UNITED STATES OF AMERICA v. BALICE et al
OPINION. Signed by Judge Kevin McNulty on 08/09/2017. (ek)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Civ. No. 14-3937 (KM)(JBC)
UNITED STATES OF AMERICA,
MICHAEL BALICE, AMBOY BANK,
The United States has filed this action to reduce to judgment defendant
Michael Balice’s tax liability for several years, and to foreclose on a property at
70 Maple Avenue in Metuchen, New- Jersey, currently held in trust. Nowpending before the Court are two interrelated motions:
a. ECF No. 187 (government’s motion for summary judgment)
b. ECF No. 191 (Balice’s motion to strike premature pleadings and
objection to the United States’s motion for summary judgment)
For the reasons stated below, the motion of the United States for summary
judgment is granted.
Because I write for the parties, I assume familiarity with the numerous
previous decisions in this matter. A brief overview of the pertinent facts is
nevertheless helpful. 1
For purposes of this opinion, citations to the record will be abbreviated as
Amended Complaint (ECF No. 144) = Am. Compi.
Memorandum of Law in Support of Plaintiffs Motion for Summary
Judgment (ECF No. 187-1) = P1. Br.
A. Transfer of the Maple Avenue Property
The Maple Avenue property was once owned by Michael Sauce and his
then-wife, Marion Balice (collectively, the “Balices”).2 In August of 1994, the
Balices, saddled with outstanding federal income tax and other liabilities,
attended a seminar given by Ronald Ottaviano that instructed attendees on
how to create trusts to obtain tax benefits. (P1. Br. 3—4) Thereafter, on August
28, 1994, the Balices executed a quitclaim deed purporting to transfer title of
the Maple Avenue property—their primary residence at the time—to the
Rosewater Trust (“Rosewater”). (Id.) The Balices did not receive consideration
for the transfer. (Id. 3)
On August 29, 1994, the Balices applied to the IRS for an Employer
Identification Number for Rosewater, listing Marion Balice as Rosewater’s
executor or trustee. A “certification” document dated October 5, 1994,
purportedly appointed Balice as Rosewater’s “Exchange?’. (Id. 4; P1. Exs. I—J)
Plaintiffs Statement of Undisputed Material Facts (ECF No. 187-3)
Amended Exhibits to Plaintiffs Motion for Summary Judgment (ECF No.
188) = P1. Ex.
January 27, 2017 Declaration of Michael MacQillivray (ECF No. 188, Ex.
A) = MacGillivray Decl.
Defendant’s Objection and Opposition to Plaintiffs Motion for Summary
Judgment and Motion to Strike Plaintiffs Premature Pleadings and Motion for
Jury Triai (ECF No. 191) = DeE Opp. & Mot.
Exhibits to Defendant’s Objection and Opposition to Plaintiffs Motion for
Summary Judgment and Motion to Strike Plaintiffs Premature Pleadings and
Motion for Jury Trial (ECF No. 191) = Def. Ex.
Defendant Amboy Bank’s Opposition to the Plaintiffs Motion for
Summary’ Judgment (Letter Memorandum) (ECF No. 190) = Amboy Ltr.
Plaintiffs Reply on Motion for Summary Judgment (ECF No. 195) = P1.
Defendant’s 2nd Objection and Opposition to Plaintiffs Motion for
Summary Judgment (ECF No. 207) = Def. 2nd Opp.
Today, Marion Sauce is known as Marion Meyers. For simplicity, I will continue
to refer to her as Marion Balice. Unless othenvise specified, however, “Balice” means
In its decision upholding the Balices’ tax deficiencies for the 1997 and
1998 tax years, the United States Tax Court made the following findings
concerning a checking account the Balices had opened in Rosewater’s name:
The Balices exercised complete control over the checking account;
All deposits into the account during 1997 and 1998 were from the
Balices or “Statewide”;3
All statements for the Rosewater checking account went to the
Sauce’s home address;
Statewide had no economic substance and should be disregarded
for tax purposes;
Following transfer to Rosewater, the Balices continued to live in
and exercise control over the Maple Avenue property.
(P1. Ex. B)
Marion Balice made signed declarations in 2011 and 2015, the
substance of which echoed the Tax Court’s findings. She admitted that
Rosewater was fictitious and set up to hold title to and protect the Maple
Avenue property from federal tax and other liabilities; that no consideration
was exchanged for the transfer; and that the Balices lived in the property and
used personal funds to pay its expenses, post-transfer. (P1. Br. 5; Ex. L) In
connection with this litigation, Balice himself signed a declaration stating that
he resided at the Maple Avenue property from 1989 to the present day,
excluding his incarceration, and has paid utility bills for the property. (Id.; ECF
B. Income Tax Obligations for 1998 (Count 1), 2007, and 2008
The Sauces filed a joint income tax return for the 1998 tax year that
reported a total amount due of $7,779, which they paid in full. The Internal
Revenue Service (“IRS”), however, subsequently determined that the Sauces
According to the United States, Statewide was a second trust that the Balices
established on the advice of Ottaviano. (P1. Br. 4)
were liable for a deficiency of $32,449 as well as a penalty of $6,489.80, for the
1998 tax year, and sent the Balices a June 21, 2004 deficiency notice saying
so. Balice challenged the deficiencies in Tax Court and the Tax Court upheld
the deficiencies on December 10, 2009. (P1. Ex. B, C; see ECF No. 208 p.2)
Following the Tax Court decision on Febman- 22, 2010, the IRS again assessed
the Balices’ 1998 taxes, concluding that they still owed $76,586. (See Am.
17; P1. Reply 2) Those deficiencies remain largely unpaid (see Am.
19) and with penalties and interest, amount to $60,179.68 as of
January 9, 2017. (P1. Br. 2)
Balice did not file any tax return for the tax years 2007 and 2008,
despite earning income by marketing products that purported to teach others
how to avoid income tax by creating sham trusts. For marketing these
products, a jun’ convicted Balice on December 21, 2011 of conspiracy to
defraud the United States, wire and mail fraud, and attempt to evade income
tax. (See P1. Ex. D) Thereafter, the IRS determined Balice’s tax deficiencies for
2007 and 2008, which Balice again challenged in the United States Tax Court.
Again, the Tax Court upheld the deficiencies, holding that for 2007, Balice
owed $35,497 in unpaid taxes and $35,049 in statutory penalties, and that for
2008, Balice owed $3,810 in unpaid tax and $1,180 in penalties. Additionally,
the Tax Court imposed a $25,000 fine, under 26 U.S.C.
maintaining frivolous positions during the Tax Court litigation. (P1. Br. 3; see
P1. Ex. E—F) On Balice’s appeal, the Third Circuit upheld the Tax Court’s
decision. (P1. Br. 3 (citing Sauce v. CIR, No. 15-2366 (3rd Cir. February 5,
Accounting for liabilities, statutory additions, and the $25,000 penalty,
Balice owes $117,337.27 for the 2007 tax year and $6,693.51 for the 2008 tax
year, as of January 9, 2017. (P1. Br. 3; MacGillivray Decl.
C. The Parties’ Motions and Relevant Procedural History
By opinion and order dated July 10, 2015, 1 previously denied Amboy’s
motion for summa’ judgment, which argued that Amboy’s KELOC mortgage
lien on the Maple Avenue property has full priority over the tax lien of the
United States. (See ECF No. 71, United States v. Balice, No. CIV. 14-3937 KM
JBC, 2015 WL 4251146, at *9 (D.N.J. July 10, 2015) (hereinafter, “Balice 1”),
reconsideration denied, No. 14-3937 (KM)(JBC), 2016 WL 1178860 (D.N.J. Jan.
