Free Motion for Default Judgment - District Court of California - California

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SCOTT N. SCHOOLS (SCSBN. 9990) United States Attorney 2 THOMAS MOORE (ASBN 4305-T78O) Assistant United States Attorney 3 10th Floor Federal Building 450 Golden Gate Avenue, Box 36055 4 San Francisco, California 94102 Telephone: (415) 436-7017 5 Attorneys for United States of America 6 IN THE UNITED STATES DISTRICT COURT FOR THE 7 NORTHERN DISTRICT OF CALIFORNIA 8 SAN FRANCISCO DIVISION 9 UNITED STATES OF AMERICA, ) Case No. C-07-5007-WHA 10 ) Plaintiff, ) NOTICE OF MOTION FOR DEFAULT 11 ) JUDGMENT AND DECREE OF SALE, v. ) MOTION FOR DEFAULT JUDGMENT 12 ) AND DECREE OF SALE AND DANA K. OLSON, et al., ) MEMORANDUM IN SUPPORT OF 13 ) MOTION FOR DEFAULT JUDGMENT Defendants. ) AND DECREE OF SALE 14 ) ) DATE: January 31, 2008 15 ) TIME: 8:00 a.m. ____________________________________) Place: Courtroom 9, 19th 16 1 17 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: 18 PLEASE TAKE NOTICE that on January 31, 2008, at 8:00 a.m., before the Honorable William

19 Alsup, United States District Court Judge, United States District Court, 19rd Floor, San Francisco, 20 California, the plaintiff, United States of America, through its undersigned counsel, will move for 21 default judgment and decree of sale pursuant to Rule 55 of the Federal Rules of Civil Procedure. 22 The United States, pursuant to Federal Rule of Civil Procedure 55, hereby moves this Court for

23 default judgment and a decree of sale in this matter. In support of this motion, the United States refers 24 the Court to the attached Memorandum of Points and Authorities and all the pleadings on file in this 25 matter. 26 27 ISSUE Whether the court should enter default judgment against defendant Dana K. Olson and order the

28 sale of her real property towards satisfaction of her federal tax liabilities and the other lien holders.

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STATEMENT OF FACTS The United States commenced this action against defendant, Dana K. Olson, by filing a

3 complaint to reduce tax assessments to judgment. A summons on the complaint was issued by the 4 clerk of the court. Defendant, Dana K. Olson, was served with copies of the summons and the United 5 States of America's complaint. Defendant Dana K. Olson failed to answer or otherwise defend against 6 the suit. The United States moved for the entry of default, which was entered on December 5, 2007. 7 The Internal Revenue Service made tax assessments against defendant. The defendant has

8 failed to pay such taxes in the amount of $209,230.79, plus interest and penalties which have continued 9 to accrue from September 30, 2007 and will continue to accrue until paid. See Complaint at paragraphs 10 14-15 and the Declaration of Thomas Moore at ¶3. 11 The real property which is the focus of this action is owned by Dana K. Olson and is located at

12 1242 Alabama Street, San Francisco, California. On July 31, 1997 and July 24, 2007, the IRS filed 13 Noticed of Federal Tax Lien for the 1995 taxes against the property of Dana K. Olson with the San 14 Francisco County Recorder's Office. See Exhibits 10-11. On March 18, 1998, the IRS filed a Notice of 15 Federal Tax Lien for the 1996 taxes against the property of Dana K. Olson with the San Francisco 16 County Recorder's Office. See Exhibit 12. On January 8, 2001, the IRS filed a Notice of Federal Tax 17 Lien for the 1997 taxes against the property of Dana K. Olson with the San Francisco County 18 Recorder's Office. See Exhibit 13. On May 4, 2007, the IRS filed a Notice of Federal Tax Lien for the 19 1998, 2000, 2001, and 2002 taxes against the property of Dana K. Olson with the San Francisco 20 County Recorder's Office. See Exhibit 14. On May 29, 2001, the IRS filed a Notice of Federal Tax 21 Lien for the 1995 section 7421 penalty against the property of Dana K. Olson with the San Francisco 22 County Recorder's Office. See Exhibit 15. 23 24 25 26 27 28 A. ARGUMENT I. THE UNITED STATES IS ENTITLED TO DEFAULT JUDGMENT AGAINST DANA K. OLSON AND A DECREE FOR THE SALE OF HER REAL PROPERTY Introduction.

