United States v. Spence ( 2000 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
NOV 15 2000
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Counter-
Defendant-Appellee,
v. Nos. 99-2325 & 99-2345
(D.C. No. CIV-98-757-JP)
RAYMOND N. SPENCE; LILA M. (D. N.M.)
SPENCE; GARY WAYNE SPENCE;
VICKI L. SPENCE,
Defendants-Counter-
Claimants-Cross-
Claimants-Appellants,
and
FIRST NATIONWIDE MORTGAGE
CORPORATION,
Defendant,
and
STATE OF NEW MEXICO
DEPARTMENT OF TAXATION &
REVENUE,
Defendant-Counter-
Claimant-Cross-
Defendant-Appellee.
ORDER AND JUDGMENT *
Before BALDOCK , KELLY , and HENRY , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
these appeals. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The cases are
therefore ordered submitted without oral argument.
The United States commenced this action to reduce to judgment federal tax
assessments against Lila and Raymond Spence (collectively, “the taxpayers”). It
also sought to set aside as fraudulent the taxpayers’ conveyance of three parcels
of property located in New Mexico, to foreclose tax liens on those properties, and
to obtain a deficiency judgment for any deficiency remaining after the sale of the
properties. The United States named as defendants in the action all known parties
having an interest in the three parcels of property, including Gary and Vicki
Spence (the taxpayers’ son and daughter-in-law, to whom title to the properties
had been transferred), and the New Mexico Department of Taxation and Revenue
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
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(which had filed its own tax liens against the properties). The taxpayers and Gary
and Vicki Spence filed cross-claims against the New Mexico Department of
Taxation and Revenue seeking to invalidate the State’s tax liens against all of the
taxpayers’ property.
After a bench trial, the district court concluded that the taxpayers were
liable to the United States for federal income taxes for tax years 1979, 1980, and
1981, and that the taxpayers were liable for tax penalties for tax years 1979
through 1986 and 1991. The court further concluded that the transfers of property
from the taxpayers to the Universal Church of Taurus and thence to Gary and
Vicki Spence were fraudulent under New Mexico law and were void as to the
United States. The court concluded that the transfers should be set aside and the
federal tax liens foreclosed on those properties. Accordingly, the court entered
judgment for the United States and against the taxpayers, set aside the property
transfers, and ordered the properties sold to satisfy the federal tax debt.
The taxpayers appealed the district court’s decision, as did Gary and Vicki
Spence, and we consolidated the two appeals for briefing and disposition. We
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exercise jurisdiction over the appeals pursuant to 28 U.S.C. § 1291, 1
and we
affirm in part and reverse in part.
Appellants raise six challenges to the district court’s rulings. First, they
contend that the tax assessments were outside the general three-year limitations
period contained in 26 U.S.C. § 6501(a), and that the United States could not rely
on the exception to the general limitations period for false or fraudulent returns
found in 26 U.S.C. § 6501(c). Second, appellants argue that the district court
should have dismissed the suit because the United States did not present proper
evidence that the suit was authorized by the Secretary of the Treasury, as required
by 26 U.S.C. § 7401. Third, appellants contend that the Universal Church of
Taurus was a necessary and indispensable party that the court should have
required the United States to add as a party-defendant, and that the district court
erred in adjudicating the church’s property rights in its absence. Fourth,
appellants contend that the district court erred in holding the taxpayers liable for
frivolous return penalties under 26 U.S.C. § 6702. Fifth, appellants argue that the
1
We initially questioned whether we had jurisdiction to hear these appeals
because the district court’s decision did not expressly dispose of appellants’
respective cross-claims against the New Mexico Department of Taxation and
Revenue. Accordingly, we ordered appellants to obtain from the district court
and present to this court either an appropriate certification under Fed. R. Civ. P.
54(b) or a final judgment adjudicating all remaining claims. Appellants complied
with our order by obtaining a final order from the district court, which dismissed
the cross-claims as moot. The district court having now adjudicated all the claims
before it, we have jurisdiction to review these appeals under 28 U.S.C. § 1291.
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district court erred in dismissing their respective cross-claims against the New
Mexico Department of Taxation and Revenue as moot, because the claims sought
to invalidate the state’s tax liens on more property than that in which the United
States claimed an interest. Finally, appellants contend that the district court erred
in setting aside the transfers of property because the United States’ fraudulent
transfer claims were extinguished by operation of state law before the United
States filed suit.
The United States refutes all of appellants’ claims, except their fifth
claim–on which the United States takes no position–and portions of their fourth
claim. As to the latter, the United States concedes that judgment should not have
been entered against Raymond Spence for frivolous return penalties for tax years
1979, 1980 and 1981, and that judgment should not have been entered against Lila
Spence for frivolous return penalties for any of the tax years at issue.
We review the district court’s findings of fact for clear error and its
conclusions of law de novo. Tosco Corp. v. Koch Indus., Inc. , 216 F.3d 886, 892
(10th Cir. 2000). We review the district court’s evidentiary rulings for an abuse
of discretion. Faulkner v. Super Valu Stores, Inc. , 3 F.3d 1419, 1433 (10th Cir.
1993). To the extent that appellants’ arguments seek a review of the sufficiency
of the evidence or otherwise require a review of the trial transcript, those
arguments are deemed waived by appellants’ failure to provide us with a
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transcript of the trial, as required by Fed. R. App. 10(b)(1), (2) and 10th Cir. R.
10.1(A)(1). E.g., United States v. Vasquez , 985 F.2d 491, 495 (10th Cir. 1993)
(“By failing to file a copy of the trial transcript as part of the record on appeal,
the appellant waives any claims concerning the sufficiency of the evidence at
trial.”).
