Le Premier Processors, Inc. v. US

• Decision Date: 03 December 1990
• Docket Number: Civ. A. No. 90-0718.
• Citation: 775 F. Supp. 897
• Parties: LE PREMIER PROCESSORS, INC., Erin Brooke, Inc., and Le Premier Products, Inc. v. UNITED STATES of America.
• Court: U.S. District Court — Eastern District of Louisiana

775 F. Supp. 897

LE PREMIER PROCESSORS, INC., Erin Brooke, Inc., and Le Premier Products, Inc. v. UNITED STATES of America.

Civ. A. No. 90-0718.

United States District Court, E.D. Louisiana.

December 3, 1990.

Russell Scott Stegeman, Stegeman & Associates, Gretna, La., James Sidney Holliday, Jr., Peter J. Losavio, Jr., Kathryn Wyble, Holliday & Jackson, Baton Rouge, La., Thomas P. Anzelmo, Campbell, McCranie, Sistrunk, Anzelmo & Hardy, Metairie, La., for plaintiffs.

David N. Crapo, U.S. Dept. of Justice, Washington, D.C., Eneid A. Francis, U.S. Attorney's Office, New Orleans, La., for defendant.

OPINION

PATRICK E. CARR, District Judge.

This matter came before the Court without a jury on Thursday, September 13, 1990 for an evidentiary hearing on the plaintiffs' motion for preliminary injunction and on the merits. The Court now DENIES the motion and DISMISSES the action on the merits. Pursuant to F.R.Civ.P. 52, the Court makes the following findings of fact and conclusions of law.

I.

Breaux & Daigle, Inc. is a family-run and -owned business that processes and sells crabmeat in Pierre Part (Assumption Parish), Louisiana. In April 1988, it filed an action in this Court for refund of federal employment taxes (specifically, social security contributions and federal unemployment taxes) for the years 1984 and 1985 in the amount of $2.53; the United States counterclaimed to recover unpaid employment taxes for the same period. In May 1989, after a trial in April 1989, the Court held that crabmeat pickers working for the company were employees and not independent contractors for federal employment tax purposes; thus, the Court entered judgment in the government's favor for its entire claim of $65,693.33, plus interest, statutory additions, and costs. See Breaux & Daigle, Inc. v. United States, Civ. 88-1535 (Section "D"), 1989 WL 119058. On appeal, the Fifth Circuit affirmed. See 900 F.2d 49 (5th Cir.1990). In both this Court and the Fifth Circuit, counsel representing the company was Peter J. Losavio Jr.

Alger J. Daigle; his wife, Roberta Breaux Daigle; and their two sons, Anthony P. and Michael J. Daigle, are the sole shareholders in the company. Alger, Roberta, and Anthony held various positions as officers and directors of the company when the employment tax liabilities were incurred. These three live adjacent to the Breaux & Daigle plant; Michael lives in South Carolina and does no work for Breaux & Daigle.

A certified transcript of "assessments and payments" from the Memphis IRS Center indicates that on January 11, 1989, the IRS assessed an $18,881.37 penalty against Alger for the year 1985; that a first notice of this penalty assessment was mailed to him on January 11, 1989 and then again on March 6, 1989; that a tax delinquency notice for this penalty assessment was mailed to him on May 1, 1989;¹ and that accumulated interest totaled $309.74 as of March 6, 1989 for a total balance due of $19,191.11. See Exh. G-3a. Another certified transcript indicates the same for Roberta.² See Exh. G-3b. Anthony and Alger each denied recalling any knowledge of these various notices; ill, Roberta did not testify.

On July 27, 1989, the Houma office for the IRS sent Alger, Roberta, and Anthony substantially similar letters advising them that it "proposed to assess a penalty against" each of them under I.R.C. 26 U.S.C. § 6672 as a responsible person for the employment taxes owing from Breaux & Daigle for the year 1985. See Exhs. P-4, P-8, P-9. Anthony and Alger each testified that these letters were the first notice they received of any efforts by the IRS to make any penalty assessments against them for Breaux & Daigle's unpaid employment taxes.

There is no evidence on the one hand that Alger, Roberta, or Anthony ever contested these penalty assessments against them or on the other that the IRS has collected any money from either Alger or Roberta for the assessments against them.

Meanwhile, on February 7, 1989, Losavio had three companies incorporated under Louisiana law for the Daigles: Le Premier Products, Inc.; Erin Brooke, Inc.; and Le Premier Processors, Inc. The articles of incorporation for each list an employee of Losavio as the sole incorporator, Anthony and Michael as the sole directors, Anthony as the president, Losavio as the registered agent for service of process, and Losavio's law office as the registered corporate address. See Exhs. G-5a to G-5c. None of the corporations ever obtained a license to do business in Assumption Parish; in fact, Anthony admits that the three corporations have not done "any business."

