Raub et al v. Moon Lake Property Owners' Association et al

Filing 73

ORDER Rejecting 60 David Raub's Notice of Disclaimer, Granting Defendants' 58 MOTION to Allow for Payment of Judgment, and Directing Plaintiffs to Furnish Counsel for Defendants Oscoda County and Tim Whiting with Completed W-9 Forms. (W-9 Forms due by 12/9/2016.) Signed by District Judge Thomas L. Ludington. (Sian, M)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
DAVID RAUB, et al.,
Plaintiffs,

Case No. 15-13480

v

Honorable Thomas L. Ludington

MOON LAKE PROPERTY OWNERS
ASSOCIATION, et al.,
Defendants.
__________________________________________/
ORDER REJECTING DAVID RAUB’S NOTICE OF DISCLAIMER,
GRANTING DEFENDANTS’ MOTION TO ALLOW PAYMENT OF JUDGMENT,
AND DIRECTING PLAINTIFFS TO FURNISH COUNSEL FOR DEFENDANTS
OSCODA COUNTY AND TIM WHITING WITH COMPLETED W-9 FORMS
On October 12, 2016 Plaintiffs David and William Raub filed notice that they had
accepted Defendant Oscoda County and Tim Whiting’s offer of judgment pursuant to Federal
Rule of Civil Procedure 68(a). Pursuant to that rule, “[i]f, within 14 days after being served
[with an offer of judgment], the opposing party serves written notice accepting the offer, either
party may then file the offer and notice of acceptance, plus proof of service. The clerk must then
enter judgment.” Id. (emphasis added). Judgment was therefore entered against Defendants
Oscoda County and Tim Whiting in the amount of $5,000 on October 21, 2016. See ECF No.
54.
I.
On November 2, 2016 Defendants Oscoda County and Tim Whiting filed a motion to
allow for the payment of judgment. See ECF No. 58. Defendants argue that they and their
insurance company have attempted to obtain a W-9 and Plaintiffs’ social security numbers from
Plaintiffs and Plaintiffs’ counsel in order to comply with IRS and Medicare reporting

requirements, but that Plaintiffs are refusing to provide the information. Defendants further
allege that Plaintiffs are requesting that the judgment be paid directly to certain venders for
certain litigation services instead of to Plaintiffs directly. In response, Plaintiffs filed a purported
disclaimer of interest in the judgement proceeds on behalf of David Raub. See ECF No. 60.
Plaintiffs then filed a response, arguing that they had submitted the W-9 for William Raub, but
believed that David Raub could disclaim interest in the judgment proceeds pursuant to 15 U.S.C.
§ 2518. See ECF No. 67. 15 U.S.C. § 2518 is not a valid citation as it does not correspond to any
existing federal statute.
Plaintiffs also argue that they are able to disclaim their interest in the judgment under
Michigan law pursuant to M.C.L. §§ 700.2901 and 700.2909. Disclaimer of interest generally
arises in cases where one party rejects another party’s attempt to confer property, the right to
receive and control property, or the power of appointment upon that party. A party cannot
disclaim property that he has bargained for and contractually obligated himself to receive. As
explained in § 700.2901(b), “[d]isclaimable interest does not include an interest retained by or
conferred upon the disclaimant by the disclaimant at the creation of the interest.” Here, by filing
suit against Defendants and then accepting Defendants’ offer of judgment, David Raub
contractually committed to accepting the funds, and conferred upon himself an interest in the
$5,000 judgment at the time the interest was created along with all of the associated obligations
under the Internal Revenue Code.

His interest in the judgment proceeds is therefore not

disclaimable under the plain terms of the Michigan statute.
David Raub’s attempt to disclaim the judgment proceeds also creates a basic problem of
contract law. Defendant’s offer of judgment constituted a valid offer. The Raubs’ acceptance of
that offer was a valid acceptance, and thus a contract was created whereby Defendants paid

-2-

$5,000 in consideration for Plaintiffs’ dismissal of the lawsuit against them. Allowing Plaintiff
David Raub to disclaim consideration for the entry of judgment would render the agreement
illusory as against David Raub. An entry of judgment is not just for the benefit of the prevailing
party. It also benefits the party against whom judgment is entered in that it provides that party
with an assurance that the matter has come to a conclusion and that it will not be sued again for
the same alleged conduct. Allowing Plaintiffs to prevail in their lawsuit as against Defendants
Oscoda County and Tim Whiting while leaving the door open for William Raub to challenge the
finality of that judgment would be an impermissible result. William Raub’s attempt to disclaim
the judgment proceeds for which he bargained will therefore be rejected.
How David and William Raub ultimately decide to allocate the $5,000 judgment amongst
themselves is a different matter that should not involve Defendants or this Court. If David Raub
wishes to gift his portion of the judgment to his brother William after his receipt of the income,
he presumably may. However, it is noted that a party’s attempt to allocate funds in a certain way
is not binding upon the Internal Revenue Service. If the Internal Revenue Service determines that
the purported allocation of funds does not reflect the economic realities of the transaction, then
the Internal Revenue Service may reallocate the funds. See Patterson v. C.I.R., 810 F.2d 562,
570 (6th Cir. 1987) (noting the “Commissioner’s ability, and indeed his duty, to look beyond the
form of a transaction to its economic substance when there is reason to suspect either collusion
or overreaching between the parties in order to improperly avoid the tax consequences of their
actions.”).
II.
Accordingly, it is ORDERED that Plaintiff David Raub’s notice of disclaimer, ECF No.
60, is REJECTED.

-3-

It is further ORDERED that Defendants Oscoda County and Tim Whiting’s motion to
allow for the payment of judgment, ECF No. 58, is GRANTED.
It is further ORDERED that Plaintiffs are DIRECTED to provide counsel for
Defendants Oscoda County and Tim Whiting with completed W-9 forms for Plaintiff William
Raub, Plaintiff David Raub, and Plaintiffs’ counsel’s law firm on or before December 9, 2016.
Failure to comply with this order may result in sanctions or contempt hearings.

s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
Dated: November 28, 2016

PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on November 28, 2016.
s/Michael A. Sian
MICHAEL A. SIAN, Case Manager

-4-