Petition for Writ of Certiorari — Brown v. United States

NO.

IN THE

SUPREME COURT OF THE UNITED STATES

L. SHYRL BROWN AND ILA D. BROWN, PETITIONERS

VS

UNITED STATES, RESPONDENT.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

L. Shyr! Brown

Ila D. Brown

46 West First North

Richfield, Utah 84701

801-896-5730

QUESTIONS PRESENTED FOR REVIEW

1. Were we deprived of due process of law?

2. Did the district court have jurisdiction?

3. Did the assessment comply with the law (26 USC 6201) and

regulation (26 CFR 301.6201-1)?

4. Was there a lawful lien to be foreclosed?

5. Were we unlawfully deprived of trial by jury on the merits of

the assessment and trial by jury on the merits of the frauduient

conveyance?

6. Are the computer generated certificates of assessments and

payments reliable, admissible, conclusive, relevelant or material

in the absence of source documents (supporting documents), when

they can not be cross-examined and when they are not supported

by first person testimony subject to cross examination?

7. Are the assessments and/or the money judgment of the district

court arbitrary, without rational foundation, in violation of the

law, excessive, naked, null, or void?

NO.

IN THE

SUPREME COURT OF THE UNITED STATES

L. SHYRL BROWN AND ILA D. BROWN, PETITIONERS

VS

UNITED STATES, RESPONDENT.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

L. Shyrl Brown

Ila D. Brown

46 West First North

Richfield, Utah 84701

801-896-5730

PARTIES

L. Shyr! Brown and Ila D. Brown, Petitioners v United States

Respondent. .

TABLE OF CONTENTS AND AUTHORITIFS

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ST OPE TERE ETE EERO REE Eee.

Constitution and statutory provisions......................38

I

TS ERE EEE CR 3

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TTP eT e eee 4

II]. Lack of territorial jurisdiction .........................5

IV. Action not properly authorized ....................054- 5

SES PEPE PTET EERE TERE EEE 7

Ce Ga ed nt aaeassebstivevues 7

VII. Assessment does not comply with statute ............... 8

OS eee eee eee eee 9

ES ee 10

ee gigs s bec b va rsa e csase ee nee 12

I, cect e tees w ce dss seccees 13

XII. Assessment arbitrary and void....................... 13

gases ee we see eceeeewes 14

AUTHORITIES

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Amalgamated Sugar v Bergland, 664 F2d818............... 5

oe.

PUEIIIND WF, OO POD on ccc ees ..7-13

Bar L Ranch v Phinney, 426 F2d 995 ................ ee

Basso v Utah Pand L, 496 F2d906 ................. eee eee 4

Butler v Derwinski, 960 F2d 139......................2005- 4

I Ss pace vee vee see e nesses ceans 13

Caterpillar Inc v Williams, 107 SCt 2425 ................... 4

Christiansen v Colt Industries, 108 SCt 2166 ............... 4

Citizens Action League v Kizer, 887 F2d 1003 ........... or

EE 9

ee 13

SR eee ese sehen tes ereens 13

Commmissioner v Shapiro, 424 US614.................. 8-12

es eye cesses ees asvessecens 11

Dairy Queen Inc v Wood, 369 US 469 .................... Sa

Daviditis v Nat Bank of Matton, 263 F2d 884............... 13

Denman v Great Western RR, 811 P2d415.................. 4

Diversified Financial v Maderak, 811 P2d 1237............. 11

ns DAs ee I a co abe ee ae eee ks bataubebes 6

Foley Bros v FPilar@e, GP GCLGTG .... 5c ice cece ecenen 5

Cees © Gs SEU, gb Groves s Kace Vv dnc sucuseuuesen 8

Goodman v Lewis, 277 SE2d 908 ..............0.0000.00005. 10

Hammel v Christian, 610 A2d 979 ..................... 10-11

Helvering v Stockholms Enskilda Bank, 293 US 84........... 8

Helvering v Taylor, 293 US 507... 1... ccc tees 13

Hodgson v Bowerbank, 9 US 303.................2200005. 13

James v Dravo Contracting Co, 303 US 144 .................5

Johnson v Estate of Rayburn, 587 NE2d 182 ............... 10

Lenzini v Columbia Foods, 829 SW2d 482.................. 11

LED OW Gia EE sn cbc ccc ccuetscetnecsesvces 4

eae WG, Oe PI sg vk ccc cacccccednssreesensace 4

O'Brian v Equitable Life Assurance, 212 F2d 383 ........... 12

Ohio National Life Ins v US, 922 F2d 320................... 5

Pacific Coast Dairy v Dept of Agriculture of Calif, 318 US 285 . .5

sg bh! @ (ho: | 9 ree err rrr ere er 5

Penn Dairies v Milk Control Comm of Penna, 318 US 261......5

Portillo v Commissioner, 932 F2d 1128.................... 14

Ragsdale v Pashal, 118 F Supp 280 ........................ 12

DRes © UU, We HE co cc be keen cas ee wscwapeecsaess g

Silas Mason Co v Tax Comm of Washington, 302 US 186 ...... 5

Skinner v Mid-America Pipeline, 109SCt1726.............. )

Skinner v Total Petroleum Inc, 859 F2d 1439................ 9

Smith v Greenwood, 278 SE2d 380 ................000cce0- 10

en I EE es ck cbs betes bueawhuana nn 8

ee ee ee icc ckvaewcakos nae seme hes 5

Nn ee ad ark gaia ae w Pale or eae ae 5

es ee ks ac bay eee ce kh eee bkere's 13

en Wr ne oa as Saaww bees ee Bere ewe 6

Territoria] Sav and Loan v Baird, 781 P2d452.............. i6

pp rr eee ree reer re ree 7

pp errr ere rs rere 4

ee es I oo vc a ok 4s MG vee week oe wees 10

Union Pac R Co v US 524 F2d 1343 ................. cc cece 12

eS as a kk eee ee eee 11

US v General Motors Corp, 929 F2d 245 .................... 7

ee Ry 7

US v International Harvester, 274 US 393 .............. 11-12

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See ee: WO es o's ca we Wado cela as chen eeeees 5

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ne ee ees ke se ecbeeueb ee xe 8-9

ee cuca b hb ee eew es sacueeds 8

ce cetadebeesiseaneben 11

US v One 1972 Cadillac, 355 F Supp513.................... 6

See © I CO UI BOT bik vidoe esc ceed iceccssicvcs 13

US v State of New Mexico, 642 F2d 397 .................... i]

US v Twenty Two Firearms, 463 F Supp 730 ................ 6

UES VW ROWY Cn OO MD ov ccc thc c cc crc ccssvcces 8

Utah Div of Public Lands v US 107 SCt 2318 ................ 5

wo Se en eee 7

Wateon v Watson, 607 A2d 383... ccc ccc ccc eee 10

Weimerskirch v Commissioner, 596 F2d 358 ................ 6

ee CU Is. 5 6 keds sus dks vbeeusecvecdeeuds 9

ee Re ET OE 6 6 0b 5 5.5 ok 6 0 060605 0c eesndssee 5

SN Cala Feu cdscuedee sabes eeuuuneneadea® 5

Go ci. VyoUlavoys ee ess awwewy 7

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United States Code 26 USC 6020(b)... 2.2... 0.0.0... 0002005. 8

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SEPP eee 7

WEE i cxweens 5-6

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Code of Federal Regulations 26 CFR 301.6201-1 ............. 8

Rules of Evidence No. 106 .............. ccc cccccccscvcees 6

PI CED o 6g Ss cab hvueesusenesaveaces ewe g

-2b-

OPINIONS

The decision of the 10th Circuit is in appendix A. (p. 15). The

rehearing in the 10th Circuit is in appendix B. (p. 22) The opinion

of the district court is in appendix C. (p. 24) The Judgment,

Foreclosure and Order of Sale is in Appendix D. (p. 28)

JURISDICTION OF THIS COURT

We seek review of the decision of the 10th Circuit, U.S.

Court of Appeals decided Dec 23, 1992. Rehearing was decided

Feb 12, 1993. Jurisdiction of this court is found under 28 USC

1254(1).

CONSTITUTIONAL AND STATUTORY PROVISIONS

We rely upon Art. I, Section 8, Cl. 17, the 5th and 7th

Amendments to the U.S. Constitution and 26 USC 6201, 6020(b),

7401, 7402, 7403 and 26 CFR 301.6201-1 as our defense against

this civil action. These are found in Appendix E.

STATEMENT OF THE CASE

The. United States (hereafter US) filed its civil action Feb

13, 1989, seeking to reduce federal tax assessments to judgment,

set aside a fruadulent conveyance of real property and to foreclose

federal tax liens. Jurisdiction was alleged under 26 USC 7402

and 28 USC 1340 and 1345. The complaint alleges the civil ac-

tion was authorized as required by 26 USC "7401 and 7403. We

answered the complaint March 2, 1989, generally denying the

jurisdiction of the district court and generally denying the alleg-

tions of the complaint. We moved the court to dismiss on these

grounds or, in the alternative demanded trial by jury.

Trial by jury was denied and bench trial was held Feb 4 and

5, 1991. The Order and Judgment was filed Sept 25, 1991.

Our appeal to the 10th Circuit was denied and the lower

court affirmed on Dec 23, 1992. Rehearing was denied Feb 12,

1993.

