United States of America v. Lindsey et al

Filing 79

ORDER GRANTING THE GOVERNMENT'S: (1) MOTION FOR SUMMARY JUDGMENT; AND (2) MOTION FOR DEFAULT JUDGMENT re 68 , 58 . Signed by JUDGE J. MICHAEL SEABRIGHT on 7/30/13. "... (1) that the Lindseys federal income tax liabilities and associated penalties plus interest be reduced to judgment, (2) that the Lindseys federal tax liens be foreclosed on the Kiwi property, and (3) sale of the Kiwi property."(gls, )CERTIFICATE OF SERVICEParticipants registere d to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
UNITED STATES OF AMERICA,

)
)
Plaintiff,
)
)
vs.
)
)
LEABERT F. LINDSEY, KAREN )
A. LINDSEY, SIGNATURE
)
GROUP HOLDINGS, INC., STATE )
OF HAWAII DEPARTMENT OF
)
TAXATION, STATE OF HAWAII )
DEPARTMENT OF HEALTH,
)
)
Defendants.
)
_____________________________ )

CIVIL NO. 11-00664 JMS-KSC
ORDER GRANTING THE
GOVERNMENT’S: (1) MOTION
FOR SUMMARY JUDGMENT;
AND (2) MOTION FOR DEFAULT
JUDGMENT

ORDER GRANTING THE GOVERNMENT’S: (1) MOTION FOR
SUMMARY JUDGMENT; AND (2) MOTION FOR DEFAULT JUDGMENT
I. INTRODUCTION
Plaintiff United States of America (the “Government”) moves for
summary judgment against Defendants Leabert F. Lindsey (“Mr. Lindsey”) and
Karen A. Lindsey (“Mrs. Lindsey”) (collectively, “the Lindseys”) to reduce to
judgment certain federal income tax assessments, to foreclose federal tax liens on
real property owned by the Lindseys at 74-4924 Kiwi Street, Kailua Kona, Hawaii
96740 (the “Kiwi property”), and to obtain an order forcing the sale of the Kiwi
property to satisfy those liens. The Government also moves for default judgment

against Defendants Signature Group Holdings, Inc. (“Signature Group”), and the
State of Hawaii Department of Health (“Department of Health”). Based on the
following, the court GRANTS the Government’s Motion for Summary Judgment
and Motion for Default Judgment.
II. BACKGROUND
A.

Factual Background
1.

Mr. Lindsey’s Tax Liability
Mr. Lindsey failed to file individual federal income tax returns for tax

years 1997 through 2003. See Doc. No. 58-3, Decl. of Maria C. Haydn ¶ 6. Based
on that failure, the Internal Revenue Service (“IRS”) assessed federal income tax
liabilities (Forms 4340) against Mr. Lindsey using available information, including
Forms 1099 and Forms W-2 for tax years 1997-2003. Id. ¶¶ 7-19; Doc. Nos. 58-4
- 58-21, Gov’t Exs. 1-18 to Haydn Decl. The IRS sent Mr. Lindsey Notices of
Deficiency with the 1997-2002 assessments and demands for payment. Doc. No.
58-3, Haydn Decl. ¶¶ 16-19; Doc. Nos. 58-18 - 21, Gov’t Exs. 15-18 to Haydn
Decl. As of April 15, 2013, the total unpaid balance of all federal income tax
liabilities assessed against Mr. Lindsey for tax years 1997-2003 is $210,090.78.
Doc. No. 58-3, Haydn Decl. ¶¶ 20-21. Of that amount, $135,183.13 represents the

2

balance due on the assessments and $74,907.65 represents accrued, but unassessed,
interest pursuant to 26 U.S.C. §§ 6601, 6621(a)(2) and 26 C.F.R.
§ 301.6621-1. Id.; Doc. No. 58-22, Gov’t Ex. 19 to Haydn Decl.; Doc. No. 78-1,
Haydn Supp. Decl. ¶ 7.
2.

