Pt 2 of doc
II. LEGAL ANALYSIS
A. Summary Judgment Standards
Motions for summary judgment essentially "define disputed facts and issues and . . . dispose of unmeritorious claims [or defenses]." Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1982 (2007); see Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986) ("One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses. . . ."). Any party may move for summary judgment regarding "all or any part" of the claims asserted in a case. FED R. CIV. P. 56(a), (b) (allowing a claimant to move for summary judgment "at any time after the expiration of 20 days from the commencement of the action or after service of a motion for summary judgment by the adverse party," and allowing a defending party to move for summary judgment "at any time"). Summary judgment is only appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Id. 56(c) (emphasis added); see Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990 (8th Cir. 2005) ("Summary judgment is appropriate if viewing the record in the light most favorable to the nonmoving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.").
A fact is material when it "'might affect the outcome of the suit under the governing law.'" Johnson v. Crooks, 326 F.3d 995, 1005 (8th Cir. 2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). Thus, "the substantive law will identify which facts are material." Anderson, 477 U.S. at 248. Facts that are "critical" under the substantive law are material, while facts that are "irrelevant or unnecessary" are not. Id. An issue of material fact is genuine if it has a real basis in the record, Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir. 1992) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)), or when "'a reasonable jury could return a verdict for the nonmoving party' on the question," Woods, 409 F.3d at 990 (quoting Anderson, 477 U.S. at 248); see Diesel Machinery, Inc. v. B.R. Lee Indus., Inc., 418 F.3d 820, 832 (8th Cir. 2005) (stating genuineness depends on "whether a reasonable jury could return a verdict for the non-moving party based on the evidence"). Evidence presented by the nonmoving party that only provides "some metaphysical doubt as to the material facts," Matsushita, 475 U.S. at 586, such as a "scintilla of evidence," Anderson, 477 U.S. at 252; In re Temporomandibular Joint (TMJ) Implants Prods. Liab. Litig., 113 F.3d 1484, 1492 (8th Cir. 1997), or evidence that is "merely colorable" or "not significantly probative," Anderson at 249-50, does not make an issue of material fact genuine.
Thus, a genuine issue of material fact is not the "mere existence of some alleged factual dispute between the parties." State Auto. Ins. Co. v. Lawrence, 358 F.3d 982, 985 (8th Cir. 2004). "'Instead, "the dispute must be outcome determinative under prevailing law."'" Mosley v. City of Northwoods, 415 F.3d 908, 910-11 (8th Cir. 2005) (quoting Get Away Club, Inc. v. Coleman, 969 F.2d 664, 666 (8th Cir. 1992), in turn quoting Holloway v. Pigman, 884 F.2d 365, 366 (8th Cir. 1989)). In other words, a genuine issue of material fact requires "sufficient evidence supporting the claimed factual dispute" so as to "require a jury or judge to resolve the parties' differing versions of the truth at trial." Anderson, 477 U.S. at 248-49. Essentially, a genuine issue of material fact determination, and thus the availability of summary judgment, is a determination of "whether a proper jury question [is] presented." Id. at 249. A proper jury question is present if "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Id.
Procedurally, the moving party does not have to "support its motion with affidavits or other similar materials negating the opponent's claim," Celotex, 477 U.S. at 323, but the moving party does bear "the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the record which show a lack of a genuine issue." Hartnagel, 953 F.2d at 395 (citing Celotex, 477 U.S. at 323). Thus, a movant need only demonstrate the absence of a genuine issue of material fact and that it is entitled to judgment according to law. See Celotex, 477 U.S. at 323 ("[T]he motion may, and should, be granted so long as whatever is before the district court demonstrates that the standard for the entry of summary judgment, as set forth in Rule 56(c), is satisfied."). Once the moving party has successfully carried its burden under Rule 56(c), the nonmoving party has an affirmative burden to go beyond the pleadings and by depositions, affidavits, or otherwise, designate "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e); Mosley, 415 F.3d at 910 ("The nonmoving party may not 'rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.'" (quoting Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995))). Thus, the movant must show the absence of a genuine issue of material fact as it relates to the substantive law, and the nonmovant must show the alleged issue of fact is genuine and material as it relates to the substantive law. If a party fails to make a sufficient showing of an essential element of a claim or defense with respect to which that party has the burden of proof, then the opposing party is "entitled to judgment as a matter of law." Celotex, 477 U.S. at 322; In re Temporomandibular Joint, 113 F.3d at 1492.