REASONS FOR GRANTING THE WRIT

This writ should be granted because (1) the lower decisions

are in conflict with the law of the case, (2) the courts are in con-

"ict over the issues involved, (3) the lower courts are in conflict

*/ 2. opinions of this court and (4) the lower courts have departed

2«. “sr from the demands of trial by jury, numerous issues of due

process of law and rules of evidence, that they require supervision

of this court. The issues are set down in greater depth below.

I. DEFECTIVE COMPLAINT

The complaint appears fatally defective. The complaint

states: ‘3. The court has jurisdiction over this action pursuant to

Section 7402 of the Internal Revenue Code of 1986 and Sections

1340 and 1345 of Title 28, United States Code.”

The complaint fails to allege (a) violation of any particular federal

law, (b) any particular law making Shyrl LIABLE for any par-

ticular tax, (c) any particular federal law granting jurisdiction to

the district court to determine rights, title or ownership of real

property in Richfield, Utah, (d) any particular law granting

jurisdiction in a fraudulent conveyance action or (e) any par-

ticular law requiring Shyr] to file any particular return at any

particular time for any particular purpose.

The complaint is not well pleaded. A federal question does

not appear on the face of the complaint. The jurisdiction of the

district court is in question. See Caterpillar Inc v Williams, 107

SCt 2425, 2429. Jt is the burden of US to allege and prove the

jurisdiction. Denman v Great Western RR, 811 P2d 415, 418

(1990).

Therefore, we believe the complaint is fatally defective re-

quiring 4ismissal of the civil action.

II. FAILURE TO FIND JURISDICTION

Even as the complaint fails to complete its jurisdictional

allegation, the district court fails to find jurisdiction with par-

‘ ticularity. The district court totally ignors the issue of jurisdic-

tion for the word is not found in its decision. The 10th Circuit

feebly addresses jurisdiction at p 16. It cites Lonsdale v US,

919 F2d 1440. Lonsdale is a quiet title action in which Lonsdale

alleged the jurisdiction of the court and that jurisdiction was not

challenged by United States. The 10th Circuit follows by stating

that the circuit “...rejected tax protester arguments (p. 16 ).

Whether or nor arguments are entered or rejected does not

establish jurisdiction to a legal] certainty. The 10th Circuit refus-

ed to address the issues of district court jurisdiction.

It is long settled that the plaintiff must allege and prove

jurisdiction. There is a presumption against district court

jurisdiction. Jurisdiction can not be waived nor conferred upon a

federal court by consent, inaction or stipulation and can not be ex-

panded by judicial interpretation. Proof of jurisdiction must pro-

ceed to a legal certainty. A court lacking jurisdiction must

dismiss the cause of action at any stage of the proceeding. Chris-

tiansen v Colt Ind., 108 SCt 2166, 2169-70; McNutt v GMAC, 56

SCt 780, 785; Thompson v Gaskill, 62 SCt 673, 675; Butler v Der-

winski, 960 F2d 139, 140; Basso v Utah P&L, 495 F2d 906 (10th

-4.

| ———

1981); ene y y US, 6 683 Pad. 199 (DC. 1 1982); Ohio Nat Life Ins v

US, 922 F2d 320, 324-5 (1990); Appeal of AH, 590 A2d 123, 129.

Therefore, the 10th Circuit appears in conflict with deci-

sions of this court, other circuits and its own decisions.

III. LACK OF TERRITORIAL JURISDICTION

We contest the territorial jurisdiction of the district court.

The complaint correctly states at No.4 and 5 that Defendants

reside at 490 North First West, Richfield, Utah. It then alleges

that the stated address is, ‘'...within this judicial] district and divi-

sion’. The complaint fails to allege with any particularity the

lawful or constitutional grounds extending district court jurisdic-

tion to that particular address in Richfield, Utah.

Generally, a state has complete jurisdiction over the lands

within its exterior boundaries. State v Vaughn, 786 P2d 1051,

1054. Jurisdiction is territorial] in nature. There are only three

known lawful means whereby the United States can gain jurisdic-

tion within the boundaries of Utah. (1) By purchase of lands from

Utah with the consent of Utah Legislature (Art I, Sec 8, Ci 17,

U.S. Constitution). (2) By the United States reserving jurisdiction

in the Utah Enabling Act of 1894 (Utah Div of Pub Lands v US,

107 SCt 2318 (1987)). 3. Utah ceding jurisdiction to the United

States for specific constitutional purposes (Utah Code, 63-8-1) and

the United States officially accepting that ceded jurisdiction

(Adams v US, 87 LEd 1421, 1423; State v Vaughn, supra. Also see

Paul] v US, 371 US 245, 269.

Congress may legislate with respect to Washington, D.C.,

its territories, and under certain conditions within federal

enclaves within Utah (US v Jenkins, 734 F2d 1322, 1325) but

may not legislate with respect to Richfield, Utah nor to we defen-

dants who are citizens and residents of Richfield. Foley Bros v

Filardo, 69 SCt 575 577. Other cases will be cited on the merits.

Statutes are governed by jurisdiction as well. James v

Dravo Contracting Co. 302 US 134; Silas Mason Co. v Tax Comm

of State of Washington, 302 US 186; Wilson v Cook, 327 US 474.

This is particularly pointed out by comparing Pacific Coast Dairy

v Dept of Agriculture of California, 318 US 285 and Penn Dairies

v Mi Tr Control) Comm of Pennsylvania, 318 US 261.

The lower courts appear in clear conflict with and have

refused to consider decisions of this court.

IV. SUIT NOT PROPERLY AUTHORIZED

26 USC 7401 prohibits commencement of this civil action

for failure of the Secretary to authorize or sanction the pro-

ceeding. The US refused to produce the alleged authorization

either upon our denial of authorization, our motions to dismiss, or

by discovery. Further, on January 25, 1993, Shyrl submitted a

Freedom of Information Request to IRS to attempt to secure

authorization. That request has never been answered.

The 10th Circuit correctly found that Mr. Lusty, IRS trial

lawyer, filed an unsworn declaration stating that a Marion K.

Mortensen had requested this action. However, the actual letter

has never been found nor entered in evidence. Mr. Lusty must

produce the letter to satisfy the completeness doctrine’. Failure

to produce the signed letver of authorization appears grounds for

citing Mr. Lusty with perjury because the letter appears nonexis-

tent, especially when this petition is considered as a whole.

“When a writing or recorded statement or part thereof

is introduced by a party, an adverse party may require him

at that time to introduce any other part or any other writing

or recorded statement which ought in fairness to be

considered with it.” Rules of Evidence No 106.

The 10th Circuit continued that we, the Defendants, must

go forward and produce the letter (p. 16 ).. Courts have

recognized it is not easy and may be impossible to prove a

negative. See Elkins v US, 364 US 206, 218; Weimerskirch v

Comm 596 F2d 358, 361. We believe there never was any such let-

ter and it is therefore impossible for either US or Defendants to

produce.

Proof of jurisdiction is the burden of the US, this should in-

clude compliance with Section 7401. The annotated cases view

this section as jurisdictional. Upon failure of the Plaintiff to pro-

ve the authorization, the suits have been dismissed. See US v

One_ 1972 Cadillac, 355 FSupp 513 (1973); US v Twenty-Two

Firearms, 463 FSupp 730 (1979). This court recognized the va)idi-

ty of the former statute (26 USC 3740) in Sullivan v US, 348 US

170, 171. This appears to support dismissal for failure to prove

authorizat’on as in the cases cited above and the 10th Circuit ap-

pears in conflict for failure to dismiss.

Grounds for review may include (1) no authorization letter

in evidence, (2) if there was a letter, it is a deliberately concealed

document obviously critical to Defendants defense, (3) the case

proceeded in violation of the law, (4) the burden of proof of

jurisdiction can not be imposed upon the Defendants and (5) the

10th circuit is in conflict with the above cases in the annotated

code.

V. LIEN ENFORCEMENT

US claims it is enforcing a lien under 26 USC 7403 against

Ila’s real property. We deny the validity of this action in district

court on these grounds: (1) The Secretary failed to request the

civil action, and (2) there is no lien to enforce for failure to comply

with the Utah Foreign Judgment Act.

“If the requirements of this chapter are satisfied, the foreign

judgment becomes a lien upon the judgment debtor property on

the date it is docketed.”” Utah Code, 78-22a-5(2). See Thompson v

Avery, 39 P 829, 835 (1895); US v Kendall, 263 F 126, 127 (1920).

Compliance with Utah law is an essential] element to establish a

lien in this case, rather than mere assessment of alleged tax for

26 USC 6322 clearly states: “Unless another date is specifically

fixed by iaw, the lien imposed by section 6321 shall arise at the

time the assessment is made.” Clearly, the Utah Code specifically

fixes another date and therefore there appears to be no lien to en-

force because no judgment has been filed in Sevier County, Utah.

(3) Ila’s deed predates the alleged assessment by 11 years and

predates any lawful US lien by at least 21 years. Thus, there is

no lien to enforce. Aquilino v US, 363 US 509; US v Hershberger,

475 F2d 677, 681 (1973); Washington v US, 402 F2d 3, 7. (4) The

civil action in the lower court was not an action to enforce a lien

but a is a fraudulent conveyance action not authorized under

7403, nor 1s it proven to be under the jurisdiction of the district

court. The 6th Ciruit ruled a tax lien can not attach to property

which has been previously transferred by the taxpayer at the

time the assessment is made. US v General Motors Corp, 929 F2d

245, 253 (6th Cir 1991). Of course, Shyr] has not been proven to be

a taxpayer in relation to the alleged lien.

