United States of America v. Belzner
Filing
11
REPORT AND RECOMMENDATIONS re 7 MOTION for Default Judgment as to Patrick J. Belzner filed by United States of America. Objections to R&R due by 4/21/2014. Signed by Magistrate Judge Susan K. Gauvey on 4/3/14. (dass, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
UNITED STATES OF AMERICA
*
Plaintiff
*
v.
*
PATRICK J. BELZNER,
*
WDQ-13-2414
*
Defendant.
*
CIVIL NO.
*
*
*
*
*
*
*
*
*
*
upon
motion
*
REPORT AND RECOMMENDATION
This
matter
comes
before
the
court
by
the
United States of America (“United States” or “Government”) for
entry
of
default
judgment
against
Patrick
J.
Belzner
(“Defendant”), pursuant to Fed. R. Civ. P. 55(b)(2), for failure
to
appear
or
otherwise
defend
in
this
matter.
(ECF
No.
7).
Defendant has not filed a response and the time for doing so has
passed.
Local
necessary.
2011).
Rule
105.2a
(D.
Md.
2011).
No
hearing
is
Fed. R. Civ. P. 55(b)(2); Local Rule 105.6 (D. Md.
The
Honorable
William
D.
Quarles,
Jr.
referred
the
matter to the undersigned magistrate judge to review the default
judgment and make recommendations concerning damages. (ECF NO.
10).
For the reasons set forth herein, I recommend that the
United States’ motion (ECF No. 7) be GRANTED and that damages be
AWARDED as set forth herein.
1
I.
Background
On
August
19,
2013,
the
Government
filed
a
complaint
alleging that Defendant is liable for additional federal income
taxes and statutory additions to tax for the 1995 and 1996 tax
years.
(ECF No. 1, ¶ 7).
The Government alleges that Defendant
is liable to the United States for $2,017,626.40, as of May 28,
2013, in federal income taxes, penalties, and accrued interest,
plus interest and costs that have accrued since that date and
continue to accrue according to law until fully paid.
15).
The
present
motion
seeks
to
reduce
to
(Id. at ¶
judgment
the
aforementioned claims for damages. (ECF No. 7).
II.
Standard for Default under Rule 55(b)(2)
Federal Rule of Civil Procedure 55(b)(2) authorizes courts
to enter a default judgment against a properly served defendant
who fails to file a timely responsive pleading.
In deciding whether to grant a motion for default judgment,
the Court must first consider the following three factors: (1)
whether
the
plaintiff
will
be
prejudiced
if
default
is
not
granted, (2) whether the defendant has a meritorious defense,
and (3) whether the defendant’s delay was the result of culpable
2
misconduct.
Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 73 (3rd
Cir. 1987), see also Smith v. Bounds, 813 F.2d 1299 (4th Cir.
1987) (relying on these factors in determining whether a default
judgment merited reconsideration).
The Court must also determine whether the plaintiff has
alleged
a
legitimate
cause
of
plaintiff’s
motion
entry
of
accepts
true
as
for
the
well-pleaded
complaint as to liability.
action.
default
Court
to
determine
reviewing
judgment,
factual
the
allegations
a
Court
in
the
Ryan v. Homecomings Fin. Network,
253 F.3d 778, 780-81 (4th Cir. 2001).
the
In
whether
It, however, remains for
these
unchallenged
allegations constitute a legitimate cause of action.
also 10A WRIGHT, MILLER & KANE, FEDERAL PRACTICE
AND
factual
Id., see
PROCEDURE § 2688 (3rd
ed. Supp. 2010) (“[L]iability is not deemed established simply
because of the default . . . and the Court, in its discretion,
may require some proof of the facts that must be established in
order to determine liability.”).
If the Court determines that liability is established, it
must then determine the appropriate amount of damages.
253 F.3d at 780-81.
liability,
the
Court
Ryan,
Unlike allegations of fact establishing
does
not
accept
factual
allegations
regarding damages as true, but rather must make an independent
determination regarding such allegations.
See Credit Lyonnais
Secs. (USA), Inc. v. Alcantara, 183 F.3d 151, 154 (2nd Cir.
3
1999).
