In re Faith Missionary Baptist Church, Bankruptcy No. 91-61074. Adv. No. 91-6211.
| Decision Date | 06 September 1994 |
| Docket Number | Bankruptcy No. 91-61074. Adv. No. 91-6211. |
| Citation | 174 BR 454 |
| Parties | In re FAITH MISSIONARY BAPTIST CHURCH, Debtor. FAITH MISSIONARY BAPTIST CHURCH, Plaintiff, v. INTERNAL REVENUE SERVICE, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Texas |
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James Michael Bandy, Tyler, TX, for plaintiff/debtor.
Thomas M. Herrin, Dept. of Justice, Tax Div., Dallas, TX, for defendant.
Before the Court is a Complaint to Compel Turnover of Property filed by Faith Missionary Baptist Church ("FMBC"). FMBC alleges that the Internal Revenue Service ("IRS") wrongfully levied against property belonging to FMBC in order to satisfy the personal tax liabilities of Roger and Nan Gorham (hereafter sometimes referred to collectively as the "Gorhams"). Accordingly, FMBC seeks turnover from the IRS of approximately $60,000.00 levied prepetition and $14,967.50 levied postpetition. The IRS asserts that the levies were proper pursuant to 26 U.S.C. §§ 63311 and 6332.2 In its counterclaim, the IRS asserts that the assets listed in FMBC's schedules are not part of FMBC's estate. Alternatively, the IRS asserts that FMBC is the Gorhams' alter ego or that the assets were fraudulently conveyed to FMBC in order to hinder collection efforts of an existing creditor. Accordingly, the Court should annul the automatic stay and permit the IRS to enforce its levies.3 After a two day trial, the Court took this matter under advisement. The following shall constitute the Court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052. Where appropriate, findings of fact shall be deemed conclusions of law and vice-versa.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a) and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(E) and (O).
In July 1975, Roger Gorham was ordained as a minister by Union Grove Baptist Church in Troup, Texas. Following his ordination, Roger Gorham served as pastor of Union Grove Baptist church until a doctrinal dispute arose within the church. To resolve the dispute, Roger Gorham and several others left Union Grove Baptist Church in August 1976 and organized a new church as an unincorporated association—FMBC. At an organizational meeting held on October 3, 1976, Articles of Faith were adopted and trustees for FMBC were elected. Ronny Melton, Nathan Holdren, and Jerry Don Fussell were elected as trustees and Roger Gorham was chosen to serve as the pastor. The initial congregation was approximately ten members. After the creation of FMBC, the church petitioned and was accepted to join three baptist missionary associations. FMBC joined the Smith County Baptist Missionary Association in 1976, the Baptist Missionary Association of Texas in 1977, and the Baptist Missionary Association of America in 1979.
For the first few weeks, services were held in the homes of members of FMBC. Prior to the holding of the October 3rd organizational meeting, members of FMBC learned of an available building formerly used by Bible Baptist Church in Troup, Texas ("Building").5 The Building was abandoned after members of Bible Baptist Church joined Overton Bible Baptist Church in Overton, Texas. Negotiations ensued between Roger Gorham and the pastor of Overton Bible Baptist Church, Jack McGoy, regarding the acquisition of the Building by FMBC. McGoy asserted that he owned the Building and he agreed to sell the Building to FMBC if a $600.00 down payment was paid. After paying the $600.00, FMBC hired an attorney, Roland Matthews, to provide legal advice regarding the purchase of the Building. While performing a title search, Matthews discovered that the deed records reflected that the Building was actually owned by the trustees of Bible Baptist Church of Troup, and not McGoy. Accordingly, FMBC secured quitclaim deeds from the former trustees of Bible Baptist Church of Troup and filed the quitclaim deeds in the deed records of Smith County.
