Posts tagged with "New York"

State Lawmaker Involved in Car Accident Lawsuit Accused of Drunk Driving

A personal injury lawsuit filed this week accuses Connecticut State Rep. Christina Ayala of fleeing the scene of an accident caused by her own drunk driving, according to a report from the Norwich Bulletin.

Sources say the lawsuit, filed by 26-year-old Krystal Valez, claims that Ayala was under the influence of alcohol when she ran her car into a vehicle driven by Valez. The lawsuit also alleges that Ayala fled the scene of the accident.

The accident in question occurred last August, when Ayala’s 2007 Nissan Sentra allegedly struck a 2002 Honda Accord being driven by Valez.

Ayala allegedly fled the scene of the accident, but a person who witnessed the crash followed her car and eventually forced her to pull over about six blocks from the location of the collision, according to sources.

When Ayala was questioned by officers after the accident, she claimed that she tried to check on Valez following the collision, but that she decided to leave the scene because she felt “scared” due to the presence of a man who was screaming at her.

Car Accident Lawsuit

Interestingly, when police took Ayala into custody, they did not test her for alcohol, because they claimed she did not appear to be intoxicated. Nevertheless, the lawsuit filed by Valez alleges that Ayala was drunk at the time of the crash.

The plaintiff claims that she suffered back injuries and a concussion as a result of the accident, and that her medical costs amount to roughly $11,000.

Valez, however, will have to refute the testimony of Ayala’s father, Alberto Ayala, who claims that his daughter had not been drinking before the accident, according a statement given to the Connecticut Post.

Of course, Alberto Ayala has every incentive to make this claim, because not only is he the driver’s father, he is also named as a defendant in the car accident lawsuit.

Unfortunately for Christina Ayala, a native of Bridgeport, Connecticut, the pending personal injury lawsuit is the least of her legal concerns.

Sources say Ayala, who is serving her first term in the state legislature, was officially charged with failing to renew her driver’s registration, failing to obey a traffic signal, and evading responsibility.

During her latest court hearing, Ayala was told by her judge that she could accept a plea bargain offered by prosecutors or stand trial for her criminal counts.

Under the plea deal, Ayala would receive a suspended sentence and have an extended period of probation. Sources say Ayala has three weeks to make her choice.

By JClark, totalinjury.com

At Maya Murphy, P.C., our experienced team of personal injury attorneys is dedicated to achieving the best results for individuals and their families and loved ones whose daily lives have been disrupted by injury.  Our personal injury attorneys assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and throughout Fairfield County. If you have any questions relating to a personal injury claim or would like to schedule a free consultation, please contact our Westport office by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com

Woman Injured in Rail Crash Files Train Accident Lawsuit

A 65-year-old woman who was injured in a dramatic train crash last month in Connecticut has filed a negligence lawsuit against Metro-North Railroad, according to a report from ABC News.

Sources say the woman, Elizabeth Sorenson, a resident of Bridgeport, Connecticut, suffered multiple bone fractures and remains in critical condition as doctors tend to a severe brain injury.

The lawsuit was the first claim filed by a victim of the crash that occurred on May 17. According to sources, the crash injured more than 70 people.

Sorenson’s personal injury attorney told sources that he filed the lawsuit in federal court in order to gain access to witnesses that observed the accident and to allow families of the victims to become involved in the investigation.

Sources expect more lawsuits to eventually be filed in the wake of the massive train accident, which happened at 6:10 p.m. on a weekday as the train carried 300 passengers from New York’s Grand Central Station to New Haven, Connecticut.

The train reportedly derailed near a highway overpass in the town of Bridgeport, and was then struck by a train holding 400 passengers that was headed the opposite direction.

The Damage Caused by the Accident

The damage caused by the accident was “absolutely staggering,” according to Connecticut Senator Richard Blumenthal, as he observed the scene. Sources say parts of the roof of some of the train cars had been torn off, and that some of the tracks were noticeably twisted.

Three people remain in critical condition after the accident, and the National Transportation Safety Board has launched a full investigation into the wreck.

Thus far, investigators have yet to isolate the cause of the accident, but the impact was so severe, some passengers initially thought it may have been caused by a bomb.

“We came to a sudden halt. We were jerked. There was smoke. People were screaming; people were really nervous. We were pretty shaken up. They had to smash a window to get us out,” said one passenger traveling from New York.

Another passenger told local sources that they “went flying” and reported that “one entire compartment was completely ripped open.”

Most of the 70 passengers who were injured received prompt treatment at the site of the accident, but three victims are still in critical condition, according to reports.

According to report from train officials, the tracks involved in the collision suffered “extensive infrastructure damage,” and the train involved in the accident will “need to be removed by crane” following a thorough investigation.

