United States of America v. Martin et al
Filing
69
ORDER GRANTING THE GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT ON COUNTS ONE AND TWO IN THE COMPLAINT re 44 Motion for Summary Judgment. Signed by JUDGE LESLIE E. KOBAYASHI on 09/25/2014. (eps)CERTIFICATE OF SERV ICEParticipants registered 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
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Plaintiff,
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vs.
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ABRAHAM NGUYEN MARTIN,
Individually and Trustee for )
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the ABRAHAM NGUYEN MARTIN
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REVOCABLE TRUST AGREEMENT
DATED JANUARY 10, 1991, ANNA )
ANH MARTIN, Individually and )
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Trustee for the ANNA ANH
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MARTIN REVOCABLE TRUST
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AGREEMENT DATED JANUARY 10,
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1991, JOANNE ANN MARTIN,
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WELLS FARGO BANK, N.A.,
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LOANCARE, a Division of FNF
SERVICING, INC., AND STATE OF )
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HAWAII, DEPARTMENT OF
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TAXATION, ,
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Defendants.
_____________________________ )
UNITED STATES OF AMERICA,
CIVIL NO. 13-00503 LEK-KSC
ORDER GRANTING THE GOVERNMENT’S MOTION FOR SUMMARY
JUDGMENT ON COUNTS ONE AND TWO IN THE COMPLAINT
Before the Court is Plaintiff the United States of
America’s (“the Government”) Motion for Summary Judgment on
Counts One and Two in the Complaint (“Motion”), filed on June 9,
2014.
[Dkt. no. 44.]
Pro se Defendant Abraham Nguyen Martin
(“Abraham Martin”) filed his memorandum in opposition on
August 11, 2014, and the Government filed its reply on August 18,
2014.
[Dkt. nos. 62, 65.]
September 2, 2014.
This matter came on for hearing on
After careful consideration of the Motion,
supporting and opposing memoranda, and the arguments presented at
the hearing, the Government’s Motion is HEREBY GRANTED for the
reasons set forth below.
BACKGROUND
On October 3, 2013, Plaintiff filed its Complaint to
Reduce Federal Tax Assessments to Judgement and Foreclose Federal
Tax Liens on Real Property (“Complaint”) against: Abraham Martin,
individually and trustee for the Abraham Nguyen Martin Revocable
Trust Agreement dated January 10, 1991; Anna Anh Martin
(“Anna Martin”), individually and trustee for the Anna Anh Martin
Revocable Trust Agreement dated January 10, 1991; Joanne Ann
Martin (“Joanne Martin”); Wells Fargo Bank, N.A.; LoanCare, a
division of FNF Servicing, Inc.; and State of Hawai`i, Department
of Taxation.
The Complaint centers on the Government’s attempt to
foreclose on the Martin home, located in Honolulu (“the
Property”), and to ensure that the Government can satisfy Abraham
and Anna Martin’s (collectively, “the Martins”) tax liabilities
through the sale – by setting aside purported fraudulent
transfers of the Property and adjudging title.
The Government alleges that Abraham Martin failed to
pay certain tax liabilities in 1992, and the Martins jointly
failed to pay additional liabilities in 1993 and 1994.
[Complaint at ¶¶ 26, 32.]
Together, the Government alleges that,
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with fraud and failure-to-pay penalties and interest, their debt
amounted to over $700,000 as of August 2013.
[Id.]
The
Government further alleges that, beginning in 1998, the Martins
engaged in a series of fraudulent transfers of the Property
between family trusts for no consideration, in an attempt to
evade an audit by the federal government.
[Id. at ¶¶ 15-18, 21-
22, 45-55.]
The Complaint alleges the following claims: reduce to
judgment federal tax assessments against Abraham Martin for tax
year 1992 (“Count I”); reduce to judgment federal tax assessments
against the Martins jointly for tax years 1993 and 1994
(“Count II”); foreclose on federal tax liens against the Property
(“Count III”); determine that the suspect transfers of the
Property do not affect the Government’s ability to collect on the
Martins’ tax debts from the Property (“Count IV”); find that the
suspect conveyances were fraudulent (“Count V”); and find that
the current titleholders of the Property, Anna and Joanne Martin,
are holding title as nominees of the Martins (“Count VI”).
[Id.
at ¶¶ 25-63.]
The Government seeks the following relief, that this
Court: adjudge that Abraham Martin is indebted to the Government
in the sum of $126,265.16, plus statutory interest, and the
Martins are jointly indebted in the sum of $577,898.24, plus
additional interest; adjudge and decree that the tax liens have
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attached to the Property; in the alternative, adjudge and decree
that the transfers were all made subject to the tax liens, were
fraudulent, and should be set aside, and that Anna and Joanne
Martin hold title as nominees of the Martins, and thus the liens
subsist; order the tax liens foreclosed on the Property, the
Property sold, and the proceeds applied to the Martins’ tax
debts; and award costs and all other appropriate relief.