Mrs. Lindsey’s Tax Liability
Mrs. Lindsey failed to file individual federal income tax returns for

tax years 1998-2000 and 2003. Doc. No. 58-3, Haydn Decl. ¶ 22. Based on that
failure, the IRS assessed federal income tax liabilities (Forms 4340) against Mrs.
Lindsey using available information, including Forms 1099 and Forms W-2 for tax
years 1998-2000 and 2003. Id. ¶¶ 23-29; Doc. Nos. 58-23 - 58-31, Gov’t Exs. 2028 to Haydn Decl. The IRS sent Mrs. Lindsey a Notice of Deficiency with the
1998-2000 assessments and demand for payment. Doc. No. 58-3, Haydn Decl.
¶¶ 16-19; Doc. No. 58-31, Gov’t Ex. 28 to Haydn Decl. As of April 15, 2013, the
total unpaid balance of all federal income tax liabilities assessed against Mrs.
Lindsey for tax years 1998-2000 and 2003 is $25,277.99. Doc. No. 58-3, Haydn
Decl. ¶¶ 30-31. Of that amount, $15,895.99 represents the balance due on the
assessments and $9,382.00 represents accrued, but unassessed, interest pursuant to
26 U.S.C. §§ 6601, 6621(a)(2) and 26 C.F.R. § 301.6621-1. Id.; Doc. No. 58-32,
Gov’t Ex. 29 to Haydn Decl.; Doc. No. 78-1, Haydn Supp. Decl. ¶ 9.
3

3.

The Kiwi Property
To satisfy the Lindseys’ outstanding federal tax debt, the Government

seeks foreclosure of federal tax liens against the Kiwi property. On June 15, 1987,
the Lindseys, as tenants by the entirety, obtained 100% interest in the Kiwi
property pursuant to a Warranty Deed. See Doc. No. 58-33, Decl. of Rick Watson
¶ 14; Doc. No. 58-43, Gov’t Ex. 10 to Watson Decl. The Warranty Deed was
signed on June 15, 1987, and was recorded with the State of Hawaii Bureau of
Conveyances (“Bureau of Conveyances”) on June 18, 1987. Id.
On March 28, 1994, the Department of Health recorded a judgment
lien against Mr. Lindsey in the amount of $143.60 at the Bureau of Conveyances.
Doc. No. 1, Compl. ¶ 18. On July 12, 2004, a mortgage deed against the Kiwi
property in favor of Fremont Investment and Loan in the amount of $87,000, was
recorded at the Bureau of Conveyances. Id. ¶ 12. Fremont Investment and Loan
was acquired by Signature Group and on December 9, 2010, a deed transferring the
interests of Fremont Investment and Loan to Signature Group was recorded at the
Bureau of Conveyances. Id. ¶ 13.
The IRS filed Notices of Federal Tax Liens with the Bureau of
Conveyances for the 1997-2001 tax assessments against Mr. Lindsey on September
9, 2003; the 2002-03 tax assessments against Mr. Lindsey on February 6, 2007; the
4

1998-2000 tax assessments against Mrs. Lindsey on February 14, 2005; and the
2003 tax assessment against Mrs. Lindsey on November 15, 2007. Doc. No. 5833, Watson Decl. ¶¶ 15-18; Doc Nos. 58-44 - 58-47, Gov’t Exs. 11-14 to Watson
Decl.
B.

Procedural Background
On October 31, 2011, the Government filed its Complaint against the

Lindseys, Signature Group, State of Hawaii Department of Taxation (“Department
of Taxation”), and the Department of Health seeking to reduce to judgment the
federal tax assessments against the Lindseys, foreclose the tax liens on the Kiwi
property, and “determine the validity and priority of all liens on and other interests
in the” Kiwi property. Doc. No. 1, Compl. ¶¶ 1, 7-9, A-E. On November 16,
2011, the Government properly served the Department of Health and the
Department of Taxation, Doc. Nos. 3 & 4, and on November 18, 2011, the
Government properly served Signature Group. Doc. No. 5. Neither the
Department of Health nor Signature Group filed an answer or other responsive
pleading. On December 29, 2011, the Clerk of Court entered default against the
Department of Health and Signature Group. Doc. No. 11. On June 6, 2013, the
Government filed the instant Motion for Default Judgment against Signature
Group and the Department of Health. Doc. No. 68.
5

Meanwhile, on April 16, 2013, the Government filed the instant
Motion for Summary Judgment, Doc. No. 58, and that same day, the court mailed
to the Lindseys a Notice to Pro Se Litigants explaining the Lindseys’ obligations
regarding motions for summary judgment. Doc. No. 60. The Lindseys did not file
an Opposition to the Motion for Summary Judgment.1 On June 14, 2013, the
Government and Department of Taxation stipulated that the Government’s federal
tax liens on the Kiwi property take priority over the Department of Taxation liens
should the court order foreclosure. Doc. No. 75, Stipulation Regarding Priority