It appears the lower courts acted outside of their jurisdic-

tion, abused their discretion, violated Utah law and are in conflict

with decisions of this court and other circuits as cited above.

VI. UNLAWFUL ORDER OF SALE

The district appears to have directly violated the law when

it issued its Judgment, Order of foreclosure and Order of Sale

(App D). Utah law states:

‘No execution or other process for the enforcement of a

foreign judgment filed under this chapter may issue until 30

days after the judgment is filed.” Utah Code, 78-22a-3(3).

The foreign judgment has not been filed as required by law

and therefore the district court order is unlawful and in

direct violation of the law.

VII. ASSESSMENT DOES NOT COMPLY WITH STATUTE

Relying upon 26 USC 6201 and 26 CFR 301.6201-1, the US

(not the Defendants) must prove: (1) The tax is imposed by this ti-

tle. (2) It is a stamp tax. (3) That Shyr] is the taxpayer (LIABLE at

law for the tax). (4) That the tax was determined by the taxpayer

or by the district director or the director of the regional service

center and was disclosed on a return or list. (5) That the article(s)

taxed was sold or removed for sale. (6) That the district director

determined Shyr] was the person liable at law for the stamp tax.

(7)That any transaction or act was a transaction or act which re-

quired payment of a tax by stamp. (8) That Shyr] refused to pay

such tax at the time and in the manner provided by law or regula-

tions (no law or regulation has been cited mandating my com-

pliance). (10) That the alledged assessment had been made accor-

ding to law and regulation (26 USC 6201 and its regulation).

“Yet it is for Congress, not the courts, to write the

law” Standard v Olesen, 74 SCt 768, 771.

Taxing acts are not to be extended beyond the clear import of the

language used. US v Meriam, 263 US 179, 187-8; Helvering v

Stockholms Enskilda Bank, 293 US 84, 93-4; Gellman v US, 235

F2d 87, 89, 90, 93; Citizens Action League v Kizer, 887 F2d 1003,

1006 (9th Cir 1989).

Assessments made contrary to statute are illegal. US v Yellow

Cab, 90 F2d 699, 701.

We believe the record will reveal that the US failed to prove

even one element of the law and regulation. The lower courts ap-

pear in direct conflict with the law and cases cited above.

Thus, the 10th Circuit, in citing US v McMullin, 948 F2d

1188, 1192 appears wholly off point and in direct violation of 26

USC 6201. Further, Section 6201 and its regulation is not raised

nor decided in McMullin. When there is no assessment at law, the

complaint is fatally flawed, there is no lien at law and no cause of

action.

The 10th Circuit found (p. 18 ) that Shyr! had not filed

returns for the years in question. There is no evidence or

discovery that the Secretary executed any returns in compliance

with 26 USC 6020(b). There is no list of taxable articles in

evidence. Therefore, it further appears the alleged assessment is

void for failing to specifically comply with 26 USC 6201(aX1). US

must produce its evidence.

“In either event, under Williams Packing the relevant

_ facts are those in the Government’s possession and they

must somehow be obtainable from the Government.”

Comm v Shapiro, 424 US 614, 628. Also, the government must

prove the essential elements. Weir vy US, 716 FSupp 574, 577.

Congress further reveals its intent that assessment in 6201

refers only to STAMP TAXES. In 1954, The House Report, 83d

Congress, 2d Session, 1954, Excise Tax Reduction Act, p. 4552 is

quoted as follows:

6201. Assessment Authority. This section

makes two material changes from existing law. The

first permits the assessment of the amount of any

check or money order, given in payment for stamps,

which is not duly paid.”’

6201 was found valid by the Sixth Circuit in Cole v Cardosa,

441 F2d 1337, 1342, and the issued appeared well settled until

the 10th Circuit refused to consider the law of the case. 26 USC

6021 refers to lists of taxable articles. This court recognizes the

concept of STAMP TAXES in Skinner v MidAmerica Pipeline Co.

109 SCt 1726, 1732. This court continues generally discussing the

Internal Revenue Code but has not specifically ruled upon 6201 to

our knowledge. The code is remarkably specific (Id p. 1732. The

regulations determine how the internal revenue laws shall be ap-

plied (Id p. 1732).

‘(It is ‘constitutionally sufficient if Congress clearly

delineates the general policy, the public agency which is

to apply it, and the boundaries of this delegated authori-

ty. Private rights are protected by access to the courts to

test the application of the policy in the light of these

legislative declarations.’)” Skinner, supra p. 1371.

We have been denied access to the lower courts because they

refused to consider the law. We believe these rules should be NAR-

ROWLY applied (Id p 1733) to 6201 and its regulation.

VIII. TRIAL BY JURY

Defendants are guaranteed trial by jury under the 7th Amend-

ment, U.S. Constitution. Defendants were denied trial by jury on the

merits of the assessment and the merits of the fraudulent con-

veyance.

The 10th Circuit cites US v McMullin, 948 F2d 1188. At page

1190 it extensively documents that with respect to a money judg-

ment Shyr1 is entitled to jury trial. It cites Ross v Bernhard, 936 US

531,538...; Dairy Queen, Inc v Wood, 369 US 469, 473, n. 4...;

Skinner v Total Petroleum Inc 859 F2d 1439, (10th Cir 1988), US v

State of New Mexico, 642 F2d 397, 399-400 (10th Cir 1981); US v

McMahan, 569 F2d 889 (5th Cir 1978). The 10th Circuit obviously

disagrees with its own citations. We believe the cases it cites repre-

sent the correct opinions. We think that when a jury is confronted on-

ly with computer generated documents, knowing the nature of such

documents (garbage in - garbage out), in the absence of any suppor-

ting documents or source documents, which appear to be in direct

violation of the law of the case and regulations, and in the absence of

any support of first hand testimony subject to cross examination, a

jury may well have reached a different conclusion as to Lhe money

judgment. We believe the court violated the 7th Amendment by deny-

ing a jury trial.

Ila was denied a jury trial on the alleged fraudulent con-

veyance in a competent Utah court.

We believe that a jury, which would hear ALL the

testimony, see a deed dated 1972, and hear other information in

the trial, it may well reach another conclusion.

Numerous courts have ruled that fraudulent conveyance ac-

tions are subject to jury trial. Watson v Watson, 607 A2d 383

(1991); Johnson v Estate of Rayburn, 587 NE2d 182 (1991); Tyers

v Coma, 570 A2d 186 (1990); Territorial Sav & Loan Assn v Baird,

781 P2d 452 (1990); Smith v Greenwood, 278 SE2d 380 (1981);

Goodman v Lewis, 277 SE2d 908 (1981)

The 10th Circuit errs in stating the lower trial was an equi-

ty proceeding to enforce a lien. Since there is no lien at law, there

can be no enforcement proceeding for the nonexistent lien. The

civil action was a fraudulent conveyance action, (clearly a jury

matter according to the above cases), and was held in a court

which did not have jurisdiction over the subject matter nor the

property.

This court should protect our right to jury trial.

_IX. CERTIFICATES OF ASSESSMENT

The Certificates of Assessment and Payment (hereafter

Certificates) are recognized as computer summaries of many

taxes and were admitted as public documents, business records

exception to the hearsay rule. . (See 10th Cir III Evidentiary Mat-

ters). We contest the RELIABILITY of the certificates and con-

tend they should not have been admitted.

The Certificates by themselves, without foundation, and

without first person testimonial support appear generally inad-

missible.

With respect to past recollection recorded, ‘'1) the

witness must have had firsthand knowledge of the event;

2) the written statement must be an original memoran-

dum made at or near the time of the event and while the

witness had a clear and accurate memory of it; 3) the

witness must (sic) (not) lack a present recollection of the

-10-

event, and 4) the witness must vouch for the accuracy of

the written memorandum.” Hamme! v Christian, 610

A2d 979, 982-3.

Also, for computer printout to be admissible under business

record exception to hearsay rule, entries must be made in regular

course of business at or reasonable near the time of the events

they record, and trial court must be satisfied that sources of infor-

mation and mode and time of preparation indicate sufficient

trustworthiness to justify admission. Lenzini v Columbia Foods,

829 SW2d 482, 485.

These cases compare favorably with International Harvester, in-

fra.

(1)The certificates are summaries of taxes and do not, on

their face, identify Shyrl as LIABLE for any tax. (2) The alleged

taxes for 1971 were assessed in 1983, raising a strong presump-

tion against reliability. Similar delays are seen for each alleged

year raising the question of recording the alleged liability in a

normal course of business activity. (Dist. Court. p. 28 ). (3) The

10th Circuit never found that the assessment complied with 26

USC 6201 (above) and refused to consider the law of the case. (4)

The certificates are certified as being based upon SUPPORTING

DOCUMENTS and subject to correction. In the absence of the

supporting documents they appear unreliable.

