UNITED STATES OF AMERICA, Plaintiff, vs. BARTLE, JOHN W, BARTLE, REBECCA MCCOWAN, BARTLE, WHITNI, BARTLE, PAIGE, FIRST HEALTH CORPORATION, INVERNESS CORPORATION, HAMMES, JOSEPH W TRUSTEE FOR THE BANKRUPTCY ESTATE OF DELMAR LIMITED PARTNERSHIPS, Defendants., UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION, IP 01-0768-C B/S, January 16, 2002

UNITED STATES OF AMERICA, Plaintiff, vs. BARTLE, JOHN W, BARTLE, REBECCA MCCOWAN, BARTLE, WHITNI, BARTLE, PAIGE, FIRST HEALTH CORPORATION, INVERNESS CORPORATION, HAMMES, JOSEPH W TRUSTEE FOR THE BANKRUPTCY ESTATE OF DELMAR LIMITED PARTNERSHIPS, Defendants.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

IP 01-0768-C B/S

January 16, 2002

NON PUBLISHED OPINION

NOT INTENDED FOR PUBLICATION IN PRINT

USA v. Bartle

Judge Sarah Evans Barker

CAUSE NO. IP01-0768-C-B/S

Douglas Snoeyenbos

Trial Attorney Tax Division

United States Department of Justice

P O Box 55 Ben Franklin Station

Washington, DC 20044

David B Hughes

Hughes & Miller

10401 North Meridian Street, #202

Indianapolis, IN 46290-1125

Patricia McCrory

Harrison & Moberly

2100 First Indiana Plaza

135 N Pennsylvania Street

Indianapolis, IN 46204

Stephen K Miller

Hughes & Miller

Suite 202

10401 North Meridian Street

Indianapolis, IN 46290

Charles R Whybrew

Tabbert Hahn Earnest & Weddle LLP

One Indiana Square Suite 2100

Indianapolis, IN 46204

UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

UNITED STATES OF AMERICA, Plaintiff, vs. JOHN W. BARTLE, et al., Defendants.

IP 01-0768-C-B/S

═

ENTRY GRANTING MOTION FOR SUMMARY JUDGMENT

This matter comes before the Court on the Government's Motion for Summary Judgment seeking foreclosure of federal tax liens against stock in First Health Corporation and Inverness Corporation as assets of John Bartle, based on federal taxes assessed against Bartle on February 2, 1994. For the reasons set forth below, we GRANT the Government's Motion for Summary Judgment and order the appointment of a receiver to oversee the disposition of the specified corporate assets.

Factual Background

John Bartle and Rebecca McCowan Bartle are husband and wife, residing at 16535 East 114 ^th Street, Fishers, Indiana. ¹ Compl. ╤ 2. In 1992, John Bartle resided at 9724 Gulfstream Drive, Fishers, Indiana, while maintaining his business address at 421 South Walnut Plaza, Muncie, Indiana. Aff. of John Bartle ╤ 1. Individual Income Tax Returns for tax years 1992, 1993, 1994 and 1997 bore John Bartle's Muncie business address. Supp. Decl. of Douglas W. Snoeyenbos, Exs. 4-8.

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¹ Whitni Bartle Jentes and Paige Bartle, children of John Bartle, are also named as defendants in this action based on their status as shareholders in the corporations at the heart of this foreclosure action. Compl . ╤ 6.

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On February 2, 1994, a delegate of the Secretary of the Treasury made the following assessments against John Bartle pursuant to 26 U.S.C. ╖ 6672: $489,154.71; $25,785.11; and $417,683.75. Pl's Statement of Material Facts ╤╤ 1-3. These amounts were assessed for John Bartle's alleged failure "to collect, truthfully account for, or pay over income and FICA taxes due and owing from wages of the employees" of Elkhart Investors, Ltd., Delmar, Ltd., and Health Care Affiliates for specified quarters of 1990, 1991, and 1992. Id . On April 12, 1994, the Government filed a Notice of Federal Tax Lien with the recorder in Muncie, Delaware County, Indiana, listing John Bartle's address as 421 South Walnut, Muncie, Indiana, the same address reflected on Bartle's 1992, 1993, 1994, and 1997 tax returns. Decl. of Snoeyenbos, Exs. 4-8.

