United States of America v. Staton et al
Filing
321
ORDER DENYING DEFENDANT BRENDA L. STATON'S MOTION FOR LEAVE TO FILE AN INTERLOCUTORY APPEAL re 297 .. Signed by JUDGE ALAN C. KAY on 04/03/2018. (eps, )COURTS CERTIFICATE of Service - Non-Registered CM/ECF Part icipants served by First Class Mail on April 4, 2018 to the addresses of record listed on the Notice of Electronic Filing (NEF): Ronald B. Staton, 233 Kalalau St. Honolulu, HI 96825 ; Brenda L. Staton, 233 Kalalau St., Honolulu, HI 96825
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
___________________________________
UNITED STATES OF AMERICA,
)
)
Plaintiff,
)
)
v.
) Civ. No. 12-00319 ACK-KSC
)
RONALD B. STATON, BRENDA STATON,
)
NAVY FEDERAL CREDIT UNION,
)
CAPSTEAD MORTGAGE CORPORATION,
)
and STATE OF HAWAII,
)
)
Defendants.
)
___________________________________)
ORDER DENYING DEFENDANT BRENDA L. STATON’S MOTION FOR
LEAVE TO FILE AN INTERLOCUTORY APPEAL
For the reasons discussed below, the Court DENIES
Defendant Brenda Staton’s Motion for Leave to File an
Interlocutory Appeal.
BACKGROUND
For purposes of the current motion, the Court
discusses only those facts of particular relevance to Defendant
Brenda Staton’s (“Mrs. Staton”) Motion for Leave to File an
Interlocutory Appeal (the “Motion”). 1
ECF No. 297.
The Court issued an Order Granting Plaintiff’s Motion
for Summary Judgment on the Third Claim in the Complaint on
August 31, 2015.
ECF No. 157.
That same day, the Court issued
1
As the Court explained in its Minute Order entered March 21, 2018, ECF No.
299, the Court will construe Mrs. Staton’s notice of appeal, ECF No. 297, as
a motion to permit an interlocutory appeal under 28 U.S.C. § 1292. E.g., In
re Van Zandt, No. BR 12-03184-HLB, 2014 WL 1422973, at *1 (N.D. Cal. Apr. 11,
2014) (“The Court construes Debtor's notice of appeal . . . to be a motion
for leave to appeal an interlocutory order.”).
1
an Order of Foreclosure and Judicial Sale (“Foreclosure Order”)
of the Staton’s home (the “Residence”).
ECF No. 158.
On
September 1, 2015, however, Defendant Ronald Staton (“Mr.
Staton”) filed a petition for relief under 11 U.S.C. § 301 in
the United States Bankruptcy Court for the District of Hawaii.
ECF No. 160-1.
In view of Mr. Staton’s bankruptcy petition, the
Court stayed this case.
ECF No. 161.
The court reinstated the
Foreclosure Order on December 7, 2015, in response to the
Bankruptcy Court’s Order Granting United States’ Motion for
Relief from Automatic Stay.
ECF No. 168.
On November 16, 2016, Mr. Staton filed a second
petition for relief under 11 U.S.C. § 301 in the United States
Bankruptcy Court for the District of Hawaii.
ECF No. 208.
Again, in view of Mr. Staton’s bankruptcy petition, the Court
stayed this case.
ECF No. 209.
Mr. Staton’s second petition
for relief under 11 U.S.C. § 301 was dismissed, however, and on
April 24, 2017, the Court reinstated its Foreclosure Order and
directed the parties to proceed in accordance therewith.
ECF
No. 212.
The day before the scheduled foreclosure sale auction,
on June 20, 2017, Mrs. Staton filed a petition for relief under
11 U.S.C. § 301 in the United States Bankruptcy Court for the
District of Hawaii.
ECF No. 214.
Based on Mrs. Staton’s
bankruptcy petition, the Court stayed this case.
2
ECF No. 215.
The following month, on August 7, 2017, the Plaintiff
United States (the “Government”) filed a Motion for Relief from
Automatic Stay in the Bankruptcy Court.
The Bankruptcy Court
entered an order on October 6, 2017, granting the Government’s
Motion for Relief from Automatic Stay.
Accordingly, the Court
unstayed this case and reinstated its Foreclosure Order,
directing the parties to proceed in accordance therewith.
ECF
No. 219.
The foreclosure sale of the Residence was set for
December 20, 2017.
ECF No. 230.
But on December 8, 2017, Mr.
Staton filed an Emergency Motion to Strike Notice of Lis Pendens
(NOPA), ECF No. 226, along with a Supplement to the Emergency
Motion, ECF No. 227.