The 10th Circuit regards the certificates as conclusive in the

absence of the supporting documents. The 2d Circuit in US v

Q’Connor, 291 F2d 520, 527 (1961), distinguished between con-

clusive and presumptive but inconclusive certificates. That cir-

cuit held that the certificates are presumptive but inconclusive.

Similarly, Coson v US, 169 FSupp 675-6 (SC Cal, 1958), held that

since the supporting documents are not in evidence, the cer-

tificates are not conclusive. Also, see footnotes 15, 16, p.675. This

same position is taken by the 5th Circuit when it recognized that

there are no reported cases allowing certificates in evidence over

objection without the underlying official record. US v Buford, 889

F2d 1406, 1408 (1989). Also, admissibility of computer

documents is dependent upon the source of the information and

trustworthiness, which burden of proof is upon US. Diversified

Financial v Maderak, 811 P2d 1237, 1240 (1991).

We have shown above that it is extremely unlikely that

there are any documents supporting the certificates (26 USC

6201(aX1)). We believe the only proper method of proving the

certificates trustworthy and admissible it to compel the US to pro-

duce the alleged supporting documents and then compare these

3%.

documents to the certificates and the law of the case. The US

must produce the documents according to Comm. v Shapiro,

supra 424 US at 628.

Therefore, we attack the 10th Circuit’s conclusion of no

SUBSTANTIAL EVIDENCE. Our ARGUMENT is that the

assessment does comply with the statute (26 USC 6201), that

there are no supporting documents, that no district director found

Shyr] liable for any tax, under any specific law, and we were

denied our right to cross examine the computer generated hear-

say certificates, under oath, to establish whether or not they are

trustworthy, reliable, relevant and material.

Therefore, we believe the certificates are unreliable and in-

admissible.

Presumptions are not evidence, and they disappear in the

face of substantive evidence tending to disprove them. Union Pac

R Co v US, 524 F2d 1343. Neither possibilities nor assumptions

can take the place of evidence. Ragsdale v Paschal, 118 FSupp

280. The burden of proof remains upon the plaintiff to establish

his substantive case. O’Brian v Equitable Life Assurance, 212

F2d 383.

X. DUE PROCESS OF LAW

This court has established an important element of due pro-

cess.

“But it is entirely plain that to treat the statements

in this report - based on an ex parte investigation and for-

mulated in the manner herein set forth - as constituting

in themselves substantive evidence upon the questions of

fact here involved, violates the fundamental rules of

evidence entitling the parties to a trial of issues of fact,

not upon hearsay, but upon the testimony of persons hav-

ing first hand knowledge of the facts, who are produced as

witnesses and are subject to the test of

cross-examination.”” US\ v International Harvester, 274

US 693, 703. Compare 10th Cir EVIDENTIARY MAT-

TERS.

The 10th Circuit errs in requiring us to produce the

witnesses with first hand knowledge of the assessment. The US

must produce the witnesses, we have the right to cross-examine.

The 10th Circuit errs in saying we refused the district courts offer

to make available two witnesses who executed the certificates.

This appears in direct conflict with this court in that (1) The US

must cal] its witnesses to establish the reliability of the supposed

evidence; (2) The persons who signed the certificates are not iden-

-12.

i

tified as either a district director or a director of a regional service

center (26 CFR 301.6201-1) and therefore have no first hand

knowledge. The person who did make the assessments is not vet

identified: (3) It is our right to cross examine (not directly ex-

amine as the 10th Circuit claims), under oath, the person having

first hand knowledge of the alledged assessment; (4) The cer-

tificates themselves are not executed under oath and therefore

are not reliable unless proven reliable by US witnesses.

Therefore, we believe the 10th Circuit is in conflict with this

court and does violence to long standing and well settled demands

of due process of law.

XI. FRAUDULENT CONVEYANCE

The district court apparently lacks jurisdiction and discre-

tion to decide a fraudulent conveyance action. There is no law

granting jurisdiction to the district court in a fraudulent con-

veyance action nor to decide rights, titles or ownership of rea! pro-

perty in Richfield, Utah.

This court alluded to this jurisdictional issue in Aquilino v

US, 363 US 509, 515 but did not directly decide this issue. This

appears an important jurisdictional issue. It is well settled that,

“A statute can not extend federal jurisdiction beyond the limits of

the Constitution.’” Hodgson v Bowerbank, 9 US 303 (1809), 1 Fed

Proc, LEd 1.1. In this civil action, no particular statute is cited

alleged to grant jurisdiction to the district court. Fraudulent con-

veyance does not arise under the Constitution, laws or treaties of

the United States. Daviditis v Nat. Bank of Matton, 263 F2d 884,

886. Also, see Coll v Coll 690 FSupp 1085, 1090 (DC, 1988)

The lower courts have refused to address this jurisdictional]

issue and appear to be in conflict with the cited cases.

XII. ASSESSMENT AND JUDGMENT ARBITRARY AND

VOID

Relying on the above, we believe this civil action falls into

the category of cases in which the alleged assessment is arbitrary,

fails to comply with the law and regulation, is without rational

foundation, is excesive, & is naked where the alledged documents

supporting the computer generated certificates do not exist. The

assessment having been shown to be arbitrary, the money judg-

ment must also be arbitrary as we have shown above. Helvering

v Taylor, 293 US 507, 514; US v Janis, 428 US at 442; Carson v

US 560 F2d 693, 696 (5th Cir 1977); Coleman v US, 704 F2d

326, (6th Cir, 1983;) US v Schroeder, 900 F2d 1144, 1148-9

(7th Cir 1990). When an assessment is erroneous, see Suarez v US

582 F2d 1007, 1010. Upon showing assessment arbitrary the

-13.

burden is then upon the government to show whether any defi-

ciency exists and, if so, in what amount. Bar L Ranch Inc v Phin-

ney, 426 F2d 995, 999 (1970). Even in tax court cases, with an ar.

bitrary and erroneous assessment the government must prove the

correct amount of any taxes owed. Portillo v Comm, 932 F2d

1128, 1133 (5th Cir 1991). This is not a tax court case. The

burden of proof should be entirely upon the US to prove the

allegations in its complaint. It should be viewed as any other

civil action for any other kind of alleged debt with traditional! pro-

tections for the Defendants.

The lower courts proceeded entirely upon presumption, from

jurisdiction to fact and law. The US has not introduced any rele-

vant evidence under oath. We believe the US failed to prove the

allegations in its complaint.

Therefore, we believe the 10th Circuit is in conflict with the

law, cases decided by this court, and in conflict with the other cir-

cuits cited above when it failed to find the assessments arbitrary

and void and failed to reverse the district court decision and

orders.

XIII. CONCLUSION

This appears to be a most unique case. This may be the first

case in the country tried by computer. This may be the first case

in which all facts are presumed. This may be the first case where

the law of case is ignored. We believe we have shown conflicts

with the law (26 USC 6201, 7401) which law has not been and

should be decided by this court, conflicts with decisions of this

court, conflicts with other circuits and district court decisions and

that the 10th Circuit sanctioned the departure of the district so

far from the usual course of judicial proceedings as to cal] for an

exercise of this Court’s supervision. We believe this Petition for

Writ of Certiorari should be granted.

L. Shyr! Brown Ila D. Brown_

Petitioner, Defendant Petitioner, Defendant

UNITED STATES COURT OF APPEALS FOR THE TENTH

CIRCUIT

No. 91-4175 (DC 89-C-143J)

United States of America, Plaintiff-Counter-Claim Defendant-

Appellee v L. Shyrl Brown and Ila D. Brown, Defendants-

Counter-Claimants-Appellants.

ORDER AND JUDGMENT

Before Moore and Tacha, Circuit Judges and Saffels, Senior

Judge

Honorable Dale E. Saffels, Senior Judge, United States District

Court for the District of Kansas, sitting by designation.

After examining the briefs and appeallate record, this panel

has determined unanimously that oral argument weuld not

materially assist the determination of this appeal. See Fed R App

P 34(a); 10th Cir R 34.1.9. The case is therefore ordered submit-

ted without oral argument.

The United States brought this action against defendants L.

Shyrl Brown and Ila D. Brown to reduce to judgment Mr. Brown's

unpaid tax liability, to set aside as fraudulent Mr. Brown’s con-

veyance of real property to Mrs. Brown, and to foreclose federal

tax liens against the fraudulently transferred property. The

district court entered judgment in the amount of $190,404.89,

plus interest and statutory additions, for unpaid income taxes for

the years 1971, 1972, 1973, 1977, 1978, 1980, and 1982, against

Mr. Brown, the sole wage earner. The district court also set aside

as fraudulent Mr. Brown’s conveyance of his interest in his

business property, upheld the tax liens— on the property, and

ordered the property foreclosed and sold to satisfy the liens.

Defendants appea!. We exercise our jurisdiction under 28 USC

1291, and affirm.

The real property that is the subject of the foreclosure and sale

order was used by Mr. Brown for his dentistry business.” In 1972,

Mr. Brown conveyed his undivided one-half interest in the proper-

ty to his wife, defendant Ila D. Brown, who owned the other un-

divided one-half interest, resulting in title to the property in Mr.

Brown’s name. At about that time, Mr. Brown ceased paying

federal income taxes. Mr. Brown continued to use the property

for his business.

