United States of America v. Autoridad de Edificios Publicos
Filing
39
OPINION AND ORDER denied 25 Motion for Summary Judgment. Signed by Judge Carmen C. Cerezo on 3/10/2017. (mld)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
UNITED STATES OF AMERICA
Plaintiff
vs
AUTORIDAD DE EDIFICIOS
PUBLICOS
Defendant
CIVIL 14-1606CCC
OPINION AND ORDER
On August 5, 2014, plaintiff United States of America filed a Complaint
(d.e. 1) against Autoridad de Edificios Públicos (“AEP”) pursuant to 26 U.S.C.
§ 6332(d)(1) alleging in Count 1 that the U.S. Treasury made assessments
against taxpayer Advanced Computer Technology, Inc. (“Taxpayer”) which it
failed to pay accruing a debt as of June 27, 2014 for unemployment taxes of
$368,416.45; that on March 15, 2011, pursuant to section 26 U.S.C. § 6331(a),
the Internal Revenue Service (“IRS”) served a notice of levy upon defendant
AEP for all property and rights to property belonging to the delinquent
Taxpayer; that “[a]t the time of the Levy, Autoridad de Edificios Públicos was
holding property belonging to the taxpayer consisting of $262,307.60 owed to
the Taxpayer in connection with a decision rendered in the Court of First
Instance of San Juan, Puerto Rico”; and that defendant AEP failed to honor
that levy and is indebted to the United States pursuant to 26 U.S.C.
§ 6332(d)(1) “in the amount of all property and rights to property in its
possession belonging to Taxpayer on the date of the levy, plus interest
thereon.” (d.e. 1, pp. 2-3). Count 2 seeks a penalty against AEP equal to
50 percent of the amount recoverable alleging that AEP “had no reasonable
cause in refusing to surrender the property that was subject to the Internal
Revenue Service levy.” (d.e. 1, pp. 3-4).
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Before the Court is the United States’ Motion for Summary Judgment
(d.e. 25) filed on April 5, 2016 and defendant AEP’s Opposition filed on
July 22, 2016 (d.e. 27 and d.e. 29). The government’s dispositive motion
essentially repeats the allegations of the Complaint (d.e. 1). Facts numbered
4-8 of the government’s Statement of Facts in Support of Its Motion for
Summary Judgment (d.e. 25-1) read as follows:
4.
On March 17, 2011, AEP owed Advanced Computer
Technology, Inc. funds in the amount of $262,307. (Dec.
Carmelo Gonzalez ¶8.)
5.
On March 17, 2011, the date of the levy, AEP was holding
funds due Advanced Computer Technology, Inc. in the amount
of $262,307. (Dec. Carmelo Gonzalez ¶9.)
6.
The defendant failed to honor the notice of levy dated
March 15, 2011. (Dec. Carmelo Gonzalez ¶10.)
7.
After March 17, 2011, AEP did not turn over any funds to the
Internal Revenue Service pursuant to the notice of levy
attached as Exhibit 1. (Dec. Carmelo Gonzalez ¶11.)
8.
AEP lacked reasonable cause for failing to honor the Internal
Revenue Service’s notice of levy attached as Exhibit 1. (Dec.
Carmelo Gonzalez ¶12.)
In its Statement of Additional Uncontested Material Facts on page 2 of
its Opposition (d.e. 27), AEP confirms that it received the notice of levy
submitted by plaintiff on March 17, 2011. There is no controversy regarding
the fact that there was a state court judgment issued by the Court of First
Instance of Puerto Rico, San Juan Part, in a collection of monies action filed
by the Taxpayer, Advanced Computer Technology, Inc. against AEP and that
the judgment was favorable to plaintiff in the amount of $262,307.60. While
accepting that it received the notice of levy, defendant explains that it had
received other third party claims from creditors to that money, including its
judgment creditor Advanced Computer Technology, Inc. and another from
Gomez Holdings, Inc., the latter a few days after it received the notice of levy
CIVIL 14-1606CCC
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from the IRS. Faced with this situation, AEP raises that it “had reasonable
cause to doubt as to whom had rights over the funds, therefore opted to
deposit the funds in the State Court case” and that “the funds are still
deposited in the State Court case.” (d.e. 29, p. 2).
Defendant AEP’s position is strictly based on the reasonable cause factor
of 26 U.S.C. § 6332(d)(2) arguing that it decided to deposit the funds in the
State Court case to make sure that the payment was correctly made since
there were three parties which all claimed rights over the funds to wit, the
Taxpayer who sued AEP for collections of monies in the Commonwealth Court
and prevailed, the I.R.S. based upon the levy, and Gomez Holdings, Inc. based
on a security agreement. Section 6332(d)(2) states, in part:
if any person required to surrender property or rights to property
fails or refuses to surrender such property or rights to property
without reasonable cause, such person shall be liable for a penalty
equal to 50 percent of the amount recoverable under
paragraph (1).
26 U.S.C.A. § 6332 (d)(2) (emphasis ours).
The determination of reasonable cause for failing or refusing to surrender
the property, in this case, the judgment amount of $262,307.60 until its deposit
in the State Court case in the Superior Court of Puerto Rico is a fact specific
issue that cannot be determined solely from the filings of both parties. The
penalty claimed in Count 2 of the Complaint and in the Motion for Summary
Judgment simply asserts that defendant AEP acted without “reasonable
cause.” The circumstances raised by AEP regarding its uncertainty as to
whom to pay the funds it owed pursuant to the collections of monies judgment
raises a genuine issue as to its alleged refusal to surrender the property
without reasonable cause which is the basis for the 50 percent penalty claimed
in Count 2 of the Complaint.
CIVIL 14-1606CCC
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For the reasons stated above, the government’s Motion for Summary
Judgment (d.e. 25) is DENIED.
SO ORDERED.
At San Juan, Puerto Rico, on March 10, 2017.
S/CARMEN CONSUELO CEREZO
United States District Judge
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