Opinion
Case No. CV-F-01-5594 LJO
December 20, 2001
ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (Doc. 22)
Pursuant to a notice filed on November 6, 2001, plaintiff United States of America seeks an on granting summary judgment on each of its three claims against defendant Jupiter Logistics, Inc. dismissing defendant Karen Fries. The United States seeks to (1) reduce to judgment the asses penalties and tax liabilities against Jupiter Logistics, (2) avoid a fraudulent transfer of a security in the in the Heaton Property, and (3) foreclose tax liens against Jupiter Logistics on the Heaton Property. timely opposition or statement of non-opposition has been filed pursuant to Local Rule 78-230(c). matter was submitted on the pleadings without oral argument pursuant to Local Rule 78-230(h). December 12, 2001, the Court requested that plaintiff further explain portions of its evidence submit in support of its motion, provide the Court with statutory references for interest and penalties provide proposed forms. On December 18, 2001, plaintiff provided the requested information. Having considered the moving and explanatory papers, as well as the Court's file, the Court issues the follow order.
FACTUAL BACKGROUND
Defendant Jupiter Logistics is a California corporation engaged in trucking operations with principal executive office at property it owns at 5490 E. Heaton Avenue, Fresno, Cal. 93727 "Heaton Property"), which is more particularly described as follows:
Lot 29 of Tract No. 1788, Walnut Forest, in the County of Fresno, State of California, according to the map thereof recorded in Book 20 at Page 49 of Plats, Fresno County Records.
Defendant Karen Fries is Jupiter Logistic's president, chief executive officer and director.
In 1996, 1997 and 1998, the Internal Revenue Service (IRS) made tax assessments against Jupiter Logistic for civil penalties under 26 U.S.C. § 6721 for the period ending December 31, 1995 and unpaid FICA tax liabilities for quarterly periods ending December 31, 1995 and September 30, is The IRS also issued notices of assessments and demand for payment for the assessments. Jupiter Logistics did not pay the assessments or liabilities. Plaintiff claims that as of October 31, 2001, Jupiter Logistics is indebted to the United States in the amount of $357,233.90 plus interest and penalties
The United States alleges three counts in its complaint. In the first count, the United States sees to reduce to judgment certain unpaid employment tax assessments against defendant Jupiter Logistic In the second count, the United States seeks to have a deed of trust encumbering the Heaton Property ("Matthews deed of trust") declared invalid and to have it voided as a fraudulent conveyance. Matthews deed of trust was executed by defendant Karen Fries, as president of Jupiter Logistics, for benefit of defendant Mark Matthews, purportedly to secure payment of $150,000 in accordance with promissory note, and was recorded before the federal tax liens. In the third count, the United States seeks to foreclose the related tax liens on the Heaton Property.
Defendant Commonwealth Land Title Company was the trustee on the Matthews deed of Matthews has since reconveyed the interest in the Heaton Property back to Jupiter Logistics and not claim any interest in the Heaton Property. On August 6, 2001 and October 10, 2001, the Court dismissed Matthews and Commonwealth, respectively, from the action. Jupiter Logistics and Fries are the only remaining defendants. The United States, however, is not seeking judgment against Karen Fries personally in the action. She is named as a defendant solely to adjudicate her interest in Heaton Property. (Plaintiffs Points Authorities p. 2.)
ANALYSIS DISCUSSION
A. Burden of Proof
Initially, it is the moving party's burden to establish that there is "no genuine issue of mate fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Bri Airways Board v. Boeing Co., 585 F.2d 946, 951 (9th Cir. 1978).
The court cannot grant the motion merely because a party has failed to oppose the motion failed to submit a statement of disputed facts. Henry v. Gill Industries, Inc., 983 F.2d 943, 950 (9th 1993). Rule 56(e) requires the party against whom the motion is made to "set for specific facts showed that there is a genuine issue for trial." Absent such a showing, a properly supported motion for summary judgment may be granted if the court finds it appropriate. Nelson, Robbins, et al v. Louisiana Hydro 854 F.2d 1538, 1545 (9th Cir. 1988). The moving party still has to meet its burden of proof.
When plaintiff is the moving party, plaintiffs burden of proof is: (1) to demonstrate affirmation (by admissible evidence) that there is no genuine issue of material fact as to each element of' its for relief; entitling it to judgment as a matter of law; and (2) to demonstrate the lack of any genuine is of material fact as to affirmative defenses asserted by the defendant. Schwarzer, Tashima Wagsta Cal Prac. Guide: Fed Civ. Pro. Before Trial, § 14:140 (the Rutter Group 2000) and cases cited there see also Wright, Miller Kane, Federal Practice and Procedure, § 2734, p. 256. Here, the defendant has not opposed the motion. "If the adverse party does not so respond, summary judgment appropriate, shall be entered against the adverse party." Fed.R.Civ.P. 56(e). Accordingly, sumn judgment will be granted "if appropriate."