We have carefully reviewed each of appellants’ claims and, based upon the
parties’ briefs, the record, and the pertinent law, we conclude that the district
court did not commit reversible error, with the exception of the two points on
which the United States concedes error. The district court’s orders are, therefore,
reversed only as to those two points.
On our view, only appellants’ challenge concerning the government’s
fraudulent conveyance claims warrants further explication. The district court
found the following pertinent facts. The taxpayers purchased the three parcels of
property at issue in 1965, 1976, and 1983, respectively. By March 30, 1983, the
taxpayers had deeded each of the properties to the Universal Church of Taurus, a
sham church they created and used for the purposes of evading taxes. On
March 31, 1988, the taxpayers deeded each of the properties to their son Gary by
special warranty deed. On April 7, 1988, the taxpayers, individually and as
trustees of the church, and Gary and Vicki Spence, as trustees of the church,
deeded each property to Gary by special warranty deed.
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The United States sought to set aside these conveyances, arguing that they
were fraudulent under New Mexico law. The United States relied upon New
Mexico’s Uniform Fraudulent Conveyances Act (“UFCA”), N.M. Stat. Ann.
§§ 56-10-1 to -13 (repealed), which was in effect at the time the transfers were
made. New Mexico repealed its UFCA effective June 16, 1989, and replaced it
with the Uniform Fraudulent Transfer Act (“UFTA”), N.M. Stat. Ann.
§§ 56-10-14 to -25. See 1989 N.M. Laws ch. 382, § 13. The UFTA was the law
in effect when the United States filed suit in June 1998.
The district court concluded that the UFCA, not the UFTA, properly
applied to the United States’ claims because the UFCA was the law in effect at
the time of the conveyances. The court further concluded, however, that it
mattered little which statute applied, because appellants’ conduct was fraudulent
under either statute and there was no material difference between the two
statutes.
Appellants do not challenge the district court’s findings that their conduct
was fraudulent under either statute. Rather, they challenge the court’s
conclusions that the UFCA applied to the United States’ claims and that there is
no material difference between the two statutes. In particular, they argue that the
UFTA contains a claim-extinguishment provision that differs significantly from
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the provisions of the UFCA, and that this provision extinguished the United
States’ fraudulent conveyance claims before it filed suit.
Appellants are correct that the UFTA contains a claim-extinguishment
provision, N.M. Stat. Ann. § 56-10-23, which has no analogue in the UFCA.
Under § 56-10-23, a cause of action for a fraudulent transfer under the UFTA
must be brought within one year or four years after the transfer, depending on the
section under which the claim is brought. In addition,
the UFTA also provides an additional, though shorter, time period to
guard against the potentially harsh application of the four-year
extinguishment provision. The second clause of Section 56-10-23(A)
provides a period of “one year after the transfer or obligation was or
could reasonably have been discovered by the claimant.” The plain
language of the statute makes the one-year “safety valve” limitations
period available to all claimants under the UFTA.
First Southwestern Fin. Servs. v. Pulliam , 912 P.2d 828, 830 (N.M. Ct. App.
1996). Unlike the UFTA, the UFCA does not contain its own statute of repose or
limitation. See N.M. Stat. Ann. §§ 56-10-1 to -13 (1988). Fraudulent conveyance
claims under the UFCA are therefore governed by the four-year statute of
limitations generally applicable to fraud claims. N.M. Stat. Ann. § 37-1-4; Dow
v. Chilili Coop. Ass’n , 728 P.2d 462, 464 (N.M. 1986).
Regardless of which statute of limitations applies, “the United States is not
bound by state statutes of limitation . . . in enforcing its rights.” United States v.
Summerlin , 310 U.S. 414, 416 (1940); see also Bd. of County Comm'rs for
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Garfield County, Colo. v. W.H.I., Inc. , 992 F.2d 1061, 1065 (10th Cir. 1993)
(“[A] state’s statute of limitations does not apply to an action brought by the
federal government to vindicate public rights or public interests, absent a clear
showing of contrary congressional intent.”) (internal quotations and citation
omitted). Instead, the United States is governed by 26 U.S.C. § 6502(a), which
gives the government ten years from the date of the deficiency assessment to
institute a proceeding to collect on the assessment. E.g., Foutz v. United States ,
72 F.3d 802, 803 (10th Cir. 1995). The United States made the first assessment
against the taxpayers on March 29, 1989, and it instituted suit on June 23, 1998.
Accordingly, we need not address the question of retroactivity because the United
States’ fraudulent conveyance claims were timely filed under either statute.
In sum, the district court properly entered judgment against both Lila and
Raymond Spence for federal income taxes for tax years 1979, 1980, and 1981, and
it properly entered judgment against Raymond Spence for civil penalties for tax
years 1982 through 1986 and 1991. The court erred, however, in entering
judgment against Raymond Spence for civil penalties for tax years 1979 through
1981, and in entering judgment against Lila Spence for civil penalties for tax
years 1979 through 1986 and 1991. The court also properly set aside the property
conveyances as fraudulent, foreclosed the federal tax liens against the properties,
and ordered the properties sold.
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Therefore, we REVERSE the district court judgment against Raymond
Spence for civil penalties under 26 U.S.C. § 6702 for tax years 1979 through
1981. We also REVERSE the district court judgment against Lila Spence for
civil penalties under 26 U.S.C. § 6702 for tax years 1979 through 1986 and 1991.
In all other respects, we AFFIRM the district court’s judgment.
Entered for the Court
Bobby R. Baldock
Circuit Judge
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