Audio Investments v. Robertson, No. 8:002847-20BG.

CourtUnited States District Courts. 4th Circuit. United States District Court of South Carolina
Writing for the CourtHerlong
Citation203 F.Supp.2d 555
PartiesAUDIO INVESTMENTS, an Irrevocable Trust, Plaintiff, v. Dewey L. ROBERTSON, Sr., Defendant and Third-Party Plaintiff, v. Roger Davenport, a/k/a Roger-Orme: Davenport; and the United States of America, Third-Party Defendants.
Docket NumberNo. 8:002847-20BG.
Decision Date19 April 2002
203 F.Supp.2d 555
AUDIO INVESTMENTS, an Irrevocable Trust, Plaintiff,
v.
Dewey L. ROBERTSON, Sr., Defendant and Third-Party Plaintiff,
v.
Roger Davenport, a/k/a Roger-Orme: Davenport; and the United States of America, Third-Party Defendants.
No. 8:002847-20BG.
United States District Court, D. South Carolina, Greenwood Division.
April 19, 2002.

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COPYRIGHT MATERIAL OMITTED

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Orin Gail Briggs, Briggs and Cox, Lexington, SC, for Plaintiff.

James O. Spence, Dooley Dooley Spence Parker and Hipp, Lexington, SC, for Defendant.

Roger Davenport, Leesville, SC, Pro se.

Scott N. Schools, Asst. U.S. Atty., U.S. Attorneys Office, Charleston, SC, James D. McCoy, III, U.S. Attorneys Office, Greenville, SC, Brian Kaufman, Marc J. Korab, Maggie O'Shaughnessy, U.S. Department of Justice Tax Division, Washington, DC, for Third-party Defendants.

ORDER

HERLONG, District Judge.


This matter is before the court with the Report and Recommendation of the United States Magistrate Judge, made in accordance with 28 U.S.C. § 636(b) and Local Rule 73.02 DSC.1 Several motions are pending in the case. On January 25, 2002, United States Magistrate Judge George C. Kosko issued a Report and Recommendation which recommends, inter alia, granting the United States of America's ("Government") motion for summary judgment. After receiving extensions on the time to file objections, Roger Davenport ("Davenport"), proceeding pro se, filed a multitude of objections, most of which are untimely. Audio Investments, an Irrevocable Trust ("Audio Investments"), also filed objections. The Government responded to Davenport's and to Audio Investments's objections. After a de novo review of the case, the court grants the Government's motion for summary judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

This dispute centers around Davenport's failure to pay federal income taxes and the Internal Revenue Service's ("IRS") subsequent seizure of his house. On July 22, 1985, Davenport and his wife, Marie Davenport, purchased lakefront property in Saluda County, South Carolina for $22,000.00 ("Saluda Property"). (Gov't M. Summ. J. Ex. 8.) During the years 1993 through 1996, the Saluda Property purportedly changed hands several times. Davenport executed two deeds attempting to transfer his interest in the Saluda Property to his daughter, Faith Davenport, for $10.00. (Id. Ex. 9, 11.) On March 28,

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1994, Margaret Davenport attempted to transfer her interest in the Saluda Property to Faith Davenport, also for $10.00. (Id. Ex. 10.) On June 10, 1996, Faith Davenport attempted to transfer her interest in the Saluda Property to Audio Investments. (Id. Ex. 12.)

Davenport failed to file federal income taxes for the years 1991 through 1993, despite earning an adjusted gross income of over $100,000.00 in 1991 and 1992, and over $50,000.00 in 1993. (Id., Ex. 1, 2 at ¶ 2.) On February 13, 1995, the IRS made an assessment of $33,534.00 in taxes plus $3,245.04 in interest for unpaid taxes due for 1991. (Id. Ex. 1.) On July 3, 1995, the IRS made an assessment of $34,111.00 in taxes plus $8,020.41 in interest for taxes due in 1992. (Id.) On February 12, 1996, the IRS made an assessment of $11,338.00 in taxes plus $2,467.03 in interest for taxes due in 1993. (Id.)

On March 21, 1996, and April 10, 1996, the IRS filed notices of federal tax liens for the tax years 1991, 1992, and 1993 in Saluda County against Davenport. (Id. Ex. 3, 4.) On August 26, 1996, the IRS issued notices of its intent to levy to Davenport. (Id. Ex. 19, 20.) On October 24, 1997, the IRS filed a notice of federal tax lien in Saluda County against Audio Investments, as the alter ego of Roger Orme Davenport. (Id. Ex. 7.) On February 9, 1998, the IRS levied on the assets owned by Davenport. (Id. Ex. 21.) Finally, on March 16, 1998, the IRS seized the Saluda Property. (Id. Ex. 2.)