In
hearing.
so
doing,
the
Court
may
Fed. R. Civ. P. 55(b)(2).
conduct
an
evidentiary
The Court may also make a
determination of damages without a hearing as long as there is
an adequate evidentiary basis in the record for the award.
See,
e.g., Stephenson v. El-Batrawi, 524 F.3d 907, 917 n.11 (8th Cir.
2008) (“Foregoing an evidentiary hearing may constitute an abuse
of discretion when the existing record is insufficient to make
the
necessary
findings
in
support
of
a
default
judgment.”);
Adkins v. Teseo, 180 F. Supp. 2d 15, 17 (D.D.C. 2001) (finding
that a court need not make determination of damages following
entry
of
detailed
default
affidavits
through
or
hearing,
documentary
but
rather
evidence
may
to
rely
determine
on
the
appropriate sum).
III.
Preliminary Factors
The
Clerk
of
court
having
filed
entry
of
default
on
November 15, 2013 (ECF No. 5), the undersigned concludes that
the procedural requirements for entry of default judgment have
been met.
Moreover, because Defendant has failed to file any
responsive pleadings or otherwise show cause as to why default
should not be granted, the Court is “not in a position to judge
whether
any
Sambrick,
834
delay
F.2d
was
at
the
73.
result
of
Further,
culpable
Defendant’s
misconduct.”
failure
to
appear deprived the Government of any other means of vindicating
4
their claim and the Government would be prejudiced if default is
not granted.
IV.
Discussion
A. Default Judgment
The Government’s complaint alleges that on August 25, 2003,
for the 1995 tax year, the IRS assessed federal income tax ——
$11,483.00, penalties —— $8,612.25, and interest —— $15,410.14,
against Defendant; and on October 15, 2007, also assessed a late
payment penalty —— $2,870.74.
(Id. at ¶ 8). Similarly, the
complaint alleges that on August 25, 2003, for the 1996 tax
year,
the
IRS
assessed
federal
income
tax
——
$393,832.00,
penalties —— $295,374.00, and interest —— $426,223.86, against
Defendant; and on October 15, 2007, also assessed a late payment
penalty —— $98,458.00.
complaint
alleges
(Id. at ¶ 9).
that,
as
of
May
As such, the Government’s
28,
2013,
Defendant
owes
$61,523.45 (1995 tax assessment) plus $1,956,103.00 (1996 tax
assessment), making Defendant liable to the United States for
$2,017,626.40 plus accrued statutory additions to tax, interest,
and costs that have accrued since that date and will continue to
accrue according to law until fully paid. (ECF No. 1, ¶ 15).
In support of its motion for entry of default judgment, the
Government has attached two “Certificate[s] of Official Record,”
“Form 2866,” to establish the taxes, penalties, and interest
5
assessed against Defendant.
These Form 2866 Official Records
confirm the August 25, 2003 and October 15, 2007 assessments as
alleged
in
8-12).
the
Also
Government’s
attached
complaint.
to
the
(ECF
Government’s
No.
7-1,
motion
is
3-7,
the
declaration of Willette F. Strong, Revenue Officer, Baltimore,
Maryland, Office of the IRS.
(ECF No. 7-1, 1).
Ms. Strong’s
declaration states that she has custody of the “IRS Account
Transcripts” pertaining to Defendant, which demonstrate that, as
of December 2, 2013, Defendant is indebted to the United States
for unpaid income tax, penalties, and interest as follows: 1995
tax
year
——
$62,414.74;
1996
(collectively $2,046,855.61).
Transcripts”
referenced
in
tax
year
(Id. at 2).
Ms.
Strong’s
——
$1,984,440.87
The “IRS Account
declaration
are
also
attached to the Government’s motion and confirm the amounts due
as declared by Ms. Strong.
(Id. at 13, 16).
Where an assessment of any tax is imposed pursuant to the
Internal Revenue Code, 26 U.S.C. § 6502(a)(1) provides for a
ten-year statute of limitations period to collect such tax by
levy or proceeding in court.
Here, the United States filed its
complaint on August 19, 2013, within the ten-year limitations
period that began with the IRS’s August 25, 2003, 1995 and 1996
tax year assessments.
motion,
as
discussed
Further, the Government has supported its
supra,
with
the
Strong
declaration,
Certificates of Official Record (Form 2866), and IRS Account
6
Transcripts.
