U.S. v. Porter
| Decision Date | 04 August 2008 |
| Docket Number | No. 4:05-cv-00464-JEG.,4:05-cv-00464-JEG. |
| Citation | 569 F.Supp.2d 862 |
| Parties | UNITED STATES of America, Plaintiff, v. Raymond PORTER, Individually and d/b/a Porter Livestock Products; Farmers and Merchants Savings Bank; Iowa Department of Revenue; and John Russell Porter, Defendants. |
| Court | U.S. District Court — Southern District of Iowa |
Joan Stentiford Ulmer, Laquita Taylor-Phillips, U.S. Department of Justice, Washington, DC, for Plaintiff.
Jonathan F. Altman, The Altman Law Firm LLC, Malvern, PA, R. Todd Gaffney, Finley Alt Smith Scharnberg Craig Hilmes & Gaffney PC, William E. Robak, Robak Law Firm PC, Des Moines, IA, for Raymond Porter, John Russell Porter.
Hubert J. Pries, Steven J. Havercamp, Stanley, Lande & Hunter, Davenport, IA, for Farmers and Merchants Savings Bank.
Valencia V. McCown, AAG, Des Moines, IA, for Iowa Department of Revenue.
This matter is before the Court on the Government's Motion for Summary Judgment, which Defendant Raymond Porter (Defendant) has resisted, and Defendant's Motion to Dismiss, Defendant's Notice of Objection to Failure to Include an Essential Party, Defendant's Demand for Jury Trial, and Defendant's Motion for Judgment on the Pleadings. The Government has resisted each of these motions. Neither party has requested a hearing, and the Court concludes a hearing on the pending motions is not necessary. The matters are now fully submitted for review.
Defendant operated Porter Livestock Products Company (Porter Livestock) from approximately 1982 until 1998 or 1999; Raymond Porter's son, John Russell Porter, continued the business thereafter. Porter Livestock was in the business of the manufacture and sale of nutritional products for swine and dairy and beef cattle, selling such nutritional products as Dairy Aid, Belly Buster, Iron Vite, and Culture Pac. During 1996 and 1997, the employment tax years at issue, Porter Livestock employed salesmen who sold Porter Livestock's products. The parties agree that James DenBoer (DenBoer), David Willard (Willard), Chad Mattes (Mattes), Thomas Brugman (Brugman), Donald Klostermann (Klostermann), Christopher Gottman (Gottman), and John Blickhan (Blickhan) were Porter Livestock's salesmen during the relevant time period. For tax reporting purposes, Defendant treated these salesmen as "independent contractors;" however, the Government asserts they were "employees." The distinction is important because Porter Livestock would be responsible for withholding and remitting employment and unemployment taxes for those deemed "employees" but not those deemed "independent contractors."
IRS Agent Carolyn Hingst (Agent Hingst) began an audit of Defendant's taxes in 1997, including Porter Livestock's 1996 and 1997 federal employment taxes. Based upon the IRS's conclusion that the salesmen were in fact employees, and not independent contractors, on May 8, 2000, additional federal employment and unemployment taxes and interest against Defendant, doing business as Porter Livestock, were assessed. The IRS also audited Defendant and Letha Porter's personal income taxes for tax years 1994 through 1997 and on February 14, 2000, assessed additional federal income taxes and interest against Defendant and Letha Porter.1 The additional assessed taxes were not remitted by the Porters for either the employment or income taxes. Due to the nonpayment of these taxes, on May 14, 2001, a notice of federal tax lien was filed on the Porters' real property with the Recorder of Deeds for Muscatine County, Iowa.
On August 12, 2005, the Government filed a complaint alleging indebtedness for federal taxes (count one) and lien foreclosure (count two). The complaint listed Defendant, Farmers and Merchants Savings Bank, the Iowa Department of Revenue, and John Russell Porter as defendants.2 The Government requests the Court (1) enter judgment in the amount of $276,714.36 against Defendant for unpaid federal income tax with additional interest and additions accruing according to law after the dates assessed, (2) enter judgment against Defendant doing business as Porter Livestock products in the amount of $90,301.04 for unpaid, federal employment and unemployment taxes with additional interest and additions accruing according to law after the dates of the assessment, (3) order foreclosure of the Government's tax liens upon certain real property owned by Defendant, and (4) determine the respective interests and claims of the other named defendants in the real property that is subject to the tax liens.
