ACI CONSTRUCTION LLC v. << (2024)

FINDINGS OF FACTS AND CONCLUSIONS OF LAW AFTER A BENCH TRIAL

ACI Construction, LLC sued the United States to quiet title to real and personal property on which the United States filed a lien. The United States subsequently filed a counterclaim against ACI Construction to obtain a determination that it is liable for the federal tax and related assessments and penalties as a successor-in-interest to Sid Crookston, LLC (“Sid Crookston Construction”).¹ The court held a five-day bench trial on ACI Construction's quiet title claim and the United States’ successor-in-interest counterclaim. After considering the trial testimony, documentary evidence, and the parties’ posttrial submissions, the court determines that further argument is not necessary. Based on the application of the law to the evidence, the court finds against ACI Construction on its quiet title claim and finds in favor of the United States on its successor-in-interest counterclaim.

I. FINDINGS OF FACT

A. Introduction

1. This is a civil action in which (1) ACI Construction seeks to quiet title to its property by challenging the validity of certain federal tax liens referenced in Notices of Federal Tax Liens (“NFTLs”) and (2) the United States seeks to hold ACI Construction liable for the unpaid taxes of Sid Crookston Construction under Utah successor liability. ECF Nos. 2, 19–20 (Count 2).

2. The United States also sought to reduce to judgment nearly $2 million in unpaid federal tax and related assessments against Sid Crookston Construction. ECF No. 19–20 (Count 1). Between 2009 and 2016, Sid Crookston Construction repeatedly failed to timely and fully pay federal taxes, penalties, and interest relating to unpaid unemployment taxes (Form 940), unpaid employment taxes (Form 941), penalties for failure to file corporate income tax returns (Form 1120S), and heavy highway vehicle use taxes (Form 2290). See ECF No. 73. The Court previously granted the United States’ motion for partial summary judgment against Sid Crookston Construction and concluded the United States is entitled to a monetary judgment against Sid Crookston Construction as a matter of law. See ECF No. 81.

3. ACI Construction was formed by the Crookston family to enable Sid Crookston Construction to continue operating without paying its many outstanding liabilities. Indeed, ACI Construction was “what [Sid Crookston Construction] goes by now.” Ex. 201. Sidney Crookston (“Sid”) and his son, Chris Crookston, one of the owners of ACI Construction, have every motivation to protect themselves and their family's business interests. Sid and Chris's testimony reflects their selective memory and is inconsistent with the documentary evidence, the testimony of non-interested parties, and their own prior testimony. The Court finds that their testimony was not credible.

B. The Crookstons and Sid Crookston Construction

4. Sid Crookston has worked in the construction industry since the 1980s. Trial Tr. 658:10–15.²

5. In November 1994, Sid formed Sid Crookston Construction.³ Exs. 300–01; Trial Tr. 690:12–22, 691:1–3.

6. Sid Crookston Construction performed concrete, excavation, framing, red iron, and finish work. Trial Tr. 689:12–21, 690:12–22, 691:1–3.

7. It worked as a general contractor under Sid Crookston's license or a subcontractor operating under another general contractor. See e.g., Trial Tr. 610:17–20, 684:18–686:25; Ex. 253.

8. Sid was a superintendent and foreman; he ran crews of employees, directed people, and operated equipment. Trial Tr. 693:24–694:14.

9. Sid was very hands-on with the work performed by Sid Crookston Construction. Trial Tr. 800:13–21.

10. Sid was also the company's project estimator. Trial Tr. 693:12-14. He prepared bids, with the assistance of one of the secretaries, and made agreements with customers. See Exs. 253 (Alitis Air), 262 (Revolve), 267 (Providence Hollow), and 456 (Revolve); Trial Tr. 91:3–7, 92:9–13, 696:24–697:2, 697:7–10; ECF No. 134-001 at 28:16–25, 30:22–31:2.

11. Sid's late wife — Julie Crookston — also helped the company but was not on Sid Crookston Construction's payroll. Trial Tr. 699:21–700:3; Ex. 302. She signed checks, ran errands on behalf of the company, and may have occasionally helped secure clients.⁴ Trial Tr. 681:16–17, 699:3–11, 699:21–700:3.

12. Sid's children — Chris Crookston, Aldon Crookston, Bronson Twitchell, and Marie Christensen — and his daughter-in-law, Eva Crookston, worked for the company. Trial Tr. 662:2–7, 662:17–22; ECF No. 134-001 at 27:9–11; Ex. 302 (Marie was not on payroll as of June 30, 2016).

13. Chris worked on construction sites in various roles, and eventually served in leadership roles (i.e., foreman and superintendent) alongside Sid between 2014 and 2016. Trial Tr. 18:21–19:1, 662:8–16, 695:22–692:2, 799:14–20.

14. Aldon also worked on construction sites in various roles and eventually took on more responsibility between 2014 and 2016. Trial Tr. 662:8–16, 695:24–696:2, 799:21–25.

15. Bronson — Julie's son and Sid's stepson — was a laborer and operated equipment for Sid Crookston Construction. Trial Tr. 402:8–11, 662:17–22, 800:1–6.

16. Marie Christensen was one of Sid Crookston Construction's secretaries, and she handled the company's finances (e.g., payroll, collections, accounts payable, and paying bills). Trial Tr. 660:23–661:5, 661:12–19; ECF No. 134-001 at 19:4–8.

17. Sid, however, oversaw the company's financial affairs. Trial Tr. 800:22–24, 801:4–12. Marie took orders from him. ECF No. 134-001 at 19:11–22, 20:6–9.

18. Marie worked with an accounting firm to prepare the company's tax returns. ECF No. 134-001 at 97:20–98:6; see ECF No. 134-001 at 101:25–102:7 (Eva assisted Marie).

19. Sid signed tax returns on behalf of the company. See, e.g., Exs. 233 (Form 940), 234 (Form 941), 303 (Form 1120S); Trial Tr. 748:12–24; 800:22–24. Sid also gave other individuals like Marie authority to sign documents on the company's behalf, including with the use of a Sid Crookston stamp. See Trial Tr. 759:7–760:12.

20. Marie also provided information to Cache Valley Bank and worked with the bank regarding Sid Crookston Construction's account with the bank, including payments on outstanding loans. See ECF No. 134-1 at 35:9–13 (Sid gave Marie access), 56:12–57:14 (Marie dealt with the bank regarding payments on behalf of Sid).

21. Sid signed financial and loan documents on behalf of the company. Trial Tr. 700:21–24; 800:22–24; see e.g., Exs. 211 – 216.

22. Sid communicated regularly with Cache Valley Bank and kept it informed of Sid Crookston Construction's and his financial situation. Trial Tr. 282:8–24, 283:23–284:10.

23. Eva Crookston, Aldon's wife, was another secretary and assisted with invoicing customers and attended some meetings for Sid Crookston Construction. ECF No. 134-1 at 19:23–20:5, 28:16–19; Trial Tr. 872:4–18, 877:20–24.

C. Sid Crookston Construction and Sid's Financial and Legal Troubles

24. Sid Crookston Construction historically had some success as a business. See generally Ex. 213 at p. 39, Ex. 214 at p. 46, Ex. 216 at p. 34, Ex. 217, Ex. 219 (Cache Valley Bank believed that Sid Crookston Construction's historical financial spread shows a positive cash margin from years of operation and experience).

25. Between 2008 and 2010, Sid ran into issues with the development of the Pheasant Ridge subdivision. Trial Tr. 663:12-25, 756:14-22. In September 2013, an $842,500 judgment related to the Pheasant Ridge project was entered against Sid individually. Ex. 237, D.L. Evans Bank v. Pheasant Ridge Dev. Inc., Case No. cv-2011-5484-OC (Idaho Dist. Ct. 2013). The Pheasant Ridge judgment against Sid was later registered in Utah in 2015. Id.

26. Between 2009 and 2016, Sid Crookston Construction repeatedly failed to timely and fully pay federal taxes, penalties, and interest relating to unpaid unemployment taxes (Form 940), unpaid employment taxes (Form 941), corporate income tax penalties (Form 1120S), and heavy highway vehicle use taxes (Form 2290). See ECF No. 81; see also ECF No. 73.

27. Marie Christensen knew the company's taxes were not being paid, and she informed Sid of this on multiple occasions. ECF No. 134-001 at 65:23–66:14.

28. When Sid signed tax returns for the company, he was aware of the federal taxes owed. See Exs. 233, 234, and 303; see also Exs. 288A (Department of Professional Licensing documents acknowledging federal tax liabilities), 232 (April 2016 letters from the IRS to Sid Crookston Construction). Although Sid Crookston testified that he did not pay attention to the company's tax returns and was not aware of the unpaid federal taxes, this is not credible. See Trial Tr. 748:17–749:4 (“I didn't do the financing ․”). Marie Christensen's testimony directly rebuts the assertion that Sid was unaware of the federal tax issues because she told him about the unpaid taxes, and he told her to “find the money” and “figure it out.” ECF No. 134-001 at 66:25–67:7, 68:1–6. Additionally, Sid personally signed company returns, had authority over the company's finances, and testified that he was aware of state tax problems that he had Marie Christensen take care of. Trial Tr. 757:23–24, 758:22–759:2; Ex. 288A.

29. Sid and Sid Crookston Construction made Cache Valley Bank aware of the unpaid federal tax liabilities before Sid Crookston Construction stopped operating. Trial Tr. 283:19–21, 283:23–284:5.

30. Sid Crookston Construction also had frequent problems with making payments on its loans with Cache Valley Bank between 2014 and 2016. ECF No. 134-001 at 56:12–57:3; Trial Tr. 283:8–11, 283:18–22.

31. Sid Crookston Construction also struggled to timely pay its vendors and, as a result, was sometimes unable to timely secure the materials it needed for its ongoing projects in or around late 2015 or early 2016. Trial Tr. 27:2–8, 95:13–19, 331:2–4.

32. Around April 18, 2016, the Internal Revenue Service sent Sid Crookston Construction letters informing it of the overdue taxes. Ex. 232; Trial Tr. 229:5–230:21.

33. By the end of June 2016, Sid Crookston Construction stopped operating because of its unpaid taxes and the judgment related to the Pheasant Ridge subdivision. Trial Tr. 664:3–7, 666:25–667:5.

34. Sid Crookston also testified that another reason Sid Crookston Construction shut down was because his daughter Marie Christensen had been embezzling money. See Trial Tr. 664:5-7, 667:5, 714:20-717:11. Marie Christensen had some sort of arrangement to be compensated for the numerous services she provided; however, Sid Crookston could not remember the arrangement he made with Marie Christensen, and Marie testified she received $2,000 per month. See Trial Tr. 717:20–719:6; ECF No. 134-1 at 20:13–16; but see Trial Tr. 719:7–719:11 (Sid could remember that his sons were paid hourly though). It is impossible to determine how much Marie Christensen embezzled from Sid Crookston Construction, considering Sid's inability to remember anything regarding her compensation arrangement. Trial Tr. 716:21–717:3. At the time of the alleged embezzlement, Sid and Julie Crookston had also used the company to pay for nearly $450,000 of their personal expenses. See Ex. 206B.

