William G. Wilcox, D.O., P.C. Employees' Defined Ben. Pension Trust v. U.S.

• Decision Date: 03 November 1989
• Docket Number: Nos. 88-1008,88-2194,s. 88-1008
• Citation: 888 F.2d 1111
• Parties: -5830, 90-1 USTC P 50,095 WILLIAM G. WILCOX, D.O., P.C. EMPLOYEES' DEFINED BENEFIT PENSION TRUST; and William G. Wilcox, D.O., P.C., Plaintiffs and Counterclaim Defendants-Appellants (88-1008), v. UNITED STATES of America, Defendant and Counterclaim Plaintiff-Appellee, v. RUBENSTEIN, ISAACS, BORDMAN & LAX CORPORATION, Counterclaim Defendant, Lowell R. Stuckman, Intervenor-Appellant (88-2194).
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1111

888 F.2d 1111

64 A.F.T.R.2d 89-5830, 90-1 USTC P 50,095

WILLIAM G. WILCOX, D.O., P.C. EMPLOYEES' DEFINED BENEFIT

PENSION TRUST; and William G. Wilcox, D.O., P.C., Plaintiffs and Counterclaim Defendants-Appellants (88-1008), v. UNITED STATES of America, Defendant and Counterclaim Plaintiff-Appellee, v. RUBENSTEIN, ISAACS, BORDMAN & LAX CORPORATION, Counterclaim Defendant, Lowell R. Stuckman, Intervenor-Appellant (88-2194).

Nos. 88-1008, 88-2194.

United States Court of Appeals,

Sixth Circuit.

Argued Aug. 4, 1989

Decided Nov. 3, 1989.

Alan C. Applebaum (argued), Reifman & Applebaum, Kevin T. Keena and Erwin A. Rubenstein, Rubenstein, Issacs, Lax & Bordman, Southfield, Mich., William G. Wilcox, D.O. P.C. Employee's Defined Benefit Pension Trust and William G. Wilcox, D.O. P.C., plaintiff-appellant, and Rubenstein, Isaacs, Lax & Bordman, Corp., third-party appellee.

Gary R. Allen, Acting Chief, U.S. Dept. of Justice, Tax Div., Anne B. Durney, U.S. Department of Justice, Tax Div. Appellate Section, Murray S. Horwitz (argued), Dept. of Justice, Tax Div., Washington, D.C., Charles Stroad, Dist. Counsel, I.R.S., Detroit, Mich., Fred Goldberg, Chief Counsel, I.R.S., Todd Luwoma, U.S. Dept. of Justice, Tax Div., Washington, D.C., Frank Poma, Manager, I.R.S. Pontiac, Mich., for the U.S Peter J. Kelley (argued) Kathryn L. Duhamel, Ann Arbor, Mich., for Lowell R. Stuckman, intervenor-appellant.

Before KRUPANSKY and RYAN, Circuit Judges, and LIVELY, Senior Circuit Judge.

PER CURIAM.

This is a consolidated appeal of William G. Wilcox (Wilcox), ¹ in appeal number 88-1008, who has appealed from the district court's grant of summary judgment in favor of defendant-appellee, Internal Revenue Service (IRS), permitting the IRS to seize the assets of Wilcox, his medical corporation, and pension trust to satisfy his delinquent tax liabilities which had accrued during the years of 1981 and 1982, and Lowell Stuckman (Stuckman), in appeal number 88-2194, who has appealed the district court's denial of his motion to intervene in appeal number 88-1008 as a party in interest arising from his ownership of a 1935 Auburn automobile which Stuckman had in his possession at the time of the IRS' seizure of Wilcox's property.

Wilcox is a physician licensed to practice osteopathic medicine in the State of Michigan. In 1977, Wilcox incorporated his medical practice, under the laws of Michigan, as William G. Wilcox, D.O., P.C. (the corporation). Wilcox was the sole shareholder, officer, director and employee of the corporation. The corporation employed independent contractors to perform all services not performed by Wilcox.

On June 30, 1981, the corporation created a pension trust, Employee's Defined Benefit Pension Trust (pension trust) which qualified as a tax-exempt retirement plan under the Internal Revenue Code. Wilcox was the sole trustee and beneficiary of the pension trust.

A 1986 Lincoln Continental was titled to the corporation and the following vehicles were titled to the pension trust:

1) 1977 Ferrari

2) 1937 Packard

3) 1910 Maxwell

4) 1981 Chevrolet pick-up truck

Wilcox testified that he has used the 1986 Lincoln Continental, from time to time, for personal purposes and transportation.

In March of 1984, Wilcox belatedly filed his individual federal income tax returns for the 1981 and 1982 tax years. On May 14, 1984, the IRS assessed taxes, penalties, and interest of $244,960.62 against Wilcox for his failure to pay 1981 federal income taxes. Wilcox paid $153,235.79 of this amount, leaving an unpaid balance of $91,724.83. On June 25, 1984, the IRS assessed $177,530.84 against Wilcox as 1982 income taxes, interest and penalties. Wilcox paid $116,958.41, leaving an unpaid balance of $60,572.97.

