U.S. v. Troyer

• Decision Date: 25 January 1993
• Docket Number: No. 91-3560,91-3560
• Citation: 983 F.2d 1074
• Parties: NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within the circuit. UNITED STATES of America, Plaintiff-Appellee, v. Emmett K. TROYER, et al., Defendants-Appellants. 2
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1074

983 F.2d 1074

NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within the circuit.

UNITED STATES of America, Plaintiff-Appellee, v. Emmett K. TROYER, et al., Defendants-Appellants. ²

No. 91-3560.

United States Court of Appeals, Seventh Circuit.

Submitted Dec. 14, 1992. ¹

Decided Dec. 16, 1992.

Rehearing and Rehearing En Banc

Denied Jan. 25, 1993.

Before BAUER, Chief Judge, and CUMMINGS, Circuit Judge, and ESCHBACH, Senior Circuit Judge.

ORDER

The Government brought this action under 26 U.S.C. § 7403 against Emmett K. Troyer and Carol L. Troyer, individually and in their capacity as trustees of the Life Science Church of South Bend, Indiana, to reduce to judgment outstanding federal tax assessments against the Troyers in the amount of $50,031.19, to set aside as fraudulent the Troyers' conveyances of two parcels of property located at 1820 East Colfax Avenue and 3105 Mishawaka Avenue in South Bend, and to foreclose its tax liens against the Troyers' interests in these properties. ³ The district court gave the Government summary judgment and ordered foreclosure. This appeal followed.

Our review of the record leads us to agree with the district court that the Troyers were the equitable owners of the South Bend property. We therefore affirm its decision reducing the assessments to judgment and ordering foreclosure of the tax liens against the real estate for the reasons stated in Parts IV. and V.B. of the attached Memorandum and Order.

In their brief, the Troyers contest the validity of the IRS's assessments on numerous grounds, but none is sufficient to rebut the presumption that such assessments are correct. Avco Delta Corp. Canada Ltd. v. United States, 540 F.2d 258, 262 (7th Cir.1976), cert. denied sub nom. Canadian Parkhill Pipe Stringing, Ltd. v. United States, 429 U.S. 1040 (1977). First, the Troyers waived any statute of limitations defense by failing to present one to the district court. ⁴ Saenz v. Young, 811 F.2d 1172, 1173 (7th Cir.1987). Second, they offered no proof that they were prejudiced by the filing of the assessments in this case, or that they had no employees for whom tax liabilities could have accrued. Avco Delta Corp., 540 F.2d at 262. Third, and last, the documents submitted by the Government show that its assessments were duly authenticated. United States v. Chila, 871 F.2d 1015, 1017 (11th Cir.), cert. denied, 493 U.S. 975 (1989).

The Troyers also contest the district court's characterization of the property transfers, but they failed to preserve a disputed issue of material fact regarding the existence of fraudulent intent. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The Government's evidence amply supported the district court's finding of fraud. Avco Delta Corp., 540 F.2d at 262. To the extent the Troyers argue that the Government is barred by laches from foreclosing on its tax liens, the argument is unavailing. The doctrine of laches provides no defense to fraud. King v. Ionization International, Inc., 825 F.2d 1180, 1187 (7th Cir.1987); Central Railway Signal Co. v. Longden, 194 F.2d 310, 320 (7th Cir.1952).

AFFIRMED.

ATTACHMENT

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

SOUTH BEND DIVISION

United States of America, Plaintiff

v.

Emmett K. Troyer, et al., Defendants

Cause No. S90-195 (RLM).

July 15, 1991.

MEMORANDUM AND ORDER

This cause is before the court on the plaintiff's motion for summary judgment on all counts of the complaint. Defendants Emmett and Carol Troyer also seek summary judgment with respect to anticipated claims against them brought by the State of Indiana's Department of Revenue ("DOR"), a named defendant in this cause.

These matters were fully briefed by the parties. Both the government and the Troyers requested that the court rule without a hearing pursuant to Federal Rule of Civil Procedure 78. At first, the court concluded that a hearing on the motions would be useful. That hearing had to be cancelled due to the court's engagement in the jury trial of a criminal matter and, upon reflection, the court concluded that a hearing was unnecessary.

I.

The United States brought this cause against primarily the Troyers, both as individuals and as trustees of the Life Science Church of South Bend. The Life Science Church has also been named as a defendant, along with the Church of St. Matthew, Standard Federal Bank, Fidelity Investment, Inc., and the DOR. The government seeks to reduce certain tax assessments against the Troyers to judgment and to foreclose on tax liens against two parcels of real estate, allegedly owned by the Troyers, in satisfaction of that judgment. The two plots of real estate at issue are located at 1820 East Colfax Avenue, South Bend, Indiana ("Colfax property"), and 3105 Mishawaka Avenue, South Bend, Indiana ("Mishawaka Avenue property").

