Mary C. VANDENHEEDE, Plaintiff-Appellant, v. Frank B. VECCHIO; Frank A. Borschke; Butzel Long, A Professional Service Corporation; and Doeren Mayhew and Co., P.C., Defendants-Appellees.
No. 13-1253.
United States Court of Appeals, Sixth Circuit.
Oct. 1, 2013.
544 F. App‘x 577
X.
Defendants’ convictions are AFFIRMED. However, because Moore and Clark received sentences greater than the statutory maximum of twenty years without a special finding by the jury, their judgments are REVERSED and REMANDED to the district court for resentencing consistent with this opinion.
Before: COOK, GRIFFIN, and KETHLEDGE, Circuit Judges.
COOK, Circuit Judge.
I.
This litigation arises from a dispute between the trustees of the Donald J. Chinn Trust (“Trust“) and Vandenheede, Chinn‘s longtime girlfriend, regarding whether substantial payments by the Trust to Vandenheede qualified as taxable income. According to the complaint, Chinn paid his and Vandenheede‘s living expenses from this revocable trust. (Compl. ¶ 7.) Vecchio and Borschke, Chinn‘s attorney and accountant, became trustees when Chinn was diagnosed with dementia, and they filed 1099-MISC forms for tax years 2006 and 2007, showing that the Trust paid Vandenheede more than $110,000 in “nonemployee compensation” during those years. (Id. ¶¶ 14, 18.) The 1099s information returns reporting payments of income to the IRS prompted the IRS and the Michigan Department of Treasury to assess her taxes and penalties; she has since succeeded in abating the federal taxes. (Id. ¶¶ 36, 46-47.) Chinn died in 2009, and Vandenheede filed this action in May 2012 after Vecchio and Borschke refused to correct or retract the filings.
Vandenheede‘s tax fraud, civil conspiracy, and intentional infliction of emotional distress claims challenge the propriety of defendants’ filing the 1099s and their refusal to file retractions. She characterizes these tax filings as fraudulent because the trustees knew: (1) of her long-term relationship with Chinn; (2) that the “payments . . . were for the benefit of . . . Chinn, not of [Vandenheede]“; (3) that Chinn paid her living expenses and bought her a house; and (4) she “never performed compensated services for . . . Chinn” during their relationship. (Id. ¶¶ 12-13, 15-17, 20-26.) She also alleges “detrimental reliance/breach of contract,” claiming that Vecchio “individually and as trustee of the Donald J. Chinn Trust” reneged on a promise to reimburse her for attorneys’ fees related to the drafting of a prenuptial agreement. (Id. ¶¶ 75-77.) In that regard, she alleges that “the intermeddling Vecchio” requested the prenuptial agreement “[t]o prevent . . . Chinn and [her] from marrying.” (Id. ¶ 51.)
The district court granted defendants judgment on the pleadings on all counts, finding that: (1) as a matter of law, Chinn, not the trustees, qualified as the “filer” of the 1099s, defeating the
II.
We give fresh review to a
In determining the sufficiency of the complaint, we confine our review to the pleadings, exhibits attached to or addressed in the complaint, documents included with a motion to dismiss if referenced in the complaint, and public records. Rondigo, L.L.C. v. Twp. of Richmond, 641 F.3d 673, 680-81 (6th Cir. 2011). We may affirm the district court‘s judgment on alternative grounds supported by the record or pleadings. See, e.g., Bondex Int‘l, Inc. v. Hartford Accident & Indem. Co., 667 F.3d 669, 676 (6th Cir. 2011); Murphy v. Nat‘l City Bank, 560 F.3d 530, 535 (6th Cir. 2009).
A. Tax Fraud Under § 7434
The relevant tax code provision states:
Civil damages for fraudulent filing of information returns
(a) In general.—If any person willfully files a fraudulent information return with respect to payments purported to be made to any other person, such other person may bring a civil action for damages against the person so filing such return.
Looking to the related provision governing untimely and incorrect information returns,
We resolve this appeal on the more direct path noted by the district court in dismissing other claims in this case: the absence of particularized allegations dem-
(a) Payments of $600 or more.—All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than [excluded payments covered by other tax code provisions]), of $600 or more in any taxable year . . . shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.
