United States of America v. Bonadio et al
Filing
36
DECISION AND ORDER that Plaintiff's motion is GRANTED. Pursuant to 26 U.S.C. §§ 6321, 6322 and 6323, Plaintiff has valid, subsisting and enforceable tax liens associated with the assessments of income tax against Defendant Thomas Bon adio for the 2001 and 2003 tax years upon all property and rights to property belonging to Defendant Thomas Bonadio. The federal tax liens in favor of Plaintiff have attached to Defendant Thomas Bonadio's one-half interest in the real proper ty located at 31 Baker Road, in the Town of Sanford, in Broome County, New York, legally described in paragraph 4 of the Complaint. The federal tax liens in favor of Plaintiff do not attach to Defendant Elizabeth Bonadio's one-half interest in the Baker Road property, but Defendant Elizabeth Bonadio has raised no equitable factors for the Court to consider in exercising its discretion to order the sale of the property pursuant to 26 U.S.C. § 7403. The federal tax liens in favor of Plaintiff upon the Baker Road property are hereby enforced, and the property shall be judicially sold pursuant to 26 U.S.C. § 7403 to enforce such liens, free and clear of all rights, titles, claims and interests of the parties to this act ion, with the proceeds distributed as follows: (a) first, to the costs and expenses of sale, including payment of any real property taxes due and owing and the compensation and expenses of a Receiver, if one is appointed, and (b) second, to b e divided in half and distributed as follows: (i) 50% to Defendant Elizabeth Bonadio; and (ii) 50% to Plaintiff, in full or partial satisfaction of the federal tax liens against Defendant Thomas Bonadio, with the remainder (if any) to be paid to Defendant Thomas Bonadio. Signed by Chief Judge Glenn T. Suddaby on 5/19/2020. (Served Defendants Thomas Bonadio and Elizabeth Bonadio at 355 State Street, #5W, Albany, NY, 12210). (sal )
Case 3:14-cv-01391-GTS-TWD Document 36 Filed 05/19/20 Page 1 of 10
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
UNITED STATES OF AMERICA,
Plaintiff,
3:14-CV-1391
(GTS/TWD)
v.
THOMAS BONADIO and ELIZABETH BONADIO,
Defendants.
____________________________________________
APPEARANCES:
OF COUNSEL:
HON. WILLIAM P. BARR
United States Attorney General
Counsel for Plaintiff
United States Department of Justice–Tax Division
P.O. Box 55
Ben Franklin Station
Washington, DC 20044
JAMES M. STRANDJORD, ESQ.
KAREN WOZNIAK, ESQ.
Trial Attorneys, Tax Division
GLENN T. SUDDABY, Chief United States District Judge
DECISION and ORDER
Currently before the Court, in this income tax enforcement action filed by the United
States of America (“Plaintiff”) against Thomas Bonadio and Elizabeth Bonadio (“Defendants”),
is Plaintiff’s motion for default judgment pursuant to Fed. R. Civ. P. 55(b)(2). (Dkt. No. 34.)
For the reasons stated below, Plaintiff’s motion is granted.
I.
RELEVANT BACKGROUND
A.
Plaintiff’s Complaint
Generally, in its Complaint, Plaintiff alleges that a federal tax lien was filed against a
property held by Defendant Thomas Bonadio (in which property Defendant Elizabeth Bonadio
Case 3:14-cv-01391-GTS-TWD Document 36 Filed 05/19/20 Page 2 of 10
received an interest beginning December 14, 2007) arising from Defendant Thomas Bonadio’s
unpaid income tax liabilities for the years 1999 through 2003. (Dkt. No. 1 [Pl.’s Compl.].)
