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Cranmer Nice v. United States

United States District Court, E.D. Louisiana

October 16, 2019

MARY ELLEN CRANMER NICE
v.
UNITED STATES OF AMERICA

         SECTION: “H”

          ORDER AND REASONS

          JANE TRICHE MILAZZO UNITED STATES DISTRICT JUDGE.

         Before the Court are Defendant's Motion for Partial Summary Judgment (Doc. 31); Defendant's Motion in Limine to Exclude Plaintiff's Expert (Doc. 32); Plaintiff's Motion in Limine to Admit Certain Items of Evidence (Doc. 33); Plaintiff's Motion for Partial Summary Judgment (Doc. 35); and Defendant's Motion in Limine to Preclude Evidence of Fraud or Criminal Conduct (Doc. 67). For the following reasons, Defendant's Motion for Partial Summary Judgment is DENIED AS MOOT; Defendant's Motions in Limine are GRANTED; and Plaintiff's Motion for Partial Summary Judgment and Motion in Limine are DENIED.

         BACKGROUND

         This case arises out of the alleged over-taxation of Plaintiff Mary Ellen Cranmer Nice (“Mrs. Nice”) by the federal government.[1] In 2002, Mrs. Nice's husband died after sixty-one years of marriage, leaving behind substantial assets to provide for her care for the remainder of her life. Mrs. Nice's son, Charles Nice, III (“Chip”), was named executor of Mrs. Nice's husband's estate and subsequently moved in with Mrs. Nice. By 2005, Mrs. Nice began showing signs of mental deterioration, and she was diagnosed with probable early dementia in 2007. Over the course of the next few years, her dementia progressed. During this time, Chip allegedly began exploiting his mother financially. Plaintiff alleges that Chip separated Mrs. Nice from access to her accounts, diverted Mrs. Nice's income for his own personal use, gained fraudulent access to Mrs. Nice's retirement accounts, caused distributions to be made from Mrs. Nice's retirement accounts, and diverted said distributions for his own personal control and use.

         In 2011, Chip allegedly caused Mrs. Nice to execute a fraudulent power of attorney. Between August 2011 and April 2014, Chip allegedly submitted tax returns on behalf of Mrs. Nice. In 2014, Mrs. Nice's daughter, Julianne Nice, instituted suit against Chip in Orleans Parish Civil District Court (“Civil District Court”) to remove him from Mrs. Nice's home and finances. A temporary injunction was subsequently issued. Chip died on January 1, 2015, and on January 6, 2015, Mrs. Nice was interdicted; Julianne Nice was named her curatrix. In 2016, the Civil District Court ordered that the 2011 power of attorney granted to Chip was an absolute nullity. Julianne Nice filed amended tax returns on behalf of Mrs. Nice, seeking a refund for the tax years 2006, 2007, 2009, 2010, 2011, 2012, and 2013. All claims were denied except for tax years 2009, which was accepted in part, and 2007, which was never responded to. Plaintiff appealed each denial, and the appeals were denied.

         On August 2, 2018, Mrs. Nice, acting through her curatrix Julianne Nice, instituted this suit, seeking from the United States a refund of $519, 502 in federal income taxes, plus interest and penalties, for the aforementioned years. The crux of Plaintiff's complaint is that Mrs. Nice never actually received the income for which she was taxed because of Chip's fraudulent diversion of her funds for his own use and benefit. Because of Chip's alleged fraudulent acts, Plaintiff argues that Mrs. Nice's tax returns from 2006 until 2014 over-stated her real income, which resulted in an overpayment of income taxes. Plaintiff seeks a return of these funds.

         Defendant filed the instant Motion for Partial Summary Judgment, asking the Court for a determination that, as a matter of law, the constructive receipt doctrine is inapplicable for determining whether Plaintiff received as income the items disbursed into her personal bank account and later reported on her federal income tax returns. Plaintiff filed the instant Motion for Partial Summary Judgment asking the Court to determine that, as a matter of law, Plaintiff did not actually or constructively receive the items of income deposited into her bank account. Thereafter, the parties filed a Joint Stipulation regarding these two Motions. The Joint Stipulation states that the constructive receipt doctrine is inapplicable in this case; that, consequently, the Defendant's Motion for Partial Summary Judgment is moot; and that the only remaining issue in Plaintiff's Motion for Partial Summary Judgment is whether Mary Ellen Cranmer Nice actually received as income the items disbursed into her personal bank account and reported on her tax returns.