35. Around June 2016, Sid Crookston individually filed for bankruptcy. Trial Tr. 664:17–20; Ex. 317.

36. The company did not file for bankruptcy but stopped operating. Trial Tr. 667:13–16.

37. For the seven-month period ending May 31, 2016, Sid Crookston Construction's Statement of Revenue and Expenses reflected gross profit of $1,033,566 and net income from operations of $57,008. Ex. 235. It's balance sheet for the same period reflected machinery and equipment of $1,904,997, less accumulated depreciation of $1,669,301. It also showed long-term debt of $537,974 and liabilities for unpaid payroll taxes of $1,341,246. Ex. 235; Trial Tr. 266:2–14.⁵ Although some of Sid Crookston Construction's equipment was encumbered, it is unclear from the evidence the extent of the encumbrance. See, e.g., Exs. 23, 235. And the balance sheet did not reflect the value of its business reputation and good will. Ex. 235.

D. ACI Construction Continued the Family Business.

38. ACI Construction was formed by the Crookston family to enable Sid Crookston Construction to continue operating without paying its many outstanding liabilities. Indeed, ACI Construction was “what [Sid Crookston Construction] goes by now,” according to Julie Crookston. Ex. 201.

39. Bronson Twitchell, one of the former owners of ACI Construction on paper, testified that there were times that he thought ACI was not a new business but was carrying on some of Sid Crookston Construction's business. Trial Tr. 451:2–20; see Ex. 204.

40. According to Jason Mohr, one of Sid Crookston Construction's and ACI's highest paid employees, the company was “Sid Crookston Construction and then it was ACI Construction.” Trial Tr. 809:1–5.

41. Chris testified that ACI Construction and Sid Crookston Construction were different companies and that he intended ACI Construction to be a competitor of Sid Crookston Construction. Trial Tr. 101:21–23. This testimony, however, is not credible because ACI Construction immediately hired Sid Crookston Construction's employees, used its equipment, and continued its contracts and general business operations. See infra Finding of Fact (FOF) 51–53, 77–82, 83–84, 93–94, 101, 102–103, 106–109.

1. Sid Crookston Construction Used the Name “ACI” Before ACI Construction Was Formed.

42. In 2010, Sid Crookston Construction had merged with ACI Development, a company formed by Sid Crookston's sister. Ex. 265. Although Sid testified that Sid Crookston Construction and ACI Development had no relationship (Trial Tr. 693:2–11), this is not credible considering the merger documents filed with the State of Utah, which Sid Crookston signed. Additionally, Jason Mohr's testimony that ACI Development was related to Sid Crookston Construction is more credible than Sid's because Mohr is an uninterested party in this action. See generally Trial Tr. 805:5–16 (testifying that ACI Development was related to Sid Crookston Construction's concrete business).

43. Before Sid Crookston Construction stopped operating, it had also used the name ACI Construction to conduct business. See, e.g., Exs. 202 (in submittals), 238 at p. 31 (on its proposals), 262 (in email correspondence), 284 (in email correspondence).

44. Sid Crookston Construction's email address was ACIConstruction@hotmail.com. It had used this email address as early as 2012 on a proposal for work. Ex. 238 at p. 31. Bronson had created the ACIConstruction@hotmail.com email address while he was living with Sid and Julie Crookston. Trial Tr. 413:2–9, 16–17; see Trial Tr. 424–425.

45. Marie Christensen and Eva Crookston used this email address for Sid Crookston Construction work, including for communicating with customers and vendors. See Exs. 202, 262, 284; ECF No. 134-001 at 30:1–3, 30:9–18, 30:24–31:8; Trial Tr. 873:7–21.

46. Sid Crookston Construction used the name “ACI Construction” in bid submittals it sent to Legrand Johnson Construction Company; Legrand Johnson coordinated its work with Sid Crookston Construction and ACI Construction through Sid. See Ex. 202; see also Trial Tr. 601:6–18, 602:20–603:2, 607:5–8, 607:22–24, 608:19–23.

2. ACI Construction, LLC Was Formed Around the Pinnacle of Sid Crookston Construction's Financial and Legal Troubles in 2016.

47. On April 27, 2016, Chris Crookston filed the Certificate of Organization with the State of Utah to form ACI Construction. Trial Tr. 28:8–13; Ex. 304.

48. Christopher Crookston, Aldon Crookston, and Bronson Twitchell were the Limited Liability Company members of ACI Construction according to the Operating Agreement. Ex. 305.

49. In the first half of 2016, Sid informed customers that they would no longer be working with Sid Crookston Construction but would work with a new company. Trial Tr. 885:15–23. He also informed them the owners of ACI Construction would be his sons and stepson, and he would still play a major role, remaining heavily involved. Trial Tr. 810:16–21, 885:21–23, 891:23–892:4. Sid also advised Eva Crookston on how to address a problem when there was a delay in obtaining a Utah withholding account number after ACI Construction had begun operating. See Ex. 285; Trial Tr. 870:21–25; but see Trial Tr. 871:6–9 (Eva testified, “You're going to go to people that have been in the business that understand, that can give you some guidance on where to go.”). Although Chris and Sid testified that Sid was not involved with forming ACI Construction (see, e.g., Trial Tr. 30:3–18, 671:2–4, 676:10–19), this is not credible because of what Sid communicated to customers about his ongoing involvement in ACI Construction, his actions reflecting his continued involvement in ACI Construction during the transition from Sid Crookston Construction to ACI Construction, and documentary evidence showing Sid Crookston's involvement in the formation process. See, e.g., Exs. 204 (Sid indicates that he remained involved in the business); Trial Tr. 451:2–20 (Bronson testifying that ACI Construction was carrying on some of Sid's business); see also infra section I.D.4.

50. ACI Construction did not begin fully operating or paying employees until July 2016, around the time Sid Crookston Construction shut down and Sid Crookston personally filed for bankruptcy. Exs. 308, 284.

3. ACI Construction Hired Nearly All of Sid Crookston Construction's Employees.

51. ACI Construction immediately hired nearly all of Sid Crookston Construction's employees when ACI Construction started operations. Trial Tr. 40:5–19, 42:19–22, 43:3–6, 114:11–21, 261:23–262:6, 706:16–711:25; compare Ex. 302 (as of June 30, 2016), with Ex. 240 (as of July 15, 2016); see also Exs. 208A (comparing the two lists), 284 (Eva informing Jared Chatterton that he should have access to the company's employee records through QuickBooks because Marie Christensen provided him access).

52. ACI Construction's crews were the same as Sid Crookston Construction's working the same jobs. Trial Tr. 811:18–24.

53. ACI Construction's crews were run by the same superintendents and foremen who had run Sid Crookston Construction's crews. See Trial Tr. 48:8–11 (Jose Casas, Aldon Crookston, Jason Mohr), 110:17–19 (Antonio Escareno), 118:5–9 (Sid Crookston), 796:4-11 (Jason Mohr); see also Trial Tr. 707:6–7 (Jose Casas), 707:20–22 (Aldon Crookston), 707:24–708:2 (Chris Crookston), 708:18–22 (Antonio Escareno).

54. As was the case at Sid Crookston Construction, the ACI Construction foreman or job superintendent was the central authority on the job site and was responsible for organizing the job and the employees to make sure the job was completed in an efficient manner. Trial Tr. 49:19–22, 110:20–25. The foreman or job superintendent would primarily interact with customers for job site related things and were also responsible for communicating with vendors and purchasing materials. Trial Tr. 110:20–25, 124:16–25, 608:19–24.

55. Sid, Chris, and Jason Mohr had the authority to hire and fire individuals at both Sid Crookston Construction and ACI Construction. Trial Tr. 797:22–25, 798:16–22.

56. Jason Mohr, Sid Crookston Construction's main concrete superintendent, had the same job duties at ACI Construction as he had at Sid Crookston Construction. Trial Tr. 796:4–11.

57. Jason Mohr's salary was also the same. Trial Tr. 809:10–810:6; 811:16–17; Ex. 242.

58. Just as she had for Sid Crookston Construction, Eva continued working for ACI Construction as its office manager and continued using the ACIConstruction@Hotmail.com email address to conduct its business. Trial Tr. 867:15–21; 867:25–868:5.

59. Julie's title at ACI Construction was secretary. See generally Trial Tr. 51:15–24, 52:4–7, 414:6–19; see supra FOF 11.

4. Sid Continued to Play a Major Role in the Rebranded Family Business.

60. Sid played a major role in ACI Construction's business. Trial Tr. 450:14–19 (Sid was “still kind of the main role in running it, taking control of everything, but slowly [it's] being turned over to us on the job site but also in the office.”); 451:2–20 (Bronson testifying the statement in Ex. 204 is true and Sid still had a pretty major role).

61. Sid's established construction experience was an invaluable asset to ACI Construction's business. Trial Tr. 43:25–44:3, 434:2–5, 870:21–25, 871:7–9.

62. Even at ACI Construction, “Sid was always the boss” and “Everybody listened to Sid.” Trial Tr. 812:5–9, 813:1–9.

63. Sid was more than just an equipment operator for ACI Construction. Trial Tr. 676:10–24. Sid worked for ACI as a foreman or superintendent when ACI Construction first started operating in mid-2016 even though he did not formally become an employee on paper until 2017. See generally Ex. 241 at pp. 21, 30 (Sid appearing as supervisor on ACI Construction timesheets for early July 2016); Trial Tr. 409:23–410:2, 423:13–17 (Bronson Twitchell testified that Sid was on ACI Construction sites early in its operations). Chris's and Sid's testimony that there was a delay in hiring Sid is simply not credible. See Trial Tr. 43:11–24 (Chris testified that there was a delay in hiring Sid because he believed Sid still had his own company even though he also testified that Sid Crookston Construction shut down in mid-2016); 676:10–17 (Sid testified that he needed a job and could not remember when he asked ACI Construction for a job).

64. Sid made estimates to secure new projects and made calls to find business for ACI Construction. Trial Tr. 43:25–44:3, 126:16–22.

65. Sid met with city officials regarding projects, met with the bank regarding new projects, met with customers regarding issues on projects, and met with potential investment partners regarding the RC Smithfield parcels. See e.g., Trial Tr. 436:6–23, 547:11–18, 886:9–12, 928:2–8, 950:11–13.

66. Sid would send auction information for new equipment for ACI Construction to purchase. Trial Tr. 432:20–433:10.

67. Sid signed documents allowing ACI Construction to get a loan within its first year. See, e.g., Ex. 314 (ACI Construction loan dated May 2016) at p. 1 (agreement to provide insurance), pp. 60–62 (individual commercial guaranty), pp. 63–65 (Sid Crookston Construction's commercial guaranty), pp. 82–86 (commercial security agreement); Trial Tr. 579:8–17.

68. Sid's Logan Canyon parcels were also used as collateral for ACI Construction's early loan. See Ex. 314 at p. 87; Trial Tr. 319:4–5, 320:2–3, 320:9–14.

69. Before Sid received a formal paycheck from ACI Construction, he was compensated through other means such as by shifting income to Julie Crookston and by paying for his personal expenses. See generally Exs. 242, 243, 206B.