1

Although they did not file an Opposition, the Lindseys do object to this court’s
jurisdiction. On April 17, 2013, they filed their Denial to the Government’s First Request for
Admissions stating that they:
are Hawaiian subjects and “protected persons” under the 1949
Fourth Geneva Convention, and that [they] are tax payers under
Hawaiian Kingdom law and that this court cannot claim
jurisdiction in the Hawaiian Islands without a treaty of cession
whereby the Hawaiian Kingdom ceded its sovereignty to the
UNITED STATES OF AMERICA.
Doc. No. 62; see also Doc. No. 58-36, Gov’t Ex. 3 to Watson Decl. Similarly, both Mr. and
Mrs. Lindsey responded to each interrogatory from the Government as follows: “This court does
not have subject matter jurisdiction because there is no treaty for cession.” Doc. Nos. 58-37 &
58-38, Gov’t Exs. 4&5 to Watson Decl.
To state the obvious, Hawaii is a state of the United States and therefore, the Lindseys’
position implying that Hawaii is not a state of the United States fails as a matter of law, and this
court can exercise jursidiction over the Lindseys. See United States v. Lorenzo, 995 F.2d 1448,
1456 (9th Cir. 1993) (holding that the Hawaii district court has jurisdiction over Hawaii residents
claiming they are citizens of the Sovereign Kingdom of Hawaii); Kupihea v. United States, 2009
WL 2025316, at *2 (D. Haw. July 10, 2009) (dismissing complaint seeking release from prison
on the basis that plaintiff is a member of the Kingdom of Hawaii); State v. French, 77 Haw. 222,
228, 883 P.2d 644, 649 (Haw. App. 1994) (“[P]resently there is no factual (or legal) basis for
concluding that the [Hawaiian] Kingdom exists as a state in accordance with recognized
attributes of a state’s sovereign nature.”) (quotations omitted).
6

¶ 3. A hearing was held on July 22, 2013. No Defendants, including the Lindseys,
appeared.
On July 26, 2013, the Government clarified the calculations of tax
liabilities at issue in this action. See Doc. No. 78.
III. STANDARDS OF REVIEW
A.

Summary Judgment
Summary judgment is proper where there is no genuine issue of

material fact and the moving party is entitled to judgment as a matter of law. Fed.
R. Civ. P. 56(a). Rule 56(a) mandates summary judgment “against a party who
fails to make a showing sufficient to establish the existence of an element essential
to the party’s case, and on which that party will bear the burden of proof at trial.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Broussard v. Univ. of
Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).
“A party seeking summary judgment bears the initial burden of
informing the court of the basis for its motion and of identifying those portions of
the pleadings and discovery responses that demonstrate the absence of a genuine
issue of material fact.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th
Cir. 2007) (citing Celotex, 477 U.S. at 323); see also Jespersen v. Harrah’s
Operating Co., 392 F.3d 1076, 1079 (9th Cir. 2004). “When the moving party has
7

carried its burden under Rule 56[(a)] its opponent must do more than simply show
that there is some metaphysical doubt as to the material facts [and] come forward
with specific facts showing that there is a genuine issue for trial.” Matsushita
Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87 (1986) (citation and internal
quotation signals omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48 (1986) (stating that a party cannot “rest upon the mere allegations or
denials of his pleading” in opposing summary judgment).
“An issue is ‘genuine’ only if there is a sufficient evidentiary basis on
which a reasonable fact finder could find for the nonmoving party, and a dispute is
‘material’ only if it could affect the outcome of the suit under the governing law.”
In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson, 477 U.S. at
248). When considering the evidence on a motion for summary judgment, the
court must draw all reasonable inferences on behalf of the nonmoving party.
Matsushita Elec. Indus. Co., 475 U.S. at 587; see also Posey v. Lake Pend Oreille
Sch. Dist. No. 84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating that “the evidence
of [the nonmovant] is to be believed, and all justifiable inferences are to be drawn
in his favor” (citations omitted)).
///
///
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B.

