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UNITED STATES v. WILLIAMS

April 9, 1997

UNITED STATES OF AMERICA, Plaintiff, against MARLON WILLIAMS, Defendant.


The opinion of the court was delivered by: CONNER

 Conner, Senior D.J.:

 This action was brought by plaintiff, the United States of America ("the Government") to enforce two tax levies against pro se Defendant Marlon Williams ("Williams"). We have jurisdiction pursuant to 28 U.S.C. §§ 1340 and 1345 and 26 U.S.C. §§ 7402 and 7403.

 BACKGROUND

 This action has its genesis in a consolidated tax return for the year 1991 filed in October 1992 by Yelram Productions, Inc. ("Yelram") and three of its subsidiary corporations, Marley Marl Productions, Inc. ("MMP"), Marley Marl Music, Inc., and Marley Marl Management, Inc. The consolidated return reported Yelram's 1991 consolidated federal income tax liability, without penalties, to be $ 43,659. Williams signed the consolidated return as Yelram's President; the return identifies Williams as Yelram's sole shareholder. The return was not accompanied by any payment of the taxes reported as due. On November 23, 1992 the IRS assessed Yelram for the unpaid taxes, together with interest and penalties. Yelram did not satisfy this liability and on November 15, 1993, the IRS filed a Notice of Federal Tax Lien against Yelram.

 In connection with administrative collection proceedings regarding Yelram's 1991 tax liability, two IRS Form 433-B Collection Information Statements, one for Yelram and one for MMP were submitted on October 25, 1994. Both listed Williams as the "person being interviewed" and were signed by him "under penalties of perjury." (See July 30, 1996 Declaration of Daniel S. Alter, Exhs. E and F.) Yelram's form lists as its sole asset a note payable by Williams to Yelram in the amount of $ 15,568; MMP's form lists under Accounts/Notes Receivable a note payable by Williams in the amount of $ 280,408. Id. at Exh. E. However, the $ 280,408 is not reflected on the next page of the form, "Asset and Liability Analysis," which represents, in line 18, that the amount of "Equity in Asset" for Accounts/Notes receivable is zero. Id.1

 On February 3, 1995, the IRS served Williams with two Notices of Levy, one for Yelram and one for MMP, each in the amount of $ 60,094.59 (the "Levies"). The Levies advised Williams that the IRS had made demand upon Yelram to satisfy its outstanding federal tax obligations, and that Yelram had failed to comply. The Levies directed Williams to turn over to the IRS all "property and rights to property (such as money, credits, and bank deposits)" that Williams has or "is obligated to pay" either Yelram or MMP. Id. at Exh. G. When Williams failed to comply with the Levies, the IRS issued two Final Demand Notices on March 30, 1995. Williams still did not reply and on January 10, 1996, the Government instituted this action to enforce the Levies. On July 31, 1996 the Government moved for summary judgment.

 DISCUSSION

 Summary judgment is appropriate if "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 a judgment as a matter of law." FED. R. CIV. P. 56(d). A fact is material only if, based on that fact, a reasonable jury could find in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). On a motion for summary judgment, all evidence must be viewed and all inferences must be drawn in the light most favorable to the nonmoving party. City of Yonkers v. Otis Elevator Co., 844 F.2d 42, 45 (2d Cir. 1988).

 The party seeking summary judgment bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Upon the movant's satisfying that burden, the onus then shifts to the non-moving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250. The non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. Ltd v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986), "but must set forth specific facts showing that there is a genuine issue for trial." First Nat'l Bank of Az. v. Cities Serv. Co., 391 U.S. 253, 288, 20 L. Ed. 2d 569, 88 S. Ct. 1575 (1988). "When a party is proceeding pro se, as in the instant action, this Court has an obligation to 'read his supporting papers liberally, and . . . interpret them to raise the strongest arguments that they suggest.'" Hernandez v. Strack, 1997 U.S. Dist. LEXIS 3400, No. 96 Civ. 417, 1997 WL 137439 (S.D.N.Y. March 25, 1997) (unpublished disposition) (citations omitted). A "pro se party's 'bald assertion,' however, completely unsupported by evidence, is not sufficient to overcome a motion for summary judgment." Id., (citing Carey v. Crescenzi, 923 F.2d 18, 21 (2d Cir. 1991)); Lee v. Coughlin, 902 F. Supp. 424, 429 (S.D.N.Y. 1995).