Immediately prior to April 1, 1996, John Bartle owned at least 96 of the 100 issued and outstanding shares of stock in Inverness Corporation. Pl's Statement of Material Facts ╤ 7. On April 1, 1996, John Bartle assigned 48 shares of stock in Inverness to Rebecca Bartle, "in consideration of mutual promises and covenants set forth herein, along with one dollar ($1.00) and other valuable consideration." Decl. of Snoeyenbos, Ex. 2. Immediately prior to October 1, 1998, John Bartle owned at least 95 of the 100 issued and outstanding shares of stock in First Health Corporation. Pl's Statement of Material Facts ╤ 6. On October 1, 1998, John Bartle transferred to Rebecca Bartle one half of his shares in First Health "for good and valuable consideration." Decl. of Snoeyenbos, Ex. 1. As of March 1, 1999, shareholders of Inverness Corporation included John Bartle, Rebecca Bartle, Whitni Bartle Jentes and Paige Bartle. Pl's Statement of Material Facts ╤ 8.

On November 2, 1999, this court entered judgment in favor of the Government and against Bartle for the unpaid balance of the aforementioned federal tax assessments. Id . ╤ 5. To date, certain portions of these assessments remain unpaid. Id . ╤ 4. The Government alleges, and Defendants neither confirm nor deny, that the amount due totals $1,674,655.98 plus interest and other statutory additions accruing after April 24, 2001. D's Response to Pl's Statement of Material Facts ╤ 4.

On June 15, 2001, the parties entered into an agreed preliminary injunction, restricting distribution of the corporations' assets in anticipation that such assets may be used to satisfy the assessments against John Bartle. On July 19, 2001, the Government filed the present Motion for Summary Judgment, seeking foreclosure on the federal tax liens against John Bartle and the appointment of a receiver for the disposition of corporate assets to satisfy those liens. ²

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² Defendants Rebecca Bartle, Whitni Bartle Jentes and Paige Bartle request in their opposition brief that the Court "sustain [the] Cross-Motion for Summary Judgment, and grant all other just and proper relief." However, no cross motion for summary judgment has yet been filed or docketed with the Court. Therefore, we confine our focus to the Government's motion for summary judgment previously filed and fully briefed.

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Standard of Review

Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue of material fact exists if there is sufficient evidence for a reasonable jury to return a verdict in favor of the non-moving party on the particular issue. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986). The nonmovant must establish more than mere doubt as to the material facts, but must "adduce evidence ▒set[ting] forth specific facts showing that there is a genuine issue for trial.'" Fed. R. Civ. P. 56(e); Packman v. Chicago Tribune Co. , 267 F.3d 628, 6374 (7 ^th Cir. 2001). The mere existence of a factual dispute will not bar summary judgment; the facts in dispute must be outcome-determinative. Id . In considering a motion for summary judgment, a court must review the record and draw all reasonable inferences in the light most favorable to the non-moving party. Id . at 255; Del Raso v. U.S. , 244 F.3d 567, 570 (7 ^th Cir. 2001). "If the non-movant does not come forward with evidence that would reasonably permit the finder of fact to find in [his] favor on a material question, then the court must enter summary judgment against [him]." Waldridge v. American Hoechst Corp. , 24 F.3d 918, 920 (7 ^th Cir. 1994), citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 585-87 (1986); Celotex Corp. v. Catrett , 477 U.S. 317, 322-24 (1986); Anderson , 477 U.S. at 249-52. A self-serving affidavit, unsupported by specific concrete facts reflected in the record, cannot preclude summary judgment. Albiero v. City of Kankakee , 246 F.3d 927, 933 (7 ^th Cir. 2001); Slowiak v. Land O'Lakes, Inc., 987 F.2d 1293, 1295 (7 ^th Cir. 1993).

Legal Issues

The Government asserts, and Defendants dispute, that notice of the federal tax assessments and demands for their payment were sent to John Bartle's last known address, in compliance with the notice requirements of 26 U.S.C. ╖ 6303(a). The statute provides, in relevant part:

[T]he Secretary shall, as soon as practicable, and within 60 days, after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person's last known address.

26 U.S.C. ╖ 6303(a). If using the taxpayer's last known address, the IRS must exercise reasonable diligence in attempting to discover such address. Eschweiler v. U.S., 946 F.2d 45, 48 (7 ^th Cir. 1991); McPartlin v. Commissioner , 653 F.2d 1185, 1189 (7 ^th Cir. 1981). The Seventh Circuit has held that, to meet this obligation, the IRS may properly rely on the "address found in the return being audited, unless there is ▒clear and concise notification from the taxpayer directing the Commissioner to use a different address.'" Eschweiler , 946 F.2d at 48, quoting Goulding v. U.S. , 929 F.2d 329, 331 (7 ^th Cir. 1991).