By JClark, totalinjury.com

At Maya Murphy, P.C., our experienced team of personal injury attorneys is dedicated to achieving the best results for individuals and their families and loved ones whose daily lives have been disrupted by injury.  Our personal injury attorneys assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and throughout Fairfield County. If you have any questions relating to a personal injury claim or would like to schedule a free consultation, please contact our Westport office by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com

$825,000 Verdict for Injuries from Truck Accident

In a personal injury trial in the Stamford Superior Court a woman received $825,000 for injuries to her head and neck suffered in a collision with a large truck.

Case Details

The case involved a motor vehicle accident whereby, the plaintiff, Mrs. Hutter, was hit from behind by a large beer truck owned by DiChello Distributors. As a result of the collision, Mrs. Hutter sustained a number of serious injuries including injuries to her head and neck. She also sustained a mild traumatic brain injury.

During the course of a three week trial, the plaintiff presented a substantial number of witnesses to establish the significance of the impact and the extent of the injuries. The experts included an accident reconstruction expert from Maryland, a bio-mechanical expert from Virginia, a neurologist, a psychiatrist and a neuropsychologist.

In addition to the various expert witness, Mrs. Hutter also presented testimony from her friends who knew her before the time of the accident and were able to explain to the jury the significant change in Mrs. Hutter that occurred as a result of the incident.

The Verdict

After three weeks of evidence, the jury deliberated for two and one-half days and then rendered a verdict in favor of Mrs. Hutter in the amount of $825,000 including over $500,000 for compensation for her pain and suffering.

At Maya Murphy, P.C., our experienced team of personal injury attorneys is dedicated to achieving the best results for individuals and their families and loved ones whose daily lives have been disrupted by injury.  Our personal injury attorneys assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and throughout Fairfield County. If you have any questions relating to a personal injury claim or would like to schedule a free consultation, please contact our Westport office by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com

Flood of Lawsuits Suggests New York Hospital a ‘Deathtrap’

Criticism of New York Hospital 

One of New York’s hospitals faces mounting criticism and risks losing federal and state healthcare funding because of widespread complaints of medical errors and shoddy practices.

In October, after a tragedy unfolded at Brookdale Hospital when a newborn died after he was admitted to the emergency room with a fever, an investigation by the city’s medical examiner determined that six month-old Amaan Ahmmad died because he was mistakenly given an adult dose of an antibiotic.

Since then, scrutiny of the hospital’s safety record exposed that Brookdale is defending a slew of lawsuits against it for medical malpractice. According to the New York Daily News, the once-respected Brooklyn hospital has over 100 live lawsuits against it for various acts of substandard care. A state department of health investigation uncovered multiple violations ranging from untested smoke detectors to misidentified blood samples to unsafe conditions for preventing airborne infections.

And a year ago, the hospital’s CEO David Rosen stepped down amid corruption allegations. He was later tried and convicted of trying to bribe three state politicians in return for beneficial treatment of the hospital. State politicians are now calling for changes to the leadership and management of the hospital.

Lawsuits Against the Hospital

On the legal front, some victims of the hospital’s alleged negligence will have a more difficult road to getting justice, thanks to a new state law.

The same month that baby Amaan died, the state legislature passed a tort reform statute that forces parents who sue over their newborn’s birth-related neurological injuries to put any winnings from such a lawsuit into a state fund.

Two lawsuits against Brookdale Hospital – both ending in patient deaths – hint at some of the underlying problems at the beleaguered medical center.

The First Case

In one case, an elderly patient developed bedsores that went untreated by doctors and nurses until she died shortly after.

Nora Stephens, a 92 year-old grandmother who moved to New York after a tough life of sharecropping in Virginia, entered the hospital with her “skin intact,” but developed pressure ulcers on her feet that worsened so quickly to Stage IV ulcers that she developed an infection and gangrene on both feet. Before she could have her feet amputated, she died.

“They didn’t do very basic things to take care of an elderly person not able to get out of bed,” such as turning her every two hours to make sure she did not develop ulcers, said Matthew Gammons, an attorney for Stephens’ relatives.

The Second Case

In a second case, Gammons alleges the hospital’s delayed treatment caused the death of a teenager who arrived at the emergency room with a head injury.

Eighteen year-old Corey Ray appeared “awake, oriented and agitated” when he was brought to the hospital by EMTs after being beaten up at a nearby park.

According to Gammons, the hospital breached normal practices by waiting two and a half hours to give the injured boy a CT scan, then delayed getting him a neurosurgeon for another five and a half hours. In addition to the delay, the neurosurgeon missed two other areas of bleeding in the boy’s brain and a post-operative CT scan wasn’t done until 10 hours after surgery, the lawsuit claims.

