United States of America v. Porath et al

Filing 18

FINDINGS and RECOMMENDATIONS signed by Magistrate Judge Kendall J. Newman on 3/24/15 RECOMMENDING that the 13 Motion for Default Judgment be granted and that judgment be entered in favor of the United States. Referred to Judge Troy L. Nunley. Objections due within 14 days. (Manzer, C)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA

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UNITED STATES OF AMERICA,

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Plaintiff,
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v.
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RONALD B. PORATH and
MARZELLA J. PORATH,

Case No. 2:13-cv-02436-TLN-KJN
FINDINGS AND
RECOMMENDATIONS

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Defendants.
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On November 22, 2013, the United States commenced this action to (1) reduce to

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judgment outstanding unpaid assessments of federal income taxes (Form 1040) against

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defendants Ronald B. Porath and Marzella J. Porath for the tax years 2006, 2007, and 2008; (2)

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foreclose federal tax liens on real property located in El Dorado County, California; and (3)

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obtain a sale of such property. (ECF No. 1.)

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Defendants were properly served by publication on May 11, 2014 in accordance with this

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Court’s order dated April 8, 2014 (ECF No. 8), and an affidavit of publication and proof and

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statement of publication were filed with the Court on May 19, 2014. (ECF No. 9.) Upon the
FINDINGS AND RECOMMENDATIONS GRANTING
UNITED STATES’ MOTION FOR
DEFAULT JUDGMENT
(Case No. 2:13-cv-02436-TLN-KJN)

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U.S. DEPARTMENT OF JUSTICE
Tax Division, Western Region
P.O. Box 683
Washington, D.C. 20044
Telephone: [phone]

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United States’ request, the Clerk of Court then entered default against defendants on September

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22, 2014. (ECF No. 12.)

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The instant motion for default judgment followed on January 13, 2015, with a hearing

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noticed for February 19, 2015. (ECF No. 13.) After defendants failed to file an opposition to the

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motion in accordance with Local Rule 230(c), the motion was submitted on the record and

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written briefing without oral argument. (ECF No. 16.)

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Having carefully considered the briefing and documentation in support of the motion for
default judgment, as well as the applicable law, THE COURT FINDS AS FOLLOWS:

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Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party

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against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend

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against the action. See Fed. R. Civ. P. 55(a). However, “[a] defendant’s default does not

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automatically entitle the plaintiff to a court-ordered judgment.” PepsiCo, Inc. v. Cal. Sec. Cans,

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238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25

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(9th Cir. 1986)). Instead, the decision to grant or deny an application for default judgment lies

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within the district court’s sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir.

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1980).

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In making that determination, the court considers the following factors: “(1) the

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possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the

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sufficiency of the complaint, (4) the sum of money at stake in the action[,] (5) the possibility of a

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dispute concerning material facts[,] (6) whether the default was due to excusable neglect, and (7)

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the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the

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merits.” Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). As a general rule, once

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default is entered, well-pleaded factual allegations in the operative complaint are taken as true,
FINDINGS AND RECOMMENDATIONS GRANTING
UNITED STATES’ MOTION FOR
DEFAULT JUDGMENT
(Case No. 2:13-cv-02436-TLN-KJN)

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U.S. DEPARTMENT OF JUSTICE
Tax Division, Western Region
P.O. Box 683
Washington, D.C. 20044
Telephone: [phone]

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except for those allegations relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d

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915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. Group, 559 F.2d 557, 560

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(9th Cir. 1977) (per curiam)); accord Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th

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Cir. 2002).

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In the present case, the well-pleaded factual allegations of the complaint (ECF No. 1),

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together with the Declaration of Tim W. Lyons (a Revenue Officer with the IRS) and its

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corresponding exhibits (ECF No. 14), support the claims pled in the complaint and demonstrate

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that the United States is entitled to the relief requested in its complaint and motion for default

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judgment. In particular, the United States has shown that (a) it is entitled to reduce to judgment

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its tax assessments, including applicable interest and penalties, against defendants for the tax

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years of 2006, 2007, and 2008 in the amounts detailed in the Certificates of Assessment and the

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Lyons Declaration; (b) that defendants have property interests in certain real property located at

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2278 Rainbow Road, #27, Meyers, California (the “Subject Property”); (c) that the United States

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has valid federal tax liens against the Subject Property based on the above-mentioned tax

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assessments for 2006-2008 to be reduced to judgment, as well as a June 27, 2013 amended final

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judgment that was entered in favor of the United States and against defendants in the United

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States District Court for the District of New Mexico, Case No. 1:11-cv-00901, ECF No. 82; and

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(d) that the United States is entitled to foreclose its federal tax liens against the Subject Property.

