United States of America v. Jones et al

Filing 47

ORDER granting 46 Motion for Default Judgment. See order for details. Signed by Judge Susan C Bucklew on 5/8/2018. (JD)

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

Case No. 8:17-cv-2389-T-24 AEP

DAPHNE D. JONES, ET AL.,
Defendants.
______________________________/
ORDER
This cause comes before the Court on Plaintiff’s Motion for Default Judgment. (Doc.
No. 46). As explained below, the motion is granted.
I. Background
Plaintiff United States of America filed this lawsuit in order to reduce to judgment
Defendant Daphne Jones’ unpaid federal income tax liabilities for the tax years 2005, 2006,
2007, and 2014. Additionally, Plaintiff seeks to foreclose the federal tax liens that encumber real
property (“Subject Properties”) held by Defendant On Point Group Inc., to sell the Subject
Properties free and clear of the liens and claims of Defendants in this case, and to disburse the
sales proceeds.1
A. Jones’ Tax Liability
The IRS made the following assessments with respect to Jones’ income tax liabilities for
the tax years 2005, 2006, 2007, and 2014:

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The Subject Properties are located at 10610 and 10612 McIntosh Road, Thonotosassa,
Florida 33595.

Tax Year
2005

2006

Date of
Assessment
10/15/2007
6/16/2008
6/21/2010
9/20/2010
11/17/2014
9/20/2010

Tax Assessed
$

$
$

4/2/2012 $

2007

9/20/2010 $

2014

11/17/2014
3/21/2016 $

Interest
Penalties
Assessed
Assessed
31,503.00 $ 4,689.15 $ 6,608.00
$ 2,312.94
$ 5,947.56
68,585.00
$ 13,717.00
$ 55,449.50 $ 17,146.25
50,776.00 $ 12,340.39 $ 2,402.92
$ 11,424.60
$ 10,662.96
47,943.00 $ 19,005.89 $ 12,684.00
$ 10,149.00
$
250.00
31,433.00 $ 4,537.12 $ 1,430.59
$ 7,072.43
$ 4,714.95
$ 6,765.21 $ 3,053.29
11,538.00 $
354.83 $
163.00
$ 2,076.84
$
546.36

Additionally, the IRS assessed a civil penalty, plus interest, due to Jones’ excessive claim for a
refund or credit relating to her 2005 taxes:
Tax Year
2005

Date of
Interest
Penalties
Assessment
Assessed
Assessed
6/7/2010
$ 6,300.00
11/17/2014 $
810.09

The Secretary of Treasury filed Notices of Federal Tax Liens against Jones for her unpaid
income tax liabilities for the tax years 2005, 2006, 2007, and 2014, as well as for the civil penalty
assessed for the 2005 tax year. As of April 30, 2018, after taking into account payments, credits,
and abatements, Jones’ total tax liability for the tax years 2005, 2006, 2007, and 2014 is
$432,233.89. (Doc. No. 46-1). Interest, penalties, and statutory additions continue to accrue until
the balance is paid in full.