70. Julie was ACI Construction's highest paid employee. Exs. 242, 243. Chris testified that Julie was ACI Construction's highest paid employee because she helped ACI Construction get its bigger clients through her contacts in the industry from Legrand Johnson Construction Company. Trial Tr. 51:17–22, 52:4–13, 73:2–9. However, the only clients Chris could remember Julie Crookston might have assisted ACI Construction in bringing to the business were Alitis Air, LLC—which was a Sid Crookston Construction client, and the client testified he exclusively worked with Sid Crookston (see Trial Tr. 612:12–16)—and Providence Hollow, which was also originally a Sid Crookston Construction project (see Ex. 267). See also infra, section I.D.6. Chris's explanation as to why Julie was the highest paid employee of ACI Construction is not credible considering Sid's delayed employment and the only clients Chris could remember Julie bringing to ACI Construction were in fact Sid Crookston Construction's clients.

71. ACI Construction, like Sid Crookston Construction, immediately paid for Sid and Julie's expenses, including their mortgage, gas, electric, extermination, and landscaping bills for their multi-million-dollar home and payments to purchase and insure Julie's Jeep. See, e.g., Ex. 206B (summarizing payments ACI Construction directly paid for these expenses).

72. At trial, Chris testified that the reason ACI Construction paid for Julie's expenses was because of a handshake trade arrangement between Julie and Chris where ACI Construction would pay for Julie's personal expenses in exchange for the use of gravel pits she either owned outright or had access to through her family. See, e.g., Trial Tr. 53:23–54:16, 60:8–61:8, 180:9–188:64 (describing trade arrangement between Julie Crookston and ACI Construction). However, Chris had never previously testified about a gravel trade arrangement. See Trial Tr. 186:16–23 (testifying he had no idea why ACI Construction would write a check for Sid and Julie home), 187:3–10 (testifying he could not remember why ACI Construction would pay for the insurance for Sid and Julie's house), 188:11–17 (testifying he did not know why ACI Construction wrote a check for Julie's Jeep); see, e.g., Ex. 206B at p. 2; Ex. 452 at p. 425 (ACI Construction wrote check to Quality First Insurance for Sid and Julie's home); Ex. 206B at p 9; Ex. 453 at p. 430 (ACI Construction made payments for Julie's jeep); Trial Tr. 194:10–13.

73. Chris also explained that this gravel trade arrangement was more akin to a loan. See Trial Tr. 185:15–186:4. While there is some evidence that Julie Crookston had access to some gravel pits and ACI Construction occasionally used these gravel pits, the record does not support that ACI Construction paid over $100,000 of personal expenses as a part of this trade or loan arrangement. No other employee or family member (except Sid) could substantiate that there was an agreement, and no documentation exists regarding the amount of gravel used, how the gravel was evaluated, or how balances were tracked. Further, Chris's explanation that the gravel trade arrangement was a “loan” arrangement is not supported by ACI Construction's loan tracking document. Ex. 244; Trial Tr. 121:6–9. There are only two entries for Julie Crookston: a $10,000 employee loan that was later repaid with gravel in 2021, well after the transition years. Therefore, the gravel pit explanation is not a credible explanation for why ACI Construction paid over $100,000 for Sid and Julie's personal expenses.

74. Chris also testified that some of ACI Construction's payments for Sid were merely loans that Sid would pay back in cash or through his wages. Trial Tr. 58:16–59:11, 60:8–12. However, ACI Construction's employee loan tracking document also does not support this testimony. See Ex. 244. While ACI Construction tracked approximately $30,000 in loans to Sid Crookston, the total is generally unpaid. Id. Further, the loans tracked do not provide a credible explanation for why ACI Construction paid over $100,000 of Sid and Julie's personal expenses. See Ex. 206B. The most plausible explanation is that ACI Construction merely continued the pattern of paying for Sid and Julie's expenses began by Sid Crookston Construction.

75. When Sid received his first paycheck from ACI Construction in January 2017, he also received a bonus that was three times the amount of his salary. See Ex. 243 at p. 15.

76. The timing of Sid's formal employment with ACI Construction, coupled with Julie Crookston's high salary and ACI's payment of Sid and Julie's expenses, were calculated to shift income from Sid following the shutdown of Sid Crookston Construction and Sid filing his individual bankruptcy petition in which he asserted under penalty of perjury that he was not employed and had no monthly income in mid-2016. Ex. 317; see In re Sydney Crookston, case no. 2:26-bk-25829 (Bk. D. Utah).

5. ACI Construction Took Substantially All of Sid Crookston Construction's Assets.

77. Before ACI Construction was formed, Sid Crookston Construction used a 2014 Case Loader 721-F obtained for ACI Construction with a loan from Cache Valley Bank. Trial Tr. 25:19–25, 33:21–34:1; Ex. 247. Pursuant to a purported handshake agreement, Sid Crookston Construction originally made payments on the loan for the 2014 Case Loader 721-F and ACI Construction then began using that piece of equipment and continued the payments. See Trial Tr. 26:1–10; Exs. 210A, 247, 248; Trial Tr. 34:13–25.

78. ACI Construction also began using substantially all of Sid Crookston Construction's equipment as soon as it began operations. Trial Tr. 37:11–15, 432:5–9, 730:23-731:10; compare Ex. 315 at 93–94 (ACI Construction's list submitted to the IRS as of July 1, 2016), with Exs. 314 at 54, 215 at 16 (lists maintained in Cache Valley Bank's files); see Ex. 209A.⁶ There is conflicting testimony about how ACI Construction came to possess Sid Crookston Construction's equipment. See, e.g., ECF No. 135-1 at 188:9–189:10, 189:18–190:1 (ACI simply began using the equipment and Cache Valley Bank did not object as long as it received payments towards Sid Crookston Construction's loans);⁷ Trial Tr. 34:13–25 (Chris testified he and Sid agreed to a lease agreement), 138:8 – 10 (Chris speculated that Cache Valley Bank seized the equipment), 668:3–6 (Sid testified Cache Valley Bank repossessed the equipment), 768:23-770:12 (Sid testified ACI Construction negotiated with the bank to use Sid Crookston Construction's equipment because Cache Valley Bank had the titles to the equipment). The most credible explanation is that ACI Construction simply took Sid Crookston Construction's equipment with Sid's permission and only approached Cache Valley Bank as an afterthought to arrange making payments on Sid Crookston Construction's outstanding loans. ECF No. 135-1 at 188:9–189:10, 189:18–190:1; see generally Ex. 220.

79. In the beginning, ACI Construction could not afford to purchase its own equipment and instead relied upon Sid Crookston Construction's operations to secure loans for new equipment. See generally Trial Tr. 292:12–20 (ACI Construction was unable to buy new vehicles in the beginning); Ex. 314 (early equipment loan received because Sid Crookston Construction profits would be used to repay the loan).

80. ACI Construction informed its insurer, Quality 1st Insurance, that Sid Crookston Construction sold, transferred, or conveyed its physical assets to ACI Construction. Ex. 200; see Trial Tr. 381:16–20 (Aldon confirming his signature on the document).⁸ The lists of vehicles insured by Sid Crookston Construction and ACI Construction were nearly identical. Compare Ex. 294 (Quality 1st’s March 2016 Sid Crookston Construction list), with Ex. 433 (Quality 1st’s June 2016 ACI Construction list).

81. ACI Construction also “purchased” equipment from Sid Crookston Construction for a nominal amount of one dollar. See Exs. 222 at 1, 338 at p. 1, 344 at p. 9, 346 at pp. 4; Trial Tr. 139:11–16, 142:8–18, 142:21–143:9; see also Exs. 329 at pp. 11–12, 336 at p. 2, 337 at p. 2. Although Sid and Chris initially testified that there were no purchases of equipment or vehicles from Sid Crookston Construction (see, e.g., Trial Tr. 37:21–24, 770:2–12, 770:16–774:8), this is not credible because there is documentary evidence of the purchases. When questioned further and shown the purchase documents, Sid provided a variety of dubious reasons why the equipment was valued at one dollar and that the sale may have occurred. See generally Trial Tr. 771:17–774:4 (testimony that various parts of the equipment or vehicles were probably broken).

82. Sid Crookston Construction and ACI Construction also used the same physical shop. Trial Tr. 78:7–17, 81:25–82:19, 493:6–15, 814:7–11. Again, this was purportedly facilitated through a handshake agreement. Trial Tr. 82:20–83:6. Even though there was conflicting testimony as to which of Sid Crookston Construction's multiple addresses ACI Construction used (see, e.g., Trial Tr. 79:3–9, 81:11–17), the documents and testimony clearly indicate that ACI Construction used at least one of Sid Crookston Construction's shop addresses. See, e.g., Exs. 227 at p. 2, 308, 434 (both companies using “124 W. 560 S #1” as its address); Exs. 226, 227, 231, 238 at p.31, 247, 330 at p. 6, 334 at p. 3, 336 at p. 2, 337 at p. 2 (both companies using “125 W. 560 S # 1”); Trial Tr. 705:20–706:5.

6. ACI Construction Continued Sid Crookston Construction's Projects.

83. ACI Construction continued multiple projects (e.g., Providence Hollow, Little Baldy, Revolve, Copper Leaf) that Sid Crookston Construction had started. See Trial Tr. 123:2–6, 417:2–6, 440:23–444:16, 897:11–22.

84. ACI Construction did not have a marketing plan to generate work; it relied upon word of mouth and client referrals stemming from Sid Crookston Construction's business. Trial Tr. 126:3–22.

85. For example, Sid and Sid Crookston Construction originally agreed to work on the Revolve Recycling project in exchange for Julie receiving a partnership interest in SA Ferrous LLC and Revolve Recycling. Trial Tr. 437:20–25, 438:5–8, 438:15–21, 439:1–5, 883:23–884:12, 885:10–15, 892:5–12, 893:3–13, 900:7–14, 902:1–22, 953:2–11; Exs. 255, 261, 457.

86. Sid, as the general contractor for Sid Crookston Construction on this project, attended a meeting with the engineers on this project around December 2015. Trial Tr. 886:9–21.

87. Sid, on behalf of Sid Crookston Construction, prepared the initial estimate for the Revolve Recycling project. Trial Tr. 887:14–20, 897:2–4, 897:11–898:11, 898:22–25; 899:1–17; Exs. 262, 456.

88. Around mid-2016, Sid informed Alex Bearnson, an owner of SA Ferrous and Revolve Recycling, that Sid was going to remain heavily involved, i.e., managing and organizing the job site and production flow, but that the work would be through a new company and his son Chris would be involved. Trial Tr. 891:15–892:4; 894:2–23; 904:2–16, 917:8–20, 923:12–25, 925:20–926:5, 926:15–25, 933:3–15.

89. Around the same time, Sid signed the bid cost summary for Revolve with an ACI Construction header, even though he was not an employee of ACI Construction at the time. Trial Tr. 890:3-16; 890:19-891:1; Exs. 243, 260.⁹

90. A contractor's license was required to complete the work for the Revolve recycling facility, which ACI Construction did not have until August 2016. Trial Tr. 150:14–19, 885:7–9, 905:3–15; Ex. 306.

