The opinion of the court was delivered by: Monti L. Belot United States District Judge
This matter is before the court on the following: Cross-Claimant Internal Revenue Service's (IRS) Motion for Summary Judgment against Ronald Leathers (Doc. 135) and Memorandum in Support (Doc. 136);
Ronald Leathers' and James Holden's Response (Doc. 148) and Memorandum in Support (Doc. 149); and IRS's Reply (Doc. 150).
Louise Leathers owned certain real properties in Haskell County, Kansas. During her lifetime, Louise transferred the surface rights in these properties to the Leathers Land Company, which was a partnership between Louise and her two sons, Michael and Ronald Leathers. Louise retained the mineral rights.
Louise died in 1991. Pursuant to her will -- and subsequent litigation -- the mineral interest in the Haskell County properties was distributed equally to Michael and Ronald, who each received an undivided one-half interest in the mineral estate.
By virtue of Louise's death, Michael and Ronald also each owned 50% of the Leathers Land Company. Subsequent litigation over a buy-out provision established that Michael had the right to buy out Ronald's interest in the partnership. As a result, Ronald signed a quit claim deed in May 1998 transferring the Haskell County properties to Michael. The deed said nothing about reserving to Ronald his share of the mineral interest. But neither Michael nor Ronald intended or believed that the quit claim deed transferred Ronald's share of the mineral interest to Michael. They only intended it to transfer the surface interest.
This mistake contributed to a number of complications. There were several productive oil and gas wells on the properties, and some royalty payments that might otherwise have gone to Ronald were either sent to Michael or were placed in suspense. A divorce proceeding between Ronald and his former wife, Theresa, resulted in a decree awarding Theresa one-half of Ronald's share of the mineral interest. Additionally, the U.S. Internal Revenue Service (IRS) claimed tax liens on certain royalties due to income taxes allegedly owed by Ronald amounting to more than $900,000. Finally, Ronald purportedly conveyed "all right, title and interests ... related to 'mineral rights' and 'chose(s) of action'" pertaining to the mineral rights to the Dirt Cheap Mine Trust, which is allegedly a trust established to reacquire Ronald's mineral interest and royalty payments. All of the foregoing coalesced in the current litigation, where the parties asserted numerous claims and cross-claims against one another.
In a summary judgment ruling on May 13, 2010, Judge Wesley Brown granted equitable reformation of the quit claim deed based on the doctrine of mutual mistake. (Doc. 69). The court reformed the deed to reflect the intention of Ronald and Michael to reserve to Ronald his one-half share of the mineral interest. The court further found that Theresa, pursuant to the divorce decree, was entitled to one-half of Ronald's interest in the mineral estate. Accordingly, the court declared that Michael owned a one-half interest, Ronald owned a one-fourth interest, and Theresa owned a one-fourth interest in the mineral estate of the Haskell County properties. Michael retained all surface rights to the properties. (Doc. 69 at 20-21).
Judge Brown also ruled on other claims. He granted judgment to Michael on Ronald's claim for breach of fiduciary duty. (Doc. 69 at 26). He found that Ronald (and/or James Holden, the trustee of the trust) might have a claim against Michael for unjust enrichment, which could result in a constructive trust on royalty payments, but that any such claim would not include interest. Moreover, any such claim would be limited by the fact that Michael did not learn until December of 2006 that he may have received payments belonging to Ronald, and by evidence from which a factfinder could conclude that Ronald acted with unclean hands. The court additionally rejected Ronald's motion for judgment on Theresa's claim and affirmed her right under the divorce decree to one-fourth of the mineral interest.
The case was reassigned in February of 2012 to the undersigned judge. In May 2012 this court ruled on a second round of dispositive motions. (Doc. 114). The court denied Theresa's motion for judgment on her unjust enrichment claim against Michael because of genuine issues about when Theresa (and Ronald) first learned of the title problem and what they did about it. The court granted summary judgment to Michael on Ronald and Holden's claim for conversion, finding the claim barred by the statute of limitations. The court also granted judgment to Michael on Ronald and Holden's claim for fraud by silence. These rulings left at least two issues for trial: whether Michael was unjustly enriched, and whether the royalty payments received by Michael gave rise to a constructive trust in favor of Theresa and Ronald. (Doc. 114 at p. 13).
