Court Opinion

ID: 4332662
Source: CourtListenerOpinion
Date Created: 2018-11-14 00:48:11.960696+00
Date Added: 2024-06-11T14:20:31.174402
License: Public Domain

PHOTO ART MARKETING TRUST, JOHN P. WILDE, CO-TRUSTEE, AND PHOTO ART PUBLISHING TRUST, JOHN P. WILDE, CO-TRUSTEE, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, RespondentPhoto Art Mktg. Trust v. CommissionerNo. 20582-98United States Tax CourtT.C. Memo 2000-65; 2000 Tax Ct. Memo LEXIS 72; 79 T.C.M. 1571; February 29, 2000, Filed 2000 Tax Ct. Memo LEXIS 72">*72  An order of dismissal for lack of jurisdiction granting respondent's motion will be entered.  John P. Wilde, for petitioners.David W. Otto and Doreen M. Susi, for respondent.  Chiechi, Carolyn P.CHIECHIMEMORANDUM OPINIONCHIECHI, JUDGE: This case is before the Court on respondent's motion to dismiss for lack of jurisdiction (respondent's motion). We shall grant respondent's motion.BACKGROUNDFor purposes of respondent's motion, the parties do not dispute the following factual allegations that are part of the record. At all relevant times, each petitioner was a trust organized under the laws of the State of Arizona and was engaged in business in that State.Upon commencement of the examination of each petitioner's taxable years 1995 and 1996, respondent requested that each petitioner provide respondent with complete copies of the trust documents relating to each such petitioner as well as other items of substantiation. Each petitioner refused to provide respondent with the trust documents and other information requested.At the time respondent issued the notice of deficiency (notice) to each petitioner, respondent's address records indicated an entity named2000 Tax Ct. Memo LEXIS 72">*73  D & E Sword Co. as the trustee for each petitioner. Respondent's address records were not based on any trust documents or other legal documents submitted by each petitioner that could constitute credible evidence regarding who was/is the trustee of each petitioner. Instead, respondent's address records were prepared and updated in accordance with respondent's procedures and were based solely on correspondence submitted by each petitioner which alleged that D & E Sword Co. was the trustee for each petitioner.The notice issued to petitioner Photo Art Marketing Trust was addressed as follows:   PHOTO ART MARKETING TRUST   SWORD D & E CO-TTES   P.O. BOX 4047   SEDONA, AZ 86340-4047 473The notice issued to Photo Art Publishing Trust was addressed as follows:   PHOTO ART PUBLISHING TRUST   D & E SWORD TRUSTEE CO TTEE   P.O. BOX 4047   SEDONA, AZ 86340-4047 473Photo Art Marketing Trust and Photo Art Publishing Trust jointly filed a petition in this Court. That petition was signed on behalf of Photo Art Marketing Trust and Photo Art Publishing Trust by John P. Wilde (Mr. Wilde), as "co-Trustee of Photo Art Marketing Trust and Photo2000 Tax Ct. Memo LEXIS 72">*74  Art Publishing Trust".Respondent's motion contends in pertinent part:     7. Arizona law provides that the trustee has the   capacity to institute court proceedings on behalf of   the trust. A.R.S. section 14-7233 C. 25. However, Mr. Wilde   has not demonstrated with credible evidence that he is   a Co-Trustee of the [petitioner] trusts with capacity   to bring the instant action.     *     *     *     *     *     *     *     11. Moreover, respondent's counsel contacted the   Arizona Corporation Commission to determine the   existence/validity of the entity called D & E Sword Company.   The Corporation Commission informed respondent's   counsel that it had no record of any entity by that   name ever existing in the State of Arizona. Further, the   Corporation Commission informed respondent's counsel that it   had no record of any entity incorporated in Arizona under the   name of, or in reference to, an individual named John P. Wilde.     12. There is absolutely no evidence from which the Court   can adduce2000 Tax Ct. Memo LEXIS 72">*75  that there has been a legal assignment of John P.   Wilde as the Co-Trustee of either of the petitioner trusts.     13. Petitioners have provided no evidence that Mr. Wilde's   appointment as Co-Trustee is valid or authorized under the terms   of the trust indentures (assuming they exist).     14. At a minimum, petitioners should be required to provide   complete copies of the original trust document(s) wherein the   initial trustee is appointed. Petitioners should also provide   any and all documents in the chain of appointments of subsequent   trustees. If the initial trustees or any successor trustees   thereafter were, in fact, an entity called D & E Sword   Company, petitioners should be required to produce credible   evidence establishing legal existence and validity of that   entity.     15. Without the evidence described above in paragraph 14.,   petitioners have failed to demonstrate that John P. Wilde was   legally appointed as Co-Trustee authorized to act on behalf of   the trusts and bring the instant case before this Court. See   T. 2000 Tax Ct. Memo LEXIS 72">*76  C. Rule 60(c).Petitioners filed a response to respondent's motion in which they ask the Court to deny that motion. Petitioners' response to respondent's motion asserts in pertinent part:     3. The Respondent's objection goes to the management of the   trusts, their internal affairs, concerns about their   administration, the declaration of rights and the determinations   of matters involving the trustees. As the Respondent concedes   that these are "Arizona Trusts" * * *, this issue falls   within the exclusive jurisdiction of the superior court here in   the State of Arizona. See A.R.S. section 14-7201. At this point,   this court is without jurisdiction to determine whether * * *   Mr. Wilde [is] the duly authorized Trustee. The Petitioners need   not remind the Court of the consequences of taking any action   over which subject matter jurisdiction is completely lacking.     