Markham v. Fay

• Decision Date: 22 March 1995
• Docket Number: Civ. A. No. 91-10821-RWZ.
• Citation: 884 F. Supp. 594
• Parties: Paul F. MARKHAM, as he is Trustee for the Bankruptcy Estate of Louis Almeida, Plaintiff, v. Claire M. FAY, Individually and as Trustee of the Highland Avenue Nursing Home Trust, the Parker Hill Nursing Home Trust, and the Green Pastures Nursing Home Trust, Regina Nursing Home, Inc., the United States of America, Richard H. Gens, Joseph Wine, P.C., Defendants.
• Court: U.S. District Court — District of Massachusetts

884 F. Supp. 594

Paul F. MARKHAM, as he is Trustee for the Bankruptcy Estate of Louis Almeida, Plaintiff, v. Claire M. FAY, Individually and as Trustee of the Highland Avenue Nursing Home Trust, the Parker Hill Nursing Home Trust, and the Green Pastures Nursing Home Trust, Regina Nursing Home, Inc., the United States of America, Richard H. Gens, Joseph Wine, P.C., Defendants.

Civ. A. No. 91-10821-RWZ.

United States District Court, D. Massachusetts.

March 22, 1995.

COPYRIGHT MATERIAL OMITTED

Patrick P. Dinardo, Sullivan & Worcester, Boston, MA, for Paul F. Markham.

Deborah A. Beard, Boston, MA, for Claire M. Fay, Regina Nursing Home, Inc.

George P. Eliopoulos, U.S. Dept. of Justice, Tax Div., Washington, DC, Susan M. Poswistilo, U.S. Atty's Office, Boston, MA, for U.S.

William E. Gens, Boston, MA, for Richard H. Gens.

OPINION

COLLINGS, United States Magistrate Judge.

I. INTRODUCTION

This is an interpleader action arising out of the bankruptcy case In Re: Louis Almeida, No. 78-1684-L in the District of Massachusetts. The trustee in bankruptcy of the debtor has interpled a fund of $67,809.89 representing the proceeds from the sale of nursing homes held in the name of Almeida upon which the defendants Regina Nursing Home, Inc. (hereafter "the corporate defendant" or "Regina"), the Highland Avenue Nursing Home Trust (hereinafter "Highland Avenue"), the Parker Hill Nursing Home Trust (hereinafter "Parker Hill") and the Green Pastures Nursing Home Trust (hereinafter "Green Pastures") retained mortgages. Earlier in this litigation, the rights to a portion of that amount, i.e., $16,970.00, were determined as a matter of law on the basis of summary judgment. (# 89)

The United States is asserting an interest in the balance of the fund, i.e., $50,839.89 plus interest, as the holder of a judgment in the amount of $699,142.21 rendered against the defendant Claire M. Fay (hereinafter "Fay") individually on December 30, 1990. That judgment was premised upon federal tax assessments made against Fay under 26 U.S.C. §§ 6671 and 6672 for her willful failure as a responsible person to collect, truthfully account for and pay over to the United States, the income and F.I.C.A. taxes withheld from the wages of employees of various nursing homes held in the name of Louis Almeida. The United States takes the position that its federal tax liens against Fay attached "upon all property and rights to property, whether real or personal, belonging to" her pursuant to 26 U.S.C. § 6321.

To digress momentarily for contextual purposes, Fay was the president, treasurer and sole stockholder of the corporate defendant (at least for a period of time), and was also the settlor, trustee and a beneficiary of each of the defendant trusts. The principal asset of the defendant corporation¹ and trusts were nursing homes which, in 1976, Fay caused to be transferred to Louis Almeida. Fay, on behalf of the defendant corporation and trusts, took back mortgages on the properties from Almeida. These are the nursing homes that were ultimately sold by the trustee in bankruptcy and the source of the interpled fund.

The basis for the government's claim in the instant case is twofold. First it is alleged that Fay retained such significant powers under the terms of the three defendant trusts to use the trust assets for her own benefit that the United States, as a creditor of Fay, can reach the assets of the defendant trusts, i.e., the interpled fund, to satisfy Fay's federal tax liabilities established by the judgment and secured by the federal tax liens against Fay. Second, the United States contends that the corporate and trust defendants are alter egos, instrumentalities or nominees of Fay such that their assets are in fact Fay's assets and, therefore, subject to the federal tax liens that arose pursuant to 26 U.S.C. § 6321.

A three day non-jury trial was held during November of 1993.² Following the receipt of the trial transcripts, the parties filed proposed findings of fact and conclusions of law (## 115, 117) as well as posttrial briefs (# 116, 118, 119). After due consideration of the evidence and the parties' submissions, the Court makes the following findings of fact and conclusions of law in accordance with Rule 52(a), Fed.R.Civ.P.