This is an action to reduce the assessments made against Dana K. Olson for unpaid federal

N O T. O F M O T. FO R D E FAU LT JUD G . & D E C R E E O F SA LE , M O T. FO R D E F. JUD G . & D E C R E E O F SA LE & M E M O . IN SU P P O R T O F M O T . FO R D E F. JU D G . & D EC R EE OF SALE (C -07-5007-W H A )

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income taxes, statutory additions and interest for the taxable years above described to judgment. Such

2 an action is explicitly authorized under Sections 7401 and 7402 of the Internal Revenue Code of 1986 3 (26 U.S.C.). Caleshu v. United States, 570 F.2d 711, 713 (8th Cir. 1978). 4 A court proceeding to obtain a judgment for unpaid tax assessments must be instituted within

5 ten years after assessment, or prior to the expiration of any period for collection agreed upon in writing 6 by the taxpayer and the Internal Revenue Service. 26 U.S.C. § 6502(a)(1). As reflected on the 7 certificates of assessments and payments attached to the Declaration of Thomas Moore as Exhibits 1-9, 8 the tax assessments in this case occurred on the dates described in paragraph 14 of the complaint, all of 9 which occurred within ten years from the date this suit was brought against Dana K. Olson. 10 Accordingly, this action was timely filed for all taxable years in suit. 11 12 B. The Court Should Enter Default Judgment Against Dana K. Olson

Default was entered against defendant Dana K. Olson on December 4, 2007. Despite the entry

13 of default against her, defendant Olson has yet to defend this suit. Thus, this court should enter default 14 judgment against her and order the sale of her real property to carry out such judgment. Rule 55(b)(2) 15 of the Federal Rules of Civil Procedure provides that in cases such as this where "to enter judgment or 16 to carry it into effect, it is necessary to take an account or to determine the amount of damages or to 17 establish the truth of any averment by evidence or to make an investigation of any other matter, the 18 court may conduct such hearing or order such references as it deems necessary and proper . . .." 19 Accordingly, this court should hold a hearing to determine the extent of defendant Olson's tax debt and 20 her interest in the real property which this court should order sold to satisfy her tax debts. 21 22 23 This suit against defendant Olson is based upon the assessments made against her for unpaid C. The assessments against defendant Olson are established by the certificates of assessments and payments filed herein.

24 federal income taxes, statutory additions, and interest for the taxable years 1995, 1996, 1997, 1998, 25 2000, 2001, 2002 and for Section 6721 penalties for the 1995 and 1998 tax years as reflected on the 26 Certificate of Assessments and Payments filed herein (Exhibits 1 through 9). 27 A certificate of assessments and payments is admissible into evidence pursuant to Rules 803(8)

28 and 902(4) of the Federal Rules of Evidence and is the proper means of establishing the facts of the

N O T. O F M O T. FO R D E FAU LT JUD G . & D E C R E E O F SA LE , M O T. FO R D E F. JUD G . & D E C R E E O F SA LE & M E M O . IN SU P P O R T O F M O T . FO R D E F. JU D G . & D EC R EE OF SALE (C -07-5007-W H A )

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administrative assessment, notice, and demand for payment. United States v. Lorsen Electric Co.,

2 480 F.2d 554, 555-556 (2d Cir. 1973); United States v. Strebler, 313 F.2d 402, 403-404 (8th Cir. 3 1963); Holland v. United States, 209 F.2d 516, 520-521 (10th Cir.), aff'd, 348 U.S. 121 (1954); 4 Frick v. Phillips, 518 F. Supp. 1329, 1331 (E.D. Wis. 1981). See also, Welch v. Helvering, 290 U.S. 5 111, 115 (1933). An assessment for unpaid federal taxes, when properly certified, is presumptively 6 correct evidence of a taxpayer's liability and satisfies the Government's burden of proof so that the 7 United States may rest its case. United States v. Janis, 428 U.S. 433, 440-441 (1976); Anderson v. 8 United States, 561 F.2d 162, 165 (8th Cir. 1977). See also Welch v. Helvering, 290 U.S. 111 (1933); 9 Foster v. Commissioner, 756 F.2d 1430, 1439 (9th Cir. 1985); Rockwell v. Commissioner, 512 F.2d 10 882, 885 (9th Cir.), cert. denied, 423 U.S. 1015 (1975). The defendant taxpayer must then prove that 11 the assessment is incorrect. 12 In the present case, the certificate of assessments and payments for defendant Olson with