“By the time they read the scans, he had a massive hemorrhage in the back of his brain. They missed the ball. … To me, it epitomizes the lack of thoroughness of this hospital,” said Gammons.

He added that he will be looking into whether understaffing and lack of available specialists played a role in the two tragedies.

‘Radical’ New law

The number of lawsuits against a hospital may only represent a fraction of actual errors that take place.

“There may be hundreds of more legitimate cases that have not been brought and hospitals are never accountable for in terms of negligence,” said Joanne Doroshow, an attorney and consumer advocate.

It can be difficult for patients to find out about the history of a hospital, although consumers can look online to check if an individual doctor has a malpractice or disciplinary record, she added.

Recently, many hospitals say they have no money to improve patient care and have moved to cut back on patients’ legal rights, according to Doroshow. For example, for the youngest victims of medical errors in New York, a new law will make their families jump through another hoop to get future medical bills paid. The law requires that money damages awarded for future medical costs of babies who are injured during birth because of medical error go into the state fund. Doroshow criticized it as “a radical piece of legislation that severely cuts back on liability of hospitals when an injury to a newborn is birth-related.”

Besides forcing families who fight and win the long legal battle for their loved ones to then “beg” for money from the state to cover their child’s medical expenses, the new law is bad for patient safety because it takes away a financial incentive for hospitals to feel accountable, she said.

By: Sylvia Hsieh

At Maya Murphy, P.C., our experienced team of personal injury attorneys is dedicated to achieving the best results for individuals and their families and loved ones whose daily lives have been disrupted by injury.  Our personal injury attorneys assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and throughout Fairfield County. If you have any questions relating to a medical malpractice claim, hospital negligence, or personal injury claim or would like to schedule a free consultation, please contact our Westport office by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com

$98,000 Settlement for Neck and Back Injuries after Broad-sided by Drunk Driver

A Southbury resident received a $98,000 settlement of his lawsuit stemming from an accident where his vehicle was hit by an intoxicated motorist in a “hit and run” accident.     

The automobile collision happened on a local road in Southbury, Connecticut. The drunk driver defendant was operating a Ford F350 pickup truck which belong to the owner of an excavation company.

The intoxicated motorist crossed over the center of the road into the plaintiff’s travel lane causing the motor vehicle crash.  The plaintiff was forced off the road after being broadsided by the drunk driver.

While the defendant motorist fled the scene, he was later arrested by the Connecticut State Police and charge with DUI.

As a result of the accident the plaintiff suffered neck strain, headaches, lower back strain and tinnitus.  He was treated by a chiropractic physician for her neck and lower back strain and a neurologist for his headaches and tinnitus.  The lawsuit against the intoxicated excavator was settled for $98,000 to cover medical cost and property damage.

At Maya Murphy, P.C., our experienced team of personal injury attorneys is dedicated to achieving the best results for individuals and their families and loved ones whose daily lives have been disrupted by injury.  Our personal injury attorneys assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and throughout Fairfield County. If you have any questions relating to a personal injury claim or would like to schedule a free consultation, please contact our Westport office by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com

Family Devastated by Train Derailment Settles for $36 Million

Canadian National Railway will pay a $36 million settlement for wrongful death and personal injury claims stemming from a 2009 derailment in Rockford, Illinois. The tragedy resulted from a combination of freak weather and communications failures.

Case Details

Jose Tellez was injured in the accident and his wife, Zoila, died at the scene. Their 19-year old pregnant daughter also suffered serious injury and miscarried her baby as a result.  All three were in a car stopped at a railroad crossing when the oncoming train derailed. The train included several ethanol tank cars, one of which exploded. The Tellezs’ were all burned as they abandoned the vehicle. Mrs. Tellez never escaped the fire.

According to Robert J. Bingle, who represented the family members, the catastrophe could have been avoided with better communication by Canadian National. The train derailed at a washout near the crossing. Torrential rains that evening caused a retention pond near the rail line to overflow. The runoff from this washed all of the ballast from under a section of track.

“This left the rails literally hanging in the air” at that section, said Bingle.

Communicating Safety Issues

The county sheriff’s office alerted the Canadian National communications center in Montreal of the washout. This information never made it to the engineer of the approaching train. According to Bingle, the Canadian National employee who received the warning that evening was inexperienced and untrained. He didn’t know enough to alert the train’s engineer immediately of the danger.

Bingle pointed out a second problem in Canadian National’s safety system. He said a second office in Edmonton had received a hazardous weather alert about the downpour almost two hours before the accident. But it was bundled with one or more other alerts, and the employee at the Edmonton center didn’t read the entire message. Bingle said local Canadian National employees in illinois admitted in discovery that had the alert been forwarded to them, they would have inspected the track and found the washout in ample time to stop the train.