Plaintiff alleges that the unpaid income tax liabilities were assessed at $204,026.25 for 1999,
$95,943.56 for 2000, $17,768.54 for 2001, and $19,644.69 for 2003, amounting to a total
outstanding owed balance of $337,383.04, plus statutory additions and interest from November
15, 2014. (Id. at ¶¶ 5-7.) Plaintiff also alleges that Defendant Thomas Bonadio (who was a
titleholder of the relevant property for all relevant tax years) was provided notice of the income
tax assessments and that a demand for payment was made upon him, but that he did not make
payment. (Id.) Finally, Plaintiff alleges that, on January 18, 2007, a Notice of Federal Tax Lien
against Defendant Thomas Bonadio for the above-described unpaid income tax liabilities was
recorded in the Broome County Clerk Records Office, and that, on September 12, 2013, a Notice
of Federal Tax Lien Refiling against Defendant Thomas Bonadio for the above unpaid income
tax liabilities was recorded in the Broome County Clerk Records Office. (Id. at ¶¶ 16-17.)
Based on these alleged facts, Plaintiff requests the following relief: (1) a determination
that Plaintiff has valid and subsisting federal tax liens on all property and property rights
belonging to Defendant Thomas Bonadio; (2) a determination that the federal tax liens against
Defendant Thomas Bonadio attach to the subject property; and (3) an order that the federal tax
liens on the subject property be enforced and that the property be sold, free and clear, in a judicial
sale, and that the proceeds of that sale be distributed to Plaintiff in satisfaction of Defendant
Thomas Bonadio’s unpaid tax liabilities and to such parties in such amounts as the Court
determines. (Id. at 4.)
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B.
Relevant Procedural History
On November 17, 2014, Plaintiff filed its Complaint against Defendants. (Dkt. No. 1.)
On April 20, 2015, Plaintiff filed a stipulation of dismissal with a right to reinstate the action up
to twelve months after a judgment or settlement in a concurrent case pending in the United States
District Court for the District of Connecticut, which the Court approved the same day. (Dkt.
Nos. 11, 12.) On March 26, 2019, Plaintiff filed a motion to reinstate the action based on the fact
that the resolution of the concurrent case in the District of Connecticut (related to real property
held by Defendant Thomas Bonadio in Connecticut) did not result in a payment that satisfies the
full amount of the federal tax lien; specifically, the proceeds from the sale of the Connecticut
property were $220,424.75, which reduced the outstanding balance owed on the tax liens
encumbering Defendant Thomas Bonadio’s Broome County property to approximately
$32,700.00 as of April 21, 2018. (Dkt. No. 13, at 2-3.) On April 4, 2019, Plaintiff filed an
amended motion to reinstate the action at the direction of the Court, which the Court granted on
May 8, 2019. (Dkt. Nos. 14, 15, 16.)
On May 9, 2019, Plaintiff filed affidavits of service of the summons and Complaint on
both Defendants. (Dkt. Nos. 17, 18.) On July 31, 2019, Plaintiff filed a request for entry of
default, and, on August 1, 2019, the Clerk of Court made an entry of default. (Dkt. Nos. 29, 30.)
C.
Plaintiff’s Motion for Default Judgment and Defendants’ Non-Response
On September 11, 2019, Plaintiff filed the current motion for default judgment. (Dkt.
No. 34.) Defendants were provided until September 30, 2019, to respond to that motion. (Text
Notice filed Sept. 12, 2019.) As of the date of this Decision and Order, Defendants have not
appeared or responded to Plaintiff’s motion for default judgment. (See Docket Sheet.)
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II.
RELEVANT LEGAL STANDARD
“Federal Rule of Civil Procedure 55 provides a two-step process that the Court must
follow before it may enter a default judgment against a defendant.” Robertson v. Doe, 05-CV7046, 2008 WL 2519894, at *3 (S.D.N.Y. June 19, 2008). “First, under Rule 55(a), when a party
fails to ‘plead or otherwise defend . . . the clerk must enter the party's default.’” Robertson, 2008
WL 2519894, at *3 (quoting Fed. R. Civ. P. 55[a]). “Second, pursuant to Rule 55(b)(2), the
party seeking default judgment is required to present its application for entry of judgment to the
court.” Id. “Notice of the application must be sent to the defaulting party so that it has an
opportunity to show cause why the court should not enter a default judgment.” Id. (citing Fed. R.
