the Millers' activities with respect to the property were regular and continuous and designed to produce income.
Inasmuch as the Millers claimed deductions of expenses on their tax returns, they gained a benefit of, at least, reduction of their tax obligations, and the activity was regular and continuous and designed to produce income, the above-cited authorities lead to the conclusion that the Millers engaged in a trade or business under section 1301(b)(1).
C. LIABILITY OF IDA MILLER
The final issue is the liability of Ida Miller. Defendants contend that even if the rental of the house constituted a trade or business, Ida Miller cannot be held personally liable for the withdrawal liability because she was not a partner in the business. The Fund argues that the evidence shows that Ida Miller intended to be a de facto partner in the leasing enterprise and is therefore equally personally liable for the withdrawal liability.
Defendants rely on Johnson, 991 F.2d at 387, to support their view that Ida Miller did not intend to be a partner with her husband and is thus not liable to plaintiffs. In Johnson, the court held that both spouses will be liable for a business's unmet pension obligations only when they intended to be partners in that enterprise. Id. at 391-92. See also Chicago Truck Drivers, Helpers & Warehouse Workers Union Pension Fund v. Rose Steinberg, 32 F.3d 269, (7th Cir. 1994); Chicago Truck Drivers, Helpers & Warehouse Workers Pension Fund v. Slotky, 9 F.3d 1251, 1253 (7th Cir. 1993). In Johnson, Johnson leased to a controlled group entity a building and a semi-tractor of which he was the owner of record. Id. at 388. The district court held this leasing enterprise a trade or business under common control with the withdrawing corporation and, because Johnson owned the enterprise, he was personally liable for the obligation. Id. at 389. The Fund also sued Johnson's wife in order to make a claim against the marital home. Under Indiana law, the Fund had to establish that the couple were jointly liable in order to reach this property. Thus her participation in her husband's business affairs was relevant. The district court found that the money used to purchase the building and semitractor came out of the couple's joint bank accounts, that the rental income produced by the leasing activities was deposited into joint accounts, and that the couple claimed deductions from their combined gross income on their joint federal tax return based on the leasing activities. Id. The court of appeals reversed summary judgment in favor of the wife on the basis that a genuine issue of fact concerning intent existed.
Neither party in this case asserts that an issue of fact exists; rather, each side believes the facts demonstrate that it is entitled to judgment -- plaintiffs believe they show intent to form a partnership and defendants believe they show lack of intent. Defendants point to Ida Miller's lack of involvement in the rental activity. Ida Miller did not recall receiving or depositing rent checks or spending the money received from the rental. On the other hand, the Fund of evidence indicating that Ida Miller intended to form a partnership with her husband. The house was purchased with funds jointly owned by the Millers; Ida Miller was a record owner of the property; and losses from the business were taken as deductions from the couple's joint income tax returns.
Ida Miller signed a number of documents relating to the property, such as the listing contract, a settlement statement regarding the sale, an agreement to make certain modifications to the property, an "FHA Amendment," closing documents regarding the sale and mortgage documents.
Perhaps most instructive is the reference in Johnson to Connors v. Ryan's Coal Co., 923 F.2d 1461 (11th Cir. 1991), which held a wife liable based on her partnership interest in a cattle farm jointly owned with her husband. The wife had not executed a formal partnership agreement and she claimed little involvement in the cattle farm, but the court decided that a partnership existed on the basis that the cattle farm operation paid property taxes and made mortgage payments on the farm land owned jointly by the couple, and the couple took those mortgage payments as deductions on their joint tax return. "The court acknowledged that co-ownership of property without more does not create a partnership. But it found that the facts in [that] case -- especially the sharing of business profits and losses -- supported a determination that [the couple] intended to be partners." Johnson, 991 F.2d at 392.
Here, Ida Miller admits that she shared her husband's intention to buy the house for her daughter's use, and she later shared in the profits and losses from the rental and sale after the original intention was derailed. The fact that Ida Miller did not involve herself in the leasing does not separate her from the Connors principle that the sharing of business profits and losses supports a determination of partnership, especially where there was in total little activity respecting the real estate. Here, of course, it is the additional fact that Ida Miller was an owner of record. The facts stated in a light favorable to the Millers point to the conclusion that Ida Miller intended to be a partner in the enterprise.
CONCLUSION AND ORDER
In summary, the court concludes that there is no genuine issue of material fact that the withdrawal liability was properly assessed, that the Millers' leasing activity was under common control with the withdrawn corporation, that the leasing activity constituted a trade or business, and that Ida Miller was a partner in the enterprise. Under the decisions of the Court of Appeals for the Seventh Circuit, plaintiffs are entitled to judgment as a matter of law against Robert Miller and Ida Miller for the withdrawal liability.
For these reasons, plaintiffs' motion for summary judgment is granted and defendants' motion for summary judgment is denied. Plaintiffs are directed within 30 days to file a motion for entry of judgment setting out the various elements of their proposed judgments. The parties are directed to use their best efforts to agree on the amount of the judgment so as to avoid further delay in final disposition of this matter.
JOAN HUMPHREY LEFKOW
United States Magistrate Judge
Dated: October 18, 1994