US v. Romano
| Decision Date | 09 November 1989 |
| Docket Number | No. 87-0841-CIV-ORL-18.,87-0841-CIV-ORL-18. |
| Citation | 757 F. Supp. 1331 |
| Parties | UNITED STATES of America v. Anthony ROMANO; Josephine Romano, individually and Josephine Romano, as Trustee; Amerifirst Bank, a Federal Savings Bank; Golden Gate Investors, a California Limited Partnership; Inovonics, Inc.; Anthony Mario Romano; VNA Respite Care, Inc.; and Ernest T. Baumeister. |
| Court | U.S. District Court — Middle District of Florida |
David N. Geier, Marika Lancaster, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., Kendell W. Wherry, Asst. U.S. Atty., Orlando, Fla., for the U.S.
H. Richard Bates, Anderson & Rush, Orlando, Fla., for Amerifirst Bank, a Federal Sav. Bank.
Bruce Cornelius, Graves, Allen, Cornelius & Celestre, Oakland, Cal., Arthur B. Friedman, Friedman, Friedman & Levin, Longwood, Fla., for Golden Gate Investors.
Stephen M. Stone, Orlando, Fla., for Inovonics, Inc.
Leo P. Rock, Gray, Harris & Robinson, P.A., Orlando, Fla., for VNA Respite Care, Inc.
Milton E. Grusmark, Miami, Fla., for Anthony and Joseph Romano and Anthony Mario Romano.
Scott L. Sterling, Orlando, Fla., for Anthony Mario Romano.
Frank C. Whigham, Stenstrom, McIntosh, Julian, Colbert, Whigham & Simmons, P.A., Sanford, Fla., for Ernest T. Baumeister.
This case was tried on October 10, 1989, without a jury. Based on the facts agreed to by the parties in their joint-pretrial stipulation, the testimony, and the evidence admitted at trial, this court enters the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).
The United States of America brought this civil action under 26 U.S.C. §§ 7401-7403 (1988) against Anthony (Tony) Romano and Josephine Romano to reduce their outstanding federal income tax liabilities to judgment. The government also brought this action to foreclose the federal tax liens on the Romanos' property, both real and personal, through the sale of certain real property that their nineteen-year-old son, Anthony Mario Romano, presently holds. The government claims Tony and Josephine Romano have been the true owners of the subject real property since its acquisition and they have conveyed the real property with the actual intent to delay, hinder, and defraud their creditors. The government, as a creditor, seeks to set the conveyance aside.1
The real property in question (Spring Valley property) is described as LOT 14, BLOCK B, SPRING VALLEY FARMS, SECTION 10, according to the Plat thereof as recorded in Plat Book 16, page 54, of the Public Records of Seminole County, Florida. It is a house and lot located at 118 Hamlin Terrace Lane, Altamonte Springs, Florida.
The Romanos maintain that Anthony Mario Romano is the legal and equitable owner of the Spring Valley property. They claim that in 1973 Tony Romano's father gave him $60,000.00 in cash to purchase property to safeguard the future interests of his grandson, Anthony Mario Romano. The grandfather did not think Tony Romano would further his grandson's well-being, because Tony Romano was a compulsive gambler. The Romanos claim that shortly after receiving the $60,000.00, Tony Romano bought property in Contra Costa County, California (California property). Allegedly, the grandfather wanted Anthony Mario Romano to become the fee simple owner of that property when he reached the age of majority. Anthony Mario Romano was approximately three years old when the California property was purchased.
Despite the grandfather's gift and intent, title to the California property was held under a grant deed by "Anthony Romano and Josephine Romano, his wife, as joint tenants." They held the property in that capacity from the time the property was acquired on May 2, 1973, until the time it was sold on June 26, 1980. Tony Romano could not explain why he and his spouse were not classified as the trustees for Anthony Mario Romano on the deed to the California property.
After selling the California property for $253,000.00, Tony and Josephine Romano located the Spring Valley property. On July 7, 1980, the property was acquired by warranty deed in the name of Jerry S. Luxenberg, trustee. The purchase price was $129,900.00, and the property was subject to a mortgage in favor of the predecessor in interest of Amerifirst Bank.
Mr. Luxenberg is the Romanos' attorney and friend. To the best of his knowledge, a written trust agreement was never drafted. When he held the title, he was not responsible for the taxes, mortgage, upkeep, or any other aspect of the Spring Valley property. Mr. Luxenberg considered himself merely a "drop-off point" for the proceeds from the sale of the California property; he disposed of the money per Tony Romano's instructions.
