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UNITED STATES v. CANELLIS

March 13, 1980

UNITED STATES OF AMERICA, PLAINTIFF,
v.
GEORGE C. CANELLIS, GEORGIA CANELLIS, AND CHICAGO FEDERAL SAVINGS AND LOAN ASSOCIATION, DEFENDANTS.



The opinion of the court was delivered by: Robson, Senior District Judge.

MEMORANDUM AND ORDER

This cause is before the court on plaintiff's motion for entry of judgment and defendant Georgia Canellis' renewed motion for summary judgment. For the reasons hereinafter stated, the plaintiff's motion for entry of judgment will be granted and the defendant Georgia Canellis' motion for summary judgment will be granted.

The plaintiff United States of America [hereinafter the government] brought this action in order to reduce to judgment federal tax liabilities owed by the defendant George C. Canellis. In accordance with a stipulation by the parties in this cause, it has previously been determined that George C. Canellis owes the government $130,363.04 and that by reason of Internal Revenue Code § 6321 [hereinafter I.R.C. § 6321, the government has lien for this amount against George C. Canellis' property. The government's lien arose at the time it made assessments for Canellis' tax liability in May, 1972. I.R.C. § 6322. The government has now made a motion to foreclose on its lien against George C. Canellis' property, including his 100% beneficial interest in an Illinois land trust. Jurisdiction is invoked pursuant to 28 U.S.C. § 1340 and § 1345 and is undisputed.

Defendant Georgia Canellis, who is George C. Canellis' mother [hereinafter Mrs. Canellis], contests this action against her son only to the extent that she claims a lien prior to the government's lien. Her renewed motion for summary judgment seeks a determination that she has a prior lien in the amount of $30,000. Briefs have been submitted in support, in answer and in reply to her motion.

I. Facts

The relevant facts appear in the oral deposition transcripts of George Canellis and Daniel Parry, various affidavits, photo copies of checks, a promissory note and a deed in trust, as well as the pleadings that have been filed in this case.

Mrs. Canellis' deposition was taken on April 26, 1979. She was then 84 years old and living in a health care facility where she was being treated for severe injuries including head injuries. She speaks no English and testified through a Greek interpreter. She was tired and stated that several times during the deposition. Her exhaustion after direct examination precluded any cross-examination by the government. Although it appears that the deposition was terminated with the understanding that cross-examination would take place another day, that examination apparently has never occurred. In support of its contention no credible evidence exists in the record to conclude that a security interest was intended to be created in Mrs. Canellis' favor, the government asserts that the court has a special need to observe Mrs. Canellis' demeanor during direct and cross-examination. In addition, it asserts that her son was communicating with her throughout the deposition by gesture or by speaking in Greek. The government also asserts that the interpreter was suggesting answers to Mrs. Canellis. Contrary to the government's contention, upon examination of the deposition transcript, the court finds that her testimony was barely coherent. Mrs. Canellis' advanced age and the condition of her health should have precluded the taking of her deposition in the first instance. Based on the plaintiff's attempt to depose her, where everyone present including the government's attorney and her son had great difficulty communicating with her because of her age and ill health, the court would not find her competent to testify at trial. Accordingly, the court has not considered her testimony in connection with the instant summary judgment motion. 6 Moore's Fed. Prac. ¶ 56.11[1.-3] at 56-2002 (2d ed. 1979).

Mrs. Canellis was widowed in May, 1956, and ever since then has maintained separate savings accounts of her own funds. Upon her husband's death, her son George Canellis acquired two laundry businesses founded by his father. From approximately 1960 until July 2, 1971, George Canellis asked his mother to advance him several thousands of dollars for use in the operation of the businesses. She executed cashier's checks made payable to George Canellis and to herself which were allegedly paid to George with the understanding that eventually the funds would be repaid. In approximately June, 1971, George Canellis needed $5,000.00 to meet an upcoming payroll. When he contacted the family's attorney, the advisor, Daniel Parry, about this further advance, Parry suggested that prior to the disbursement of the amount, George Canellis should agree to provide security to his mother for the existing indebtedness and for what became the final advance of $5,000.00. Parry, Mrs. Canellis and her son agreed that although the total indebtedness exceeded $30,000.00, security would be provided for this amount only. To accomplish this purpose, Parry drafted documents necessary to convey George Canellis' fee interest in a residential property at 7424 Kolmar Ave. in Skokie, Illinois, to his mother as trustee of an Illinois land trust in which George Canellis retained the beneficial interest. A deed in trust and trust agreement was executed in Party's office on July 2, 1971. The relevant provision of the trust agreement provides:

  [I]t is hereby agreed between the trustee and the
  beneficiary herein that in the event of the sale of
  this property the trustee shall retain the sum of
  $30,000. from the net proceeds of the sale, being the
  sum the beneficiary has borrowed from the trustee in
  the past few years. If, however, the sale is made
  after the death of said trustee, the sum of $30,000.
  shall be waived and be considered as having been paid
  and the beneficiary shall not be obligated to the
  trustee's estate in any sum whatsoever.

The deed in trust was recorded with the Cook County Recorder of Deeds on July 7, 1971. The following year, in May, 1972, the government made its first assessments against George Canellis for unpaid taxes, giving rise to its lien.

II. Discussion

The instant motion for summary judgment by Mrs. Canellis raises two issues. First, has Mrs. Canellis demonstrated the absence of any genuine issues of material fact on the question of the existence and priority of her lien? Second, if so, is she entitled to summary judgment in her favor? The government asserts that the answer to both questions is no.

A. Availability of Summary Judgment

Mrs. Canellis produced documentary evidence in the form of copies of cashier's checks drawn on the First National Bank of Chicago and payable to George Canellis in the amounts of $10,000.00 and $5,000.00, dated January, 1964 and July 9, 1971, respectively. These documents support her contention that monies were withdrawn and paid by her to her son over a period of years. She also produced copies of two cashier's checks payable to herself drawn in February, 1968, and January, 1969, in the amounts of $2,000.00 and $1,000.00. She produced a copy of a promissory note dated September 22, 1970, evidencing a promise by George Canellis to pay her $10,200.00 on demand at 6% interest. The note and checks total $30,267.00. Finally, the trust agreement previously referred to states that the sum of $30,000. should ...


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