US v. Comparato, CV 92-3326(RR).

• Decision Date: 02 July 1993
• Docket Number: No. CV 92-3326(RR).,CV 92-3326(RR).
• Parties: UNITED STATES of America, Plaintiff, v. Anthony COMPARATO, individually and as Administrator of the Estate of John Comparato; Mildred Comparato; Millicent Comparato; Diana Comparato Carlucci; Baron & Vesel, P.C.; and James Collins, Clerk of the Surrogate's Court of New York, Queens County, Defendants.
• Court: U.S. District Court — Eastern District of New York

850 F. Supp. 153

UNITED STATES of America, Plaintiff, v. Anthony COMPARATO, individually and as Administrator of the Estate of John Comparato; Mildred Comparato; Millicent Comparato; Diana Comparato Carlucci; Baron & Vesel, P.C.; and James Collins, Clerk of the Surrogate's Court of New York, Queens County, Defendants.

No. CV 92-3326(RR).

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

July 2, 1993.

Zachary W. Carter, U.S. Atty., E.D. of N.Y., Civ. Div., Brooklyn, NY by Thomas A. McFarland, for plaintiff.

U.S. Dept. of Justice, Tax Div., Washington, DC by Deborah S. Meland, for plaintiff.

Frederic P. Szostek, Woodside, NY by Frederic P. Szostek, for defendants Anthony Comparato, Mildred Comparato, Millicent Comparato, and Diana Comparato Carlucci.

Baron & Vesel, P.C. by David A. Vesel, Steven M. Weinstein, defendant pro se.

Office of Court Admin. New York City by Michael Colonder, for defendant James J. Collins.

MEMORANDUM and ORDER

RAGGI, District Judge:

The United States brings this action to reduce to judgment the tax liabilities of Anthony and Mildred Comparato, which now exceed $890,000. Because the principal asset to which the United States would look to collect on the Comparatos' indebtedness is $650,000 in escrow accounts, which monies represent the settlement proceeds of malpractice actions relating to the Comparatos' deceased son, plaintiff further seeks a judgment setting aside the Comparatos' attempts to renounce their interests in this property. The United States submits that a taxpayer cannot renounce a vested right to property to defeat a federal tax lien. Because this case presents no factual dispute as to the Camparatos' tax liabilities, the United States asks this court to resolve the renunciation issue in its favor on a motion for summary judgment. Having carefully considered the submissions of the parties and the applicable law, the court concludes that the attempted renunciations do not defeat the federal tax liens. Summary judgment is, therefore, granted in favor of the United States against Anthony and Mildred Comparato.

Factual Background

1. The Comparatos' Tax Liabilities

The long history of civil and criminal tax disputes between the Comparatos and the United States is detailed in a recent Tax Court opinion, Comparato v. Commissioner of Internal Revenue, 65 T.C.M. (CCH) 1890, 1993 WL 36033 (T.C.1993), familiarity with which is assumed. Because that decision resolves all outstanding disputes between the parties as to the Comparatos' tax liabilities, this court simply notes the following now-undisputed jeopardy assessments filed against the Comparatos by the Internal Revenue Service.

With respect to Anthony Comparato:

(1) On September 30, 1985, he was assessed $10,253.75 in tax, interest, and penalties for tax year 1983.

(2) On May 19, 1986, he was assessed $1,108.12 in tax, interest, and penalties for tax year 1984.

(3) On July 7, 1986, he was assessed $365,048.19 in tax, interest, and penalties for tax year 1985.

(4) On October 27, 1986, he was assessed $14,832.74 in tax, interest, and penalties for tax year 1986.

(5) On August 23, 1989, he was assessed a total of $153,565.00 representing $32,379.00 in tax, interest, and penalties for tax year 1974, $72,197.00 for tax year 1975, and $48,989.00 for tax year 1976.

(6) On August 23, 1989, he was further assessed $131,727.19, representing $1,044.00 in tax, interest, and penalties for tax year 1981, an additional $23,791.75 for tax year 1982, an additional $20,327.50 for tax year 1983, and an additional $86,563.94 for tax year 1984.

These assessments total $676,534.99.

With respect to Mildred Comparato:

(1) On August 23, 1989, she was assessed $118,841.00, representing $20,447.00 in tax, interest, and penalties for tax year 1974, $58,416.00 for tax year 1975, and $39,978.00 for tax year 1976.

(2) On August 23, 1989, she was further assessed $96,674.22, representing $1,044.00 in tax, interest, and penalties for tax year 1981, $4,324.50 for tax year 1982, $3,966.00 for tax year 1983, and $87,339.72 for tax year 1984.

These assessments total $215,515.22.

2. Malpractice Actions Relating to the Treatment and Death of John Comparato

John Comparato, the son of defendants Anthony and Mildred Comparato, was born a quadriplegic in 1965. An extremely sick child, he suffered two strokes before the age of seven and required constant care and medical attention. On March 30, 1984, John Comparato died intestate at the age of 19.