Section 7434(a) prohibits the “willful[] fil[ing]” of “a fraudulent information return with respect to payments purported to be made to any other person.” As Vandenheede acknowledges, willfulness in this context “connotes a voluntary, intentional violation of a legal duty.” (Appellant Br. at 35.) Tax fraud typically requires “intentional wrongdoing.” See Maciel v. Comm‘r, 489 F.3d 1018, 1026 (9th Cir. 2007); Granado v. Comm‘r, 792 F.2d 91, 93 (7th Cir. 1986) (per curiam). At the motion to dismiss stage, then, the complaint must contain specific allegations supporting a plausible inference that Vecchio and Borschke willfully filed false information returns. Republic Bank, 683 F.3d at 247. It does not.
To begin with, the complaint does not specify how the Trust made the payments to Vandenheede after Vecchio and Borschke became trustees or what exactly the payments were for. Rather, it vaguely asserts that: (1) Chinn previously “paid his living expenses, and those of Plaintiff, from the . . . Trust” (Compl. ¶ 7); (2) the new trustees “continued paying . . . Chinn‘s living expenses from the . . . Trust” (id. ¶ 19); and (3) that the “payments” to Vandenheede “were for the benefit of . . . Chinn, not of Plaintiff” (id. ¶ 25). Vandenheede‘s briefing, which may not supplement the pleadings, adds little clarity regarding the money she received, arguing at different points that the Trust payments were for her benefit, mostly for Chinn‘s benefit, living expenses for either, and gifts. Though she notes that she succeeded in abating her federal taxes, she offers no judicial or administrative finding supporting her challenge to the information returns. Moreover, she does not suggest a different or preferable way that the trustees should have categorized the payments for tax purposes or who (other than her) should have suffered the tax conse-
Her complaint also fails to include specific facts supporting an inference of scienter i.e., that Vecchio and Borschke willfully filed fraudulent information returns. In this regard, she alleges only that the trustees knew she “never performed compensated services” for the Trust or Chinn. (Compl. ¶ 26.) But this allegation carries little weight, because, as noted above, she specifies no alternative take on how and for what the money was paid. Expanding on her complaint, Vandenheede‘s appellate brief alludes to the “substantial economic motive” of Chinn‘s non-party children and the trustees’ firms. Yet even if we could consider these supplemental allegations, see Rondigo, 641 F.3d at 680-81, they fail to provide particularized facts from which one could infer that defendants knowingly issued false notices to the taxing authorities. Finally, her conclusory allegation that Vecchio prevented her from marrying Chinn by requesting a prenuptial agreement, discussed more fully below, does not evince fraud in the filing of the 1099s.
In any event, her complaint acknowledges that Vecchio and Borschke maintained that they lacked the “authority to make gifts from the . . . Trust.” (Id. ¶ 30.) The Trust itself, identified in the complaint and included in the trustees’ motions, supports their position. It authorizes them to “distribute . . . or apply for [Chinn‘s] benefit such amounts of net income and principal, even to the extent of exhausting principal, as the Trustee believes desirable from time to time for [his] health, support in reasonable comfort, best interests and welfare, considering all circumstances and factors deemed pertinent by the Trustee.” (R. 20-2, Trust art. II(A) “Distributions to Me.“) For others, though, it only authorizes them to “distribute . . . such amounts of net income and principal as [Chinn], if not disabled as determined . . . [under this instrument], may from time to time direct in writing.” (Id. art. II(B) “Power of Withdrawal.“) Vandenheede neither disputes these Trust terms nor asserts that Chinn made written requests for her to receive the payments. In fact, she fails to point to authority enabling (let alone obliging) the trustees to continue paying her substantial sums of discretionary money.
Nevertheless, her complaint conclusorily asserts that “[o]bviously . . . Chinn intended that the . . . Trust pay his living expenses, and those of Plaintiff” (id. ¶ 31), suggesting that “[i]f [the trustees] had any doubts about the legal authority to make payments from the . . . Trust, they should have sought direction from the Probate Court” (id. ¶ 33). Her appellate brief goes one step further, proposing that the trustees could have “ceased” paying her altogether until they received guidance. (Appellant Br. at 50.) In her view, the trustees could have rationalized the payments as either gifts or, “if the trustees were not authorized to make gifts from the Trust for Ms. Vandenheede‘s benefit,” an “unauthorized payment.” (Id. at 50-51.) Before the district court, plaintiffs’ counsel offered even a third categorization: income, just not in a “trade or business.” (R. 46, Hr‘g Tr. at 21.)
