United States of America v. Winland et al

Filing 41

ORDER denying with leave to renew Plaintiff's Motion for Default Judgment (Doc. 37 ). The Government will have up to and including September 5, 2017, to file a renewed motion that supplements the record with information and argument as to its claim that Sherry Jean Hetz, Newline Holdings, LLC, and DABTLC5, LLC, and the State of Florida have no interest in the Subject Property. Signed by Judge Sheri Polster Chappell on 8/16/2017. (CMC)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.

Case No: 2:17-cv-63-FtM-38CM

DOUGLAS WINLAND, SHERRY
JEAN HETZ, NEWLINE HOLDINGS,
LLC, LARRY HART, DABTLC5, LLC
and STATE OF FLORIDA,
Defendants.
/
OPINION AND ORDER1
This matter comes before the Court on the Government’s Motion for Default
Judgment filed on April 26, 2017. (Doc. 37). Defendants Douglas Winland, Sherry Jean
Hetz, Newline Holdings, LLC (“Newline”), DABTLC5, LLC (“DABTLC5”), and the State of
Florida have not filed a response and the time to do so has expired. Therefore, the Motion
is ripe for review.
BACKGROUND
This case arises from Winland’s failure to pay tax liabilities in the amount of

1

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$1,115,884.38,2 plus ongoing interest and penalties. (Doc. 37 at 9). The Government
alleges that, between September and November 2007, the IRS assessed tax liabilities
against Winland for the 1998 through 2003 and 2006 tax years (“2007 Tax
Assessments”). (Doc. 1 at ¶ 15). Later, on August 24, 2009, the IRS made additional tax
assessments against Winland for the 2004 and 2005 tax years (“2009 Tax
Assessments”). (Doc. 1 at ¶ 15). To collect on these obligations, the Department of the
Treasury sent Winland several notices and demands for payment. (Docs. 1 at ¶¶ 16,
41(f); 37-2 at 4-64). But Winland did not pay. (Doc. 1 at ¶ 17). Tax liens were thus
created based upon the unpaid 2007 and 2009 Tax Assessments (respectively, the “2007
Tax Lien” and the 2009 “Tax Lien”) (collectively the “Tax Liens”), and the Government
recorded them on October 2, 2008 and November 23, 2009 in Howard County, Maryland.
(Doc. 1 at ¶ 22). The Department of the Treasury also filed notices of federal tax liens in
Lee County Florida against Winland on May 7, 2014, and against Hetz as Winland’s
“transferee and/or nominee” with respect to a residence located at 3510 NW 47 th Street,
Cape Coral, Florida 33993 (the “Subject Property”) on December 9, 2014. (Doc. 1 at ¶¶
36-37).
At the time of the 2007 Tax Assessments, Winland was the sole owner of a
property located in Howard County, Maryland (the “Maryland Property”). (Doc. 1 at ¶ 21).
In January of 2008, Winland sold the Maryland Property for $188,246.43. (Doc. 1 at ¶
23). Then, on February 21, 2008, Winland deposited $180,246.43 into a joint checking
account he shared with Hetz, with whom he also shared a close romantic relationship.

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This amount represents the amount allegedly accrued as of the filing of the
Government’s Motion on April 10, 2017, rather than the $1,099,119.76 that the
Government alleged was due as of the filing of its Complaint. (Doc. 1 at ¶ 18).

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(Doc. 1 at ¶¶ 25, 41(b)). One week later, Hetz withdrew $150,000.00 from the shared
account and purchased a Certificate of Deposit (“CD”) in her name alone. (Doc. 1 at ¶
26). On October 10, 2008, the value of Hetz’s CD was $152,390.60. (Doc. 1 at ¶ 27).
But by December 10, 2008, the CD’s value had decreased to $102,994.80. (Doc. 1 at ¶
27).
On December 19, 2008, Hetz redeemed the CD and made two deposits into her
personal checking account: one for $103,073.92 and one for $40,000.00. (Doc. 1 at ¶
28). Days later, Hetz used $120,289.33 from her personal checking account to acquire
the Subject Property via a special warranty deed that listed both herself and Winland as
co-grantees.

(Doc. 1 at ¶¶ 5, 29-30).