While John Comparato was still alive, a malpractice action was brought in his name in New York State Supreme Court against various defendants to recover damages for pain and suffering. After his son's death, Anthony Comparato was appointed administrator of his estate by the Surrogate's Court in Queens County and in that capacity pursued both the pain and suffering claim and a further action against the same defendants for wrongful death. The claim for pain and suffering was ultimately settled for $350,000; the claim for wrongful death was settled for $500,000.

Sometime in 1989, the date not being clear from the record before this court, Mr. Comparato petitioned the Surrogate's Court inter alia to approve this settlement and to permit payment therefrom of various expenses, including legal fees. He asked that the net proceeds be distributed equally as between himself and his wife as his son's statutory distributes. Before the court acted on this request, however, the Internal Revenue Service, (referred to herein as the "IRS"), in August 1989, served notices of levy on Baron & Vesel, attorneys for the Comparato estate, and on the defendants in the malpractice actions, citing tax liens against both Anthony and Mildred Comparato. This prompted Mr. Comparato to again seek the assistance of the Surrogate's Court. On September 8, 1989, he advised that court that he and his wife were pursuing court challenges to the federal tax assessments. He asked the Surrogate to issue an order directing the payment of settlement funds into an escrow account pending final determination of the tax proceeding. On August 22, 1990, the Surrogate did issue such an order, but permitted payment of $200,000 in attorney fees, thereby leaving $650,000 to be deposited in eleven separate escrow accounts.

3. The Renunciations

In the interim, on March 6, 1990, tax counsel for the Comparatos wrote to District Counsel for the IRS expressing his clients' desire to have the settlement proceeds applied to their tax indebtedness, subject to refund if they were to prevail on appeal. The record fails to reveal what, if any, steps the parties took toward this end. What is undisputed is that the following year, on April 10, 1991, Anthony and Mildred Comparato executed separate, but otherwise identical, renunciations of their interests in the estate of their deceased son pursuant to Section 2-1.11 of the New York Estates, Powers and Trusts Law (McKinney 1981 & Supp.1993). Because these renunciations were not filed within the nine-month statutory period, the Comparatos were obliged to seek an extension of time from the Surrogate's Court. An order to show cause why the extension should not be granted was issued on August 10, 1991 and served on, among others, the Internal Revenue Service. The IRS, which enjoyed sovereign immunity from being joined in the New York action, did not respond to the order.¹ On September 23, 1991, the Surrogate permitted the renunciations to be filed out of time. In re Estate of John Comparato, No. 1910/86 (Surr.Ct.Queens County Sept. 23, 1991).

On May 1, 1992, the Comparatos' remaining children, Diana and Millicent, petitioned the Surrogate's Court to intervene in the administration of their brother's estate, which application was granted on July 21, 1992. By law, they would succeed their parents as statutory distributees of John Comparato. See N.Y.Est.Powers & Trusts Law § 4-1.1(a)(5) (McKinney Supp.1993).

On July 15, 1992, the United States commenced this action. The Surrogate's Court is apparently awaiting the outcome of this case before making any final disposition of the monies it ordered placed in escrow.

Discussion

I. Federal Tax Liens

Federal law provides that if a taxpayer fails to pay his due to the United States Treasury, there "shall be a lien in favor of the United States upon all rights and rights to property, whether real or personal, belonging to such person." 26 U.S.C. § 6321 (1988). The statute's reach is deliberately broad and is meant "to reach every interest in property that a taxpayer might have." United States v. National Bank of Commerce, 472 U.S. 713, 720, 105 S.Ct. 2919, 2924, 86 L.Ed.2d 565 (1985). Accordingly, a tax lien attaches as soon as the Secretary of the Treasury issues an assessment of tax liability. 26 U.S.C. § 6322 (1988). Moreover, the lien reaches both current and after-acquired property. Glass City Bank of Jeanette, Pa. v. United States, 326 U.S. 265, 267, 66 S.Ct. 108, 110, 90 L.Ed. 56 (1945); accord United States v. McDermott, ___ U.S. ___, ___, 113 S.Ct. 1526, 1527, 123 L.Ed.2d 128 (1993).

In this case, it is undisputed that, as a result of the various jeopardy assessments filed against Anthony Comparato, the United States has six liens in effect totalling $676,534.99. Similarly, it is undisputed that, as a result of the assessments filed against Mildred Comparato, the United States has two liens in effect totalling $215,515.22.

The threshold question in any case to enforce a tax lien is whether a taxpayer possesses "property" to which such a lien could attach. The answer depends in the first instance on state law, which "controls in determining the nature of the legal interest which the taxpayer has in the property...." Aquilino v. United States, 363 U.S. 509, 513, 80 S.Ct. 1277, 1280, 4 L.Ed.2d 1365 (1960); accord United States v. National Bank of Commerce, 472 U.S. at 722, 105 S.Ct. at 2925; Don King Prods., Inc. v. Thomas, 945 F.2d 529, 534 (2d Cir.1991) ("Whether the...