Following the seizure of the Saluda Property, the IRS issued notices of sale. (Id. Ex. 22-27.) On May 29, 1998, the IRS sold the property to Dewey L. Robertson, Sr. ("Robertson") for $110,000.00. (Id. Ex. 31.) The IRS issued Robertson a deed on December 7, 1998. (Id. Ex. 2.)

Audio Investments originally filed this case in state court against Robertson as an action to quiet title. Robertson filed an amended answer and a third-party complaint naming Davenport and the Government as third-party defendants. On September 13, 2000, the Government removed the case. Currently pending before the court are the following motions: (1) Audio Investments' motion to certify a question of law to the South Carolina Supreme Court; (2) Audio Investments' motion to deny the claim of privilege as to a memo to counsel; (3) Audio Investments' motion for partial summary judgment; (4) the Government's motion for summary judgment, and in the alternative, to dismiss for lack of jurisdiction; and (5) Davenport's motion to remand.

II. DISCUSSION OF THE LAW
A. Summary Judgment Standard

Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Rule 56(c) mandates entry of summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In deciding whether there is a genuine issue of material fact, the evidence of the non-moving party is to be believed and all justifiable inferences must be drawn in his favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). However, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are

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irrelevant or unnecessary will not be counted." Id. at 248, 106 S.Ct. 2505. Moreover, "[w]hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).

B. The Government's Motion for Summary Judgment

In its motion for summary judgment, the Government asks the court to determine whether the IRS properly seized the Saluda Property and whether Robertson holds legal title to the Saluda Property. To decide this question, the court must resolve two main issues. First, the court must decide whether persons or entities other than Davenport held any real interest in the Saluda Property. Second, the court must determine whether the IRS complied with the applicable law in seizing the Saluda property.

1. Fraudulent Conveyances

The Government contends that Davenport's conveyances of the Saluda Property were fraudulent and that Audio Investments is simply his alter ego. Audio Investments and Davenport contend that the IRS wrongfully seized the Saluda Property to satisfy Davenport's tax obligations because Davenport had no interest in the property — the Saluda Property belonged to Audio Investments.

Assuming it exists at all, Audio Investments is a curious creature. On June 19, 1992, a "Contract and Declaration of Trust" was filed in Maricopa County, Arizona. (Gov't M. Summ. J. Ex. 14.) The front page of the document states, "This Declaration of a Pure Trust Organization Authorizes Its Trustees to Operate Under the Name of AUDIO INVESTMENTS." (Id.) The document designates John Michael Crim of Bernalillo County, New Mexico as the "Creator" of the trust and P.R. Houtz, also of Bernalillo County, as the trust's "Exchangor." (Id.) Ray A. Young and Steven E. Duke, both of Bernalillo County, are listed as the "First Trustee" and "Second Trustee," respectively. The "Successor Trustee" is Dana T. Houtz. (Id.)

Audio Investments purportedly held title to the Saluda Property through a series of conveyances by members of the Davenport family. Each of these conveyances was made for nominal consideration — $10.00. Davenport testified that he owns no assets and does not keep a bank account in his own name. (Davenport Depo. at 30.) Davenport initiated the transactions eventually leading to Audio Investments' possession of the Saluda Property on September 23, 1993, by executing the first deed to his daughter. (Gov't M. Summ. J. Ex. 9.) By that time, Davenport certainly was on notice that he failed to pay his income taxes. (Davenport Depo. at 35.) Therefore, these transfers rendered Davenport insolvent at a time when he also was indebted to the United States for unpaid income taxes.

Under South Carolina law, such a conveyance is a nullity. South Carolina's Statute of Elizabeth, which invalidates fraudulent conveyances such as those made by Davenport, states:

Every gift, grant, alienation, bargain, transfer, and conveyance of lands ... by writing or otherwise ... made to or for any intent or purpose to delay, hinder, or defraud creditors and others of their just and lawful actions, suits, debts, accounts, damages, penalties, and forfeitures must be deemed and taken (only as against that person or persons, his or

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their heirs, successors, executors, administrators and assigns, and every one of them whose actions, suits, debts, accounts, damages, penalties, and forfeitures by guileful, covinous, or fraudulent devices and practices are, must, or might be in any ways disturbed, hindered, delayed, or defrauded) to be clearly and utterly void, frustrate and of no effect, any pretense, color, feigned consideration, expressing of use, or any other matter or thing to the contrary notwithstanding.