Accordingly,
the
Government
has
supported
its
claim for unpaid federal income taxes, penalties, and statutory
interest
with
a
declaration
and
certified
records,
“thus
shifting the burden to Defendant to produce evidence refuting
the Government’s position.”
U.S. v. Kitila, No. DKC-09-0455,
2010 WL 917873, at *3 (D. Md. Mar. 8, 2010) (citing U.S. v.
Pomponio, 635 F.2d 293, 296 (4th Cir. 1980)).
Defendant has
produced no evidence, thus, liability is established for unpaid
taxes, related penalties, and interest.
As such, the Court
GRANTS the Government’s motion for Default Judgment.
B. Damages
Here,
the
Government
seeks
to
reduce
to
judgment
the
Defendant’s liability for federal income taxes, penalties, and
accrued
interest,
plus
interest
and
costs
that
have
accrued
since the Government filed its complaint and continue to accrue
according to law until fully paid.
As such, the Government’s
complaint, motion for default, and supporting documents contain
evolving
figures
as
to
alleged
damages.
The
Government’s
complaint alleges that, as of May 28, 2013, Defendant is liable
for $2,017,626.40.
for
default
(ECF No. 1, ¶ 15).
judgment,
the
Strong
The Government’s motion
Declaration,
and
the
IRS
Account Transcripts each proffer that, as of December 2, 2013,
Defendant is liable for $2,046,855.61.
(ECF No. 8, 2; ECF No.
7-1,
motion
2,
13-16).
The
Government’s
7
and
supporting
documents, however, do not direct the Court to any precedent or
statutory
provisions
providing
for
post-assessment
costs
and
interest, including, for example, what post-judgment interest
rate this Court should apply if default judgment is awarded.
Instead, the Government merely asserts post-assessment costs and
interest
accrue
as
a
matter
of
law
and
cite
the
Strong
Declaration and IRS Account Transcripts to establish the accrued
interest as calculated by the IRS through December 2, 2013.
The
Government
Court,
is
through
its
“statutorily
own
research,
entitled
to
finds
recover
that
interest
the
on
unpaid taxes accruing to the date of payment, regardless of
whether the interest is reflected in an assessment.”
Sarubin, 507 F.3d 811, 812-13 (4th Cir. 2007).
establishing
evidence,
the
yet,
amount
the
of
amount
tax
of
liability is a matter of law.
liability
interest
U.S. v.
This is because
is
accrued
a
on
matter
of
such
tax
Id. at 816 (citations omitted).
As such, interest is statutorily mandated pursuant to 28 U.S.C.
§ 6601(a), which states: “if 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 section 6621 shall be paid for the period from
such
last
date
to
the
date
paid.”
Moreover,
interest accrues according to the same rate.
post-judgment
See 28 U.S.C. §
1961(c) (providing that post-judgment interest shall be allowed
8
with
respect
to
any
internal
revenue
tax
case
“at
the
underpayment rate or overpayment rate (whichever is appropriate)
established under section 6621 of the Internal Revenue Code”).
Here, the Strong Declaration and the IRS Account Transcripts
account for the 1995 and 1996 tax year assessments combined with
statutorily accrued interest up until December 2, 2013, in the
amount of $2,046,855.61.
V.
(ECF No. 8, 2; ECF No. 7-1, 2, 13-16).
Conclusion
Having
judgment,
considered
as
well
as
the
Government’s
the
evidence
motion
presented
for
and
default
relevant
statutory authority, it is hereby RECOMMENDED that:
1.
The United States’ motion for default judgment be GRANTED;
2.
Judgment be entered against Patrick J. Belzner for unpaid
income taxes, penalties and interest relevant to the 1995
and 1996 tax years in the amount of $2,046,855.61, as of
December 2, 2013, plus penalties, interest, and statutory
additions accruing after that date according to 26 U.S.C.
§ 6601(a) and 28 U.S.C. § 1961(c).
Date: __4/3/14 _
_______________/s/______________
Susan K. Gauvey
United States Magistrate Judge
9
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