United States of America v. Staton et al

Filing 416

ORDER. Signed by JUDGE ALAN C. KAY on 12/20/2018. Excerpt of order:"[T]he Court (1) determines the amount of principal, interest and penalties on Defendant Ronald B. Staton's tax liabilities owed to Plaintiff United States; (2) determines the amount of principal, interest and costs owing to the Lender Defendants under the Statons' mortgage; (3) approves the Commissioner's Request for additional commissioner fee s and costs, as modified herein; (4) determines the amount of proceeds from the sale of the subject property to which each party is entitled; and (5) orders disbursement of the remaining sales proceeds." I. Amou nt of Principal, Interest and Penalties to which Plaintiff United States is Entitled. "[T]he Court approves Mr. Staton's aggregate tax liability to Plaintiff United States, as of December 20, 2018, in the amount of $ ;418,624.78." II. Amount of Principal, Interest and Costs Owing to the Lender Defendants under the Statons' Mortgage. "[T]he Court approves a total amount of $368,831.67 for the Lender Defendants.III. Additional Commissioner Fees and Costs to Which the Commissioner is Entitled. "The Court approves a total amount of $14,658.36 consisting of: (1) $12,207.50 in additional commissioner fees for past services; (2) a $669.46 General Excise Tax; [footnote omitted] and (3) a $1,781.40 reimbursement for costs associated with the eviction." IV. Determination of the Amount of Sa le Proceeds to Which Each Party is Entitled."Pursuant to its April Order setting forth the order of priority for all future disbursements [ECF 330 ], this Court approves the amount of sales proceeds to which each party is en titled as follows: 1. To Commissioner Lyle S. Hosoda for the additional commissioner fees and costs he has incurred since the Court approved his initial request for commissioner fees and costs, a total amount of $14,658.36; 2. To the Lender Defendants Navy Federal Credit Union and Capstead Mortgage for the principal, interest and recording fee to which they are entitled in the amount of $306,768.67 (consisting of $289,197.10 in principal, $17,546.57 in inte rest, and a $25.00 recording fee), plus attorneys' fees and costs in the amount of $62,063.00, for a total amount of $368,831.67; The amount of sales proceeds remaining after payment to the Commissioner and the Lend er Defendants is $724,061.69. That amount is to be distributed as follows:3. To Defendant Brenda L. Staton, fifty (50) percent of the remaining proceeds for a total amount of $362,030.85; and4. To Plaintiff United States, fif ty (50) percent of the remaining proceeds for a total amount of $362,030.84."Conclusion:"For the foregoing reasons the Court directs the Clerk of Court to disburse the remaining proc eeds of the sale to each of the parties in accordance with the amounts approved above.Pursuant to Rule 54 of the Federal Rules of Civil Procedure, the Clerk of Court is further directed to enter judgment in accordance with this order, including a deficiency judgment against Mr. Staton in the amount of $56,593.94." IT IS SO ORDERED. Signed by U.S. DISTRICT JUDGE ALAN C. KAY on 12/20/2018. (afc)COURTS CERTIFICATE of Service - Non-Registered CM/ECF Participants have been served by First Class Mail to the addresses of record listed on the Notice of Electronic Filing (NEF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I
___________________________________
UNITED STATES OF AMERICA,
)
)
Plaintiff,
)
)
v.
) Civ. No. 12-00319 ACK-KSC
)
RONALD B. STATON, BRENDA L. STATON,)
NAVY FEDERAL CREDIT UNION,
)
CAPSTEAD MORTGAGE CORPORATION,
)
and STATE OF HAWAI`I,
)
)
Defendants.
)
___________________________________)
ORDER
For the reasons set forth below, the Court (1)
determines the amount of principal, interest and penalties on
Defendant Ronald B. Staton’s tax liabilities owed to Plaintiff
United States; (2) determines the amount of principal, interest
and costs owing to the Lender Defendants under the Statons’
mortgage; (3) approves the Commissioner’s Request for additional
commissioner fees and costs, as modified herein; (4) determines
the amount of proceeds from the sale of the subject property to
which each party is entitled; and (5) orders disbursement of the
remaining sales proceeds.
BACKGROUND
For purposes of this Order, the Court will not recount
this case’s lengthy procedural history beginning in 2012.