Default Judgment
The Clerk of Court may enter default if the defendant has “failed to

plead or otherwise defend” within the permitted time. Fed. R. Civ. P. 55(a).
Generally, “upon default the factual allegations of the complaint, except those
relating to the amount of damages, will be taken as true.” TeleVideo Sys., Inc. v.
Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). The Court has discretion
whether to enter default judgment. See Lau Ah Yew v. Dulles, 236 F.2d 415 (9th
Cir. 1956). The Ninth Circuit applies seven factors that districts court may
consider in exercising their discretion to award a default judgment:
(1) the possibility of prejudice to the plaintiff; (2) the
merits of plaintiff’s substantive claim; (3) the sufficiency
of the complaint; (4) the sum of money at stake in the
action; (5) the possibility of a dispute concerning
material facts; (6) whether the default was due to
excusable neglect; and (7) the strong policy underlying
the Federal Rules of Civil Procedure favoring decision on
the merits.
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).
Although the well-pleaded allegations in the complaint are taken as
true upon entry of default, see Fair Housing of Marin v. Combs, 285 F.3d 899, 906
(9th Cir. 2002), to obtain judgment the plaintiff must establish the relief to which it
is entitled. See Pope v. United States, 323 U.S. 1 (1944); Fair Housing of Marin v.
Combs, 285 F.3d 899, 906 (9th Cir. 2002).
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IV. DISCUSSION
A.

The Lindseys’ Unpaid Taxes and Associated Penalties
The Government asserts that summary judgment should be granted

against the Lindseys for the assessments of unpaid taxes and penalties for income
tax years 1997-2003. Doc. No. 58-1, Pl.’s Mem. at 2. The court agrees.
“‘In an action to collect federal taxes, the government bears the initial
burden of proof.’” In re Olshan, 356 F.3d 1078, 1084 (9th Cir. 2004) (quoting
Palmer v. I.R.S., 116 F.3d 1309, 1312 (9th Cir. 1997)). This burden can be met by
presenting federal tax assessments. United States v. Stonehill, 702 F.2d 1288, 1293
(9th Cir. 1983). Certificates of Assessments and Payments (“Forms 4340”) are
highly probative and in the absence of contrary evidence, are sufficient to establish
a tax assessment was properly made and notice and demand for payment were sent.
See Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993) (“Generally, courts
have held that IRS Form 4340 provides at least presumptive evidence that a tax has
been validly assessed . . . .”); Hughes v. United States, 953 F.2d 531, 535 (9th Cir.
1992) (“Official certificates, such as Form 4340, can constitute proof of the fact
that the [tax] assessments were actually made.”).
When supported by a minimal factual foundation, the IRS’
assessments for taxes and related penalties are entitled to a presumption of
10

correctness and the burden shifts to the taxpayer to show the assessment is
incorrect. See In re Olshan, 356 F.3d at 1084; see also Palmer, 116 F.3d at 1312
(explaining that taxpayer can rebut presumption of correctness, shifting “the
burden of proof back to the IRS” with a showing “that a determination is arbitrary,
excessive or without foundation”). If the taxpayer fails to rebut the presumption,
the government is entitled to judgment as a matter of law. See Hansen v. United
States, 7 F.3d 137, 138 (9th Cir. 1993) (finding taxpayers’ declaration that they did
not receive notice of the tax assessment insufficient to show a genuine issue of fact
for trial where IRS presented Form 4340); see also Adams v. United States, 358
F.2d 986, 994 (Ct. Cl. 1966).
The Government has submitted Forms 4340 calculating Mr.
Lindsey’s tax liability and related penalties for tax years 1997-2003, see Doc. Nos.
58-4 - 58-10, Gov’t Exs. 1-7 to Haydn Decl., and Mrs. Lindsey’s tax liability and
related penalties for tax years 1998-2000 and 2003, see Doc. Nos. 58-23 - 58-26,
Gov’t Exs. 20-23 to Haydn Decl., along with Haydn’s Declaration supporting
those assessments. Doc. No. 58-3, Haydn Decl. ¶¶ 1-31. Because the
Government’s showing exceeds the minimal factual foundation necessary, the
assessments receive a presumption of correctness and the burden of proof shifts to
the Lindseys to demonstrate any error.
11