The Troyers purchased the Colfax property in June, 1975. They mortgaged the Colfax property to Tower Federal Savings & Loan ("Tower"), predecessor in interest to Standard Federal, in July, 1975. That mortgage agreement included a provision requiring the Troyers to secure Tower's acceptance of any written assumption agreement from a successor in interest before the Troyers could be released from liability on the mortgage. Neither Tower nor its successor, Standard Federal, has accepted a written assumption agreement with respect to the Troyers' mortgage.

On November 10, 1977, the Troyers executed a quitclaim deed, attempting to transfer their interest in the Colfax property to the Life Science Church. The deed specified "One dollar and other valuable consideration" and, furthermore, that the transfer was to Emmett and Carol Troyer, as trustees of the Life Science Church.

On September 23, 1983, the Life Science Church executed a quitclaim deed with respect to the Colfax property to the Church of St. Matthew. The deed reflected consideration in the amount of $10,000.00, but evidence in the record confirms that neither the Troyers nor the Life Science Church ever received those funds. Emmett Troyer was trustee of the Church of St. Matthew when this deed (and the similar September, 1983 deed to the Mishawaka Avenue property) was executed.

The Troyers purchased the Mishawaka Avenue property in February, 1978. Following the purchase, the Troyers mortgaged the Mishawaka Avenue property to Fidelity Investment on February 27, 1978. The Troyers have never arranged for a successor in interest to assume their mortgage with Fidelity Investment. The principal balance due on that mortgage as of April 19, 1991 was $9,271.21, with interest accruing at the daily rate of $3.03.

On November 10, 1977, the Troyers executed a quitclaim deed, transferring their interest in the Mishawaka Avenue property to themselves, as trustees of the Life Science Church, for "One dollar and other valuable consideration." On September 23, 1983, the Life Science Church transferred its interest in the Mishawaka Avenue property to the Church of St. Matthew by quitclaim deed. Again, while the deed reflected consideration in the amount of $10,000.00, neither the Troyers nor the Life Science Church ever received that sum.

The Church of St. Matthew executed two $10,000.00 promissory notes in favor of the Life Science Church in September, 1983 as purported consideration for the transfer of the Colfax and Mishawaka Avenue properties. The $10,000.00 sums reflected amounts collectible by the Life Science Church "in the event its congregation did not remain as members of the congregation of the Church of St. Matthew for at least 90 days." The Church of St. Matthew states that it assumed the mortgages on those properties with Standard Federal Savings and Fidelity Investment, Inc. and thereafter made mortgage payments.

The Troyers remained in possession of the Colfax and Mishawaka Avenue properties after the 1983 conveyances, pursuant to an oral lease between the Troyers and the Church of St. Matthew requiring the Troyers to pay rent in the amount of the monthly mortgages due on the properties, plus an additional $10.00. The alleged oral lease also required the Troyers to keep insurance on the properties, to pay real estate taxes on them, and to maintain the properties in good condition.

The alleged oral lease was never reduced to writing, as required by IND.CODE 32-2-1-1, and purportedly ran from September, 1983 to May, 1989, when the Troyers were ousted from the Church of St. Matthew. Thereafter, the Troyers made mortgage payments on the Colfax and Mishawaka Avenue properties directly to the financial institutions.

The Troyers have retained uninterrupted possession of the Colfax and Mishawaka Avenue properties since acquiring those parcels in 1975 and 1978. They presently reside at the Colfax property. They have continued to pay the expenses of both properties and made improvements on the properties. In a state court proceeding the Troyers instituted against the Church of St. Matthew, the Troyers admitted that the transfers of their ownership rights to these properties were "solely for the purpose of defeating the provisions of the Internal Revenue Code ..."

In July, 1982, the Life Science Church filed for bankruptcy under Chapter 13 of the Bankruptcy Code; in October, 1982, the bankruptcy court converted the filing to one under Chapter 11. On May 19, 1983, the United States filed its proof of claim in the Life Science Church's bankruptcy case. In January, 1984, the government filed its objection to the debtor's plan of reorganization and disclosure statement with the bankruptcy court.

On May 26, 1987, the Internal Revenue Service ("IRS") made assessments against Emmett and Carol Troyer for unpaid withholding and Federal Insurance Contribution Act taxes for the fourth quarter of 1977, all four quarters of 1978 and 1979, and the first three quarters of 1...