Defendants do not contend that Bartle never received notice, ³ but that " [m]ailing of the notice to the usual place of business , which was the Muncie address, does not satisfy the statutory notice and demand requirements that such notice must be left at a business." This reading of the statute ignores the final option the statute provides for effecting notice of an assessment and the very method of serving notice that the Government contends it used √ mailing notice to the subject's last known address.

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³ The Government suggests that the Court should draw an adverse inference from Mr. Bartle's failure to testify as to whether he received the notices of assessment, presumably based on the "missing witness" rule. However, the Seventh Circuit has repeatedly expressed reluctance to apply this rule in such a mechanical fashion, at least in the labor law context. Multi-Ad Servs., Inc. v. NLRB , 255 F.3d 363, 372 n.1 (7 ^th Cir. 2001); NLRB v. Louis A. Weiss. Mem'l Hosp., 172 F.3d 432, 445-46 (7 ^th Cir. 1999). Therefore, instead of drawing any dispositive inferences based on this lack of evidence, we will simply factor the evidentiary gap into our summary judgment analysis regarding issues of material fact.

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Defendants offer no evidence to refute the contention that the IRS sent notice to anywhere other than to John Bartle's Muncie address, which he provided to the IRS on his individual tax returns for tax years 1992, 1993, 1994 and 1997, as would be permitted by the terms of the statute. To the contrary, Defendants' argument seems to rely on the assumption that the Government did mail the notices to the Muncie address. Even taken in the light most favorable to Defendants, the record does not undermine the Government's assertion (supported by the sworn statement of IRS technical support advisor Louis Leach) that it properly gave notice by mailing the notices to John Bartle's last known address. Therefore, we find that by mailing the notices of assessment to John Bartle's Muncie address, the address Bartle had repeatedly used in his filings with the IRS, the Government properly met the statutory notice requirements.

Defendant further argues that the transfers of shares to Rebecca Bartle must take priority over the Government's liens because Rebecca Bartle qualifies for protection as a purchaser under 26 U.S.C. ╖ 6323 and the Government failed to satisfy the filing requirements of 26 U.S.C. ╖ 6323(f)(2)(B) necessary to trump her interest. The Government counters that the filing location is irrelevant because Rebecca Bartle was not entitled to priority as a purchaser because she did not give full and adequate consideration in exchange for the transferred shares.

To protect certain parties from the encumbrances created by existing federal tax liens, 26 U.S.C. ╖ 6323 offers protection for specified classes of interest-holders. Specifically, purchasers take priority over federal tax liens until such liens are filed according to the requirements of 26 U.S.C. ╖ 6323(f). Even if properly filed, such liens do not affect the interests of purchasers who do not have actual notice or knowledge of the existence of the lien at the time of purchase. ⁴ 26 U.S.C. ╖ 6323(b)(1)(A). To qualify for this statutory priority, a purchaser must give "adequate and full consideration in money or money's worth" for the acquired interest. Id . ╖ 6323(h)(6). "Adequate and full consideration" requires "consideration in money or money's worth having a reasonable relationship to the true value of the interest in the property acquired." 26 C.F.R. ╖ 301.6323(h)-1(f)(3). The regulations define "money or money's worth" as "tangible or intangible property, services and other consideration reducible to a money value," but not "any other consideration not reducible to a money value." Id . ╖ 301.6323(h)-1(a)(3). The question of adequacy of consideration typically turns on factual issues. Schoppert v. CCTC Int'l, Inc., 972 F. Supp. 444, 447 (N.D. Ill. 1997). The burden of proof as to adequate consideration rests on the party seeking purchaser status. A & B Steel Shearing & Processing, Inc. v. U.S., 934 F. Supp. 254, 257 (E.D. Mich. 1996); U.S. v. McCombs , 928 F. Supp. 261, 267 (W.D.N.Y. 1995).

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⁴ Although we need not decide the notice issue in determining whether Rebecca Bartle qualifies for the statutory protection, the Court notes that given Rebecca Bartle's status as spouse and cohabitant with John Bartle, the sequence of events underlying John Bartle's federal tax liens and the amounts involved could not reasonably have escaped her attention.