The parties’ ownership interests were not

specifically enumerated. (Doc. 1 at ¶ 30).
Almost a year later, on August 24, 2009, the IRS issued the 2009 Tax Assessment.
(Doc. 1 at ¶ 33). Then, on October 29, 2009, Winland executed a quitclaim deed on the
Subject Property to Hetz in return for $10.00. (Doc. 1 at ¶ 34). Despite the transfer,
Winland continued to reside at the Subject Property until he was later incarcerated for an
unrelated series of events. (Doc. 1 at ¶ 44(g)).
Based on these allegations, the Government filed a four count Complaint against
Winland that requested that the outstanding tax liabilities be reduced to judgment, the
foreclosure of the Tax Liens on the Subject Property, that the Court set aside Winland’s
transactions leading up to and regarding the Subject Property as fraudulent, and for a
determination that Hetz holds the Subject Property as Winland’s nominee. (Doc. 1).
Given the possibility that other entities would claim an interest in the property, the

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Complaint also included Hetz, Hart, Newline, DABTLC5, and the State of Florida. (Doc.
1 at ¶¶ 7-11).
The Government then served Newline on February 13, 2017 (Doc. 13), Hart and
the State of Florida on February 21, 2017 (Doc. 14, 16), Hetz on February 23, 2017 (Doc.
15), DABTLC5 on March 2, 2017 (Doc. 17), and Winland on March 7, 2017 (Doc. 22).
Hart timely filed an Answer. (Doc. 18). On April 7, 2017, the Government filed a joint
stipulation with Hart as to the priority of interests and the distribution of proceeds from the
prospective sale of the Subject Property. (Doc. 32). Thereafter, when Winland, Hetz,
Newline, DABTLC5, and the State of Florida (collectively, the “Default Defendants”) failed
to act, the Government obtained clerk’s defaults. (Doc. 24, 25, 29, 30). Now, the
Government seeks default judgments against the Default Defendants.
LEGAL STANDARD
Rule 55 of the Federal Rules of Civil Procedure establishes a two-step procedure
for obtaining default judgment. First, when a defendant fails to plead or otherwise defend
a lawsuit, the clerk of the court must enter a clerk's default against the defendant. See
Fed. R. Civ. P. 55(a). Second, after receiving the clerk's default, the court can enter a
default judgment provided the defendant is not an infant or incompetent. See Fed. R.
Civ. P. 55(b)(2); see also Solaroll Shade & Shutter Corp. v. Bio-Energy Sys., Inc. 803
F.2d 1130, 1134 (11th Cir. 1986) (stating a default judgment may be entered "against a
defendant who never appears or answers a complaint, for in such circumstances the case
never has been placed at issue.").
That said, a court may enter a default judgment only if "the well-pleaded allegations
in the complaint, which are taken as true due to the default, actually state a substantive

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cause of action and that there is a substantive, sufficient basis in the pleadings for the
particular relief sought." Tyco Fire & Sec., LLC v. Alcocer, 218 F. App'x 860, 863 (11th
Cir. 2007). The upshot of this rule is that “the defendant is not held to admit facts that are
not well-pleaded or to admit conclusions of law.” Nishimatsu Constr. Co., Ltd. v. Houston
Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975).3 Consequently, when considering a
motion for default judgment, courts must "examine the sufficiency of plaintiff's allegations
to determine whether the plaintiff is entitled to" relief. See PNC Bank, N.A. v. Starlight
Props. & Holdings, LLC, No. 6:13-cv-408, 2014 WL 2574040, at *1 (M.D. Fla. June 9,
2014) (citation omitted).
DISCUSSION
I.

COUNT I: WINLAND’S TAX ASSESSMENTS
The Complaint alleges that Winland is liable for unpaid federal income tax liabilities

as laid out in the 2007 and 2009 Tax Assessments. (Doc. 1 at ¶ 15). A tax assessment
is a determination that a taxpayer is liable to the Government for unpaid taxes. United
States v. Fior D’Italia Inc., 536 U.S. 238, 242 (2002). To reduce a tax “assessment to
judgment, the Government must first prove that the assessment was properly made.”
United States v. White, 466 F.3d 1241, 1248 (11th Cir. 2006). To do so, a notice of the
amount assessed and a demand for payment must be sent to each person liable for the
unpaid tax.

See 26 U.S.C. §§ 6303(a).