Mr. Staton represented that he obtained
financing in the amount of $1,032,000—sufficient to satisfy all
liens on the property—with a closing date set for December 8,
2017.
ECF No. 226.
The Court held a hearing on this matter on
December 11, 2017 and ordered the parties to have a settlement
conference with Magistrate Judge Chang.
ECF No. 234.
On December 18, 2017, Magistrate Judge Chang held the
settlement conference, which he ended when the Statons could not
produce a loan commitment from the lender for the abovedescribed financing.
ECF No. 244.
The Statons filed an
Emergency Motion Regarding Foreclosure and Request for a Hearing
and Stay Pending Hearing later that day.
3
ECF No. 241.
And—
still on December 18, 2017—the Court held a hearing on the
Statons’ motion, concluding that the foreclosure of the
Residence would proceed on December 20, 2017.
ECF No. 243.
The day before the foreclosure sale, on December 19,
2017, the Statons filed a Notice Re: Conditional Loan Approval
Letter and requested a stay of the foreclosure sale. 2
245.
ECF No.
The Court held a hearing the morning of December 20, 2017
regarding the Statons’ Notice. 3
ECF No. 251.
The Court denied
the request for a stay and ordered the foreclosure sale to
proceed.
Id.
The foreclosure sale occurred on December 20, 2017
around 12:00pm on the steps of the United States District Court
for the District of Hawaii.
Following the foreclosure sale, on
December 21, 2017, the Commissioner filed a Notice of Sale,
informing the Court that the Residence was sold to a third-party
bidder one day earlier for $1,135,000.00, subject to
confirmation by the Court.
ECF No. 254.
2
The conditional loan approval letter stated that the Residence was “[n]onowner occupied” and that “the borrower’s current intention is to rent the
property.” ECF No. 245-1 at 1.
3
At the December 20, 2017 hearing, factual circumstances were brought to the
attention of the Statons’ lender—who was in attendance at the hearing by
telephone—which caused the lender to confirm that it could not provide a loan
to the Statons. ECF No. 262-1 at 3-4. Specifically, Mrs. Staton disclosed
at the hearing that she had formed a business entity for the purpose of
obtaining business financing to pay down Mr. Staton’s debts, which the
Statons were claiming were “business debts.” Id. Moreover, the issue of
whether the Statons continued to reside in the Residence or instead intended
to use it as an investment property or other business venture was discussed.
Id. at 4. Because it became apparent that the Statons were seeking a loan
for personal rather than business purposes, the lender withdrew its offer of
conditional loan approval. Id.
4
On December 21, 2017, however, the Government filed a
Notice of Defendant Ronald Staton’s Bankruptcy Case, which
stated that: (1) Mr. Staton filed a new bankruptcy case on
December 20, 2017 and (2) the Government intended to seek relief
from the stay in that case so that the Commissioner’s sale could
be confirmed.
ECF No. 253.
On December 22, 2017, Mrs. Staton filed a Notice of
Pendency of Action (“notice of lis pendens”), asserting that she
was contesting the validity of the foreclosure sale as having
been filed in violation of Mr. Staton’s bankruptcy, which she
contended was filed at 11:54 a.m. before the foreclosure sale.
ECF No. 255.
She also asserted that the foreclosure sale failed
“to protect defendant interests in the property.”
at 2.
ECF No. 255
The Court entered a minute order on January 5, 2018,
setting a hearing on Mrs. Staton’s claim for January 31, 2018
and directing the parties to file briefs.
ECF No. 258.
On January 17, 2018, the Statons filed a Brief in
Support of Claim of Failure to Protect Defendant Interests in
Real Property.
ECF No. 260.
On January 23, 2018, the United
States filed a Memorandum in Response to the Statons’ December
22, 2017 and January 17, 2018 briefs.
ECF No. 261.
On January
24, 2018, Defendants Navy Federal Credit Union and Capstead
Mortgage Corporation (together, the “Lender Defendants”) filed a
Response to Brenda Staton’s Brief in Support of Claim of Failure
5
to Protect Defendant Interests in Real Property.
ECF No. 262.
The Bankruptcy Court granted the Government’s Motion
for Relief from Automatic Stay on January 31, 2018, and applied
the lifting of the stay retroactively to December 20, 2017.
This Court continued the hearing on Mrs. Staton’s claim
originally scheduled for January 31, 2018 until February 16,
2018 because the Government: (1) did not seek a waiver of the
14-day stay provided under Fed. R. Bankr. P. 4001(a)(3) in Mr.