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B. On Point Group Inc.’s Liability
On the dates of the assessments listed above, federal tax liens arose and attached to Jones’
property and Jones’ rights to property. In August of 2008, Jones registered On Point Group Inc.
(“OPG”) as a corporation with the State of Florida.
On September 20, 2012, Jones used personal funds (which were encumbered by tax liens)
to purchase the Subject Properties through OPG. As a result, the tax liens (which arose from the
assessments occurring prior to September 20, 2012) attached to the Subject Properties held by
OPG.
Additionally, OPG holds title to the Subject Properties as Jones’ nominee and/or alter ego
as illustrated by the following: Jones is the 100% shareholder of OPG and exercises sole
dominion and control over OPG. Jones granted a mortgage on the Subject Properties as OPG’s
CEO. Jones and OPG’s finances are co-mingled. Jones is the sole authorized signer on OPG’s
bank account, and she has used the “corporate” funds to pay for clothing, beauty supplies,
groceries, airfare, pool maintenance, childcare, housekeeping, entertainment, car insurance, and
other personal expenses. Jones withdrew over $180,000 in cash from the “corporate” account in
2014 and another $234,000 during the first half of 2015. When the IRS questioned these large
withdrawals, Jones did not provide any explanation.
OPG has failed to follow corporate formalities, including failing to file an annual report.
As a result, on September 27, 2013, the Florida Secretary of State administratively dissolved
OPG.
Based on the above, the IRS has shown that OPG is a shell utilized by Jones to hide her
property from collection and that Jones is the true and equitable owner of the Subject Properties.
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The Secretary of Treasury filed a Notice of Federal Tax Lien against OPG as the nominee and/or
alter ego of Jones for her unpaid income tax liabilities for the tax years 2005, 2006, 2007, and
2014, as well as for the civil penalty assessed for the 2005 tax year.
C. Procedural Background
On October 12, 2017, Plaintiff filed suit against Jones, OPG, as well as others that
Plaintiff believed may claim an interest in the subject properties.2 Plaintiff asserts the following
three claims: (1) a claim to reduce Jones’ federal tax liabilities to judgment; (2) a claim to
foreclose on the federal tax liens on the Subject Properties; and (3) an alternative claim to
adjudge that OPG is liable for Jones’ tax liabilities as her alter ego.
The following defendants failed to file a response to the complaint, and as a result, the
Clerk entered default against them: (1) R. Dennis Langston (Doc. No. 28), (2) the Florida
Department of Revenue (Doc. No. 37), (3) Stay Dry Roofing of Tampa Bay (Doc. No. 29), (4)
Bay Gulf Credit Union (Doc. No. 30), and (5) CitiFinancial Services, Inc. (Doc. No. 38).3
Likewise, Jones and OPG failed to respond to the complaint, and the Clerk entered default
against them. (Doc. No. 41, 42).
The only defendant that responded to the complaint is Defendant Hillsborough County
Code Enforcement (“the County”). (Doc. No. 12). Plaintiff and the County entered into a
stipulation in which they agreed that Plaintiff’s liens on the Subject Properties for unpaid income

2

The other parties were added as defendants pursuant to 26 U.S.C. § 7403(b), which
provides that “[a]ll persons having liens upon or claiming any interest in the property involved in
such action shall be made parties thereto.”
3

Plaintiff dismissed its claims against Defendants Tampa Bay Black Business Investment
Corp. and John A. Rhoades, Jr. (Doc. No. 22).
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taxes are superior in priority to the County’s outstanding fine connected to the Subject Properties.
(Doc. No. 45).
II. Motion for Default Judgment
In the instant motion, Plaintiff seeks default judgment against Jones, OPG, and the other
defaulting defendants. As to R. Dennis Langston, (2) the Florida Department of Revenue, (3)
Stay Dry Roofing of Tampa Bay, (4) Bay Gulf Credit Union, and (5) CitiFinancial Services, Inc.,
this Court finds that default judgment should be entered against them declaring that these
defendants have no interest in the Subject Properties.
A. Jones’ Federal Tax Liability
The allegations in the complaint, which are deemed true as to Jones and OPG, establish
that Jones is liable for federal tax liabilities for tax years 2005, 2006, 2007, and 2014 that were
assessed against her and that she failed to pay despite notice and demand. Accordingly, the
Court grants Plaintiff’s motion to reduce Jones’ federal income tax liabilities to judgment. The
Court finds that as of April 30, 2018, Jones owes $432,233.89 on account of the taxes claimed in
this case, plus interest and statutory additions that will continue to accrue from April 30, 2018
through the date of payment in full.
B. The Subject Properties
Pursuant to 26 U.S.C. § 6621, “[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.” The lien “arise[s] at the time the assessment is made and
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shall continue 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. § 6322. “[T]he lien follows any property substituted for what the taxpayer owned,
provided that the chain of substitution can be traced.” Municipal Trust & Savings Bank v.
United States, 114 F.3d 99, 101 (7th Cir. 1997). “Property of the nominee or alter ego of a
taxpayer is subject to the collection of the taxpayer's tax liability.” Shades Ridge Holding Co.,
Inc. v. U.S., 888 F.2d 725, 728 (11th Cir. 1989).
In the instant case, Jones used personal funds (which were encumbered by tax liens) to
purchase the Subject Properties through OPG. As a result, the tax liens (which arose from the
assessments occurring prior to September 20, 2012) attached to the Subject Properties held by
OPG, as Jones’ nominee and/or alter ego.4 As explained by the Shades Ridge court:
Whether a corporation . . . [is subject to collection of the taxpayer’s
tax liability] turns on: (1) the control taxpayer exercises over the
[corporation] and its assets; (2) the use of corporate funds to pay
taxpayer's personal expenses; and (3) the family relationship, if any,
between the taxpayer and the corporate officers.
Id. at 729 (citations omitted). Jones and OPG’s relationship clearly meets this test.
Jones is the 100% shareholder of OPG and exercises sole dominion and control over
OPG. Jones granted a mortgage on the Subject Properties as OPG’s CEO. Jones and OPG’s
finances are co-mingled. Jones is the sole authorized signer on OPG’s bank account, and she has
used the “corporate” funds to pay for clothing, beauty supplies, groceries, airfare, pool