91. Delays in the Revolve Recycling project ultimately led to litigation, which was settled by the “ACI Parties mean[ing] ACI [Construction], Sid Crookston, and Chris Crookston,” as defined and signed by SA Ferrous dba Revolve Recycling, ACI Construction, Chris Crookston, and Sid Crookston. Trial Tr. 917:23–918:12, 921:20–929:4, 935:5–939:4; Exs. 256, 257.

92. As with the Revolve Recycling project, Sid Crookston Construction contracted to do the work for the Providence Hollow project, and ACI Construction continued the work on this project once Sid Crookston Construction shut its doors. Exs. 204, 267; Trial Tr. 67:8–22, 751:22–755:9.

93. ACI Construction deposited into its account a $116,645.20 check written to Sid Crookston Construction for the Providence Hollow project, even though ACI Construction was not contracted to do the work. Exs. 453A; 268 at 25; Trial Tr. 676:4–7.

94. ACI Construction also deposited other checks into its account written to Sid Crookston Construction and Sid Crookston. See Trial Tr. 162:6–164:11; Exs. 452, 453, 453-A; see, e.g., Exs. 208A (deposited at least $139,000).

95. For example, ACI Construction deposited a check written to Sid Crookston Construction for worked performed on an airplane hangar project for Alitis Air, LLC.

96. Sid Crookston Construction was contracted to do the work for Alitis Air. Trial Tr. 610:15–20, 611:1–3, 612:10–16, 617:2–25, 618:7–9, 619:16–22, 620:10–621:1.

97. Chris's testimony that ACI Construction obtained the contract with Alitis Air through Julie is not credible when viewed in light of other third-party witnesses and documentation regarding the project. Trial Tr. 73:2–9, 168:14–169:2. It's clear from Mr. Hill's testimony and the exhibits that Alitis Air contracted with Sid Crookston Construction, not ACI Construction, and Mr. Hill wrote a check to Sid Crookston Construction. See Exs. 252, 253, 455; Trial Tr. 610:17–616:18, 637:17–639:11.

98. Even though the check was written to Sid Crookston Construction, ACI Construction deposited Alitis Air's final check in its own bank account. Trial Tr. 630:16–25; Exs. 254, 453 at 735.

99. ACI Construction then attempted to strongarm Alitis Air into paying ACI Construction for additional services rendered under Alitis Air's contract with Sid Crookston Construction. Exs. 252, 253, 254, 255, 455; Trial Tr. 632:12–646:7.

100. Similarly, ACI Construction tried to bill Legrand Johnson Construction for Sid Crookston Construction's projects. See Ex. 264; Trial Tr. 604:5–17, 608:19–23.

101. By taking over Sid Crookston Construction's ongoing projects and subsuming its equipment, materials, goodwill, and personnel, ACI Construction was able to generate $4.7 million in gross profit in its first full year. Trial Tr. 106:10–16.

7. ACI Construction Paid Sid Crookston Construction's Obligations.

102. As soon as ACI Construction began operating, it began making payments on many of Sid Crookston Construction's obligations even though it had never entered any formal arrangements that required it to do so. See, e.g., Ex. 205A; Trial Tr. 153:18–25, 286:20–24, 287:2–23.

103. ACI Construction essentially assumed Sid Crookston Construction's loans with Cache Valley Bank and paid over $450,000 on Sid Crookston Construction's loans with Cache Valley Bank. Exs. 205A, 210, 211, 212, 213, 214, 215, 216, 217.

104. One of those loans was the loan Sid Crookston Construction took out to assist Jason Mohr with purchasing a new truck. Sid Crookston Construction made payments towards the loan as part of Jason's compensation. Ex. 211; Trial Tr. 801:16–802:6, 802:18–23, 803:7–8, 803:15–19, 806:18–807:2. When Sid Crookston Construction went out of business, ACI Construction continued making the payments on the loan. Trial Tr. 807:6–808:12; see generally Ex. 221 (title issued in March 2016 to Jason Mohr and ACI Construction before ACI Construction was formed).

105. ACI Construction claims that it made the payments on Sid Crookston Construction's loans as part of a “lease arrangement” with Sid Crookston (Trial Tr. 34:13–25, 35:8–13), but there is no documentation to support this arrangement. Further, this explanation is not credible considering (1) Sid's testimony that Cache Valley took the assets and he was not a part of ACI Construction's negotiations with the bank (Trial 768:23-770:12) and (2) the bank's testimony that it did not negotiate with ACI Construction prior to ACI Construction possessing and using the assets and that it did not object so long as payments were made (ECF No. 135-1 at 188:9–189:10, 189:18–190:1).

106. ACI Construction continued making payments to acquire two parcels of real property that Sid Crookston Construction originally put money towards purchasing. These parcels are also known as the “RC Smithfield parcels” and are the subject of related litigation. Trial Tr. 546:5-12; Exs. 278, 279, 380, 323; see generally RC Smithfield, LLC v. United States, case no. 1:21-cv-00090-JNP (D. Utah).

107. ACI Construction made payments towards Sid Crookston Construction's outstanding federal tax liabilities. See Ex. 452 at p. 193 ($1,100), at p. 314 ($1,100); ECF No. 73-12.

108. ACI Construction also took up Sid Crookston Construction's ongoing contracts with its vendors and utilities, like Reladyne and Verizon, instead of opening new accounts. Exs. 230, 231; Trial Tr. 840:21–850:10.

109. Cache Valley Bank determined the primary source of repayment for ACI Construction's loans was “profits generated through operations of Sid Crookston Construction.” Trial Tr. 574:17–22, 576:13–577:1, 577:4–23, 578:2–5; Exs. 217, 219, 314 at p. 87, 454.

E. Federal Tax Liens and Notice of Federal Tax Liens

110. Sid Crookston Construction's liabilities created federal tax liens as a matter of law on the date of each of the assessments against Sid Crookston Construction for each tax type and period. ECF Nos. 19, 73, 81; 26 U.S.C. §§ 6321, 6322. The earliest assessment date was January 4, 2010. See generally ECF No. 73-8.

111. The Internal Revenue Service assigned former Revenue Officer Tammy Ward (“RO Ward”)¹⁰ to collect unpaid employment, unemployment, heavy highway usage, and corporate taxes of Sid Crookston Construction. Trial Tr. 508:25–509:6.

112. RO Ward completed an investigation, prepared drafts of Notices of Federal Tax Liens and a memorandum with exhibits and submitted those documents with her request for approval of the special condition NFTLs. Trial Tr. 496:13–20; 498:3–15.

113. IRS Counsel approved the recording of NFTLs against ACI Construction as a successor-in-interest of Sid Crookston Construction, against RC Smithfield as nominee of Sid Crookston Construction, and against Julianne Crookston as a nominee of Sid Crookston Construction.¹¹ Trial Tr. 498–499.

114. Once RO Ward received approval for the NFTLs described in the preceding paragraph, she prepared, signed, and filed these NFTLs with the county. Trial Tr. 498:22–499:17; 516:18–527:22. The NFTL against ACI Construction as successor-in-interest was recorded with Cache County on May 22, 2018. Ex. 316; Trial Tr. 517:15–22.

115. The IRS sent ACI Construction a Notice to Successor-in-Interest of Federal Tax Lien Filing in Relation to taxpayer: Sid Crookston Construction LLC. Exs. 316; 10A at 113.

116. Although ACI Construction requested a Collection Due Process hearing, it was not entitled to one because it was not the taxpayer whose liabilities created the federal tax liens. See infra, section II.C.4 ACI Construction did not request the Collection Appeals Procedure hearing to which it was entitled. Trial Tr. 505:15–19; 507:8–13.

II. CONCLUSIONS OF LAW

A. General Conclusions of Law

1. Any Conclusion of Law denominated as a Finding of Fact shall be deemed a Conclusion of Law and any Finding of Fact denominated as a Conclusion of Law shall be deemed a Finding of Fact.

2. Venue is proper under 28 U.S.C. § 1391(b)(2).

3. Sid Crookston Construction failed to pay its employment, unemployment, heavy highway, and corporate income taxes and penalties for numerous periods between 2009 and 2016. See generally ECF No. 73-8. The Court has already entered judgment against Sid Crookston Construction on the underlying federal tax liabilities in ACI Construction v. United States. See Order, No. 1:19-cv-00054, at ECF No. 81 (regarding the United States’ Claim 1). Thus, the federal tax liens against Sid Crookston Construction that arose from these assessments are valid. See United States v. Kalevik, 398 F. Supp. 2d 1152, 1159–60 (D. Colo. 2005).

4. The United States has asserted a counterclaim seeking to hold ACI Construction liable for the unpaid federal taxes of Sid Crookston Construction as its successor under Utah law. See generally ECF No. 19–20 (Claim 2). This Court has jurisdiction over the United States’ counterclaim under 28 U.S.C. §§ 1340 and 1345 and 26 U.S.C. § 7402.

5. ACI Construction seeks to quiet title to its real and personal property because it alleges the federal tax liens that arose from Sid Crookston Construction's liability are invalid. See generally ECF No. 2. This Court has jurisdiction over ACI Construction's claim under 28 U.S.C. § 1340 and 26 U.S.C. § 2410(a).

6. The Court decides these claims de novo. It is not limited to the evidence the IRS considered, or the IRS's reasoning, in recording the NFTLs against ACI Construction. See e.g., ACI Constr. v. United States, No. 1:19-cv-00054-JNP-JCB, 2021 WL 5162563, at *2 (D. Utah Nov. 5, 2021) (citing Leeds LP v. United States, 2009 WL 10672061 at *3 (S.D. Cal. 2009)).

7. Because the Court must determine whether ACI Construction is Sid Crookston Construction's successor in both ACI Construction's quiet title claim and the United States’ counterclaim, the Court addresses this first and then addresses ACI Construction's challenges to the federal tax liens and NFTLs.

B. ACI Construction is Sid Crookston Construction's Successor.

8. The United States can satisfy the tax debt of the taxpayer from a third party if that third party is determined to be the taxpayer's successor-in-interest under state law. See generally Eriem Surgical, Inc. v. United States, 843 F.3d 1160, 1161–62 (7th Cir. 2016) (applying state law to determine that a successor company was liable for the predecessor's taxes). As both Sid Crookston Construction and ACI Construction are Utah corporations and all the relevant events took place in Utah, Utah state law applies.

9. “The general rule is that where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the transferor.” ACI Constr., LLC v. United States, No. 1:19-cv-00054-JNP-JCB, 2022 WL 3999907, at *4 (D. Utah Aug. 31, 2022) (quoting R.J. Enstrom Corp. v. Interceptor Corp., 555 F.2d 277, 281–82 (10th Cir. 1977)).

10. Utah adheres to the traditional corporate law view of successor liability, as detailed in section 12 of the Restatement (Third) of Torts. Vivint, Inc. v. NorthStar Alarm Servs., LLC, No. 2:16-cv-00106-JNP-EFJ, 2017 WL 3484905, at *2 (D. Utah Aug. 14, 2017). However, Utah law on successor liability “is sparse.” Id. (citing to Tabor v. Metal Ware Corp., 168 P.3d 814, 816–17 (Utah 2007)). Thus, in analyzing successor liability, this Court will apply Utah state law, and where Utah law is sparse, will look to analogous state and federal law. See generally id.

