U.S. v. Washington
| Decision Date | 20 June 2011 |
| Docket Number | CIVIL ACTION H-09-3996 |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. CRAIG A. WASHINGTON, SR., et al., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Pending before the court are plaintiff United States of America's ("USA") motion for summary judgment (Dkt. 20) and defendants Craig A. Washington, Sr. ("Washington") and Washington Children's Trust No. 1's (the "Trust") (collectively, "Defendants") motion for summary judgment (Dkt. 31). After reviewing the motions, related filings, and applicable law, the court is of the opinion that Defendants' motion should be GRANTED IN PART AND DENIED IN PART and that the USA's motion should be DENIED.
This is an action to collect allegedly delinquent taxes by foreclosure upon real property. The USA seeks a judgment setting aside a conveyance of certain real property to Washington Children's Trust No. 1 so that it may foreclose upon the property in order to satisfy a tax lien relating to unpaid federal taxes by Washington. Dkt. 1. The USA brought its complaint against Washington individually and in his capacity as the trustee of the Trust, as well as various other defendants who it asserts may claim an interest in the real property at issue. Dkt. 1.
The properties at issue are located at 2317 Caroline Street, Houston, Texas, 2323 Carolyn Street, Houston, Texas, and 1313 McIlhenny, Houston, Texas. Dkt. 20-2. Washington purchased the property located at 2317 Caroline Street, Houston, Texas on September 8, 1976. Dkt. 20-2. Hepurchased the property located at 2323 Caroline Street, Houston, Texas and the property located at 1313 McIlhenny, Houston, Texas on August 16, 1976.1 Id.
In 1989 and 1990, according to Washington, he created twelve irrevocable trusts for the benefit of his children: the Washington Children's Trust Numbers 1 through 10, the Washington Children's Trust Fund, and Washington Children's Family Trust. Dkt. 31. The trust at issue in this case is the Washington Children's Trust No. 1, and Washington is the trustee of that Trust. Id. Washington claims that he created the trusts from a form book but that he no longer has copies of the trusts because they were destroyed when the warehouse in which they were stored was flooded during a tropical depression in 2001. Dkt. 25-1. He contends that both the paper and any electronic versions of the documents were destroyed, and he submits an affidavit in which he provides the alleged terms of the original documents. Dkt. 27, Exh. 6.
On January 11, 1991, Washington filed for bankruptcy. Id. His wife, Dorothy M.L. Washington, also filed for bankruptcy in 1991. Dkt. 31. Dorothy M.L. Washington's bankruptcy was discharged in 1992. Id. Washington did not receive a discharge in his bankruptcy, and the case was dismissed on February 28, 2000. Id. In the meantime, Washington and Dorothy M.L. Washington got divorced. Id. On March 10, 1993, pursuant to a property settlement agreement reached in their divorce, Washington conveyed the two Caroline Street properties and the property located at 1313 McIlhenny to Dorothy M.L. Washington. Id. She, in turn, conveyed a property located at 3001 N. Calumet Drive, Houston, Texas, to Washington. Id.
On November 29, 1999, the USA recorded a Notice of Federal Tax Lien in the real and personal property records of Harris County, Texas, against Washington for the 1988, 1989, and 1990 tax years. Id. On November 6, 2000, the USA filed a Notice of Federal Tax Lien refiling for the 1989 tax period in Harris County, Texas. Id. These two liens were released on June 22, 2008, but a revocation of the certificate of release was filed on July 24, 2008. Id. Additionally, on July 24, 2008, the USA filed another notice of federal tax lien in the property records of Harris County, Texas for the income tax years of 1988, 1989, and 1990, but it filed the lien as a nominee lien against the Trust as nominee, transferee and/or alter ego of Craig A. Washington, Sr. Id.
On July 9, 2004, Dorothy M.L. Washington recorded Warranty Deeds dated June 23, 2004, in which she conveyed the two Caroline Street properties and the McIlhenny property to Washington—as trustee of the Trust. Dkt. 31. Washington, in turn, conveyed the Calumet Drive property to Dorothy M.L. Washington.
