Court Opinion

ID: 6916607
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:43:13.226506+00
Date Added: 2024-06-11T16:06:40.444129
License: Public Domain

FINNEGAN, Circuit Judge
(concurring) .
The base-line from which I set out in deciding my view of this case is Rule 52, Federal Rules of Civil Procedure, 28 U. S.C., and being satisfied that the findings of fact made by the judge of the Tax Court cannot be classed as “clearly erroneous” they remain undisturbed. Wisconsin Memorial Park Co. v. Commissioner, 7 Cir., 1958, 255 F.2d 751. Indeed the Trustee-appellant’s brief writers tell us that “No questions of fact or credibility are raised,” and in substance, the legal effect of such facts constitute the nub of the appeal.
Actually the Tax Court proceedings consisted of several cases consolidated for trial, yet theoretically divided between witnesses in the transferee and gift tax cases. In the latter the burden was on petitioner, Marva Trotter Barrow Spaulding, former wife of Joe Louis Barrow, while the government had the burden of proof in the transferee cases *764involving Trusts numbered 36358 and 38328. [26 U.S.C. § 1119 (1946 ed.)]. The combined record is lengthy containing as it does the testimony of numerous witnesses, including significant evidence given by Mrs. Spaulding and Joe Louis, implemented by key documentary exhibits. This record supports the findings of fact.
Consequently what remains are questions of interpretation and the propriety of inferences drawn by the Tax Court judge from the evidence before him. I am expressing my views separately from, and with all due deference to, my brothers because I think affirmance is correct but that it can be put on broader grounds. Stern v. C. I. R., 6 Cir., 1957, 242 F.2d 322, awaiting disposition in the Supreme Court, mentioned by Commissioner, concerns the familiar problem of whether the beneficiary of a life insurance policy can be held as a transferee of the insured taxpayer after his death. Both sides see varying degrees of relevancy in Stern, yet I think the matter before us can stand on its own ground.
When the government occupies creditor status for unpaid federal income taxes it can invoke § 311, I.R.C.1939 [26 U.S.C. § 311 (1952 ed.)] and reach assets transferred by the debtor-taxpayer when the latter is insolvent or if the shift of assets produces insolvency. In other words, familiar principles governing fraudulent conveyances in fraud of creditors are brought into the Code framework. Section 311, and incidently its 1954 Code counter-part, is a summary weapon supplied by Congress to the Commissioner for collecting unpaid taxes from persons who dissipate their estates to the detriment of the creditor-government rights. Before creation of that statutory remedy the government was forced to proceed “by a creditor’s bill against the transferee, seeking to impress the property transferred with a trust for the payment of the taxpayer’s debts.” 9 Merten’s Federal Income Taxation, chap. 53, § 53.01 (1958).
Relying upon § 311 of the Code, Commissioner seeks to collect from The First National Bank of Chicago, Trustee, under Trusts No. 36358 and No. 38328, money of Louis in respect of his delinquent income taxes to the extent of the value for the property transferred to the Trustee as the initial corpus of each Trust. Briefly the Commissioner is saying that while Louis was insolvent, delinquent, and owing federal income taxes, he dissipated his assets by setting up the two trusts for his children. Obviously the Trustee, in position of transferee, can only successfully resist the Commissioner’s claim by establishing that the corpus was transferred for value —or, by showing there was full, fair and adequate consideration for the transfer, which, in turn, would eliminate prejudice of the creditor’s rights. Here, the Trustee struggles for supplying consideration by blurring the release of Marva’s (the former wife of Louis) support rights, approved in a Cook County, Illinois divorce decree, with the consideration required to rescue the children’s Trusts. But from this record I am satisfied that Marva had no personal interest in the two trusts, save for adhering to her contractual commitments with Louis. Her failure to set up these trusts (the second one by virtue of continuing the agreement) would choke off the flow of money coming to her under the “Management Agreement.” The “Settlement Agreement” makes this readily apparent:
“It is mutually agreed that in the event that any time during the term of the said Manager’s Agreement between Marva Trotter Barrow, as manager, and Joe Louis Barrow, as boxer, that there be any default or breach on the part of Marva Trotter Barrow to be kept and performed with respect to the provisions here-inbefore set forth relating to the minor child of the parties hereto, that in such event the said manager’s contract, may, at the option of Joe Louis Barrow, be immediately revoked, terminated and held for naught.”
It is not the argumentative value of Marva’s support rights that control, but *765the undisputed fact she could only retain 12%%. Under the Management-Settlement Agreements Marva acted as a conduit for carrying the money earned by Louis to the Trustee, she was his agent and he the donor. The arguments concerning child support are tenuous and State judicial approval of the settlement agreement does not undercut the Commissioner’s position. While the Illinois court was satisfied with Louis’ provision for his children, that approval cannot override the legitimate claim of the Federal Tax Collector. We have nothing to do with policy matters.