15, 2016). There, in Balice I, 1 determined that Amboy’s lien would take
priority, but only “to the extent of the outstanding balance on the home equity
line of credit as of July 12, 2005, plus any additional sums advanced
thereafter, but before August 27, 2005.” I explained that the amount of the lien
could not be determined on summary judgment, however, because the priority
dollar amount depends on the outstanding loan disbursements that occurred
before August 27, 2005, any reduction of that balance by repayment, and
interest and fees—all issues undeveloped in the record at the time.
The parties still have not submitted evidence sufficient to establish the
dollar amount of Amboy’s priority. The government’s motion for summary
judgment, which is directed at Balice, puts off the issue: it recognizes in
principle, however, that the proceeds of a foreclosure sale on the Maple Avenue
property would be distributed to Amboy Bank “to satisfy those portions of
Amboy Bank’s lien that the Court determines, pursuant to further briefing,
hold priority over federal tax liens,” prior to being distributed to the United
States to satisfy “the outstanding balance of the federal tax liens that attach to
the property, including interest and penalties arising from such liens
Br. 13) Therefore, the dollar amount of any such priority is not at issue on this
motion; indeed the parameters of the issue depend to some degree on the
issues decided here, so the parties’ failure to address it definitively is
In Balice I, I also denied Balice’s motion to dismiss and rejected Balice’s
argument that under principles of res judicata, the prior judgments for Balice’s
tax debts for the years 1992, 1993, 1996, and 2001 bar the government from
proceeding with this action. I explained that not only are different tax years at
issue in this case (with respect to claims for judgment), but the government is
also seeking foreclosure in this action—a type of relief it did not seek in prior
actions. “Rather, those prior actions established the Balices’ liability for tax
assessments and entered money judgments, resulting in the attachment of tax
liens to all property and rights that the Balices owned.” Balice Iat *9• There is
no preclusion, I noted, even as to tax years for which debts were previously
reduced to judgment, on which the United States seeks to foreclose in this
action. Id. at *10.
Moreover, in Balice I, I rejected,
alia, Balice’s tax-protestor-style
arguments that the U.S. Constitution does not give Congress the power to
collect income taxes and that Congress may not delegate tax-collecting power
to the IRS, Id. at *lo_l2. I rejected largely identical arguments in my opinion
dated July 20, 2016. (See ECF No. 152, hereinafter “Balice IF’, pp. 1—2)
In that July 20, 2016 opinion, Balice II, I also rejected Balice’s argument
that the 2010 assessment of his 1998 taxes violated the three-year statute of
limitations provided for in 26 U.S.C.
§ 6501. That statute establishes a six-
year, rather than three-year, statute of limitations when a taxpayer has
understated his income by more than 25%, as Balice did.
§ 6501(e)(l). (Balice hat 3—4) Even setting aside this substantive
reasoning, I held that Balice’s timeliness argument was barred by resjudicata,
“having already been decided adversely to Balice in the Tax Court” in a decision
that became final on February 8, 2010. (Id. 4)
In an opinion and order dated October 11, 2016, “Balice III’, I rejected,
inter alia, Balice’s motion for summary judgment, and with it his argument
that tax withholding in the amount of $10,162 satisfied his 1998 tax year
deficiency. (See ECF No. 167, hereinafter “Balice HP, at 4)1 explained that
Count I seeks to reduce to judgment additional amounts due for the 1998 tax
year, over and above the $10,162, so Balice’s argument was beside the point.
(Id.) In Balice III, I also, for the second time, disposed of Balice’s argument that
the 2010 tax assessment on his 1998 tax year income taxes was barred by the
applicable statute of limitations. (Id. at 4—5)
Seeking to resolve all counts remaining in this action, the United States
brought the motion for summary judgment that is now before me. (ECF No.
187) Filed on January 27, 2017, this summary judgment motion asks the court
to (a) reduce the Balices’ 1998 joint income tax and Balice’s 2007 and 2008
income tax assessments to judgment (Counts I and VI); (b) declare that
Rosewater holds title to the Maple Avenue property as the Balices’ nominee or
alter ego (Count 110; (c) in the alternative, to set aside the transfer of the Maple
Avenue property from the Balices to Rosewater as a fraudulent conveyance
(Count IV); and (d) hold that the United States may foreclose its federal tax
liens against the Maple Avenue property (Count V).
Balice’s motion (ECF No. 191), flIed Februan- 14, 2017, asks me to strike
the motion for summary judgment as premature. He says he is entitled to, but
has not received, further discovery in the form of “IMF data, files, records, and
record-sets.” (Def. Mot. & Opp. 3,
12) Balice’s motion also serves as his
opposition to the summary judgment motion of the United States. In broad
strokes, Balice argues that disputed issues of material fact preclude summary
judgment and he also seeks to attack the judgments of the Tax Court. Balice
has also filed a second, tardy opposition to the United States’s motion, dated
June 29, 2017 (Def. 2nd Opp.). In light of his pro se status, I nevertheless
Defendant Amboy Bank (“Amboy”), which has a mortgage lien on the
Maple Avenue property, also opposes the summary judgment motion, but only
as to the status of Rosewater and the ability of the United States to foreclose on
this trust-held asset (Counts III, IV, and V). (See ECF No. 190, filed Februan’ 7,
2017; see also ECF No. 119 (opposition to the United States’s motion for
summary judgment against Amboy)) Amboy Bank argues that the United
States is time-barred from challenging the status of Rosewater and therefore
cannot foreclose on the Maple Avenue property for the purpose of satisfying the
Bahces’ personal tax liabilities.
Since the parties flied the motions that are the subject of this Opinion,
Magistrate Judge Clark and I have ruled on several ancillary motions (See, e.g.,
ECF nos. 202, 208). Judge Clark’s letter order dated May 8, 2017 (ECF no.
202) is relevant to Bahce’s motion to strike. By that order, Judge Clark denied
three discovery motions Balice filed which sought orders to compel the United
States to produce individual master file (“IMF”) data and other documents.
(ECF no. 202 at 1) Judge Clark held that Balice’s request for IMF data was
moot, as the United States represented that it had already provided all relevant
data, and that, as to the other documents, Balice had failed to serve discovery
requests on the United States. (Id. at 2)
Subsequently, during a May 16, 2017 telephone conference, Judge Clark
announced that discovery had concluded. Balice conceded that his “master file”
from the IRS “was the main thing that [he] really wanted” out of the discovery
stage of this action. (ECF No. 204, p.
My most recent memorandum opinion and order, dated July 5, 2017
(ECF No. 208, hereinafter “Sauce IV), is also relevant. In that memorandum
opinion and order, SaUce TV, I rejected (for the third time) Balice’s argument
that the 2010 assessment of his 1998 tax year liability was untimely. With the
aid of a timeline of events, I explained that the IRS’s February 22, 2010
assessment of the Balices’ 1998 taxes was timely because the six-year statute
of limitations, see 26 U.S.C.