Defendants raise several arguments on appeal. In general, they

maintain the government failed to establish a duty tc pay taxes

and failed to establish the district court’s jurisdiction. They also

claim (1) the action was not filed in compliance with 26 USC/7401

and 7403 requiring authorization for the civil action by the

ET

Secretary of the Treasury and the Attorney General; (2) the

district court erred in receiving and relying on various items of

evidence; (3) the district court’s findings of fact and law that the

business property was fraudulent conveyed was incorrect; and (4)

defendants were denied their right to a jury trial.

I. TAX PROTESTER ARGUMENTS

Defendants make several arguments that the district court was

without jurisdiction. We review de novo the question of the

district court’s jurisdiction. Kunkel v Continental Casualty Co.,

886 F2d 1269, 1273 (10th Cir 1989)

In Lonsdale v United States, 919 F2d 1440 (10th Cir 1990), we

addressed and rejected many tax protester arguments, several of

which were raised by defendants in this case to challenge the

district court’s jurisdiction. In Lonsdale we rejected arguments

raised here by petitioners, hold that the following arguments ...

are completely lacking in legal merit and patently frivolous: (2)

the authority of the United States is confined to the District of

Columbia; (3)...[various arguments against the government's

power to impose income taxes on individuals; (6) the income tax is

voluntary; (7) no statutory authority exists for imposing an in-

come tax on individuals; {and\9) individuals are not required to

file tax returns fully reporting their income... Id. at 1448. Also

meritiess is the argument that “the Commissioner of Internal

Revenue and employees of the Internal Revenue Service have no

power or authority to administer the Internal Revenue

laws...because of invalid or nonexistent delegations of authority.”

Id. Accordingly, defendant’s similar arguments are rejected as

meritless.

I] AFFIRMATIVE DEFENSE 26 USC 7401 & 7403

Defendants raised the affirmative defense that the government

failed to comply with 26 USC 7401 and 7403(a), which require

the authorization of the Secretary of the Secretary of the

Treasury and the Attorney General before commencement of a

civil action to collect taxes or enforce a tax lien. Defendants claim

the civil action against them was filed without the requisite

authorizations. Counsel for the government filed the following

writtent statement:

3. By letter dated March 21, 1986 Chief Counsel, Internal

Revenue Service by Marion K. Mortensen, District Counsel, a

delegate of the Secretary of the Treasury, requested that an ac-

tion be brought to reduce the federal tax assessments against L.

Shyr! Brown to judgment, to set aside the fraudulent conveyance

of two parcels of real property and to forclose the federal tax liens

against L. Shyr] Brown.

-16-

4. I was instructed by Stephen Fuerth, Chief, Civil Trial Section,

Western Region, Tax Division, U.S. Department of Justice to br.

ing the present action. Mr. Fureth is a delegate of the Attorney

General of the United States.

] declare under penalty of perjury that the foregoing is true and

correct.

R. Vol. I. doc 50 at 1-2. The record reflects that defendants did

not respond to the government’s statement. They neither came

forward with evidence to controvert the statement nor challenged

the form or the content of the statement. In pleadings filed after

the government's statement of compliance with 7401 and

7403(a), defendants merely reiterated their claim that the govern.

ment had not complied with those sections.

Once the government offered some evidence of compliance with

7401 and 7403%(a), defendants had the burden of going forward

with evidence to establish their affirmative defense. See

Simopoulos v Virginia, 462 US 506, 510 (1983) (‘Placing upon the

defendant the burden of going forward with evidence on an affir-

mative defense is norma!ly permissible.’’); Patterson v New York,

432 US 197 207-08 (1977) (requiring defendant to carry burden of

persuasion on affirmative defense of extreme emotional distur-

bance does not violate due process clause). Defendants failed to

meet their burden. Therefore, because the government's

evidence of compliance with 7401 and 7403(a) is uncon-

troverted, we determine defendants conceded that the govern-

ment complied with those sections.

II] EVIDENTIARY MATTERS

Defendants allege several evidentiary errors. First, they claim

the government failed to produce sufficient admissible evidence

to establish the taxes due from Mr. Brown.

In a suit brought by the government to collect taxes resulting

from unreported income, the government generally establishes a

prima facie case when it shows a timely assessment of the tax

due, supported by a minimal evidentiary foundation, at which

point a presumption of correctness arises. A presumption of cor-

rectness attaches to the Commissioner’s assessment, once some

substantive evidence is introduced demonstrating that the tax-

payer received unreported income. This presumption will permit

judgment in the Commissioner’s favor unless the opposing party

produces substantial evidence overcoming it.

United States v McMullin, 948 F2d 1188, 1192 (10th Cir

1991Xcitations omitted).

In this case, the government introduced into evidence the cer-

tificates of assessment. The government then elicited testimony

17.

from Mr. Brown that he had not filed a tax return showing his in-

come since 1970, and that he had been the sole source of financial

support of his family of eight during the tax years in question.

Accordingly, the government’s evidence met the McMullin test.

Defendants produced no evidence to challenge the information

reflected on the assessments. Therefore, judgment in the govern-

ment’s favor was warranted.

Defendants next contend the certificates of assessment were

inadmissible hearsay evidence. They also contend the certificates

were inadmissible because they are computerized summaries.

Certificates of assessments fall within the public records excep-

tion to the rule against hearsay because they ‘qualify as

[records], reports, ... or data compilations, in any form, of public

offices or agencies, setting forth...matters observed pursuant to

duty imposed by law as to which matters there was a duty to

report.”” Hughes v United States, 953 F2d 531, 539 (9th Cir

1992Xquoting Fed R Evid 803(8)). Official IRS documents, in-

cluding those generated by computer, are admissible as public

records. Id. at 540; see also United States v Hayes, 861 F2d 1225,

1228 (10th Cir 1988Xnoting the ‘well established proposition”

that data generated by computer may qualify under business

records exception of Rule 803(6)). Accordingly, we determine the

certificates of assessment were properly admitted.

Defendants further complain that they were denied discovery

of the documents underlying the assessments. “We review orders

relating to discovery for an abuse of discretion.” Johnson ex rel.

Johnson v Thompson, 971 F2d 1487, 1497 (10th Cir 1992), peti-

tion for cert. filed 61 USLW 3371 (US Nov 4, 1992No 92-779).

During trial, the government’s attorney stated that the govern-

ment had complied with all of defendant’s discovery requests. R.

Vol III at 138-39. Defendants did not dispute the government’s

representation except to say they were really trying to discover

information other than the supporting documents. Id. at 142-43.

Defendants also complain that no witness appeared to testify

about the data underlying the assessments, yet they refused the

district court’s offer to make available two witnesses who ex-

ecuted the certificates of assessment. R. Vol. IV at 243-44. The

district court found that defendants had adequate opportunity to

ascertain the identity of any witness they wanted to call. Id. at

243. Defendants do not dispute the figures stated in the

assessments, except to say that the government has not proven

their accuracy to the defendant’s satisfaction. Therefore, we

perceive no abuse of discretion relating to discovery of the infor-

-18-

mation underlying the assessments.

IV. FRAUDULENT CONVEYANCE

The district court found that Mr. Brown had conveyed the

business property to his wife with the intent to defraud the

United States. R. Vol. II, doc. 107 at 6. Based on that finding, the

district court set aside the transfer pursuant to Utah Code Ann

25-1-7 (1953Xcurrently codified at 25-6-5

(1989)), and ruled that Mr. Brown retained one-half undivided in-

‘terest in the business property to which the federal tax liens at-

tached. R Vol. II, doc 107 at 7.

Defendants allege several errors relative to the district court’s

order setting aside the business property conveyance: (a) the cor-

rect statute of limitations was for years after the transfer, as pro-

vided by Utah Code Ann. 25-6-10 (1989), not the six years provid-

ed by the federal statute for collection of tax after assessment, 26

USC 6502; (b) the government failed to prove it was a creditor; (c)

the government failed to establish notice and demand was sent to

defendants; (d) the Utah fraudulent conveyance statute, 25-1-7

(1953), permitting a future creditor to move to set aside a

fraudulent conveyance, is unconstitutionally vague; (e) the

government’s liens did not attach to the property; and (f) a prere-

quisite to a finding of fraudulent conveyance under section 25-1-4

(1953Xcurrently codified at section 25-6-6 (1989X, was a finding

that Mr. Brown was insolvent at the time of the conveyance or

that he became insolvent because of the conveyance.

We conduct a de novo review of the district court’s determina-

tion of state law. Mares v ConAgra Poultry Co. 971 F2d 429, 495

(10th Cir 1992). We review de novo the construction of federal

statutes. FDIC v Canfield, 967 F2d 443, 445 (10th Cir), cert.

dismissed 113 SCt 516 (1992).

The Utah four-year statute of limitatgions for fraudulent con-

veyances, section 25-6-10 (1989), conflicts with the federal law

providing a six-year statute of limitations under 26 USC °6502.

The Supremacy Clause, U.S. Const. art. VI, cl. 2, accords priority

to federal rights “whenever they come in conflict with state law.”’

Chapman v Houston Welfare Rights Org., 441 US 600, 613 (1979);

accord Golden State Transit Corp. v City of Los Angeles, 493 US

103, 107 (1989). “It is well settled that the United States is not

bound by state statutes of limitation or subject to the defense of

laches in enforcing its rights. The same rule applies whether the

United Siates brings its suit in its own court or in a state court.”

United States v Summerlin, 310 US 414, 416 (1940Xcitations

omitted).