11. Utah law has four exceptions to successor nonliability. See Tabor, 168 P.3d at 816. Under Utah law, successor liability occurs where one company sells or otherwise transfers substantially all its assets to another company and where (1) the transfer amounts to a de facto merger, (2) the transferee corporation is a mere continuation of the predecessor corporation, (3) the transferee expressly or impliedly assumes the predecessor's obligations, or (4) the transaction or transfer was entered fraudulently to escape liability. Id.; see also Vivint, 2012 WL 3484905, at *2; Macris & Assocs. v. Neways, Inc., 986 P.2d 748, 752 (Utah Ct. App. 1999) (quoting Florom v. Elliott, 867 F.2d 570, 575 n.2 (10th Cir. 1989)).

12. Successor liability is an equitable doctrine, looking beyond organizational documents and at the substance of what occurred. See Vivint, 2017 WL 3484905, at *2 (citing, among others, DeJesus v. Bertsch, Inc., 898 F. Supp. 2d 353, 362 (D. Mass. 2012)), aff'd sub nom. DeJesus v. Park Corp., 530 F. App'x 3 (1st Cir. 2013) (unpublished) (listing cases where family members and related entities were used to mask retention of control); see also Perez v. Paragon Contrs. Corp., 340 F. Supp. 3d 1194, 1213 (D. Utah 2018) (“Because the origins of successor liability are equitable, fairness is a prime consideration in its application.”).

13. Under Utah Law, the test for successor liability is disjunctive: only one of the theories needs to apply to hold ACI Construction liable for Sid Crookston Construction's tax debts. Depending on the underlying theory, successor liability must be established by preponderance of the evidence or by clear and convincing evidence. See Perez, 340 F. Supp. 3d at 1197, n.4 (entering findings of facts based on the preponderance of evidence in case where a construction company sought to use a successor to evade an injunction); see also Leeds LP, 807 F. Supp. 2d 946, 967, aff'd sum nom Fourth Inv. LP v. United States, 720 F.3d 1058 (9th Cir. 2013) (in a nominee analysis); Jones v. Mackey Price Thompson & Ostler, 469 P.3d 879, 890 (Utah 2020) (determining actual fraud using the clear and convincing evidence standard). ACI Construction is clearly Sid Crookston Construction's successor under each of the four theories.

1. Sid Crookston Construction Transferred Substantially All of Its Assets to ACI Construction.

14. As a threshold matter, successor liability does not require that there be a transfer of all assets. “[U]nder Utah law, the sale or transfer of all assets is not an absolute prerequisite to a finding of successor liability.” Vivint, 2017 WL 3484905, at *3. Rather, only the acquisition of “substantially all” of the assets is required for successor liability to attach. See id. at *7 (citing Tabor, 168 P.3d at 816–17 and True-Flo Mech. Sys., Inc. v. Bd. of Rev. of the Indus. Comm'n of Utah, 743 P.2d 1161, 1163 (Utah 1987)).

15. Under Utah law, transfer has a very broad definition. In the context of Utah's fraudulent transfer law, for instance, “transfer” is defined as “every mode, direct or indirect, absolute or conditional, or voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance.” Utah Code § 25-6-2(12).¹²

16. Under traditional corporate law, taking possession of property constitutes a transfer of the property, even though “there was no formal transfer of assets” in a successor business analysis. See ACI Constr., LLC, 2022 WL 3999907, at *3 (concluding under Utah law, transfer has a broad definition); see also High Desert Recovery, LLC v. N.M. Taxation & Revenue Dep't, 517 P.3d 258, 263 (N.M. Ct. App. 2021) (concluding that, in a successor in business analysis, taking possession of property constituted a transfer of the property, even though “there was no formal transfer of assets”).

17. As determined in the factual findings above, Sid Crookston Construction transferred substantially all its equipment, employees, customers, ongoing projects, and goodwill to ACI Construction when Sid Crookston Construction terminated its operations. See Findings of Fact (FOF) 51–53, 58–59, 77–82, 83–101.

a. Sid Crookston Construction transferred its equipment and vehicles to ACI Construction.

18. The machinery and equipment at Sid Crookston Construction and ACI Construction were substantially the same. FOF 77–82.

19. ACI Construction admits that Sid Crookston Construction parted with or disposed of its equipment and permitted ACI Construction to obtain possession of the equipment. FOF 78, 80, 81. In some instances, ACI Construction even “purchased” equipment for a mere dollar. FOF 81.

20. Although there is conflicting testimony as to who “owns” and “owned” various pieces of Sid Crookston Construction equipment, ACI Construction clearly took possession of and began using substantially all of Sid Crookston Construction's equipment and vehicles. FOF 78.

21. ACI Construction argues that because Sid Crookston Construction's equipment is fully encumbered by a bank lien, the equipment did not consist of assets that could be transferred. See Ex. 23; see also ECF No. 99 at 4. Utah Code § 25-6-2(12) (2016)¹³ provides that an asset does not include “property to the extent it is encumbered by a valid lien.” However, ACI Construction failed to establish at trial that the equipment was fully encumbered by a bank lien. See FOF 37. And even if all the equipment were fully encumbered, the Court would still conclude that Sid Crookston Construction transferred substantially all its assets to ACI Construction because, as addressed below, it transferred its other tangible assets, ongoing projects, and goodwill.

b. Sid Crookston Construction transferred its employees to ACI Construction.

22. ACI Construction immediately hired nearly all of Sid Crookston Construction employees when ACI started operations. FOF 51–59.

23. At least 85% of ACI Construction's documented employees were Sid Crookston Construction employees at the time ACI Construction started operating. FOF 51. This percentage is artificially low because it does not properly consider Julie and Sid Crookston as employees of both Sid Crookston Construction and ACI Construction despite testimony that they both performed work for Sid Crookston Construction and ACI Construction throughout the transitionary period. FOF 11, 59, 63–67, 70–86.

24. Importantly, ACI Construction hired Sid Crookston Construction's managers, including Sid Crookston. FOF 53–57.

25. It is not important for the successor analysis whether ACI Construction eventually hired other non-Sid Crookston Construction employees. In its successor analysis, the Court focuses on the substance of what occurred at the time Sid Crookston Construction stopped operating and ACI Construction began operating, not months or years after ACI Construction began operating. See generally Restatement (Third) of Torts: Products Liability § 12, cmt. A (1998).

c. Sid Crookston Construction transferred its ongoing projects, goodwill, and accounts receivable to ACI Construction.

26. Under Utah law, contracts, customer lists, and goodwill are assets. See generally Jackson v. Caldwell, 415 P.2d 667, 670 (Utah 1966); S. Utah Mortuary v. Roger D. Olpin Southern Utah Mortuaries, 776 P.2d 945, 948 (Ct. App. Utah 1989); Ekotek Site PRP Comm. v. Self, 948 F. Supp. 994, 998 (D. Utah 1996); cf. Bagford v. Ephraim, 904 P.2d 1095, 1098–99 (Utah 1995) (finding intangible property, such as contracts, is property within scope of eminent domain under Utah law).

27. ACI Construction continued many of Sid Crookston Construction's projects, such as Revolve Recycling and Providence Hollow. FOF 83–101.

28. This was possible because ACI Construction immediately began using the same email address as Sid Crookston Construction, worked out of Sid Crookston Construction's shop, relied upon Sid Crookston Construction's reputation and experience in the industry, and had access to Sid Crookston Construction equipment. Sid and Sid Crookston Construction helped ACI Construction secure equipment in its own name. And ACI Construction seems to have had access to Sid Crookston Construction's customer lists. FOF 51, 64, 84. It is also evident that Sid Crookston Construction's goodwill and intangible assets were transferred to ACI Construction. FOF 37, 101, 109 (Cache Valley Bank considered Sid Crookston Construction's profits for repayment of ACI Construction loan).

29. Not only did ACI Construction continue Sid Crookston Construction's existing projects, but it deposited into its own account money owed to Sid Crookston Construction on past projects. FOF 93–98; see, e.g., Ex. 208A.

30. When Sid Crookston Construction ceased operating in 2016, it had significant assets, including equipment, vehicles, materials, projects, and goodwill. The evidence clearly establishes these assets went to ACI Construction's business. And because substantially all of Sid Crookston Construction's equipment and vehicles were transferred to ACI Construction, it is irrelevant that ACI Construction later obtained additional equipment and vehicles.

2. ACI Construction Implicitly Assumed Sid Crookston Construction's Obligations.

31. A successor corporation is liable for the debts of its predecessor if it has implicitly agreed to assume those debts. See Tabor, 168 P.3d at 816; Ladjevardian v. Laidlaw-Coggeshall, Inc., 431 F. Supp. 834, 839 (S.D.N.Y. 1977). Express assumption of debts is not required. Decius v. Action Collection Serv., Inc., 105 P.3d 956, 958 (Ct. App. Utah 2004) (“[T]he purchaser expressly or impliedly agrees to assume such debts.” (emphasis added)); Ekoktek Site PRP Comm. v. Self, 948 F. Supp. 994, 1000 (D. Utah 1996); see City of Richmond, Va. v. Madison Mgmt. Grp., Inc., 918 F.2d 438, 450 (4th Cir. 1990) (a successor's conduct may indicate it implicitly assumed the predecessor's liabilities).

32. ACI Construction's conduct evinces its intent to take responsibility for Sid Crookston Construction's debts. As soon as ACI Construction began operating, it began making payments on many of Sid Crookston Construction's obligations even though it had never entered any formal arrangements that required it to do so. See FOF 71, 73, 78, 102–109.

33. ACI Construction made the payments on Sid Crookston Construction's equipment loans and vehicle loan obtained for Jason Mohr. FOF 103–104. ACI Construction made the remaining payments on the RC Smithfield parcels, which Sid Crookston Construction had first made. FOF 106. ACI Construction also continued the payments Sid Crookston Construction had been making towards Sid Crookston and Julie Crookston's personal expenses, despite Sid Crookston no longer having a formal ownership interest in the company. FOF 71.

34. ACI Construction also took up Sid Crookston Construction's ongoing contracts with its vendors and utilities—like Reladyne and Verizon—instead of opening new accounts. FOF 108.

35. Indeed, ACI Construction even made payments towards Sid Crookston Construction's outstanding federal tax liabilities. FOF 107.

36. ACI Construction's conduct in taking on many of Sid Crookston Construction's payment obligations and paying some of Sid Crookston Construction's outstanding tax liabilities, is consistent with an intention to acquire Sid Crookston Construction's liabilities. See United States v. Sterling Centrecorp Inc., 960 F. Supp.2d 1025, 1039 (E.D. Cal. 2013) (imposing CERCLA liability on a successor corporation in part because the successor's payment of workers compensation claims brought by employees of the predecessor demonstrated “its intention to assume all liabilities of [the predecessor], known and unknown”); City of Richmond, 918 F.2d at 451 (successor corporation's attempts to repair problems with work of predecessor provided a reasonable basis to hold it liable for all of predecessor's liabilities).