1

The

Court only discusses those facts of specific relevance to the
issues that this Order addresses.
On April 10, 2018, the Court filed an Order Confirming
Sale, Approving Commissioner’s Report, and Determining Priority
of Future Disbursements (the “April Order”).

ECF No. 330.

In

the April Order, the Court (1) confirmed the sale of the subject
property; (2) approved the Commissioner’s Report requesting
commissioner fees and costs related to the sale of the subject
property; and (3) approved the proposed order of priority for
future disbursements.

April Order at 1.

As to the distribution

of sales proceeds, the Court reserved consideration of that
issue pending a final determination of: (1) the reasonable
amount of attorneys’ fees and costs to which Defendants Navy
Federal Credit Union and Capstead Mortgage Corporation (the
“Lender Defendants”) are entitled; and (2) the amount of
interest and penalties to which Plaintiff United States is
entitled.

Id. at 1-2.

The Court stated that it would rule on

the ultimate amount of sales proceeds to be distributed to each
party and order distribution of the proceeds following a
separate hearing.

Id.

On September 27, 2018, the Magistrate Judge filed its
Findings and Recommendation (the “F&R”) regarding the amount of
attorneys’ fees and costs to which the Lender Defendants are
entitled.

ECF No. 400.

The Magistrate Judge found that the

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Lender Defendants were entitled to total award of $62,063.00
consisting of (1) $35,000.00 in attorneys’ fees and costs as
agreed to by Plaintiff United States and the Lender Defendants
in a Stipulation dated February 24, 2015; and (2) $27,063.00 in
attorneys’ fees incurred in related bankruptcy proceedings.
at 12.

F&R

The Magistrate Judge denied the Lender Defendants’

request for costs incurred in the bankruptcy proceedings because
the Lender Defendants did not adequately substantiate the costs
that they incurred.

Id. at 13.

This Court reviewed the hours

billed and rates charged and found that the attorneys’ fees and
costs the Magistrate Judge recommended were reasonable; on
October 18, 2018, this Court filed an Order Adopting the
Magistrate Judge’s Findings and Recommendation.

ECF No. 404.

On May 16, 2018, Plaintiff United States filed a
Memorandum correcting and clarifying the amount of interest and
penalties that it seeks to recover in this matter.

ECF No. 369.

On the same day, the Lender Defendants filed a Statement of No
Position with respect to Plaintiff United States’s Memorandum.
ECF No. 373.
In its April Order, the Court approved the
Commissioner’s Report of Sale dated February 14, 2018, ECF No.
270, in which the Commissioner requested a total of $39,048.15
consisting of:

(1) $30,065.00 in commissioner fees for past

services; (2) $2,000.00 in commissioner fees for anticipated

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future services; (3) a $1,416.67 General Excise Tax; and (4) a
$5,566.48 reimbursement for costs associated with publicizing
the foreclosure sale.

April Order at 22.

On May 11, 2018, the

Commissioner received a check for $39,048.15 in satisfaction of
his Court-approved Report.

ECF No. 395-1.

On June 27, 2018, the Commissioner filed a Declaration
requesting additional commissioner fees and costs relating to
his efforts to remove Defendants Ronald B. Staton and Brenda L.
Staton (the “Statons”) and their personal property from the
subject property post-closing.

ECF No. 395.

In his

Declaration, the Commissioner requested a total of $18,658.36
consisting of:

(1) $14,207.50 in additional commissioner fees

for past services; (2) $2,000.00 in additional commissioner fees
for anticipated future services; (3) a $669.46 General Excise
Tax; and (4) a $1,781.40 reimbursement for costs associated with
the eviction. Decl. ¶ 20.

On June 28, 2018, Plaintiff United

States filed a Statement of No Opposition to the Commissioner’s
Request.

ECF No. 396.
On October 18, 2018, this Court entered a Minute

Order, ECF No. 405, that:

(1) directed the Lender Defendants to

file any objections to the Commissioner’s Declaration by Monday,
October 29, 2018; and (2) directed the Statons to file any
objections to Plaintiff United States’s Memorandum and the
Commissioner’s Declaration by the same deadline.

