United States of America v. Dade
ORDER Granting 20 Motion for Default Judgment. Signed by District Judge David M. Lawson. (SPin)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
UNITED STATES OF AMERICA,
Case Number 12-13224
Honorable David M. Lawson
LATOYA E. DADE and LATOYA E.
ORDER GRANTING MOTION FOR DEFAULT JUDGMENT
This matter is before the Court on the plaintiff’s motion for default judgment. On October
23, 2012, the plaintiff filed an original complaint under the authority of the Internal Revenue Code,
26 U.S.C. §§ 7405 and 7402, seeking recovery of an erroneously issued income tax refund. The
original complaint was served on and answered by defendant Latoya Dade. The complaint later was
dismissed without prejudice, by the stipulation of the parties. On October 26, 2016, the plaintiff
filed an amended complaint seeking recovery of the same erroneously paid refund. The plaintiff
filed certificates of service attesting to service of the summons and amended complaint on the
defendants. The defendants have not answered or otherwise responded to the amended complaint,
and the Clerk of the Court entered their defaults pursuant to Fed. R. Civ. P. 55(a) on February 3,
2017. The plaintiff then filed a motion for default judgment on April 5, 2017.
The Court held a hearing on the plaintiff’s motion on April 26, 2017, which was attended
by counsel for the government and defendant Latoya Dade, who appeared pro se. The Court
received evidence on the record as to the amount of damage. The defendant did not oppose the
government’s motion or offer contrary evidence. At the end of the hearing, based on the evidence
presented at the hearing and the well-pleaded allegations in the complaint, the Court announced from
the bench its decision to award a judgment in favor of the plaintiff and against the defendants in the
amount of $266,279.05, which includes the amounts attested to by the government’s revenue agent
for outstanding principal, along with interest, penalties, and fees, through February 15, 2017.
Because the defendants have failed to answer or otherwise respond to the complaint and the
Clerk has entered default against them, the Court must accept all well pleaded factual allegations
in the complaint as true. Stooksbury v. Ross, 528 F. App’x 547, 551 (6th Cir. 2013). The amended
complaint alleges that on “March 12, 2009, Latoya E. Dade filed an income tax return (Form 1041)
in the name of the taxpayer ‘Latoya E. Dade TR’ for the income tax year 2008, which named
‘Latoya Dade TTEE’ as the fiduciary of the taxpayer.” Am. Compl. ¶ 5. On the Form 1041, Dade
reported “an equal amount of income and deductions for the purported trust,” where she “listed total
income for the purported trust in the amount of $534,256, but then deducted $534,256 in fiduciary
fees, and reported that the purported trust had $0 in income tax liability.” Id. ¶ 6. Dade “also
reported on the Form 1041 that the purported trust had federal income tax withheld in the amount
of $178,085, and was entitled to a refund in the amount of $178,085.” Id. ¶ 7. The complaint further
alleges that the government issued a check for a refund in the claimed amount, which Dade
personally endorsed and deposited into her checking account. Id. ¶ 8-9. Finally, the complaint
alleges that the purported trust is a sham, that it had no income and did not pay any fiduciary fees
during the 2008 tax year, and that Dade concocted it merely for the purpose of obtaining a tax refund
that she was not entitled to receive. Id. ¶¶ 10-11. The government asserts in its amended complaint
that Dade has been informed of her obligation to repay the improper refund — including, in
pertinent part, by the filing of the original complaint in this case — but to date she has failed or
refused to do so.
Under Section 7405 of the Internal Revenue Code, 26 U.S.C. § 7405, “[a]ny portion of a tax
imposed by this title, refund of which is erroneously made . . . may be recovered by civil action
brought in the name of the United States.” 26 U.S.C. § 7405(b). Under I.R.C. section 6352(b), the
United States generally has five years from the date that the IRS made an erroneous refund to bring
a suit to recover the overpayment “if it appears that any part of the refund was induced by fraud or
misrepresentation of a material fact.” The government’s original complaint was filed on July 23,
2012, well within the applicable limitations period. Although the case previously was dismissed
without prejudice by the stipulation of the parties, Dade stipulated that “[s]hould the
above-captioned action be reinstated after the statute of limitations has expired, [she] agrees to
waive any statute of limitations defense in this case.” Stipulation of Dismissal [dkt. #8]. Because
the parties agreed that any subsequent amended complaint would not be time-barred, the Court finds
that the present amended complaint seeking repayment of the improper refund is timely. The Court
further finds that the allegations of the complaint, which the Court must accept as true, adequately
establish that the refund in question was issued in error and was procured by Dade through fraud or
misrepresentation about the existence and legitimacy of her trust.
The Court finds, therefore, that the plaintiff is entitled to entry of a judgment by default in
the amount proved by the evidence submitted with its motion.
Accordingly, it is ORDERED that the plaintiff’s motion for entry of default judgment [dkt
#20] is GRANTED, and a default judgment shall enter in favor of the plaintiff and against the
It is further ORDERED that the plaintiff shall recover of the defendants, jointly and
severally, in the amount of $266,279.05, which includes statutory interest, penalties, and fees
through February 15, 2017. The judgment shall bear interest as provided for by law from April 26,
2017. A judgment in favor of the plaintiff and against the defendant separately shall enter.
s/David M. Lawson
DAVID M. LAWSON
United States District Judge
Dated: April 26, 2017
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 April 26, 2017.
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