In considering whether a genuine issue of material fact is present the court must view all the evidence in the light most favorable to the nonmoving party. Matsushita, 475 U.S. at 587-88; Mosley, 415 F.3d at 910. Further, the court must give such party the benefit of all reasonable inferences that can be drawn from the facts. Matsushita, 475 U.S. at 587-88. However, "because we view the facts in the light most favorable to the non-moving party, we do not weigh the evidence or attempt to determine the credibility of the witnesses." Kammueller v. Loomis, Fargo & Co., 383 F.3d 779, 784 (8th Cir. 2004). Rather than "attempt[ing] to determine the truth of the matter . . . the court's function is to determine whether a dispute about a material fact is genuine." Quick v. Donaldson Co., Inc., 90 F.3d 1372, 1376-77 (8th Cir. 1996).
Of course, the facts are not the sole concern of the court; after all, a genuine issue of material fact necessarily depends on the substantive law. See Holloway, 884 F.2d at 366 ("The presence of a genuine issue of fact is predicated on the existence of a legal theory which can be considered viable under the nonmoving party's version of the facts. The mere existence of a factual dispute is insufficient alone to bar summary judgment; rather, the dispute must be outcome determinative under prevailing law."). Thus, the relevant law concerning plaintiff's claims is pivotal. Anderson, 477 U.S. at 252 ("[T]he inquiry involved in a ruling on a motion for summary judgment . . . necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits."); see Brandon v. Lotter, 157 F.3d 537, 539 (8th Cir. 1998) ("'In ruling on a motion for summary judgment, the court must bear in mind the actual quantum and quality of proof necessary to support liability under the applicable law.'" (quoting Hartnagel, 953 F.2d at 396)). Even if no genuine issue of material fact is present, summary judgment is not appropriate unless the governing law supports the moving party's position. FED. R. CIV. P. 56(c) (requiring the moving party to show that it "is entitled to judgment as a matter of law"). Moreover, summary judgment is particularly appropriate "where the unresolved issues are primarily legal rather than factual." Aucutt v. Six Flags Over Mid-America, Inc., 85 F.3d 1311, 1315 (8th Cir. 1996).
With these standards in mind, the court turns to consideration of the parties' cross-motions for summary judgment.
B. Analysis Of Issues
Because there is little overlap in the issues raised in the parties' motions, the court will proceed by addressing the parties' motion seriatim, commencing with defendant Reed's motion.
1. Defendant Reed's Motion for Summary Judgment
a. Necessity of a response to Reed's answer
The first issue the court is called upon to address is defendant Reed's assertion that the government is in default because it has not filed a response to his answer. Federal Rule of Civil Procedure 7(a) provides as follows:
(a) Pleadings. Only these pleadings are allowed:
(1) a complaint;
(2) an answer to a complaint;
(3) an answer to a counterclaim designated as a counterclaim;
(4) an answer to a crossclaim;
(5) a third-party complaint;
(6) an answer to a third-party complaint; and
(7) if the court orders one, a reply to an answer.
FED. R. CIV. P. 7(a).
The court notes that defendant Reed's answer did not assert any counterclaims, or crossclaim and the court has not directed the government to reply to defendant Reed's answer. Accordingly, the government was not required to file a reply to defendant Reed's answer and, as such, is not in default. Therefore, this portion of defendant Reed's motion is denied.
b. Reed's "payment" of his tax liabilities
Defendant Reed also contends that he is entitled to summary judgment because he and defendant Raymond Cox, as trustee of Two Ponds, Chakra, Indigo and Circle Phase, have already provided payment to the government in the sum of $ 3,000,000 and therefore his outstanding tax liabilities have been satisfied. The government responds that defendant Reed has merely submitted "bogus 'bonds'" to the government and, therefore, he has not satisfied his federal tax liabilities.
Defendant Reed has attached to his motion for summary judgment copies of the purported "bonds" which he claims satisfied his outstanding federal tax liabilities. These two documents are denominated "Bond to discharge attachment for debt Via Pass-through Account Michael A. Reed ***-**-****" and "Bond to discharge attachment for debt Via Pass-through Account Raymond M. Cox ***-**-****". Both documents purport to be payable on demand "through the back office for settlement via the pass through account . . . at the treasury window, Department of the Treasury, 1500 Pennsylvania Ave., N.W., Washington DC 20220, for the settlement and adjustment of the account enumerated herein." The court concludes that both documents are works of legal fiction, neither of which constitutes a viable financial instrument or represents a recognized legal medium of exchange the tendering of which would satisfy defendant Reed's outstanding federal tax liabilities. See Don E. Williams Co. v. Commissioner of Internal Revenue, 429 U.S. 569, 583 (1977) (holding that "promissory note", even when payable on demand and fully secured, is not the equivalent of a check and does not constitute a medium of exchange). Accordingly, defendant Reed's presentation of these documents to the government failed to satisfy his outstanding federal tax liabilities. Therefore, this portion of defendant Reed's motion is denied.
