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United States v. Gerard

United States District Court, N.D. Indiana, Fort Wayne Division

April 17, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
CYNTHIA J. GERARD, ROBERT E. GERARD, and TREASURER, ALLEN COUNTY, INDIANA, Defendants.

          AMENDED OPINION AND ORDER

          THERESA L. SPRINGMANN CHIEF JUDGE

         On March 5, 2014, the United States of America filed a Complaint [ECF No. 1] against Defendants Cynthia J. Gerard, Robert E. Gerard, and the Treasurer of Allen County, Indiana seeking unpaid taxes and a judgment that the United States can enforce collection against the property of Robert Gerard, which was formally owned by Robert and Cynthia Gerard as tenants by the entirety. On November 23, 2015, the Plaintiff filed a Motion for Summary Judgment [ECF No. 27], which was denied on September 8, 2016 [ECF No. 37]. On August 10, 2017, this case was transferred to Chief Judge Theresa L. Springmann for all further proceedings [ECF No. 38]. The Plaintiff filed a Motion for Partial Reconsideration [ECF No. 43] of the prior Summary Judgment Order under Rule 54(b), which the Court granted [ECF No. 49] on October 23, 2017; however, the Court declined to consider the merits of the Plaintiff's substantive arguments at that time because the Defendants had briefed only the procedural propriety of the Motion rather than responding substantively. On November 29, 2017, the Court held a telephonic scheduling conference and set a briefing schedule for the merits of the Plaintiff's Motion. This matter is now fully briefed and ripe for review.

         BACKGROUND

         A. Factual Background

         In 1990, Robert and Cynthia Gerard bought residential real property (“the Property”) as husband and wife, which they owned as tenants by the entirety, and for which Robert paid at least ninety percent of the purchase price. From 2003 through 2008, Cynthia owned and operated a limited liability company as its sole member. Under the applicable regulations, the company was treated as a sole proprietorship for federal tax purposes. Over the years, Cynthia and her company incurred employment and unemployment tax liabilities, some of which remain unpaid. The Plaintiff and the Gerards dispute the amount of unpaid taxes but agree that unpaid taxes exist. The parties do not seem to dispute that all but two of the assessments associated with these claims liabilities attached to Cynthia's interest in the Property prior to its conveyance to Robert.

         In July 2012, Robert and Cynthia, as tenants by the entirety, conveyed the Property to Robert, individually. The Gerards maintain that, at that time, Cynthia's interest in the property was far less than Robert's interest due to her lesser contribution to the purchase of the property and her consumption of joint assets for the sole benefit of her company. The deed to the Property specified that the transfer from Cynthia to Robert was “by way of gift and without any consideration other than for love and affection.” The Gerards claim that they transferred the Property in this manner on the advice of former counsel due to Cynthia's debilitating brain aneurism and the need for Robert to manage her affairs and assets. They also claim that Cynthia transferred her remaining interest in the Property to Robert for both (1) consideration previously transferred from Robert's assets to Cynthia, which Cynthia used to support her business, and (2) the release by Robert of his claim against Cynthia related to the previous transfers. (See Def. Opp. Br. 4, ECF No. 56.)

         B. Summary Judgment Order

         In its Motion for Summary Judgment [ECF No. 27], the Plaintiff addressed three issues. First, the Plaintiff asked for a determination regarding the amount of taxes owed. Second, the Plaintiff requested a ruling that the tax liens that arose upon assessment of the unpaid tax liabilities attached to Cynthia's interest in the Property and remain attached to a one-half interest in the Property despite its conveyance to Robert. Finally, the Plaintiff asked that the tax liens be enforced against the Property via a sale of the entire Property pursuant to 26 U.S.C. § 7403.

         The Gerards responded that the Plaintiff had not submitted sufficient documentation to support its assertions regarding the amount of taxes owed and that the documents that the Plaintiff did submit were contradictory to the Plaintiff's claims. Therefore, the Gerards argued, there remains a genuine issue of material fact regarding the amount allegedly due. The Gerards also argued that because Robert qualifies as a “purchaser” under 26 U.S.C. § 6323(a), any lien that attached to Cynthia's interest in the Property prior to its conveyance to Robert is no longer valid. But, even if the Court were to find the liens valid as against the Property, the Gerards argued that the Court should exercise its equitable discretion and decline to enforce those liens against the Property.

         In reply, the Plaintiff explained the apparent discrepancies in the amounts claimed in its brief with the amounts listed in the supporting documentation, specifically referencing credits applied to the balances and interest accruals. The Plaintiff also argued that, as a matter of law, Robert was not a “purchaser” under § 6323(a) because there was no consideration for the transfer of Cynthia's interest. Finally, the Plaintiff argued that the balance of the equities weighed in favor of enforcing the liens via a sale of the Property rather than against it.

         After the denial of the Plaintiff's Motion and the subsequent transfer of the case to this Court, the Plaintiff moved for partial reconsideration as to the amount of taxes owed and whether the tax liens survived the conveyance of the Property to Robert. The Plaintiff did not ask for reconsideration of the issue regarding the equitability of a forced sale of the Property, conceding that there remain factual disputes that are reserved for the trier of fact. The Court now reconsiders these issues.[1]

         STANDARD OF REVIEW

         Summary judgment is proper where the evidence of record shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The moving party bears the initial burden of informing the Court of the basis for its motion and identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact. Id. at 323. The burden then shifts to the non-movant to “go beyond the pleadings” to cite evidence of a genuine factual dispute that precludes summary judgment. Id. at 324. “[A] court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial.” Waldridge v. Am. Heochst Corp., 24 F.3d 918, 920 (7th Cir. 1994). If the non-movant does not come forward with evidence that would reasonably permit the finder of fact to find in its favor on a material issue, then the Court must enter summary judgment against it. Id.

         ANALYSIS

         A. Delinquent Tax Amounts

         There appears to be no dispute that Cynthia is personally liable for some amount of unpaid taxes, that the assessments were properly made, and that the taxes remain unpaid after the IRS properly sent a notice and demand for payment to Cynthia. Rather, the dispute on this issue centers on whether ...


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