United States District Court, Northern District of New York
March 25, 1999
UNITED STATES OF AMERICA, PLAINTIFF,
SHELDON G. HANSEL, CHRISTY HANSEL, GRANT HANSEL, SHELLEY HANSEL AND EUNICE HANSEL, DEFENDANTS.
The opinion of the court was delivered by: Mcavoy, Chief Judge.
MEMORANDUM — DECISION & ORDER
Plaintiff United States of America ("plaintiff") commenced an
action against defendants pursuant to 26 U.S.C. § 7401 and 7403
to reduce tax assessments to judgment against Sheldon Hansel and
to set aside certain alleged fraudulent conveyances of stock to
Defendants Christy, Grant, Shelley, and Hope Hansel.*fn1 By
Memorandum — Decision & Order dated March 14, 1998, familiarity
with which is
assumed, see United States v. Hansel, 999 F. Supp. 694 (N.D.N Y
1998), the Court granted summary judgment against Sheldon,
Christy, Grant and Shelley Hansel.*fn2 Plaintiff now moves
pursuant to FED. R. CIV. P. 56 seeking summary judgment against
Defendant Hope Hansel declaring that the one share of stock
transferred to Eunice Hansel and re-transferred to Hope Hansel be
set aside as fraudulent.
The facts surrounding the instant litigation were fully set
forth in the Court's prior decision, Hansel, 999 F. Supp. 694.
In brief, in 1983 the Internal Revenue Service ("IRS") commenced
an examination of Sheldon and Hope Hansel's tax liabilities for
the years 1980 and 1981. In 1984, Sheldon and Hope transferred
their farm land, buildings, and equipment into a farm corporation
entitled Hanwinsel Farms, Inc. ("Hanwinsel") in exchange for all
200 shares of outstanding stock in the Corporation (100 shares to
Sheldon, 100 to Hope). On June 25, 1985, the IRS sent Sheldon and
Hope a Notice of Deficiency in the amounts of $70,691.00 for 1980
and $86,603.00 for 1981, plus interest and penalties. In
September 1985, Sheldon and Hope filed a petition with the United
States Tax Court for a determination of the tax liabilities set
forth in the Notice of Deficiency.
In 1987, Sheldon transferred 45 shares of stock in Hanwinsel
equally to each of his children. In 1989, Sheldon transferred his
remaining 55 shares as follows: 30 shares equally to each of his
children; 25 shares to his mother, Eunice Hansel.
On January 23, 1991, the Tax Court determined Sheldon to have
deficiencies of $20,909.00 for 1980 and $53,030.00 for 1981.
Shortly before her death in 1995, Eunice transferred her 25
shares as follows: 8 shares to each of her grandchildren (Sheldon
and Hope's children); 1 share to Hope.
The plaintiff thereafter commenced the instant litigation
seeking to: (1) reduce to judgment the tax assessments against
Sheldon Hansel; (2) set aside the fraudulent transfers by Sheldon
Hansel to Christy, Grant, Shelley, and Eunice; and (3) obtain
judgments against Christy, Grant, Shelley and Eunice in amounts
equal to the value of the shares of stock conveyed to them, plus
dividends, profits, and increases in the value of the stock. By
Memorandum — Decision & Order dated March 14, 1998, Hansel,
999 F. Supp. 694, the Court granted summary judgment to plaintiff and
declared the stock conveyances to be fraudulent under New York
Debtor and Creditor Law § 273. Judgment was subsequently entered
in favor of the United States and against Sheldon Hansel in the
amount of $222,007.21, plus interest. The judgment provided that
"[t]he conveyances of that interest in the stock of Hanwinsel
Farms, Inc., for no consideration by Sheldon G. Hansel to Eunice,
Christy, Grant and Shelley Hansel were fraudulent under N Y
Debt. & Cred. L. § 273."
Plaintiff now moves pursuant to Fed. R.Civ.P. 56 seeking
summary judgment that one of the shares of stock fraudulently
transferred to Eunice and re-transferred by her to Hope remains
tainted and must be set aside.
A. Fraudulent Transfer of Stock to Eunice Hansel
The issue of whether Sheldon fraudulently conveyed 25 shares of
stock in Hanwinsel to his mother, Eunice, has already been
decided by this Court in its prior Memorandum — Decision & Order.
See Hansel, 999 F. Supp. at 701 ("[T]here is no genuine issue of
fact as to any of the
elements of § 273. The conveyances were therefore fraudulent
under New York law, and the Government is entitled to summary
judgment against the transferees."). That finding is the law of
the case and defendant has offered no reasons why the Court
should not adhere to its prior ruling. See Prisco v. A & D
Carting Corp., 168 F.3d 593, 606 (2d Cir. 1999). There are no
new facts, intervening changes of law, or other factors
demonstrating that the Court made an error of law requiring
departure from the prior decision. See id.