“It’s certainly our hope and belief that Canadian National will take steps to remedy these flaws in communicating safety issues,” Bingle said.

By Authur Buono

At Maya Murphy, P.C., our experienced team of personal injury attorneys is dedicated to achieving the best results for individuals and their families and loved ones whose daily lives have been disrupted by injury.  Our personal injury attorneys assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and throughout Fairfield County. If you have any questions relating a personal injury claim or would like to schedule a free consultation, please contact our Westport office by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com

In Divorce Action, Court Penalizes Husband for Deceptive Conduct During the Discovery Process

Case Background

In a decision rendered in the Superior Court for the Judicial District of Fairfield at Bridgeport, the Court took a hard stance against a husband that dissipated assets, doctored bank statements and intentionally hid accounts during the pendency of his divorce.  The parties were married in India in 2009.  The wife claimed that after moving to the United States, she lived a life of total isolation.  The husband allegedly left for work very early each morning, and returned home late each night, while the wife had no friends and no knowledge of American practices or culture.  The wife further claimed that the husband failed to fulfill her basic needs, such as providing her with food and clothing.

The Court’s Findings

The husband denied the wife’s allegations; however, due to the husband’s conduct during the discovery process, the court found his testimony to be lacking credibility, and ultimately held him responsible for the breakdown of the marriage.  More specifically, the court found that after receiving notice of the pending divorce, the husband withdrew over $100,000.00 from a bank account, transferring the money to an unknown and undisclosed location.  The court ordered the husband to obtain bank account statements demonstrating to where the monies had been transferred, however, he never complied.

The court further found that, while self-represented, the husband provided doctored account statements on which he “whited out” numbers and inserted new ones.  Additionally, during trial, the wife’s attorney revealed that the husband maintained a bank account in New York which he never included on his financial affidavit, and which he claimed under oath did not exist.  The court also found that the husband intentionally got himself fired from a job which was paying him $150,000.00 per year and that, as a result, he was in arrears on his alimony.

Based on the husband’s deceptive conduct and failure to follow court orders, the court awarded the wife lump sum (as opposed to periodic) alimony from his share of the marital estate.  The court also awarded the wife the entirety of several bank/retirement accounts as well as $15,000 in counsel fees.

Should you have any questions about divorce proceedings, or family matters in general, please do not hesitate to contact Attorney Joseph Maya.  He can be reached in the firm’s Westport office at (203) 221-3100 or by e-mail at JMaya@mayalaw.com.

Where the Grantors Intend a Trust to be Modified Jointly, A Surviving Grantor May Not Make Unilateral Modifications After the Death of the Co-Grantor

Whitehouse v. Gahn, 84 A.D.3d 949  (N.Y. App. Div. 2011)

In a case before the Appellate Division of the Supreme Court of New York, a trust beneficiary appealed a New York Supreme Court decision that declared the trust amendment naming her as sole beneficiary to be void and unenforceable.  The Appellate Division affirmed the lower court ruling and remitted the case for an entry of judgment.

Case Details

In their lifetimes, the mother and father, as grantors, established an irrevocable trust naming their three children as the beneficiaries of the trust estate, which consisted of the family home.  The trust instrument expressly reserved for the grantors a limited power of appointment to change or alter the remaindermen.  Approximately five months after the father died, the mother executed an amendment to the trust, naming the daughter as its sole beneficiary.

Less than one month after the amendment was executed, the mother died.  The two children who were removed as trust beneficiaries sought a declaratory judgment in the Supreme Court to declare the amendment void and unenforceable.  The court decided in their favor, and the daughter who had been named sole beneficiary appealed the decision.

Unambiguous Language in a Trust

According to New York case law, a trust instrument is to be construed as written and the grantor’s intent is to be determined solely from the unambiguous language of the trust instrument itself. Mercury Bay Boating Club v. San Diego Yacht Club, 557 N.E.2d 87 (N.Y. App. Ct. 1990); see Matter of Wallens, 877 N.E.2d 960 (N.Y. App. Ct. 2007); Matter of Chase Manhattan Bank, 846 N.E.2d 806 (N.Y. App. Ct. 2006).  The Appellate Division found that the terms of this trust instrument were unambiguous, and clearly expressed the grantors’ intent that their three children share the trust estate equally.

These unambiguous terms may not be altered by a separate provision of the trust which may allow the plural usage of “grantors” to be interpreted as a singular “grantor.”  The Appellate Division held that because the trust agreement allowed an amendment to be made with the joint consent of the grantors, a surviving grantor may not unilaterally amend the trust after the death of the co-grantor.  Therefore, because only the mother executed the amendment to the trust, it was void and unenforceable.