4. Any objection the Respondent or Respondent's   counsel has in this area must be taken up in the Superior Court   here in Arizona, assuming of course the Respondent or   Respondent's counsel has2000 Tax Ct. Memo LEXIS 72">*77  standing. The irony is of course, if   Respondent or Respondent's counsel does take the matter up with   the Superior Court, where the Respondent will have the burden of   proof, and if the Superior Court finds that the Trusts   are valid, then the Respondent will be barred by res judicata   from asserting the sham trust claim that forms the basis for his   deficiency determination.     5. * * * In essence the factual claims raised by the Motion   to Dismiss are inextricably intertwined with the facts going to   the merits of the Commissioner's sham trust claim at issue in   this case. If the Trusts are valid, then Mr. Wilde, under   Arizona Law, will be presumed to be the duly authorized trustee,   whether it is as a Trustee of the resulting trust, constructive   trust or expressed [sic] trust. Therefore, the only course   available to this Court is to defer consideration of the   jurisdictional claims to the trial on the merits.  Farr v.   United States, 990 F.2d 451">990 F.2d 451, * * * [454] n.1 (9th Cir., 1993).  Careau Group v. United Farm Workers [of Am.], 940 F.2d 1291">940 F.2d 1291,2000 Tax Ct. Memo LEXIS 72">*78     1293 (9th Cir. 1991).  See also Rosales v. United States, 824   F.2d 799, 803 (9th Cir. 1987) ("A * * * [district] court may   hear evidence and make findings of fact necessary to rule on the   subject matter jurisdiction question prior to trial, IF THE   JURISDICTIONAL FACTS ARE NOT INTERTWINED WITH THE MERITS."   (Emphasis added))The Court held a hearing on respondent's motion. At that hearing, Mr. Wilde appeared on behalf of petitioners.  1 Petitioners proffered no evidence, and the parties presented no new arguments, at that hearing.DISCUSSIONRule 602 provides in pertinent part:     (a) Petitioner: (1) Deficiency or Liability   Actions: A case shall be brought by and in the name of2000 Tax Ct. Memo LEXIS 72">*79     the person against whom the Commissioner determined the   deficiency (in the case of a notice of deficiency)   * * * or by and with the full descriptive name of the   fiduciary entitled to institute a case on behalf of   such person. See Rule 23(a)(1). A case timely brought   shall not be dismissed on the ground that it is not   properly brought on behalf of a party until a reasonable time   has been allowed after objection for ratification by such party   of the bringing of the case; and such ratification shall have   the same effect as if the case had been properly brought by such   party. * * *     *     *     *     *     *     *     *     (c) Capacity: * * * The capacity of a fiduciary or other   representative to litigate in the Court shall be determined in   accordance with the law of the jurisdiction2000 Tax Ct. Memo LEXIS 72">*80  from which such   person's authority is derived.The parties do not dispute that each petitioner is a trust organized under the laws of, and doing business in, the State of Arizona. Under Arizona law, see Rule 60(c), a trustee has the power to commence litigation on behalf of a trust. See Ariz.Rev. Stat. Ann. sec. 14-7233.C.25. (West 1995). In the instant case, each petitioner has the burden of proving that this Court has jurisdiction, see Fehrs v. Commissioner, 65 T.C. 346">65 T.C. 346, 65 T.C. 346">348 (1975); National Comm. to Secure Justice in the Rosenberg Case v. Commissioner, 27 T.C. 837">27 T.C. 837, 27 T.C. 837">839 (1957), by establishing affirmatively all facts giving rise to our jurisdiction, see Wheeler's Peachtree Pharmacy, Inc. v. Commissioner, 35 T.C. 177">35 T.C. 177, 35 T.C. 177">180 (1960); Consolidated Cos., Inc. v. Commissioner, 15 B.T.A. 645">15 B.T.A. 645, 15 B.T.A. 645">651 (1929). In order to meet that burden, each petitioner must provide evidence establishing that Mr. Wilde has authority to act on its behalf. See National Comm. to Secure Justice in the Rosenberg Case v. Commissioner, supra 27 T.C. 837">27 T.C. 839-840; Coca-Cola Bottling Co. v. Commissioner, 22 B.T.A. 686">22 B.T.A. 686, 22 B.T.A. 686">700 (1931). We reject2000 Tax Ct. Memo LEXIS 72">*81  petitioners' position that under Arizona law the validity of the purported appointment of Mr. Wilde as co-trustee of each petitioner falls within the exclusive jurisdiction of the courts of the State of Arizona.On the record before us, we find that each petitioner has failed to establish that Mr. Wilde is authorized to act on its behalf.  3To reflect the foregoing,An order of dismissal for lack of jurisdiction granting respondent's motion will be entered.  Footnotes1. At the hearing the Court informed Mr. Wilde that its allowing him to appear at the hearing as the alleged co-trustee of each petitioner did not mean that the Court agreed that he in fact was a duly appointed and authorized co-trustee of each petitioner.↩2. All Rule references are to the Tax Court Rules of Practice and Procedure.↩3. We have considered all of the contentions and arguments of petitioners that are not discussed herein, and we find them to be without merit and/or irrelevant.↩