United States v. Rozbruch
| Citation | 28 F.Supp.3d 256 |
| Decision Date | 07 July 2014 |
| Docket Number | No. 11 Civ. 6965(GWG).,11 Civ. 6965(GWG). |
| Parties | UNITED STATES of America, Plaintiff, v. Jacob ROZBRUCH et al., Defendant. |
| Court | United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York |
OPINION TEXT STARTS HERE
Motion granted. David Vincent Bober, U.S. Attorney's Office, Tomoko Onozawa, New York, NY, for Plaintiff.
Jeremy M. Klausner, Agostino & Associates a Professional Corporation, Hackensack, NJ, Martin C. Geagan, Dewey & Leboeuf, L.L.P., Marc L. Antonecchia, Patrick Joseph Sweeney, Holland & Knight LLP, Donald Glenn Davis, Butler, Fitzgerald & Potter a Professional Corporation, New York, NY, for Defendant.
Plaintiff United States of America (the “Government”) filed this action to: (1) reduce to judgment federal tax assessments made against defendants Jacob Rozbruch and Marsha Rozbruch (the “Rozbruchs”) and East 72nd Street Orthopaedic Surgery Specialists, P.C. (collectively “defendants”); and (2) to foreclose on federal tax liens levied on property owned by the Rozbruchs. The Government now moves for summary judgment on both of its causes of action. The parties consented to having this matter decided by a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). For the reasons set forth below, the Government's motion for summary judgment is granted.
I. BACKGROUNDA. Procedural History
The Government filed the complaint in this action on October 4, 2011. See Complaint, filed Oct. 4, 2011 (Docket # 1). The original complaint named as defendants Jacob and Marsha Rozbruch, 420 East 72nd Tenants Corporation (“Tenants Corporation”), Emigrant Mortgage Company (“Emigrant”), the New York State Department of Taxation and Finance, and the New York City Department of Finance. See id. The complaint stated that the Government sought to “collect certain federal tax liabilities of the defendants” and to “enforce federal tax liens upon personal property owned by the Rozbruchs, namely 564 shares of stock of [Tenants Corporation] and the proprietary lease for Unit 7J; 377 shares of stock of [Tenants Corporation] and the proprietary lease for Unit 1K; and 480 shares of stock of [Tenants Corporation] and the proprietary lease for Unit 1 J, all three units being located in the building known as 420 East 72nd Street” in New York City. Id. ¶ 1. The complaint alleged that Tenants Corporation owns “the land and residential building” in which the three units are located and that Tenants Corporation “may have or claim to have an interest in the proceeds of any sale of the Apartments.” Id. ¶ 6. Similarly, it alleged that Emigrant “holds a mortgage on the Apartments” and that “Emigrant may have or claim to have an interest in the proceeds of any sale of the Apartments.” Id. ¶ 7. Finally, the complaint alleged that the New York State Department of Taxation and Finance and the New York City Department of Finance may also “have or claim to have an interest in the proceeds of any sale of the Apartment[s].” Id. ¶¶ 9–10.
On March 15, 2012, the Government filed an amended complaint adding East 72nd Street Orthopaedic Surgery Specialists, P.C. (“Ortho”) as a defendant. See Amended Complaint, filed March 15, 2012 (Docket # 4). The Government later filed second and third amended complaints. See Second Amended Complaint, filed April 26, 2013 (Docket # 27); Third Amended Complaint, filed June 26, 2013 (Docket # 33).
On May 14, 2013, Tenants Corporation filed an answer to the second amended complaint, alleging that it held “a priority interest over all others, including Plaintiff, in the proceeds of any sale of the Apartments ... to collect any past and future unpaid maintenance, as well as attorneys' fees and costs for the collection thereof....” Defendant 420 East 72nd Tenants Corp.'s Answer to the Second Amended Complaint, filed May 14, 2013 (Docket # 28), ¶ 15. On June 3, 2013, Emigrant filed an answer to the second amended complaint, in which it asserted that it “has and does claim a first position mortgage lien on the Apartments ... [and] an interest in the proceeds of any sale of the Apartments” and that “any liens or security interests that Plaintiff may have or claim in the Apartments is subordinate to the senior and first position mortgage lien of Emigrant on the Apartments, as a result of two subordination agreements executed by the Internal Revenue Service in favor of Emigrant.” Answer, Defenses, Counterclaim and Cross–Claims of Emigrant Mortgage Company, Inc. to the Second Amended Complaint, filed June 3, 2013 (Docket # 30), ¶ 4.
The Government filed the instant motion for summary judgment on both of its causes of action on February 12, 2014.1
B. Facts
The following facts are undisputed unless otherwise stated.