The district court relied upon section 25-1-7 (1953) and Dahnken

-19-

Inc v Wilmarth, 726 P2d 420 (Utah 1986), in finding Mr. Brown

had fraudulently conveyed his interest in the business property to

his wife, and therefore, that Mr. Brown retained a one-half un-

divided interest in the property, subject to the federal tax liens.

The district court properly employed state law to ascertain

defendnts’ interest in the property, then applied federal tax law

to that interest. United States v National Bank of Commerce,

472 US 713, 722 (1985\X‘[S)tate law controls in determining the

nature of the legal interest which the taxpayer had in the proper-

ty [;]...tax consequences thenceforth are dictated by federal law.”’).

Defendants argue on appeal that the Utah statute permitting a

future creditor to request a conveyance to be set aside as

fraudulent, section 25-1-7 (1953), is unconstitutionally vague.

The question of the constitutionality of the statute is not listed in

the pretrial order as a disputed issue. Our review of the record

does not reveal that the defendants raised this argument at the

district court, and defendants fail to direct us to pertinent por-

tions of the record. See Securities & Exc Comm’r v Thomas, 965

F2d 825, 826-27 (10th Cir 1992Xin counseled case, court would

search the record for the requisite record support). Therefore, we

decline to address the issue raised for the first time on appeal. See

Hicks v Gates Rubber Co., 928 F2d 966, 970 (10th Cir 1991).

We next address defendants’ claims that the government failed

to prove it was a creditor, and that the assessment procedure was

deficient. Proof that the government was a creditor was received

at trial in the form of the assessment notices for the tax years in

question. See Long v United States, 972 F2d 1174, 1181 (10th Cir

1992Xciting casesXcertificate of assessment prima facie evidence

of valid assessment). Moreover, “a Certificate of Assessments

and Payments is sufficient evidence that an assessment was

made in the manner prescribed by [26 USC] 6203 and Treas Reg

301.6203-1.” id

The government became a creditor on the dates the tax returns

were due. 26 USC 6151(aXtaxpayer shall pay the tax at the time

fixed for filing the return); Pan Am Van Lines v United States,

607 F2d 1299, 1301 (9th Cir 1979Xholding tax was due one the

date the tax return was due); United States ve Thomassen, 610

FSupp 386, 391-92 (D Neb 1985Xsame); see also Holywell Corp v

Smith, 112 SCt 1021, 1028 (1992X“‘No tax liability becomes due

under 6151 until the time required for making returns’’).

Therefore, we reject defendants’ claims that the government was

not a creditor and the assessment procedure did not comply with

statutory requirements.

.20-

|

Defendants also claim that the liens did not attach to the proper-

ty, primarily because title was transferred to Mrs. Brown’s name

prior to the notices of assessments, and prior to trial. A federal

tax lien arises upon assessment for unpaid taxes, and attaches to

all property belonging to the delinquent taxpayer. 26 USC

6321-6322. When the district court set aside the conveyance to

Mrs. Brown, Mr. Brown’s interest became subject to the liens.

Defendants next claim that because Mr. Brown was not in-

solvent prior to the conveyance of the business property to Mrs.

Brown, and because the conveyance did not make him insolvent,

Utah Code Ann. 25-6-6 (1989) precludes a finding that the con-

veyance was fraudulent. The district court set aside the con-

veyance of the business property pursuant to Utah Code Ann

25-1-7 (1953), not section 25-1-4 (1953Xcurrently section 25-6-6

(1989)). ‘“‘Utah’s Fraudulent Conveyance Act, 25-1-1, et seq.,

establishes several different grounds for setting aside a debtor's

transfer of property as a fraudulent conveyance.” Builer v

Wilkinson, 740 P2d 1244, 1260 (Utah 1987Xemphasis added). Ac-

tual fraudulent intent is required to make a conveyance

fraudulent under section 25-1-7, while a transfer by an insolvent

debtor under section 25-1-4 requires no actual intent. Butler, 740

P2d at 1261. The district court’s finding that the conveyance was

fraudulent under section 25-1-7 does not conflict with the

separate provisions of sectgion 25-1-4. Therefore, the district

court’s determination will not be set aside.

V. JURY TRIAL

Finally, defendants maintain they were entitled to a jury

trail. A defendant in a suit brought by the government for collec-

tion or recovery of taxes is entitled to a jury trial. United States v

Anderson, 584 F2d 369, 373 (10th Cir 1978). When the govern-

ment seeks only to enforce its tax lien, an action sounding in equi-

ty, no right to a jury trial arises. United States v Annis 634 F2d

1270, 1272 (10th Cir 1980). Where, as here, the government seeks

a money judgment and forclosure of tax liens, the taxpayer is en-

titled to a jury trial on the money judgment claim. McMullin 948

F2d at 1190.

Here, the government’s evidence that Mr. Brown was in-

debted for unpaid taxes included the certificates of assessment

and Mr. Brown’s testimony that he alone had provided all of the

financial support for his family during the tax years in question.

Defendants presented no countervailing evidence. Under these

circumstances, even if defendants had been granted a jury on the

government’s legal claims, the district court would have been re-

quired to direct a verdict on those claims in the government's

favor. Therefore, any error in denying defendants a jury trial was

-21-

| —

harmless. Id. at 1192.

All pending motions are DENIED.

The judgment of the United States District Court for the

District Court of Utah is AFFIRMED. The mandate shall issue

forthwith. Dec. 23, 1992

Entered for the Court Dale E Saffels Senior District Judge

UNITED STATES COURT OF APPEALS FOR THE TENTH

CIRCUIT

United States of America, Plaintiff-Counter-Claim Defendant-

Appellee, v L. Shyrl Brown and Ila D. Brown, Defendants-

Counter-Claimants-Appellants.

Number 91-4175 (DC No 89-C-143JXD Utah)

ORDER Before Moore and Tacha, Circuit Judges and Saffels,

Senior District Judge. Honorable Dale E. Saffels, Senior District

Judge, United States District Court for the District of Kansas, sit-

ting by designation.

This matter is before the court on appellants’ petition for

rehearing.

The materials submitted by appellants have been reviewed

by the members of the hearing panel, who conclude that the

original disposition was correct. Accordingly, the petition is

denied on the merits.

Entered for the Court Robert L Hoecker, Clerk by Barbara

Schermerhorn Deputy Clerk Feb. 12, 1993

FOOTNOTES

1. The district court granted the parties’ requests to stay the sale

of the property.

2. The government also claimed that the defendants’ residential

real property, held from the date of purchase in Mrs. Brown’s

name, was subject to foreclosure and sale for Mr. Brown’s tax ©

liability, but the district court declined to find a fraudulent con-

veyance of the residential property. The government filed a notice

of appeal, but subsequently voluntarily dismissed its appeal.

3. The statute was subsequently amended to provide for a ten-

year statute of limitations. 26 USC 6502(aX1990).

IN THE UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF UTAH CENTRAL DIVISION. United States of

America, Plaintiff, L. Shyrl Brown, et al., Defendant.

MEMORANDUM OPINION Civil No. 89-C-143J

INTRODUCTION

-22-

The above captioned matter came on for trial on February 4

and 5, 1991. Plaintiff United States (‘plaintiff’) claimed that

defendant L. Shyrl Brown (‘‘Mr. Brown’’) was indebted to the

United States for unpaid federal income taxes. To help satisfy

Mr. Brown’s alleged debt, plaintiff sought to foreclose federal tax

iiens on two parcels of real property (hereinafter referred to as the

“residential” and “business” properties), owned by defendant Ila

Del Brown (Mrs. Brown’’).

At trial, the court found that plaintiff had properly assessed

the income taxes in question, and that Mr. Brown had failed to

pay such taxes when due. Specifically, the court determined that

the amounts claimed against Mr. Brown for the calendar years

1971, 1972, 1973, 1977, 1978, 1979, 1980 and 1982, were correct,

and that the United States was entitled to judgment thereon. As

to the residential property, the court found that the land was

legitimately placed in the name of Mrs. Brown, and therefore,

that the property was unreachable. With respect to the business

property, the court took under advisement the issue of whether

the land was subject to federal tax liens.

FACTS

UNITED STATES COURT OF APPEALS FOR THE TENTH

CIRCUIT

United States of America, Plaintiff-Counter-Claim Defendant-

Appellee, v L. Shyrl Brown and Ila D. Brown, Defendants-

Counter-Claimants-Appellants.

Number 91-4175 (DC No 89-C-143JXD Utah)

ORDER Before Moore and Tacha, Circuit Judges and Saffels,

Senior District Judge. Honorable Dale E. Saffels, Senior District

Judge, United States District Court for the District of Kansas, sit-

ting by designation.

This matter is before the court on appellants’ petition for

rehearing.

The materials submitted by appellants have been reviewed by

the members of the hearing panel, who conclude that the original

disposition was correct. Accordingly, the petition is denied on the

merits.

Entered for the Court Robert L Hoecker, Clerk by Barbara

Schermerhorn Deputy Clerk

FOOTNOTES

1. The district court granted the parties’ requests to stay the sale

of the property.

-23..

2. The government also claimed that the defendants’ residential

real property, held from the date of purchase in Mrs. Brown's

name, was subject to foreclosure and saie for Mr. Brown's tax

liability, but the district court declined to find a fraudulent con-

veyance of the residential property. The government filed a notice

of appeal, but subsequently voluntarily dismissed its appeal.