650 1(e)(1), began running when the Balices flied
their tax return on December 20, 1999. Although February 2010 is, as Balice
In the teleconference, the United States responded that it would produce “the
individual master file.” (Id. pp. 3—5) The United States represented in its briefing on its
motion for summary judgment, however, that it had “already produced to Balice all
data from the master file that has even an arguable connection to the claims or
defenses in this matter,” including “44 pages of information from Balice’s individual
master ifie showing the IRS’s record of all assessments, payments, credits, interest,
and other calculations” relevant to the tax years at interest in this action. (Reply 2) At
any rate, the IMF data seems to have been produced. (See, e.g., Def. Opp. & Mot. Ex.
A4 (IMF transcript); ECF No. 184, Ex. A (44 pages of IMF data))
points out, more than six years after December 1999, the six-year statute of
limitations was tolled for over five years by the filing of the June 21, 2004
notice of deficiency and the intervening Tax Court proceeding. See 26 U.S.C.
6503(a)(1). (BalicelVat 1—2)
U. LEGAL STANDARD
Federal Rule of Civil Procedure 56(a) provides that summary judgment
should be granted “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ.P, 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248, 106 S Ct. 2505, 91 L.Ed.2d 202 (1986); Kreschollek v. S. Stevedoring Co.,
223 F.3d 202, 204 (3d Cir. 2000). In deciding a motion for summary judgment,
a court must construe all facts and inferences in the light most favorable to the
nonmoving path’. See Boyle v. County of Allegheny Pennsylvania, 139 F.3d
386, 393 (3d Cir. 1998). The moving party bears the burden of establishing
that no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477
U.S. 317, 322—23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “[W]ith respect to an
issue on which the nonmoving party bears the burden of proof.
on the moving party may be discharged by ‘showing’—that is, pointing out to
the district court—that there is an absence of evidence to support the
nonmoving party’s case.” Celotaç 477 U.S. at 325.
Once the moving party has met that threshold burden, the non-moving
party “must do more than simply show that there is some metaphysical doubt
as to material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475
U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The opposing party
must present actual evidence that creates a genuine issue as to a material fact
for trial. Anderson, 477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (setting forth
types of evidence on which nonmoving party must rely to support its assertion
that genuine issues of material fact exist). “lUJnsupported allegations
pleadings are insufficient to repel summary judgment.” Schoch v. First Fid.
Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990); see also Gleason v. Nonuest
Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001) (“A nonmoving party has created
a genuine issue of material fact if it has provided sufficient evidence to allow a
jury to find in its favor at trial.”). If the nonmoving pam’ has failed “to make a
showing sufficient to establish the existence of an element essential to that
party’s case, and on which that party will bear the burden of proof at trial,
there can be ‘no genuine issue of material fact,’ since a complete failure of proof
concerning an essential element of the nonmoving party’s case necessarily
renders aJI other facts immaterial.” Katz
Aetna Cas. & Sur. Co., 972 F.2d 53,
55 (3d Cir. 1992) (quoting Celotex, 477 U.S. at 322—23).
In deciding a motion for summary judgment, the court’s role is not to
evaluate the evidence and decide the truth of the matter, but to determine
whether there is a genuine issue for trial. Anderson, 477 U.S. at 249, 106 5.
Ct. 2505. Credibility determinations are the province of the fact finder. Big
Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992).
The summary’ judgment standard, however, does not operate in a vacuum. “[Ijn
ruling on a motion for summary judgment, the judge must view the evidence
presented through the prism of the substantive evidentiaiy burden.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 5. Ct. 2505, 2513, 91 L. Ed. 2d
A. Balice’s Motion and Opposition
Motion to strike
The only argument Balice makes in support of striking the United
States’s motion for summary judgment is that he is still entitled to discovery of
IMF data. (Def. Mot. & Opp. 2—4,
4—16; Def 2nd Opp. 1) Sauce accuses the
United States of “improperly secreting and hiding” undisclosed IMF records,
which Balice assumes must be exculpatory. But Balice offers no evidence or
substantive argument to support his accusation or his assumption. The United
States has represented, many times, that it has produced all relevant IMP data
and that any further information would be irrelevant and burdensome to
produce, in light of the needs of this case. (See P1. Reply 2; ECF No. 189 at 1—2;
ECF No. 196 at 2.) Cf Fed. I?. Civ. P. 26(b)(1) (“Parties may obtain discovery
regarding any nonprivileged matter that is relevant to any party’s claim or
defense and proportional to the needs of the case . . . .“); Caver v. City of
Trenton, 192 F.R.D. 154, 159 (D.N.J. 2000) (“The party seeking discovery has
the burden of showing that the information sought is relevant to the subject
matter of the action and may lead to admissible evidence.”).
For these reasons, Judge Clark has already denied Sauce’s essentially
identical requests (see ECF nos. 182, 185, 186) and has closed discovery in
this action. (See ECF No. 202 (denying Balice’s request to compel production of
additional IMF data as moot where United States represented it had already
produced all relevant IMP data); ECF No. 204 (announcing close of discovery
and scheduling summary judgment briefing); discussion at p. 8, supra.)
In Goodman v. Burlington Coat Factory Warehouse Corp., 292 F.R.D. 230
(D.N.J. 2013), Judge Schneider summarized the relevant considerations in
discovery’ disputes like this one:
[I]t is well settled that the Federal Rules of Civil
Procedure allow broad and liberal discovery....
Nonetheless, while the scope of discovery pursuant to
Rule 26 is broad, it is not unlimited and may be
circumscribed.... Even if discovery is relevant the
Court has discretion to impose limits where the
discovery’ sought is unreasonably cumulative or
duplicative, or where the burden or expense of the
proposed discovery outweighs its likely benefit.... The
Court has broad discretion to tailor discovery narrowly
to meet the needs of each case.... This rule of
proportionality is intended to guard against redundant
or disproportionate discovery by giving the court
authority to reduce the amount of discovery that may
be directed to matters that are othenvise proper
subjects of inquiry.... See also Public Service Enterprise
Group, Inc. i,’. Philadelphia Elec. Co., 130 F.R.D. 543,
551 (D.N.J. 1990) (employing the rule of
proportionality to exclude marginally relevant evidence
from the scope of discovery); Bowers v. N.C.A.A., C.A.
No. 97-2600 BS), 2008 WL 1757929, at *6 (D.N.J.
Feb. 27, 2008)(exercising discretion to bar marginally
Id. at 232
A party’s speculative need for additional evidence is not grounds for re
opening discovery, especially where doing so would deprive the other parties of
certainty and delay resolution of the action. This relatively straightfonvard
matter has been pending for three years. Discovery has closed and the parties
expressly agreed to a summary judgment briefing schedule before Judge Clark.
Accordingly, Balice’s motion to strike the United States’s motion for summary
judgment as premature is denied.
2. Ba/ice’s contentions in opposition to the motion for summary
In advance of analyzing the summary judgment motion of the United
States on the merits, I summarily dispose of six contentions made by Balice, all
of which lack merit and fail to raise a material dispute.
(1) Balice argues that the 2010 assessment of 1998 tax year liabilities
ran afoul of the statute of limitations, depriving this court of jurisdiction (Def.