The Lindseys, however, have not put forth any evidence that there are
deficiencies in the Government’s Forms 4340. Because the Lindseys fail to
identify any facts that would rebut the veracity of the Forms 4340, the only
permissible inference is that the assessments of Mr. Lindsey’s 1997-2003 and Mrs.
Lindsey’s 1998-2000 and 2003 tax liabilities are valid as a matter of law. See
Adams, 358 F.2d at 994. Accordingly, the court GRANTS the Government’s
Motion for Summary Judgment as to Mr. Lindsey for federal tax assessments
against him for tax years 1997-2003 and as to Mrs. Lindsey for federal tax
assessments against her for tax years 1998-2000 and 2003.
Pursuant to 26 U.S.C. §§ 6601(a) and (e)(2)(A), 6621, and 6622, the
Government is entitled to statutory interest on income taxes and associated
penalties imposed as of the date of notice and demand, which accrues daily until
paid in full. See Purcell v. United States, 1 F.3d 932, 943 (9th Cir. 1993). Once a
court validates a tax assessment, awarding statutory interest is mandatory. See id.
(noting that § 6601(e)(2)(A) is a “binding statutory directive” to award interest).
Thus, the court GRANTS summary judgment with respect to the
statutory interest on Mr. Lindsey’s 1997-2003 and Mrs. Lindsey’s 1998-2000 and
2003 assessments and penalties and ORDERS that judgment be entered against the

12

Lindseys for those income tax liabilities and associated penalties plus statutory
interest.2
B.

Attachment and Foreclosure of the Lindseys’ Federal Tax Liens Against
the Kiwi Property
Because the Lindseys’ federal tax liens attached to the Kiwi property,

the Government is entitled to foreclosure of those liens against the Kiwi property.
Pursuant to 26 U.S.C. § 6321, after notice and demand, the
Government obtains a lien “upon all property and rights to property, whether real
or personal, belonging to” the taxpayer in the amount of the unpaid taxes,
penalties, and interest. A lien arises as of the date of the assessment and continues
until paid. See 26 U.S.C. § 6322.
Spouses who own property as tenants by the entirety in Hawaii hold a
sufficient bundle of rights to constitute “property” or “rights to property” within
the federal lien statute § 6321. See United States v. Craft, 535 U.S. 274, 288
(2002) (concluding that, under Michigan law, husband-tenant in the entirety had
sufficient “property” or “rights to property” for the purposes of the federal tax lien
statute); see also United States v. Webb, 2008 WL 4761745, at *4 & n.10 (D. Haw.

2

As of April 15, 2013, Mr. Lindsey owed the Government $210,090.78, and Mrs.
Lindsey owed the Government $25,277.99 in federal tax liabilities, including penalties and
interest. Doc. No. 58-3, Haydn Decl. ¶¶ 20-21, 30-31.
13

Oct. 23, 2008) (reaching same conclusion under Hawaii law following examination
of similarities between Michigan law, at issue in Craft, and Hawaii law). IRS tax
liens, therefore, attach to a debtor’s interest in Hawaii property owned as a tenant
by the entirety. See id.; see also In re Pletz, 221 F.3d 1114, 1118 (9th Cir. 2000).
The Government’s tax liens are perfected upon assessment, see United
States v. Vermont, 377 U.S. 351, 355 (1964), and are effective against the taxpayer
and other lienholders without filing notice. See 26 U.S.C. §§ 6321, 6323(a).
Because all of the Lindseys’ federal tax liens were perfected, they became valid
against them and other lienholders on April 11, 2011 -- the date of assessment of
the Lindseys’ 1997-2003 tax liabilities. See Doc. Nos. 58-4 - 58-10,
58-23 - 58-26, Gov’t Exs. 1-7, 20-23 to Haydn Decl. Accordingly, the court
ORDERS that the Lindseys’ Federal Tax Liens be foreclosed against the Kiwi
property.
C.

Sale of the Kiwi Property
Pursuant to 26 U.S.C. § 7403, the Government may enforce a lien by

commencing an action in the district court, joining all parties with an interest in the
property, and obtaining a judicial sale of the property. See United States v.
Rodgers, 461 U.S. 677, 691-92 (1983) (stating that § 7403 grants the power to a

14

federal district court to order the sale of a delinquent taxpayer’s home); In re Pletz,
221 F.3d at 1118. Section 7403(c) states, in pertinent part, that
[t]he 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.
“[I]n order to enforce a lien and collect on justly owed debts, the
district court is empowered to order the sale of property to satisfy the tax debt of
one tenant, so long as it compensates the nondebtor spouse for his or her interest.”
In re Pletz, 221 F.3d at 1117-18 (noting that § 7403 “explicitly allows a lien
creditor like the IRS to sell not only a debtor’s interest in a property, but the entire
property held as a tenancy by the entirety by the debtor and his nondebtor wife”);
see also Rodgers, 461 U.S. at 680.3

