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United States of America v. Rodney Michel

July 23, 2012


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


The United States of America ("plaintiff" or the "government") commenced this action against defendant Rodney Michel ("defendant") seeking to collect unpaid internal revenue taxes through the judicial enforcement of an Internal Revenue Service ("IRS") levy. The Court held a final pretrial conference and scheduled a bench trial to commence on January 9, 2012. By Order dated January 3, 2012, however, the Court noted that neither party had adequately "framed the issues that would be tried," and that it appeared that the action might be more appropriately resolved by way of a summary judgment motion made by the government. (See Jan. 3, 2012 Order at 1.) Accordingly, the Court set a briefing schedule and adjourned the bench trial without date.

Presently before the Court are plaintiff's motion seeking summary judgment pursuant to Federal Rule of Civil Procedure 56, as well as defendant's cross-motion for summary judgment. For the reasons set forth below, plaintiff's motion is granted to the extent the government has established as a matter of law that defendant failed to honor the Notice of Levy served upon defendant on June 26, 1996 by improperly distributing estate assets to Robert Burger after that date, but is denied as to its concomitant request for summary judgment in the amount of $177,528.94 plus interest.*fn1 Rather, the Court finds that defendant is liable to the government for at least $114,519.68, plus interest. Defendant's cross-motion for summary judgment is denied.


The following material facts are drawn from the parties' written submissions and are undisputed unless otherwise noted.*fn2

The Will and Estate at Issue

Non-party Helen M. Burger died testate on August 14, 1995. Pursuant to the Last Will and Testament of Helen M. Burger, dated March 25, 1991 (the "Will"), the majority of her estate (the "Estate") was left to her "trustee, in trust, to be held, administered, managed, invested, and reinvested" as set forth in the Will. (Gov't Ex. 2 at ¶ 5.) Paragraph 15 of the Will named defendant as trustee. (See id. ¶ 15.)

The Will further provided, in relevant part:

I direct my trustee, at least as often as annually or as often as monthly should he see fit, in the sole, absolute, and uncontrolled discretion of the trustee, to pay to or apply for the benefit of my son, Bob Burger, at least $1,000 per month but not more than 60% of the net income of the trust. In addition, the Trustee may pay to or apply for the benefits of my son Bob Burger such amount or amounts of the principal of the trust as the Trustee in his sole, absolute, and uncontrolled discretion deems necessary or desirable for the comfortable maintenance, support, health, education, and well being of my son Bob Burger and his sons Mark and Bobby. (Id. ¶ 5.C.)

On November 8, 1995, the Surrogate's Court of the State of New York, Nassau County, entered a Decree of Probate of the Will. On the same day, defendant was appointed Executor for the Estate, and was issued Letters Testamentary. On February 20, 1996, defendant was issued Letters of Trusteeship for the trust created by the Will.

The Tax Levy and Lien

By letter dated April 19, 1996, defendant was informed by his former attorney, Frederick M. Reuss,*fn3 that "Bob Burger owes the Federal Government, (for various taxes) a total of $246,579.91, as to which interest continues to accrue on a daily basis." (Gov't Ex. 8.) In his letter to defendant, Reuss opined that: "Now that you are I are privy to that information, we cannot fail to act with reference to it." (Id.) According to Reuss, "whatever is coming to Bob Burger (no matter what the source) must go to his creditors first, insofar as those creditors have us 'on notice'." (Id.)

On June 20, 1996, defendant was served with an IRS Notice of Levy and Notice of Federal Tax Lien. (Gov't Exs. 5 & 6.) Defendant acknowledged his receipt of both documents on that date with his signature. (Id., Exs. 5 & 6.) The Notice of Levy listed federal income tax liabilities and civil penalties that Robert Burger owed to the IRS for the tax years ending December 31, 1979 through December 31, 1989, in an amount totaling $359,880.96. (Gov't Ex. 5.) The Notice of Levy further stated, in relevant part, "This levy requires you to turn over to us this person's property and rights to property (such as money, credits, and bank deposits) that you have or which you are already obligated to pay this person." (Id.)

By letter dated September 11, 1997, Reuss informed Robert Burger that Reuss "[would] not, in any event, advise . . . Michel to make any payments to you whatsoever [from the Estate]. He is forbidden to so do, by operation of law, he having been served with a 'Notice of Levy.'" (Gov't Ex. 9 at 1.) Reuss further stated: "I now have to also advise . . . Michel that it is time to pay out the estate, pursuant to the terms of the Will. This means, essentially speaking, that all which would go to you must go to the Internal Revenue Service." (Id.) Reuss concluded by informing Burger that he would advise defendant "to move immediately to close the estate" in four weeks. (Id.) A copy of Reuss's September 11, 1997 letter to Robert Burger was also sent to defendant. (Id. at 2.)

Petition for Judicial Settlement of Account

On June 28, 1999, defendant, through his new attorney, Joseph F. Ruchala,*fn4 filed a Petition for Judicial Settlement of Account (the "Petition") in the Surrogate's Court. (Gov't Ex. 10.) The Petition indicated that, as of February 28, 1999, the Estate maintained "cash-on-hand in the amount of $295,881.57." (Pl.'s 56.1 ¶ 12 (citing Gov't Ex. 10 at 7).) By Order dated June 14, 2000, the Surrogate's Court denied the Petition, finding it "replete with errors." (Gov't Ex. 11 at 3.) The Surrogate's Court directed defendant "to start from the beginning and file a new accounting within sixty (60) days . . . and to move for its judicial settlement anew." (Id. at 4.) There is no indication from the record whether such action was taken by defendant.

Defendant's Alleged Distribution of Estate Funds and the Bank Accounts

Defendant testified during his deposition in this case*fn5 that at some point either in 2000 or 2001, "Ruchala directed [him] to make the distribution . . . to the beneficiaries [of the Estate], because he said the IRS had been satisfied." (Gov't Ex. 16 at 59.) Defendant further testified as follows:

Q: So Mr. Ruchala advised you to make a distribution to the beneficiaries being who?

A: Rene Burger and Robert Burger.

Q: So you actually signed checks payable to Robert and Rene


A: I signed checks that were not completed. Before I signed them, I asked, specifically asked Ruchala, "Has the IRS levy been satisfied?" He said, "I have the document ...

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