Mot. & Opp. 6—7,
ii, vi & 18; Def. 2nd Opp. 4—5); As explained in detail,
supra pp. 5—8, this Court has thrice rejected Balice’s challenge to the
timeliness of the 2010 assessment ((1), supra). (See Ba/ice hat 3—4; Ba/ice III at
4—5; Ba/ice TV 1—2) This decision marks the fourth disposition of the same
(2) Balice argues that the Tax Court’s orders must be set aside because
the Balices never received notices of deficiency (Def. Mot. & Opp. 8,
government points out that this argument contradicts the Tax Court’s finding
that the IRS “mailed [the Balices] a notice of deficiency for years 1997 and
1998 on July 21, 2004,” and that “[t]hereafter, [the Balices] challenged [the
IRS’s] determinations by filing a petition” in Tax Court. (P1. Br. Ex. 2 at 2 (ECF
No. 187-2 at p.8); see P1. Reply 4) The government argues that the findings of
the Tax Court are binding on the parties to this action. (P1. Reply 4) Tax Court
determinations litigated on the merits are binding as a matter of resjudicata.
United States v. Bottenfield, 442 F.2d 1007, 1008 (3d Cir. 1971).
Without even wading into the applicability of preclusion doctrines,
though, Balice’s lack-of-service challenge is insufficient to defeat summary
judgment. It is entirely implausible that Balice never received a notice of
deficiency and yet challenged the IRS’s assessment in Tax Court. “The notice of
deficiency, sometimes called a ‘ninety day’ letter, is the taxpayers’ ‘ticket to the
Tax Court’ to litigate the merits of the deficiency determination, and is a
jurisdictional prerequisite to a suit in that forum.” Robinson v. United States,
920 F.2d 1157, 1158 (3d Cir. 1990) (citations omitted); 26 U.S.C.
§ 6213; see
also Tax Ct. R. Prac. & Proc. 20(a) (“A case is commenced in the Court by filing
a petition with the Court, inter alia, to redetermine a deficiency set forth in a
notice of deficiency issued by the Commissioner
. . .“).
Where the record
makes clear that the Balices themselves initiated an action to challenge their
1998 tax deficiency, the only conclusion is that they initiated that action with
the necessary “ticket”—their notice of deficiency.
It follows that there is no prejudice. Any procedural defect that may have
existed in the IRS’s service of the notice of deficiency did not deprive Balice of a
full and fair opportunity to litigate the merits of his deficiency. Cf Freeland v.
C,LR., 345 F. App’x 829, 830—3 1 (3d Cir. 2009) (“A taxpayer at a Collection Due
Process hearing can challenge the ‘existence or amount of the underlying tax
liability for any tax period’ if the taxpayer ‘did not receive any statutory notice
of deficiency for such tax liability or did not otherwise have an opportunity to
dispute such tax liability.”’ (emphasis added) (quoting 26 U.S.C.
6330(c)(2flBfl); Robinson v. United States, 920 F.2d 1157, 1161 (3d Cir. 1990)
(determining that district court had jurisdiction to hear challenge to IRS lien
where “the IRS’s failure to send a notice of deficiency denied plaintiffs an
opportunity to litigate the merits of the alleged deficiency in the Tax Court.”).
Accordingly, Balice’s second challenge fails.
(3) Balice argues that the IRS incorrectly calculated the balance due on
the Balices’ tax deficiencies and has not accounted for “funds taken in multiple
levy actions.” (Del. Mot. & Opp. 8—11, ¶T ix, xi, xiii; Def. 2nd Opp. 3) Directing
the Court to a line on an exhibited “Account Transcript” (see Def. 2nd Opp. 3 &
Ex. A) listing “-$76,586.40” as the “write-off balance due”, Balice contends that
the United States has fraudulently concealed the fact that Balice’s balance for
the 1998 tax year is actually zero. (Def. 2nd Opp. 3) The transcript to which
Balice refers is a printout of an electronic list of internal IRS accounting
actions. The amount of $76,586.40, surely related to the IRS’s February 22,
2010 assessment of additional income taxes due for 1998 (see Am. Compl.
(showing Feb. 22, 2010 assessment of $76,586 for the 1998 tax year)), appears
to be subtracted as a “Transfer out” action, then added as a “Transfer-in”
action, then subtracted again with the description “Write-off balance due”. The
subtraction-addition-subtraction sequence is admittedly confusing but the list
appears to be incomplete and the “write-off balance due” entry appears to have
been made in error, and has since been corrected.5 At any rate, Balice offers no
evidence to substantiate his interpretation that a negative “write-off balance
due” absolves him of all liability.
This is not all a big misunderstanding. Weighing against Balice’s
unsupported interpretation is a nearly eight-year history of IRS records and
Tax Court documents establishing and substantiating Balice’s deficiencies for
the 1998, 2007, and 2008 tax years. (P1. Br. Exs. B—C, E—F, M; P1. SUF
10; see generally MacGillivray Decl.) These records leave little room for doubt
that Balice owes $60,179.68, not $0, in deficient income taxes, penalties, and
interest for 1998 (P1. SUF
2—5; P1. Br. Exs. B—C (Tax Court Memorandum,
Order and Decision granting Commissioner of IRS summary judgment on
Balices’ 1997 and 1998 tax deficiencies; MacGillivray DecI.
6—10 & Ex. 1;
ECF No. 184-1); and $124,030.68 for the 2007 and 2008 tax years (as of
ECF No. 137 Ex. A (2016 “Account Transcript” showing subtraction and
addition of $76,586 but no second subtraction); MacGillivray Deci. Ex. 1 (same).
January 27, 2017) (see MacGillivray Deci.
11—13 & Ex. 1). See Bottenfield,
442 F.2d 1007 (Tax Court’s determinations of liabilities are final, binding, and
resjudicata in later actions); see also Freck v. I.R.S., 37 F.3d 986, 992 n.8 (3d
Cir. 1994) (“Assessments are generally presumed valid and establish a prima
facie case of liability against a taxpayer.
. . .“);
Psaty v. United States, 442 F.2d
1154, 1160 (3d Cir. 1971) (“Once the tax is assessed a rebuttable presumption
arises based, in part, on the probability of its correctness
considerations of public policy.”).
(4) Balice argues that the balance due for tax years 2007 and 2008 is
incorrect because the IRS impermissiblv based the Balices’ income on bank
deposits, and that the United States has also failed to establish a prima fade
case of the existence of Balice’s tax liabilities (Def. Mot. & Opp. 9,
x) The IRS,
however, is authorized to estimate individuals’ tax liability as long as the
method used is reasonable. United States v. FiorD’Italia, Inc., 536 U.S. 238,
243, 122 S. Ct. 2117, 2122 (2002) (collecting cases upholding IRS’s use of
various means to extrapolate and estimate income taxes owed). “Deposits in a
taxpayer’s bank account are prima facie evidence of income, and the taxpayer
bears the burden of showing that the deposits were not taxable income but
were derived from a nontaxable source.” Welch v. C.LR., 204 F.3d 1228, 1230
(9th Cir. 2000); see also Reynoso v. Comm’r of Internal Revenue, 112 T.C.M.
(CCH) 400 (T.C. 2016) (“The Commissioner often uses bank-deposits analyses
to reconstruct taxpayers’ income—and we have long approved their use.”).
Balice has made no showing that his bank deposits in this instance were not
taxable income or that the IRS’s use of them was not reasonable. See Dodge v.
C.LR., 981 F.2d 350, 354 (8th Cir. 1992) (“Once the deposits were shown to be
in the nature of income and to exceed what the taxpayers had reported as
income, it became the taxpayers’ responsibility to persuade the trier of fact that
the deposits were nontaxable.”).