37. ACI Construction's takeover of Sid Crookston Construction's ongoing projects (FOF 83–101) and the collection of amounts owed on these projects (FOF 99–100) demonstrates its intention to take on Sid Crookston Construction's outstanding obligations, inasmuch as a successor corporation may not “demand all of the benefits under the contract[s]” of its predecessor without also being “obligated to perform all the obligations.” Kirby Lumber Co. v. R.I. Lumber Co., 279 S.W. 546, 549 (Tex. Ct. App. 1926). ACI Construction's conduct obligated it to also take on Sid Crookston Construction's liabilities since a corporation cannot enjoy the “substantial benefits” of its predecessor under its contracts without assuming its “reciprocal obligation[s].” Maffi v. O'Neal, 138 S.W.2d 134, 137 (Ct. App. Tex. 1940); see City of Richmond, 918 F.2d at 451 (collecting money owed to predecessor supported inference of implicit assumption of liability by successor corporation); States Roofing Corp v. Bush Const. Corp., 426 S.E.2d 124, 127 (Ct. App. Va. 1993) (receiving payments under predecessor's contracts evinces intent to assume predecessor's liabilities).

38. Many of ACI Construction's “acts are only explicable upon th[e] theory” that it assumed Sid Crookston Construction's obligations. See Wiggins Ferry Co. v. Ohio & M. Ry. Co., 142 U.S. 396, 409 (1892).

39. In assessing whether a successor corporation has implicitly agreed to assume the debts of its predecessor, some courts have also considered “the effect of the transfer upon creditors of the predecessor corporation.” Ladjevardian, 431 F. Supp. 834, 839 (S.D.N.Y. 1977) (citing In re Almanac Op. Corp., 42 F.2d 120 (2d Cir. 1930); Blackington v. United States, 6 F.2d 147 (8th Cir. 1925)); see Morris Ave. Corp. v. Daniel Realty Corp., 429 So.2d 268, 271–72 (Ala. 1983). Since Sid Crookston Construction no longer has any assets (as substantially all of them were transferred to ACI Construction and are in ACI Construction's control), Sid Crookston Construction's creditors, like the United States, would be left with no remedy if ACI Construction did not assume Sid Crookston Construction's liabilities.¹⁴

40. Considering the equities in this case and ACI Construction's conduct evincing its intent to take on Sid Crookston Construction's outstanding obligations, this Court concludes that ACI Construction implicitly agreed, through its conduct, to assume Sid Crookston Construction's outstanding liabilities.

3. A De Facto Merger Occurred Between Sid Crookston Construction and ACI Construction.

41. “Courts applying the de facto merger exception look beyond the form of an asset transfer to determine whether there has been, in substance, a merger or consolidation.” Vivint, 2017 WL 3484905 at *2; see, e.g., MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 965 N.Y.S. 2d 284, 297 (Sup. Ct. 2013).

42. The following factors are examined to determine whether a de facto merger has occurred: (1) there is a continuation of the enterprise in terms of management, personnel, physical location, assets, and operations; (2) there is continuity of shareholders, (3) the transferor ceases operations, and (4) the successor corporation assumes the obligations of the predecessor for uninterrupted continuation of business operations.” Vivint Inc., 2017 WL 3484905, at *2 (citing Ekotek Site PRP Comm. v. Self, 948 F. Supp. 994, 1002 (D. Utah 1996)). All factors are present here.

43. The first, third, and fourth factors are clearly present. As noted above, virtually all of Sid Crookston Construction's employees (including its managers) were transferred to ACI Construction, and ACI Construction retained the physical location, assets, and operations of Sid Crookston Construction. FOF 51–59, 77–82,83–101. There is no dispute that Sid Crookston Construction ceased operations at the time its assets were transferred to ACI Construction. FOF 29, 33. And ACI Construction assumed the obligations (i.e., payments on loans for equipment, Verizon services, and fuel charges) of Sid Crookston Construction in a nearly seamless transition. FOF 71, 102–109.

44. Even though the owners of Sid Crookston Construction and ACI Construction do not overlap on paper, the ownership of the companies overlap in substance. Indeed, in analyzing the four factors when determining whether a de facto merger has occurred, courts take a “broad view” and “disregard[ ] mere questions of form and ask[ ] whether, in substance, it was the intent of the successor to absorb and continue the operation of the predecessor.” MBIA Ins., 965 N.Y.S.2d at 293 (citation omitted); see Lehman Bros. Holdings v. Gateway Funding Diversified Mortgage Services, L.P., 989 F. Supp. 2d 411, 434 (E.D. Pa. 2013) (continuity of shareholder can exist even where the predecessor does not receive shares when “look[ing] beyond the superficial formalities of a transaction in order to examine the transactional realities and their consequences.”).

45. Beneath the superficial formalities, the evidence overwhelmingly shows Sid Crookston sought to retain control of Sid Crookston Construction after artificially cleansing the company of its liabilities to avoid paying the looming federal tax liabilities. Even though Sid was not a formal owner, he exerted significant authority over the company: he acted as a supervisor as soon as ACI Construction began operations in July 2016 (FOF 60, 62, 63); he regularly communicated with customers, often assuring them he would remain heavily involved and would play a major role (FOF 49, 64–67, 83–92); and he generally held himself out to be the boss (FOF 63). Further, the employees believed that Sid remained in charge of the business (Id.).

46. Coupling the above evidence with Sid's delayed formal employment with ACI Construction, his wife's abnormally large salary for her job duties, the familial relationship to ACI Construction's owners, and how his and his wife's personal expenses were paid by both companies, it is apparent that Sid had a significant interest in the success and well-being of ACI Construction. In substance, he was not a mere employee, but he was an owner of ACI Construction and reaped the benefits from the company in his control. FOF 75–76.

47. Effectively, a de facto merger occurred between Sid Crookston Construction and ACI Construction.

4. ACI Construction Merely Continued Sid Crookston Construction's Business.

48. A purchasing corporation is liable for the debts of the selling corporation when the purchasing corporation is merely a continuation of the selling corporation. Under Utah law, the mere continuation theory is limited to situations where the predecessor company and the successor company are essentially the same entity. Decius v. Action Collection Serv., 105 P.3d 956, 959 (Utah Ct. App. 2004). This is generally established through continuation of ownership and control. Id. However, like the de facto merger exception, under the mere continuation theory, the substance of what occurred matters more than what has been formalized on paper. See, e.g. Call Ctr. Techs., Inc. v. Grand Adventures Tour & Travel Pub. Corp., 635 F.3d 48, 54 (2d Cir. 2011). The question becomes: Is the new company merely the predecessor company in disguise? See ACI Constr., 2022 WL 3999907, at * 7 (citing Hetronic Int'l, Inc. v. Hetronic Germany GmbH, 10 F.4th 1016, 1028 (10th Cir. 2021)) (finding personal jurisdiction imputed through a successor's contacts with a forum by evaluating successor liability under Oklahoma law); see also Patin v. Thoroughbred Power Boats, Inc., 294 F.3d 640 (5th Cir. 2002) (mere continuation looks at whether the successor entity is the predecessor entity, “simply wearing a ‘new hat.’ ”). Here, ACI Construction was Sid Crookston Construction in disguise.

49. ACI Construction continued the family business. In fact, Sid Crookston Construction had used the name before it shut down. FOF 42–46. As noted throughout, ACI Construction merely continued Sid Crookston Construction's business: it assumed its employees, its customers, its projects, its obligations, and accounts receivable. FOF 51–59, 77–82,83–101. Additionally, Julie Crookston, Bronson Twitchell, and Sid Crookston Construction's employees believed ACI Construction was “what the company”—Sid Crookston Construction—“goes by now.” FOF 38–40. Chris's self-serving testimony that the companies were not the same is simply not credible. FOF 3, 41.

50. Therefore, successor liability exists because ACI Construction merely continued Sid Crookston Construction.

5. Sid Crookston Construction Fraudulently Transferred Its Assets and Operations to ACI Construction.

51. The final successor liability theory looks to fraudulent transfer under state law. See Vivint, 2017 WL 3484905, at *2; Tabor, 168 P.3d at 816; Restatement (Third) of Torts: Products Liability § 12 cmts. b & e. The Utah Fraudulent Transfer Act, Utah Code § 25-6-1 (2016), et seq.,¹⁵ outlines the standards for actual and constructive fraud. Under this statute, the clear and convincing evidence standard applies. Jones, 469 P.3d at 890–91.

52. The record establishes by clear and convincing evidence that Sid Crookston Construction fraudulently transfer its business to ACI Construction.

a. Actual Fraud

53. For actual fraud, a transfer is fraudulent to a creditor, whether the creditor's claim arose before or after the transfer was made, if the debtor made the transfer “with actual intent to hinder, delay, or defraud any creditor of the debtor.” Utah Code § 25-6-5(1)(a) (2016). To determine actual intent, Utah law directs courts to examine eleven non-exclusive factors.¹⁶ Utah Code § 25-6-5(2) (2016). The majority of these factors are present here.

i. Sid Crookston Construction transferred its assets to ACI Construction, an insider. See Utah Code § 25-6-5(2)(a) (2016); see also id. § 25-6-2(7) (defining the term “insider”). FOF 12, 48, 49.

ii. Sid Crookston Construction, disguised as ACI Construction, retained possession or control of the business and its assets after the transfer. See id. § 25-6-5(2)(b).

iii. The transfer or obligation was disclosed or concealed. See id. § 25-6-5(2)(c). The full extent of what happened to Sid Crookston Construction's assets remains unknown because many of the actions that occurred were handshake or undocumented agreements. See generally FOF 78–82. The only people who truly know what happened are Sid and Chris Crookston and they manipulated their testimony to serve their own interests. See FOF 3.

iv. Before the transfer was made, Sid Crookston Construction (and Sid) were aware of the outstanding federal tax debts and were threatened with suit. See id. § 25-6-5(2)(d). Sid and Sid Crookston Construction were also aware of the Pheasant Ridge judgment against Sid Crookston, which led in part to Sid Crookston Construction shutting down. See FOF 24–37.

v. As detailed above, Sid Crookston Construction transferred substantially all its assets to ACI Construction. See id. § 25-6-5(2)(e); supra FOF 51–59, 77–82, 83–101.

vi. Sid Crookston Construction shut down around July 2016 without making formal arrangements for the disposal of its assets or liabilities. See id. § 25-6-5(2)(f). It eventually let its Utah registration and license lapse. At the same time, it left substantial liabilities behind.

vii. Sid Crookston claims not to know what happened to Sid Crookston Construction's assets after it shut down, but those assets were evidently transferred to ACI Construction. See id. § 25-6-5(2)(g); see supra FOF 77–78. Sid Crookston Construction went to varied lengths to conceal moving assets to ACI Construction. FOF 79–82. Sid Crookston Construction and ACI Construction also removed money from the hands of its creditors by funneling it towards Sid and Julie Crookston's personal expenses and Sid and Julie's employment arrangements. FOF 71.