[Id.
at pgs. 18-21.]
DISCUSSION
On May 9, 2003, the United States Tax Court entered a
stipulated decision (“Deficiency Decision”) that found
Abraham Martin had a deficiency of $18,349.00 from 1992, and that
the Martins jointly had deficiencies of $69,731.00 and $23,763.00
from 1993 and 1994, respectively.
The tax court also adjudged
penalties of $13,762.00, $52,298.00, and $17,822.00 for fraud in
each of those years.
[Abrahams Martin’s Concise Statement of
Material Facts, filed 8/11/14 (dkt. no. 62-1) (“Martins’ CSOF”),
Exh. E (Deficiency Decision).1]
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Along with his memorandum in opposition and the Martins’
CSOF, Abraham Martin filed the Declaration of Abraham Martin
(“Martin Declaration”) and Exhibits A-F. Although these
documents were not strictly compliant with all of the subsections
of Rule LR56.1 of the Local Rules of Practice of the United
States District Court for the District of Hawai`i, “pro se
litigants are held to less stringent standards than those of
their legal counterparts,” Welsh v. Wilcox Mem’l Hosp., Civil No.
12-00609 LEK-KSC, 2012 WL 6047745, at *1 (D. Hawai`i Dec. 4,
2012) (citing Haines v. Kerner, 404 U.S. 519, 520 (1972) (per
(continued...)
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The crux of Abraham Martin’s argument in his memorandum
in opposition, his declaration, and his Notice of Acts of Fraud
upon the Court, which he filed on August 28, 2014, [dkt. no. 67,]
is that the Deficiency Decision was fraudulent.2
He argues that:
he could not have stipulated to or executed the Deficiency
Decision because he was in Vietnam at the time he purportedly
executed it; Anna Martin was coerced into signing the Deficiency
Decision; and the Martins’ attorney, the IRS, and the tax court
conspired against the Martins in reaching the Deficiency
Decision.
[Mem. in Opp. at 3, 5-8; Martins’ CSOF at ¶¶ 1-10;
Abraham Decl. at ¶¶ 6-12.]
However, these same arguments were rejected by the tax
court in an order dated June 7, 2011 (“Vacatur Order”), denying a
motion brought by the Martins to vacate the Deficiency Decision
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(...continued)
curiam); Jackson v. Carey, 353 F.3d 750, 757 (9th Cir. 2012)).
The Government also submitted the Deficiency Decision, [United
States’ Concise Statement of Material Facts, filed 6/9/14 (dkt.
no. 44-2) (“Govt.’s CSOF”), Decl. of Jeremy N. Hendon (“Hendon
Decl.”), Exh. 2,] albeit without Abraham Martin’s annotations.
2
The Court rejects all of Abraham Martin’s other arguments
– including that he has an absolute right to a jury trial even
where there are no issues in dispute, that the Government
violated discovery rules and proper investigatory procedures, and
that res judicata cannot apply here – as legally and factually
unsupported. While the Court is sympathetic to the Martins’
feelings that they have been treated unjustly, this Court and the
other courts that have ruled in this matter are bound by rules of
court and civil procedure, and there is no evidence, presented
either by the Government or the Martins in this case, that the
Government has violated any of these rules or treated the Martins
unfairly.
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more than seven years after that decision became final.
Decl., Exh. 6 (Vacatur Order).]
[Hendon
The Vacatur Order upheld the
Deficiency Decision, and the Ninth Circuit affirmed on appeal.
[Id., Exh. 7 (“Ninth Circuit Order”).]
Based on the Deficiency
Decision, the Vacatur Order, and the Ninth Circuit Order, the
Government argues that res judicata applies in this case, and any
argument that Abraham Martin raises regarding the Martins’ tax
liabilities and fraud on the court, must be rejected.
Supp. of Motion at 13-15.]
[Mem. in
This Court agrees that it is bound by
res judicata as to these issues.
The Ninth Circuit has held:
Res judicata, also known as claim
preclusion, applies only where there is “(1) an
identity of claims, (2) a final judgment on the
merits, and (3) privity between parties.”
Tahoe–Sierra Pres. Council, Inc. v. Tahoe Reg’l
Planning Agency, 322 F.3d 1064, 1077 (9th Cir.
2003) (citation and internal quotation marks
omitted). . . . We consider four factors in
determining an “identity of claims”:
(1) whether rights or interests established
in the prior judgment would be destroyed or
impaired by prosecution of the second
action; (2) whether substantially the same
evidence is presented in the two actions;
(3) whether the two suits involve
infringement of the same right; and
(4) whether the two suits arise out of the
same transactional nucleus of facts.
