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United States of America v. Capital Tax Corporation

April 16, 2012

UNITED STATES OF AMERICA, PLAINTIFF,
v.
CAPITAL TAX CORPORATION, STEPHEN J. PEDI, WILLIAM LERCH, AND MERVYN DUKATT, DEFENDANTS.



The opinion of the court was delivered by: Judge George M. Marovich

MEMORANDUM OPINION AND ORDER

After the Environmental Protection Agency ("EPA") spent more than $2,000,000.00 removing hazardous waste from the Site of an old paint factory, plaintiff the United States of America ("United States" or the "government") filed suit, in 2004, against defendants Capital Tax Corporation ("Capital Tax"), Stephen J. Pedi, Frank Pedi and William Lerch ("Lerch"). In its complaint, the United States asserted claims arising under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601-9675. Defendants Frank Pedi and Stephen J. Pedi settled with the government. In October 2007, this Court entered judgment in favor of the plaintiff and against defendants Capital Tax and Lerch. The Court had concluded, among other things, that Capital Tax was an owner and, therefore, strictly liable to reimburse the government for its response costs. Capital Tax appealed, arguing, among other things, that it had reached an agreement with Mervyn Dukatt ("Dukatt") to sell the property to Dukatt and, therefore, was not the owner. The Seventh Circuit remanded for consideration of a discrete issue: whether or not Capital Tax and Mervyn Dukatt ("Dukatt") entered a valid, oral agreement for the purchase of the relevant parcels, such that an equitable conversion had occurred and Capital Tax was not an "owner" of the Site. Fifteen months after the Seventh Circuit's remand, the United States sought leave to amend the complaint to add Dukatt as a defendant, and the Court allowed it.

Dukatt now moves for summary judgment on his statute-of-limitations affirmative defense. Dukatt believes that the government's claims against him are barred by CERCLA's three-year statute of limitations. The United States argues that Dukatt is equitably estopped from asserting the statute of limitations defense. For the reasons set forth below, the Court grants Dukatt's motion for summary judgment.

I. Background

Local Rule 56.1 outlines the requirements for the introduction of facts parties would like considered in connection with a motion for summary judgment. The Court enforces Local Rule 56.1 strictly. Facts that are argued but do not conform with the rule are not considered by the Court. For example, facts included in a party's brief but not in its statement of facts are not considered by the Court, because to do so would rob the other party of the opportunity to show that such facts are disputed. Where one party supports a fact with admissible evidence and the other party fails to controvert the fact with citation to evidence admissible for summary judgment purposes, the Court deems the fact admitted. See Ammons v. Aramark Uniform Services, Inc., 368 F.3d 809, 817-818 (7th Cir. 2004). At the summary judgment stage, it is not sufficient merely to deny a fact or to claim a lack of knowledge. The non-moving party must come forward with contrary evidence. This, however, does not absolve a party of its initial burden of putting forth admissible evidence to support his or its facts. Asserted "facts" not supported by deposition testimony, documents, affidavits or other evidence admissible for summary judgment purposes are not considered by the Court.

Unless otherwise noted, the following facts are undisputed.

Capital Tax was in the business of buying properties and, hopefully, reselling them for a profit. One of the ways Capital Tax obtained properties was by bidding at property tax "scavenger sales" to obtain the tax deeds to properties. The Site at issue in this case contains parcels for which Capital Tax bid on and obtained the tax deeds.

On or about June 17, 2004, the EPA completed its clean-up at the Site. On June 21, 2004, the United States filed its original complaint. Capital Tax answered on August 20, 2004 and, in its answer, admitted ownership of the Site.

The original parties engaged in discovery. For example, in January and February of 2006, the United States deposed Dukatt, Timothy Balin (of Capital Tax) and Jonathan Smith (of Capital Tax). From these three men, the government obtained different stories about whether Dukatt had agreed to purchase the Site parcels from Capital Tax.

Tim Balin testified, "Capital Tax isn't in the business to buy Mervyn Dukatt property. It's in the business to buy Gil Balin, Jonathan Smith and Tim Balin property and make a profit. And if it so happens to sell something to Mervyn Dukatt, it happens. We're not in the business to get property for Mervyn to go in there and, you know, prior to buy it from us, no." Tim Balin also testified that Capital Tax was responsible for the parcels as an owner and that Dukatt "was going to buy the property." In its interrogatories, Capital Tax stated that, "once it gained access to its parcels, it was to sell its parcels to Mr. Dukatt." Smith agreed that Dukatt "was going to buy the property from us." Still, neither Smith nor Tim Balin could state an exact purchase price, the particular parcels involved in the sale agreement or whether Dukatt actually paid the purchase price.

When Dukatt was deposed, he testified that he did not reach an agreement with Capital Tax to buy the property. Dukatt explained that he had been interested in a portion of the Site, parcel 12, where he hoped to move his office. Dukatt testified that he ultimately passed on the property, because his wife did not like it.

Discovery also turned up evidence that Dukatt had been to the Site many times, but Dukatt testified that he was there as an agent of Capital Tax. Tim Balin, too, testified that Dukatt was not free to do as he wished at the parcels, because the parcels belonged to Capital Tax.

In January 2007, this Court entered partial summary judgment on the merits in favor of the government and against Capital Tax and Lerch for the reasons set out in its memorandum opinion. After the Court entered final judgment in September 2007, Capital Tax appealed. The Seventh Circuit remanded so that the Court could consider whether Capital Tax and Dukatt had reached a valid, oral agreement for the sale of some of the parcels at the Site. The parties requested time for additional discovery, and the Court reopened discovery. By this time, the statute of limitations had run, and Dukatt changed his tune.

After discovery reopened, Capital Tax produced to the government an affidavit, which was signed by Dukatt and which Dukatt described as a "truthful affidavit." In the affidavit, Dukatt states that he had reached an agreement with Capital Tax whereby he (or an entity he controlled) would pay Capital Tax all of the costs and taxes incurred in the scavenger tax sale process plus an additional $25,000.00 in order to obtain parcels 5, 9, 11, 26 and 12. Dukatt testified that when the EPA became involved with the Site, he "reneged" on the deal and told Gilbert Balin that he no longer wanted the property. Dukatt admitted that he disclaimed ownership after learning about the EPA's involvement and the potential for liability. Dukatt explained that, ...


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