Civ. P. 55[b][2]). “When an action presents more than one claim for relief . . . , the court may
direct entry of a final judgment as to one or more, but fewer than all, claims or parties . . . if the
court expressly determines that there is no just reason for delay.” Fed. R. Civ. P. 54(b).
Pursuant to Second Circuit law, when determining whether to grant a default judgment,
the Court must consider three factors: (1) whether the defendant’s default was willful; (2)
whether the defendant has a meritorious defense to the Government’s claims; and (3) the level of
prejudice the non-defaulting party would suffer as a result of the denial of the motion for default
judgment. Pecarksy v. Galaxiworld.com, Ltd., 249 F.3d 167, 170-71 (2d Cir. 2001); Enron Oil
Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993). “An unexcused or unexplained failure to
provide an answer to the Complaint will itself demonstrate willfulness,” as does failing to
respond to both a complaint and a subsequent motion for default judgment. United States v.
Silverman, 15-CV-0022, 2017 WL 745732, at *3 (E.D.N.Y. Feb. 3, 2017) (citing S.E.C. v.
McNulty, 137 F.3d 732, 738-39 [2d Cir. 1998]; Indymac Bank v. Nat’l Settlement Agency, Inc.,
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07-CV-6865, 2007 WL 4468652, at *1 [S.D.N.Y. Dec. 20, 2007]).
When a court considers a motion for the entry of a default judgment, it must “accept[ ] as
true all of the factual allegations of the complaint . . . .” Au Bon Pain Corp. v. Artect, Inc., 653
F.2d 61, 65 (2d Cir. 1981) (citations omitted). “However, the court cannot construe the damages
alleged in the complaint as true.” Eng’rs Joint Welfare, Pension, Supplemental Unemployment
Benefit and Training Funds v. Catone Constr. Co., Inc., 08-CV-1048, 2009 WL 4730700, at *2
(N.D.N.Y. Dec. 4, 2009) (Scullin, J.) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183
F.3d 151, 155 [2d Cir. 1999] [citations omitted]). “Rather, the court must ‘conduct an inquiry in
order to ascertain the amount of damages with reasonable certainty.’” Eng’rs Joint Welfare,
Pension, Supplemental Unemployment Benefit and Training Funds, 2009 WL 4730700, at *2
(quoting Alcantara, 183 F.3d at 155 [citation omitted]). This inquiry “involves two tasks: [1]
determining the proper rule for calculating damages on such a claim, and [2] assessing plaintiff's
evidence supporting the damages to be determined under this rule.” Alcantara, 183 F.3d at 155.
Finally, in calculating damages, the court “need not agree that the alleged facts constitute a valid
cause of action . . . .” Au Bon Pain, 653 F.2d at 65 (citation omitted).
Under N.D.N.Y. L.R. 55.2(a), when requesting an entry of default judgment from the
Clerk of the Court, the moving party must submit (a) the Clerk’s certificate of entry of default,
(b) a statement showing the principal amount due (not to exceed the amount demanded in the
Complaint and giving credit for any payments with the dates of payments), (c) a computation of
the interest to the day of judgment, (d) a per diem rate of interest, (e) the costs and taxable
disbursements claimed, and (f) an affidavit of the moving party or the party’s attorney. N.D.N.Y.
L.R. 55.2(a). The appended affidavit must show that (a) the party against whom judgment is
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sought is not an infant or incompetent person, (b) the party against whom judgment is sought is
not in military service, (c) the party against whom judgment is sought has defaulted in
appearance in the action, (d) service was properly effected under Fed. R. Civ. P. 4, (e) the amount
shown in the statement is justly due and owing and no part has been paid except as set forth in
the party’s other statement, and (f) disbursements sought to be taxed have been made in the
action or will necessarily be made or incurred. Id.