         The Defendant also filed the instant Motions in Limine, seeking to exclude the expert witness testimony of Plaintiff's expert, Dr. Nona Epstein, and to exclude evidence of fraud or criminal conduct by Chip from being introduced at the trial on this matter. Plaintiff also filed the instant Motion in Limine, seeking an order admitting three certain items into evidence. The Court will address each motion in turn.

         LEGAL STANDARD

         I. Summary Judgment

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[2] “As to materiality . . . [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.”[3] Nevertheless, a dispute about a material fact is “genuine” such that summary judgment is inappropriate “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[4]

         In determining whether the movant is entitled to summary judgment, the Court views facts in the light most favorable to the non-movant and draws all reasonable inferences in his favor.[5] “If the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial.”[6] Summary judgment is appropriate if the non-movant “fails to make a showing sufficient to establish the existence of an element essential to that party's case.”[7]

         “In response to a properly supported motion for summary judgment, the nonmovant must identify specific evidence in the record and articulate the manner in which that evidence supports that party's claim, and such evidence must be sufficient to sustain a finding in favor of the nonmovant on all issues as to which the nonmovant would bear the burden of proof at trial.”[8] The Court does “not . . . in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts.”[9] Additionally, “[t]he mere argued existence of a factual dispute will not defeat an otherwise properly supported motion.”[10]

         II. Admissibility of Evidence

         “The essential prerequisite of admissibility is relevance.”[11] Evidence is relevant if “it has any tendency to make a fact more or less probable than it would be without the evidence . . . and the fact is of consequence in determining the action.”[12] Whether a fact is of consequence is a question governed by the substantive law applicable to the case.[13]

         LAW AND ANALYSIS

         I. Defendant's Motion for Partial Summary Judgment

         The Defendant's Motion for Partial Summary Judgment asks the Court to determine that, as a matter of law, the constructive receipt doctrine is inapplicable in this case.[14] As previously noted, the parties filed a Joint Stipulation wherein the parties agree that the constructive receipt doctrine is inapplicable and that the “the United States' motion for partial summary judgment is moot.”[15] Accordingly, the Defendant's Motion for Partial Summary Judgment is DENIED AS MOOT.

         II. Plaintiff's Motion for Partial Summary Judgment

         The Plaintiff's Motion for Partial Summary Judgment asks the Court to determine that, as a matter of law, the funds deposited into Mrs. Nice's bank account and later reported on her federal income tax returns were (a) not “actually received” by her as that term is used in §§ 61 and 451 of the Internal Revenue Code and Treasury Regulations § 1.451-1 or § 1.451-2; and (b) not “constructively received” by her as that term is used in §§ 61 and 451 of the Internal Revenue Code and Treasury Regulations § 1.451-1 or § 1.451-2.

         Considering the Joint Stipulation's assertion that “the only legal issue outstanding in Plaintiff's motion for partial summary judgment is whether Mary Ellen Nice actually received as income the items disbursed into her personal bank account and reported on the federal income tax returns submitted to the IRS in the years 2011, 2012, 2013, and 2014, ”[16] the Court first turns to the relevant law.

         According to the Internal Revenue Code (“the Code”), gross income is taxable income.[17] The Code defines gross income as “all income from whatever source derived, including (but not limited to) . . . [i]nterest . . . [d]ividends . . . [a]nnuities . . . [i]ncome from life insurance and endowment contracts . . . [and] [p]ensions.”[18] An item of income is to be included in the taxpayer's taxable gross income “for the taxable year in which received by the taxpayer.”[19]Treasury regulations further provide that “[g]ains, profits, and income are to be included in gross income for the taxable year in which they are actually or constructively received by the taxpayer.”[20] Actual receipt of income occurs when it is reduced to a taxpayer's possession.[21] Thus, when a taxpayer actually receives an item of gross income-when it is reduced to her possession-it is subject to taxation for the year in which it was received.

         While the Internal Revenue Code does not define “receipt, ” the case law provides some instruction. The Supreme Court has held that “income which is subject to a taxpayer's unfettered command and that which he is free to enjoy at his own option is taxed to him as his income whether he sees fit to enjoy it or not.”[22] Plaintiff asks this Court to find that Mrs. Nice never “actually received” the income for which she was taxed because (1) she was unaware of the funds; (2) she could not and did not exercise control of the funds; (3) she was substantially restricted from access to the funds and from using the funds due to her son's control; and (4) she did not benefit from the funds except to a “very limited, and indirect extent.”

         To support this position, Plaintiff asserts that “[c]ourts have routinely held that even where income is reduced to the possession of a taxpayer by deposit into an account owned by the taxpayer, actual possession does not occur when the possession of the taxpayer is hindered through no fault of ...


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