2. The government's Motion for Summary Judgment
a. Federal income tax liabilities
Section 6321 of the Internal Revenue Code provides that the United States has a lien on all property belonging to an individual who is liable for unpaid taxes. 26 U.S.C. section 6321. See EC Term of Years Trust v. United States, 127 S. Ct. 1763, 1765 (2007); United States v. Craft, 535 U.S. 274, 291 (2002). The Supreme Court has given an expansive reading to this statutory language, stating that it "reveals on its face that Congress meant to reach every interest in property that a taxpayer might have." United States v. Stonehill, 83 F.3d 1156, 1158 (9th Cir. 1996) (citing United States v. National Bank of Commerce, 472 U.S. 713, 719-20 (1985)). Unless another date is fixed by law, a lien imposed under section 6321 arises at the time the tax assessment is made and continues "until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time." 26 U.S.C. section 6322; In re Nerland Oil, Inc., 303 F.3d 911, 916 (8th Cir. 2002) ("A federal tax lien attaches and becomes choate at assessment"); United States v. Jepsen, 268 F.3d 582, 584 (8th Cir. 2001) (noting that tax assessment creates a lien in favor of the United States on all property and rights to property pursuant to 26 U.S.C. sections 6321, 6322).
The government asserts that summary judgment should be granted against defendant Reed for the assessments of unpaid taxes and penalties for the tax years 1998 through 2003. For the reasons that follow, the court agrees with the government.
"'In an action to collect federal taxes, the government bears the initial burden of proof.'" In re Olshan, 356 F.3d 1078, 1084 (9th Cir. 2004) (quoting Palmer v. I.R.S., 116 F.3d 1309, 1312 (9th Cir. 1997)); see Carson v. United States, 560 F.2d 693, 696 (5th Cir. 1977). The government's burden can be met by presenting federal tax assessments. United States v. Stonehill, 702 F.2d 1288, 1293 (9th Cir. 1983). Certificates of Assessments and Payments ("Form 4340s") are highly probative and in the absence of contrary evidence, are sufficient to establish a tax assessment was properly made and notice and demand for payment were sent. See United States v. Strebler, 313 F.2d 402, 403-04 (8th Cir. 1963) ("The law is that such assessment is presumptively correct; and 'the burden is on the taxpayer to overcome this presumption' by countervailing proof."); see Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993) ("Generally, courts have held that IRS Form 4340 provides at least presumptive evidence that a tax has been validly assessed. . . ."); Hughes v. United States, 953 F.2d 531, 535 (9th Cir. 1992) ("Official certificates, such as Form 4340, can constitute proof of the fact that the [tax] assessments were actually made.").
When supported by a minimal factual foundation, the IRS's assessments for taxes and related penalties are entitled to a presumption of correctness and the burden shifts to the taxpayer to show the assessment is incorrect. See In re Olshan, 356 F.3d at 1084; see also Palmer, 116 F.3d at 1312; Helvering v. Taylor, 293 U.S. 507, 515 (1935); Avco Delta Corp. Canada Ltd. v. United States, 540 F.2d 258, 262 (7th Cir. 1976); United States v. Rexach, 482 F.2d 10, 17 (1st Cir. 1973); Psaty v. United States, 442 F.2d 1154, 1159-60 (3d Cir. 1971); United States v. Strebler, 313 F.2d 402, 403-04 (8th Cir. 1963). If the taxpayer fails to rebut the presumption, the government is entitled to judgment as a matter of law. See Adams v. United States, 358 F.2d 986, 994 (Ct. Cl. 1966); see also Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993) (finding taxpayers' declaration that they did not receive notice of the tax assessment was insufficient to show a genuine issue of fact for trial where IRS presented Form 4340).