(5) Balice argues that the Balices transferred the Maple Avenue property
to Rosewater for “fair and equitable value” and without the intent to evade
liabilities (Def. Mot. & Opp. 11—12, ¶j xiii—xv) This argument goes to the
question of whether Rosewater is an alter ego or nominee. It is, for reasons that
will be explained infra. Balice offers absolutely no evidence that he received fair
value, or any value, from Rosewater in exchange for title to the Maple Avenue
property. He also offers no evidence, or even an alternative explanation, to
support his claim that he did not transfer his property with the intent to evade
liabilities. His wife, the other transferor party, says otherwise. Accordingly, this
argument raises no disputed issues of fact and cannot overcome the United
States’s satisfactory evidence, discussed in Section LA., supra.
(6) Finally, Balice argues that, regardless of whether material facts
remain in dispute, Balice has a constitutional right to a trial by jury (Def. Mot.
& Opp. 16—25,
¶ 25; Def. 2nd Opp. 6—15). This amounts to a constitutional
attack on summary judgment itself, a matter settled over a century ago.
“Summary judgment does not violate a party’s Seventh Amendment jury trial
rights so long as the person having the right to the jury trial is an actual
participant in the summary judgment proceeding.” In re TMILitig., 193 F.3d
613, 725 (3d Cir. 1999), amended, 199 F.3d 158 (3d Cir. 2000); see also
Fidelity & Deposit Co. v. United States ex rel. Smoot, 187 U.S. 315, 319—21, 23
S.Ct. 120 (1902) (rule authorizing judgment for a plaintiff who has filed and
served affidavit setting out cause of action under contract and amount claimed
due where defendant has not filed a sufficient affidavit in defense does not
violate the right to a jury trial but rather “prescribes the means of making an
Balice has therefore raised no issues of law or fact to defeat summary
judgment.7 To succeed on its motion, however, the government still must make
At certain points in Sauce’s brief, he characterizes this argument as a demand
or motion for ajuiy trial. The claims are equivalent, and the result is the same.
Sauce also disputes certain facts that the United States avers as background
which are immaterial to the grounds on which the United States moves for
summary judgment. (See Def. Mot. & Opp. 6, ¶ i (claiming an assessment for tax year
was performed in 2010, not in 2005); cf Opp. 2 (agreeing an assessment occurred in
2010, not in 2005. See also Def. Mot. & Opp. 6, ¶ iii (alleging a typographical error
its positive case. It must show that summary judgment is appropriate, and this
includes overcoming Amboy’s challenges as to Counts V and III and/or IV.
B. The Assessments on Balice’s 1998, 2007, and 2008
Liabilities WIU Be Reduced to Judgment (Counts I and VI)
As I observed in Sections LB. and III.A.2., supra, the Tax Court upheld
the IRS’s deficiency determinations concerning the Balice’s income tax
obligations for the 1998, 2007, and 2008 tax years. The amounts the Tax Court
determined are i-es judicata in this action. Bottenfleld, 442 F.2d at 1008. And
according to the sworn declaration of IRS revenue officer Michael MacGillivray,
the IRS’s Integrated Data Retrieval System8 shows that the unpaid portions of
the IRS’s assessments against Balice together with penalties and interest
amount to $60,179.68 for the 1998 tax year and $124,030.68 for the 2007 and
2008 tax years. Amboy does not challenge these tax liabilities and, as
discussed, Balice fails to introduce any contrary financial or other evidence
that would raise a material dispute as to their correct calculation. Accordingly,
summary-judgment will be granted as to Counts I and VI.
without explaining its materiality); Id. at ¶j iv, viii, 26 (disputing complete production
of IMF data); id. ¶ v (concerning overpayments, which were credited and not related to
the later assessments that the United States now seeks to reduce to judgment); Id. ¶ xi
(alleging a typographical error without explaining its materiality); id. ¶ xii (taking issue
with a quote from the Third Circuit’s denial of Balice’s earlier appeal in this case,
without explaining its materiality to this motion); Id. ¶ xvi (alleging the legitimacy of
Statewide Trust, which the Tax Court found to be a sham but is not at issue in this
action)) As these challenges have no bearing on the substance of the United States’s
motion, I need not address them further.
Balice also argues that this Court lacks subject matter jurisdiction as to any
action concerning tax liability for pre-1998 tax years because a ten-year statute of
limitations has run. (Id. ¶ 21)1 address and dispose of this statute of limitations
argument in response to Amboy’s opposition at Section III.C.1., infra.
“IDRS” is a database “the IRS uses to maintain taxpayer accounts, including
the balance due for tax liabilities, payoff amounts, penalty and interest calculations,
notice issuance, and credit and debit transfers within an account.” (MacGillivray Decl.
C. The United States May Foreclose On the Maple Avenue
Property Because Rosewater Is Balice’s Nominee (Counts III
I further rule that Rosewater is Balice’s nominee, and that the United
States may therefore foreclose on the property to satisfy Balice’s personal tax
obligations. I consider, and reject, Amboy’s related arguments that
foreclosure is barred by the statute of limitations and resjudicata.
1. Rosewater’s status as nominee
It is undisputed that the United States may foreclose on property subject
to federal tax liens upon this court’s adjudication and decree, 26 U.S.C.
7403(a), (c), and that this foreclosure right extends to property held by a
taxpayer’s nominee, see G. M. Leasing Corp. v. United States, 429 U.S. 338,
351, 97 S. Ct. 619, 627 (1977). The United States has established many times
over in this action that federal tax liens arose against the Balices upon timely
assessments for the 1992, 1993, 1996, 1998, 2007, and 2008 tax years, and
that these tax liens attached to the Balices’ Maple Avenue property. See 26
6321. As discussed, the Balices received proper notice and demand for
payment in accordance with 26 U.S.C.
6303. Thereafter, they failed to satisfy
the assessments and the government filed federal tax liens against the Balices
and against Rosewater as nominee of Michael Balice. (See P1. Br. Ex. M
(Notices)). Accordingly:, the United States is entitled to summary judgment on
Count V and may enforce its federal tax liens through sale of the Maple Avenue
property—if Rosewater is in fact a nominee of Balice.
In Count III, the United States asks for a finding that this is so. Because
Rosewater is Balice’s nominee, says the government, the Maple Avenue
property, despite being held in trust, is subject to the federal government’s
liens for taxes owed by Balice. The government’s premise is legally correct.
“Where a property owner is acting as a nominee or alter ego for a taxpayer, the
nominee’s assets may be used to satisfy the taxpayer’s outstanding tax
liability.” United States u. Patras, 909 F. Supp. 2d 400, 410 (D.N.J. 2012), affd,
544 F. App’x 137 (3d Cir. 2013). This “nominee theory is utilized to determine
whether property should be construed as belonging to the taxpayer if he/she
treated and viewed the property as his/her own, in spite of the legal
machinations employed to distinguish legal title to the property.” In re
Richards, 231 B.R. 571, 578 (E.D. Pa. 1999). Therefore, as the Third Circuit
Court of Appeals has explained,
[wjhen the “Government seeks to reach” real property,
we must determine what rights the taxpayer has in
such property to determine if it is subject to the lien.
Dr-ye v. United States, 528 U.S. 49, 58, 120 S. Ct. 474,
145 L.Ed.2d 466 (1999). If the property is under the
control of a third party found to be the delinquent
taxpayer’s nominee or alter ego, it can be subject to a
tax lien. G.M. Leasing Corp. v. United States, 429 U.S.
