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Hirko v. United States

March 13, 2009

ELISABETH HIRKO, PLAINTIFF,
v.
UNITED STATES OF AMERICA, STEVEN CANTOR AND K.E.M. ENTERPRISES INC., DEFENDANTS.
UNITED STATES OF AMERICA, CROSS-CLAIM PLAINTIFF,
v.
STEVEN CANTOR, CROSS-CLAIM DEFENDANT, AND JOYCE MILILLO, ADDITIONAL DEFENDANT ON THE CROSS-CLAIM.



The opinion of the court was delivered by: Hurley, District Judge

MEMORANDUM AND ORDER

Defendant/cross-claim plaintiff the United States of America (the "United States") has moved for summary judgment against cross-claim defendant Steven Cantor ("Cantor") pursuant to Federal Rule of Civil Procedure ("Rule") 56. The United States seeks an order: (1) declaring that the United States has a valid and subsisting federal tax lien on all property, and rights to property, belonging to Cantor, including his 100 shares of stock in K.E.M. Enterprises, Inc. ("KEM"); (2) foreclosing the federal tax lien upon Cantor's KEM stock; (3) directing that Cantor's KEM stock be sold free and clear of any right, title, lien, claim or interest; and (4) directing the sale of the proceeds to be distributed to the United States toward satisfaction of its lien, with any excess proceeds to be distributed to such parties in such amounts as this Court deems appropriate. Cantor has not filed any opposition papers. For the reasons that follow, the United States's motion is granted.

BACKGROUND

The following facts, which are supported by the record, will be deemed admitted.

I. The Pleadings

Plaintiff Elisabeth Hirko ("Plaintiff") filed the instant action in the New York State Supreme Court, Suffolk County, to quiet title to real property located at 275 Timber Point Road, East Islip, New York upon which the United States had filed a tax lien. The United States removed the action to this Court. The Complaint was later amended adding Cantor and KEM as defendants and seeking additional relief against them.

The United States cross-claimed against Cantor, joining Joyce Milillo ("Milillo") as an additional defendant on the cross-claim, seeking adjudication with respect to Cantor's interest in KEM. Specifically, the United States alleged that on February 6, 1995, the IRS made a single assessment against Cantor pursuant to 26 U.S.C. § 6672 as a responsible person of Cantor Bros. Glass Corp. ("CBGB") who "willfully fail[ed] to collect . . . or truthfully account for and pay over" income and FICA taxes withheld from the wages of CBGC's employees. The United States further alleged that it had served Cantor with statutory notice of the assessment under § 6672 and demanded payment. Despite its demands, Cantor failed to make payment. The cross-claims seek: (1) a determination that the United States has a valid and subsisting federal tax lien on all property, and rights to property, belonging to Cantor, including his stock in KEM; (2) a determination that Milillo held title to the stock in KEM as a nominee or alter ago of Cantor; (3) a determination that the United States has a valid and subsisting federal tax lien on the stock of KEM; and (4) an order to foreclose its lien upon the stock of KEM, to have the stock sold free and clear of any right, title, lien, claim or interest, and to have the sale proceeds distributed to the United States toward satisfaction of Cantor's tax liability.

II. The United States's Motion for Summary Judgment as Against Plaintiff is Granted

On July 29, 2005, the United States filed a motion for summary judgment against Plaintiff seeking an order setting aside Cantor's March 1993 transfer of his interest in the 275 Timber Point Road property to Plaintiff to the extent necessary to satisfy Cantor's § 6672 tax liability. The United States also sought an order declaring that the federal tax liens against Cantor with respect to the § 6672 liability attached to the subject property, on the ground that the transfer of Cantor's interest was fraudulent as against the United States. The Court granted the United States's motion by Memorandum of Decision and Order dated March 16, 2006.*fn1

III. Evidence Pertaining to the United States's Cross-Claims

The only claims remaining in this action are the United States's cross-claims against Cantor. At the time the cross-claims were brought, all of the stock of KEM was held in Milillo's name and Cantor's ownership in the stock was in dispute. The parties now agree that Cantor owns half of the stock in KEM. (See Joint Proposed Pre-Trial Order, Stipulated Facts, at 6, docket no. 77.) In addition, at the time the cross-claim was brought, there were two outstanding § 6672 assessments against Cantor. Since then, one of the § 6672 assessments against Cantor has been fully paid.

In support of its motion for summary judgment on its cross-claims, the United States proffers the Declaration of Andrew Barone, who is employed by the Internal Revenue Service ("IRS") as a Technical Services Advisor in the Small Business/Self-Employed Compliance Technical Services Advisory Unit. Mr. Barone states that in his official capacity with the IRS, he has access to the records to the IRS with regard to Cantor. The files and records of the IRS*fn2 indicate that on February 6, 1995, the IRS made a single assessment in the amount of $122,305.28 against Cantor pursuant to 26 U.S.C. § 6672 as a responsible person of CBGB who willfully failed to collect or truthfully account for and pay over income and FICA taxes withheld from the wages of CBGC's employees. This assessment encompassed Cantor's liability for the tax periods of CBGB ending September 30, 1992, December 31, 1993, March 31, 1994, and June 30, 1994. On February 6, 1997, the IRS served Cantor with notice under § 6672 and demanded payment. Cantor has thus far neglected to fully pay the § 6672 assessment and the current balance due is $74,257.35, plus statutory interest and additions from August 31, 2007.

IV. The Present Motion: The United States's Motion for Summary Judgment as to its Cross-Claims

On August 8, 2007, the Court issued a briefing schedule on the United States's motion for summary judgment against Cantor. In accordance with that schedule, the United States served the instant motion for summary judgment on counsel for Plaintiff, as well as counsel for Cantor and Milillo, on September 7, 2007. By Orders filed October 15, 2007 and November 9, 2007, the Court granted Cantor additional time to submit opposition papers pending the parties' settlement discussions. On November 9, 2007, the deadline for Cantor to serve a response was set for January 8, 2008, and the deadline for the United States to serve reply papers, and ...


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