Costantini v. Trans World Airlines, 681 F.2d
1199, 1201–02 (9th Cir. 1982) (citation
omitted). “The last of these criteria is the
most important.” Id. at 1202 (citation
omitted).
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Turtle Island Restoration Network v. U.S. Dep’t of State, 673
F.3d 914, 917-18 (9th Cir. 2012)
Courts regularly apply res judicata in the tax
assessment context.
For example:
“In the tax context, once a taxpayer’s
liability for a particular year is litigated, ‘a
judgment on the merits is res judicata as to any
subsequent proceeding involving the same claim and
the same tax year.’” In re Baker, 74 F.3d 906,
910 (9th Cir. 1996) (quoting Comm’r v. Sunnen, 333
U.S. 591, 598, 68 S. Ct. 715, 92 L. Ed. 898
(1948)). “For res judicata purposes, an agreed or
stipulated judgment is a judgment on the merits.”
Id. (citing United States v. Int’l Bldg. Co., 345
U.S. 502, 505–06, 73 S. Ct. 807, 97 L. Ed. 1182
(1953); Lawrence v. Steinford Holding B.V. (In re
Dominelli), 820 F.2d 313, 316–17 (9th Cir. 1987)).
United States v. Burrell, No. 2:11-CV-03079-GEB-EFB, 2013 WL
4710498, at *3 (E.D. Cal. Aug. 30, 2013).
The Court finds that res judicata applies in this case,
and this Court is bound by the judgments of the tax court and the
Ninth Circuit on these issues.
As to the fraud on the court
issue – the claims are the same, there has been a final judgment
on the matter, and the parties are identical.
673 F.3d at 917.
See Turtle Island,
As to the tax assessments for the Martins for
1992-1994, which Abraham Martin has not specifically denied at
any point, those have been litigated and determined in a
stipulated judgment, and twice upheld.
4710498, at *3.
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See Burrell, 2013 WL
At the hearing on the Motion, the Court gave
Abraham Martin an opportunity to present evidence and argument as
to why the earlier decisions should be set aside.
However, there
was no admissible evidence presented that, even construed in the
light most favorable to him, could raise a genuine issue of
material fact that he was not liable for the amount at issue in
the Deficiency Decision or that there had been fraud upon the
court.
See Crowley v. Bannister, 734 F.3d 967, 976 (9th Cir.
2013) (stating that, at summary judgment, the court “must
determine, viewing the facts in the light most favorable to the
nonmoving party, whether there are any genuine issues of material
fact and whether the district court correctly applied the
relevant substantive law” (citation and quotation marks
omitted)).
Thus, the Court CONCLUDES that the Martins were
properly assessed tax liabilities according to the Deficiency
Judgment and there was no fraud on the court.
Further, the Government has included three Certificates
of Assessments, Payments, and Other Specified Matters (Forms
4340s), for the Martins for tax deficiencies from tax years 19921994.
[Hendon Decl., Exhs. 3-5.]
These Forms 4340, all dated
September 13, 2013, show tax liabilities, penalties, and assessed
interest up through late 2003, amounting to $77,575.59,
$258,738.47, and $78,961.79, respectively.
[Id.]
Forms 4340 are
“presumptive evidence that a tax has been validly assessed[.]”
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Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993); see
also United States v. Lindsey, Civil No. 11-00664 JMS-KSC, 2013
WL 3947757, at *4-5 (D. Hawai`i July 30, 2013).
Again, there was
no evidence presented to rebut these documents or their
substance.
Thus, even if res judicata did not apply, the Court
would grant the Motion as to the Martins’ federal tax assessments
and penalties against them for tax years 1992-1994, based on the
Government’s evidence.
The Government also moves for summary judgment as to
the interest on the tax assessments and penalties.
Supp. of Motion at 16-17.]
[Mem. in
26 U.S.C. § 6601(a) provides that,
“[i]f any amount of tax imposed by this title . . . is not paid
on or before the last date prescribed for payment, interest on
such amount at the underpayment rate established under [26 U.S.C.
§ 6621] shall be paid for the period from such last date to the
date paid.”
Section 6621 establishes the underpayment rate, and
26 U.S.C. § 6622 provides that the interest compounds daily.
Similarly, under 26 U.S.C. § 6601(e)(2)(A), “[i]nterest shall be
imposed under subsection (a) in respect of any assessable
penalty . . . only if such assessable penalty . . . is not paid
within 21 calendar days from the date of notice and demand
therefor . . . .”
The Ninth Circuit has described
Section 6601(e)(2)(A) as a “binding statutory directive to allow
interest to the government” upon a showing that it has a right to
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reduce the assessment to judgment, and also has held that a
district court is “not permitted . . . to exercise its discretion
regarding the award of interest.”