338, 350—51, 97 5. Ct. 619, 50 L.Ed.2d 530 (1977). A
third party is a taxpayer’s nominee where “the
taxpayer has engaged in a legal fiction by placing legal
title to property in the hands of [that] third party while
actually retaining some or all of the benefits of true
ownership.” Holman u. United States, 505 F.3d 1060,
1065 (10th Cir.2007); see also Fourth mu. LP u. United
States, 720 F.3d 1058, 1066 & n. 3 (9th Cir.2013). We
initially look to state law to determine the taxpayer’s
ownership interest in the property and whether the
title holder is merely a nominee. See Dr-ye, 528 U.S. at
58, 120 5. Ct. 474. If the taxpayer has a property
interest under state law, then federal law determines
whether that property interest is subject to a federal
tax lien. Id.
United States v. Patras, 544 F. App’x 137, 140—4 1 (3d Cir. 2013) (footnotes
omitted);° see also Balice Iat *3 (“While state law governs the parties’
In Qnffiths t.c Helvering, the U.S. Supreme Court described certain principles
motivating this theory:
We cannot too often reiterate that ‘taxation is not so much
concerned with the refinements of title as it is with actual
command over the property taxed-the actual benefit for
which the tax is paid.’ Corliss u. Bowers, 281 U.S. 376, 378,
50 S.Ct. 336, 74 L.Ed. 916. And it makes no difference that
such ‘command’ may be exercised through specific
retention of legal title or the creation of a new equitable but
Taxes cannot be escaped ‘by
anticipatory arrangements and contracts however skillfully
underlying property rights, federal law governs the priority between a federal
tax lien and a competing lien.”).
Under New Jersey law, the following factors are relevant in determining
whether a person or entity to whom property has been transferred is a
taxpayer’s nominee: (1) whether adequate consideration was paid for the
transferred property; (2) whether the transfer occurred in anticipation of a
lawsuit or other liabilities; (3) the relationship between the taxpayer and
transferee; (4) whether the parties failed to record the conveyance; (5) whether
the property remained in the taxpayer’s possession; and (6) whether the
taxpayer continued to enjoy the property’s benefits. See Patras, 909 F. Supp.
2d at 410 (D.N.J. 2012) (listing these factors and noting that the standard is
the same under federal and state law); Jugan v. Friedman, 275 N.J. Super. 556,
570, 646 A.2d 1112, 1119 (App. Div. 1994), abrogated on other grounds by
Banco Popular N. Am. u. Gandi, 184 N.J. 161, 876 A.2d 253 (2005); Coles u.
Osback, 22 N.J. Super. 358, 366, 92 A.2d 35, 39 (App. Div. 1952); see also
Shades Ridge Holding Co. v. United States, 888 F.2d 725,728(11th Cir. 1989),
as amended on denial of reh’g (Sept. 29, 1989).
Here, the government’s evidence establishes that five out of six factors
support the nominee theory. (See Section l.A., supra) The exception is factor
four; failure to record a conveyance. The Balices did record a quitclaim deed
conveying the Maple Avenue property to Rosewater. (Id.) Nevertheless,
considering the substantial, undisputed evidence supporting the other five
factors, factor four cannot be dispositive. The Third Circuit and its constituent
courts have arrived at the same conclusion when faced with this balance of
factors. See, e.g., United States a Patras, 909 F. Supp. 2d at 411 (“Although the
conveyance to [the nominee] was recorded, this factor is not dispositive given
the substantial evidence supporting the other factors.”), aff’d, 544 F. App’x
devised by which the fruits are attributed to a different tree
from that on which they grew.’ Lucas v. Earl, i81 U.S. 111,
115, 50 S.Ct. 241, 74 LEd. 731.
308 U.S. 355, 357—58, 60 S. Ct. 277, 278—79 (1939).
137, 142 (3d Cir. 2013) (“[Although the transfer was recorded, this factor alone
is not dispositive.”); In re Richards, 231 B.R. 571, 579 (ED. Pa. 1999)
(explaining no one factor in the nominee theory’ is determinative and finding
that transferee was taxpayer’s nominee where the only non-supporting factor
was recordation of a deed). Accordingly, I find the evidence overwhelming and
rule that there is no genuine, material issue of fact that Rosewater is Balice’s
2. Amboy’s Statute of Limitations Argument
But wait, says Amboy; none of this matters, because the government
waited too long to assert its nominee theory. Amboy contends that 28 U.S.C.
2462’° (which sets a five-year statute of limitations on enforcing “any civil fine,
penalty or forfeiture”), rather than 26 U.S.C.
6502 (which sets a ten-year
statute of limitations on the collection of taxes from the time the taxes are
assessed) applies here. That is so, says Amboy, because the government’s
nominee/alter ego claims “are not ‘assessments.”’ (Amboy Ltr. 2). The five-year
period under 28 U.S.C.
2462, says Amboy, began running when the United
States’s claim against the Maple Avenue property accrued, which (Amboy says)
was when the government was put on notice that the Maple Avenue property
had been transferred to Rosewater.
Because the Balices transferred the Maple Avenue property to Rosewater
by a deed recorded on September 9, 1994, and because New Jersey operates
Amboy’s letter twice refers to “11 U.S.C.A.
U.S.C. § 2462, which provides in full:
2462.” Amboy surely meant to cite
Except as otherwise provided by Act of Congress, an action,
suit or proceeding for the enforcement of any civil fine,
penalty, or forfeiture, pecuniary or otherwise, shall not be
entertained unless commenced within five years from the
date when the claim first accrued if, within the same
period, the offender or the property is found within the
United States in order that proper service may be made
under a “race-notice” regime,” Amboy concludes that the United States’s claim
accrued on September 9, 1994. Alternatively, says Amboy, the United States
had actual notice of the transfer (and thus its claim may have accrued) when it
filed a Notice of Federal Tax Lien against the Maple Avenue property on July
11, 2005. (Amboy Ltr. 1) Amboy maintains that whether the date of
constructive notice (1994) or actual notice (2005) applies, the clock had run by
the time the United States brought this action in 2014.
Amboy cites no case law to support its assertion that the government’s
nominee theory constitutes an independent claim against Rosewater, or that 28
2462 rather than 26 U.S.C.
6502 applies here. What case law does
exist ovenvhelmingly suggests that where a tax levy or collection of judgment
would be timely as against a taxpayer, a tax levy or collection of judgment
against the taxpayer’s nominee is also timely; no separate claim need be
asserted against the nominee. For these purposes, the taxpayer and his
nominee are considered one and the same; this is not an independent cause of
action, but simply an exercise in tracking the taxpayer’s assets. See, e.g.,
United States u. Scherping, 187 F.3d 796, 800—801 (8th Cir. 1999) (where
action to collect judgment against taxpayer is timely filed, statute of limitations
does not reset with respect to later-joined alter egos of taxpayer against whom
judgment is sought); Hall u. United States, 403 F.2d 344, 347 (5th Cir. 1968)
New Jersey is considered a ‘race-notice’jurisdiction, which
means that as between two competing parties the interest
of the party who first records the instrument will prevail so
long as that party had no actual knowledge of the other
party’s previously-acquired interest. Palamarg Realty Co. a
Rehac, 80 N.J 446, 454, 404 A.2d 21(1979). As a corollary
to that rule, parties are generally charged with constructive
notice of instruments that are properly recorded. Friendship
Manor, Inc. a Greiman, 244 N.J Super. 104, 108, 581 A.2d
893 (App.Div. 1990) (“In the context of the race notice
statute, constructive notice arises from the obligation of a
claimant of a property interest to make reasonable and
diligent inquiry as to existing claims or rights in and to real
estate.”), certf denied, 126 N.J 321, 598 A.2d 881 (1991).
