Davis v. USA

Filing 135

MEMORANDUM RULING re 118 MOTION for Installment Payment Order and Imposition of Ten-Percent Surcharge filed by USA. Signed by Judge S Maurice Hicks on 10/6/2011. (crt,Keifer, K)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT DIVISION
S. P. DAVIS, SR.

CIVIL ACTION NO. 06-0158

VERSUS

JUDGE S. MAURICE HICKS, JR.

UNITED STATES OF AMERICA

MAGISTRATE JUDGE HORNSBY

MEMORANDUM RULING
Before this Court is the United States’ Motion for Installment Payment Order and
Imposition of Ten-Percent Surcharge. (Record Document 118). This motion applies to four
of the counterclaim defendants in this case: (1) S.P. Davis Jr. (“Davis”); (2) Willie J.
Singleton (“Singleton”); (3) James C. Williams (“Williams”); and (4) Samuel W. Stevens, III
(“Stevens”). (Record Document 118-1 at 1). Only Davis opposes the calculation of
installments the United States made in their Motion. (Record Document 129). The
installment payment order and a ten-percent surcharge are unopposed and appropriate.
The sole remaining issue is the amount of each of Davis’ installment payments.
After full consideration of the fillings of the parties, the United States’ Motion for
Installment Payment Order and Imposition of Ten-Percent Surcharge is GRANTED. The
counterclaim defendants are ordered to pay the following amounts, monthly, until their debt
to the United States is satisfied: (1) Davis: $3,327; (2) Singleton: $2,056; (3) Williams:
$2,313 and (4) Stevens: $634. Further, the United States is also entitled to a ten-percent
surcharge on the counterclaim defendants’ debts to the United States. Therefore the
counterclaim defendants are subjected to a ten-percent surcharge on their judgment,
amounting to the following penalties: (1) Davis: $315,265.28; (2) Singleton: $315,275.74;
(3) Williams: $315,275.77 and (4) Stevens: $340,631.36.

BACKGROUND
On October 7, 2008, this Court entered a judgment in favor of the United Sates
against Davis, Singleton, Williams, Stevens and Phillip Pennywell, Jr. (“Pennywell”).1
(Record Document 118-1 at 1).
This Court found that these five counterclaim defendants were responsible for the
collection and payment of the employment taxes of three corporate entities and each failed
to make those tax payments. (Record Document 118-1 at 1-2). Accordingly, this Court
entered a judgment against each of the counterclaim defendants for the following amounts:
(1) Davis: $3,152,652.85; (2) Singleton: $3,152,757.49; (3) Pennywell: $3,152,438.07; (4)
Williams: $3,152,757.77 and (5) Stevens: $3,406,313.64. (Record Document 118-1 at 2).
The five counterclaim defendants were held by this Court as jointly and severally liable for
this indebtedness. See id.
In the three years since this Court entered the judgment, none of these counterclaim
defendants have begun paying the judgment. See id. In fact, the only payments that were
made on this judgment were nominal amounts made by Stevens prior to the entry of this
judgment. See id.
The United States has moved for this Court to subject these five counterclaim
defendants to monthly installment payment orders to satisfy the judgment entered by this
Court in October of 2008 under 28 U.S.C. § 3204. Further, they have requested that a tenpercent surcharge be added to the judgment totals under 28 U.S.C. § 3011.
In response to this Motion, only Davis has filed an opposition with the Court. (Record
1