4

On October 19,

2018, the Lender Defendants filed a Statement of No Position
regarding the Commissioner’s Declaration.

ECF No. 406.

On

October 29, the Statons filed a request, ECF No. 408, asking for
additional time to object to Plaintiff United States’s
Memorandum and the Commissioner’s Declaration.

On October 30,

2018, the Court granted the Statons an extension until November
5, 2018.

ECF No. 407.

On November 5, 2018, the Statons filed a

Response (the “Response”) that raises objections to both
Plaintiff United States’s Memorandum and the Commissioner’s
Declaration.

ECF No. 409.

In this Order, the Court addresses each of the
following issues in turn:

(1) the amount of principal, interest

and penalties to which Plaintiff United States is entitled; (2)
the amount of principal, interest and costs owing to the Lender
Defendants under the Statons’ mortgage; (3) the amount of
additional commissioner fees and costs to which the Commissioner
is entitled; and (4) the amount of proceeds from the sale of the
subject property to which each party is entitled.

Finally, the

Court addresses disbursement of the proceeds of the sale in
accordance with the order of priority set forth in its April
Order.

The Court, in the exercise of its discretion pursuant to

Local Rule 7.2(d), finds that these matters are appropriate for
disposition without a hearing.

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DISCUSSION
I.

Amount of Principal, Interest and Penalties to which
Plaintiff United States Is Entitled
On February 15, 2018, Plaintiff United States filed a

Notice (the “Notice”), ECF No. 271, providing that the aggregate
balance of Mr. Staton’s tax liabilities for the years 2001
through 2007, as of March 30, 2018, was $412,166.31.
2.

Notice at

In its April Order, the Court approved Mr. Staton’s tax

liabilities owed to Plaintiff United States in the amount of
$355,526.74. 1

April Order at 26.

Given the discrepancy between

the amount set forth in Plaintiff United States’s Notice and the
amount approved in the Court’s April Order, the Court directed
Plaintiff United States to file a Memorandum clarifying the
amount of penalties and interest it is seeking to recover from
Mr. Staton.

Id.

Plaintiff United States filed its Memorandum

on May 16, 2018.

1

This amount was determined pursuant to two stipulations filed
by Plaintiff United States and Mr. Staton. Pursuant to the
first stipulation, filed on September 30, 2014, the Court
entered judgment against Mr. Staton with respect to tax years
2001, 2002, 2003, and 2005 in the amount of $273,715.67, plus
interest accruing after July 1, 2014 and less any payments made
or credits applied after that date. ECF No. 104 at 2. Pursuant
to the second stipulation, filed on November 25, 2014, the Court
entered judgment against Mr. Staton with respect to tax years
2004, 2006, and 2007 in the amount of $81,811.07, plus interest
accruing after October 31, 2014 and less any payments made or
credits applied after that date. ECF No. 108 at 2.

6

Plaintiff United States explains that after the Court
filed its April Order, the Internal Revenue Service (the “IRS”)
determined that it made a calculation error when it added
failure to pay penalties for the 2001, 2002, and 2003 Tax Years
in the total amount of $8,523.00.
4.

United States’s Memorandum at

Because the IRS added the penalties in error, Plaintiff

United States corrected the aggregate amount owed as of March
30, 2018, which it states is $403,643.31.

Id.

Plaintiff United States explains that the discrepancy
between the Court’s judgment of $355,526.74 and the requested
amount of $403,643.31 is due to (1) two payments made by Mr.
Staton in the amounts of $992.00 and $186.00 for the 2001 Tax
Year; (2) a collection fee of $128.00 for the 2001 Tax Year; and
(3) interest in the total amount of $49,166.57 for the 2001-2007
Tax Years as of March 30, 2018.

Id. at 6-11.

The Statons argue that “the United States has
wrongfully added extra penalties and interest” to the tax
judgments.

Response at 3.

With respect to the “extra

penalties,” the Court finds that this argument is without merit.
As discussed, Plaintiff United States eliminated failure to pay
penalties totaling $8,523.00 which the IRS had erroneously added
to Mr. Staton’s tax liabilities when Plaintiff United States
filed its Notice.

United States’s Memorandum at 4.