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Therefore, the United States’ claims have merit and are sufficiently pled.

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Furthermore, the other Eitel factors do not preclude the entry of default judgment in this

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case. The United States would plainly be prejudiced if a default judgment is not entered, because

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it would have no other recourse against defendants with regards to their federal tax liabilities.

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Additionally, the sums of money at stake, while significant, merely reflect defendants’ accurately
FINDINGS AND RECOMMENDATIONS GRANTING
UNITED STATES’ MOTION FOR
DEFAULT JUDGMENT
(Case No. 2:13-cv-02436-TLN-KJN)

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U.S. DEPARTMENT OF JUSTICE
Tax Division, Western Region
P.O. Box 683
Washington, D.C. 20044
Telephone: [phone]

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computed federal tax liabilities. Also, given defendants’ failure to appear and the Clerk’s entry

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of default, there is little possibility of a dispute concerning material facts, and there is no

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indication in the record that defendants’ default was due to excusable neglect. Finally, the policy

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favoring decisions on the merits does not by itself preclude entry of default judgment, and is

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outweighed by the other Eitel factors.

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Accordingly, for the reasons outlined above, IT IS HEREBY RECOMMENDED THAT:

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A.

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The United States’ motion for default judgment against defendants Ronald B.

Porath and Marzella J. Porath (ECF No. 13) be GRANTED.
B.

Judgment be entered in favor of the United States and against Ronald B. Porath in

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the amount of $16,572.06, plus interest and other statutory additions from January 9, 2015,

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which represents the unpaid balance of the federal income tax liabilities assessed against Ronald

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B. Porath for the tax years 2006, 2007, and 2008, together with accrued but unassessed interest

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and other statutory additions, together with statutory interest and other additions accruing

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thereafter pursuant to 26 U.S.C. §§ 6601, 6621 & 6622, and 28 U.S.C. § 1961(c) until paid.

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C.

Judgment be entered in favor of the United States and against Marzella J. Porath

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in the amount of $17,951.25, plus interest and other statutory additions from January 9, 2015,

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which represents the unpaid balance of the federal income tax liabilities assessed against

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Marzella J. Porath for the tax years 2006, 2007, and 2008, together with accrued but unassessed

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interest and other statutory additions, together with statutory interest and other additions accruing

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thereafter pursuant to 26 U.S.C. §§ 6601, 6621 & 6622, and 28 U.S.C. § 1961(c) until paid.

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D.

It be declared that the United States has valid and subsisting federal tax liens on

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all property and rights to property of Ronald B. Porath and Marzella J. Porath, including the

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Subject Property.
FINDINGS AND RECOMMENDATIONS GRANTING
UNITED STATES’ MOTION FOR
DEFAULT JUDGMENT
(Case No. 2:13-cv-02436-TLN-KJN)

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U.S. DEPARTMENT OF JUSTICE
Tax Division, Western Region
P.O. Box 683
Washington, D.C. 20044
Telephone: [phone]

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E.

The United States’ tax liens encumbering the Subject Property be foreclosed and

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that the Subject Property be sold pursuant to 26 U.S.C. § 7403 and 28 U.S.C. § 2001, and that the

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net proceeds be applied toward the satisfaction of the federal tax liens.

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F.

The United States be required to submit an Order of Sale of the Subject Property

for Court approval.

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G.

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These findings and recommendations are submitted to the United States District Judge

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assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen (14)

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days after being served with these findings and recommendations, any party may file written

The Clerk of Court be directed to close this case.

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objections with the court and serve a copy on all parties. Such a document should be captioned

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“Objections to Magistrate Judge’s Findings and Recommendations.” Any reply to the objections

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shall be served on all parties and filed with the court within fourteen (14) days after service of

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the objections. The parties are advised that failure to file objections within the specified time

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may waive the right to appeal the District Court’s order. Turner v. Duncan, 158 F.3d 449, 455

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(9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153, 1156-57 (9th Cir. 1991).

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IT IS SO RECOMMENDED.
Dated: March 24, 2015

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FINDINGS AND RECOMMENDATIONS GRANTING
UNITED STATES’ MOTION FOR
DEFAULT JUDGMENT
(Case No. 2:13-cv-02436-TLN-KJN)

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U.S. DEPARTMENT OF JUSTICE
Tax Division, Western Region
P.O. Box 683
Washington, D.C. 20044
Telephone: [phone]