 Although Williams has not contested this point, it is clear that the IRS was authorized to levy upon any debts that Williams owed to Yelram and MMP. The Second Circuit has held that the "indebtedness of a third party to a taxpayer" is property that is subject to an IRS levy. United States v. Long Island Drug Co., 115 F.2d 983, 985-86 (2d Cir. 1940) (predecessor statute providing for levies against, inter alia, "evidences of debt"); Frasier v. Hegeman, 607 F. Supp. 318, 323 (N.D.N.Y. 1985); Treas. Reg. § 301.6331-1 (as amended in 1994) ("Levy may be made by serving a notice of levy on any person in possession of or obligated with respect to, property or rights to property subject to levy, including receivables, bank accounts, evidences of debt. . . .") (emphasis added). Moreover, treasury regulations provide that "the common parent corporation and each subsidiary which was a member of the group during any part of the consolidated return year shall be severally liable for the tax for such year." 26 C.F.R. § 1.1502-6(a). Thus, it was proper for the IRS to levy against any money Williams owed Yelram or any of its subsidiaries in order to satisfy Yelram's consolidated tax obligations.

 Once a person is served with a notice of levy, there are only two defenses available to a "failure to comply with the demand." United States v. Nat'l Bank of Commerce, 472 U.S. 713, 721-22, 86 L. Ed. 2d 565, 105 S. Ct. 2919 (1985) (citations omitted). First, that the person is "neither 'in possession of' nor 'obligated with respect to' property or rights to property belonging to the delinquent taxpayer." Id. Second, that the taxpayer's property is "subject to a prior judicial attachment or execution." Id. Where neither defense is available, a party must honor an IRS Notice of Levy or be liable for "the amount not surrendered, plus costs and interest." Schiff v. Simon & Schuster, Inc., 780 F.2d 210, 212 (2d Cir. 1985) (citing 26 U.S.C. § 6332(c)(1)). Williams has attempted to raise the first defense, by denying that he currently has outstanding loan obligations to Yelram in the amount of $ 15,568 and to MMP in the amount of $ 280,408. (Def. Memorandum in Opposition to Pl. Motion for Summary Jdgmt, p. 1.)

 The only support Williams offers for this position is his sworn affidavit stating that he is not currently indebted to Yelram or MMP, that "no tax returns subsequent to the 1991 returns of Yelram Productions, Inc. . . . make any reference to any outstanding loan obligations to either Yelram Productions Inc. or Marley Marl Productions . . ." and that both of the 1994 433-B forms relied upon by the Government "were prepared and presented to me by an accountant without any explanation as to their contents, and I signed the same without any understanding of their contents. These documents were not signed before any notary or other public official; nor was I ever sworn under oath to the veracity of the contents of these forms." (Williams Aff. P 3.)

 We agree with the Government that this evidence is insufficient as a matter of law. As regards the $ 15,568 loan to Yelram, it is difficult to determine from Yelram's 1991 consolidated tax forms precisely what monies Williams owed Yelram and its subsidiaries as of the end of 1991. We note that the consolidated balance sheet shows a net loan "to stockholders" (and Williams was the sole stockholder of Yelram and all of its subsidiaries) of $ 99,661. (See Exh A., Form 1120, Schedule L.) Relying upon Williams' statements to the IRS in 1994, these loan amounts apparently subsequently changed. Regardless, Williams in 1994 declared under the penalty of perjury that Yelram's sole asset was a $ 15,568 loan to himself *fn2" (See July 30, 1996 Declaration of Daniel S. Alter, Exh. E.) Similarly, he declared under the penalty that one of MMP's seven assets was a $ 280,408 loan to himself. Id. at ...


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