II. FINDINGS OF FACT

1. During the 1960's and 1970's, defendant Fay created numerous legal entities for the purpose of owning and operating nursing homes in Massachusetts. (TR2-155-158)

2. In late July or early August of 1967, Fay became the sole stockholder of the corporate defendant. At the same time, Fay named herself President and Treasurer of the corporation. In addition, Fay was a director of Regina along with Blanche L. Minville and Maxime A. Minville, her parents. The clerk of the corporation was John B. Delaney. At some point in time, but at least by June 15, 1973, Mr. Minville no longer served as a director, and Theresa Dzialo (hereinafter "Dzialo"), Fay's sister, was named in his stead. (TR2-157-158; Exh. 4A, 4B)

3. The corporation defendant owned and operated the Chester Manor Nursing Home (hereinafter "Chester Manor") located at 10 Chester Street in Cambridge, Massachusetts. Subsequent to the summer of 1967, Regina also acquired at least three other parcels of real estate in Cambridge, Massachusetts. (TR2-158; Exh. 4A, 4B, 4I, 4J, 4K)

4. Fay contends that in the late 1970's she "assigned" all of her stock in the corporate defendant to Dzialo as security for monies that her sister had lent her. According to an affidavit signed by Theresa Dzialo on July 22, 1992, Dzialo assumed Fay's individual debts in return for which Fay "exchanged" all of her corporate stock with Dzialo. Fay denies owning the corporate defendant; Dzialo claims to own all of the stock. There has been no documentation produced evidencing this "assignment" or "exchange." (TR2-158-160; TR3-3-4; Exh. 19 at pp. 20, 23, Exh. 42)

5. On or about June 21, 1976, Fay, as Treasurer and President of the corporate defendant, conveyed the property located at 10 Chester Street, as well as Chester Manor, to Louis Almeida (hereinafter "Almeida") as trustee of the Chester Manor Nursing Home Trust which was created on June 18, 1976, for $10,000.00. On or about September 8, 1976, pursuant to an amended agreement, a confirmatory deed was recorded reflecting that the purchase price for the property was increased to $275,000.00. According to the terms of the amended agreement, Almeida was to pay the corporate defendant $10,000.00 in cash, assume an existing mortgage in the amount of $6,500.00, and execute notes and mortgages in favor of Regina for the balance of the purchase price. (Exh. 4C, 4D, 4E, 4F, 4G, 4H)

6. On or about September 22, 1978, Fay, as Treasurer and President of the corporate defendant, transferred the property at 16 Chester Street to James Daniel Fay, as trustee of the James Daniel Realty Trust, for no consideration. James Daniel Fay is Fay's son; the James Daniel Realty Trust was created on September 18, 1978. (TR3-7-9; 3-27-28; Exh. 4I)

7. On or about October 6, 1978, Fay, as Treasurer and President of the corporation defendant, transferred two additional parcels of real estate located in Cambridge, Massachusetts, to James Daniel Fay, as trustee of the James Daniel Realty Trust, again for no consideration. (TR3-7; 3-28; Exh. 4J, 4K)

8. On or about July 16, 1980, Blanche L. Minville as trustee of the James Daniel Realty Trust, transferred the property located at 16 Chester Street to Edward Paul Silva, as trustee of the C. and E. Realty Trust, for no consideration. Edward Paul Silva was an acquaintance of Fay for more than twenty years; the C. and E. Realty Trust was created on July 14, 1980. (TR3-12; 3-14; Exh. 4K) 9. On or about March 5, 1981, Edward Paul Silva as trustee of the C. and E. Realty Trust transferred the property located at 16 Chester Street to Edward Paul Silva, as trustee of the T.J. Realty Trust, for no consideration. The abbreviation "T.J." stands for Timothy James, one of Fay's sons; the T.J. Realty Trust was created on February 28, 1981. (TR3-13-15; Exh. 4L)

10. On or about September 23, 1982, Edward Paul Silva, as trustee of the T.J. Realty Trust transferred the property located at 16 Chester Street to Richard E. Lenza, as trustee of the CHE Trust, for $130,000.00. Richard E. Lenza is an attorney and an acquaintance of Fay; the CHE Trust was created on September 20, 1982. (TR3-15-16; Exh. 4N)

11. Property owned by the corporate defendant located at 6 Chester Street, Cambridge, Massachusetts was subject to a similar series of transfers, the final conveyance occurring on or about June 6, 1985 from Edward P. Silva, as trustee of the T.J. Realty Trust to Richard E. Lenza, as trustee of the MCA Trust, which was created on May 1, 1985, for nominal consideration. (TR3-19-20; Exh. 4K, 4L, 4M)

12. On or about February 20, 1992, Fay filed a complaint in the Land Court of the Commonwealth of Massachusetts wherein it was alleged that she individually was the owner in fee simple absolute of, inter alia, the land and buildings situated at 16 Chester Street and 6 Chester Street. Fay demanded judgment that she be entitled to an estate in fee simple absolute in those properties. (TR3-16-21; Exh. 29E)

13. On or about January 21, 1974, Fay, as settlor, created the Green Pastures Nursing Home Trust ("Green Pastures") and named herself as the sole trustee. The beneficiaries of the trust were Fay and her two sons, James Daniel Fay and Timothy James Fay, all in equal shares. Pursuant to the declaration of trust, Fay caused to be transferred to herself as trustee the Green Pastures Nursing Home. (Exh. 1A, 1B)

14. Paragraph 5 of the Green Pastures declaration of trust provided as follows:

In extension and not in limitation of the powers she will have by law or other provisions of this DECLARATION OF TRUST, the Trustee shall have the following powers and discretions with respect to this Trust and its property, in each case to

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