Court Opinion

ID: 4332653
Source: CourtListenerOpinion
Date Created: 2018-11-14 00:48:06.337663+00
Date Added: 2024-06-11T14:20:26.861338
License: Public Domain

BANANA MOON TRUST, J.C. CHISUM, TRUSTEE, AND PURPLE PASSION TRUST, J.C. CHISUM, TRUSTEE, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, RespondentBanana Moon Trust v. CommissionerNo. 514-99United States Tax CourtT.C. Memo 2000-73; 2000 Tax Ct. Memo LEXIS 80; 79 T.C.M. (CCH) 1601; March 3, 2000, Filed *80  An order of dismissal for lack of jurisdiction granting respondent's motion will be entered.  Jimmy C. Chisum, for petitioners.Richard A. Rappazzo, 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 engaged in business in the State of Arizona.Petitioner Banana Moon Trust filed a Federal income tax return for estates and trusts, Form 1041 (return), for 1995 which was signed by Jimmy C. Chisum (Mr. Chisum) as the fiduciary or officer representing the fiduciary. Banana Moon Trust's 1995 return did not contain the name of the trustee or any information that would enable respondent to determine who the trustee was.Petitioner Purple Passion Trust filed a return for 1995 which was signed by Mr. Chisum as the fiduciary or officer representing the fiduciary. That return did not contain the name of the trustee*81  or any information that would enable respondent to determine who the trustee was.Upon commencement of the examination of each petitioner, respondent requested complete copies of the trust documents relating to each such petitioner as well as other information. Each petitioner refused to provide respondent with the trust documents and other information requested.Although neither petitioner provided respondent with the documentation and other information requested, respondent's examining agent obtained from an unrelated third-party financial institution what appear to be the governing trust documents for petitioner Banana Moon Trust and the governing trust documents for petitioner Purple Passion Trust. Those governing trust documents pertaining to each petitioner appear to be identical except for the name of each petitioner reflected therein.The respective governing trust documents relating to petitioners state that they are "executed under the laws of the Constitution for the United States of America and the Constitution for the State of Nevada". Those documents identify the original trustee of each petitioner as Sugartree, LLC. The respective governing trust documents relating*82  to petitioners further provide in pertinent part:     1. The Anglo-Saxon Common Law Irrevocable Pure   Trust for Asset Protection Purposes, also known as an   Asset Protection Trust, created by this Contract and   Indenture on this 30th day of September, 1994, is   authorized to exist and function by and through its   Board of Trustees (hereinafter referred to as the   Board) pursuant to all of the conditions contained   herein, with certain assets to be administered by the   Trustee for the benefit of the Holders of Capital Units   (hereinafter referred to as Beneficiaries) represented   by Certificates of Beneficial Interest, in accordance   with the unalienable Anglo-Saxon Common Law rights   afforded to man. * * *           *   *   *   *   *   *   *     6. This Trust shall be originally domiciled in   the State of Nevada, and shall be interpreted and   construed under the Constitution of the United States   and the laws of the State of Nevada. The domicile, and   thereby the controlling interpretational laws under *83    which the Trust shall be construed, may be changed to   any other State or Nation as shall be deemed prudent,   wise, necessary, or appropriate by the Board [of Trustees].           *   *   *   *   *   *   *       14. The Creator shall appoint a Fiduciary to serve as   "Protector" of the Beneficiaries. The Protector shall be an   independent third party with no obligations to any other party   to this Trust. The Protector shall have the power to remove any   Trustee who violates any term or condition of this Trust   agreement, or is in breach of any Anglo-Saxon Common Law Trustee   duty, and shall have the power to appoint a Successor Trustee to   fill any vacancy which occurs for any reason.           *   *   *   *   *   *   *       16. The Board [of Trustees] shall have, except as    modified by the terms of this Indenture and the Minutes    of the Board interpreting the same, all of the powers    of Trustees under the Anglo-Saxon Common Law, as well    as those specified under*84  the laws of the State of    Nevada. * * *           *   *   *   *   *   *   *       33. The Trustee may be replaced in any of the    following manners:         A. Resignation. The Trustee may resign with    or without cause at any time by sending a notice of his    intention to do so to the Trust principle [sic] office    by Certified Mail. However, such resignation shall not    be effective unless and until such time as a Successor    Trustee has accepted the appointment to assume the    duties and responsibilities of Trustee on the expiration    date of the outgoing Trustee, or thirty days after receipt of    the resignation, whichever occurs first.         B. Removal. Upon complaint for proper cause    by any agent or person appointed by the Trust, the    Protector shall appoint a Committee of Arbitrators    (hereinafter referred to as the Committee), to investigate    the complaint.           *   *   *   *  *85  *   *   *          2. The Committee shall have the power,   upon meeting, investigation, and a two-thirds (           *   *   *   *   *   *   *        C. Incapacitation. In the event the Trustee   is unavailable to participate in the process of his   removal or the selection of a Successor Trustee, the   Protector shall have the authority to execute an affidavit,   under oath, setting forth the unavailability of   the Trustee. * * *        D. Court Appointment. In the event it   becomes necessary to litigate the removal of a Trustee   and/or appointment of a Successor Trustee, the Trust,   by and through its Beneficiaries, may apply to a court   of competent jurisdiction for the appointment of a   Successor Trustee.The notice of deficiency (notice) issued to petitioner Banana Moon Trust for taxable years 1994 and 1995 was addressed as follows:   BANANA MOON TRUST   SUGARTREE LLC TTEE   5804 WEST VISTA NO. 347   GLENDALE, AZ 85301-1341the notice issued to petitioner Purple Passion Trust*86  with respect to taxable year 1995 was addressed as follows:   PURPLE PASSION TRUST   SUGARTREE LLC TTEE   5804 WEST VISTA AVENUE NO. 347   GLENDALE, AZ 85301-1341 040Banana Moon Trust and Purple Passion Trust jointly filed a petition in this Court. That petition was signed on behalf of each petitioner by J.C. Chisum as "Trustee".Respondent's motion contends in pertinent part:     14. There is absolutely no evidence from which   the Court can adduce that Mr. Chisum is the current   trustee of either of the petitioner trusts.     15. Petitioners have provided no evidence that   the appointment of Mr. Chisum (as trustee) was valid or   authorized under the terms of the respective trust   indentures * * *.     16. * * * petitioners have failed to demonstrate   that Mr. Chisum was legally appointed as trustee of   either of the petitioner trusts and therefore, [is]   authorized to act on behalf of the petitioner trusts   and bring the instant case before this Court. See T.C.   Rule 60(c).Petitioners filed a response to respondent's motion in which*87  they ask the Court to deny that motion. That response 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. Chisum is the duly authorized Trustee. The   Petitioners need not remind the Court of the consequences of   taking any action over which subject matter 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 has standing. The irony is of course, if   Respondent or Respondent's counsel does take the matter up with *88    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. Chisum, under Arizona Law, will be   presumed to be the duly authorized trustee, whether it   is as a Trustee of a 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, 1293 (9th   Cir. 1991). See also Rosales v. United States, 824 F.2d   799, 803 (9th*89  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 which Mr. Chisum appeared on behalf of petitioners.  1 At that hearing, Mr. Chisum contended, inter alia:   I was one of the members of Sugar Tree, LLC, and subsequently   substituted the trustee to give a better control in the tax   matters and in the business administration.     The fact that this trust is again administered   within the State of Arizona, it comes under the exclusive   jurisdiction of the courts*90  of Arizona and the law   of Arizona for determining the real parties. * * *           *   *   *   *   *   *   *     There was [sic] subsequent items, subsequent   trustee replacements that are not a part of the record.   The role of protector that the Respondent brings up is   only one of the methods of removal of a trustee. Any   trustee has the authority and the power to resign at   any time. * * *Petitioners presented no additional contentions and proffered no evidence at the hearing on respondent's motion.DISCUSSIONRule 60 2 provides in pertinent part:     (a) Petitioner: (1) Deficiency or Liability   Actions: A case shall be brought by and in the name of   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*91  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 jurisdiction   from which such person's authority is derived.The respective governing trust documents pertaining to petitioners suggest that each petitioner was organized as a trust under the laws of the State of Nevada. However, in petitioners' response to respondent's motion and at the hearing on that motion, Mr. Chisum asserted that the administration of each petitioner trust is governed by the laws of the State of Arizona*92  and that the exclusive jurisdiction in determining the validity of the trust and of the trustee is in the Superior Court of the State of Arizona.Assuming arguendo, as petitioners claim, that each petitioner is a trust, the administration of which is subject to the laws of the State of Arizona, under Arizona law, see Rule 60(c), a trustee has the power to commence litigation on behalf of a trust.  3 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, 348 (1975); National Comm. to Secure Justice in the Rosenberg Case v. Commissioner, 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, 180 (1960); Consolidated Cos., Inc. v. Commissioner, 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. Chisum has authority to act on its behalf. See National Comm. to Secure Justice in the Rosenberg Case v. Commissioner, supra 27 T.C. at 839-840;*93 Coca-Cola Bottling Co. v. Commissioner, 22 B.T.A. 686">22 B.T.A. 686, 700 (1931). We reject petitioners' position that under Arizona law the validity of the purported appointment of Mr. Chisum as trustee of each petitioner falls within the exclusive jurisdiction of the courts of the State of Arizona.On the record before*94  us, we find that each petitioner has failed to establish that Mr. Chisum is authorized to act on its behalf.  4To 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. Chisum that its allowing him to appear at the hearing on behalf of each petitioner did not mean that the Court agreed that he in fact had the capacity to be appearing on their behalf.↩2. All Rule references are to the Tax Court Rules of Practice and Procedure.↩3. Assuming arguendo, as the respective governing trust documents pertaining to petitioners suggest, that each petitioner is a trust, the administration of which is subject to the laws of the State of Nevada, under Nevada law, see Rule 60(c), a trustee has the power to commence litigation on behalf of a trust if the trust instrument so provides. See Nev. Rev. Stat. Ann. secs. 163.260 and 163.375↩ (Michie 1993). The respective governing trust documents pertaining to petitioners stated in pertinent part that the board of trustees of each petitioner trust was to have "all of the powers of Trustees under the Anglo-Saxon Common Law, as well as those specified under the laws of the State of Nevada."4. 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.↩