Staton’s bankrupty case; and (2) failed to record the Bankruptcy
Court’s Order in Mrs. Staton’s prior bankruptcy case granting
relief from the stay, which provided for “‘in rem’ relief, i.e.
this order is binding with respect to the subject property for
240 days after the date of the entry of this order in any other
bankruptcy case that has been or may be filed.”
ECF No. 268.
The Government subsequently recorded the Bankruptcy Court’s in
rem Order with the Hawaii Bureau of Conveyances.
ECF No. 296 at
3 (citing ECF No. 294-1).
On February 12, 2018, Mr. Staton filed a Motion to
Vacate, Alter, or Amend Order Granting Relief from Automatic
Stay Retroactive to December 20, 2017 in the Bankruptcy Court.
On February 15, 2018, the Bankruptcy Court denied this Motion.
On that same date, Mr. Staton filed a Notice of Appeal of the
Bankruptcy Court’s Order and its subsequent denial of his Motion
to Vacate, Alter, or Amend.
6
The Court held a hearing on February 16, 2018 (after
expiration of the 14-day stay provided under Fed. R. Bankr. P.
4001(a)(3)) to consider Defendant Brenda Staton’s assertion that
there has been a failure “to protect defendant interests in the
property.”
Following the February 16, 2018 hearing, the Court
entered an Order Finding Defendant Brenda Staton’s Claim that
the Foreclosure Sale Fails to Protect Her Interest in the
Property to be Without Merit (the “February 16, 2018 Order”).
ECF No. 276.
On March 19, 2018, Mrs. Staton filed a notice of
appeal, ECF No. 297, appealing from the Court’s February 16,
2018 Order, ECF No 276.
The Court entered a minute order on
March 21, 2018, construing Mrs. Staton’s notice of appeal as a
motion for leave to file an interlocutory appeal, as well as
setting a briefing schedule and hearing on the Motion.
299.
ECF No.
The Government filed its Opposition to the Motion on March
23, 2018, ECF No. 303, to which the Lender Defendants and
Defendant State of Hawaii joined, ECF Nos. 304, 305.
The
Statons filed a Memorandum in Support of Brenda L. Staton’s
Motion to Certify Interlocutory Appeal (“Staton Mem.”) on March
27, 2018.
ECF No. 312. Lender Defendants then filed an
opposition to Mrs. Staton’s memorandum in support on March 29,
2018.
ECF. No. 317.
Separately, on March 26, 2018, the Statons filed a
7
Motion for Continuance of Hearings Scheduled for March 29, 2018
and April 6, 2018. ECF No. 307. The Government filed an
opposition on March 28, 2018. ECF No. 309.
By Minute Order
entered March 28, 2018, the Court denied the Statons’ motion for
a continuance and directed that the hearings set for March 29,
2018, and April 6, 2018, would be held as scheduled.
311.
ECF No.
The Court, however, granted Mrs. Staton permission to
appear at the March 29, 2018 hearing by telephone.
Id.
The
Courtroom Manager contacted Mrs. Staton the day before the
hearing to confirm these details and arrange Mrs. Staton’s
appearance by telephone.
The Court held a hearing on the Motion on March 29,
2018. Despite the Courtroom Manager’s prior coordination with
Mrs. Staton, she was unable to reach Mrs. Staton by telephone
after several attempts.
ECF No. 318.
However, Mr. Staton, who
appeared at the March 29, 2018 hearing in person, stated that he
represented Mrs. Staton and would present their joint statement.
Id.
DISCUSSION
The Statons contend that the February 16, 2018 Order is
an “appealable interlocutory Order pursuant to 28 U.S.C. §
1292(a)(1)[.]”
Staton Mem. at 1-2.
They also claim that the
Court should grant leave to file an interlocutory appeal
pursuant to 28 U.S.C. § 1292(b).
Id. at 2.
8
The Government,
Lender Defendants, and Defendant State of Hawaii oppose the
Statons’ Motion. See ECF Nos. 303 (“Pl.s Mem.”), 304 (“Lender
Def.’s Mem.’), 305 (“Haw. Mem.”).
The Court has reviewed the
parties’ arguments and addresses them in turn.
I.
Interlocutory Review Under 28 U.S.C. § 1292(a)(1)
Under 28 U.S.C. § 1292(a)(1), the courts of appeals
have jurisdiction over “[i]nterlocutory orders of the district
courts of the United States . . . granting, continuing,
modifying, refusing or dissolving injunctions.”
The Supreme
Court has stated that an order may be appealable under section
1292(a)(1) if it has the “practical effect” of denying an
injunction.