3

Each spouse owns a fifty percent interest in property held as tenants by the entirety.
See, e.g., Popky v. United States, 419 F.3d 242, 245 (3d Cir. 2005) (affirming district court’s
valuation of non-debtor’s fifty percent interest in the proceeds of property sale); United States v.
Ryan, 2005 WL 6153137, at *3 (W.D. Mo. July 19, 2005) (valuing each spouse’s interest in
property held as tenants by the entirety at fifty percent and dividing proceeds from foreclosure
sale equally); Mfrs. & Traders Trust Co. v. Ruff, 2003 WL 21439883, at *2 (N.D. Ill. June 19,
2003) (holding tenant by the entirety is entitled to half surplus from foreclosure sale); see also In
re Dean’s Trust, 47 Haw. 629, 647, 394 P.2d 432, 441-42 (1964) (stating wife was entitled to
one-half of the profits from property held with husband as tenant by the entirety).
15

The Government has complied with § 7403. The Lindseys have
refused to pay their federal tax liabilities, and as a result, this court has foreclosed
their federal tax liens against the Kiwi property. The Government commenced this
action in the district court and all parties “having liens upon or claiming any
interest in the property involved in such action” at the time of filing have been
named as Defendants. See Doc. No. 1, Compl. ¶¶ 5-9. The Department of
Taxation stipulated to the priority of the Government’s tax liens against the Kiwi
property. Doc. No. 75. And as discussed below, the court grants default judgment
against Signature Group and the Department of Health, thereby extinguishing any
interest they may have held in the Kiwi property. Accordingly, pursuant to
§ 7403, this court ORDERS the sale of the Kiwi property to satisfy the Lindseys’
federal tax liens.
D.

Default Judgment Against Signature Group Holdings, Inc. and the
Department of Health
The Government seeks default judgment against Signature Group and

the Department of Health, thereby extinguishing any interest either Defendant may
hold in the Kiwi property. Neither Defendant has appeared in this action and the
Clerk of Court entered default against both Defendants on December 29, 2011.
Doc. No. 11.

16

Application of the Eitel factors supports this court’s finding that the
Government is entitled to default judgment against Signature Group and the
Department of Health. First, the Government has diligently litigated the instant
case and will be prejudiced if the interests of Signature Group and the Department
of Health in the Kiwi property are not extinguished and these Defendants are not
precluded from objecting to the Government foreclosing its federal tax liens
against the Kiwi property. Second, the court finds that the Complaint sufficiently
alleges substantive claims. Third, the amount of the Department of Health’s
possible interest in the Kiwi Properly is minimal. Fourth, while Signature Group’s
possible interest is more substantial, extinguishment of its interest in the Kiwi
property would not affect any amount the Lindseys may owe Signature Group.
Fifth, because neither Signature Group nor the Department of Health has appeared
in this action, there is no possibility of a dispute over material facts. Sixth, there is
no indication that their default was due to excusable neglect. Thus, the first six
Eitel factors weigh in favor of default judgment. The final factor -- the strong
policy favoring decisions on the merits -- is the only factor weighing against
default judgment, but it is far outweighed by the factors favoring default judgment.
Having considered all seven factors, this court finds that default judgment against

17

Signature Group and the Department of Health is warranted. Accordingly, the
court GRANTS the Government’s Motion for Default Judgment.
V. CONCLUSION
Based on the foregoing, the court GRANTS the Government’s Motion
for Summary Judgment, GRANTS the Government’s Motion for Default
Judgment, and ORDERS (1) that the Lindseys’ federal income tax liabilities and
associated penalties plus interest be reduced to judgment, (2) that the Lindseys’
federal tax liens be foreclosed on the Kiwi property, and (3) sale of the Kiwi
property. A separate Order of Foreclosure and Judicial Sale will follow this Order.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, July 30, 2013.

/s/ J. Michael Seabright
J. Michael Seabright
United States District Judge

United States v. Lindsey, et al., Civil No. 11-00664 JMS-KSC, Order Granting the
Government’s: (1) Motion for Summary Judgment; and (2) Motion for Default Judgment
18