United States v. Arthur
| Decision Date | 27 April 2012 |
| Docket Number | Case No. 4:10CV01561 AGF |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. JOHN P. ARTHUR, et. al., Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
UNITED STATES OF AMERICA, Plaintiff,
v.
JOHN P. ARTHUR, et. al., Defendants.
Case No. 4:10CV01561 AGF
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION
Dated: April 27, 2012
This matter is before the Court on the United States of America's motion for summary judgment (Doc. No. 46), the response of Defendant Tandy Thompson ("Thompson") thereto (Doc. Nos. 63 and 73), and the motion of William C. McIlroy, Trustee, ("Trustee") for Order of Discharge and Allowance of Attorney's Fees (Doc. No. 79). For the reasons set forth below, the motion of the United States will be granted, and the motion of the Trustee will be granted in part and denied in part.
BACKGROUND
The United States commenced this action to reduce to judgment Defendant John P. Arthur's ("Arthur") unpaid federal tax assessments for the years 1994 through 1998 and 2001 through 2005, and to foreclose on federal tax liens on four parcels of real property
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described in the complaint as "Parcels A,1 B,2 C,3 and D."4 Parcel A is located in St.
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Louis County, Missouri, and Parcels B, C, and D are located in Pike County, Missouri.
Acting pursuant to 26 U.S.C.§ 7403(b), the United States named Thompson and Community State Bank ("CSB") as Defendants5 in this action because of their claimed interests in the properties. CSB claimed security interests in Parcels B, C, and D under a deed of trust dated July 3, 2003 ("CSB Deed of Trust"), arising from loans made to Arthur and Thompson. The United States and CSB stipulated that CSB's interests in Parcels B, C, and D were superior to the United States' federal tax liens on the parcels. (Doc. No. 35.) CSB claimed no interest in Parcel A.
Thompson claims an interest in all four parcels. After the filing of this action, Thompson filed two state court actions against Arthur involving, among other things, the four parcels at issue in this case. She failed to name the United States as a party defendant in those cases, and the United States intervened in those actions, subsequently removing them to this Court.6
The United States has moved for summary judgment, asserting that there is no genuine dispute of fact and that, as a matter of law, (1) Arthur's unpaid taxes should be reduced to judgment; (2) the United States has valid federal tax liens on Arthur's real estate; (3) those liens should be foreclosed; and (4) the net sale proceeds from that real estate should be distributed to the interests determined by this Court.
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On November 18, 2011, after the filing of the United States' motion, CSB gave timely notice to the Internal Revenue Service ("IRS") of its intent to foreclose on its interests in Parcels B, C, and D. CSB thereafter foreclosed on those properties and intervened in this action by interpleader, depositing the surplus sale proceeds of $236,408.44 into the Court's registry. (Doc. No. 35 at ¶ 2.) Thereafter, the Court dismissed CSB as a party, substituting the Trustee for CSB as Defendant. In addition to an order of discharge, the Trustee seeks to recover attorney's fees attributable to the interpleader. The United States opposes the request for fees on the ground that such recovery will impermissibly reduce its own recovery on the tax lien.
Upon review of the record before it the Court finds the following undisputed facts. Arthur, a licensed Doctor of Veterinary Medicine, performed services as a veterinarian from 1967 to December of 2010. He earned income as a veterinarian for the tax years 1994 through 1998 and 2001 through 2005, but failed to file federal income tax returns for 1994 through 1998 and to report the taxes he owed on account of that income. Due to Arthur's failure to file his returns for tax years 1994 through 1998, the IRS examined Arthur's income for those years and issued examination reports. Arthur signed the examination reports, thereby consenting to the immediate assessment and collection of the taxes, penalties and interest detailed in them. The earliest of these assessments occurred on September 4, 2000. Thereafter, Arthur failed to timely file his federal income tax returns for the years 2001 through 2005 or to pay the taxes reported on his late-filed returns for those years. Based on the signed examination reports for 1994 through 1998 and Arthur's late-filed returns for 2001 through 2005, the IRS assessed
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federal income taxes, penalties, and interest against Arthur for these periods, on the dates and in the amounts indicated below:
+---------------------------------------------+
¦Tax ¦Date ¦Tax ¦Tax Penalty¦Interest ¦
+----+--------+--------+-----------+----------¦
¦Year¦Assessed¦Assessed¦Assessed ¦Assessed ¦
+----+--------+--------+-----------+----------¦
¦1994¦09/04/00¦$16,316 ¦$2,727.77 ¦$ 5,388.38¦
+----+--------+--------+-----------+----------¦
¦1995¦09/11/00¦12,607 ¦3,832.22 ¦5,677.24 ¦
+----+--------+--------+-----------+----------¦
¦1996¦09/04/00¦20,727 ¦10,943.72 ¦8,287.44 ¦
+----+--------+--------+-----------+----------¦
¦1997¦09/04/00¦48,017 ¦8,225.92 ¦4,192.24 ¦
+----+--------+--------+-----------+----------¦
¦1998¦09/04/00¦21,807 ¦11,353.02 ¦3,369.49 ¦
+----+--------+--------+-----------+----------¦
¦2001¦01/12/04¦463 ¦124.36 ¦29.64 ¦
+----+--------+--------+-----------+----------¦
¦2002¦01/05/04¦4,635 ¦1,209.54 ¦1,251.44 ¦
+----+--------+--------+-----------+----------¦
¦2003¦07/07/08¦10,013 ¦4,889.04 ¦3,919.11 ¦
+----+--------+--------+-----------+----------¦
¦2004¦07/07/08¦6,954 ¦3,119.95 ¦2,241.12 ¦
+----+--------+--------+-----------+----------¦
¦2005¦06/30/08¦5,224 ¦1,880.64 ¦1,112.86 ¦
+---------------------------------------------+
Arthur and Thompson had a relationship for over 21 years, but the nature of their relationship is unclear and, during this case, they have given conflicting statements under oath regarding their marital status.7 During the course of their association, and as discussed below, they jointly or individually acquired the parcels at issue in this case.