Carson v. American Brands, 450 U.S. 79, 83-84
(1981).
To determine whether an order has the practical effect
of denying an injunction, courts “look to [the order’s]
substantial effect rather than its terminology.”
Tagupa v.
East–West Center, 642 F.2d 1127, 1129 (9th Cir. 1981) (citation
omitted).
In so doing, courts have “construed the statute
narrowly” because “§ 1292(a)(1) was intended to carve out only a
limited exception to the final-judgment rule[.]”
U.S. at 84.
Carson, 450
Thus, even where an order has the practical effect
of refusing an injunction, the Supreme Court has explained that
“not all denials of injunctive relief are immediately
appealable; a party seeking review also must show that the order
9
will have a ‘serious, perhaps irreparable, consequence[.]’”
Stringfellow v. Concerned Neighbors in Action, 480 U.S. 370, 379
(1987) (citation omitted).
The Court finds that § 1292(a)(1) is inapplicable here
because the February 16, 2018 Order did not have the practical
effect of refusing an injunction.
The February 16, 2018 Order
resolved one claim in the Statons’ December 22, 2017 notice of
lis pendens—that the foreclosure sale failed “to protect
defendant interest in the property”—but a notice of lis pendens
is neither an injunction nor a request for an injunction.
The
Ninth Circuit analyzed in Orange County. v. Hongkong & Shanghai
Banking Corporation whether an order expunging a notice of lis
pendens has the practical effect of refusing an injunction.
F.3d 821, 825-27 (9th Cir. 1995) (“Orange”).
52
The Court finds
the Orange court’s analysis instructive here.
In Orange, the Ninth Circuit dismissed an appeal after
rejecting the appellants’ argument that an order expunging a lis
pendens was appealable under § 1292(a)(1).
The Orange court
first determined that a lis pendens is distinguishable from a
preliminary injunction.
Id. at 825.
The court reasoned that
while a “preliminary injunction absolutely forbids the relevant
parties from selling the subject property, and is backed by the
sanction of contempt . . . . [a] lis pendens, . . . does not
absolutely forbid the sale of the subject property.”
10
Id.
The
recording of a lis pendens “simply serves to provide potential
purchasers constructive notice of the pending proceedings
ensuring that anyone who acquires an interest in the property
takes subject to any judgment that may be rendered therein.”
Id. at 825 (citation and internal quotation marks omitted).
Significant here, the court next evaluated whether the
challenged order expunging the lis pendens had the practical
effect of granting or denying an injunction.
Id.
To make this
determination, the court first stated that “the three
fundamental characteristics of an injunction are that it is (1)
‘directed to a party,’ (2) ‘enforceable by contempt,’ and (3)
‘designed to accord or protect some or all of the substantive
relief sought by a complaint’ in more than preliminary fashion.”
Id. at 825-26 (citations omitted).
Comparing a lis pendens
against this standard, the court reasoned that a lis pendens is
not injunctive because it “is neither directed at a party nor
enforceable by contempt.”
Id. at 826.
The court emphasized
that, although “a lis pendens does attempt to protect the
substantive relief sought in the complaint . . . . the fact
[that it] does not compel a party to act or refrain from acting
under threat of contempt fundamentally distinguishes it from an
injunction.”
Id.
Accordingly, the court held the order
expunging the lis pendens was necessarily not appealable under §
1292(a)(1) because did not have the practical effect of refusing
11
an injunction.
Id. at 827; see also Golden State Bank v. First-
Citizens Bank & Tr. Co., 411 F. App’x 62 (9th Cir. 2011)
(dismissing appeal from an order expunging a lis pendens, among
other things, because the order “[wa]s not an order granting,
modifying or denying a preliminary injunction [under]. . . . 28
U.S.C.A. § 1292(a)(1)”); Sanai v. Sanai, 141 F. App’x 677 (9th
Cir. 2005) (holding that an order releasing a lis pendens was
not appealable under § 1292(a)(1)”).
Here, the February 16, 2018 Order was entered in
response to a single claim within the Statons’ notice of lis
pendens.
Like the notice of lis pendens in Orange, the Statons’
notice of lis pendens is neither a preliminary injunction nor a
request for injunctive relief; rather, the notice of lis pendens
by its terms simply gave notice that Mrs. Staton was contesting
“the validity of [the foreclosure] sale as . . . failing to
protect defendant interests in the property. . . . [and
therefore] no transfer of title shall go forth pending this
notice.”
ECF No. 255 at 2.
