United States v. Brand

• Decision Date: 30 May 1972
• Docket Number: No. C71-85.,C71-85.
• Citation: 346 F. Supp. 279
• Parties: UNITED STATES of America, Plaintiff, v. Steven M. BRAND and Susan Brand, Defendants.
• Court: U.S. District Court — Northern District of Ohio

346 F. Supp. 279

UNITED STATES of America, Plaintiff, v. Steven M. BRAND and Susan Brand, Defendants.

No. C71-85.

United States District Court, N. D. Ohio, E. D.

May 30, 1972.

Robert Bauer, Asst. U. S. Atty., Cleveland, Ohio, for plaintiff.

Harlan Pomeroy, Cleveland, Ohio, for defendants.

MEMORANDUM

BEN C. GREEN, District Judge:

This action was brought on October 9, 1970:

. . . to obtain a judgment against defendants for certain unpaid federal tax liabilities of Milton Brand, a resident of Miami Beach, Florida. Such unpaid federal tax liabilities are collectible from the defendants by virtue of a fraudulent conveyance of certain real property hereinafter described.

The defendants, Steven M. and Susan Brand, are the son and daughter-in-law of Milton Brand. The alleged fraudulent conveyance was the transfer of a residence located at 18040 N.E. Ninth Place, North Miami Beach, Florida, on or about March 22, 1966, from the taxpayer to the defendants.

This matter is now before the Court on a motion by defendants for summary judgment and a motion by plaintiff to take additional depositions. There is a direct correlation between the said motions, it being plaintiff's position that there exists a genuine issue of material fact relative to the question of law raised by defendants' motion and that further discovery is essential to resolve such factual issue.

The factual predicate of defendants' motion is contained in the following excerpts from defendants' affidavit:

. . . In May of 1967 Milton Brand telephoned the defendants from Florida and told them that he would have to sell the house because he needed money. Milton arranged for the sale and defendants took no part in it, except to sign and return papers as instructed by Milton's attorney in Florida. The necessary papers were prepared by Milton Brand's attorney in Florida, forwarded to the defendants by mail, executed by them and returned by mail to Florida. . .

When the defendants received the check (for $5,531.48) from the sale of the house from the escrow agent, they kept the $500 which Milton then owed them and on May 27, 1967 returned the remainder ($5,031.48) to Milton as he had directed. The balance of the proceeds, held by Milton's attorney in Florida, was paid directly by him to Milton Brand. After they forwarded to Milton Brand the balance of the money from the sale of the house, the defendants had nothing whatsoever to do with the house. They were never informed, nor did they inquire, as to the reasons for the sale of the house or for Milton's need for funds.

Appended to the affidavit are documents, including the check referred to above, supporting the representations made by defendants.

Plaintiff in response to an interrogatory, has admitted that it "is not aware of any official notification to the defendants of either the existence of the unpaid tax liabilities or the amounts thereof" owed by Milton Brand. Plaintiff also admits that "the United States made no attempt, other than the present action, to collect from the defendants".

Based on the sale of the property and transmittal of the proceeds thereof (less the $500 loan repayment) to Milton Brand prior to any notice of the tax liability of Mr. Brand, or an attempt to effect collection thereof, defendants maintain that transferee liability may not be imposed upon them.

Plaintiff resists the motion for summary judgment based on the contention that defendants may be held liable for transferee liability, notwithstanding the sale of the property and the payment of the proceeds thereof to Milton Brand, if they had knowledge of Milton Brand's tax problems prior to the sale. Plaintiff contends that there is already a fact question on the record regarding such knowledge. Additionally, plaintiff wishes to continue discovery by deposing the defendants, Milton Brand and George Talianoff, contending that such discovery is essential to resolution of the fact question regarding the defendants' alleged knowledge of Mr. Brand's difficulties.

There is an aspect of this request for continuing discovery which is both somewhat puzzling and also somewhat disturbing to the Court. It appears from the record that the government has been aware of the pertinent facts regarding the transfer of the property to the defendants, and its subsequent sale, since shortly after the sale took place in 1967. The Court finds it puzzling that since that time the government has not, through its investigation, developed what it believes are the true state of facts. The Court is also somewhat surprised that the plaintiff did not make the taking of the depositions of the taxpayer and the defendants the first order of deposition discovery, rather than the last. The disturbing aspect of this request is that plaintiff has already taken two rounds of depositions in Miami, Florida in March and May, 1971, one of which was devoted to taking the testimony of government employees. George Talianoff and Milton Brand are both located in the Miami area. It seems to the Court to be imposing an inordinate burden upon defendants to have their counsel attend, or secure representation at, a third round of depositions in Florida. This is particularly true in light of the fact that the total recovery sought herein is $10,000, based on a limited period of record ownership of the realty in question by the defendants which resulted in no benefits (economic or otherwise) to them.

The additional discovery which plaintiff seeks to undertake is stated to be for the purpose of proving that the defendants, prior to the sale of the property, knew of the tax problems of Milton Brand. From the record to date, it appears to the Court that plaintiff is seeking to pursue a rather forlorn hope in that regard.

By way of affidavit the defendants completely disclaim any knowledge of Milton Brand's financial affairs, and it is doubtful that they would change that position. While the circumstances of the transfer and later sale of the property might cause a reasonable person to wonder about Mr. Brand's general solvency, it would not charge one with knowledge of existing tax claims.

Originally, in answers to interrogatories, the government maintained that the defendants were charged with knowledge in that Steven Brand lived with his father in 1965, and "it is reasonable to assume that the defendants, being close relatives of the taxpayer" knew of his tax problems. However, by way of affidavit, defendants established that they were married and living in their own residence in Washington, D. C. in 1965, from which location they moved to Iowa. It is also established that their contacts with Milton Brand were, at the very best, minimal.

Faced with that sworn testimony, the government has shifted its position and now maintains that knowledge on the part of the defendants is established by reason of a letter from George Talianoff, an attorney located in Miami Beach, Florida, to an agent of the Internal Revenue. The I.R.S. had levied upon the rents of the property in question, after the transfer of title to the defendants, based upon an assessment against Milton Brand. Mr. Talianoff wrote requesting removal of the notice of levy, enclosing a copy of a lease executed between the tenants and Steven M. Brand, stating that:

Mr. Wolfstein advised our clients, Mr. and Mrs. Steven M. Brand, that by virtue of the Notice of Levy, they will not pay the rent due January 1, 1967 to Mr. and Mrs. Brand.

However, the government's own discovery to date rebuts the statement of the letter that Mr. and Mrs. Brand had dealings with the tenants.

When title to the...