Since Pennywell is not self-employed, the United States is not seeking a monthly
installment payment order against him.
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Document 129). Davis does not oppose a monthly installment order but rather opposes the
amount the United States requests. (Record Document 129 at 1). For this reason, this
Court notes that the imposition of a monthly installment order is unopposed. The imposition
of the ten-percent surcharge upon the four counterclaim defendants in this Motion is also
unopposed.
LAW AND ANALYSIS
28 U.S.C. § 3204 specifically authorizes a court to order a judgment debtor to make
“specified installment payments to the United States.” The United States must make a
showing that the “judgment debtor (1) is receiving or will receive substantial nonexempt
disposable earnings from self employment that are not subject to garnishment; or (2) is
diverting or concealing substantial earnings from any source, or property received in lieu
of earnings.” 28 U.S.C. § 3204(a)(1)-(2). When determining the payment amounts, the
Court is to take into consideration “the income, resources, and reasonable requirements
of the judgment debtor and the judgment debtor's dependents, any other payments to be
made in satisfaction of judgments against the judgment debtor, and the amount due on the
judgment in favor of the United States.” 28 U.S.C. § 3204(a).
“Nonexempt disposable earnings” is defined as twenty-five percent of disposable
earnings. 28 U.S.C. § 3002(9). “ ‘Disposable earnings’ means that part of earnings
remaining after all deductions required by law have been withheld.“ 28 U.S.C. § 3002(5).
Finally, “‘Earnings’ means compensation paid or payable for personal services, whether
denominated as wages, salary, commission, bonus, or otherwise, and includes periodic
payments pursuant to a pension or retirement program.” 28 U.S.C. § 3002(6). Therefore,
to determine the proper monthly installment amounts, the proper calculation is to determine
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the debtor’s total income for a year, less federal income tax withholdings. Then, take
twenty-five percent of that number and divide it by twelve in order to calculate the amount
of each monthly payment installment.
S.P. DAVIS, JR.
Davis is a self-employed attorney. (Record Document 118-1 at 5). In its initial
memorandum in support of this motion, the United States used Davis’ 2009 federal income
tax return to determine that Davis’ income for 2009, less federal income tax withholdings,
equaled $213,430. (Record Document 118-1 at 6). Twenty-five percent of $213,430 is
$53,357.50. This number divided by twelve equals $4,446. See id.
Davis objects to this calculation, not the installment payment order. (Record
document 129). Davis argues his 2009 income is inflated due to a large, one-time
contingency fee he received that year. Further, he argues that his income has decreased
due to the economy and his health. Finally, Davis points out the health of his wife, the
general economic climate, and a personal loan he took out that requires repayment as
reasons why it is inappropriate to use his 2009 tax return in calculating his monthly
payments. (Record Document 129 2-3). Davis requests the Court use his 2010 income
along with an estimated 2011 income or, in the alternative, a six year average of his income
to calculate his installment payments.(Record Document 129 at 4).
The United States responds by agreeing that 2009 should not be the sole basis for
calculating Davis’ monthly payments. However, they also assert 2009 should not be
ignored completely. (Record Document 132 at 2). The United States proposes that it would
be proper to base the calculation of his monthly installment payments on his average
income for the past three years (2008, 2009 and 2010).
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The Court agrees with Davis that 2009 should not be the only basis for calculating
his monthly payments. The Court also agrees with the United States that 2009 should not
be ignored. Therefore, the Court finds that Davis’ calculations should be based on his
income from an average of the past three years. The Court will not consider 2011 as it is
inappropriate to base these calculations on estimates. If 2011 brings a substantive change
to Davis’ financial circumstances, he may request a modification of the monthly amounts.
28 U.S.C. § 3204 (b).
In 2008, Davis reported a total income of $148,714, less federal income tax
withholding, amounting to $147,394. In 2009, Davis reported a total income of $214,579,
less federal income tax withholding, amounting to $213,430. In 2010, Davis reported a total
income of $119,745, less federal income tax withholding, amounting to $118,325. Davis’
three-year average income for 2008-2010 is $159,716.33. Twenty-five percent of that