Because plaintiff is a creditor, see United States v. Kaplan,
267 F.2d 114, 117 (2d Cir. 1959); United States v. Scharfman,
1981 WL 1855, at * 5 (S.D.N.Y. Aug. 14, 1981), and the Court
already found the transfers to be fraudulent pursuant to § 273,
the Court need not consider whether the transfers were also
fraudulent under § 276.
B. Whether Hope Hansel is a Purchaser in Good Faith
The Court's inquiry does not end there because Eunice
re-transferred one share of Hanwinsel stock to Hope. Thus, the
conveyance may be set aside only if Hope is not a purchaser in
good faith. See N.Y. Debt. & Cred. L. §§ 278, 279; Atlantic
Bank of New York v. Toscanini, 145 A.D.2d 590, 591, 536 N.Y.S.2d 132
(2d Dep't 1988).
Hope is the wife of Sheldon and was privy to all the stock
transfers and the financial affairs of Sheldon, the farm and
Hanwinsel. See generally, Jan. 8, 1998 Aff. of Hope Hansel.
Thus, she knew, or reasonably should have known, the value of
Sheldon's assets and liabilities, including the tax assessment,
and the ramifications of the stock transfers. See Schmitt v.
Morgan, 136 A.D.2d 792, 793, 523 N.Y.S.2d 252 (3d Dep't 1988).
Furthermore, Hope received her one share of stock from Eunice
"in consideration of the 25 years that [Hope] had spent caring
for Eunice  in [her] home and  because the dedication that
[Hope] had shown in maintaining the family farm convinced
[Eunice] that [Hope] was in the best position to see that the
farm continued to operate in accordance with [Eunice's] desires."
Id. at 35. Hope stated at deposition that she did not have any
contract with Eunice to provide services to her. See Dep. of
Hope Hansel, at 9. Hope also did not include this share of stock
as income on her 1995 tax return, which she would have been
required to if, indeed, such stock was given to her as payment
for services rendered.
These facts demonstrate that the transfer of the one share of
stock was more akin to a gift than a conveyance for fair value in
satisfaction of an antecedent debt. Aside from Hope's
unsubstantiated and conclusory statements in her affidavit, there
is no evidence of: (1) an antecedent debt owed to Hope by Eunice
"for the labor she had supplied Eunice;" (2) an implied promise
by Eunice to pay Hope for "services;" (3) an actual agreement by
Eunice to pay Hope for 25 years of caring for her in their home;
or (4) the value of any alleged antecedent debt. Even if the
Court assumed that Eunice gave the share of stock to Hope in
exchange for past services, this would not be a valid contract
because it would be based upon past consideration, see Pershall
v. Elliott, 249 N.Y. 183, 188, 163 N.E. 554 (1928); rather, it
would have been a gift.
Accordingly, the facts support a finding that Hope Hansel was
not a purchase in good faith because: (1) she knew the nature of
the original conveyances, see Anderson v. Blood, 152 N.Y. 285,
293, 46 N.E. 493 (1897); Schmitt, 136 A.D.2d at 793,
523 N.Y.S.2d 252; Farm Stores, Inc. v. School Feeding Corp.,
102 A.D.2d 249, 255, 477 N.Y.S.2d 374 (2d Dep't 1984), appeal
dismissed, 63 N.Y.2d 741, 480 N.Y.S.2d 208, 469 N.E.2d 529
(1984); and (2) she did not pay fair consideration for the one
share of Hanwinsel stock. See N.Y. Cred. & Debt. L. § 278(2);
Pittsford Develop. Corp., 6 Misc.2d 873, 875, 164 N.Y.S.2d 324
For the foregoing reasons, plaintiff's motion for summary
judgment is GRANTED. The Court finds that: (1) the 1989
transfer of stock by Sheldon Hansel to Eunice Hansel was
fraudulent under N.Y. Cred. & Debt. L. § 273; (2) Eunice Hansel
was not a purchaser for fair consideration; (3) Hope Hansel was
not a purchaser for fair consideration; (4) the stock conveyances
must be set aside and Sheldon Hansel is the true owner of the
subject one share of Hanwinsel stock; and (5) the United States
may foreclose the tax liens on Sheldon Hansel's stock in
Hanwinsel through judicial sale and a distribution of the
proceeds to satisfy Hansel's liability to the United States. The
United States is directed to submit an appropriate order within
30 days of the date of this decision upon which judgment may be
IT IS SO ORDERED.