The next day, February 8th, Roberta transferred a Ford van she owned to Le Premier Products, Inc. in return for 250 shares of its stock, see Exh. G-6b; Alger transferred a Volvo car he owned to the company in return for another 100 shares of its stock, see Exh. G-6c; and the couple together transferred three tracts of immovable property they owned, including their and Anthony's homes and the land on which the Breaux & Daigle plant is located, to the company for another 1000 shares of its stock, see Exh. G-6a. These three assets are and have always been the sole assets held by Le Premier Products, Inc. There is no evidence that this corporation issued any share of stock other than these 1350 shares.

That same day, February 8th, Alger transferred a houseboat he owned to Erin Brooke, Inc. in return for 1000 shares of its stock. See Exh. G-6d. This asset is and has always been the sole asset held by Erin Brooke, Inc. There is no evidence that this corporation ever issued any share of stock other than these 1000 shares.

That same day, February 8th, Alger and Roberta formed "The Alger and Roberta Daigle Trust for the Benefit of Michael J. Daigle." The trust is designated an irrevocable spendthrift trust under Louisiana law; the sole beneficiary is Michael, and the sole trustee is Anthony. See Exh. G-7. Upon creation of the trust, Alger and Roberta transferred to the trust 1000 shares of stock in Le Premier Products, Inc.; 1000 shares in Erin Brooke, Products, sic Inc.; and 1000 shares in Le Premier Processors, Inc.³ See Exh. G-7a. These shares of stock are and have always been the sole assets held by the trust.

These various documents — the articles of incorporation, the trust agreement, and the acts of transfer — were all drafted and notarized by Losavio.

Anthony testified — in only the most vague and conclusory of terms — that these various transfers were the result of "estate planning" begun in early 1987 in response to Alger's earlier diagnosis of cancer. Yet neither Anthony and Alger in their testimony nor their attorneys in the briefs have explained how or why this elaborate, deliberate scheme furthered any legitimate estate planning purpose that Alger and Roberta may have had; for example, Alger was unable to answer why only one child, wayward Michael, was made the beneficiary of the various transfers. Further, on questioning from the Court, Anthony admitted that he and his parents were aware, through advice of Losavio and co-counsel, that the three would each be subject to personal penalty assessments if Breaux & Daigle lost its refund action. Finally, Anthony and Alger gave conflicting explanations for the alleged delay between 1987 and 1989. On the one hand, Anthony testified that a delay occurred because "lots of time" was needed for Losavio to prepare the various documents. On the other, Alger testified that a delay occurred because the family was "waiting to see how his health improved."

According to Alger's testimony, the only asset he and Roberta retained was "a little property in case they needed money for his illness."

Alger, Roberta, and Anthony have continued to use these various assets — the van, car, houseboat, and three parcels of land — for their own unrestricted personal use without paying any rent. Anthony testified that in "mid-1988" (which was months before any of the three plaintiffs were in existence) he and his parents had executed a "verbal lease" with Le Premier Products, Inc. for their use of both the land and the houseboat.

The records of the Office of Motor Vehicles for the Louisiana Department of Public Safety and Corrections still show Roberta as the owner of the van and Alger as the owner of the car. See Exhs. G-13, G-15a. Alger as named insured and Roberta as additional insured have been covered by automobile insurance policies for the van since at least March 1989 and for the car since at least September 1989; none of these policies lists Le Premier Products, Inc. as a named or additional insured or as a loss payee or owner. See Exh. G-20.

In September 1989 and again in March 1990, Alger and Roberta refinanced loans with a bank and used these parcels of land as security. See Exh. G-19, at 1-5. Further, Alger and Roberta have been named insureds on homeowner's policies for their home on this land since at least October 1987, and Alger alone on fire insurance policies since at least April 1988; likewise, none of these policies lists Le Premier Products, Inc. as a named or additional insured or as a loss payee or owner. See Exh. G-20a. While the transfer of these three parcels was recorded on February 8, 1989 with the Clerk of Court for Assumption Parish, the property tax rolls for Assumption Parish list the owner of the parcels as "Le Premier Product Inc. c/o Roberta B. Daigle" at her mailing address. See Exh. G-8a.

The transfer of the houseboat to Erin Brooke, Inc. was not registered with the Louisiana Department of Wildlife and Fisheries until October 9, 1989, see Exh. G-12 — one day before IRS Collection Agent Steve Fanguy was scheduled to meet with Losavio about collection of the Daigles' penalty assessments.

The trust instrument directs the trustee (viz., Anthony) to make annual income distributions to the beneficiary (viz., Michael). See Exh. G-7, ¶ 7.1, at 2. Yet according to Anthony's testimony, he has made no such distributions.

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