Washington continues to maintain a law practice in the 2323 Caroline office building despite Dorothy M.L. Washington's conveyance of the property to the Trust in 2004. Washington claims that he pays the Trust $15,000.00 per month rent and that he has paid over $302,000.00 in rent since July 2004. Dkt. 31. Additionally, Washington contends that the Trust has paid over $350,000.00 in property taxes, and that it would not have been able to pay these taxes without income from Washington—the largest tenant at 2323 Caroline. Id. Washington also contends that the Trust has paid, through its own bank account, the cost of maintenance, electricity, water, and other expenses associated with ownership of 2323 Caroline. Id. Thus, according to Washington, the Trust is the proper owner of the property and the USA may not foreclose upon it to collect a tax debt allegedly owed by Washington.
Summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that 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); see also Carrizales v. State Farm Lloyds, 518 F.3d 343, 345 (5th Cir. 2008). The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; there must be an absence of any genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505 (1986). An issue is "material" if its resolution could affect the outcome of the action. Burrell v. Dr. Pepper/Seven Up Bottling Grp., Inc., 482 F.3d 408, 411 (5th Cir. 2007). "[A]nd a fact is genuinely in dispute only if a reasonable jury could return a verdict for the non-moving party." Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006).
The moving party bears the initial burden of informing the court of all evidence demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548 (1986). Only when the moving party has discharged this initial burden does the burden shift to the non-moving party to demonstrate that there is a genuine issue of material fact. Id. at 322. If the moving party fails to meet this burden, then it is not entitled to a summary judgment, and no defense to the motion is required. Id . "For any matter on which the non-movant would bear the burden of proof at trial . . . , the movant may merely point to the absence of evidence and thereby shift to the non-movant the burden of demonstrating by competent summary judgment proof that there is an issue of material fact warranting trial." Transamerica Ins. Co. v. Avenell , 66F.3d 715, 718-19 (5th Cir. 1995); see also Celotex, 477 U.S. at 323-25. To prevent summary judgment, "the non-moving party must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348 (1986) (quoting Fed. R. Civ. P. 56(e)).
When considering a motion for summary judgment, the court must view the evidence in the light most favorable to the non-movant and draw all justifiable inferences in favor of the non-movant. Envl. Conservation Org. v. City of Dallas, Tex., 529 F.3d 519, 524 (5th Cir. 2008). The court must review all of the evidence in the record, but make no credibility determinations or weigh any evidence; disregard all evidence favorable to the moving party that the jury is not required to believe; and give credence to the evidence favoring the non-moving party as well as to the evidence supporting the moving party that is uncontradicted and unimpeached. Moore v. Willis Ind. Sch. Dist., 233 F.3d 871, 874 (5th Cir. 2000). However, the non-movant cannot avoid summary judgment simply by presenting "conclusory allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation." TIG Ins. Co. v. Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir. 2002); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). By the same token, the moving party will not meet its burden of proof based on conclusory "bald assertions of ultimate facts." Gossett v. Du-Ra-Kel Corp., 569 F.2d 869, 872 (5th Cir. 1978); see also Galindo v. Precision Am. Corp., 754 F.2d 1212, 1221 (5th Cir. 1985).
The USA contends that summary judgment should be granted in its favor because (1) Washington failed to pay tax assessments for 1988 through 1990; (2) the assessments are presumptively correct; (3) Washington is the true owner of the properties, notwithstanding that theproperties were conveyed to the Trust; (4) the USA filed a Notice of Federal Tax Lien in the property records of Harris County, Texas; and (5) the USA should thus be allowed to foreclose on the properties to satisfy Washington's tax debt. Dkt. 20-2.
Washington argues, in response to the USA's motion, that the statute of limitations bars the USA's claims. Dkt. 25-1. Washington also contends that the debts were either discharged in his bankruptcy or that the USA should be barred from asserting a claim for the debts now under the doctrine of laches, as the claim should have been asserted during the bankruptcy proceedings. Id. Additionally, Washington argues that the properties cannot be foreclosed upon to satisfy the debt from the 1990 taxes because he did not own the properties when the taxes for 1990 were assessed. Id. Washington's final contention is that the properties are currently owned by the Trust,...
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