If, as she says, the trustees could have classified the payments as gifts, income, or unauthorized payments to justify their disbursement of Trust funds, it stands to reason that the Trust could report the payments accordingly for tax purposes in good faith. And if, as she admits, the money “w[as] for the benefit of . . . Chinn, not of Plaintiff,” a person reasonably could
Today‘s opinion decides neither the veracity nor the accuracy of the trustees’ justification for classifying the payments as “nonemployee compensation.” Rather, we conclude that Vandenheede fails to present particularized allegations supporting the inference that they willfully filed fraudulent information returns. Absent a well-pleaded foundation, we do not credit appellant‘s conclusory fraud claim, and we affirm the district court‘s judgment.2
B. State Law Claims and the Statute of Limitations
With regard to the state-law claims for conspiracy and intentional infliction of emotional distress, which accrued upon the filing of the 2006 and 2007 information returns, see
C. Promissory Estoppel Claim Against Vecchio
On appeal, Vandenheede recharacterizes her “detrimental reliance/breach of contract” claim as one for promissory estoppel, and she argues that the district court prematurely made factual findings on the pleadings in concluding that “[a]ny promise made by Vecchio [regarding payment of attorneys’ fees] would have been a representation made on behalf of his client Mr. Chinn, not one made on his own personal behalf.” In view of her pleadings, we discern no error.
The complaint acknowledges that Vecchio represented Chinn “[t]hroughout the time” she dated Chinn, or from 1992-2009. (Compl. ¶¶ 11, 14.) It further avers that “Vecchio, individually and as trustee of the . . . Trust, told [her] to have a prenuptial agreement prepared, and that if she did so he would reimburse her the attorney fees.” (Id. ¶ 75.) These allegations reflect Vandenheede‘s understanding that Vecchio served in a representative capacity for Chinn and the Trust, a fact that she does not contest on appeal.
Michigan‘s courts recognize that an agent acting on the behalf of a disclosed principal does not become a party to a contract absent facts demonstrating that the attorney intended to become a party to the contract. See, e.g., Andersons, Inc. v. Horton Farms, Inc., 166 F.3d 308, 315 (6th Cir. 1998); Uniprop, Inc. v. Morganroth, 260 Mich. App. 442, 678 N.W.2d 638, 641-42 (2004);
We also find plaintiff‘s complaint to be deficient based upon principles of agency law as summarized in 2 Restatement Agency, 2d, § 320, p 67:
“Unless otherwise agreed, a person making or purporting to make a contract with another as agent for a disclosed principal does not become a party to the contract.”
Comment (a) to § 320 explains, in pertinent part:
“Whether or not a person purporting to act as agent for another becomes a party to the contract depends upon the agreement between such person and the other party. See § 146. As stated in Section 4, a principal is disclosed if, at the time of making the contract in question, the other party to it has notice that the agent is acting for a principal and of the principal‘s identity. One who purports to contract on behalf of a designated person does not manifest by this that he is making a contract on his own account, and only where he so manifests does the agent become a party to the contract which he makes for the principal. In the absence of other facts, the inference is that the parties have agreed that the principal is, and the agent is not, a party.”
Id. at 919 (emphasis in Riddle).
Although the complaint refers to Vecchio as “intermeddling” and faults him for preventing her marriage to Chinn, it offers no facts supporting a plausible inference that Vecchio acted in any capacity other than a representative capacity in requesting the prenuptial agreement and offering to pay for related fees. Her appellate briefing again attempts to fill in these gaps by alleging ill will harbored by Chinn‘s children and arguing that the trustees’ firms viewed Chinn‘s company as an important client, but these allegations neither appear in the complaint nor speak to her claim against Vecchio. Absent well-pleaded facts supporting a plausible claim that Chinn‘s attorney individually promised to pay Vandenheede‘s legal fees, we affirm the district court‘s judgment.
III.
For these reasons, we AFFIRM the district court‘s judgment and remand for proceedings consistent with this opinion.