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Defendants submit affidavits asserting that Rebecca Bartle "received her shares of stock in Inverness Corporation both for cash consideration and guaranteeing millions of dollars of corporate debt of Inverness Corporation" and "received her shares of stock in First Health Corporation because an estimated ninety percent of the income received by the corporation is directly related to her work as a consultant and the work of consultants under her guidance." These are relatively vague descriptions of facts that would seem to be readily susceptible to proof. However, despite providing lengthy descriptions of Ms. Bartle's qualifications to serve in a health care administration capacity, Defendants' affidavits provide no specific facts establishing the money value of Rebecca Bartle's services or even whether the shares received by Rebecca Bartle were compensation for future obligations or past services. ⁵ Defendants' failure to reduce this amount to money value leaves the Court unable to evaluate whether Rebecca Bartle's services bore a reasonable relationship to the value of the shares she received, and, therefore, whether she in fact qualified for statutory protection as a purchaser. Because Defendants have not offered specific factual evidence tending to prove that Rebecca Bartle qualified for protection as a purchaser with regard to the federal tax liens that arose in this case (other than vaguely factual, conclusory statements by John and Rebecca Bartle), we find Defendants' arguments as to the filing requirements for these liens to be moot. Accordingly, summary judgment is GRANTED in favor of the United States and the federal tax liens on John Bartle's interests in the Inverness Corporation and First Health Corporation as of the dates of the assessments are hereby foreclosed free and clear of any of the rights, title, claims, or interests of any other party in this action.

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⁵ Under Indiana law, past consideration is not sufficient to support a new obligation. Comstock v. Coon , 35 N.E. 909, 911 (Ind. 1893); Field v. Alexander & Alexander of Indiana, Inc., 503 N.E.2d 627, 631 (Ind. Ct. App. 1987).

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Finally, the Government seeks appointment of a receiver to arrange for the sale of all the stock or assets of the Inverness Corporation and First Health Corporation. Defendants stress the extraordinary nature of receivership as a remedy under Indiana law, primarily in the realm of actions for corporate mismanagement. However, Defendants make no argument regarding the standard for the appointment of a receiver under federal law, specifically 26 U.S.C ╖ 7402(a), the legal basis for the Government's request. The statute directs courts to appoint receivers "as may be necessary or appropriate for the enforcement of the internal revenue laws." 26 U.S.C. ╖ 7402(a). This provision has been construed broadly, to allow courts the full panoply of remedies necessary to effectuate the enforcement of the federal tax laws. U.S. v Raymond , 78 F. Supp. 2d 856, 877 (E.D. Wis. 1999), citing Brody v. U.S. , 243 F.2d 378, 384 (1st Cir. 1957). Pursuant to the exigencies here and the clear authorization set forth in this statutory directive, we hereby order the appointment of a receiver, the identity and compensation of which shall be established by a future order of this court, to oversee the disposition of the assets of First Health Corporation and Inverness Corporation for the satisfaction of the liens against John Bartle foreclosed upon by the Government by the terms of this Order.

Conclusion

The Government moved for summary judgment regarding foreclosure on federal tax liens against Defendant John Bartle. Defendants argued that alleged notice and filing deficiencies should preclude the grant of summary judgment in favor of the Government and that receivership was an inappropriate remedy in this case. For the foregoing reasons, we find that 1) Defendants have not set forth specific facts suggesting any genuine issue of material fact with regard to the notices of assessments mailed to John Bartle's Muncie address; 2) Rebecca Bartle has not provided facts sufficient to find that she qualified for priority as a purchaser under 26 U.S.C. ╖ 6323; and 3) receivership is proper under 26 U.S.C. ╖ 7402. Accordingly, we GRANT summary judgment for the Government in this matter. In addition, we order the appointment of a receiver to oversee the disposition of stock and assets of the Inverness Corporation and First Health Corporation, the specifics of which appointment shall be outlined in a future order.

It is so ORDERED this day of January 2002.

SARAH EVANS BARKER, JUDGE

United States District Court

Southern District of Indiana

Copy to:

B Douglas Snoeyenbos

Trial Attorney Tax Division

United States Department of Justice

P O Box 55 Ben Franklin Station

Washington, DC 20044

David B Hughes

Hughes & Miller

10401 North Meridian Street, #202

Indianapolis, IN 46290-1125

Patricia McCrory

Harrison & Moberly

2100 First Indiana Plaza

135 N Pennsylvania Street

Indianapolis, IN 46204

Stephen K Miller

Hughes & Miller

Suite 202

10401 North Meridian Street

Indianapolis, IN 46290

Charles R Whybrew

Tabbert Hahn Earnest & Weddle LLP

One Indiana Square Suite 2100

Indianapolis, IN 46204

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