Because the Statons’ notice of lis
pendens was not injunctive, the February 16, 2018 Order finding
that Mrs. Staton’s claims therein lacked merit did not have the
practical effect of refusing an injunction.
The Court also notes that, even if Mrs. Staton were
correct that “[a]n Order directing the sale or disposal of
property . . . is the same thing as an Order” granting or
12
refusing an injunction, Staton Mem. at 1-2, that description
does not fit the February 16, 2018 Order from which Mrs. Staton
attempts to appeal.
Rather, the Court directed the sale of the
Residence in its August 31, 2015 Order of Foreclosure and
Judicial Sale.
ECF No. 158.
The Order to which Mrs. Staton’s
current Motion relates decided only that the Statons’ claim
within their notice of lis pendens that the foreclosure sale
failed to protect their interests in the property was without
merit.
Because the February 16, 2018 Order did not have the
practical effect of refusing an injunction, § 1292(a)(1) is
inapplicable.
II.
Interlocutory Review Under 28 U.S.C. § 1292(b)
The Statons also contend that the Court should permit
them to file an interlocutory appeal under 28 U.S.C. § 1292(b).
Courts have explained that a “movant seeking an interlocutory
appeal [under 28 U.S.C. § 1292(b)] has a heavy burden to show
that exceptional circumstances justify a departure from the
basic policy of postponing appellate review until after the
entry of a final judgment.”
Coopers & Lybrand v. Livesay, 437
U.S. 463, 475 (1978) (internal quotation marks omitted); see
also James v. Price Stern Sloan, Inc., 283 F.3d 1064, 1067 n.6
(9th Cir. 2002) (“Section 1292(b) is a departure from the normal
rule that only final judgments are appealable, and therefore
13
must be construed narrowly.”); Du Preez v. Banis, No. CIV. 1400171 LEK-RL, 2015 WL 857324, at *1 (D. Haw. Feb. 27, 2015)
(collecting cases).
Certification for interlocutory appeal
under § 1292(b) is only appropriate where: (1) the order
involves a controlling question of law; (2) a substantial ground
for difference of opinion exists; and (3) an immediate appeal
from the order may materially advance the ultimate termination
of the litigation
A. Whether the February 16, 2018 Order Involves a Controlling
Question of Law
A question of law is controlling if the resolution of
the issue on appeal could “materially affect the outcome of
litigation in the district court.”
In re Cement Antitrust
Litig., 673 F.2d 1020, 1026 (9th Cir. 1981).
A “question of
law” under § 1292(b) means a “pure question of law” rather than
a mixed question of law and fact or the application of law to a
particular set of facts. 4
Chehalem Physical Therapy, Inc. v.
Coventry Health Care, Inc., No. 09-CV-320-HU, 2010 WL 952273, at
*3 (D. Or. Mar. 10, 2010) (collecting cases); see also McFarlin
v. Conseco Servs., LLC, 381 F.3d 1251, 1259 (11th Cir. 2004)
(Section “1292(b) appeals were intended, and should be reserved,
4
Questions of law appropriate for interlocutory appeal include, for example,
“‘the determination of who are necessary and proper parties, whether a court
to which a cause has been transferred has jurisdiction, or whether state or
federal law should be applied.’” In re Cement Antitrust Litig., 673 F.2d at
1026 (quoting United States v. Woodbury, 263 F.2d 784, 787 (9th Cir. 1959)).
14
for situations in which the court of appeals can rule on a pure,
controlling question of law without having to delve beyond the
surface of the record in order to determine the facts”); Oliner
v. Kontrabecki, 305 B.R. 510, 529 (N.D. Cal. 2004) (“Because the
alleged ‘controlling questions of law’ raised by Kontrabecki are
inextricably intertwined with the bankruptcy court’s factual
findings, an interlocutory appeal is not appropriate.”); In re
Bridgestone/Firestone, Inc., Tires Prods. Liab. Litig., 212 F.
Supp. 2d 903, 907 (S.D. Ind. 2002) (stating that a question of
law is one that presents an abstract legal issue that can be
decided quickly and cleanly without having to study the record).
The Court finds that Mrs. Staton’s supposed questions
of law are not pure questions of law appropriate for
interlocutory review.
First, determining whether the
foreclosure sale in this matter protected “defendant interests
in the property” requires the application of law to this
litigation’s particular set of facts.