B. Judgment for the Assessed Penalty and Employment Tax Liabilities
In an action to collect taxes, the government bears the initial burden of proof Palmer v. United States, 116 F.3d 1309, 1312 (9th Cir. 1997). The Commissioner's deficiency determinations assessments for unpaid taxes are normally entitled to a presumption of correctness so long as they supported by a minimal factual foundation. Id. "It is settled in this circuit that Certificate: Assessments and Payments are probative evidence in and of themselves and, in the absence of evidence, are sufficient to establish that assessments were properly made." Koff v. United States, 3 F 1297, 1298 (9th Cir. 1993). The presumption shifts the burden of proof to the taxpayers to show that determination is incorrect. Id. The government's burden normally is met if it can produce an official certificate of assessment, such as the Form 4340, because "a presumption of correctness attaches to assessment, and its introduction establishes a prima facie case." United States v. Crisp, 190 F.R.D. (E.D.Cal. 1999). "So long as the assessment is supported by a minimal factual foundation, [the] need not present any additional evidence; the risk of uncertainty falls on the taxpayer." Fior D'Ita Inc. v. United States, 242 F.3d 844, 847 (9th Cir. 2001).
In support of its motion, the United States has introduced Form 4340 chronicling assessm against Jupiter for the civil penalty under 26 U.S.C. § 6721 (Exh. D-1) and for PICA tax liabilities (For 941 liabilities). (Pl. Exh. D-2 to D-9). Since the government has introduced an official certificate assessment for each assessment and such a document establishes a prima facie case, the government met its burden of proof There is no contrary evidence indicating the assessed penalty or tax liabili are invalid. Accordingly, judgment should be entered on their validity.
The United States has asked for judgment against Jupiter Logistics in the amount of $357,233 which is the cumulative amount shown on the certificates of assessments, as well as "interest, penalties and other statutory additions from October 31, 2001." (Plaintiffs Points Authorities p. 8:1-3.)
Pursuant to 26 U.S.C. § 6601(a), the Internal Revenue Code imposes interest on any amour tax that is not paid when due, starting from the last date prescribed for payment of the tax until the is fully paid. The applicable rate is provided in 26 U.S.C. § 6621. See also 26 U.S.C. § 6622 (inter compounded daily). The interest imposed is assessed, collected and paid in the same manner as underlying tax. 26 U.S.C. § 6601(e)(1). Further, even after the unpaid penalty and tax liabilities reduced to a judgment, the interest rate provided under Section 6621 continues to apply, instead at rate provided under 28 U.S.C. § 1961(a). See 28 U.S.C. § 1961(c)(1) (the applicable interest rate on civil judgment with respect to in any internal revenue tax is that provided under 26 U.S.C. § 6621.
In addition to interest, the Internal Revenue Code imposes penalties and additions to tax, failure to satisfy certain filing or payment requirements. The applicable penalties and additions to in this case are: 26 U.S.C. § 6721(a) (penalty for failure to file correct information returns); 26 U.S § 6721(e) (penalty for intentional disregard of filing requirement under 26 U.S.C. § 6721(a)); 26 U.S § 6651(a) (late filing penalty); 26 U.S.C. § 6656(a) (federal tax deposit penalty); and 26 U.S.C. § 665 (failure to pay tax penalty). Pursuant to these statutory authorities, the United Sates is therefore entitle to interest and penalties on the unpaid penalty and tax liabilities.
C. Valid Tax lien
Pursuant to 26 U.S.C. § 6321, the United States has a valid lien for taxes:
If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person. 26 U.S.C. § 6321.
Under 26 U.S.C. § 6321, a federal tax lien may attach to "all property and rights to property" belong to a taxpayer m default. See Drye v. United States, 528 U.S. 49 at 58-60, 120 S.Ct. 474 (1999) (hold that a federal tax lien properly attached to a state-law-created right to property that had pecuniary vat That lien attaches to all real or personal property belonging to the delinquent taxpayer and remained attached to that property until either the tax is paid or the lien becomes unenforceable because of ' of time, i.e., upon expiration of the federal statute of limitations for collection of the underlying See 26 U.S.C. § 6322; United States v. Donahue Indus., Inc., 905 F.2d 1325, 1330 (9th Cir. 1990).