Tax assessments are entitled to a legal

presumption of correctness. Fior D’Italia, Inc., 536 U.S. at 242.
Further, the Internal Revenue Code provides that

3

In Bonner v. City of Prichard, 661 F. 2d 1206, 1208 (11th Cir. 1981) (en banc), the
Eleventh Circuit adopted as binding precedent all decisions that the former Fifth Circuit
issued before the close of business on September 30, 1981.

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[i]f 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. The tax lien arises automatically “by operation of law ‘at the time the
assessment is made.’” United States v. Saccullo, No. 2:16-cv-155-FtM-29CM, 2017 WL
347553 *2 (M.D. Fla. Jan. 24, 2017) (quoting 26 U.S.C. § 6322).
Upon consideration, the Complaint has sufficiently alleged that Winland is liable to
the Government for unpaid tax liabilities. First, the Complaint includes a detailed chart
that illustrates the dates of the IRS’s assessments, the amounts assessed, and the type
of assessments made for the 1998 through 2006 tax years. (Doc. 1 at ¶ 15). These
assessments indicated that Winland owed the Government a substantial sum of money
for deficiencies and additions regarding his tax filings. (Doc. 1 at ¶ 15). The Complaint
also alleges that the Department of the Treasury sent Winland several notices and
demands for payment, but that Winland failed to pay.4 (Doc. 1 at ¶¶ 16-17).

And while

the Complaint stated that Winland’s overall outstanding tax liability as of the date of filing
was $1,099,119.76, (Doc. 1 at ¶ 18), that figure has grown with the addition of interest
and time to $1,115,884.38 as of the filing of the Government’s Motion. (Doc. 37 at 9).
Consequently, ample grounds exist to merit the reduction of Winland’s outstanding tax
liabilities to judgment in the amount of $1,115,884.38 plus interest that accrued after the
Government filed its Motion on April 10, 2017

These allegations were thereafter substantiated by the Government’s attachment of the
Certificate of Assessments, Payments and Other Specified Matters to its Motion. (Doc.
37-2).
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II.

FORECLOSURE
Next, the Complaint alleges the Tax Liens attached to the Subject Property

because the Government can trace the 2007 Tax Liens to Winland’s interest in his
Maryland Property and thereafter to the encumbered funds used to purchase the Subject
Property. (Doc. 1 at ¶ 35). Moreover, the Government alleges that the 2007 and 2009
Tax Liens encumbered Winland’s interest as co-grantee of the Subject Property. (Doc. 1
at ¶ 33). The Court agrees.
The Internal Revenue Code provides that failure to pay tax liabilities after notice
and demand of payment creates a lien “upon all property and rights to property, whether
real or personal, belonging to such person.” 26 U.S.C. § 6321. The language “all property
and rights” is broad enough “to reach every interest in the property that a taxpayer might
have.” United States v. Nat’l Bank of Commerce, 472 U.S. 713, 719–20 (1985); see also
Atlantic States Const., Inc. v. Hand, 892 F.2d 1530, 1534 (11th Cir. 1990) (holding a lien
may attach to the taxpayer’s “property [that is] acquired after the tax lien arises.”).
Moreover, when a lien is created, and the asset to which the lien applies is sold, “[t]he
lien reattaches to the thing and to whatever is substituted for it.” Phelps v. United States,
421 U.S. 330, 334–35 (1975). Thereafter, the District Court can foreclose the lien and
force a sale for the Government’s benefit. See United States v. Rodgers, 461 U.S. 677,
692–94 (1983); see also 26 U.S.C. § 7403(c). Such an act consists of the sale of not only
“the delinquent taxpayer’s own interest, but the sale of the entire property (as long as the
United States has any claim or interest in it), and the recognition of third-party interests
through the mechanism of judicial valuation and distribution.” Id. (internal quotations
omitted).

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Accordingly, the 2007 Tax Lien attached to the Maryland Property because at the
time of the 2007 Tax Assessment, Winland held it as the sole titleholder. See 26 U.S.C.
§ 6321. Upon selling the Maryland Property, the 2007 Tax Liens attached to the proceeds
of the sale. See Phelps, 421 U.S. at 334–35. Thereafter, when Winland transferred the
proceeds of the sale to Hetz, the 2007 Tax Lien followed. See United States v. Bess, 357
U.S. 51, 57 (1958) (“The transfer of property subsequent to the attachment of the lien
does not affect the lien, for it is the very nature and essence of a lien, that no matter into
whose hands the property goes, it passes cum onere.”); see also United States v.
Domenico, No. 8:09-CV-1282-T-26AEP, 2010 WL 3029019, at *2 (M.D. Fla. Apr. 29,
2010) (“Once a federal tax lien attaches to property belonging to a taxpayer, it follows that
property into the hands of any transferee”). Finally, the 2007 Tax Lien then attached to
the Subject Property when Hetz purchased it with the encumbered proceeds.