2018 Order makes this clear.
The Court’s February 16,
In analyzing whether the
foreclosure sale protected “defendant interests in the
property,” the Court applied the law to determine, among other
issues, whether: (1) the successful bid at the foreclosure sale
auction was adequate compared to a purported recent appraisal
15
the Statons claimed but did not support, 5 ECF No. 276 at 7-8; (2)
Mrs. Staton would only receive around $50,000 from the
foreclosure sale auction, id. at 9; and (3) the United States
frustrated the Statons’ efforts to obtain loans when it refused
to lift its Notice of Pendency of Action notwithstanding the
Statons’ failure to produce a loan commitment from any lender,
id. at 11.
The Court first notes that it has not yet confirmed
the foreclosure sale.
The Court has announced that bidding will
be re-opened at the sale confirmation hearing, and the
Commissioner anticipates further bids. See ECF Nos. 285-1, 291.
Second, these issues do not present abstract legal questions.
Their resolution is inextricably intertwined with the facts of
this litigation, and the court of appeals would be required to
delve far beyond the surface of the record to review the
February 16, 2018 Order.
Keystone Tobacco Co., Inc. v. United
States Tobacco Co., 217 F.R.D. 235, 239 (D.D.C.2003) (“Where the
5
To the extent the Statons continue to argue that the successful bid falls
short of an alleged recent appraisal of the Residence, their claims are not
persuasive. E.g., Staton Mem. at 2. First, the Statons have failed to
provide any support for this supposed recent appraised value, which differs
significantly from the appraised value listed on a recent title report the
Government filed on March 15, 2018. See ECF No. 294-1. Moreover, any
arguments regarding the adequacy of the sale price must consider the Statons’
interactions with the Commissioner which made the pre-sale process more
difficult. E.g., ECF No. 270 ¶¶ 7-18. As the Court has explained, the
Statons’ resistance may have decreased the amount of the bid. ECF No. 276 at
8 (“[I]n the past, the Statons did not always cooperate with the Commissioner
regarding pre-sale open houses held at the residence and their lack of
cooperation may be a reason that the auction price was not higher.” (quoting
ECF No 261 at 4.)).
16
crux of an issue decided by the court is fact-dependent, the
court has not decided a ‘controlling question of law’ justifying
immediate appeal”); In re Bridgestone/Firestone, Inc. Tires
Prods. Liab. Litig., 212 F. Supp. 2d 903, 907 (S.D. Ind. 2002)
(“A question of law in this situation is one that presents ‘an
abstract legal issue’ that can be ‘decide[d] quickly and cleanly
without having to study the record’” (citation omitted)); Hulmes
v. Honda Motor Co., Ltd., 936 F. Supp. 195, 210 (D.N.J.1996),
aff’d 141 F.3d 1154, cert denied, 525 U.S. 81 (1998) (“Section
1292(b) was not designed to secure appellate review of factual
matters or of the application of the acknowledged law to the
facts of a particular case[.]” (internal quotation marks
omitted)).
The Statons also contend that a separate but related
controlling question of law exists: whether the Government could
properly enforce its federal tax liens against Mr. Staton
through foreclosure and sale of the Residence where the Statons
own the Residence as tenants by the entirety.
Staton Mem. at 2.
This Court has already resolved the propriety of the
Government’s enforcement of its tax liens through foreclosure.
In its August 31, 2015 Order Granting Plaintiff’s
Motion for Summary Judgment on the Third Claim in the Complaint,
ECF No. 157, the Court stated that “[s]pouses that own property
as tenants by the entirety under Hawaii law hold ‘property’ or
17
‘rights to property’ subject to liens under 26 U.S.C. § 6321.”
ECF No. 157 at 16-17 (citing U.S. v. Lindsey, Civ. No. 11-00664
JMS-KSC, 2013 WL 3947757, at *5 (D. Haw. July 30, 2013)).
Court further explained:
In order to enforce its tax liens, the
Government is empowered, under 26 U.S.C. §
7403, to join all parties with an interest
in the subject property and request a
judicial sale of the property. United
States v. Rodgers, 461, 677, 691-92 (1983)
(citing 26 U.S.C. § 7403). The Government
may seek the sale not only of the debtor’s
interest in the property, but the entire
property held by the debtor and his spouse
in a tenancy by the entirety. Id. at 69394; see also In re Pletz, 221 F.3d 1114,
1118 (9th Cir. 2000). In such instances,
the Court may order the sale of the entire
property and compensate the nondebtor spouse
for her ownership interest. Pletz, 221 F.3d
at 1117 (citations omitted). Each spouse
owns a fifty percent interest in property
held as tenants by the entirety under Hawaii
law. Lindsey, 2013 WL 3947757 at *6 n.3
(citations omitted); United States v. Webb,
Civ. No. 07-00564 JMS-KSC, 2008 WL 4761745 *
6 n.12 (D. Haw. Oct. 23, 2008) (citations
omitted) . . . The evidence shows that
Ronald Staton and Brenda Staton purchased
and own the Residence as tenants by the
entirety, as reflected in the Agreement of
Sale and Deed. Duffy Decl. ¶¶ 8-9, Exs. G,
H, ECF Nos. 109-2, 109-4, 109-5.
