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United States v. Wesselman

April 22, 2010

UNITED STATES OF AMERICA, PLAINTIFF,
v.
HERMAN A. WESSELMAN, MILLIE WESSELMAN, KENNETH CAYO, AGENT OF THE TRUSTEE(S) OF THE BOUNTEOUS HARVEST TRUST AND THE SALVATION ROCK TRUST, DAVID WESSELMAN, AGENT OF THE TRUSTEE(S) OF THE BOUNTEOUS HARVEST TRUST AND THE SALVATION ROCK TRUST, WILLIAM BRIAN PATRICK DOWLING, TRUSTEE OF THE J.A.W. HOMESTEAD TRUST, FREDERICK V. WEDEMEIER, AGENT OF TRUSTEE(S) OF THE STEWARD OF THE LORD TRUST, VIRGIL STRAUCH, AGENT TRUSTEES OF THE STEWARD OF THE LORD TRUST, ILLINOIS DEPARTMENT OF REVENUE, JOHN DOE 1, TRUSTEE OF THE BOUNTEOUS HARVEST TRUST, JOHN DOE 2, TRUSTEE OF SALVATION ROCK TRUST, JOHN DOE 3, TRUSTEE OF J.A.W. HOMESTEAD TRUST, JOHN DOE 4, TRUSTEE OF STEWARD OF THE LORD TRUST, BOUNTEOUS HARVEST TRUST, SALVATION ROCK TRUST, J.A.W. HOMESTEAD TRUST AND STEWARD OF THE LORD TRUST, DEFENDANTS.



The opinion of the court was delivered by: J. Phil Gilbert District Judge

MEMORANDUM AND ORDER

This matter comes before the Court on the second motion of the plaintiff United States of America for summary judgment (Doc. 151). The United States seeks summary judgment against defendant Herman A. Wesselman ("Taxpayer") on Count II, a claim for foreclosure of properties allegedly owned by the Taxpayer. The Taxpayer has responded to the motion (Doc. 152),*fn1 and the United States has replied to that response (Doc. 153).

I. Background

On August 18, 2005, the United States filed this suit under 26 U.S.C. § 7403 to collect allegedly unpaid federal taxes. On August 5, 2008, the Court entered judgment on Count I in favor of the United States in the amount of $1,769,148.31, plus penalties and interest that continue to accrue after June 25, 2008, for unpaid and previously assessed federal income taxes, federal employment taxes, and federal unemployment taxes from the 1991, 1992, 1993, 1994, 1995, 1996, 1997, and 2000 tax periods.

The United States now seeks to collect that judgment through foreclose on two properties:

906 S. Cherry St. 505 Clinton Effingham, Illinois Effingham, Illinois The Taxpayer used to own these properties but, at some point after the Internal Revenue Service ("IRS") began an audit of the Taxpayer's finances in 1993, purported to transfer in a series of transactions the Cherry Street property to the Bounteous Harvest Trust and the Clinton property to the Salvation Rock Trust. The United States believes the trusts are mere nominees of the Taxpayer, who continues to control and enjoy the properties.

In response, the Taxpayer argues that a refund from his 2007 tax return should be applied to offset his entire liability in this case and that foreclosure is therefore not appropriate in light of the fact that all liens against his property have been satisfied. Notably, he does not contest that the Bounteous Harvest Trust and the Salvation Rock Trust are his nominees.

II. Summary Judgment Standard

Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes Wheels Int'l-Ind., Inc., 211 F.3d 392, 396 (7th Cir. 2000). The reviewing court must construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Spath, 211 F.3d at 396.

Where the defendant is the moving party and does not have the burden of proving the claim at trial, its motion need not negate an element of the plaintiff's case. Celotex, 477 U.S. at 323. It is sufficient if the motion points to the absence of evidence in support of a critical element of the plaintiff's case. Id. The plaintiff must then present evidence from which a reasonable factfinder could find it can establish that critical element. Id. at 323-24.

However, where the plaintiff is the moving party and bears the burden of proving the claim at trial, as in this case, it must affirmatively establish that no reasonable factfinder could fail to find in its favor and that it is entitled to judgment. See Anderson, 477 U.S. at 252 ("[T]he inquiry involved in a ruling on a motion for summary judgment . . . necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits."); Firemen's Fund Ins. Co. v. Thien, 8 F.3d 1307, 1310 (8th Cir. 1993); 11 James Wm. Moore, et al., Moores Federal Practice § 56.11[1][b] (3d ed. 2010). The defendant must then present conflicting evidence or show that the moving party's evidence is insufficient to establish its entitlement to judgment. International Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991).

III. Facts

In 1979, the Taxpayer acquired sole ownership of the Clinton property. In 1988, the Taxpayer and Millie Wesselman, his wife, became joint owners of the Cherry Street property, where they lived. In April 1994, shortly after the IRS began an audit of the Taxpayer's financial dealings in 1993, the Taxpayer and Millie transferred the properties to the East Gate Trust. The respective deeds state that the consideration for transfer of the Cherry Street property was the extinguishment of a $95,000 debt and for transfer of the Clinton property was the extinguishment of a $42,000 debt, both debts having arisen from prior mortgage loans from the East Gate Trust. Neville Solomon signed the deeds as trustee of the East Gate Trust. Solomon was a preacher of the Believer's Fellowship Church, and encouraged the Taxpayer and other parishioners of the church not to pay federal income taxes.*fn2 No real estate transfer tax stamps were affixed to the instrument of conveyance.

In March 1995, the East Gate Trust transferred the Cherry Street property to the New Republic Trust #3194 in exchange for a silver coin plus either $90,537 or some quantity of "Type III Federal Reserve Notes." The Clinton property was similarly conveyed for a silver coin plus either $32,655 or some quantity of "Type III Federal Reserve Notes." Pat Niemeyer signed the deeds as trustee of the East Gate Trust, and with respect to the Clinton Property, John F. Koester signed the deed as trustee of the New Republic Trust #3194. Niemeyer and Koester were parishioners at the Believer's Fellowship Church. Koester is married to ...


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