, sued and obtained a default judgment against Hamburg for $10,713.83 on October 10, 1957, in Westchester County, and filed a transcript of the judgment on October 16, 1957 in the Bronx County Clerk's office (Ex. F-M 1). This led to the appointment of Samuel H. Lipson as a Receiver in Supplementary Proceedings under § 804 of the New York Civil Practice Act. All of the dates of assessments for the Federal tax liens are prior in time to the Fischer & Miller, Inc. default judgment and the two notices of liens filed by the Government May 9, 1956 were prior in date to the Fischer & Miller, Inc. default judgment of October 10, 1957.

Mr. Lipson, as Receiver, brought an action against Hamburg, H. M. R. and others, to set aside, as a fraud on Hamburg's creditors, the transfer of Hamburg's chattels to "Mr. Hamburg-2468 Concourse Corporation" and to recover the rent deposit, the Consolidated Edison deposit and a Chevrolet truck.

The New York State Supreme Court in an opinion by Mr. Justice Nathan found there was fraud (Lipson, as Receiver v. H. M. R. Enterprises, Inc., et al, 16 Misc.2d 447, 183 N.Y.S.2d 160). This judgment was modified in amount by the Appellate Division (First Dept.) which made its own findings and described the fraud in detail (9 A.D.2d 759, 193 N.Y.S.2d 138). The New York Court of Appeals affirmed the judgment of the Appellate Division, without opinion. (8 N.Y.2d 989, 205 N.Y.S.2d 161, 169 N.E.2d 285)

The order of the New York State Supreme Court signed by Judge Fine (Ex. 18), entered on the affirmance of the New York Court of Appeals, was consented to by the United States of America and provided that the Receiver, Mr. Lipson, "shall hold the same (the amount collected) subject to the determination of the liens and levys sic of the United States of America, if any, with the same force and effect as if the aforesaid funds had remained in the hands of said H. M. R. Enterprises, Inc., until further order of this Court, (the State Supreme Court) and that the Receiver make no disbursement of any part thereof until the question raised by the liens and levys sic of the United States of America shall be finally determined."

Then followed this suit by the Government to enforce its tax liens hereinabove listed. The complaint in this action was filed January 9, 1961. The parties named as defendants were those who had asserted claims to the funds hereinafter listed.

The specific funds involved in this action to which the Federal Government claims priority by reason of its tax liens are the following:

(1) The sum of $1,283.20 plus interest, held by defendant City of New York as stakeholder, representing a rent deposit due to Hamburg from its landlord, the Edlar Realty Corporation, and turned over to a New York City official, the City Chamberlain.

(2) The sum of $716.18, held by the Receiver Lipson, representing a security deposit paid by Hamburg to the Consolidated Edison Company of New York (Exhibit 31) and turned over to the Receiver, by Consolidated, who deposited it in his account in the Chemical Bank as required by the provisions of his order of appointment (Exhibit F-M 2).

(3) The sum of $2,841.80 plus interest, held by the Receiver Lipson, representing a rent deposit due Hamburg from The Louis Calder Foundation, the successor to Hamburg's landlord, the Edlar Realty Corporation, which sum was also deposited in the Chemical Bank account of the Receiver. This rent security was in addition to the $1,283.20 fund of (1).

(4) The sum of $3,630.78 plus interest, recovered by the Receiver Lipson from H. M. R. et al, representing the value of chattels (after certain credits allowed to H. M. R. by the Appellate Division) belonging to Hamburg which Hamburg had fraudulently transferred.

(5) The sum of $450 plus interest held by the Receiver, representing the value of a Chevrolet truck belonging to Hamburg, which Hamburg fraudulently transferred.

The tax liens claimed and filed are those of the United States...

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