. . .
Brenda Staton has an interest in the
Residence that must be taken into account.
According to the Title Report for the
Residence, she and Ronald Staton own the
Residence as tenants by the entirety. Title
Report at 1, ECF No. 138-2. In this
jurisdiction, a court may order the sale of
18
The
the entire property under 26 U.S.C. § 7403
and compensate a nondebtor spouse for her
fifty percent interest from the sale
proceeds. See Pletz, 221 F.3d at 1117;
Lindsey, 2013 WL 3947757 at * 6 n.3
(citations omitted); Webb, 2008 WL 4761745 *
6 n.12 (citations omitted).
However, the Title Report also shows that
Brenda and Ronald Staton are jointly liable
on the Capstead mortgage for the Residence.
See Title Report at 3, ECF No. 138-2. The
uncontested amount owed under the Statons’
mortgage is $294,708.82 as of July 31, 2015.
See Capstead’s Supp. Rpt. at 2, ECF No. 151;
Sieber Affd. ¶ 5, ECF No. 156; Tr. 15:11-18.
Accordingly, since the Court has determined
that the Statons’ Residence should be
foreclosed and sold free and clear of all
liens, including Capstead’s senior mortgage,
without objection from any party, the
foreclosure of Capstead’s mortgage
necessarily includes Brenda Staton’s onehalf interest in the Residence.
ECF No. 157 at 17-18, 22-23; see also ECF No. 276 at 9-10.
Moreover, the Supreme Court has previously held that the federal
tax liens of one spouse may attach to property a married couple
owns as tenants by the entirety.
United States v. Craft, 535
U.S. 274, 284 (2002) (“Excluding property from a federal tax
lien simply because the taxpayer does not have the power to
unilaterally alienate it would . . . exempt a rather large
amount of what is commonly thought of as property.”).
Moreover, Hawaii law required that the Lender
Defendants, as senior lienholders, be made parties to this
action.
Hawaii Revised Statutes § 667-2 mandates that:
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All prior and subsequent mortgage creditors,
whose names are or can be discovered by the
party foreclosing a mortgage, shall be made
parties to the action.
See also Fed. R. Civ. P. 19(a)(1)(A)-(B)(ii).
As explained
above, Mrs. Staton was jointly and severally liable on the
Capstead mortgage, and the inclusion of the foreclosure of the
mortgage is thoroughly set forth in the Order Granting
Plaintiff’s Motion for Summary Judgment on the Third Claim in
the Complaint, ECF No. 157, and the Order of Foreclosure and
Judicial Sale, ECF No. 158, both filed on August 31, 2015.
Lender Defendants have never objected to the foreclosure of the
Residence in this action.
E.g., ECF 157 at 22 n.10 (“[A]s noted
above, the parties in this case have not objected to a sale of
the Residence free and clear of all liens.”).
Under these
circumstances, the fact that the Statons own the Residence as
tenants by the entirety does not give rise to a pure question of
law as to Mrs. Staton’s rights in the Residence.
Because the February 16, 2018 Order does not involve a
controlling question of law for purposes of § 1292(b), an
interlocutory appeal is inappropriate.
B. Whether a Substantial Ground for Difference of Opinion
Exists
Further, Mrs. Staton’s disagreement with the February
16, 2018 Order is not sufficient to satisfy § 1292’s second
element—that a “substantial ground for a difference of opinion
20
exists” on the disputed question of law.
There is a
“substantial ground for difference of opinion” if “there is a
genuine dispute over the question of law that is the subject of
the appeal.”
In re Cement Antitrust Litig., 673 F.2d at 1026
(emphasis added); see also Couch v. Telescope, Inc., 611 F.3d
629, 633 (9th Cir. 2010) (“To determine if a substantial ground
for difference of opinion exists under § 1292(b), courts must
examine to what extent the controlling law is unclear.”).
Such
a dispute exists, for example, if the circuits are in
disagreement and the court of appeals in which the district
court sits has not decided the issue, the issue involves
complicated questions of foreign law, or the issue is a novel
and difficult one of first impression.
Couch, 611 F.3d at 633.
“However, just because a court is the first to rule on a
particular question or just because counsel contends that one
precedent rather than another is controlling does not mean” that
sufficient grounds exist.