See

Phelps, 421 U.S. at 334–35 (“[T]he lienholder . . . may follow the [encumbered] proceeds
wherever they can distinctly trace them.”).
In addition, the 2007 and 2009 Tax Lien attached directly to the Subject Property
because of Winland’s interest as co-grantee. Specifically, the 2007 Tax Lien attached to
Winland’s interest in the Subject Property as after-acquired property. See Atlantic States
Const., Inc., 892 F.2d at 1534. Similarly, the 2009 Tax Lien attached to Winland’s interest
as then-owned property. See Nat’l Bank of Commerce, 472 U.S. at 719–20. And despite
Winland’s subsequent transfer of his interest by quitclaim deed on the Subject Property
to Hetz, the 2009 and 2007 Tax Liens remained as to the Subject Property. See Bess,
358 U.S. at 57. By failing to answer the Complaint, Winland is deemed to have admitted
the factual allegations lodged against him. Tyco Fire & Sec., LLC, 218 F. App'x at 863.

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And upon review, the allegations are sufficient to support the foreclosure of the Tax Liens
on the Subject Property.5
III.

RIGHTS OF THE REMAINING DEFENDANTS
In an action to enforce a lien in favor of the United States “[a]ll persons having liens

upon or claiming any interest in the property involved in shall be made parties thereto.”
26 U.S.C. § 7403(b). After the plaintiff duly notifies the parties of the action, “the court
shall . . . proceed to adjudicate all matters involved therein and finally determine the merits
of all claims to and liens upon the property.” Id. § 7403(c).
In line with the statutory guidance, the record reveals that the Government
provided notice to Hetz, Newline, DABTLC5 and the State of Florida by naming them as
parties and by serving them with process. (Docs. 1, 13, 15, 16, 17). Thereafter, each
failed to answer and defend their interest. As a result, the Government argues in its
Motion, without citation to authority, that the failure to answer merits a decision that Hetz,
Newline, DABTLC5 and the State of Florida have no interest at all in the Subject Property.
(Doc. 37 at 9). But the Court lacks the information necessary to reach such a conclusion.
For one thing, the Complaint states that DABTLC5 and Newline are the respective
certificate holders of the Subject Property’s delinquent property taxes for the 2014 and
2015 tax years, and that each may claim an interest in the Subject Property. (Doc. 1 at
¶¶ 8, 9). For another, the Complaint alleges that the State of Florida recorded a judgment

The Government’s Complaint sets forth several additional claims in which they assert
that Winland violated the Florida Uniform Fraudulent Transfer Act, and specifically Florida
Statute 726.105 and 726.106, through the inclusion of Hetz as a co-grantee of the Subject
Property, as well as her ultimate acquisition of same via quitclaim deed. That said,
because the Court is satisfied that the Winland’s tax liabilities can be reduced to judgment,
and that the Subject Property can be foreclosed, it need not address the Government’s
other claims.
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against Winland in April 2012 relating to public defense attorney costs, and it may also
claim an interest in the Subject Property. As a result, although the Government has
presented sufficient grounds to justify a reduction of Winland’s federal income tax
liabilities to judgment, and has satisfied the general grounds for the foreclosure of the
Subject Property, the record does not currently merit a final determination of the merits of
all claims to, and liens upon, the Subject Property.
Accordingly, it is now
ORDERED:
(1) Plaintiff’s Motion for Default Judgment (Doc. 37) against Defendants Douglas
Winland, Sherry Jean Hetz, Newline Holdings, LLC, and DABTLC5, LLC, and
the State of Florida is DENIED with leave to renew.
(2) The Government will have up to and including September 5, 2017 to file a
renewed motion that supplements the record with information and argument as
to its claim that Hetz, Newline, DABTLC5 and the State of Florida have no
interest in the Subject Property.
DONE and ORDERED in Fort Myers, Florida this 16th day of August, 2017.

Copies: All Parties of Record

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