Here, the government has submitted Form 4340s calculating defendant Reed's tax liability and the related penalties for 1998 through 2003. See Gov't Ex. 1. Because the government's showing satisfies the minimal factual foundation necessary, the assessments receive a presumption of correctness and the burden of proof shifts to defendant Reed to demonstrate any error. Defendant Reed, however, has not put forth any evidence that there are deficiencies in the government's Form 4340s. In fact, by failing to answer the government's First Set of Admissions, defendant Reed has admitted that he owes taxes and penalties in the exact amounts stated in the IRS's assessments. See Luick v. Graybar Elec. Co., 473 F.2d 1360, 1361-62 (8th Cir. 1973) ("Unanswered requests for admissions render the matter requested conclusively established for the purpose of that suit."); Essex Ins. Co. v. McManus, 299 F. Supp. 2d 939, 942 (E.D. Mo. 2003) (quoting Luick). Since defendant Reed has failed to identify any facts that would rebut the legitimacy of the 4340s, the only permissible inference is that the assessments of defendant Reed's tax liability are valid as a matter of law. See Adams, 358 F.2d at 994. Accordingly, the court finds that the assessments of defendant Reed's tax liability and penalties for the tax years 1998 through 2003 are correct as a matter of law. Therefore, the court grants the government's motion for summary judgment against defendant Reed for the federal tax assessments made against him for tax years 1998 through 2003.
Pursuant to 26 U.S.C. sections 6601(a) and (e)(2)(A), 6621, and 6622, the United States is entitled to statutory interest on income taxes and associated penalties imposed as of the date of notice and demand, which accrues daily until paid in full. See Purcell v. United States, 1 F.3d 932, 943 (9th Cir. 1993). Once a court validates a tax assessment, awarding statutory interest is mandatory. See id. (noting that section 6601(e)(2)(A) is a "binding statutory directive" to award interest). Therefore, the court grants summary judgment with respect to the statutory interest and penalties on the assessments for tax years 1998 through 2003 and orders that judgment be entered against defendant Reed in the amount of $ 726,826.37 for those income tax liabilities, associated penalties and interest plus statutory additions accruing from August 12, 2008.
b. Foreclosure of liens
Defendant Reed's Federal Tax Liens attached to the following property prior to Reed's conveyance of them to other entities:
(1) The 255th Avenue Property;
(2) the 19th Street Property;
(3) 1947 red Indian Chief motorcycle (VIN: ending in 5320);
(4) 1974 red and white GMC truck (VIN: ending in 0221);
(5) 2002 black/red Indian Chief motorcycle (VIN: ending in 6180);
(6) 2001 blue Ford pick-up (VIN: ending in 6253);
(7) 1991 red Harley-Davidson motorcycle (VIN: ending 2735);
(
2004 silver Toyota Sequoia (VIN: ending in 7851); and,
(9) 1971 white Fan motorhome (VIN: ending in 6900).
Pursuant to 26 U.S.C. section 6321, after notice and demand, the United States obtains a lien "upon all property and rights to property, whether real or personal, belonging to" the taxpayer in the amount of the unpaid taxes, penalties, and interest. A lien arises as of the date of the assessment and continues until paid. See 26 U.S.C. section 6322. The United States's tax liens are perfected upon assessment, see United States v. Vermont, 377 U.S. 351, 355 (1964), and are effective against the taxpayer and other lienholders without filing notice. See 26 U.S.C. sections 6321, 6323(a). For a tax lien to be valid against a purchaser, however, the United States must file a notice of the lien in the appropriate location more than thirty days prior to the sale. See 26 U.S.C. sections 6323(b), (f); 7425(b) (stating that nonjudicial sale of property is subject to United States's lien if notice was filed or recorded in the proper location more than thirty days before such sale). The first of Reed's Federal Tax Liens was perfected and, therefore, became valid on October 6, 2003-the date of assessment of Reed's 1998 tax liability. See Gov't Ex. 1. The next two Federal Tax Liens were perfected on December 8, 2003-the date of assessment of Reed's 1999 and 2000 year tax liabilities. See Gov't Ex. 1. Thus, the Federal Tax Liens attached to the property described above prior to any transfer of the title to that property and, accordingly, the transferees took the property subject to the government's liens./1/ Therefore, the court orders that defendant Reed's Federal Tax Liens be foreclosed on the the following property:
(1) The 255th Avenue Property;
(2) the 19th Street Property;
(3) 1947 red Indian Chief motorcycle (VIN: ending in 5320);
(4) 1974 red and white GMC truck (VIN: ending in 0221);
(5) 2002 black/red Indian Chief motorcycle (VIN: ending in 6180);
(6) 2001 blue Ford pick-up (VIN: ending in 6253);
(7) 1991 red Harley-Davidson motorcycle (VIN: ending 2735);
(
2004 silver Toyota Sequoia (VIN: ending in 7851); and,
(9) 1971 white Fan motorhome (VIN: ending in 6900).