Id.
Said differently, “[a] party’s
strong disagreement with the Court’s ruling is not sufficient
for there to be a ‘substantial ground for difference’; the
proponent of an appeal must make some greater showing.”
Kowalski v. Anova Food, LLC, 958 F. Supp. 2d 1147, 1154 (D. Haw.
2013) (citation omitted); see also First Am. Corp. v. Al–Nahyan,
948 F. Supp. 1107, 1116 (D.D.C. 1996) (“Mere disagreement, even
if vehement, with a court’s ruling on a motion . . . does not
21
establish a ‘substantial ground for difference of opinion’
sufficient to satisfy the statutory requirements for an
interlocutory appeal.”).
The Statons have not shown that a substantial ground
for a difference of opinion exists here.
In the February 16,
2018 Order, the Court addressed and refuted the five bases for
Mrs. Staton’s claim that the foreclosure sale failed to protect
“defendant interests in the property.”
ECF No. 276 at 7-12.
For example, whether Mrs. Staton will receive closer to $50,000
or $300,000 or more from the foreclosure sale proceeds requires
that the Court make a mathematical calculation rather than a
complicated legal analysis.
Id. at 10-11.
In addition, there is no substantial ground for a
difference of opinion regarding the Government’s ability to
enforce its tax liens against Mr. Staton through foreclosure and
sale of the Residence.
See cases cited supra at 18-19.
Indeed,
the Statons do not cite conflicting or inconsistent authority on
the issue or bring to the Court’s attention a circuit split.
See Couch, 611 F.3d at 633.
Rather, the Statons simply state
that the Court’s February 16, 2018 Order was wrong.
at 2.
Staton Mem.
But the law the Court applied in its August 31, 2015
Order Granting Plaintiff’s Motion for Summary Judgment on the
Third Claim in the Complaint, which it restated in the February
16, 2018 Order, is clear and well grounded.
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And of course, Mrs.
Staton is jointly and severally liable under the Lender
Defendants’ mortgage, which is necessarily joined to this action
and is being foreclosed.
Finally, even putting aside these considerations,
absent a controlling question of law, the Statons cannot take
the first step toward showing that any “substantial ground for a
difference of opinion” exists over the question of law at issue.
See In re Cement Antitrust Litig., 673 F.2d at 1026; Couch, 611
F.3d at 633.
C. Whether the Proposed Interlocutory Appeal Will Materially
Advance the Ultimate Termination of the Litigation
Finally, granting leave for the Statons to file an
interlocutory appeal would materially delay this litigation.
A
district court generally should not permit an interlocutory
appeal where doing so would prolong litigation rather than
advance its resolution.
Fenters v. Yosemite Chevron, 761 F.
Supp. 2d 957, 1005 (E.D. Cal. 2011).
Courts within the Ninth
Circuit have held that resolution of a question materially
advances the termination of litigation if it “facilitate[s]
disposition of the action by getting a final decision on a
controlling legal issue sooner, rather than later [in order to]
save the courts and the litigants unnecessary trouble and
expense.”
See United States v. Adam Bros. Farming, Inc., 369 F.
Supp. 2d 1180, 1182 (C.D. Cal. 2004); see also In re Cement
23
Antitrust Litig., 673 F.2d at 1026 (stating that § 1292(b) is
used “only in exceptional situations in which allowing an
interlocutory appeal would avoid protracted and expensive
litigation”).
After nearly six years of litigation in this matter,
it needs to proceed toward its ultimate resolution as
expeditiously as possible.
While reaching the correct
resolution is of paramount importance, this matter has been
marred by delay, with the Statons continuing to challenge the
foreclosure sale proceedings in this Court and the United States
Bankruptcy Court.
See Pl.’s Mem. at 4; Lender Def.’s Mem. at 3.
A piecemeal appeal at this juncture likely would not promote the
efficient resolution of this matter; rather, it would further
delay an already protracted litigation.
Accordingly, Mrs.
Staton cannot satisfy the prerequisites of § 1292(b) and her
motion for leave to file an interlocutory appeal is denied.
CONCLUSION
For the foregoing reasons, the Court DENIES Mrs.
Staton’s Motion for Leave to File an Interlocutory Appeal.
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IT IS SO ORDERED.
DATED: Honolulu, Hawaii, April 3, 2018
________________________________
Alan C. Kay
Sr. United States District Judge
United States v. Staton, et al., Civ. No. 12-00319 ACK-KSC, Order Denying
Defendant Brenda L. Staton’s Motion for Leave to File an Interlocutory
Appeal.
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