7

The Statons also argue that Plaintiff United States
inappropriately added interest to the tax judgment based upon
the stipulations approved by this Court.

Response at 3.

The

Court rejects this argument given that the stipulation and
judgment for the 2001, 2002, 2003, and 2005 Tax Years expressly
provides for “interest accruing after July 1, 2014 pursuant to
26 U.S.C. § 6621.”

ECF No. 104 ¶ 1.

Similarly, the stipulation

and judgment for the 2004, 2006, and 2007 Tax Years expressly
provides for “interest accruing after October 31, 2014 pursuant
to 26 U.S.C. § 6621.”

ECF No. 108 ¶ 1.

As Plaintiff United

States explains in detail throughout its Memorandum, interest
has been added to the tax judgments through March 30, 2018 in
precise accordance with these provisions.

United States’s

Memorandum at 6-11.
The interest owing on Mr. Staton’s tax liabilities did
not stop accruing on March 30, 2018.

Accordingly, on December

6, 2018, the Court entered a Minute Order directing Plaintiff
United States to file a Notice setting forth the amount of
interest owing on Mr. Staton’s tax liabilities from March 30,
2018 to December 20, 2018.

ECF No. 411.

On December 13, 2018,

Plaintiff United States filed a Notice indicating that the
amount of interest owing for that 265-day period is $14,981.47.
ECF No. 412.

The Court has reviewed the Notice and the

8

calculations therein, and finds that the amount of interest
requested for this period is appropriate.
For the foregoing reasons, the Court finds that the
Statons’ objections to Plaintiff United States’s Memorandum are
without merit.

The Court has reviewed Plaintiff United States’s

Memorandum and the calculations set forth therein, as well as
the Notice providing the amount of interest owing from March 30,
2018 to December 20, 2018, and finds that Plaintiff United
States’s request for interest in the total amount of $64,148.04,
as of December 20, 2018, is appropriate.

The Court also finds

that the collection fee of $128.00 assessed for Mr. Staton’s
2001 Tax Year is appropriate.

Accordingly, the Court approves

Mr. Staton’s aggregate tax liability to Plaintiff United States,
as of December 20, 2018, in the amount of $418,624.78.
II.

Amount of Principal, Interest and Costs Owing to the Lender
Defendants under the Statons’ Mortgage
The Lender Defendants initially requested $289,949.89

in principal and $4,357.59 in interest, as of March 1, 2018.
ECF No. 282.

In preparing this Order, the Court noted several

mathematical errors in the Lender Defendants’ submissions, which
the Court described in a Minute Order dated December 5, 2018.
ECF No. 410.

In that Minute Order, the Court directed the

Lender Defendants to file a Notice indicating the total amount
owing under the loan as of December 20, 2018, including the

9

amount of principal due as of that date as well as the amount of
interest.

The Court also directed the Lender Defendants to

include the total amount owing under the loan as of March 1,
2018, including the amount of principal due as of that date as
well as the amount of interest.

The Lender Defendants’ filed

their Notice on December 13, 2018.

ECF No. 413.

The Lender Defendants’ Notice states that they were
owed $289,575.64 in principal and $4,973.84 in interest as of
March 1, 2018.

The Notice also stated that as of December 20,

2018, the Lender Defendants are owed $289,197.10 in principal
and $17,546.57.

The Lender Defendants also request a recording

fee in the amount of $25.00.

Accordingly, the Lender Defendants

request a total amount owing under the Statons’ mortgage of
$306,768.67.

The Court has reviewed the figures and

calculations provided by the Lender Defendants, and finds that
the amount requested is appropriate.
As of the date of this Order, December 20, 2018, the
Court finds that the total amount owing under the Statons’
mortgage to which the Lender Defendants are entitled is
$306,768.67.

This amount consists of $289,197.10 in principal;

$17,546.57 in interest; and a $25.00 recording fee.

Together

with the approved attorneys’ fees and costs in the amount of
$62,063.00, the Court approves a total amount of $368,831.67 for
the Lender Defendants.

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III. Additional Commissioner Fees and Costs to Which the
Commissioner Is Entitled
The Commissioner has requested additional commissioner
fees and costs in the amount of (1) $14,207.50 in commissioner
fees for additional past services; (2) $2,000.00 in commissioner
fees for additional anticipated future services; (3) a $669.46
General Excise Tax; and (4) a $1,781.40 reimbursement for costs
associated with the eviction.

