U.S. v. Toler

Citation666 F.Supp.2d 872
Decision Date28 September 2009
Docket NumberCase No. 2:07-cv-603.,Case No. 2:07-cv-863.
PartiesUNITED STATES of America, Plaintiff, v. Patricia J. TOLER, et al, Defendant. Patricia A. Toler, Plaintiff, v. The United States of America, Defendant.
CourtU.S. District Court — Southern District of Ohio

Edward J. Murphy, Elizabeth Lan Davis, Matthew Vonschuch, U.S. Department of Justice Ben Franklin Station, Washington, DC, for Plaintiff.

Terrence Austin Grady, Katherine R. Herron, Terrence A. Grady & Associates Co., LPA, Richard Frederick Bentley, Wolfe & Bentley LLP, Randall Lee Lambert, Ironton, OH, Susan Lynn Rhiel, Rhiel & Associates Co., LPA, Columbus, OH, William Courtney Martin, Jackson, OH, for Defendant.


ALGENON L. MARBLEY, District Judge.


This matter comes before the Court on cross motions for summary judgment: (1) the United States' Motion for Summary Judgment on its foreclosure claim against Maurice A. Toler, Patricia J. Toler, Dorothy Toler, and Patricia A. Toler (hereinafter the "Defendants") and Plaintiff Patricia A. Toler's wrongful levy claim (Dkt. 69); and (2) Defendants' Motion for Summary Judgment against the United States on the IRS's foreclosure claim (Dkt. 68). The Defendants seek summary judgment solely on the United States' foreclosure claim. The United States seeks summary judgment on five issues: 1) judgment that defendants Maurice A. Toler and Patricia J. Toler are personally liable, jointly and severally, to the United States in the amount of $380,392.31, plus interest and statutory accruals from September 15, 2008; 2) judgment that there exist federal tax liens securing the tax liabilities of Maurice A. Toler and Patricia J. Toler in the amount of 767,289.37, plus interest and statutory accruals from September 15, 2008, that may be enforced against the parcels of real property at issue in the foreclosure case; 3) judgment that defendant Maurice A. Toler is personally liable to the United States in the amount of $108,681.81, plus interest and statutory accruals from September 15, 2008, for unpaid trust fund recovery penalties, pursuant to 26 U.S.C. § 6672, resulting from his willful failure to collect, truthfully account for, or pay over the income and Federal Insurance Contributions Act taxes withheld from the wages of the employees of Trimat, Inc., and that the federal tax liens securing the same liabilities may also be enforced against the real properties at issue in the foreclosure case; 4) judgment allowing the United States to foreclose its federal tax liens against Parcels A through F, as identified in the United States' Amended Complaint, and to have those properties sold free and clear of all liens and interests of the parties, with proceeds of sale to be distributed according to the parties' lawful priorities; and 5) judgment that Plaintiff Patricia A. Toler take nothing by way of relief requested in her complaint in the wrongful levy case. For the reasons set forth below, this Court: (1) DENIES the Defendants' Motion; and (2) GRANTS in part and DENIES in part the United States' Motion.

1. The Parties

There are seven parties involved in this matter: 1) the United States; 2) taxpayer-defendant Maurice A. Toler ("Maurice"); 3) taxpayer-defendant Patricia J. Toler ("Patricia"); 4) non taxpayer-Defendant Dorothy L. Toler ("Dorothy"), who is also Maurice's mother; 5) non taxpayer-defendant and plaintiff Patricia A. Toler ("Trisha"), who is the daughter of Maurice and Patricia; 6) P.J.T., Inc. ("P.J.T."); and 7) Trimat Construction, Inc. ("Trimat").

Maurice and Patricia were the sole shareholders and owners of P.J.T. When they incorporated P.J.T. on April 28, 1980, Maurice and Patricia were married. They divorced in 2001 and separated for a period of time. Maurice and Patricia, however, are currently living together at 879 Homewood Drive. Maurice and Patricia have two children, Matthew and Trisha. Dorothy is Maurice's mother. Dorothy was owner and sole shareholder of Trimat until 2004, as well as a creditor of P.J.T. Matthew, Maurice and Patricia's son, is the current owner of Trimat. Trisha is the current title holder of all of the parcels at issue in this case.