Coxu. RK4 C’orp., 164 N.J. 487, 496, 753 A.2d 1112, 1117(2000).
(suit against transferees not to “collect taxes” but to “follow assets, fraudulently
acquired, in order to collect a judgment against the taxpayer.
ambit of [26 U.s.c.]
is outside the
§ 6502.”); In re Moore, 379 BA?. 284, 299 (Bankr. ND. Tex.
2007) (applying statute of limitations for enforcing a judgment rather than
statute of limitations for underlying cause of action in creditor’s pursuit of
debtor’s alter ego to collect judgment). Cf United States v. Perrina, 877 F. Supp.
215, 218 (D.N.J. 1994) (government’s timely assessment against taxpayer for
unpaid employment taxes enabled it to take advantage of ten-year statute of
limitations for commencing litigation to collect on tax levy against properv
fraudulently conveyed to taxpayer’s spouse; no separate assessment against
spouse was necessary); Fellenz v. Lombard Mv. Corp., 400 F. Supp. 2d 681, 684
(D.N.J. 2005) (“[Tjhe procedural safeguards in 26 u.s.c.
§ 6330 are
inapplicable to a civil suit taken to enforce tax liens against properties that
allegedly had been fraudulently conveyed to third parties or held by the
taxpayers nominees or alter egos.”).
Any distinction between Balice and Rosewater, as I have already found,
is a fiction; the statute does not start running again, any more than it would
because the taxpayer shifted his money among different bank accounts. The
only question before me for statute of limitations purposes is whether the
United States timely sought to foreclose on the Maple Avenue property. As the
government correctly submits, 26 U.S.C.
§ 6321, 6322 and 6502, provisions of
the Internal Revenue Code, set the timeline here.’2 Under these provisions:
When a person fails to pay a federal tax, a federal tax lien arises “upon
all property and rights to property, whether real or personal, belonging to
such person.” 26 U.S.C. § 6321;
A lien imposed by Section 6321 “arise[s] at the time the assessment is
made” and “continue[s] until the liability for the amount
The five-year statute of limitations provided for in 28 U.S.C. § 2462 does not
apply here. Section 2462, a catchall, applies only “[e]xcept as otherwise provided by
Act of Congress.” The Internal Revenue Code constitutes such an act that sets a
specific statute of limitations for collection of taxes after assessment. See 26 U.S.C. §
judgment against the taxpayer arising out of such liability) is satisfied or
becomes unenforceable by reason of lapse of time.” 26 U.S.C § 6322; and
A 1ev or court proceeding to collect taxes must commence within ten
years after the assessment of a tax, but “[i]f a timely proceeding in court
for the collection of a tax is commenced, the period during which such
tax may be collected by levy shall be extended and shall not expire until
the liability for the tax (or a judgment against the taxpayer arising from
such liability) is satisfied or becomes unenforceable.” 26 U.S.C. § 6502.
In this case, the United States seeks to foreclose upon the Maple Avenue
property to satisfy three groups of tax liens: (1) tax liens arising from 1994
through 2005 assessments of taxes owed for the 1992, 1993, 1996, and 2001
tax years that were reduced to judgment against Balice on June 18, 2008, (see
ECF No. 1, Ex. B (United States v. Ba/ice, No. 2:07-cv-5326 (D.N.Jjfl; (2) tax
liens arising from 1994 through 2006 assessments of taxes owed for the 1992,
1993, 1996, and 2001 tax years that were reduced to judgment against Marion
Balice on April 23, 2012, (see ECF No. 1, Ex. C (United States v. Balice, No.
2:11-cv-00130 (D.N.J.fl); and (3) tax liens arising from the assessments for the
1998, 2007, and 2008 tax years that, by order accompanying this opinion, I
now reduce to judgment against Balice, see supra Section III.B.
Because the United States has or will have (by the order accompanying
this opinion) obtained judgment liens arising from the Balice’s tax lien liability
as to all tax liens, and because judgment liens are “effective, unless satisfied,
for a period of 20 years,” 28 U.S.C.
§ 3201(c), there is no issue as to the current
enforceability of these three groups of liens.’3
A judgment in a civil action shall create a lien on all real
property of a judgment debtor on filing a certified copy of
the abstract of the judgment in the manner in which a
notice of tax lien would be filed under paragraphs (1) and
(2) of section 6323(f) of the Internal Revenue Code of 1986.
A lien created under this paragraph is for the amount
necessary to satisfy the judgment, including costs and
28 U.S.C. § 320 1(a). Amboy does not dispute that the United States has met the filing
requirements necessary to create valid judgment liens. See P1. Ex. M (notices of federal
tax liens against the Sauces and Rosewater).
As for the timeliness of the government’s action to collect taxes—i.e., the
foreclosure claim now before me—the ten-year statute of limitations under 26
6502 applies. Ambov argues that the IRS’s assessments made in 1994
and 2003 (corresponding to taxes owed for 1992, 1993, and 1996) occurred
over ten years ago, and that the United States is thus time-barred from
asserting a foreclosure claim based on those liens. (Amboy Ltr. 3) Amboy fails
to appreciate that the time to collect taxes is extended
in court for the collection of a tax is commenced
foreclosure proceeding, it is true, commenced in 2014, more than ten years
after 1994 and 2003. But this is not the only relevant proceeding. The courts
have interpreted “proceeding in court” in
6502(a) to include suits to reduce
tax assessments to judgment. See Markham v. Fay, 74 F.3d 1347, 1353 (1st
Cir. 1996) (“A lien becomes unenforceable by lapse of time upon expiration of
the six-year statute of limitations for collection, but if the government brings
suit within six years from assessment and receives a judgment in its favor, the
life of the lien is extended indefinitelv.”);’4Moyer v. Mathas, 458 F.2d 431, 434
(5th Cir. 1972) (“[TIhe limitation provisions of section 6502(a) are satisfied if the
government institutes, within six years after the assessment of the tax, a suit
for an in personam judgment against the taxpayer.”); accord United States v.
Mandel, 377 F. Supp. 1274, 1277 (S.D. Fla. 1974); see also United States v.
Ettelson, 159 F.2d 193, 196 (7th Cir. 1947) (filing of claim in probate court was
a proceeding in court sufficient to stop the running of the statute of limitations
prescribed in the predecessor statute to §6502); United States v. Mattox, No.
12-C-1291, 2014 WL 67325, at *3 (E.D. Wis. Jan. 8, 2014) (following the rule of
Ettelson and finding no cases that cast doubt on its continued validity); cf.
United States v. Silverman, 621 F.2d 961, 964 (9th Cir. 1980) (filing of claim
against an estate subject to probate did not count as a “proceeding in court” for
Prior to 1990, 26 U.S.C. § 6502 provided for a six-year statute of limitations.
The statute was amended to extend to ten years in 1990. 26 U.S.C. § 6502(a);
Omnibus Budget Reconciliation Act of 1990, Pub.L. 101—508, sec. 113 17(a), 104 Stat.
