U.S. v. Doe

Decision Date28 March 2006
Docket NumberNo. C2-04-092.,C2-04-092.
Citation438 F.Supp.2d 796
PartiesUNITED STATES of America, Plaintiffs, v. John DOE, Representative of the Estate of John M. Schlichter, et al., Defendants.
CourtU.S. District Court — Southern District of Ohio

Barry Alan Waller, Fry Waller & McCann Co. L.P.A., Mary Louise Spahia-Carducci, Assistant Attorney General, Columbus, OH, Charles A. Nemer, Mark B. Cohn, McCarthy, Lebit, Crystal & Liftman Co., L.P.A., Cleveland, OH, for Defendants.

Elizabeth Lan Davis, U.S. Department of Justice, Washington, DC.

OPINION AND ORDER

SARGUS, District Judge.

This matter is before the Court for consideration of the United States' Motion for Partial Summary Judgment. The United States moves for partial summary judgment on the grounds that the federal tax liens against John Max Schlichter, now deceased, attached to the one-half interest in the subject real property described in the United States' Complaint. Defendant, Donna H. Pendleton, opposes the Motion. For the reasons that follow, the United States' Motion for Partial Summary Judgment is granted in part and denied in part.

OVERVIEW

The United States bring this action to establish the validity of the federal tax liens upon all property and rights to property owned by John Max Schlichter, deceased. The United States also seeks to foreclose its federal tax liens on a one-half interest in certain real property located in Fayette County (hereinafter "subject property") once owned by John Max Schlichter and transferred to the Defendant, Donna Sue Schlichter and thereafter to Donna H. Pendleton. The United States also seeks a determination on the validity and respective interests of the Defendants in the subject property and the relative priority of the claims against the subject property. The United States seeks to foreclose upon the subject property and to sell it at a judicial sale so that it may apply the proceeds in accordance with the rights of the parties.

I.

John Max Schlichter and Defendant Donna Sue Schlichter were married on December 31, 1992. On May 8, 1997, John Max Schlichter's father, Arthur C. Schlichter, passed away. In the course of Arthur C. Schlichter's estate, the Fayette County Probate Court directed the transfer of the full interest in over 100 acres of property located in Fayette County, Ohio as follows: life estate to Esther R. Schlichter, one-half remainder interest to Dan A. Schlichter, and one-half remainder interest to John Max Schlichter. (See Davis Decl. Exh. 5.) The Certificate of Transfer issued by the Probate Court was recorded with the Fayette County Recorder on June 8, 1998.

Esther R. Schlichter passed away on October 13, 1999, thereby terminating her life estate in the subject property. Therefore, Dan Schlichter and John Max Schlichter each held an one-half present interest in the subject property. John Max Schlichter conveyed his one-half interest to his wife, Donna Schlichter by quit claim deed dated January 27, 2000. The quit claim deed was recorded with the Fayette County Recorder on March 17, 2000. Donna Schlichter did not pay any money or provide other consideration for her husband's one-half interest in the property.

Previously, John Max Schlichter filed a petition under Chapter 12 of the Bankruptcy Code on March 23, 1992, with the United States Bankruptcy Court for the Southern District of Ohio, Case No. 2:98-bk-22233.1 The bankruptcy petition was dismissed on February 16, 1995. Thus, John Max Schlichter's bankruptcy was dismissed before he acquired his interest in the subject property.

Between 1990 and 2002, a delegate of the Secretary of the Treasury assessed unpaid income taxes, unemployment taxes, agricultural taxes, penalties, and interest payments against John Max Schlichter. For each violation, the Internal Revenue Service instituted a separate Notice of Federal Tax Lien for the unpaid federal tax liability assessed against the Schlichter's estate.2 The United States asserts that these liens are valid.