Commissioner’s Decl. ¶ 20.

The

Commissioner’s request for additional commissioner fees and
costs is based primarily upon the difficulties and challenges
that were faced in removing the Statons and their personal
belongings from the property.
However, the Court notes that the request for
$14,207.50 in additional commissioner fees for past services
does not account for the $2,000.00 in additional anticipated
commissioner fees that the Court approved in its April Order and
that were paid to the Commissioner on May 11, 2018.

Therefore,

the Court finds it appropriate to reduce the Commissioner’s
request by $2,000.00 and approve additional commissioner fees
for past services in the amount of $12,207.50.
The Court also declines to approve the Commissioner’s
request for $2,000.00 in additional anticipated commissioner
fees for future service.

Decl. ¶ 20.

The Commissioner argues

that this request is reasonable because one of the many appeals

11

the Statons have filed in this case concerns the Commissioner’s
conduct during the course of the sale of the subject property,
removal of the Statons’ belongings, and eviction of the Statons.
Id. ¶ 22.

The Court declines to approve the Commissioner’s

request at this time.

If the Commissioner does incur additional

expenses, then he should at that time file a motion and
affidavit before the Ninth Circuit in conjunction with any
appeals in which he has incurred attorneys’ fees and costs.
In their Response, the Statons object to the
Commissioner’s request on several grounds which the Court now
addresses.
First, the Statons argue that no additional funds
should be distributed to the Commissioner because the Order
denying the Statons’ “Emergency Motion for Injunction,” ECF No.
375, is currently on appeal.

Response at 2.

The Statons filed

their “Emergency Motion for Injunction” in an attempt to halt
the eviction from taking place.

This Court denied the Statons’

Motion and the eviction took place on May 15, 2018.

Despite the

Statons’ appeal, the Court sees no reason why the Commissioner
should be denied the commissioner fees and costs he incurred in
the process of carrying out the court-ordered eviction and the
Statons have cited no authority in support of their argument.
The Statons next argue that the Commissioner’s request
for additional commissioner fees and costs is “exorbitant” for

12

work “done in 10 hours use [sic] or less (May 11, 2018 and May
16, 2018).”

Response at 2.

The Statons’ argument is misguided

because the Commissioner’s fee request includes work performed
over the course of several months—from February 14, 2018, the
date that the Commissioner submitted his initial commissioner
fee request, until June 19, 2018, the date that the Commissioner
submitted his Declaration requesting additional commissioner
fees and costs.

See ECF No. 395-12.

The Statons also argue that the Commissioner has not
provided adequate documentation supporting his request for
reimbursement of costs associated with the eviction.
at 2.

Response

In fact, the Commissioner has provided documentation

supporting his reimbursement request in the form of invoices
from the moving and junk removal firms and receipts from the
storage company that the Commissioner engaged to assist with the
eviction.

See ECF Nos. 395-9, 395-10, and 395-11.
Finally, the Statons contend that they were

cooperative throughout the eviction process, and that it was the
Commissioner’s lack of cooperation which caused him to incur
additional commissioner fees and costs.

Response at 2-3.

The

Court finds this argument unpersuasive upon review of the
Exhibits that the Commissioner attached to his Declaration
consisting of email correspondence between the Commissioner and
the Statons, which indicate that the Statons were not

13

particularly cooperative during the day of and the days
preceding the eviction.

See ECF Nos.

395-2, 395-5, and 395-6.

In light of the challenges and lack of cooperation
that the Commissioner faced in carrying out his duties, the
Court finds that the Commissioner’s request for additional
commissioner fees and costs, as modified herein, is reasonable.
The Court has reviewed the hours billed and the rates charged by
the Commissioner for his services and the services of his
colleagues, and finds that the hours and rates are reasonable.
The Court approves a total amount of $14,658.36 consisting of:
(1) $12,207.50 in additional commissioner fees for past
services; (2) a $669.46 General Excise Tax; 2 and (3) a $1,781.40
reimbursement for costs associated with the eviction.