P.J.T., a family farm owned and operated by Maurice and Patricia, was incorporated by Maurice on April 28, 1980, and ceased active operation in 1990. The Articles of Incorporation were not cancelled until February 20, 1999. As late as November 2004, P.J.T. still held title to property. The initial P.J.T. stand for "Patricia J. Toler," taxpayer-defendant Patricia J. Toler's full name. Maurice and Patricia had full responsibility for P.J.T. Maurice entered into contracts on behalf of P.J.T. He was responsible for keeping the books and records, and had sole hiring and firing responsibility. Maurice, Patricia, and their children had their family home on land that was titled to P.J.T. The family also used the property for recreational activities including hunting, fishing, sleigh rides, use of four wheel drive and all-terrain vehicles, and horseback riding. For recreation, Patricia and Trisha rode horses owned by P.J.T. in horse shows across three states. In 1983, P.J.T. entered into a land contract with Richard and Avenell Mount, in which P.J.T. agreed to pay $200,000 in exchange for title to real property in Bidwell, Ohio.1 The land contract covered 330 acres, including what became Maurice and Patricia's family home at 879 Homewood Drive in Bidwell, Ohio, and the surrounding farm. Maurice and Patricia, along with their children, moved to 879 Homewood Drive some time in the early 1980s. P.J.T. stopped making the required monthly payments on the Mount Land Contract due to lack of funds, and the Mounts sued to forfeit the contract on November 19, 1986. In order to prevent losing their home and farm, Maurice and Patricia asked Dorothy to help them with the payments, as they did not have the funds and could not take out a loan due to poor credit. Dorothy obtained a mortgage from First Huntington National Bank for $125,000 to pay off the Mount land contract. Pursuant to the land contract, the Mounts transferred the property on March 23, 1987 to P.J.T. That same day, P.J.T., by its president Maurice, transferred title to Dorothy. Maurice and Patricia state that they transferred title to Dorothy in exchange for Dorothy obtaining the loan.2 There are no written agreements memorializing this transaction. The loan payments were made by Trimat rather than Dorothy. Although there was a lease agreement that called for P.J.T. and Maurice to pay rent to Dorothy, no rent was ever paid. After the land transfer, Maurice and Patricia continued to use the land as before, as a residence, for recreational activities, and for farming. P.J.T. ceased operations in 1990, and cancelled its Articles of Incorporation in 1999. The 879 Homewood property is still the residence of Maurice and Patricia, although it is now owned by Trisha. Maurice and Patricia continue to live rent free.

Trimat was incorporated on May 6, 1991 by Dorothy. She provided the capital for the company so that her son, Maurice, would have gainful employment. "Trimat" is a combination of Maurice and Patricia's children's names (Matthew and Trisha). Dorothy, although the official owner and president, did not participate in the running or management of Trimat. She had no prior construction experience, and acknowledges that she started the business for Maurice.

Maurice was the manager and boss at Trimat.3 Maurice entered into contracts on behalf of Trimat, he supervised employees, made all personnel decisions, negotiated and entered into contracts, and served as the keeper of records and manager of all bank accounts and financing. Maurice and Patricia also used Trimat funds for their personal use. In 1997, the Tolers purchased a corvette with Trimat funds. The car, for which Patty signed a check on behalf of Trimat, was worth $28,575.00. In 1998, the Toler's purchased a Lincoln Navigator with Trimat funds. That same year, Maurice and Patricia purchased a 22-foot Sea Ray boat, which was titled to Matthew but paid for with Trimat funds. Insurance for the Sea Ray was held in Maurice's individual capacity. The three vehicles together cost approximately $90,000. Patricia also bought home furnishings, a home spa cover, and bedroom accessories with Trimat funds. Matthew Toler purchased $1,917.01 in guns and related accessories in 1997, and Trisha's high school class ring was bought with Trimat's corporate account.

Finally, there is some evidence that P.J.T. and Trimat also commingled funds. Trimat paid P.J.T.'s corporate filing fee to the State of Ohio in 1995. Additionally, Patricia deposited a check made out to P.J.T. & Trimat (from Jackie and Peggy Williams) into her personal checking account in 1993.

Maurice ceased to be the manager of Trimat when Dorothy gifted Trimat to her grandson, Matthew in 2004. When Trimat was transferred to Matthew, he also took over some of Maurice's responsibilities. Maurice continues to work for Trimat.

2. The Parcels

There are seven parcels of land at issue in this case, six in the foreclosure suit (Parcels AF) brought by the United States, and one (Parcel G) in the wrongful levy suit brought by Trisha. The descriptions of the properties and the related transfers are described herein.

a. Homewood Drive Properties

Parcels A, B, and G consist of the 879 Homewood Drive property and surrounding farm.

Parcel A is made up of 5.65 acres and contains the residence used by Maurice and Patricia. Maurice and Patricia have continuously used the 879 Homewood Drive residence since the early 1980s.4 There was no consideration for this property, and the Tolers consider the transfer to be a gift. Parcel G is made up of 97 of acres land surrounding the residence that was used for crops, livestock, and horse stables and was also part of the Mount Land Contract....

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