S.C.Code Ann. § 27-23-10(A).2

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9 practice notes
  • Anadarko E&P Onshore, LLC v. Mary Marshall Smith Trust Under Will Dated October 24, 1977, Fbo Katharine M. Marshall, Wells Fargo Bank, N.A., Civ. A. H-14-3168
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • August 12, 2016
    ...Statute" because the original version of the law was enacted during the reign of Queen Elizabeth I. Audio Investments v. Robertson, 203 F. Supp. 2d 555, 566 (D.S.C. 2002), aff'd, 67 F. Appx. 795 (4th Cir. 2003). Anadarko's Second Amended Complaint, #25 at p. 17 n.3, states, "South Carolina ......
  • Smithson v. York Cnty. Court of Common Pleas, CIVIL ACTION NO. 1:15-cv-01794
    • United States
    • U.S. District Court — Middle District of Pennsylvania
    • August 3, 2016
    ...a plaintiff's "real" name, see United States v. Rigler, 885 F. Supp. 2d 923, 930 n.4 (S.D. Iowa 2012); Audio Invs. v. Robertson, 203 F. Supp. 2d 555, 565 n.2 (D.S.C. 2002). Here, the plaintiff refers to himself in the caption of his pleadings as "Christian Michael : Smithson ©," the "Secure......
  • Smithson v. Koons, CIVIL ACTION NO. 1:15-cv-01757
    • United States
    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
    • June 26, 2017
    ...a plaintiff's "real" name, see United States v. Rigler, 885 F. Supp. 2d 923, 930 n.4 (S.D. Iowa 2012); Audio Invs. v. Robertson, 203 F. Supp. 2d 555, 565 n.2 (D.S.C. 2002). Here, the plaintiff refers to himself in the caption of his pleadings as "Christian Michael : Smithson ©," the "Secure......
  • United States v. Brooks, Case No. 6:17-cv-02010-TMC-JDA
    • United States
    • United States District Courts. 4th Circuit. United States District Court of South Carolina
    • October 11, 2018
    ...a valid assessment." United States v. Dixon, 672 F. Supp. 503, 506 (M.D. Ala. 1987) (cited with approval in Audio Invs. v. Robertson, 203 F. Supp. 2d 555,Page 7 561 (D.S.C. 2002)). Thus, "[a] district court may properly rely on [such] forms to conclude that valid assessments were made unles......
  • Request a trial to view additional results
9 cases
  • Anadarko E&P Onshore, LLC v. Mary Marshall Smith Trust Under Will Dated October 24, 1977, Fbo Katharine M. Marshall, Wells Fargo Bank, N.A., Civ. A. H-14-3168
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • August 12, 2016
    ...Statute" because the original version of the law was enacted during the reign of Queen Elizabeth I. Audio Investments v. Robertson, 203 F. Supp. 2d 555, 566 (D.S.C. 2002), aff'd, 67 F. Appx. 795 (4th Cir. 2003). Anadarko's Second Amended Complaint, #25 at p. 17 n.3, states, "South Carolina ......
  • Smithson v. York Cnty. Court of Common Pleas, CIVIL ACTION NO. 1:15-cv-01794
    • United States
    • U.S. District Court — Middle District of Pennsylvania
    • August 3, 2016
    ...a plaintiff's "real" name, see United States v. Rigler, 885 F. Supp. 2d 923, 930 n.4 (S.D. Iowa 2012); Audio Invs. v. Robertson, 203 F. Supp. 2d 555, 565 n.2 (D.S.C. 2002). Here, the plaintiff refers to himself in the caption of his pleadings as "Christian Michael : Smithson ©," the "Secure......
  • Smithson v. Koons, CIVIL ACTION NO. 1:15-cv-01757
    • United States
    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
    • June 26, 2017
    ...a plaintiff's "real" name, see United States v. Rigler, 885 F. Supp. 2d 923, 930 n.4 (S.D. Iowa 2012); Audio Invs. v. Robertson, 203 F. Supp. 2d 555, 565 n.2 (D.S.C. 2002). Here, the plaintiff refers to himself in the caption of his pleadings as "Christian Michael : Smithson ©," the "Secure......
  • United States v. Brooks, Case No. 6:17-cv-02010-TMC-JDA
    • United States
    • United States District Courts. 4th Circuit. United States District Court of South Carolina
    • October 11, 2018
    ...a valid assessment." United States v. Dixon, 672 F. Supp. 503, 506 (M.D. Ala. 1987) (cited with approval in Audio Invs. v. Robertson, 203 F. Supp. 2d 555,Page 7 561 (D.S.C. 2002)). Thus, "[a] district court may properly rely on [such] forms to conclude that valid assessments were made unles......
  • Request a trial to view additional results

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