13 respect to each of the tax years (Exhibits 1 through 9) establish that the assessments were made, that 14 notice and demand was made on defendant Olson for her liabilities, and that she has failed to pay those 15 liabilities. The United States thus has established its entitlement to default judgment. 16 17 18 19 II. THE UNITED STATES' TAX LIENS ATTACHED TO THE SUBJECT REAL PROPERTY WHEN ITS LIENS WERE RECORDED AGAINST DANA K. OLSON Under Section 6321 of the Internal Revenue Code of 1986 (26U.S.C.), the United States has a

20 lien for unpaid taxes on all property and rights to property of the taxpayer. This lien arises at the time 21 the assessment is made and continues until the liability for the amount so assessed (or a judgment 22 against the taxpayer arising out of such liability,) is satisfied or becomes unenforceable by reason of 23 lapse of time. Code Section 6322. It attaches to all property or property rights the taxpayer then holds 24 or subsequently acquires. Glass City Bank v. United States, 326 U.S. 265 (1945); Bank of America 25 National Trust & Savings Assn. v. Mamakos, 509 F.2d 1217, 1219 (9th Cir. 1975); J.D. Court, Inc. 26 v. United States, 712 F.2d 258, 260-261 (7th Cir. 1983), cert. denied, 466 U.S. 927 (1984); Treasury 27 Regulations on Procedure and Administration (1954 Code), Sec. 301.6321-1 (26 C.F.R.). 28 ///

N O T. O F M O T. FO R D E FAU LT JUD G . & D E C R E E O F SA LE , M O T. FO R D E F. JUD G . & D E C R E E O F SA LE & M E M O . IN SU P P O R T O F M O T . FO R D E F. JU D G . & D EC R EE OF SALE (C -07-5007-W H A )

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In the present lawsuit, the United States' tax liens arose on the dates of the assessments

2 described in paragraph 14 of the complaint and were perfected against other creditors on July 31, 3 1997, March 18, 1998, January 8, 2001, May 4, 2007, and May 29, 2001,when Notices of Federal Tax 4 Lien against Dana K. Olson were recorded with the San Francisco County Recorder's Office in San 5 Francisco, California. 6 The property Alabama Street real property has at all pertinent times been property belonging to

7 Dana K. Olson, and only to her, for purposes of the tax lien provisions of the Internal Revenue 8 Code. Accordingly, the federal tax liens at issue attached to the property when the liens arose, and the 9 tax liens have continued, to the present and without interruption, to attach to such property. 10 for tax lien purposes. United States v. Bank of Celina, 721 F.2d 163, 167 (6th Cir. 1983); United 11 States v. Cuti, 395 F.Supp. 1064 (E.D. N.Y. 1975). 12 13 14 15 III. THE COURT SHOULD ORDER THE SALE OF THE SUBJECT REAL PROPERTY TO PAY DANA OLSON TAX DEBTS AND THE DEBTS OWED TO THE OTHER LIEN-HOLDERS Foreclosure and judicial sale is one of the collection tools of the IRS and its purpose is to

16 ensure the prompt and certain enforcement of the tax laws. See United States v. Rodgers, 461 U.S. 17 677, 683 (1983). The United States' right to seek a forced sale of the property does not arise out of its 18 privileges as an ordinary creditor, but out of 26 U.S.C. § 7403. Rodgers, 461 U.S. at 697. 19 20 21 22 Rodgers, 461 U.S. at 697. 23 The provisions of Section 7403 are broad and profound. Rodgers, 461 U.S. at 699. One of the Moreover, the use of the power granted by § 7403 is not the act of an ordinary creditor, but the exercise of a sovereign prerogative, incident to the power to enforce the obligations of the delinquent taxpayer himself, and ultimately grounded in the constitutional mandate to "lay and collect taxes."

24 advantages of Section 7403 is that it gives the United States the opportunity to seek the highest return 25 possible on the forced sale of property interests liable for the payment of taxes. Rodgers, 461 U.S. at 26 699. Section 7403 does not require courts to foreclose tax liens in all cases. The Supreme Court, 27 however, has emphasized that: 28

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[T]he limited discretion accorded by § 7403 should be exercised rigorously and sparingly, keeping in mind the Government's paramount interest in prompt and certain collection of delinquent taxes.