Jacob Rozbruch and Marsha Rozbruch, husband and wife, reside at 420 East 72nd Street, Apartment 7J, in New York City. See Answer to Third Amended Complaint by Defendants Jacob Rozbruch, Marsha Rozbruch, and East 72nd Street Orthopaedic Surgery Specialists, filed May 5, 2013 (Docket # 34) (“Answer”), ¶ 5. Ortho is a New York professional corporation with offices located at 420 East 72nd Street, Units 1J and 1K. Id. ¶ 6; Def. 56.1 Stat. ¶ 6.2 The Rozbruchs are the sole shareholders of 564 shares of stock in Tenants Corporation and the holders of the proprietary lease for Unit 7J. See Proprietary Lease for Unit 7J (annexed as Ex. 8 to Fields Decl.); Def. 56.1 Stat. ¶ 1; Fields Decl. ¶ 130. Jacob Rozbruch is the sole shareholder of 480 shares of stock of the Tenants Corporation and the holder of the proprietary lease for Unit 1J. See Proprietary Lease for Unit 1J (annexed as Ex. 9 to Fields Decl.); Def. 56.1 Stat. ¶ 2; Fields Decl. ¶ 131. Jacob Rozbruch is also the sole shareholder of 377 shares of stock of the Tenants Corporation and the holder of the proprietary lease for Unit 1K. See Proprietary Lease for Unit 1K (annexed as Ex. 10 to Fields Decl.); Def. 56.1 Stat. ¶ 3; Fields Decl. ¶ 132.
The Internal Revenue Service (“IRS”) made assessments jointly against the Rozbruchs for deficiencies in the payment of federal income tax for the taxable years 1999 to 2011. See Fields Decl. ¶¶ 5–19; Account Transcripts (annexed as Ex. 1 to Fields Decl.); Def. 56.1 Stat. ¶ 7.3 The deficiency assessments as to the Rozbruchs' federal income taxes for the 1999–2011 tax years are based on income reported by the Rozbruchs. Fields Decl. ¶ 20; Def. 56.1 Stat. ¶ 8. The Government asserts that the amount of the deficiency assessments against the Rozbruchs for the payment of federal income taxes for these years, including accrued statutory penalties and interest as of February 12, 2014, is $3,354,840.34. Gov't 56.1 Stat. ¶ 64; Fields Decl. ¶ 125; Payoff Calculator (annexed as Ex. 6 to Fields Decl.), at 1. Defendants have contested these assessments only on the ground that the collections period for the 1999 tax year has expired. See Def. 56.1 Stat. ¶ 9. While the IRS has issued notices of assessment and demands for payment, the Rozbruchs have failed to pay the total amount of their federal income tax liabilities for these years. Fields Decl. ¶ 20; Def. 56.1 Stat. ¶ 10.
The IRS assessed trust fund recovery penalties (“TFRP's”) under 26 U.S.C. § 6672 against the Rozbruchs as “responsible persons” who each failed to withhold, account for, and pay over to the IRS income and FICA taxes relating to compensation paid to employees of Ortho for various tax quarters from 2000 to 2009. See Fields Decl. ¶¶ 21–3 8; Account Transcripts (annexed as Ex. 2 to Fields Decl.); Def. 56.1 Stat. ¶ 11. The Government asserts that the amount of the TFRP assessments with respect to Jacob Rozbruch, including statutory interest and fees as of February 12, 2014, is $466,292.43. Gov't 56.1 Stat. ¶ 65; Fields Decl. ¶ 126; Payoff Calculator (annexed as Ex. 6 to Fields Decl.), at 2. The Government asserts that the amount of the TFRP assessments with respect to Marsha Rozbruch, including statutory interest and fees as of February 12, 2014, is $466,569.48. Gov't 56.1 Stat. ¶ 66; Fields Decl. ¶ 127; Payoff Calculator (annexed as Ex. 6 to Fields Decl.), at 3. With respect to these assessments, Defendants admit that the notices of assessment and demands for payment of these amounts were issued to the Rozbruchs. Def. 56.1 Stat. ¶ 13. They add, however, that the “purported assessments for the Second Quarter 2003 and Third Quarter 2003 are invalid as they were not made within the time prescribed by statute” and that the “account balances set forth in Plaintiff's Rule 56.1 Statement [at ¶ 12] are calculated incorrectly as interest is calculated from the date that notice of assessment and demand for payment is issued, not from the date of assessment.” Id. ¶ 12. Notices of assessments and demand for payments were issued to the Rozbruchs, but the Rozbruchs have failed to pay the full amount of these liabilities. Fields Decl. ¶ 39.4
The IRS also made assessments against Ortho for deficiencies in the payment of quarterly federal payroll, unemployment, and corporate income taxes for various tax quarters and tax years from 2000 through 2012. See Fields Decl. ¶¶ 40–76; Account Transcripts (annexed as Ex. 3 to Fields Decl.); Def. 56.1 Stat. ¶ 14. The Government asserts that the amount of the deficiency assessments against Ortho for these taxes, including penalties and interest as of February 12, 2014, is $1,519,925.05. Gov't 56.1 Stat. ¶ 71; Fields Decl. ¶ 129; Payoff Calculators (annexed as Ex. 7 to Fields Decl.), at 1–3. Notices of assessments and demand for payment of these taxes were issued to Ortho, but Ortho has failed to pay the full amount of these liabilities. Fields Decl. ¶ 75.5
Finally, we note that the Government asserts that it has timely recorded a number of Notices of Federal Tax Lien relating to the assessments described above against the Rozbruchs and against Ortho. See Gov't 56.1 Stat. ¶¶ 17–63. We do not discuss this issue further, however, because the parties have not asked the Court to adjudicate any lien...
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