United States District Court, D. Arizona
Nancy K. Duckett, Plaintiff,
Dennis M. Enomoto, et al., Defendants.
NEIL V. WAKE UNITED STATES DISTRICT JUDGE
Plaintiff, the personal representative of an estate, brings this interpleader action to require Defendants to settle among themselves their rights to certain funds currently held by Plaintiff and designated to a testamentary trust.
Before the Court are Defendants’ competing summary judgment motions. The United States’ Motion for Summary Judgment (Doc. 48) contends the interpleaded funds are subject to federal tax liens. The Trustee and Trust Beneficiary’s Cross-Motion for Summary Judgment (Doc. 58) contends the liens do not attach.
Also before the Court is Plaintiff’s Motion for Discharge (Doc. 65), which seeks to recover costs and attorney’s fees incurred in bringing this action, to deposit the interpleaded funds with the Court, and to discharge Plaintiff from this action free of liability to Defendants.
Also before the Court is the Trustee’s Motion to Allow Payment of Trust Legal Fees from Interpleader Funds (Doc. 51).
For the reasons that follow, Defendants’ competing summary judgment motions (Docs. 48, 58) and the Trustee’s motion for fees (Doc. 51) will be denied without prejudice to renewal. Plaintiff’s Motion for Discharge (Doc. 65) will be granted in part and denied in part.
The parties have stipulated to the following facts only for purposes of the pending motions for summary judgment. (Doc. 49 at 2.)
On August 9, 2004, Miyoko Enomoto (“Ms. Enomoto”) executed a Last Will and Testament (“Will”) naming Nancy Duckett as the personal representative of her estate. (Doc. 49-1 at 8-11.) The Will divided certain of Ms. Enomoto’s personal property and the residue of her estate into three shares, to be devised to her three children: Duckett, Dr. Dennis Enomoto (“Dr. Enomoto”), and Joanne Bradley. (Id. at 8-9.) The Will called for Dr. Enomoto, but not Duckett or Bradley, to receive his share via trust:
The One-Third share of my Estate, other than tangible personal property, that is to be distributed to my son DENNIS MASAKI ENOMOTO, if such amount should exceed $50, 000, shall be distributed in trust. The Trustee shall pay to DENNIS MASAKI ENOMOTO so much or all of the net income and principal of the trust as in the sole discretion of the Trustee may be required for support in the beneficiary’s accustomed manner of living, for medical, dental, hospital, and nursing expenses, or for reasonable expenses of education, including study at college and graduate levels. Any income not so paid shall be accumulated and added to the principal of such trust at the end of the trust’s tax year. In the Trustee’s sole discretion and to the extent the Trustee deems advisable, the Trustee may consider or disregard the funds available to the beneficiary from other sources or the duty of anyone to support the beneficiary. Should the principal of the trust drop below $10, 000, the Trustee shall distribute the balance of the principal, together with the undistributed income therefrom to DENNIS MASAKI ENOMOTO.
(Id. at 9.) Under the terms of the Will, Carol Severyn Trust Management Services was named as trustee, but Dr. Enomoto enjoyed “the limited authority to request the removal of the Trustee and appoint a successor Trustee, ” who would have to be “an individual licensed by the Supreme Court of the State of Arizona as a Private Fiduciary, or an entity whose employee(s) responsible for managing the trust are licensed by the Supreme Court of the State of Arizona as Private Fiduciaries.” (Id. at 10.) The Will prohibited Dr. Enomoto from naming a family member as successor trustee. (Id.)
Ms. Enomoto passed away on February 16, 2013, and Duckett filed a probate petition in Maricopa County Superior Court on March 15, 2013. (Doc. 49 at 5.) On April 3, 2014, Duckett prepared a final accounting of the estate, to which both Dr. Enomoto and Bradley agreed. (Id.) That accounting provided that the estate would deliver $173, 545.12 to the trustee of the trust (“Trust”) established for Dr. Enomoto’s benefit and would pay out $282, 138.10 each to Duckett and Bradley. (Id.) In addition, Duckett withheld $15, 000 as a temporary reserve to cover future costs and fees of administration prior to closing the estate. (Id.)
On June 17, 2014, the Internal Revenue Service served on Duckett, in her capacity as personal representative, a Notice of Levy demanding that she “turn over to us [Dr. Enomoto’s] property and rights to property (such as money, credits, and bank deposits) that you have or which you are already obligated to pay this person.” (Doc. 49-2 at 27 (italics in original).) The notice, which Duckett received before distributing any money from the estate, related to a total of $701, 079.11 in assessments the IRS had made against Dr. Enomoto for income tax years 2007 through 2011. (Doc. 49 at 4.) Despite receiving statutory notices and demands for payment, Dr. Enomoto had not timely paid the full amount allegedly due. (Id. at 4-5.) He subsequently made a number of partial payments, bringing his balance owing, as of May 18, 2015, to $499, 761. (Id. at 5, 7.)
When Duckett informed Dr. Enomoto of the levy, he objected to paying the IRS the funds slated for delivery into the Trust. (Id. at 6.) Duckett subsequently filed a Petition for Interpleader in the Maricopa County Superior Court against Dr. Enomoto, the IRS, Carol A. Severyn, and Carol Severyn Trust Management Services. (Doc. 1-1 at 6; Doc. 49 at 6.) On August 7, 2014, the IRS removed the action to this court pursuant to 28 U.S.C. § 1444. (Doc. 1 at 1-2.)
On September 18, 2014, Dr. Enomoto named Kurt A. Tittelbach as the Trust’s successor trustee, and Tittelbach accepted the appointment four days later. (Doc. 49 at 6-7; Doc. 49-2 at 35.) The Court thereafter dismissed Severyn and Carol Severyn Trust Management Services. (Doc. 22 at 2.)
The IRS now moves for summary judgment, arguing that as a matter of law, “the Interpleaded Funds should go [to] the United States, not to Dr. Enomoto or the trustee.” (Doc. 48 at 2.) In their jointly filed response and cross-motion, Dr. Enomoto and Tittelbach contend the “IRS is not entitled to the Interpleaded Funds as a matter of law” and they seek summary judgment “precluding IRS attachment of this discretionary trust.” (Doc. 58 at 2, 9.)
Duckett wants out of the fight. She moves for recovery of “costs and reasonable attorney’s fees” incurred in bringing this action, as well as discharge from this action “with a finding of no liability to the Defendants upon deposit of funds with the Clerk of the Court.” (Doc. 65 at 1-2.)
Finally, Tittelbach moves to recover from the interpleaded funds “the legal fees incurred in defending the Trust assets against ...