The Court’s Decision

New York law permits a court to amend an irrevocable, unamendable trust if its grantor and all the beneficiaries consent to the amendment.  N.Y.  Estates, Powers and Trusts Law § 7-19.  Because that did not happen in this case, the Appellate Division found further reason to determine that the purported amendment was void and unenforceable.

The Appellate Division of the Supreme Court remitted the matter to the Supreme Court where it originated for entry of judgment declaring that the amendment to the trust was void and unenforceable, and that all three children were beneficiaries of that trust.


Should you have any questions relating to trusts, estate planning or personal asset protection issues, please do not hesitate to contact Attorney Susan Maya, at SMaya@Mayalaw.com or 203-221-3100, and Attorney Russell Sweeting, at RSweeting@Mayalaw.com or 203-221-3100, in the Maya Murphy office in Westport, Fairfield County, Connecticut.

Several Different Legal Theories May Allow Creditors To Reach a Debtor’s Assets Held in Trust

United States v. Evseroff, 00-CV-06029 KAM, 2012 WL 1514860 (E.D.N.Y. Apr. 30, 2012)

In a case before the United States District Court for the Eastern District of New York, the United States government sought to collect delinquent taxes by accessing assets held in a trust established for the benefit of the taxpayer’s children. The current case was remanded to the District Court by the United States Court of Appeals for the Second Circuit after the Second Circuit reversed an earlier District Court ruling on the same matter. On remand, the District Court ruled that the government may collect against all assets held by the trust.

Case Background

Between 1978 and 1982, the taxpayer invested in a series of tax shelters that generated deductions that were later disallowed by the Internal Revenue Service (IRS).  In December 1990, after being audited, the taxpayer received notification that he owed over $227,000 in taxes and penalties.  This amount was later corrected.

In January 1992, the taxpayer received a notice of deficiency indicating that he had accrued more than $700,000 in tax liability.  The taxpayer challenged the IRS calculation of his tax liability in a petition to the United States Tax Court.  In November 1992, the Tax Court entered judgment against the taxpayer in the amount of $209,113 in taxes and penalties, and $560,000 in interest.

In June 1992, the taxpayer established a trust, naming a series of family friend and business associates as the trustees and naming his two sons as the beneficiaries.  That same month, he transferred approximately $220,000 to the trust and in October 1992 he transferred his primary residence, valued at $515,000, to the trust.  The taxpayer received no consideration and there was no evidence the trust assumed the individual taxpayer’s mortgage obligations.

Pursuant to the transfer agreement, the taxpayer was allowed to live in the residence and was responsible for the expenses of the residence, including the mortgage and property taxes.  At the time of the transfer, the mortgage was scheduled to be paid off in five years; however, the transfer agreement did not specify an end date for the taxpayer’s occupancy.

The Trial

At the bench trial held in 2005, the government advanced several theories for recovering assets from the trust, all of which were rejected by the District Court. The government appealed.  In 2008, the United States Court of Appeals for the Second Circuit reversed the judgment and remanded the case.  In its remand order, the Second Circuit directed the District Court to reconsider its findings with respect to whether the conveyances by the taxpayer to the trust were actually fraudulent, whether the trust held property as the taxpayer’s nominee and whether the trust was the taxpayer’s alter ego.

Fraudulent Conveyance

According to New York law, every conveyance made with “actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud” one’s creditors is fraudulent as to both present and future creditors.  N.Y. Debtor and Creditor Law § 276.  The primary issue is the intent of the debtor in making the conveyance, not the actual financial status of the debtor at the time of the conveyance.  The requisite intent required by this section does not need to be proven by direct evidence; it may be inferred from circumstances surrounding the allegedly fraudulent transfer.

Factors, known as “badges of fraud,” that a court may consider in determining fraudulent intent include: lack or inadequacy of consideration; close relationship between the transferor and the transferee; debtor’s retaining possession, benefit or use of the property; series of transactions after incurring the debt; the transferor’s knowledge of the creditor’s claim and the inability to pay it; the financial condition of the debtor before and after the transfer; and the shifting of assets to a corporation wholly owned by the debtor.  

See Steinberg v. Levine, 6 A.D.3d 620 (N.Y. 2004); In re Kaiser, 722 F.2d 1574, 1582–83 (2d Cir.1983) (citations omitted).  To support a fraudulent conveyance finding, the creditor must have suffered some actual harm; however, actual harm may be found if the debtor depletes or diminishes the value of the assets of the debtor’s estate available to the creditors.  Lippe v. Bairnco Corp., 249 F.Supp.2d 357, 375 (S.D.N.Y. 2003)

Tax Liability

The District Court found that the taxpayer was well aware of his tax liabilities and other potential demands on his assets when he transferred his residence and $220,000 to the trust in 1992.  Evidence of the taxpayer’s conduct at the time of the transfers supported the court’s finding that the taxpayer acted with the intention to hinder or delay collection of his assets. The taxpayer retained the benefits of ownership of the residence after it was transferred to the trust for no consideration.

