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Law Offices of Damien Bosco v. Hu-Del Wines and Liquor Co.

February 22, 2008

LAW OFFICES OF DAMIEN BOSCO, AS ESCROW AGENT, DAMIEN M. BOSCO, ESQ., PLAINTIFF,
v.
HU-DEL WINES AND LIQUOR CO., INC., HUBERT S. HORNE, MAXINE D. HORNE, SUTTER LIQUOR INC., UNITED STATES OF AMERICA ON BEHALF OF THE DEPARTMENT OF TREASURY, INTERNAL REVENUE SERVICE, THE CITY OF NEW YORK ON BEHALF OF THE DEPARTMENT OF FINANCE, AND THE STATE OF NEW YORK ON BEHALF OF WORKERS COMPENSATION BOARD OF NY, DEFENDANTS.



The opinion of the court was delivered by: Townes, United States District Judge

MEMORANDUM and ORDER

On September 11, 2006, plaintiff Law Offices of Damien Bosco ("Plaintiff") commenced this interpleader action, purportedly pursuant to 28 U.S.C. § 2410, regarding $55,000.00 that Plaintiff held in escrow following a transaction in which defendant Hu-Del Wines and Liquor Co. ("Hu-Del") sold certain assets to defendant Sutter Liquor Inc. ("Sutter"). Pursuant to the escrow agreement, Plaintiff was obligated to hold the money provided by Sutter until Hu-Del provided proof to Sutter that the tax warrants, judgments, and tax liens owed by Hu-Del had been paid. Specifically, the escrow agreement required proof that Hu-Del had paid debts owed to three government agencies, defendants New York City's Department of Finance ("DOF"), New York State's Workers' Compensation Board ("WCB"), and the Internal Revenue Service ("IRS").*fn1

Having obtained proof that the requisite debts had been paid, Plaintiff moved to be discharged from its obligations under the escrow agreement and recover its costs and attorneys' fees related to its role as escrow agent. However, this Court is unable to grant the relief requested because it lacks subject-matter jurisdiction over this action. On January 14, 2008, this Court ordered Plaintiff to file a brief explaining the basis for this Court's jurisdiction by January 30, 2008, but, to date, the Court has not received a response from Plaintiff. Accordingly, the action is dismissed for lack of subject-matter jurisdiction.

BACKGROUND*fn2

On March 3, 2004, the closing date, Hu-Del and Sutter completed their transaction in which Hu-Del sold certain assets to Sutter. At the closing, the parties executed an escrow agreement in which Sutter gave $55,000.00 (the "Fund") to Plaintiff, who served as the escrow agent. Pursuant to the escrow agreement, Plaintiff was to hold the money in escrow until Hu-Del provided proof of payment to Sutter or its attorney regarding specific tax warrants, judgments, and tax liens owed by Hu-Del. In particular, Hu-Del was to demonstrate to Sutter that it had paid debts owed to the DOF, WCB, and IRS, and upon such a showing, Plaintiff was to release the Fund to Hu-Del.

Subsequently, in April 2006, Plaintiff received three Notices of Levy from the IRS that sought to recover any property belonging to Hu-Del because of certain unpaid taxes. By letter dated April 27, 2006, Plaintiff informed the IRS that the money it held in escrow was not yet owed to Hu-Del because it had not satisfied the conditions for receipt of the Fund. Thereafter, on September 11, 2006, Plaintiff filed this interpleader action, seeking a judicial resolution of the IRS's demand for payment from the Fund as well as anticipated demands for payment by the DOF and WCB. In addition to naming the three agencies as defendants, Plaintiff also named Sutter, Hu-Del, and Hu-Del's two shareholders, Mr. and Mrs. Horne.

To date, only Mrs. Horne and the WCB have filed answers to the complaint. Mrs. Horne, now divorced from Mr. Horne, appeared pro se and filed a handwritten answer. She essentially disputes the claim that she and Hu-Del have not paid debts owed to the DOF, WCB, and IRS, and attaches proof of payment to the DOF and WCB. She claims to be unable to obtain proof of payment from the IRS because she has issues relating to personal taxes owed to the IRS. She also indicates that the IRS sent the Notices of Levy to Plaintiff because she informed an IRS Revenue Officer handling her personal taxes that Plaintiff was holding money, in escrow, owed to her and Hu-Del. For its part, the WCB, in its answer, claims that a judgment against Hu-Del was docketed in 1988, and that its records indicate that the judgment remains unsatisfied.

A few months after commencing this action, Plaintiff obtained stipulations of settlement from the three agencies, which this Court "so ordered" on February 28, 2007. Each stipulation essentially states that the respective agency has in fact been paid in full by Hu-Del, as demonstrated by some proof of payment, and no longer claims a right to any of the money held in escrow by Plaintiff. In addition, Sutter executed a stipulation of settlement in which it relinquished any right to the money and any further notice of the interpleader action.

On June 26, 2007, Plaintiff moved this Court to issue an order directing that the Funds be deposited with the Court or distributed to a specific party, and awarding reasonable attorneys' fees and costs to it pursuant to the escrow agreement. Subsequently, on January 14, 2008, this Court ordered Plaintiff to file a brief addressing the basis of subject-matter jurisdiction of the Court to distribute the Funds. The Court warned Plaintiff that if it failed to address this issue by January 30, 2008 this action would be dismissed for lack of jurisdiction. To date, Plaintiff has not responded to this Court's directive.

DISCUSSION

Federal Rule of Civil Procedure 12(h)(3) provides that a court must dismiss an action "at any time that [the court] lacks subject-matter jurisdiction." Federal courts are tribunals of limited jurisdiction, and are deprived of subject-matter jurisdiction in all cases unless there is either a federal question or diversity of citizenship. Perpetual Secs., Inc., v. Tang, 290 F.3d 132, 136 (2d Cir. 2002). Moreover, federal courts have an obligation to examine the basis of their jurisdiction. See FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990), overruled on other grounds by City of Littleton v. Z.J. Gifts D-4, L.L.C., 541 U.S. 774 (2004). As the Second Circuit has stated:

Unlike failure of personal jurisdiction, failure of subject matter jurisdiction is not waivable and may be raised at any time by a party or by the court sua sponte. If subject matter jurisdiction is lacking, the action must be dismissed.

Lyndonville Sav. Bank & Trust Co. v. Lussier, 211 F.3d 697, 700-01 (2d Cir. 2000).

Here, Plaintiff has asserted 28 U.S.C. § 2410 as the basis for this Court's jurisdiction. See Compl. ¶ 1. ...


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