Under N.D.N.Y. L.R. 55.2(b), when moving for an entry of default judgment from the
Court, the moving party must submit (a) the Clerk’s certificate of entry of default, (b) a proposed
form of default judgment, (c) a copy of the pleading to which no response has been made, and (d)
an affidavit of the moving party or its attorney setting forth the facts required by N.D.N.Y. L.R.
55.2(a). N.D.N.Y. L.R. 55.2(b).
III.
ANALYSIS
After carefully considering whether Plaintiff is entitled to default judgment, the Court
answers that question in the affirmative for the following reasons.
An entry of default “formalizes a judicial recognition that a defendant has, through its
failure to defend the action, admitted liability to the plaintiff.” City of New York v. Mickalis
Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011). However, “[a] court’s decision to enter a
default against defendants does not by definition entitle plaintiffs to an entry of a default
judgment. Rather, the court may, on plaintiffs’ motion, enter a default judgment if liability is
established as a matter of law when the factual allegations of the complaint are taken as true.”
Bricklayers and Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton Masonry &
Const., LLC, 779 F.3d 182, 188 (2d Cir. 2015).
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As an initial matter, the Court finds that Plaintiff’s submissions meet the procedural
requirements of Local Rule 55.2(b). (Dkt. No. 34, Attach. 2, at 5-7, 9-10.) The Court therefore
must assess whether Plaintiff has sufficiently alleged all the substantive requirements related to
its specific claim.
This Court has previously recognized that “there are three prerequisites to the existence
of a tax lien: (1) the assessment of a tax; (2) the notice of assessment and demand for payment;
and (3) the taxpayer’s neglect or refusal to pay.” United States v. Case, 06-CV-0570, 2011 WL
13352948, at *5 (N.D.N.Y. Aug. 23, 2011) (Scullin, J.). “The Internal Revenue Code further
provides that the Government may subsequently force the sale of the debtor’s property to satisfy
a valid tax lien.” Case, 2011 WL 13352948, at *5 (citing 26 U.S.C. § 7403[c]).
Plaintiff has alleged that (a) taxes were assessed against Defendant Thomas Bonadio for
the years 1999, 2000, 2001, and 2003, (b) Plaintiff provided notice and a demand for payment
related to each of these assessments to Defendant Thomas Bonadio, (c) Defendant Thomas
Bonadio failed, neglected, or refused to pay those taxes, (d) Defendant Thomas Bonadio was and
is a title owner of the relevant property at all relevant times, and (e) notices of the federal tax lien
were recorded in the Broome County Clerk Records Office on both January 18, 2007, and
September 12, 2013, related to those tax assessments. (Dkt. No. 1, at ¶¶ 5-17 [Pl.’s Compl.].)
Because Plaintiff has therefore stated a valid claim related to the tax lien and Defendants have
failed to provide any defense to that claim, the Court finds that Plaintiff has sufficiently
established liability and entitlement to sale of the property for the purposes of this default
judgment.
The Court also finds that Plaintiff has sufficiently established damages. The affidavit of
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Mary Bishop, a Revenue Officer Adviser for the Internal Revenue Service (“IRS”),1 indicates
that Ms. Bishop assessed that Defendant Thomas Bonadio owed an outstanding balance of
$34,793.29 (with $11,389.15 outstanding related to the 2001 tax year assessment and $23,404.14
outstanding related to the 2003 tax year assessment) as of September 3, 2019, based on the
stipulation made in the proceedings in the District of Connecticut, her own calculations of
statutory additions and interest, and information in the IRS’ Integrated Data Retrieval System.