Purcell v. United States, 1
F.3d 932, 943 (9th Cir. 1993); see also Lindsey, 2013 WL 3947757,
at *5.
The Court thus CONCLUDES that the Government is entitled
to statutory interest as to the Martins’ tax and penalty
assessments, and the Court GRANTS the Motion to reduce the
Martins’ tax interest to judgment.
The only issues that remain are: (1) the form of the
proof of the unassessed interest; and (2) exactly how much
interest the Martins owe.
At the hearing on the Motion, counsel
for Joanne Martin argued that, while the Government’s proof of
tax assessments against the Martins may be proper, the Government
has not proved with admissible evidence the accrued interest due
on the Martins’ debt, and thus the Government may not reduce to
judgment the purported interest.
The Government argued that its
evidence is sufficient to grant summary judgment as to all
interest on the assessments and penalties.
To support its determination of the interest, the
Government attaches the Declaration of M. Henry Halle (“Halle
Declaration”) to the its CSOF.
Halle declares, under penalty of
perjury, that he is the Advisory & Insolvency (“AI”) Advisor in
the Small Business/Self Employed Division of the Internal Revenue
Service (“IRS”) in Seattle, Washington, and that he has personal
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knowledge of and responsibility for the tax calculations in this
case.
[Halle Decl. at ¶¶ 1-3.]
Attached to the Halle
Declaration, the Government includes Exhibits 1-3, which Halle
attests are the “breakdown[s] of the tax, penalties, and
interest, as well as a calculation of the accrued interest” for
each year.
[Id. at ¶¶ 4-6.]
He states that the outstanding
balance due by Abraham Martin is $128,969.36, and by the Martins
jointly is $590,191.98, and notes that “interest continues to be
compounded daily . . . .”
[Id. at ¶¶ 7-8.]
The Martins do not
dispute these documents or the facts that they support in the
Government’s CSOF.
The Court finds that the Halle Declaration and its
Exhibits 1-3 are sufficient to prove the Martins’ accrued
interest as of May 22, 2014.
As argued at the hearing on the
Motion, the Government regularly provides similar interest
computation tables and declarations, attesting to interest
calculations, and courts have found this proof admissible and
reliable evidence of accrued interest.
For example, in United
States v. Suganuma, 546 F. Supp. 2d 996, 1000, 1002 (D. Hawai`i
2008), this district court addressed the government’s argument
that “the submission of the declaration of an IRS advisor with
attached computer printouts which contain breakdowns of the tax,
penalties, and interest, as well as a calculation of the accrued
interest for income tax liabilities for each period, provides
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sufficient evidence of the assessed balance as well as accruals”
and concluded that the government had “properly established the
accruals through the Declaration of Henry Halle, IRS Technical
Services Advisor, and the attachments thereto.”
See also, e.g.,
Lindsey, 2013 WL 3947757, at *5 (relying on similar evidence to
compute total tax liabilities and accrued interest); United
States v. Smith, No. CV10-2358-PHX-DGC, 2012 WL 2317770, at *2,
*13 (D. Ariz. June 18, 2012) (relying on the declaration of an
IRS technical advisor and printouts attached to her declaration
used “to compute up-to-date interest and penalty calculations on
the balances owed”); cf. In re Indian Wells Estates, Inc., 96
F.3d 1451 (9th Cir. 1996) (in bankruptcy case, rejecting argument
that “the IRS failed to meet its burden of proof on the award of
interest” in part because the IRS substantiated the amounts “by
providing detailed computer printouts and an accompanying
explanation by an IRS expert in the field”).
Since there has been no specific challenge to the
calculations or any figures in the computation tables, the Court
CONCLUDES that the Halle Declaration and Exhibits 1-3 are
sufficient to prove the accrued interest of the Martins’ tax
assessment and penalty liabilities.
The Court therefore GRANTS
the Motion in its entirety and REDUCES to judgment the tax
assessments, penalties, and interest liabilities of Abraham
Martin for the tax year of 1992 to $128,969.36, and of the
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Martins jointly for the tax years of 1993-1994 to $590,191.98.
CONCLUSION
On the basis of the foregoing, the Government’s Motion
for Summary Judgment on Counts One and Two in the Complaint,
filed June 9, 2014, is HEREBY GRANTED.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, September 25, 2014.
/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
UNITED STATES OF AMERICA VS. ABRAHAM NGUYEN MARTIN, ET AL; CIVIL
13-00503 LEK-KSC; ORDER GRANTING THE GOVERNMENT’S MOTION FOR
SUMMARY JUDGMENT ON COUNTS ONE AND TWO IN THE COMPLAINT
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