On October 13, 1989, Arthur and Thompson acquired Parcel A as joint tenants with the right of survivorship through a general warranty deed. (Doc. Nos. 43, 44, and 48-14.) On May 1, 1998, Russell and Alice Benfield ("the Benfields") conveyed Parcel B to Arthur under a general warranty deed. (Doc. Nos. 43, 44 and 48-15.) On May 1, 1998, the Benfields also transferred to Arthur by a quit claim deed, an undivided one half
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interest in Parcel C. (Doc. Nos. 43, 44 and 48-16); (Doc. No. 48-29, Dep. of Pike County Title Company ("PCTC") Designee William McIlroy ("PCTC Dep."); at 42:6-9.)
Prior to the closing for the purchase of Parcels B and C, PCTC sent Arthur a title insurance commitment for Parcel B, listing "John P. Arthur" as the "Proposed Insured." (Doc. No. 48-23; PCTC Dep. 12:11-13). PCTC also required that Arthur provide in writing the name of anyone not referred to in the title insurance commitment who was to obtain an interest in Parcel B. Id.; PCTC Dep. 13:8-21; 14:1-11. Arthur did not add any other persons, and PCTC has no record of any written statement from any source indicating that Thompson would receive an interest in Parcel B or of a request by Arthur or Thompson to include Thompson's name on any of the documents involving Arthur's purchase of Parcels B and C from the Benfields. PCTC Dep. at 8:8-22; 9:1-5; 50:6-11.
Arthur's signature appears on the documents executed on May 1, 1998, the date on which the Benfields conveyed Parcels B and C. The purchase agreement, the buyer's settlement statement, the earnest money check, the acknowledgment form delivered to his realtor, and the quit claim deed bear Arthur's name or signature, as appropriate, and do not bear Thompson's signature or otherwise make reference to her. (Doc. Nos. 48-18, 48-19, 48-20, 48-21, 48-22); PCTC Dep. 26:18-22; 27:1-4; (Doc. No. 48-27, Dep. of John Arthur ("Arthur Dep."), at 80:6-22; 88:10-14; 89:3-15; 92:5-11; 94:11-15.)
Thompson was not present when the contract for the purchase of Parcels B and C was signed by Arthur or the Benfields and she did not execute either of the lines on that contract designated for the buyer's signature. Thompson testified on deposition that the
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contract reveals that only Arthur signed it as the buyer. (Doc. No. 48-28, Dep. of Tandy Thompson ("Thompson Dep."), at 90:15-22.)
In addition, Thompson testified that shortly after Arthur and the Benfields executed the purchase agreement for parcels B and C and before the closing, she saw a copy of the purchase agreement and realized that she had not signed it, but has no recollection as to why she did not sign the purchase agreement. She further testified that despite this realization, she decided that her failure to sign the purchase agreement was a "moot point." She testified: "The offer had been accepted. Why did my name need to be added?" (Doc. No. 80-1, Thompson Dep. at 90:15-22; 91:14-22; 92:1-6; 94:6-12.)
Thompson attended the closing on Parcels B and C but did not sign the buyer's declaration or any other document related to the sale "[b]ecause it wasn't passed to [her]." (Doc. No. 80-1; Thompson Dep. 95:1- 96:-11.) She testified that because no documents were passed to her for signature at the closing, she assumed that her signature was not necessary and that it never occurred to her...
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