On February 6, 1981, Florida Homecrafters, Inc., began a legal action against Tony Romano, Josephine Romano, and Jerry S. Luxenberg, as trustee, in the circuit court of Seminole County, Florida. Florida Homecrafters brought the suit to foreclose a mechanics lien on the Spring Valley property and, as an alternative cause of action, to impose and foreclose an equitable lien on the property. On March 16, 1983, the Romanos, Mr. Luxenberg, and Florida Homecrafters filed a joint stipulation to resolve a discovery dispute in the lawsuit. According to the first paragraph of the document, Tony and Josephine Romano were identified as "the beneficial owners" of the Spring Valley property. The government questioned James M. Campbell, defendants' attorney in the circuit-court suit and a signatory of the joint stipulation. He testified that the first paragraph of the stipulation was erroneous. it should have read that the Romanos were the "guardians," not the beneficial owners, of the property.
On June 10, 1985, Mr. Luxenberg conveyed the property by a quit-claim deed to Josephine Romano, as trustee, in accordance with Tony and Josephine Romano's directive. Josephine Romano testified that she did not remember any papers that made her the trustee of the property on her son's behalf. The deeds held by Mr. Luxenberg and Josephine Romano, as trustees, do not mention the beneficiary, the nature, or the purposes of the purported trust. On July 1, 1988, Josephine Romano transferred title to the Spring Valley property to Anthony Mario Romano by quit-claim deed.
At trial the Romanos did not submit a legal instrument verifying either the grandfather's gift or his intent. Instead, they relied on testimony to substantiate their claims. Anthony Mario Romano stated that he thought he owned the California and Spring Valley properties. Josephine Romano and Graham Deservine, a Federal Bureau of Investigation agent and family friend, testified that Anthony Mario Romano owned both properties. Mr. Deservine also asserted that the grandfather intended the $60,000.00 to be used for his grandson's welfare. Tony Romano stated that his son owned the properties. And, Mr. Luxenberg testified that Tony and Josephine Romano wanted him to hold the Spring Valley property for the benefit of Anthony Mario Romano.
Since the Spring Valley property was purchased, the Romanos have continuously occupied it as their residence, and Tony Romano has always been the source of the mortgage payments for the property. Each month he pays his son $560.00 in rent, which the son uses for the monthly mortgage payment of an equal amount. Tony Romano also pays the water and electric bills for the house.
On the subject of rental payments, the government certified Mr. Roger V. Phillips, president of Atwood-Phillips, Inc., a property management company in Winter Park, Florida, as an expert in Orlando area rental values. After examining the Spring Valley Property, Mr. Phillips judged the present fair market rental value of the property to be $2,500.00 per month. He testified that the methods he used to evaluate the house are commonly employed and are "very accurate." Mr. Phillips stated that the Romanos' monthly rental payment is "five times too low" and would have been the approximate fair market rental value of the Spring Valley property in 1976.
Before bringing this action, the government made tax assessments against Tony and Josephine Romano, both jointly and severally, for the years 1965, 1968, 1980, 1981, and 1982. Their tax liabilities for 1965 and 1968 were the subject of a proceeding in the United States Tax Court. The government gave Tony and Josephine Romano notice of assessment and demand for payment for their 1965 and 1968 tax liabilities on February 9, 1981. Notices of assessment for the 1980, 1981, and 1982 tax deficiencies were given on December 26, 1983, January 2, 1984, and August 15, 1983. The government duly and properly filed and refiled (where required) the federal tax liens with the Clerk of the Court, Seminole County, Florida. As of October 2, 1989, the tax liabilities of Tony and Josephine Romano totaled $1,183,960.48 plus statutory additions.2
Owing to the Romanos' outstanding tax liabilites, Pace McNealy, an Internal Revenue Service officer, met with Tony Romano in April 1986. At that meeting, Mr. McNealy and Tony Romano discussed selling the Spring Valley property; Tony Romano wanted to put the earnings from the sale toward his tax debt. Mr. McNealy testified that Tony Romano handed him a signed collection information statement, which detailed Tony Romano's assets and liabilities. In section four of the statement, Tony Romano had listed the Spring Valley property as an asset with an estimated value of $220,000.00. Tony Romano also handed Mr. McNealy a signed and notarized real estate listing and ownership affidavit. Mr. McNealy did not request the document and was "somewhat surprised" to receive it. The document gave Mr. McNealy the impression that Tony Romano had an interest in the Spring Valley property and that the property was an asset he was applying toward his tax liabilities. When questioned by the government about the document, Tony Romano responded...
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