His payments of mortgage and other property-related expenses, in lieu of rent, were the type of payments that would be made by a property owner, not a renter.  Much of the taxpayer’s net worth consisted of cash, which he was continually transferring among bank accounts held by family and close associates, as well as withdrawing to hold in an office safe. These transfers and withdrawals made it difficult for the IRS to locate and value the taxpayer’s assets.

Causing Harm to Creditors

The District Court also found that the transfers of cash and real estate to the trust unambiguously caused the requisite actual harm to his creditors by reducing the assets that the taxpayer had available to satisfy his tax debt and reducing the value of his readily accessible assets well below the amount of his tax debt.  After the transfers, the IRS would have had to collect between fifty and ninety percent of his remaining assets to satisfy his tax debt.

As a result of this analysis, the District Court found that the taxpayer’s intent to evade the IRS collection efforts was substantial and sufficient on its own; therefore, the court concluded that the taxpayer’s transfer of the residence and $220,000 to the trusts was actually fraudulent within the definition of New York law.  The remedy for fraudulent conveyance is that the creditor may collect upon the fraudulently conveyed property.  Therefore, the District Court held that the government may collect against the assets in the trust on this basis.

The Nominee Theory

The nominee theory focuses on the relationship between the taxpayer and the property to determine whether a taxpayer has engaged in a legal fiction, for federal tax purposes, by placing legal title to property in the hands of another while, in actuality, retaining all or some of the benefits of being the property’s true owner. Richards v. United States, 231 B.R. 571, 578 (E.D.Pa.1999).  The overall objective of the nominee analysis is to determine whether the debtor retained the practical benefits of ownership while transferring legal title.  Id. The critical consideration is whether the taxpayer exercised active or substantial control over the property.

Factors examined by the court include: (1) whether inadequate or no consideration was paid by the nominee; (2) whether the property was placed in the nominee’s name in anticipation of a liability while the transferor remains in control of the property; (3) where there is a close relationship between the nominee and the transferor; (4) whether they failed to record the conveyance; (5) whether the transferor retains possession; and (6) whether the transferor continues to enjoy the benefits of the transferred property.  

Giardino v. United States, No. 96–CV–6348T, 1997 WL 1038197, at *2 (W.D.N.Y. Oct.29, 1997).  A nominee finding can be made even where there is no intent to defraud creditors or hinder collection efforts.  Where a nominee relationship is found, the government may access only the property held on the taxpayer’s behalf by the nominee and not all the property of the nominee.

The Taxpayer’s Payments

The District Court found that the trust was the taxpayer’s nominee with respect to the residence only, and not with respect to the $220,000. The taxpayer had a close relationship with the trustees and the trust paid no consideration for the transfer of the residence. There was no evidence in the transfer agreement that the trust prevented the taxpayer from benefitting from the use and occupancy of the residence as much as when he held legal title to it.

The District Court found the evidence that the taxpayer made some payments relating to the property to be insufficient evidence to rebut the inference that he was the de facto owner of the property.  The payments that the taxpayer made in exchange for his occupancy were precisely those that an owner would make.  Once the mortgage was paid off, the taxpayer was only responsible for upkeep and expenses for the property; therefore, the trust received no net return from this asset.

The District Court considered that, were the trust acting as the owner of the property, it would have sought market rental rates that would have exceeded the taxpayer’s payments.  Therefore, the District Court found that the trust held the residence as the taxpayer’s nominee and that the government could recover the taxpayer’s debts against the residence under a nominee theory.

The Alter Ego Theory

The alter ego theory differs from the nominee theory because the nominee theory focuses on the taxpayer’s control over and benefit from the actual property, while the alter ego theory emphasizes the taxpayer’s control over the entity that holds the property.  The alter ego doctrine arose from the law of corporations and allows the creditor to disregard the corporate form (also known as “piercing the corporate veil”) by either using an individual owner’s assets to satisfy a corporation’s debts or using the corporation’s assets to satisfy the individual owner’s debts.

Although the New York Court of Appeals has never held that the alter ego theory may be applied to reach assets held in trust, the District Court found no policy reason not to extend the application of veil piercing to trusts.  The policy behind piercing the corporate veil is to prevent a debtor from using the corporate form to unjustly avoid liability, which applies equally to trusts.  Therefore, the District Court held that the alter ego theory could be applied to the trust in the instant case.