Specifically, the United States contends that John Max Schlichter transferred his one-half interest in the subject property to his wife, Donna Schlichter, subject to the federal tax liens for the income tax liabilities for the tax years 1991 and 1992.3 Notices of Federal Tax Lien for the income tax liabilities for the tax years 1991 and 1992 were recorded with the Fayette County Recorder on February 29, 1996. Notice of Federal Tax Lien for the income tax liability for the tax year 2000 was recorded with the Fayette County Recorder on November 5, 2001.4

By warranty deed dated January 18, 2002, Donna and Dan Schlichter then transferred their interest in the subject property to Donna Pendleton for a total purchase price of $272,514.5 The preliminary title report, based upon a search from February 1962 to January 4, 2002, did not reveal the federal tax liens against John Max Schlichter even though such liens were of public record in the Fayette County Recorder's Office.6 The preliminary report, however, did show two liens to the Ohio Department of Taxation against him. Accordingly, the Escrow Agreement provided that the title company would be permitted to withhold at least $34,000.00, from Donna Schlichter, in escrow until the two Ohio Department of Taxation liens were released. No agreements were reached with respect to the outstanding federal tax liens against John Max Schlichter. Donna Schlichter received a disbursement in the amount of $91,816.39 from the closing proceeds.

The United States contends that Donna Schlichter transferred her interest in the property subject to the federal tax liens for Schlichter's federal income tax liabilities for the tax years 1991, 1992 and 2000. Thus, the United States argues that Defendant, Donna Pendleton, acquired the subject property after the filing of the Notices of Federal Tax Liens and thus subject to those liabilities.

John Max Schlichter died on September 3, 2002. He did not leave an estate and no will of his has been admitted to probate. His liability to the United States for federal income taxes for the years 1991, 1992 and 200 remains unpaid in the total amount of $113,641.97 plus statutory additions and interest from June 17, 2005.

On February 4, 2004, the United States brought an action to foreclose the subject property and collect the unpaid tax liens. It sued, among others, the Estate of John Max Schlichter, Donna Schlichter, and Dan Schlichter. The parties stipulated on November 1, 2004 that Dan Schlichter has no right, title and interest in the subject property and agreed to dismiss him. Several weeks later, on December 20, 2004, the United States filed an Amended Complaint and added Donna Pendleton to the action.

In response to being named as a Defendant in the case, Pendleton answered the Amended Complaint and filed a Cross-Claim against both Donna Schlichter and then dismissed-Defendant, Dan Schlichter, to indemnify herself from the United States' claim. Dan Schlichter moved for his dismissal from the Cross-Claim. By previous Order of this Court, Dan Schlichter was permissively re-joined in this action to ensure full adjudication of the rights of all parties, including Defendant Pendleton, and to discourage multiplicity of litigation.

II.

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show 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). The movant has the burden of establishing that there are no genuine issues of material fact, which may be accomplished by demonstrating that the nonmoving party lacks evidence to support an essential element of its case. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Barnhart v. Pickrel, Schaeffer & Ebeling Co., 12 F.3d 1382, 1388-89 (6th Cir.1993). To avoid summary judgment, the nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); accord Moore v. Philip Morris Cos., 8 F.3d 335, 340 (6th Cir.1993). "[S]ummary judgment will not lie if the dispute about a material fact is `genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In evaluating a motion for summary judgment, the evidence must be viewed in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); see Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (stating that the court must draw all reasonable inferences in favor of the nonmoving party and must refrain from making credibility determinations or weighing evidence). In responding to a motion for summary judgment, however, the nonmoving party "may not rest upon its mere allegations ... but ... must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); see Celotex, 477 U.S. at 324, 106 S.Ct. 2548; Searcy v. City of Dayton, 38 F.3d 282, 286 (6th Cir.1994). Furthermore, the existence of a mere scintilla of evidence in support of the nonmoving party's position will not be sufficient; there must be evidence on which the jury reasonably could find for the nonmoving party. Anderson, 477 U.S. at 251, 106 S.Ct. 2505; see Copeland v. Machulis, 57 F.3d 476, 479 (6th Cir.1995); see also Matsushita, 475 U.S. at 587-88, 106 S.Ct. 1348 (finding reliance upon mere allegations, conjecture, or implausible inferences to be insufficient to survive summary judgment).

III.
A. The federal tax liens attach to all property and rights to property of John Max Schlichter

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