United States v. MacIntyre
| Decision Date | 25 June 2012 |
| Docket Number | CIVIL ACTION H-10-2812 |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. ROBERT S. MACINTYRE, Individually, and as Temporary Administrator of the Estate of James Howard Marshall II, et al., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Pending before the court are the United States of America's motion for summary judgment against E. Pierce Marshall, Jr. and Finley Hilliard, individually (Dkt. 93), Defendants E. Pierce Marshall, Jr. as Executor of the Estate of Eleanor Pierce Stevens and individually, and Finley Hilliard, as Trustee of the Eleanor Pierce (Marshall) Stevens Living Trust and individually's motion for certification (Dkt. 103), and the United States of America's motion for clarification (Dkt. 104). Upon consideration of the motions, responses, replies—if any, and the applicable law, the motion for clarification (Dkt. 104) is GRANTED, the motion for certification (Dkt. 103) is DENIED AS MOOT, and the government's motion for summary judgment (Dkt. 93) is GRANTED IN PART and DENIED IN PART.
In 1995, J. Howard Marshall, II made an indirect gift to certain members of his family. He died shortly thereafter. The IRS assessed gift taxes against Marshall's Estate, which the Estate challenged in the United States Tax Court. As part of a 2002 Stipulation of Settled Issues, the Tax Court entered judgment which, among other things, set the amount of the Gift to the Eleanor PierceStevens' Grantor Retained Income Trust ("GRIT") at $35,939,316.00 (the "Gift"). The Marshall Estate never paid the tax on the Gift. By operation of law, liability for the donor's unpaid gift tax shifted to the donee, Eleanor Pierce Stevens ("Stevens").1
In April of 2007, Stevens died. E. Pierce Marshall, Jr. ("Marshall") became the sole Executor of her Estate. Finley L. Hilliard ("Hilliard") was the Trustee for the Eleanor Pierce (Marshall) Stevens Living Trust (the "Trust"). Shortly after Stevens's death, Marshall was informed that the IRS might assert donee liability against Stevens's Estate because the Marshall Estate had failed to pay gift taxes on the Gift. Marshall mentioned this fact in an email to his brother in August of 2008. Marshall, in his capacity as Executor, made distributions from Stevens's Estate of personal property and proceeds from the sale of Stevens' car in the aggregate amount of $14,791.00. Additionally he caused the Trust to pay $4,872.00 per month rent on Stevens' vacant apartment for 12 months, totaling $58,464.00.
At the same time, Hillard was the Trustee of the Trust. The Trust, by its terms, was liable for all Stevens's debts, taxes and expenses directly due or occasioned by Stevens's death. As early as 2002, Hilliard was aware that the Trust might be liable for the unpaid gift taxes on the Gift. However, Hilliard used Trust funds to pay $29,300.01 to Hilliard & Hilliard for accounting services, and $7,952.00 in legal fees to Hunter & Blazier for charitable organizations other than the Trust and the Stevens Estate. Finally, the Trust and the Estate filed joint federal income tax returns. Marshall and Hilliard claimed offsets for charitable deductions for the periods ending March 2008, March 2010, and March 2011 in the aggregate amount of $1,119,127.00 for money permanently set aside pursuant to 26 U.S.C. § 642(c). These funds have not been distributed to any charities, norsegregated in a separate account. Instead they are earmarked for charity and, therefore, according to Marshall and Hilliard, unavailable to pay any part of the gift tax.
The government brings claims against both Marshall and Hilliard for personal liability pursuant to 31 U.S.C. § 3713, know as the Federal Priority Statute, for distributions from the Estate and the Trust to lower priority creditors and for failure to preserve sufficient funds to pay Stevens's liability for gift tax on the Gift. Additionally, it brings a claim of breach of state law fiduciary duties against Marshall for the same actions. Now, the government has moved for summary judgment on its claims.
Summary judgment is proper if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(a); 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 materialfact. 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 , 66 F.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) .
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 Federal Priority Statute, 31 U.S.C. § 3713, provides that "[a] claim of the United States Government shall be paid first when . . . the estate of a deceased debtor, in the custody of the executor or administrator, is not enough to pay all debts of the debtor." 31 U.S.C. § 3713(a)(1)(B). It further provides that "[a] representative of a person or an estate (except a trustee acting under title 11) paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government." § 3713(b). "The burden lies with those who argue that the government's priority does not apply to show that they are not within the provisions of section 3713." United States v. Cole, 733 F.2d 651, 654 (9th Cir. 1984) (citing Bramwell v. United States Fidelity Co., 269 U.S. 483, 487, 46 S. Ct. 176 (1926)).
The Tax Court has articulated the elements of § 3713 liability as (1) a fiduciary; (2) distributed the estate's assets before paying a claim of the United State and (3) knew or should have known of the United States' claim. Huddleston v. Comm'r, T.C. Memo. 1994-131, 1994 WL 100520 at *6 (U.S. Tax Ct. 1994); see also Leigh v. Comm'r, 72 T.C. 1105, 1110 (U.S. Tax Ct. 1979). "[I]n order to render a fiduciary personally liable under 31 U.S.C. [§ 3713], he must first be chargeable with knowledge or notice of the debt due to the United States . . . ." Leigh, 72 T.C. at 1109 (). "The knowledge requirement . . . may be satisfied by either actual knowledge of the liability or notice of such facts as would put a reasonably prudent person on inquiry as to the existence of the unpaid claim of the United States." Id. at 1110.
An executor of an estate may be a fiduciary for the purposes of § 3713. Schwartz v. Comm'r, 560 F.2d 311, 315 (8th Cir. 1977). And a trustee is the paradigmatic example of a fiduciary. See BLACK'S LAW DICTIONARY 1656 (9th ed. 2009) (). Marshall is a fiduciary for the purposes of § 3713 based on his role as Executor of Stevens's Estate. And, because Stevens's Trust directed that the Trust should pay any debts due or occasioned by Stevens's death, the Trustee, Hilliard,...
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