Defendant generally denies all of the allegations contained in the complaint and has set forth the affirmative defenses that (1) the tax liabilities at issue were correctly calculated, (2) tax returns were filed, and taxes due were paid, (3) the Government is taking an unreasonable position in this case, (4) some or all of the claims of the Government are barred by statutes of limitations, and (5) the complaint fails to state a claim upon which relief may be granted.
On November 1, 2006, the Government filed an amended complaint to correct an error in the street address and include the legal description for a third parcel of real property owned by the Porters. On November 7, 2006, the Government filed a Motion for Summary Judgment. The Government contends the federal income tax assessments made against Defendant and Letha Porter for the 1994 through 1997 years should be reduced to judgment, and the federal employment and unemployment taxes assessed against Defendant, individually and doing business as Porter Livestock, for the periods in 1996 and 1997 should be reduced to judgment. The Government asserts that as a result of the tax assessments, the Government has valid federal tax liens on certain parcels of real property belonging to the Porters and the Government is entitled to foreclose its liens on these parcels.
Defendant resists the motion for summary judgment. Defendant argues genuine issues of material fact exist with respect to whether (1) there is a statute of limitations issue, (2) he is entitled to relief under Section 530 of the Revenue Act of 1978, (3) he had a reasonable basis for treating the salesmen as independent contractors, (4) innocent spouse relief was factored into the IRS's calculations, and (5) he received the requisite annual notice of tax delinquency and/or garnishments.
In June of 2007, Defendant's original counsel withdrew, and present counsel appeared, and as a result, additional filings were made prior to the resolution of the pending summary judgment motion. Defendant has filed a Motion to Dismiss, a Notice of Objection to Failure to Include an Essential and Necessary Party, a Demand for Jury Trial, and a Motion for Judgment on the Pleadings. The Government has resisted each of these motions.
"[C]laims lacking merit may be dealt with through summary judgment under Rule 56." Swierkiewicz v. Sorema, 534 U.S. 506, 514, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). Summary judgment is a drastic remedy, and the Eighth Circuit has recognized that it "must be exercised with extreme care to prevent taking genuine issues of fact away from juries." Wallace v. DTG Operations, Inc., 442 F.3d 1112, 1118 (8th Cir.2006) (quotation omitted). However, "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law," judgment should be rendered. Fed. R.Civ.P. 56(c). See also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); P & O Nedlloyd, Ltd. v. Sanderson Farms, Inc., 462 F.3d 1015, 1018 (8th Cir.2006).
The party moving for summary judgment bears the initial burden of "informing the district court of the basis for its motion and identifying those portions of the record which show a lack of a genuine issue." Heisler v. Metro. Council, 339 F.3d 622, 631 (8th Cir.2003) (quoting Celotex, 477 U.S. at 323, 106 S.Ct. 2548). "If the moving party has carried its burden, the nonmoving party must demonstrate the existence of specific facts in the record that create a genuine issue for trial." Winthrop Resources Corp. v. Eaton Hydraulics, Inc., 361 F.3d 465, 468 (8th Cir.2004). The Court gives the nonmoving party the benefit of all reasonable inferences and views the facts in the light most favorable to that party. Liberty Mut. Fire Ins. Co. v. Scott, 486 F.3d 418, 422 (8th Cir.2007); de Llano v. Berglund, 282 F.3d 1031, 1034 (8th Cir.2002).
"Summary judgment is proper if, after viewing the evidence and drawing all reasonable inferences in the light most favorable to the nonmovant, no genuine issues of material fact exist and the movant is entitled to judgment as a matter of law." Hayek v. City of St. Paul, 488 F.3d 1049, 1054 (8th Cir.2007) (citing Pope v. ESA Servs., Inc., 406 F.3d 1001, 1006 (8th Cir. 2005)). Summary judgment should not be granted if the Court can conclude that a reasonable trier of fact 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); Turner v. Gonzales, 421 F.3d 688, 694 (8th Cir. 2005) (). In light of these standards, the Court considers the Government's summary judgment motion.
A. Statute of Limitations
Defendant contends an issue exists regarding whether the IRS properly obtained extensions of the statute of limitations so as to allow for the late assessment of the taxes at issue. The Government argues it properly obtained extensions, and all assessments were made in a timely manner.
With limited exceptions, tax assessments must occur within three years after the tax...
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