Piercing the Corporate Veil

To pierce the corporate veil in New York, a plaintiff must show that “(1) the owner exercised such control that the corporation has become a mere instrumentality of the owner, who is the real actor; (2) the owner used this control to commit a fraud or ‘other wrong’; and (3) the fraud or wrong results in an unjust loss or injury to the plaintiff.” Babitt v. Vebeliunas,332 F.3d 85, 91–92 (2d Cir.2003) (citations omitted); see also Wm. Passalacqua Builders, Inc. v. Resnick Developers S. Inc., 933 F.2d 131, 138 (2d Cir.1991).  With respect to analyzing the taxpayer’s control over the trust, the relevant factors can be drawn by analogy from the corporate context.

In analyzing the alter ego question as it relates to a corporation, courts consider factors such as the absence of formalities, the amount of business discretion displayed by the allegedly dominated corporation, whether the related corporations deal with the dominated corporation at arm’s length and whether the corporation in question had property that was used by other of the corporations as if it were its own. Vebeliunas,332 F.3d  at 91 n.3 (citation omitted).

The District Court’s Findings

The District Court found that the trust was an alter ego of the taxpayer.  The trust formalities were so poorly observed as to give rise to the inference that the trust was not a bona fide independent entity. Between 1992 and 1998, the trust did not record the taxpayer’s payment of expenses for the residence as income and, during this period, the trust did not claim the mortgage interest deduction for the residence.  The individual taxpayer remained as the named beneficiary of the flood and fire insurance policies of the residence.

The accounting work for the trust was performed by a business associate of the taxpayer as a professional courtesy.  The trust tax statements were sent directly to the taxpayer instead of to the trustees. The District Court also found that the manner in which the trust was managed also demonstrate that it was an extension of the taxpayer because there was little evidence that the trustees were actively involved in managing the trust or its assets.

Having trustees play an active role in managing the trust is an important factor in deciding whether to respect the form of a trust because active involvement of trustees would support the separate existence of a trust. Dean v. United States, 987 F.Supp. 1160, 1165 (W.D.Mo.1997).  Finally, the taxpayer demonstrated his domination of the trust by controlling its property to a high degree.

The Court’s Decision

Once the District Court found that the taxpayer controlled the trust, the next steps were to determine whether he used that control to commit a fraud or a wrong against the government, in its capacity as a creditor, and whether that wrong resulted in an unjust loss.  The court found these elements to be plainly satisfied by the facts and its previous findings with respect to actual fraudulent conveyance and the nominee doctrine.

Therefore, the District Court concluded that the existence of the trust as a separate entity was a legal fiction. Under the alter ego theory, the government may collect against all assets held by the trust as if they were held by the taxpayer himself.

Therefore, the District Court held that the government may proceed to collect against all the assets held by the trust that the taxpayer established for benefit of his sons in order to satisfy his delinquent tax liabilities.


Should you have any questions relating to trusts and other personal asset protection issues, please do not hesitate to contact Attorney Susan Maya, at SMaya@Mayalaw.com or 203-221-3100, and Attorney Russell Sweeting, at RSweeting@Mayalaw.com or 203-221-3100, in the Maya Murphy office in Westport, Fairfield County, Connecticut.

Trustees May Be Liable in their Own Person and Estate for Failure to Comply with IRS Notices of Levy Issued against Trust Beneficiaries

United States v. Michel, 08 CV 1313 DRH WDW, 2012 WL 3011124 (E.D.N.Y. July 23, 2012)

In a case before the United States District Court for the Eastern District of New York, the United States government commenced an action against a trustee in order to collect unpaid federal taxes owed by the trust beneficiary. The District Court granted the government’s summary judgment motion and found the trustee liable for unpaid federal taxes plus interest.

Case Details

In 1995, the beneficiary’s mother died.  Pursuant to her will, the majority of her estate was left to be held in trust, and administered, managed, invested and reinvested by the trustee as set forth in the will.  The relevant provision of the will directed the trustee to pay her son, the sole beneficiary of the trust, at least $1,000 per month, but not more than 60-percent of the net income of the trust.

The same provision also provided the trustee with sole discretion to pay trust principal to her son as necessary for the comfortable “maintenance, support, health, education and well being” of her son, and his two sons.  In February 1996, the trustee was issued letters of trusteeship for the trust created by the will.

Delinquent Tax Liability

In April 1996, the trustee was informed by his attorney by letter that the son owed the federal government for various taxes totaling $246,579.  The attorney additionally informed the trustee that whatever income was going to the son, regardless of the source, must go first to the creditor.  In June 1996, the trustee was served with an Internal Revenue Service (IRS) Notice of Levy and Notice of Federal Tax Lien. The Notice of Levy listed federal income tax liabilities and civil penalties that the son owed to the IRS for tax years 1979 through 1989.

