U.S. v. Labine

• Decision Date: 25 March 1999
• Docket Number: No. 3:98 CV 7102.,3:98 CV 7102.
• Citation: 73 F.Supp.2d 853
• Parties: UNITED STATES of America, Plaintiff, v. Eleanor L. LaBINE, et al., Defendant.
• Court: U.S. District Court — Northern District of Ohio

73 F.Supp.2d 853

UNITED STATES of America, Plaintiff, v. Eleanor L. LaBINE, et al., Defendant.

No. 3:98 CV 7102.

United States District Court, N.D. Ohio, Western Division.

March 25, 1999.

S. Robert Lyons, Dept. of Justice Tax Division, Washington, DC, for Plaintiff.

Henry Buswell Roberts, Jr., Nathan & Roberts, Toledo, OH, for Defendant.

MEMORANDUM OPINION

KATZ, District Judge.

This matter is before the Court on cross motions for summary judgment. For the following reasons, the United States' motion for summary judgment is granted. Accordingly, the Defendants' motion for summary judgment is denied. Also before the Court is a motion by the Government to strike the affidavit of Robert LaBine, or in the alternative, to reopen discovery as to the issue of the alleged bank account seizure. The United States' motion to strike the affidavit of Robert LaBine is denied, but the Government's motion to reopen discovery solely on the bank account issue is granted. Furthermore, Defendants have filed a motion to reopen discovery with respect to the transcripts for the tax years at issue. Defendants' motion is denied for lack of timeliness. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1340 and 1345.

BACKGROUND

On October 22, 1987, Defendants Nelson E. LaBine (deceased) and Eleanor L. LaBine established the LaBine Family Trust Agreement. Mr. and Mrs. LaBine were both in their eighties when the trust was established. Substantially all of the LaBine's assets, including their residence of 2233 Timberland, Toledo, Ohio, were placed into the trust. Mrs. LaBine received "200 units of beneficial interest", of nominal value, for the transfer of the residence. Originally, the trust was revocable by the donors during their lifetimes, but on September 16, 1988, the LaBines made the trust irrevocable.

Following the transfer of assets into the trust, Eleanor LaBine's remaining assets consisted of $10.00 in cash, an automobile worth $750.00, and a cemetery lot worth $600.00. No information is provided in the record with respect to the remaining assets of Mr. LaBine after the transfer of the assets. Mr. and Mrs. LaBine continued to live in their home after the transfer of the residence to the trust. During the donors' lifetimes, the trust assets were to be used primarily for their benefit. Upon their death, the trust assets were to be divided amongst the donors' children and their issue.

On or about May 14, 1984, the LaBines filed a petition in the United States Tax Court for redetermination of the remaining deficiencies assessed against them by the IRS for the 1976, 1977, 1978, and 1979 tax years. It was during the pendency of this proceeding in October, 1987, that the trust was created. On March 2, 1988, the Tax Court issued a stipulated decision in which Mr. and Mrs. LaBine, through counsel, agreed that there were "deficiencies in income tax due from [them] for the taxable years 1976, 1977, 1978, and 1979 in the amounts of $3,686.00, $5,054.00, $112.00 and $4,236.90, respectively." Nelson LaBine died on August 4,1988. On November 17, 1988, the IRS allegedly attached Mrs. LaBine's bank account and seized $211.28. The records of the IRS documents do not indicate that Mrs. LaBine has been credited for this amount, and the IRS denied seizing the funds. The IRS claims that the documentation of the seizure is suspect.

Beginning in January, 1990 through the present day, Eleanor LaBine has made payments of $50.00 per month to the IRS. As of February, 1998, the unpaid balance of the assessments for 1976-1979 tax years totals $31,827.36. On May 22, 1994, the IRS issued a Federal tax lien for the amount of $33,528.70. The United States filed this action on March 16, 1998, alleging that the trust was established for the purpose of hindering, delaying or defrauding the United States Government in the collection of taxes. Defendants maintain that the trust was established as a result of probate problems experienced by LaBine family members; Mr. LaBine had experienced the death of ten (10) family members and Mrs. LaBine had lost eight (8) family members. Those deaths often resulted in extended and expensive probate proceedings, and thus the LaBines created the trust to avoid a large delay in the probate of their estates. The Defendants assert that the relative closeness between the date that the trust was established and the pending outcome of the Tax Court is merely coincidental.