amount equals $39,929.08, which, when spread across twelve months, yields a monthly
installment of $3327.42. (Record Document 132 at 3-4). Therefore, Davis is ordered to pay
the United States $3,327 per month until the judgment and interest accruing on the
judgment is satisfied.
WILLIE J. SINGLETON
Singleton is a self-employed attorney. (Record Document 118-1 at 6). Singleton
does not oppose the United States’ Motion. (Record Document 129 at 1 n.1). Singleton
reported a total income of $118,245 in 2009. Less federal income tax withholding, his total
income equals $98,690. Twenty-five percent of that amount is $24.672.50, which when
spread across twelve months yields a monthly installment of $2,056. Therefore, Singleton
is ordered to pay the United States $2,056 per month until the judgment and interest
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accruing on the judgment is satisfied.
JAMES C. WILLIAMS
Williams is a self-employed owner/manager of two self-service car washes. (Record
Document 118-1 at 6). Williams does not oppose the United States’ Motion. (Record
Document 129 at 1 n.1). Williams reported a total income of $115,246 in 2009. Less federal
income tax withholding, his total income equals $111,044. Twenty-five percent of that
amount is $27,761. Spread across twelve months, the calculated monthly installment is
$2,056. Therefore, Williams is ordered to pay the United States $2,056 per month until the
judgment and interest accruing on the judgment is satisfied.
SAMUEL W. STEVENS, III
Stevens is a self-employed certified public accountant. (Record Document 118-1 at
6). Stevens does not oppose the United States’ Motion. Stevens reported a total income
of $30,453 in 2009. His tax return shows no federal income tax withholdings. Twenty-five
percent of $30,453 is $7,613.25. Spread across twelve months, the calculated monthly
installment is $634. Therefore, Stevens is ordered to pay the United States $634 per month
until the judgment and interest accruing on the judgment is satisfied.
TEN-PERCENT SURCHARGE
The United States has moved for this Court to subject all four counterclaim
defendants to a ten-percent surcharge on the judgment pursuant to 28 U.S.C. § 3011(a).
“The purpose of the ten-percent surcharge is ‘to cover the cost of processing and handling
the litigation and enforcement’ of the Government’s claim on a debt.” 28 U.S.C. § 3011(a);
(Record Document 118-1 at 7).
This portion of the Motion is unopposed by all parties. Accordingly, this Court finds
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the ten-percent surcharge to be appropriate as the counterclaim defendants have not
voluntarily paid their debt to the United States. Therefore, the Court orders that the
surcharge be applied in the following amounts: (1) Davis: $315,265.28; (2) Singleton:
$315,275.74; (3) Williams: $315,275.77 and (4) Stevens: $340,631.36. Just as the original
debt, these four counterclaim defendant’s will be held jointly and severally liable for the tenpercent surcharge.
JOINT AND SEVERAL LIABILITY
This Court held these counterclaim defendants jointly and severally liable for the
June 30, 2008 judgment. The implementation of these monthly installment payment orders
does not change the joint and several nature of this debt. Further, this Court finds it
appropriate to hold these four counterclaim defendants jointly and severally liable for the
ten-percent surcharge.
CONCLUSION
Based on the foregoing, this Court finds that the United States is entitled to a
monthly installment payment order. Therefore, the counterclaim defendants are ordered
to pay the following installment payments each month until their debt to the United States
is satisfied: (1) S.P. Davis Jr. : $3,327; (2) Willie J. Singleton: $2,056; (3) James C.
Williams: $2,313 and (4) Samuel W. Stevens: $634. The four counterclaim defendants
remain jointly and severally liable for the judgment debt. Further, the United States is also
entitled to a ten-percent surcharge on the counterclaim defendants’ debts to the United
States. Therefore the counterclaim defendants are ordered to pay to a ten-percent
surcharge on top of the amount of their judgment, amounting to the following penalties: (1)
S.P. Davis Jr. : $315,265.28; (2) Willie J. Singleton: $315,275.74; (3) James C. Williams:
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$315,275.77 and (4) Samuel W. Stevens: $340,631.36. All four counterclaim defendants
are jointly and severally liable for the ten-percent surcharge.
Accordingly,
IT IS ORDERED that the United States’ Motion for Installment Payment Order
and Imposition of Ten-Percent Surcharge (Record Document 118) be and is hereby
GRANTED.
THUS DONE AND SIGNED, in Shreveport, Louisiana, this 6th day of October,
2011.

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