3. The statute was subsequently amended to provide for a ten-

year statute of limitations. 26 USC 6502(aX1990).

IN THE UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF UTAH CENTRAL DIVISION. United States of

America, Plaintiff, L. Shyrl Brown, et al., Defendant.

MEMORANDUM OPINION Civil No. 89-C-143J

INTRODUCTION

The above captioned matter came on for trial on February 4 and

5, 1991. Plaintiff United States (‘plaintiff’) claimed that defen-

dant L. Shyrl Brown (Mr. Brown’’) was indebted to the United

States for unpaid federal income taxes. To help satisfy Mr.

Brown’s alleged debt, plaintiff sought to foreclose federal tax

liens on two parcels of real property (hereinafter referred to as the

“residential” and “business” properties), owned by defendant Ila

Del Brown (Mrs. Brown’’).

At trial, the court found that plaintiff had properly assessed the

income taxes in question, and that Mr. Brown had failed to pay

such taxs when due. Specifically, the court determined that the

amounts claimed against Mr. Brown for the calendar years 1971,

1972, 1973, 1977, 1978, 1979, 1980 and 1982, were correct, and

that the United Statges was entitled to judgment thereon. As to

the residential property, the court found that the land was

legitimately placed in the name of Mrs. Brown, and therefore,

that the property was unreachable. With respect to the business

property, the court took under advisement the issue of whether

the land was subject to federal tax liens.

FACTS

This case involves two parcels of real property, both of

which are located in Richfield, Utah. Mr. Brown’s residence is

located on one parcel, and his business is located on the other.

The business property, which is used solely by Mr. Brown for the

practice of dentistry, is the subject of this memorandum decision.

On March 24, 1972, the Browns recorded a deed with the

Sevier County Recorder. The deed conveyed the business proper-

ty from Mr. and Mrs. Brown, collectively, to Mrs. Brown in-

dividually. While Mr. Brown claims he conveyed his interest in

24.

the property as a gift, plaintiff contend that Mr. Brown

fraudulently conveyed his property interest to evade present and

future tax liabilities. Mr. Brown failed to pay federal income

taxes for the years 1971, 1972, 1973, 1977, 1978, 1979, 1980 and

1982.

DISCUSSION

Plaintiff claims Mr. Brown fraudulently conveyed his un-

divided one-half interest in the business property to Mrs. Brown

in violation of Utah Code Ann. ("UCA”) 25-1-7 of the Utah

Uniform Fraudulent Conveyance Act (the “Act’’) -. Section 25-1-7

states:

Every conveyance made, and every obligatgion incurred,

with actual intent, as distinguished from intent presumed in law,

to hinder, delay or defraud either present or future creditors is

fraudulent as to both present and future creditors.

UCA 5-1-7 (1953). Thus, to prove a violation of the UCA/ plain-

tiff must show that it is a ‘creditor’, and that Mr. Brown con-

veyed the business property with “actual intent” to defraud the

United States.

A. The United States as a Creditor

At trial, plaintiff argued that, for purposes of UCA * 25-1-7,

the United States is a creditor of Mr. Brown for the years 1971,

1972, 1973, 1977, 1978, 1979, 1980 and 1982. In contrast, Mr.

Brown asserted that plaintiff is not a creditor, or in the alter-

native, even if plaintiff is a creditor, it did not become so until

May, 1983, when the taxes were actually assessed. The court

finds that plaintiff is a creditor for purposes of USC 25-1-7, and

that plaintiff's status as a creditor is determined by the date the

taxes were due, not when they were assessed.# See United States

v Thomassen, 610 FSupp 386 (D Neb 1985).

In Thomassen, the United States sought to set aside a con-

veyance that occurred after the date in which defendant’s delin-

quent tax return was required to be filed. The court determined

that, pursuant to 26 USC *6151(a), the United States became an

existing creditor as of the date prescribed by law for the filing of

the return. Thus, the court found that “income tax liability

matures on the day the return is required to be filed and the cor-

rect amount of the tax liability becomes due at that time

regardless of when the deficiency assessment may be made.”’ Id.

at 392 (citations ommittedXemphasis in original).

Based on the foregoing, this court likewise finds that plain-

tiff had an existing claim against Mr. Brown beginning on April

15, 1972, the date on which Mr. Brown’s 1971 federal income tax

-25-

return was due to be filed. The correct amount of tax liability

became due to be filed. The correct amount of tax liability

became due at the time, regardless of when the deficiency assess-

ment was actually made. Therefore, as of that date, plaintiff was

a creditor of Mr. Brown for unpaid federal income taxes.

Defendant contends that even as creditors, plaintiff cannot

reach a conveyance that occurred on March 24, 1972, almost a

month prior to the April 15, tax deadline. The court disagrees,

and finds that plaintiff was a future creditor of Mr. Brown on

March 24, 1972. Although there is no authority defining the term

“future creditor” as that phrase is used in UCA 25-1-7, the con-

text of that term makes it clear that a future creditor is a creditor

whose claim came into existence after the conveyance at issue.

Under early fraudulent conveyance statutes, as well as the com-

mon law, a creditor did not have standing to set aside a

fraudulent conveyance unless the creditor was a creditor at the

time the conveyance occurred. See generally, 38 ALR 3d 597. In

more recent decisions, however, courts have allowed creditors to

maintain fraudulent conveyance actions even if the obligation did

not come into existence until after the conveyance had occurred.

For example, in Studley v Lefrak, 412 NYS2d 901, 905 (N.Y.App

1979) the court found:

Under the statute a creditor has standing to maintain an action

to set aside a fraudulent transfer though his debt may not have

been in existence at the time of transfer.

Utah Code Ann. 25-1-7, by using the term future creditors, ap-

pears to have adopted this more recent view. Accordingly,

although plaintiffs claim against Mr. Brown did not come into

existence until] after the conveyance of the business property,

plaintiff nevertheless has standing to sue under UCA "25-1-7 as a

future creditor

B. Intent to Defraud

The court further finds that Mr. Brown conveyed the proper-

ty with the intent to defraud the United States. Although “‘ac-

tual” fraudulent intent must be shown to hold a conveyance

fraudulent pursuant to UCA 25-1-7, the existence of such intent

may be inferred from the presence indicia of fraud, or badges of

fraud. See Dahnken, Inc of Salt Lake City v Wilmarth, 726 P2d

420 (Utah 1986). The existence of one or more badges of fraud

does not necessarily constitute fraud per se, nor is the presence of

one or more of the elements conclusive. However, the occurrence

of several elements will ordinarily establish that a particular con-

veyance was fraudulent. See Dahnken, 726 P2d at 423.

Such badges of fraud include: the insolvency of the grantor;

.26-

inadequate consideration; the transfer of all of the debtor’s pro-

perty; that the transfer was made in anticipation of a suit or

liabilities; a close relationship between the transferror and the

transferee; that the conveyance was not made in the ordinary

course of business; the retention of possession by the transferor;

the reservation of an interest or benefit by the grantor; and, that

the state taxes or real property taxes are paid by the transferor.

See Butler v_ Wilkinson, 740 P2d 1244 (Utah 1987);

Dahnken, 726 P2d at 423; Meyer v Great American Corp 569 P2d

1094 (Utah 1977).

As evidenced at trial, the conveyance of the business proper-

ty from Mr. and Mrs. Brown, collectively, to Mrs. Brown in-

dividually, was done with the intent to hinder or delay the United

States from collecting Mr. Brown’s delinquent income tax. The

conveyance was tainted with numerous badges of fraud. Mr.

Brown, who has no other assets of his own, conveyed the property

for no consideration. While the conveyance was made to his wife

alone, he retained sole possession of the property for the conti-

nuance of his dental practice. Mr. Brown continued also con-

tinued (sic) to pay all state and property taxes on the property.

Finally, Mr. Brown himself admitted that the very reason he con-

veyed the property to Mrs. Brown was to avoid potential claims

against him. Under these circumstances, the court must infer

that Mr. Brown acted with actual intent to defraud his creditors.

Having found that plaintiff is a creditor of Mr. Brown, and

that the conveyance of the business property was done with the

intent to defraud his creditors, the court finds that Mr. Brown’s

March 24, 1972, conveyance violated USC 25-1-7. Because the

conveyance was fraudulent, the transaction is set aside, and Mr.

Brown retains a one-half undivided interest in the business pro-

perty. Therefore, pursuant to 26 USC *°6321, tax liens arose in

favor of the United States aginst Mr. Brown’s interest in the

business property as of the date his federal income taxes were

assessed.

Tr 3 opinion and order will constitute findings of fact and

conclusi« 5 of law. Counsel for plaintiff to prepare and submit an

appropr. ¢ form of judgment to the court by not later then (sic)

July 23, 1991.

IT IS SO ORDERED Dated this 15 day of July, 1991. BY

THE COURT /s/Bruce S. Jenkins, Chief Judge United States

District Court.

FOOTNOTES

1. The court is troubled as to how the United States can bring

a claim for delinquent taxes dating back as far as 18 years.