The Unites States has presented evidence that despite notices and demands for payment, penalty and tax liabilities have not been paid by Jupiter Logistics. Consequently, federal tax liens are on Jupiter Logistic's property in the amount of Jupiter Logistic's assessed penalty and tax liabilities
C. Foreclosing the Tax Lien
The United States asks that the Court order that the federal tax liens on the Heaton Property foreclosed and the property sold to satisfy Jupiter Logistics' unpaid penalty and tax liabilities. 26 U.S. § 7403(c) states:
The 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. If the property is sold to satisfy a first lien held by the United States, the United States may bid at the sale such sum, not exceeding the amount of such lien with expenses of sale, as the Secretary directs.
The Code provides for two methods by which the government may enforce its lien. It can bring foreclosure action pursuant to 26 U.S.C. § 7403, as it has in this case, or it can simply levy on property pursuant to § 6331(a). United States v. Hemmen, 51 F.3d 883, 887 (9th Cir. 1995). "Once lien has been established, the statute empowers the district court to subject the whole of the property which the delinquent taxpayer has an interest to a forced sale. The power is not limited to the sale only the delinquent taxpayer's interest." United States v. Overman, 424 F.2d 1142, 1146 (9th Cir.) (district court may subject the interests on persons other than the taxpayer to an involuntary converts during the course of enforcing the Government's lien on the delinquent taxpayer's interest in the s: property. The owners other than the taxpayer, however, are entitled to just compensation from proceeds of the sale for that "taking.").
All parties who claim an interest in the property have been named in the action. Matthew reconveyed any interest he held and no other party has a superior interest in the Heaton property Judgment should be entered on the tax liens ordering the tax liens on the Heaton Property be foreclose and that the property be sold to satisfy Jupiter Logistic's assessed penalty and tax liabilities.
D. Karen Fries
The United States does not seek a personal judgment against Karen Fries. The United States: that the Court find that Karen Fries has no right, title or interest in the Heaton Property and she has otherwise asserted any other interest than an interest on behalf of Jupiter Logistics. While the United States asks to dismiss Karen Fries, the Court construes the motion as a motion for summary judgment
As evidence to support this position, the United States submits its complaint (Exh. A) and K; Fries' answer (Exh. B). The pertinent paragraphs of the complaint state:
"6. . . . Jupiter Logistics owns the Heaton Property under a grant deed.
"7. Upon information and belief; Karen Fries is Jupiter Logistics's president, chief executive officer, director, and designated agent for service of process. Upon information and belief; she owns all of Jupiter Logistics's issued shares. She currently resides at the Heaton Property and may claim an interest in it." (Exh. A, Complaint pan. 7) (emphasis added).
Karen Fries and Jupiter Logistics admit in their Answer that: (1) Fries is Jupiter Logistics' president chief executive officer, director and designated agent for service of process; (2) that Fries owns all Jupiter Logistics' issued shares; and (3) Fries currently resides at the Heaton Property. (Exh.B, Ans para. 7). Significantly, Fries admits in her answer that Jupiter Logistics acquired ownership of Heaton Property by a grant deed dated July 19, 1995 and remains its current and sole owner. (Ext Complaint para. 16 and Exh. B, Answer para. 16.)
Karen Fries has not opposed this motion. "When a motion for summary judgment is made supported as provided in this rule, an adverse party may not rest upon the mere allegations or den of the adverse party's pleadings . . . (T)he adverse party's response . . . must set forth specific f showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Karen Fries has not set forth facts that she has a right, title or interest in the Heaton Property.
Accordingly, the Court finds that Defendant Karen Fries has no right, title or interest in Heaton Property.
CONCLUSION
For the reasons stated above, the United States' motion for summary judgment is GRAM in full as follows:
A. Judgment should be entered in favor of the United States and against Jupiter Logis for unpaid civil penalties under 26 U.S.C. § 6721 and accrued interest for the period ending Decent 31, 1995 and unpaid employment tax (Form 941) liabilities and accrued interest and related penal "for the quarterly periods ending December 31, 1995 through September 30, 1997 in the amount $357,233.90, plus interest, penalties, and other statutory additions from October 31, 2001 pursuax 26 U.S.C. § 6601, 6621, and 6622 and 28 U.S.C. § 1961(c) until paid;
B. Judgment should be entered declaring that the United States has valid and subsisting liens securing the above liabilities against all property and rights to property belonging to Jupiter Logistics, including its interest in the Heaton Property; and
C. Judgment should be entered ordering that the above federal tax liens against the Her Property be foreclosed and that the property be sold to satisfy Jupiter Logistics's outstanding liability described above.
In addition, the United States' motion for summary judgment as to defendant Karen Fries is a GRANTED. The Court finds that Defendant Karen Fries has no right, title, or interest in the flea Property.
Following the entry of the judgment, plaintiff is directed to submit appropriate property orders/forms to effectuate the foreclosure,
IT IS SO ORDERED.