The opinion of the court was delivered by: KIMBA M. WOOD
The United States of America ("the government") brought this action to reduce to judgment assessments of unpaid federal income tax liabilities of William and Maribeth Werner ("the Werners"), and to foreclose federal tax liens upon two classes of assets allegedly owned by the Werners: (1) assets held in a Liechtenstein trust known as the "Casa Trust," and (2) assets formerly held by defendant David Boland ("the Receiver assets"), who was appointed by this Court in an unrelated action by private parties to take possession of William Werner's assets ("the Receiver"). Presently before the court is a motion by the Werners, together with Glenn Werner, Cori Werner, Rick Werner and Debi Neustadter, who have interests in the assets of the Casa Trust, for summary judgment on, or alternatively for dismissal of, the government's claims as to the Casa Trust and the Receiver assets. The government cross-moves for summary judgment declaring that the assets of the Casa Trust and the Receiver assets are subject to its tax liens, and directing foreclosure of its liens on those assets. For the reasons stated below, defendants' motion for summary judgment, or in the alternative for dismissal, is denied. The government's motion for summary judgment is granted.
Certain facts underlying this case arose in connection with Duttle v. Bandler & Kass, 82 Civ. 5084 (KMW), an earlier action by private plaintiffs ("the Duttle plaintiffs") to enforce a judgment against William Werner ("Werner"). The facts of Duttle are repeated only as necessary here.
After obtaining their judgment against Werner, the Duttle plaintiffs filed an application pursuant to Rule 69 of the Federal Rules of Civil Procedure, to compel Werner to deliver to them the contents of the Casa Trust and other Werner assets. The day before depositions were to begin in connection with the application, Werner filed a petition for bankruptcy. The Duttle plaintiffs moved, inter alia, to dismiss the petition as a bad faith filing, and I granted their motion on June 19, 1992. My decision was based in part on the finding that Werner had failed to honestly list all of his assets, and that he had placed his assets in his wife's name and created a Liechtenstein trust, the Casa Trust, in order to defraud his creditors. See Memorandum Opinion and Order dated June 19, 1992, 91 Civ. 6868 (KMW). On June 23, 1992, I issued an opinion holding that the Casa Trust was a fraudulent conveyance as to the Duttle plaintiffs, and that therefore they should be permitted to execute their judgment on the Casa Trust assets. 82 Civ. 5058 (KMW). On July 10, 1992, I entered an Injunction and Order, compelling turnover of the Casa Trust assets and other Werner assets to a court-appointed receiver.
On August 14, 1992, the day before Werner was to come before the court on a contempt citation for failure to comply with the court's July 10, 1992 order, he filed a second bankruptcy petition. The Duttle plaintiffs promptly filed a motion to dismiss the second petition as a bad faith filing. A hearing on the motion was held on September 9, 1992. At the hearing, Werner and his counsel testified that there were "substantial differences" between Werner's second petition and his earlier petition, such that the second petition should be regarded as filed in good faith. Mayell Decl. Ex. B at 3. The most significant of these differences was that Werner had listed all of his assets on the schedules accompanying the petition, including the assets of the Casa Trust. Id. at 3-4. Werner's admission of ownership of the Casa Trust assets, coming after repeated evasions, led me to consider his second bankruptcy petition very seriously. Id. at 3, 103. Ultimately, however, I dismissed the petition as filed in bad faith, because of its timing and because there was no evidence that Werner had made an effort to alter his opulent lifestyle. Memorandum Opinion and Order dated September 25, 1992, 82 Civ. 5084 (KMW). I also indicated to Werner that unless he complied with the court's July 1992 order, I would impose contempt sanctions on him. Werner eventually turned over to the Receiver certain of his assets, including a 1990 Porsche automobile that had been listed in his bankruptcy petition and four pieces of art work belonging to the Casa Trust. Werner also appealed the dismissal of his second bankruptcy petition.
While the Duttle plaintiffs' struggled to execute their judgment against Werner, and approximately at the time Werner filed his first bankruptcy petition, the government began to gain interest in pursuing a claim against Werner. Beginning in November of 1987, the government had assessed the Werners for unpaid federal income taxes, interest and penalties for the tax years 1976 through 1988. The government filed notices of federal tax liens reflecting those assessments on October 4, 1989 and May 30, 1990 with the Register of the City of New York, thus perfecting its tax liens. Zipkin Decl. P 6. On October 1, 1992, the government moved for a preliminary injunction, requesting the court to enjoin the Receiver from liquidating or paying out any Werner assets until the court determined whether the government or the Duttle plaintiffs held a priority lien on the assets of the Casa Trust. Because any decision on the preliminary injunction could be mooted by a reversal of my dismissal of Werner's bankruptcy petition, I asked the parties to agree to preserve the status quo regarding the government's claim to the assets held by the Receiver, which would permit me to hold the government's motion in abeyance pending the Second Circuit's decision. The parties began to negotiate a stipulation to this effect, but before it was executed, the Duttle parties informed the court that they had reached a settlement. The government objected to the settlement, and filed a motion to intervene. I entered an order approving the settlement, and denying the government's motion to intervene, on March 18, 1993. Although the stipulation preserving the status quo with regard to the government's claims was never signed, the Receiver did not liquidate or distribute any assets in violation of the proposed stipulation.
On June 29, 1993, the government filed this independent action. In October of 1993, the parties filed the instant motions. On January 19, 1994, the court entered a stipulation and order reducing to judgment the government's tax assessments against the Werners in an amount of $ 7,097,075.44. However, disagreement remains as to whether the government may collect this amount by executing its liens against the Casa Trust and Receiver assets.
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to win as a matter of law." Fed. R. Civ. P. 56(c); Citizens Bank of Clearwater v. Hunt, 927 F.2d 707, 710 (2d Cir. 1991). In deciding a summary judgment motion, the court must resolve ambiguities and draw inferences against the moving party. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970)). The moving party bears the initial burden of demonstrating that there exists no material issue of fact and that he or she is entitled to judgment as a matter of law. See Brady v. Colchester, 863 F.2d 205, 210 (2d Cir. 1988). The movant may carry this burden by demonstrating the absence of evidence to support the non-movant's claims. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Once this burden is met, a nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts," Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). Moreover, the nonmovant may not merely rest on the allegations contained in the pleadings, but must "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 248.
I. Defendants' Motion For Summary Judgment
Defendants do not explicitly contest Werner's ownership of the Casa Trust and Receiver assets.
Rather, their motion for summary judgment is grounded on the claim that the government's attempt to foreclose its tax liens against the Casa Trust assets is barred by the statute of limitations of the Federal Debt Collection Act, 28 U.S.C. § 3001 et seq. (1993) ("the Act").
According to defendants, the Act bars any claim by the government to avoid a debtor's transfer of legal title to another unless an action is commenced within six years after the transfer is made, or within two years after the transfer reasonably could have been discovered. Because the Casa Trust was created in 1984, and because the government has known about it since January of 1985,
defendants argue, any attempt to reach the Casa Trust assets is barred by the Act's statute of limitations.
Defendants' contention is without merit. Although the Federal Debt Collection Act generally provides "the exclusive civil procedures for the United States to recover judgment on a debt," 28 U.S.C. § 3001(a), its exclusivity is explicitly subject to the following limitation:
To the extent that another Federal law specifies procedures for recovering on a claim or a judgment for a debt arising under such law, those procedures shall apply to such claim or judgment to the extent ...