On February 24, 1986, after failing to receive further payments from Wilcox on the outstanding balances of his tax liabilities, the IRS filed notices of federal tax liens with the Register of Deeds for Oakland County, Michigan, pursuant to 26 U.S.C. Sec. 6321, against the assets of the pension trust and the corporation as alter egos of Wilcox. On February 26, 1986, the IRS seized the 1981 Chevrolet pick-up truck, which was titled to the pension trust, in an attempt to collect Wilcox's delinquent tax liabilities. On March 10, 1986, the IRS notified Wilcox of its intent to sell the pick-up truck at an auction on March 25, 1986.

On March 21, 1986, Wilcox, the corporation and the pension trust filed suit, pursuant to 26 U.S.C. Sec. 7426, in the United States District Court for the Eastern District of Michigan, seeking, inter alia, a temporary restraining order and a preliminary injunction against the IRS to prevent the sale of the 1981 Chevrolet pick-up truck seized by the IRS. Wilcox, the corporation and the pension trust also sought compensatory damages for alleged injuries sustained as a result of the IRS' actions.

On June 5, 1986, the IRS filed an answer and counterclaim against Wilcox, the corporation the pension trust, and the law firm of Rubenstein, Isaacs, Bordman and Lax Corp., which had claimed an interest in the 1981 Chevrolet pick-up truck. ² The IRS counterclaim sought to foreclose the federal tax liens against the assets of Wilcox, the corporation and the pension trust, alleging that they were his alter egos.

The matter was referred to a magistrate who conducted an evidentiary hearing in October, 1986. On August 14, 1987, the magistrate issued a report and recommendation concluding that Wilcox's request for a preliminary injunction should be denied because he had failed to demonstrate that irreparable harm would result from the sale of the 1981 pick-up truck; the truck was neither unique nor was it necessary for the care and maintenance of the other pension trust assets as claimed by Wilcox. The magistrate further concluded that Wilcox was unlikely to succeed on the merits because it appeared that Wilcox was the alter ego of the corporate entities. "[T]he line between [Wilcox] and the corporate entit[ies] [was] sufficiently vague to permit the corporate veil to be pierced." On November 2, 1987, the district court adopted the magistrate's report and recommendation and accordingly denied Wilcox's motion for a preliminary injunction.

On November 9, 1987, the IRS filed a motion for summary judgment to foreclose on the assets of the corporation and pension trust in order to satisfy Wilcox's outstanding tax liabilities. On December 10, 1987, the district court granted the IRS' motion for summary judgment concluding that the magistrate's recommendation denying the appellant's motion for a preliminary injunction, as adopted by the district court, was dispositive of the summary judgment motion, because it was the "law of the case." The district court accordingly granted the government's motion to foreclose on the property of the corporation and the pension trust and ordered Wilcox to deliver the foreclosed property to the United States Marshal's Service for sale to satisfy his outstanding tax liabilities and the interest that had accrued thereon. It also dismissed Wilcox's complaint with prejudice.

On appeal, Wilcox has charged that, by applying the decision disposing of his motion for preliminary injunctive relief as the law of the case to the substantive issue joined by the government's motion for summary judgment, the district court committed reversible error. He has argued that there is a distinction between the burden of proof to support the denial of a preliminary injunction and the burden of proof necessary to support a summary judgment motion addressing the substantive issues joined by the pleadings. United States v. U.S. Smelting Ref. & Mining Co., 339 U.S. 186, 70 S.Ct. 537, 94 L.Ed. 750 (1950); Cale v. Johnson, 861 F.2d 943, 947 (6th Cir.1988). "Unlike the more precise requirements of res judicata, law of the case is an amorphous concept." Cale, 861 F.2d at 947 (quoting Arizona v. California, 460 U.S. 605, 618, 103 S.Ct. 1382, 1391, 75 L.Ed.2d 318 (1983)). "Rulings that simply deny extraordinary relief for want of a clear and strong showing on the merits, or that are avowedly preliminary or tentative, do not trigger law of the case consequences." 18 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure, Sec. 4478 at 798 (1981); accord Berrigan v. Sigler, 499 F.2d 514, 518 (D.C.Cir.1974).

"The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held." University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L.Ed.2d 175 (1981). "Given this limited purpose, and given the haste that is often necessary if those positions are to be preserved, a preliminary injunction is customarily granted on the basis of procedures that are less formal and evidence that is less complete than in a trial on the merits." Id., at 395, 101 S.Ct. at 1834. "A party thus is not required to prove his case in full at a preliminary-injunction hearing ..., and the findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits...." Id., at 395, 101 S.Ct. at 1834; accord In re DeLorean Motor Co., 755 F.2d 1223, 1230 (6th Cir.1985).

Because of the lesser burden of proof required to support a motion for preliminary injunction as contrasted with a motion for summary judgment, a trial court's disposition of the substantive issues joined on a motion for extraordinary relief is not dispositive of those substantive issues on the merits. "As a general rule, decisions on preliminary injunctions do not constitute law of the case and 'parties are free to litigate the merits.' " Golden State Transit Corp. v. City of Los Angeles, 754 F.2d 830, 832 n. 3 (9th Cir.1985) (quoting City of Anaheim v. Duncan, 658 F.2d 1326, 1328 n. 2 (9th Cir.1981)), rev'd on other grounds, 475 U.S. 608, 106 S.Ct. 1395, 89 L.Ed.2d 616 (1986). "Refusal to stay a preliminary injunction pending appeal...