The evidence is uncontradicted that FMBC operated as a functioning church until 1980. Both regular Sunday services and monthly Wednesday night business meetings were held for which minutes were maintained and majority rule controlled. All members of FMBC present at the business meetings were entitled to vote on matters being discussed. Roger Gorham served as the moderator of the business meetings and was not permitted to vote unless there was a tie. In August 1979, Roger Gorham resigned as pastor of FMBC expressing an intention to travel to Mexico as a missionary and assist other churches.6
Shortly after the resignation of Roger Gorham, the evidence is not as clear regarding the actual existence of FMBC as a functioning and distinct church. Wes Kimmey replaced Roger Gorham as pastor. However, prior to the end of 1980, Kimmey left FMBC and FMBC ceased using the Building7 when all members not related to the Gorhams either transferred their memberships to other churches or stopped attending FMBC.8 Included in those transferring their memberships were the original trustees of FMBC.9 Further, although Roger Gorham resigned as pastor in 1979, he unaccountably reassumed his position as pastor in approximately October 1980. The record is void of evidence as to exactly when Roger Gorham returned as pastor and the authority for his reappointment. Also, beginning with the time Roger Gorham returned as pastor and continuing until October 1990, FMBC's only trustees and officers were the Gorhams.10
After 1980, any religious services that were held occurred in the home of a family member of the Gorhams, typically the home of the son of the Gorhams—Mike Gorham. Rarely did someone not related to the Gorhams attend the religious services.11 Although members of FMBC, both Nan Gorham and the Gorhams' daughter Christy Gorham occasionally attended services at other churches.12 Also, very few business meetings were held.13 If a business meeting was held, the only individuals who are known to have attended were the Gorhams and two of their three children—Christy and Mike.14 While it is questionable whether FMBC operated as a functioning church after 1980, there is evidence that Roger Gorham continued to perform some sacerdotal functions. Roger Gorham conducted two marriage ceremonies, albeit one included his daughter.15 Beyond that, the Gorhams generally met privately with the immediate family to hold "prayer meetings".
Despite the questionable operation of FMBC as a religious entity after 1980, the evidence is clear that the business operation of FMBC was active and successful. Starting in late 1981, FMBC acquired legal title to assets with considerable income producing capabilities. Specifically, the following significant acquisitions are known to have occurred:
In October 1982, FMBC opened a checking account19 at Arp State Bank with the Gorhams and their two oldest children (Mike and Shelly) signing the signature card.20 According to the testimony of Roger Gorham, Shelly Gorham had signature authority over the account even though she had not been a member of FMBC since 1980. The account served as the depository for the significant payments to FMBC by Ashland Oil, Inc. for the church's interest in the crude oil produced from the land in Kentucky. From 1982 through 1988, approximately $724,000.00 was paid to FMBC by Ashland Oil.21 Shortly after depositing the payments from Ashland Oil into FMBC's bank account, the Gorhams made large withdrawals either in the form of a check or by wire. During 1983, FMBC's bank account records reflect that $132,619.74 of the payments from Ashland Oil were either never deposited into the account or were withheld from deposits. What became of the non-deposited funds is unknown. Also, the Gorhams transferred at least $58,314.00 to Starfish Ranch, an entity the Gorhams controlled, and wired approximately $211,000.00 to Elmore Gorham. Additionally, $29,000.00 was withdrawn by means of checks with no clear identity as to whom received the money.22 From 1984 through 1988, the bank account records reflect that $191,826.81 was either never deposited in the account or withheld from deposits.23 No clear explanation or evidence was offered as to what happened to these funds. Further, approximately $45,900.00 was wired from the account, principally to either Roger Gorham or Elmore Gorham, and over $54,600.00 was withdrawn in the form of checks payable to either cash, the Gorhams, Mike Gorham, or Shelly Gorham. Once again, no clear explanation or evidence was offered as to what happened to these funds. Finally, of all the checks known to have been drawn on the bank account between 1982 and 1988, very few appear to be for ecclesiastical purposes.
After 1988, the Gorhams...
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