3 Rodgers, 461 U.S. at 711. 4 Because defendant Dana K. Olson has failed to defend this suit and because she has failed to

5 pay her tax debts, the court should order the sale of her real property pursuant to the 28 U.S.C. Section 6 2001(a) which empowers the Court to set the terms and conditions of sale of real property. The United 7 States requests that the Court enter the proposed Decree Of Sale, submitted with this motion, to ensure 8 that the above described real property is sold in an orderly manner and preserved pending confirmation 9 of the sale and the delivery of the deed to the ultimate purchaser(s). The proposed Decree Of Sale 10 provides in general that 1) notice of sale be published in accordance with 28 U.S.C. Sections 2001and 11 2002) the Marshal or his representative or an Internal Revenue Service Property Appraisal and 12 Liquidation Specialist ("PALS"), shall have access to the real property for purposes of showing it for 13 sale and to preserve it pending delivery to the ultimate purchaser; 3) bidders demonstrate an ability to 14 make a minimum deposit, and if successful, that they pay the remainder of the purchase price within a 15 set period of time, and if they fail to pay the remainder of the purchase price they shall be liable to the 16 United States pursuant to 28 U.S.C. §§ 3001(b) and 3203(g)(2)(C); and 4) that the sale proceeds be 17 distributed to the lien holders after the sale is confirmed and in accordance with the Court's Order 18 confirming the sale and 28 U.S.C. Section 1921(c). 19 20 CONCLUSION Based on the foregoing reasons, the plaintiff, the United States of America, respectfully

21 requests that this Court enter default judgment against Dana K. Olson and in favor of the United States 22 and order the sale of defendant Olson's real property for the payment of her tax debts. 23 24 25 26 27 28 /s/ Thomas Moore THOMAS MOORE Assistant United States Attorney Tax Division Respectfully submitted, SCOTT N. SCHOOLS United States Attorney

N O T. O F M O T. FO R D E FAU LT JUD G . & D E C R E E O F SA LE , M O T. FO R D E F. JUD G . & D E C R E E O F SA LE & M E M O . IN SU P P O R T O F M O T . FO R D E F. JU D G . & D EC R EE OF SALE (C -07-5007-W H A )

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CERTIFICATE OF SERVICE BY MAIL I, KATHY P. TAT declare: That I am a citizen of the United States and resident or employed in San Francisco County,

4 California; that my business address is Office of United States Attorney, 450 Golden Gate Avenue, 5 Box 36055, San Francisco, California 94102; that I am over the age of eighteen years, and am not a 6 party to the above-entitled action; 7 That I am employed by the United States Attorney for the Northern District of California, who

8 is a member of the Bar of the United States District Court for the Northern District of California, at 9 whose direction the service by mail described in this Certificate was made; that on December 26, 2007, 10 I deposited in the United States mails in the above-entitled action, in an envelope bearing the requisite 11 postage, a copy of: 12 NOTICE OF MOTION FOR DEFAULT JUDGMENT AND DECREE OF SALE, MOTION FOR DEFAULT JUDGMENT AND DECREE OF SALE AND MEMORANDUM IN SUPPORT 13 OF MOTION FOR DEFAULT JUDGMENT AND DECREE OF SALE; DECLARATION OF THOMAS MOORE IN SUPPORT OF MOTION FOR DEFAULT JUDGMENT; and [proposed] 14 DEFAULT JUDGMENT AND DECREE OF SALE 15 addressed to: 16 DANA K. OLSON 1242 ALABAMA STREET 17 SAN FRANCISCO, CA 94110 18 JOHN BARRETT, JR. BARRETT BLOCK PARTNERS, LP 19 1534 PLAZA LANE #320 BURLINGAME, CA. 94010 20 POWELL POOL 21 POWELL & POOL 7522 N COLONIAL AVE #100 22 FRESNO, CA 93711 23 at their last known address, at which place there is service by United States mail. 24 I declare under penalty of perjury under the laws of the States of California that the foregoing is

25 true and correct, executed on December 26, 2007, at San Francisco, California. 26 27 28 /s/ Kathy Tat KATHY P. TAT

N O T. O F M O T. FO R D E FAU LT JUD G . & D E C R E E O F SA LE , M O T. FO R D E F. JUD G . & D E C R E E O F SA LE & M E M O . IN SU P P O R T O F M O T . FO R D E F. JU D G . & D EC R EE OF SALE (C -07-5007-W H A )

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