2

The Court finds that the Commissioner’s request for a $669.46
General Excise Tax is appropriate. The request is appropriate
because in its April Order, the Court approved the
Commissioner’s fee request for past services in the amount of
$30,065.00 and anticipated future services in the amount of
$2,000.00, plus a $1,416.67 General Excise Tax; however, that
General Excise Tax only covered the tax on the $30,065.00
commissioner fee for past services. In this Order, the Court
approves a total of $12,207.50 in additional commissioner fees
for past services, plus a $669.46 General Excise Tax. This
$669.46 General Excise Tax covers both the $12,207.50 that the
Court approves in this Order, plus the $2,000.00 in commissioner
fees for anticipated future services which the Commissioner
requested in his initial Report, and the Court approved in its
April Order, but which the initial General Excise Tax did not
cover.

14

IV.

Determination of the Amount of Sale Proceeds to Which Each
Party Is Entitled
In its April Order, the Court confirmed the sale of

the subject property for a price of $1,135,000.00.
at 23.

April Order

At the escrow closing, the Commissioner received a check

in the amount of $39,048.15 in satisfaction of his initial
request for commissioner fees and costs, leaving $1,095,951.85
in remaining proceeds.

ECF No. 395-1.

Various utility payments

and credits, as well as a county tax credit, were also applied
at that time resulting in $1,096,108.23 in proceeds. 3

Id.

As of

December 20, 2018, a total of $1,107,551.72 (consisting of
$1,096,108.23 in principal and $11,443.49 in interest, and
certain expenses and credits) remains in the registry of the
Court.

Pursuant to its April Order setting forth the order of

priority for all future disbursements, this Court approves the
amount of sales proceeds to which each party is entitled as
follows:
1.

To Commissioner Lyle S. Hosoda
commissioner fees and costs he
the Court approved his initial
commissioner fees and costs, a
$14,658.36;

3

for the additional
has incurred since
request for
total amount of

These payments and credits consist of: (1) a total payment of
$541.38 for water and sewage services (consisting of two
payments of $134.16; one payment of $268.32; and one payment of
$4.74); (2) a credit of $111.80 for water and sewer services;
and (3) a credit of $585.96 for county taxes. See ECF No. 3951.

15

2.

To the Lender Defendants Navy Federal Credit
Union and Capstead Mortgage for the principal,
interest and recording fee to which they are
entitled in the amount of $306,768.67 (consisting
of $289,197.10 in principal, $17,546.57 in
interest, and a $25.00 recording fee), plus
attorneys’ fees and costs in the amount of
$62,063.00, for a total amount of $368,831.67;

The amount of sales proceeds remaining after payment
to the Commissioner and the Lender Defendants is $724,061.69.
That amount is to be distributed as follows:
3.

4.

V.

To Defendant Brenda L. Staton, fifty (50) percent
of the remaining proceeds for a total amount of
$362,030.85; and
To Plaintiff United States, fifty (50) percent of
the remaining proceeds for a total amount of
$362,030.84.

Deficiency Judgment
In its April Order, the Court also reserved

jurisdiction in order to address the possible entry of a
deficiency judgment in favor of Plaintiff United States.
Plaintiff United States requested a deficiency judgment should
the sales proceeds fail to satisfy Mr. Staton’s federal tax
liabilities.

ECF No. 272-1 at 6.

Mr. Staton’s federal tax liabilities are $418,624.78
as of December 20, 2018, and Plaintiff United States received
$362,030.84 in proceeds from the foreclosure sale.

Accordingly,

the Court finds that a deficiency exists in the amount of
$56,593.94.

16

CONCLUSION
For the foregoing reasons the Court directs the Clerk
of Court to disburse the remaining proceeds of the sale to each
of the parties in accordance with the amounts approved above.
Pursuant to Rule 54 of the Federal Rules of Civil
Procedure, the Clerk of Court is further directed to enter
judgment in accordance with this order, including a deficiency
judgment against Mr. Staton in the amount of $56,593.94.

IT IS SO ORDERED.
DATED: Honolulu, Hawai`i, December 20, 2018

________________________________
Alan C. Kay
Sr. United States District Judge

United States v. Staton, et al., Civ. No. 12-00319 ACK-KSC, Order.

17