(Dkt. No. 34, Attach. 2 [Bishop Decl.].) In its motion to reinstate this action, Plaintiff had
indicated that, as a result of the payment received to settle the proceedings in the District of
Connecticut, the balance owed on the tax lien encumbering the relevant property was
approximately $32,700.00 as of April 21, 2018, which is generally consistent with the amount
calculated by Ms. Bishop when statutory interest that accrued between April 21, 2018, and
September 3, 2019, is considered.2 (Dkt. No. 15, at 4.) The Court also notes that an assessment
by the IRS “is entitled to a legal presumption of correctness.” United States v. Fior D’Italia,
Inc., 536 U.S. 238, 242 (2002); United States v. Bowman, 16-CV-1388, 2017 WL 2610507, at *3
(N.D.N.Y. June 16, 2017) (Suddaby, C.J.) (finding that an attorney affidavit stating the amount
1
Ms. Bishop attests that accessing and reviewing IRS records related to specific
taxpayers and preparing declarations of balance based on those records is part of her regular
duties in this position. (Dkt. No. 34, Attach. 2, at ¶ 1 [Bishop Decl.].) Ms. Bishop further attests
that her declaration is based on her personal knowledge of the facts contained therein, that the
records she relied on were created at or near the time of the events described in the records, and
that it is the regular practice of the IRS to create and preserve such records. (Id.)
2
The Court notes that, although Ms. Bishop did not include the specific interest
rate used for the relevant time period, the historical rates are published and easily accessible
government information of which the Court may take judicial notice. See IRC 6621 Table of
Underpayment Rates, U.S. Dep’t of Labor, Employee Benefits Security Administration,
https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/
correction-programs/vfcp/table-of-underpayment-rates (last visited Apr. 29, 2020).
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of the damages combined with attached documentation from the IRS of the balance and the
interest rates were sufficient to establish a valid basis for the damages). The Court finds that this
evidence establishes the amount of damages with reasonable certainty. See Joe Hand
Promotions, Inc. v. Elmore, 11-CV-3761, 2013 WL 2352855, at *5 (E.D.N.Y. May 29, 2013)
(“When evaluating damages, the court may rely on affidavits or documentary evidence.”).
ACCORDINGLY, it is
ORDERED that Plaintiff’s motion is GRANTED; and it is further
ORDERED that, pursuant to 26 U.S.C. §§ 6321, 6322 and 6323, Plaintiff has valid,
subsisting and enforceable tax liens associated with the assessments of income tax against
Defendant Thomas Bonadio for the 2001 and 2003 tax years upon all property and rights to
property belonging to Defendant Thomas Bonadio; and it is further
ORDERED that the federal tax liens in favor of Plaintiff have attached to Defendant
Thomas Bonadio’s one-half interest in the real property located at 31 Baker Road, in the Town of
Sanford, in Broome County, New York, legally described in paragraph 4 of the Complaint; and it
is further
ORDERED that the federal tax liens in favor of Plaintiff do not attach to Defendant
Elizabeth Bonadio’s one-half interest in the Baker Road property, but Defendant Elizabeth
Bonadio has raised no equitable factors for the Court to consider in exercising its discretion to
order the sale of the property pursuant to 26 U.S.C. § 7403; and it is further
ORDERED that the federal tax liens in favor of Plaintiff upon the Baker Road property
are hereby enforced, and the property shall be judicially sold pursuant to 26 U.S.C. § 7403 to
enforce such liens, free and clear of all rights, titles, claims and interests of the parties to this
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action, with the proceeds distributed as follows:
(a) first, to the costs and expenses of sale, including payment of any real property
taxes due and owing and the compensation and expenses of a Receiver, if one is appointed, and
(b) second, to be divided in half and distributed as follows:
(i)
50% to Defendant Elizabeth Bonadio; and
(ii)
50% to Plaintiff, in full or partial satisfaction of the federal tax
liens against Defendant Thomas Bonadio, with the remainder (if
any) to be paid to Defendant Thomas Bonadio.
Date: May 19, 2020
Syracuse, New York
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