DISCUSSION

A. Summary Judgment Standard

As an initial matter, the Court sets forth the relative burdens of the parties once a motion for summary judgment is made. Summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Of course, the moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. Id. at 323, 106 S.Ct. at 2553. The burden then shifts to the nonmoving party who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (quoting Fed.R.Civ.P. 56(e)).

Once the burden of production has so shifted, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is not sufficient "simply [to] 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, 1356, 89 L.Ed.2d 538 (1986). Rather, Rule 56(e) "requires the nonmoving party to go beyond the [unverified] pleadings" and present some type of evidentiary material in support of its position. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. Summary judgment shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c).

B. The Prospective Application of the Ohio Uniform Transfer Act

Defendants maintain that Ohio's Uniform Fraudulent Transfer Act of 1990 and not its predecessor, the Uniform Fraudulent Conveyance Act, applies to the instant case. Ohio Rev.Code § 1336, et seq. In deciding whether to apply the Ohio Uniform Fraudulent Transfer Act, which superseded the Ohio Uniform Fraudulent Conveyances Act, the Court is controlled by Ohio law on the retroactive application of statutes. Retroactive application of a statute in Ohio is governed by Ohio Revised Code § 1.48 which provides: "A statute is presumed to be prospective in its operation unless expressly made retrospective." The Ohio Uniform Fraudulent Transfer Act does not contain a provision which would expressly give the statute retrospective application. See generally Ohio Rev.Code Chapter 1336. Thus, under Ohio Revised Code § 1.48, the Ohio Uniform Fraudulent Transfer Act should not be applied to transfers which predated its enactment. Whittaker v. Carmean, 153 B.R. 985, 989 (Bankr. S.D.Ohio 1993).

The transfer at issue in this matter took place on October 22, 1987. The Ohio Uniform Fraudulent Transfer Act became effective on September 28, 1990. Therefore, the Act's predecessor, the Ohio Uniform Fraudulent Conveyances Act, must control.¹

C. The Statute of Limitations

The ancient rule quod nullum tempus occurit regi — "that the sovereign is exempt from the consequences of its laches, and from the operation of statutes of limitations" —has enjoyed continuing vitality for centuries. Guaranty Trust Co. of New York v. United States, 304 U.S. 126, 132, 58 S.Ct. 785, 788, 82 L.Ed. 1224 (1938). "Citing Blackstone, Mr. Justice Story noted nearly 175 years ago that the reason for the rule was sometimes asserted to be that `the king is always busied for the public good, and, therefore, has not leisure to assert his right within the time limited to subjects.'" United States v. Peoples Household Furnishings, Inc. 75 F.3d 252, 254 (6th Cir.1996) quoting United States v. Hoar, 26 F.Cas. 329, 330 (Cir.Crt.D.Mass. 1821). Justice Story was not persuaded by this rationale: "The true reason," he said, ".... is to be found in the great public policy of preserving the public rights, revenues, and property from injury and loss, by the negligence of public officers." Id. Accord, United States v. Weintraub, 613 F.2d 612, 618 (6th Cir.1979), cert. denied, 447 U.S. 905, 100 S.Ct. 2987, 64 L.Ed.2d 854 (1980). See also United States v. Kirkpatrick, 22 U.S. (9 Wheat.) 720, 735, 6 L.Ed. 199 (1824) (Story, J.) ("The government can transact its business only through its agents; and its fiscal operations are so various, and its agencies so numerous and scattered, that the utmost vigilance would not save the public from the most serious losses, if the doctrine of laches can be applied to its transactions").

However, a debate has arisen with respect to whether a distinction exists between cases involving the government's common law right to collect on a debt and cases involving a carefully delineated state statutory right. United States v. Vellalos, 780 F.Supp. 705, 708 (D.Hawai'i 1992) (finding that the United States had no cause of action under Hawaii's Uniform Fraudulent Transfer Act because of the specific extinguishment provision within the statute which functioned in a similar manner to a statute of limitations but was an element of the statute). In other words, the issue is whether the government's exemption from a state's statute of...