viii. The value of consideration received by Sid Crookston Construction was not reasonably equivalent to the value of the assets transferred to ACI Construction. See id. § 25-6-5(2)(h). Sid Crookston Construction let ACI Construction take its assets, including its goodwill and its ongoing business through active projects, receivables, and its customer list for seemingly no consideration. At most, ACI Construction paid a dollar each for various items of Sid Crookston Construction equipment. FOF 81.

ix. Sid Crookston Construction was insolvent at the time of the transfer. See id. § 25-6-5(2)(i); see also id. § 25-6-3(2) (defining the term “insolvent”). It had not paid its debts as they became due and had amassed over $1 million in unpaid federal taxes. FOF 24–37. Sid's bankruptcy filing also indicates that Sid believed himself and Sid Crookston Construction to be insolvent, although Sid Crookston Construction did not file bankruptcy and was not the debtor in that action. FOF 35–36.

x. Sid Crookston Construction admits that it shut down, and let its assets go, after Sid Crookston “found out” about the substantial unpaid taxes owed by the company. See id. § 25-6-5(2)(j); FOF 33. At that time, Sid Crookston Construction and Sid were also embroiled in various legal controversies that only served to exacerbate Sid Crookston Construction's liabilities, eventually leading Sid Crookston Construction to shut down. See, e.g., FOF 25, 33.

xi. The final factor—whether “the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor”—is not applicable to this case. See id. § 25-6-5(2)(k). Cache Valley Bank did not take Sid Crookston Construction's equipment and assets. FOF 77–78. Sid's testimony that the bank seized the assets is not credible and directly conflicts with Cache Valley Bank's testimony. See FOF 78. However, had Sid Crookston Construction transferred the vehicles and equipment to Cache Valley Bank who then transferred the assets to ACI Construction, an insider, then this factor would also favor holding that the transfer of assets from Sid Crookston Construction to ACI Construction was fraudulent.

54. The Court concludes Sid Crookston Construction acted to hinder, delay, and defraud the United States when it transferred its business to ACI Construction.

b. Constructive Fraud

55. Successor liability can also be established through constructive fraud.

56. Utah law contains two constructive fraud provisions. A transfer is constructively fraudulent if the debtor made the transfer “without receiving a reasonably equivalent value in exchange for the transfer” and the debtor “intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due.” Utah Code § 25-6-5(1)(b) (2016). A transfer is also constructively fraudulent if (a) the debtor made the transfer “without receiving a reasonably equivalent value in exchange for the transfer” and (b) “the debtor was insolvent at the time or became insolvent as a result of the transfer.” Id. § 25-6-6(1).

57. The court finds that evidence supports the conclusion that Sid Crookston Construction was constructively fraudulent under Utah Code §§ 25-6-5(1)(b) and 25-6-6(1). Sid Crookston Construction transferred its business (assets and all) to ACI Construction “without receiving a reasonably equivalent value in exchange for the transfer” and Sid Crookston Construction was aware or reasonably should have believed that by doing so it would leave Sid Crookston Construction with debts beyond its ability to pay. See id. § 25-6-5(1)(b). Further, the transfer rendered Sid Crookston Construction insolvent (to the extent that it was not insolvent already). See id. § 25-6-6(1)(b).

58. Examining the facts and circumstances, Sid Crookston Construction defrauded its creditors, including the United States, by transferring its assets and operations to ACI Construction.

6. ACI Construction is Sid Crookston Construction's Successor.

59. The Court concludes that ACI Construction is Sid Crookston Construction's successor and is therefore liable for Sid Crookston Construction's unpaid tax debts.

C. The Federal Tax Liens Encumbering ACI Construction Are Valid.

60. The Court now turns to the question of whether the federal tax liens are valid against ACI Construction. In a quiet title suit under 26 U.S.C. § 2410, an individual may challenge only the procedural regularity of the federal tax liens and the procedures used to enforce the liens. James v. United States, 970 F.2d 750, 755 (10th Cir. 1992). The statute provides a narrowly construed waiver of sovereign immunity giving federal district courts jurisdiction over claims “of IRS failure to meet procedural requirements for assessment, levy, and seize.” Id.

61. Because the Court has already concluded that ACI Construction is Sid Crookston Construction's successor, the remaining inquiry is whether any of ACI Construction's procedural challenges invalidate the federal tax liens and the procedures used to enforce them.

1. Federal Tax Liens Arose at the Time of the Assessments Against Sid Crookston Construction.

62. When a taxpayer fails to pay an assessed tax after receiving notice and demand for payment, a lien for the tax automatically arises in favor of the United States upon “all property and rights to property, whether real or personal,” belonging to the taxpayer. 26 U.S.C. § 6321; see also 26 U.S.C. § 6303; Drye v. United States, 528 U.S. 49, 55 (1999); Arlin Geophysical Co. v. United States, 2018 WL 4621748, at *7 (D. Utah Sept. 26, 2018), aff'd, 946 F.3d 1234 (10th Cir. 2020).

63. To ensure prompt and certain enforcement of the tax laws, the language of section 6321 “is broad and reveals on its face that Congress meant to reach every interest in property that a taxpayer might have.” Drye, 528 U.S. at 56 (quoting United States v. National Bank of Commerce, 472 U.S. 713, 719-20 (1985)). It is well settled that federal tax liens encumber property and rights to property placed in the name of another. 26 U.S.C. § 6321; see also Drye, 528 U.S. at 55–56; G.M. Leasing Corp. v. United States, 429 U.S. 338, 350–51 (1977). This includes property and rights to property held by a nominee, alter ego, or successor. See Arlin Geophysical Co., 2018 WL 4621748, *7; In re Bullseye Holdings, LLC, 2018 WL 4998089, at *6-7 (Bankr. D. Ariz. Oct. 15, 2018) (recognizing that tax liens attach to property in the name of a taxpayer's successor).¹⁷

64. Federal tax liens arise “at the time the assessment is made” and continue “until the liability for the amount so assessed ․ is satisfied or becomes unenforceable by reason of lapse of time.” 26 U.S.C. § 6322.

65. A Notice of Federal Tax Lien (NFTL) is not a federal tax lien. Section 6323 protects certain third parties from the effect of the government's federal tax liens. 26 U.S.C. § 6323; see 26 C.F.R. §§ 301.6323(a)-1 to 301.6323(j)-1 (accompanying regulations issued to 26 U.S.C. § 6323). It sets forth the procedures for recording an NFTL and provides that federal tax liens “shall not be valid as against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until” an NFTL is duly recorded. 26 U.S.C. § 6323(a), (f).

66. Federal tax liens arising from assessments are enforceable without the recording of an NFTL and have priority over all interests in property acquired after the attachment of the tax liens, except as provided by 26 U.S.C. § 6323(a). United States v. City of New Britain, 347 U.S. 81, 84 (1954). Although ACI Construction alleges that its interest in its assets is superior to that of the United States because it “owns” the assets (see ECF No. 144 at 5), a dispute over lien priority between the United States and ACI Construction is not before the Court.¹⁸ The Court's inquiry is limited to whether the federal tax liens extend to ACI Construction.

67. While ACI Construction has alleged an ownership interest in the assets, it has never alleged that it is a “purchaser, holder of a security interest, mechanic's lienor, or judgment creditor” in this case. Merely touting “ownership” is not one of the carefully crafted exceptions found in 26 U.S.C. § 6323. See generally Hansen v. Black, No. 2:13-cv-736-RJS, 2015 WL 1731402, at *6 (D. Utah Apr. 14, 2015) (quoting In re Nerland Oil, Inc., 303 F.3d 911, 920–21 (8th Cir. 2002)) (“[E]xceptions permitted under § 6323 are carefully crafted and narrowly limited ․”).

68. Therefore, valid federal tax liens arose in favor of the United States against Sid Crookston Construction on the various dates of assessment,¹⁹ and because ACI Construction is Sid Crookston Construction's successor, the federal tax liens encumber ACI Construction's assets. See ECF Nos. 19–20, 73; 26 U.S.C. §§ 6321, 6322.

2. An Assessment Against ACI Construction Was Not Required

69. ACI Construction challenges the validity of federal tax liens because it argues that the IRS was required to directly assess the taxes at issue against ACI Construction under 26 U.S.C. § 6901. See ECF No. 144 at 6 – 8. However, as explained below, the IRS was not required to assess ACI Construction under 26 U.S.C. § 6901.

70. Section 6901 is a transferee liability statute that does not impose a new tax liability but provides the IRS with a procedure to enforce an existing liability. See generally Commissioner v. Stern, 357 U.S. 39 (1958). It is one avenue the United States can use to collect from assets of transferees. In United States v. Russell, the Tenth Circuit held that “the collection procedures contained in § 6901 are not exclusive and mandatory.” 461 F.2d 605, 606 (10th Cir. 1972). Thus, “an individual assessment under 26 U.S.C. § 6901 is not a prerequisite to an action to impose transferee liability.” United States v. Geniviva, 16 F.3d 522, 525 (3d Cir. 1994); see Leighton v. United States, 289 U.S. 506, 507–09 (1933).

71. ACI Construction conflates the issues—i.e., the validity of the federal tax liens that arose at the time of the assessments against Sid Crookston Construction and other collection avenues available to the United States, such as assessments under 26 U.S.C. § 6901 or a claim (such as the United States’ counterclaim) under 26 U.S.C. § 7402(a) seeking a determination to hold ACI Construction liable as Sid Crookston Construction's successor. Further, ACI Construction's reliance on an out-of-circuit case, Atlas Tool Co. v. Commissioner, 614 F.2d 860 (3d Cir. 1980) aff'g 70 T.C. 86 (1978), is misplaced. This case also does not hold that § 6901 assessments are mandatory. Id. at 870–71.

72. ACI Construction also argues that the federal tax liens are inchoate, but this is incorrect as a matter of the law. See ECF No. 144 at 5. Federal tax liens are choate and perfected under federal law as soon as they arise upon assessment. See City of New Britain, 347 U.S. at 84.

73. Further, ACI's argument on this point is irrelevant to this Court's analysis, as the rule that “choate state-created liens take priority over later federal tax liens” only applies to disputes over lien priority; choateness is irrelevant to whether the United States’ liens attach to the assets held by ACI Construction—the central dispute in this case. See generally United States v. Central Bank of Denver, 843 F.2d 1300, 1307 (10th Cir. 1988).

3. The IRS Was Not Required to Send Demand for Payment to ACI Construction.

74. Section 6321 provides that the federal lien arises “if any person liable to pay any tax neglects or refuses to pay the same after demand.” Contextually, the “person liable” is the taxpayer, i.e., Sid Crookston Construction, and the IRS was only required to send a demand for payment to Sid Crookston Construction. See 26 U.S.C. §§ 6303, 6321; see generally Markham v. Fay, 74 F.3d 1347, 1354–56 (1st Cir. 1996) (holding that, by notifying the taxpayer, the IRS complied with the plain language of 26 U.S.C. § 6303); Medaris v. United States, 884 F.2d 832, 835 (5th Cir. 1989) (affirming the district court's holding that the IRS could levy upon one half of the wife's income and she was not entitled to notice under 26 U.S.C. §§ 6303(a) and 6331(d) because “[t]hese provisions only require the Government to provide notice to the person ‘liable’ for the payment of taxes”); Jersey Shore State Bank v. United States, 479 U.S. 442, 444 (1987) (holding that 26 U.S.C. § 6303 does not require the Government to provide notice and demand for payment to a lender before bringing a civil suit against the lender to collect sums under 26 U.S.C. § 3505). Even ACI Construction acknowledges Sid Crookston Construction as “the taxpayer whose liability created the lien” in filing its suit under 28 U.S.C. § 2410(a). ECF No. 2 at ¶¶ 12, 14.