c. Sale of property
Pursuant to 26 U.S.C. section 7403, the United States may enforce a lien by commencing an action in the district court, joining all parties with an interest in the property, and obtaining a judicial sale of the property. See United States v. Rodgers, 461 U.S. 677, 691-92 (1983) (stating that section 7403 grants the power to a federal district court to order the sale of a delinquent taxpayer's home); United States v. Bierbrauer, 936 F.3d 373, 374 (8th Cir. 1991) (noting that "
ection 7403 of the Internal Revenue Code authorizes a federal district court to order a sale of property in which a delinquent taxpayer has an interest in order to satisfy that taxpayer's debt".); see also In re Pletz, 221 F.3d at 1118 (citing Rodgers, 461 U.S. at 693-94). Section 7403(c) states, in pertinent part, that
[t]he court shall, after the parties have been duly notified of
the action, proceed to adjudicate all matters involved therein
and finally determine the merits of all claims to and liens upon
the property, and, in all cases where a claim or interest of the
United States therein is established, may decree a sale of such
property, by the proper officer of the court, and a distribution
of the proceeds of such sale according to the findings of the
court in respect to the interests of the parties and of the
United States.
26 U.S.C. section 7403(c).
Under section 7403(c), "in order to enforce a lien and collect on justly owed debts, the district court is empowered to order the sale of [entireties] property to satisfy the tax debt of one tenant, so long as it compensates the nondebtor spouse for his or her interest." In re Pletz, 221 F.3d at 1117-18 (noting that section 7403 "explicitly allows a lien creditor like the IRS to sell not only a debtor's interest in a property, but the entire property held as a tenancy by the entirety by the debtor and his nondebtor wife"); see also Rodgers, 461 U.S. at 680 (observing that a federal district court is empowered to order sale of the property itself, not just the delinquent taxpayer's interest in the property). Here, the government has complied with section 7403. Defendant Reed has refused to pay his federal tax liabilities, and as a result, this court has foreclosed the federal tax liens against the real and personal property identified above. The government commenced this action in the district court and all parties "having liens upon or claiming any interest in the property involved in such action" at the time of filing have been named as defendants. Accordingly, pursuant to section 7403, the court orders the sale of the following real and personal property to satisfy defendant Reed's federal tax liens:
(1) The 255th Avenue Property;
(2) the 19th Street Property;
(3) 1947 red Indian Chief motorcycle (VIN: ending in 5320);
(4) 1974 red and white GMC truck (VIN: ending in 0221);
(5) 2002 black/red Indian Chief motorcycle (VIN: ending in 6180);
(6) 2001 blue Ford pick-up (VIN: ending in 6253);
(7) 1991 red Harley-Davidson motorcycle (VIN: ending 2735);
( 2004 silver Toyota Sequoia (VIN: ending in 7851); and,
(9) 1971 white Fan motorhome (VIN: ending in 6900).
III. CONCLUSION
For the reasons stated above, because the court denies defendant Reed's Motion for Summary Judgment and grants the government's Motion for Summary Judgment and orders the following: that judgment be entered against defendant Reed in the amount of $ 726,826.37 for those income tax liabilities, associated penalties and interest plus statutory additions accruing from August 12, 2008; that defendant Reed's federal tax liens be foreclosed on the following real and personal property:
(1) The 255th Avenue Property;
(2) the 19th Street Property;
(3) 1947 red Indian Chief motorcycle (VIN: ending in 5320);
(4) 1974 red and white GMC truck (VIN: ending in 0221);
(5) 2002 black/red Indian Chief motorcycle (VIN: ending in 6180);
(6) 2001 blue Ford pick-up (VIN: ending in 6253);
(7) 1991 red Harley-Davidson motorcycle (VIN: ending 2735);
( 2004 silver Toyota Sequoia (VIN: ending in 7851); and,
(9) 1971 white Fan motorhome (VIN: ending in 6900);
and the sale of that real and personal property.
IT IS SO ORDERED.
DATED this 23rd day of March, 2009.
Mark W. Bennett
U. S. District Court Judge
Northern District of Iowa
FOOTNOTE
/1/ The court concludes, based on the disclaimer of interest filed by Loren Brown, in his capacity as trustee of Suntasso and Pembina Nation Tribal Council, that defendants Suntasso and Pembina Nation Tribal Council have no interest in the above mentioned real and personal property. Similarly, the court finds that defendants Black Canyon Properties and Canyon Investments hold the real and personal property transferred to them by defendant Reed as nominees or alter egos of defendant Reed. Accordingly, the government's federal tax liens against defendant Reed attached to the real and personal property held by these entities which Reed transferred to them in this capacity.
ed: SSAN redacted (JRB)
other SSN redacted (Q)