A +P

However, under United States v Decker, 241 FSupp 283 (D Ariz

1965), the United States is not bound by Utah’s three-year statute

of limitations, but by the statute of limitations set forth by the In-

ternal Revenue Code. See 26 USC 6502. Section 6502 authorizes

the government to bring a cause of action for the collection of

taxes within six years from the date of assessment. Accordingly,

the statute of limitations in the case did not begin to run until

1983.

2. The Utah Fraudulent Conveyance Act, Sections 25-1-1 to

16 was repealed on April 25, 1988. See Laws 1988, ch 59, /6.

3. The government made the following federal income tax

assessments

1971, 72, 73 May 4, 1983; 1977 August 19, 1985;

1978 May 20, 1985; 1979, 80 May 20, 1985; 1981,

82 July 1, 1985

4. Section 6151(a) states in pertinent part: "...when a return

is required under this title or regulation, the person required to

make such a return shall, without assessment or notice and de-

mand from the secretary, pay such tax to the internal revenue of-

ficer with whom the return is filed, and shall pay such tax at the

time and place fixed for filing the return...”

5. Section 6321 states: If any person liable to pay any tax

neglects or refuses to pay the same after demand, the amount (in-

cluding any interest, additional amount, addition to tax, or

assessable panalty, together with any costs that may accrue in

addition thereto) shall be a lien in favor of the United States upon

all property and rights to property, whether real or personal,

belonging to such person.

IN THE UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF UTAH CENTRAL DIVISION United States

of America, Plaintiff, v L. Shyr] Brown, et al Defendant. Civil No.

89C-143J JUDGMENT, ORDER OF FORECLOSURE AND

ORDER OF SALE

This matter came for trial before United States District

Judge Bruce S. Jenkins on February 4 and 5, 1991 with Kirk C.

Lusty and John Pirkle representing the United States and L.

Shyrl Brown and Ila Dell Brown appearing pro se. The court

previously entered its Memorandum Opinion and Order. Based

on the Memorandum Opinion and Order judgment is entered as

follows:

1. Against L. Shyrl Brown and in favor of the United States

in the sum of $190,404.89, plus interest and statutory additions

28.

as provided by law.

2. Foreclosing the Federal tax liens on the real property

located at 46 West 100 North, Richfield, Utah. The legal descrip-

tion of that property is: Comm at a point 13.5 ft E of SW Cor of Lot

1 Block 45, Plat ‘'A’’, Richfield City Survey, N 48.9 ft, E 16 ft 8 in

S 48.9 ft, W 16 ft 8 in, to beg. containing approximatgely 818

square feet, situated in the Northwest quarter of the Southwest

quarter of Section 25, Township 23 South, Range 3 West, Salt

lake Base and Meridian.

3. That the United States Marshal (sic) sell the real property

identified in paragraph 2 and distribute the proceeds as follows;

(a) First, to the costs of such sale; (b) Second, to the costs of this ac-

tion; (c) Third, one-half to Defendant Ila Dell Brown and one-half

to the United States to be applied to the federal tax liabilities set

forth in paragraph 1; and (d) Any remaining sum to defendant L.

Shyr!l Brown.

4. This order of Sale shall act as a Writ of Execution. Dated

this 24 Day of Sept, 1991.

BY THE COURT /s/ Bruce S. Jenkins United States District

Judge.

UTAH CODE PROVIDES Jurisdiction is hereby ceded to

the United States in, to and over any and all lands or territory

within this state which have heretofore been acquired by the

United States by purchase, condemnation or otherwise for

military or naval purposes and for forts, magazines, arsenals,

dockyards and other needful buildings of every kind whenever

authorized by Act of Congress, and in, to and over any and al]

lands or territory within this state now held by the United States

under lese, use permit, or reserved from the public domain for any

of the purposes aforesaid; this state, however, reserving the right

to execute its process, both criminal and civil, within such ter-

ritory. The jurisdiction so ceded shal] continue so long as the

United States shall own, hold or reserve land for any of the

aforesaid purposes, or in connection therewith and no longer.

Utah Code, 63-8-1.

UNITED STATES CONSTITUTION PROVIDES:

To exercise exclusive Legislation in all Cases whatsoever,

over such District (not exceeding ten Miles square) as may, by

Cession of particular States, and the Acceptance of Congress,

become the Seat of the Government of the United States, and to

exercise like Authority over all Places purchased by the Consent

of the Legislature of the State in which the Same shall be, for the

Erection of Forts, Magazines, Arsenals, Dockyards, and other

needful Buildings; -And ArtI, Sec 8, Cl 17

Fifth Amendment; No person shall...be deprived of life, liberty or

property without due process of law;...

Seventh Amendment; In suits at common law, where the value in

controversy shall exceed twenty dollars, the right of trial] by jury

shall be preserved, and no fact tried by a jury shal] be otherwise

re-examined in any Court of the United States, than according to

the rules of the common law.

INTERNAL REVENUE CODE 26 US Code provides:

The Secretary is authorized and required to make the inquiries,

determinations and assessments of al] taxes (including interest,

additional amounts, additions to the tax, and assessable

penalties) imposed by this title, or accruing under any former in-

ternal revenue law, which have not been duly paid by stamp at

the time and in the manner provided by law. Such authority

shall extend to and include the following: (1) The Secretary shal]

assess all taxes determined by the taxpayer or by the Secretary as

to which returns or lists are made under this title.

26 USC 6201

(1) If any person fails to make any return required by any internal

revenue law or regulation made thereunder at the time prescrib-

ed therefor, or makes, willfully or otherwise, a false or fraudulent

return, the Secretary shall make such return from his own

knowledge and from such information as he can obtain through

testimony or otherwise. (2) Any return so made and subscribed by

the Secretary shal] be prima facie good and sufficient for all legal

purposes.

26 USC 6020(b)

No civil action for the collection or recovery of taxes, or of any

fine, penalty, or forfeiture, shall be commenced unless the

Secretary authorizes or sanctions the proceedings and the At-

torney General or his delegate directs that the action be com-

menced.

26 USC 7401

The district courts of the United States at the instance of the

United States shall have such jurisdiction to make and issue in

civil actions, writs and orders of injunction, and of ne exeat

republica, orders appointing receivers, and such other orders and

processes, and to render such judgments and decrees as may be

necessary or appropriate for the enforcement of the internal

revenue laws. The remedies hereby provided are in addition to

-30-

and not exclusive of any and al] other remedies of the United

States in such courts or otherwise to enforce such laws.

26 USC 7402

In any case where there has been a refusal or neglect to pay any

tax, or to discharge any liability in respect thereof, whether or not

levy has been made, the Attorney General or his delegate, at the

request of the Secretary, may direct a civil action to be filed in a

district court of the United States to enforce the lien of the United

States under this title with respect to such tax or liability or to

subject any property, of whatever nature, of the delinquent, or in

which he has any right, title, or interest, to the payment of such

tax or liability. For purposes of the preceding sentence, any ac-

celeration of payment under section 6166(g) shall be treated as a

neglect to pay tax.

26 USC 7403

Cases in the courts of appeals may be reviewed by the Supreme

Court by the following methods: (1) By writ of certiorari granted

upon the petition of any party to any civil or criminal case, before

or after rendition of a judgment or decree; 28 USCS 1254.

The district courts shall have original jurisdiction of any civil ac-

tion arising under any Act of Congress providing for internal

revenue, or revenue from import or tonnage except matters

within the jurisdiction of the court of International Trade. 28

USCA 1340.

Except as otherwise provided by Act of Congress, the district

court shall have original jurisdiction of all civil actions, suits or

proceedings commenced by the United States, or by any agency or

officer thereof expressly authorized to sue by Act of Congress. 28

USCS 1345.

THE CODE OF FEDERAL REGULATIONS provides:

The district director is authorized and required to make al] in-

quiries necessary to the determination and assessment of al]

taxes imposed by the Internal Revenue Code of 1954 or any prior

internal revenue law. The district director is further authorized

and required, and the director of the regional] service center is

authorized, to make the determinations and the assessments of

such taxes. However, certain inquiries and determinations are,

by direction of the Commissioner, made by other officials, such as

the assistant regional commissioners. The term ‘taxes’ includes

interest, additional amounts, additions to the taxes and

assessable penalties. The authority of the district director and

the director of the regional service center to make assessments in-

cludes the following: (1) The district director or the director of the

regional service center shal] assess ail taxes determined by the

-31-

taxpayer or by the district director or the director of the regional

service center and disclosed on a return or list. (2¥i) Without the

use of the proper stamp; (a) Any article upon which a tax is re-

quired to be paid by means of a stamp is sold or removed for sale

or use by the manufacturer thereof, or (b) Any transaction or act

upon which a tax is required to be paid by means of a stamp oc-

curs; the district director, upon such information as he can obtain,

must estimate the amount of the tax which has not been paid and

the district director or director of the regional service center must

make assessment therefor upon the person the district director

determines to be liable for the tax. However, the district director

or the director of the regional service center may not assess any

tax which is payable by stamp unless the taxpayer fails to pay

such tax at the time and in the manner provided by law or regula-

tions. (ii) If a taxpayer gives a check or money order as payment

for stamps but the check or money order is not

paid upon presentment, then the district director or the director

of the regional service center shall assess the amount of the check

or money order against the taxpayer as if it were a tax due at the

time the check or money order was received by the district direc-

tor.

26 CFR 301.6201-1.

32.

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