In a hearing with the parties on August 20, 2012, the court set a schedule for the oil and gas companies who pay royalties on the Haskell County properties to provide an accounting of the royalties. Those documents have since been filed. (Docs. 129-134). The court also set a briefing schedule on the IRS's motion for summary judgment against Ronald. After some delays, the IRS's motion is now ripe and the court is prepared to rule.
II. IRS Motion for Summary Judgment (Doc. 135).
The IRS moves for summary judgment on its cross-claim against Ronald Leathers and for dismissal of a claim for attorney's fees by the attorney for the Dirt Cheap Mine Trust. The cross-claim seeks to reduce to judgment federal tax assessments against Ronald. (Doc. 74). The IRS contends it has met its burden of establishing the existence and amounts of assessments against Ronald between 1997 and 2005, and it argues Ronald has no admissible evidence to rebut the presumed validity of those assessments. It seeks a judgment in its favor and an order "that all sums found in the quiet title portion of this case to be payable to Ronald Leathers are subject to the Government's pre-existing tax liens." (Doc. 135 at 1). It also contends Ronald and the trust are collaterally estopped by a related Fifth Circuit judgment from claiming a priority over the IRS's liens. Moreover, it argues that any claim for attorney's fees is either barred by sovereign immunity or is contrary to federal statute.
Ronald Leathers' response brief asserts that the IRS failed to properly mail deficiency notices to his last known address as required by statute. (Doc. 149 at 7). Moreover, it contends the IRS's calculations were arbitrary and erroneous in numerous respects, and that a pattern of errors defeats any presumption of correctness that might otherwise attach to the assessments. Insofar as Ronald's failure to file returns and pay penalties is concerned, the response claims it is up to a jury to determine whether Ronald had the state of mind required to support penalties.
Finally, the Dirt Cheap Mine Trust and its attorney Joe Izen contend that under 26 U.S.C. § 6323(b)(8), Izen's contingent fee contract gives him a super-priority on any recovery by the trust over and above any IRS tax lien. Moreover, the trust and Ronald dispute the IRS's suggestion that the related Fifth Circuit case has any preclusive effect.
The court previously ordered Ronald's summary response stricken for failure to comply with the federal and local rules and with the court's standing order. (Doc. 146 at 4). His more recent attempt (Doc. 149) fares little better. It does not refer to or address many of the IRS's factual allegations. This failure makes it impossible to tell with certainty which facts defendant seeks to controvert and which are uncontested. The memorandum also contains several conclusory allegations and blanket citations (e.g., citing to a declaration at pages "7-18"), apparently leaving it to the court to scour the record for evidence supporting defendant's position.
But the response's most glaring deficiency is that Ronald's declaration -- which is cited as support throughout the response -- is unsigned. And a December 17, 2012 affidavit of Joe Izen, attorney for Ronald and the Dirt Cheap trust, makes clear this was no accident. Izen states that he prepared the declaration and sent it to Ronald, but shortly thereafter Ronald ceased communicating with counsel and "the current whereabouts of ... Ronald Leathers  is unknown to his counsel." (Doc. 149-34). Izen's affidavit is among the numerous exhibits attached to the summary judgment response, although the brief itself does not mention or otherwise discuss Ronald's failure to sign the declaration or his disappearance.*fn1
This unsigned, unsworn declaration in the name of Ronald Leathers is not properly considered on summary judgment. See Fed. R. Civ. P. 56(c)(4); 28 U.S.C. § 1746 (requirements for unsworn declarations). See also Fed. R. Civ. P. 56, Adv. Comm. Notes, 2010 Amendments ("A formal affidavit is no longer required. 28 U.S.C. § 1746 allows a written unsworn declaration ... subscribed in proper form as true under penalty of perjury to substitute for an affidavit."); Howell v. New Mexico Dept. of Aging & Long-Term Services, 398 Fed.Appx. 355, 359, 2010 WL 3965927 (10th Cir. 2010) (unsigned document "'was not within the range of evidence the district court should consider' on summary judgment").
With the foregoing constraints, the court finds the following facts to be uncontroverted for purposes of the summary judgment motion.
Defendant Ronald R. Leathers (hereinafter "Ronald") is a citizen of the State of Colorado, with his last known place of residence in Colorado Springs, Colorado. Ronald resided in Kansas for at least some of the years at issue in this ...