4

The Court notes that the nominee and alter ego theories are separate theories, which
some courts have erroneously used interchangeably. This Court is focused on the test set forth in
Shades Ridge, regardless of whether the test is used to establish that a third party is a nominee or
an alter ego.
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maintenance, childcare, housekeeping, entertainment, car insurance, and other personal expenses.
Jones withdrew over $180,000 in cash from the “corporate” account in 2014 and another
$234,000 during the first half of 2015. When the IRS questioned these large withdrawals, Jones
did not provide any explanation.
C. Foreclosure of the Federal Tax Liens
Pursuant to 26 U.S.C. § 7403(c), this Court can order the sale of property subject to a
federal tax lien and direct the distribution of the proceeds. See U.S. v. Christiansen, 414 Fed.
Appx. 218, 220 (11th Cir. 2011)(stating that “district courts have the right to order the sale of
property encumbered by a tax lien, and ‘to render such judgments and decrees as may be
necessary or appropriate’ to complete that sale”). Accordingly, the Court grants Plaintiff’s
motion to foreclose on the tax liens that attached to the Subject Properties.
III. Conclusion
Based on the above, it is ORDERED AND ADJUDGED that Plaintiff’s Motion for
Default Judgment (Doc. No. 46) is GRANTED as follows:
(1)

Defendant Daphne Jones is indebted to the United States for unpaid federal
income tax liabilities for tax years 2005, 2006, 2007, and 2014 in the total amount
of $432,233.89 as of April 30, 2018, plus fees and statutory additions thereon as
provided by law from that date to the date of payment in full pursuant to 28
U.S.C. § 1961(c)(1) and 26 U.S.C. §§ 6621–22.

(2)

Federal tax liens arose against Defendant Daphne Jones for unpaid federal income
tax liabilities for tax years 2005, 2006, 2007, and 2014 and attached to the Subject
Properties.
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(3)

As to R. Dennis Langston, (2) the Florida Department of Revenue, (3) Stay Dry
Roofing of Tampa Bay, (4) Bay Gulf Credit Union, and (5) CitiFinancial Services,
Inc., this Court finds that default judgment should be entered against them
declaring that these defendants have no interest in the Subject Properties.

(4)

The Subject Properties (located at 10610 and 10612 McIntosh Road,
Thonotosassa, Florida 33595) are to be sold, free and clear of the defaulted
defendants’ purported interests, at public auction pursuant to a decree of
foreclosure and order of sale, a motion for which shall be submitted to the Court
by Plaintiff by June 8, 2018.

(5)

The net proceeds of the sale of the Subject Properties shall distributed as further
directed by the Court.

DONE AND ORDERED at Tampa, Florida, this 8th day of May, 2018.

Copies to:
Counsel of Record

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