75. Once the IRS made a demand for payment upon Sid Crookston Construction and Sid Crookston Construction neglected to pay its outstanding tax liabilities, liens in favor of the United States arose “upon all property and rights to property, whether real or personal, belonging to [Sid Crookston Construction].” 26 U.S.C. § 6321.

76. As explained above, the federal tax lien extended to its successor, ACI Construction because it is merely the continuation of Sid Crookston Construction. As the successor to the liabilities of Sid Crookston Construction, ACI Construction also inherited the demand for payment made to Sid Crookston Construction. The IRS was not required to make another demand for payment upon ACI Construction to collect the tax debt from it. See U.S.C. § 6321; see generally Markham v. Fay, 74 F.3d at 1354–56; Medaris v. United States, 884 F.2d at 835. Moreover, the court has found that Sid Crookston Construction orchestrated the superficial transformation to ACI Construction in a fraudulent attempt to avoid paying its taxes. ACI Construction may not accomplish the objective of this fraud by maintaining the pretense that it is a separate entity entitled to a separate demand for payment.

4. The Federal Tax Liens Are Not Invalidated Because ACI Construction was Not Entitled to CDP Notice or a Hearing Under 26 U.S.C. § 6320.

77. The Internal Revenue Code provides procedural safeguards in connection with administrative collection efforts by the IRS. ACI Construction argues that because it was not provided notice and rights required by 26 U.S.C. § 6320 the federal tax liens and corresponding NFTL are not valid. ECF No. 144 at 8–9. ACI Construction is incorrect.

78. Section 6320 provides that the IRS must notify the taxpayer—i.e., the person against whom the taxes were assessed—of the right to a collection-due-process (CDP) hearing upon filing of an NFTL.²⁰ See 26 U.S.C. §§ 6320(a)(1), 6321; 26 C.F.R. § 301.6320-1(a)(2) Q&A-A1. Further, nominees or other persons holding the taxpayer's property and rights to property, like ACI Construction, are not entitled to CDP notice under 26 U.S.C. § 6320. See 26 C.F.R. § 301.6320-1(a)(2) Q&A-A7; 26 C.F.R. § 301.6320-1(b)(2) Q&A-B5. Sid Crookston Construction, not ACI Construction, was entitled to CDP notice under 26 U.S.C. § 6320.

79. Alternatively, the notice provided to Sid Crookston Construction constituted notice to ACI Construction. The court has found that ACI Construction is a mere continuation of Sid Crookston Construction and that the transfer of assets was a fraudulent attempt to escape liability. Accordingly, the notice provided to Sid Crookston Construction was carried forward to its new incarnation as ACI Construction. This entity may not escape Sid Crookston Construction's liabilities by maintaining a fraudulent pretense that it is separate entity entitled to a separate notice.

80. Furthermore, ACI Construction has not been without due process. ACI Construction was notified of other administrative remedies available to it through the IRS Collection Appeals Program and chose not to pursue them. See Ex. 316 (Notice to Successor-in-Interest of Federal Tax Lien Filing in Relation to taxpayer: Sid Crookston Construction LLC). Additionally, the present matter has provided ACI Construction with ample due process.

81. ACI Construction's argument under 26 U.S.C. § 6320 fails to invalidate the federal tax liens or the NFTL.

III. CONCLUSION

82. Based on the foregoing, the court finds against ACI Construction on its quiet title claim. The Court also finds in favor of the United States on its successor-in-interest counterclaim. Accordingly, ACI Construction is liable for the unpaid taxes of Sid Crookston Construction and the federal tax liens are valid as to the property and rights to property held by ACI Construction.

83. The Court previously granted summary judgment against Sid Crookston Construction on the United States’ claim to reduce unpaid taxes and related assessments to judgment. But The United States has not presented updated evidence of the precise amount owed. The court orders the United States to submit a brief and any evidence to the court as to the precise amount of the tax liability. The United States shall also submit a proposed judgment. The court orders the United States to file these items by April 19, 2024. ACI Construction and Sid Crookston Construction may file a response brief and provide any evidence by May 3, 2024.

FOOTNOTES

1.   The United States also asserted a claim against Sid Crookston Construction to reduce unpaid taxes and related assessments to judgment. The court granted summary judgment in favor of the United States on this claim. Accordingly, the United States’ only remaining claim is for a determination that ACI Construction is liable for the unpaid taxes owed by Sid Crookston Construction.

2.   All citations to the trial transcript are citations to the docket in ACI Constr. v. United States, case no. 1:19-cv-00054-JNP-JCB, at ECF Nos. 160, 162, 163, 165–167.

3.   Sid Crookston Construction is also known as Sid Crookston, LLC.

4.   Julie Crookston's family previously owned another construction company, Legrand Johnson Construction Company in Cache County, Utah. Although Julie never appeared to have worked for Legrand (Trial Tr. 427:11–15, 600:11–18), witnesses agree Julie Crookston had contacts through this business and used her contacts to help obtain business for Sid Crookston Construction and ACI Construction. Trial Tr. 52:8–13; 52:20–22; 54:12–20, 343:1–5, 699:21–700:3. It was unclear from the testimony exactly how Julie used her contacts to help the businesses.

5.   Jared Chatterton is a tax accountant hired by Sid Crookston Construction to prepare interim profit and loss and balance sheets for the seven months prior to Sid Crookston Construction shutting down and to investigate some tax obligations that the company thought may be present. Trial Tr. 211:22–24, 212:4–9. Sid Crookston Construction's financial documents prepared by Jared Chatterton do not include an evaluation of the company's intangible assets such as goodwill because he was not asked to evaluate them. Trial Tr. 266:2–14. Nonetheless, the record establishes that Sid Crookston Construction had such intangible assets. Separately, but at the same time, Jared Chatterton also provided ACI Construction payroll processing services. Trial Tr. 218:18–219:7.

6.   The Court received numerous equipment lists for Sid Crookston Construction and ACI Construction. This finding relates to the list ACI Construction submitted to the IRS (Ex. 315; Trial Tr. 140:13–15) with lists of Sid Crookston Construction's equipment from Cache Valley Bank's records (Trial Tr. 730:2–18).

7.   Although Brad Peterson, a loan servicer with Cache Valley Bank, testified at trial that the bank had frozen Sid Crookston Construction's assets (see Trial Tr. 285:23–286:8), this did not occur according to Cache Valley Bank's Rule 30(b)(6) witness. See generally ECF No. 135-001 at 170:14–18, 180:12–16, 191:18–20.

8.   Throughout the pendency of the trial, the Court informed the parties that it would permit the parties to move to strike exhibits or testimony following trial. Accordingly, although the Court overruled ACI Construction's objection to Ex. 200, it is worth restating that Ex. 200 is excepted from hearsay as a business record of Quality 1st Insurance under Rule 803(6) of the Federal Rules of Evidence.

9.   Alex Bearnson testified that this form was completed in mid-2016 around the time Sid informed him that there would be a new company (i.e., around the time ACI Construction began work for Revolve), but Alex backdated it to January 5, 2016, when the estimate was originally completed by Sid. Trial Tr. 890:19–891:14.

10.   A pseudonym.

11.   Whether federal tax liens extend to the property and rights to property of Sid Crookston Construction in the hands of Julie Crookston as its nominee and RC Smithfield as its nominee is at issue in the RC Smithfield, LLC case and Estate of Julianne Crookston v. United States, Case No. 1:21-cv-000102-JNP-DAO (D. Utah).

12.   The cited provision is the one that was operative at the time that Sid Crookston Construction allegedly transferred its assets to ACI. The provision is now codified at Utah Code § 25-6-102(16).

13.   The cited provision is the one that was operative at the time that Sid Crookston Construction allegedly transferred its assets to ACI Construction. The provision is now codified at Utah Code § 25-6-102(2).

14.   While it is true that some of the assets are still titled in the name of Sid Crookston Construction, Sid Crookston Construction's creditors are limited in their recovery because these assets are under the control of ACI Construction and thus cannot be seized from Sid Crookston Construction without involving ACI Construction.

15.   Because the transfer at issue occurred before May 9, 2017, the former Utah law, the Uniform Fraudulent Transfer Act, Utah Code § 25-6-1 (2016), et seq., applies. The new Utah law, the Uniform Voidable Transactions Act, Utah Code § 25-6-101, et seq., is effective for transfers occurring on or after May 9, 2017. References herein to Utah Code § 25-6-1, et seq. are to the 2016 statute.

16.   These factors are: “(a) the transfer or obligation was to an insider; (b) the debtor retained possession or control of the property transferred after the transfer; (c) the transfer or obligation was disclosed or concealed; (d) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit; (e) the transfer was of substantially all the debtor's assets; (f) the debtor absconded; (g) the debtor removed or concealed assets; (h) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (i) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (j) the transfer occurred shortly before or shortly after a substantial debt was incurred; and (k) the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor.” Utah Code § 25-6-1(2) (2016).

17.   ACI Construction acknowledges that section 6321 is broad enough to create a lien against property held by either a nominee or an alter ego. See Drye, 528 U.S. at 54–55, 61 (holding that section 6321 creates a lien against property held by a nominee); G.M. Leasing, 429 U.S. at 350–51 (holding that section 6321 creates a lien against property held by an alter ego). It argues, however, that section 6321 does not create a lien on property held by a successor in interest because Supreme Court authority does not specifically address this scenario. The court disagrees. The Supreme Court has held that the reach of section 6321 is broad and encompasses “every interest in property that a taxpayer might have.” Drye, 528 U.S. at 56. Because section 6321 is comprehensive enough to cover property held by a nominee or an alter ego, it also covers property held by a successor in interest, which is merely a continuation of the entity liable for unpaid taxes.

18.   ACI Construction also insinuates the federal tax liens are not valid because of a possible dispute over lien priority between Cache Valley Bank and the United States based on filed UCC documents. See Exs. 6, 23. Whether Cache Valley Bank also filed liens securing Sid Crookston Construction or ACI's property or rights to property is irrelevant for purposes of this case. The priority of the federal tax liens as to other lienholders (e.g., Cache Valley Bank) is not before this Court.

19.   ACI Construction elicited testimony and presented exhibits related to other assessments that are not before the Court and are hereby disregarded. Trust Fund Recovery Penalty assessments under 26 U.S.C. § 6672 and any assessments against ACI Construction for its own tax liabilities are irrelevant to the analysis of whether the federal tax liens that arose from the assessments against Sid Crookston Construction extend to ACI Construction.

20.   Often referred to as the “Collection Due Process Hearing Notice (CDP Notice)” or “Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320.”

Jill N. Parrish, District Judge