1388—458. The pre-1990 version of the statute applied in Markham.
in light of the nature, function, and effect of the filing under
California probate law).
The 1994 and 2003 assessments were reduced to judgment, via
“proceedings in court,” in June 2008 and 2012. Those proceedings were timely
brought within the ten-year statute of limitations.’5 It follows that this
foreclosure action was not subject to the ten-year statute of limitations, which
had already been satisfied. Accordingly, the government’s Count V foreclosure
claim is timely.
3. Amboy’s Res Juthcata Argument
Amboy also suggests in the alternative that the government is precluded
from moving against Rosewater’s property now because it failed to assert
claims against Rosewater in the 2007 and 2011 actions against the Balices.
(Amboy Ltr 2—3) As the United States observes (P1. Reply 9), 1 have already
rejected what amounts to the same argument. See Section IC., supra.
There are additional complications, however. Language in the cases cited supra
suggests that the intervening “proceeding in court” must have been filed within ten
years of the assessment to stop the running of the statute of limitations. If this were
so, the actions which produced the 2008 and 2012 judgments (filed in 2007 and 2011)
would seem to have been untimely, and therefore would not have stopped the
limitations clock. But the record of the 2011 action dispels this concern.
In that 2011 action, Judge Chesler rejected Marion Balice’s statute of
limitations defense, granting summary-judgment to the government, and the Court of
Appeals affirmed. See United States v. Balice, 11-cv-00l30 (D.N.J.), ECF Nos. 45 & 46
(See ECF No. 1, Ex. Bin this action). The Third Circuit, affirming, explained that
Balice timely filed a collection-due-process (“CDP”) hearing with respect to tax
liabilities for the 1993 tax year (corresponding to the 1994 assessments) and also
timely filed an instalment agreement request. Both of those filings suspended the
statute of limitations, as did two bankruptcy filings. See id., ECF No. 52-2 (Opinion,
3d Cir. Nov. 29, 2012) at 5—6 & n.3. Those statutory suspensions, taken together,
rendered the 2011 action timely (pursuant to 26 U.S.C. § 6330(e), 6331(k)&(i), and
6503(b) & (h)) Id.
As for the 2007 action, Balice did not raise a statute of limitations defense. See
United States i-c Balice, No. 2:07-cv-5326 (D.N.J.), ECF Nos. 4, 7, 10. The statute of
limitations may be waived, however, and I see no basis to question the timeliness of
that 2007 action now. At any rate, the Third circuit’s opinion affirming summary’
judgment in the 2011 action suggests that certain if not all of the same extension
triggers would likely have applied to extend the statute of limitations with respect to
the 2007 action.
To reiterate, in Balice I, I held that the 2008 and 2012 judgments arising
out of the 2007 and 2011 actions against Michael and Marion Balice do not
have preclusive effect because the issues and relief sought in the action sub
Judice are not the same; “If Balice’s res judicata argument were correct, no
creditor could ever sue for foreclosure based on a prior judgment.
that a prior judgment precludes foreclosure would in many cases defeat the
very purpose of a foreclosure action.” SaUce Iat *10. I see no appreciable
difference for present purposes between Amboy’s argument here—that the prior
actions bar the United States from foreclosing on the Maple Avenue property
under a nominee/alter ego theory—and Balice’s rejected argument in Sauce I—
that the prior actions bar this action entirely.
The undisputed evidence shows that Rosewater is Balice—i.e., that it is
Balice’s nominee with respect to the Maple Avenue property. Amboy’s
timeliness and res judicata challenges to this finding lack merit. Accordingly,
the government is entitled to judgment on Counts III and V and the Court will
order the sale of the Maple Avenue property to satisfy the tax liens against
Because the government is entitled to reach the Maple Avenue property under a
nominee theory, I need not reach its argument in the alternative—that the Balices’
conveyance of the Maple Avenue property to Rosewater was a fraudulent conveyance.
(See P1. Br. 9—10) Nevertheless, the evidence leaves no doubt that a fraudulent
conveyance did occur and thus, had the government’s nominee theory failed, I would
set aside the conveyance to Rosewater as fraudulent, thus permitting the government
to foreclose on the Maple Avenue property as legally owned by Balice. See, e.g., United
States v. Freeman, No. CIV. A. 92-255, 1993 WL 179115, at *5 (D.N.J. Mar. 3, 1993),
affd, 16 Fad 406 (3d Cir. 1993).
The Balices put the Maple Avenue property “beyond the reach of creditors
which would have been available to them” and several “badges of fraud” indicate that
they did so with the “intent to defraud, delay, or hinder” the government. United Ass’n
u. Schmidt, No. CIV.A. 10-18 15 RBK J, 2011 WL 766057, at *7 (D.N.J. Feb. 24, 2011)
(internal quotation marks and citations omitted) (applying New Jersey’s Uniform
Fraudulent Transfer Act, N.J. Stat. 25:2-20 et seq.); see N.J. Stat. 25:2-26 (badges of
fraud include, inter alia, whether the transfer was to an insider, whether the debtor
remained in possession of control of the property, whether the debtor received
reasonable consideration for the transfer; and whether the debtor incurred substantial
For the foregoing reasons, Balice’s motion to strike the motion of the
United States for summary judgment as premature is DENIED; and the motion
of the United States for summary judgment on Counts 1,111, V, and VI is
The parameters of priority of liens were set by my opinion in Balice I. As
noted above, the amount of the priority based on Amboy’s HELOC has not been
established. See p. 5, supra. I therefore authorize the filing of short summary
judgment motions, with appropriate documentation, on the issue of the dollar
amount of Amboy’s priority. I note that by doing so, Amboy will not be deemed
to have waived its position as to the issues of law decided in Balice I.
DATED: August 9, 2017
United States District Judge
debt before or shortly after the transfer); cf Section l.A., supra; see also Freeman,
supra, at *4_5
Amboy’s argument that the government’s fraudulent conveyance claim is
untimely under New Jersey’s statute of limitations also falls as a matter of law. See
United States v. Summerlin, 310 U.S. 414, 60 S. Ct. 1019 (1940); see also United
States v. Goldston, No. 06-CV-02153-PAB-KLM, 2009 WL 2982867, at *2 (D. Cob.
Sept. 17, 2009) (“[E]ven if the Colorado statute of limitations did apply to plaintiffs
nominee and alter ego theory’, the statute of limitations would be preempted by 26
U.S.C. § 6502 and the Supremacy Clause.”); cf In re Krause, 386 B.R. 785, 833—34
(Bankr. D. Kan. 2008) (“[W]hether a panv can sustain a fraudulent conveyance claim
at present is a different question than whether it can be shown that the ancient
conveyances were fraudulent when they occurred. [Where] the alleged fraudulent
conveyances relate to the question of whether [a party is the debtor’s] nominees, 
are nothing but red herrings.”), affd, No. 08-1132,
statute of limitations issues
WL 5064348 (D. Kan. Dec. 16, 2009), affd, 637 F.3d 1160, 1166 (10th Cir.
2011) (“[W]e hold, that the terms “property” and “rights to property” for purposes of
federal law under § 6321 embrace not only rights or interest with exchangeable value
that the taxpayer holds formal legal title to, but also those that the taxpayer (as here)
is found under state law to have fraudulently conveyed to a nominee.”).
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