The notice further stated that the levy required the trustee to turn over to the IRS “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.”  In either 2000 or 2001, the trustee was directed by his new attorney to make distributions from the trust to the son because the IRS had been satisfied.

The trustee did not see the paperwork documenting satisfaction of the IRS levy and signed blank checks to permit the attorney to draw on the trust account for the son.  The government then commenced action against the trustee to collect the son’s delinquent tax liability through the judicial enforcement of the IRS levy.

Delinquent Tax Collection

The IRS has two principal tools to collect delinquent taxes.  The first is a lien foreclosure suit, brought pursuant to 26 U.S.C. § 7403(a).  The other is the issuance of a levy upon all property and rights to property belonging to the delinquent taxpayer, pursuant to 26 U.S.C. § 6331(a).  Where the taxpayer’s property is being held by another, the notice of levy is customarily served upon the custodian of the property pursuant to 26 U.S.C. § 6332(a).

Serving the notice on the custodian creates a custodial relationship between the person holding the property and the IRS so that the property comes into constructive possession of the government.  If the custodian fails or refuses to surrender the property or rights to property subject to the levy, the custodian becomes liable in his own person and estate to the government in the sum equal to the value of what he failed to surrender.  26 U.S.C. § 6332(d)(1).

Trust Instruments Under New York Law

Pursuant to New York law, the plain language of the trust instrument must be analyzed in order to determine a trust beneficiary’s property rights in trust income or principal.  The Second Circuit has held that a beneficiary has a property interest in trust income when the trust instrument sets out the trustee’s duty to pay income in mandatory terms.  Magavern v. United States, 550 F.2d 797, 801 (2d Cir.1977).  Therefore, when the trustee is required to make a payment of trust income to a beneficiary, even when the amount and timing of the mandatory income distribution are left to the trustee’s discretion, the trust beneficiary has a property right in trust income that is subject to a tax levy.

Beneficiary Property Rights 

In the instant case, because the trustee’s duty pay out a certain amount of trust income was set forth in mandatory terms, the beneficiary had a right to property in the trust income, and the government tax levy could attach to this right.  However, the will did not require the trustee to pay trust principal to the beneficiary.  The terms of the trust left decisions with respect to the trust principal entirely to the trustee’s discretion.  Therefore, the beneficiary had no attachable right to property in the trust principal until the trustee decided to make a distribution of such principal to him.

The District Court concluded that the beneficiary had some property rights to both the trust income and that portion of the trust principal, if any, that was distributed to him.  These rights to property were in the possession of the trustee, and it was undisputed under the facts of the case that the trustee did not surrender any levied property to the IRS in compliance with 26 U.S.C. § 6332(a).  Therefore, the trustee could be liable in his own person and estate to the government under 26 U.S.C. § 6332(d)(1).

Avoiding Personal and Estate Liability 

A custodian of property or rights to property that are subject to an IRS levy has only two defenses to avoid liability in his own person and estate.  The first available defense is that the trustee is neither in possession of nor obligated with respect to the property or rights to property belonging to the delinquent taxpayer.  26 U.S.C. § 6332(a).  The second available defense is that the taxpayer’s property or rights to property at issue are subject to attachment or execution under a judicial process.  Id. 

In the instant case, the first defense was not applicable because, pursuant to the terms of the will, the trustee was both obligated to pay the beneficiary certain amounts of trust income at given intervals and empowered to make discretionary distributions.  The trustee made no suggestion that the second defense was applicable.

The absence of intentional or negligent conduct is not relevant as to whether an enforcement action may be maintained against the custodian; therefore, good faith could not absolve the trustee of liability for his failure to comply with his statutory obligations to surrender property pursuant to a valid IRS Notice of Levy.  Therefore, the District Court found that the trustee could not avoid liability for his actions under either of the two statutorily available defenses.

The Court’s Decision

The District Court determined that the government established as a matter of law that the trustee failed to honor the Notice of Levy served on the trust beneficiary in June 1996 by improperly distributing estate assets to the trust beneficiary after the date of the levy.  However, the court also held that the trustee was liable for less than the judgment amount requested by the government, but the court permitted the government to submit a supplemental briefing as to its entitlement to additional estate money to which the trust beneficiary had a property right.


Should you have any questions relating to trusts or other personal asset protection issues, please do not hesitate to contact Attorney Susan Maya, at SMaya@Mayalaw.com or 203-221-3100, and Attorney Russell Sweeting, at RSweeting@Mayalaw.com or 203-221-3100, in the Maya Murphy office in Westport, Fairfield County, Connecticut.