United States of America v. Hopkins et al
Filing
176
MEMORANDUM OPINION re 167 MOTION to Alter Judgment by District Judge James O. Browning. (vv)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
UNITED STATES OF AMERICA,
Plaintiff,
vs.
No. CIV 11-0416 JB\WPL
MARK HOPKINS; SHARON HOPKINS;
and STATE OF NEW MEXICO REVENUE DEPARTMENT,
Defendants.
MEMORANDUM OPINION1
THIS MATTER comes before the Court on Hopkins’ Motion for Relief from Order [Doc
#164], filed February 27, 2013 (Doc. 167)(“Motion”). The Court denied the Motion, filed by the
Defendants Mark Hopkins and Sharon Hopkins (“the Hopkins’”) in an Order, filed September 15,
2014 (Doc. 175)(“Order”).
The primary issue is whether the Court should modify its
Memorandum Opinion and Order, filed February 14, 2013 (Doc. 164)(“SJ MOO”), granting
summary judgment in favor of Plaintiff United States of America against Defendants Mark
Hopkins and Sharon Hopkins, based on excusable neglect resulting in a mistake of fact as to the
amount for which Defendant Mark Hopkins (“M. Hopkins”) is indebted to the United States. The
primary issues which the Court addresses in the SJ MOO are:
(i) whether Plaintiff United States of America may reduce to judgment the
outstanding tax assessments for tax years 1996, 1997, 1999, 2000, and 2001
1
The Court previously issued an Order that denied the Hopkins’ Motion for Relief from
Order [Doc #164], filed February 27, 2013 (Doc. 167)(“Motion”). See Order, filed September
15, 2014 (Doc. 175)(“Order”). In the Order, the Court stated that it might issue a Memorandum
Opinion more fully detailing its rationale for this decision. See Order at 1 n.1. This
Memorandum Opinion is the promised opinion that details the Court’s rationale for the previous
Order denying the Motion.
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against Defendants Mark Hopkins and Sharon Hopkins, who were convicted of
tax evasion for these same years in the United States’ case against them, United
States v. Mark E. Hopkins and Sharon J. Hopkins, No. CR 09-0863 MCA
(D.N.M.); and (ii) whether the United States is entitled to foreclosure on its
federal tax liens encumbering the Hopkins’ interest in certain real properties
located in Eddy County, New Mexico, in partial satisfaction of their tax liabilities
owed to the Internal Revenue Service (“IRS”).
SJ MOO at 1-2. The Court granted the Hopkins’ Motion for Surreply and their Defendants’
Motion for Telephonic Appearance Re: Motion Hearing on January 3, 2013, “for the reasons stated
on the record at the hearing.” SJ MOO at 2. Concluding that there were no genuine issues of
material fact, and that the United States was entitled to judgment as a matter of law, the Court
granted in part and denied in part the United States’ Motion for Summary Judgment, filed July 16,
2012 (Doc. 66)(“SJ Motion”). See SJ MOO at 2. The Court concluded that the Hopkins’ “have
a liberty interest in their right to engage in the common occupation of their choosing, pursuant to
Article I, section 8 and the Sixteenth Amendment of the United States Constitution,” and
concluded that “Congress constitutionally can tax the Hopkins’ income from the exercise of that
right . . . and has not specifically exempted, excepted, or excluded the Hopkins’ income from
taxation under the Internal Revenue Code . . . .” SJ MOO at 2. Accordingly, the Court
concluded that the Hopkins’ income from their labor is not exempted from taxation. See SJ MOO
at 2. The Court concluded that, in the criminal case against the Hopkins’, establishing that the
Hopkins’ owed the United States a “substantial amount of tax” and that the Hopkins’ used
“nominees and/or alter-egos to shelter their income from the United States to evade taxes,” was
necessary to the jury’s verdict that the Hopkins’ were guilty of Criminal Tax evasion for tax years
1996-1997, and 1999-2001. SJ MOO at 2. The Court concluded, therefore, that res judicata
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prevents the Hopkins’ from relitigating those issues in the civil case against them. See SJ MOO
at 2. The Court concluded that:
[b]ecause the record establishes that there is no genuine dispute whether
the IRS assessments underlying the IRS’ federal tax liens on which they seek to
foreclose are valid and accurate, and there is no material dispute whether the
Hopkins used the Defendants Grace Trust, Shalom Enterprises, Inc., and House
of Royale, Inc. as their nominees or alter-egos to shield their assets from the IRS,
there is no genuine dispute that the United States is entitled to foreclose on its
liens against the subject property and is entitled to summary judgment as a matter
of law. Because the United States has agreed with Defendant Bayview Loan
Servicing, LLC, that they will equitably divide profits from the sale of Tract #1,
the Court denies the United States’ Summary Judgment to the extent it seeks the
Court to declare that its interest in Tract #1 is prior and superior to any other
interest in the property.
SJ MOO at 2-3. Granting summary judgment in favor of Plaintiff United States of America
against Defendant Mark Hopkins, the Court ordered that “M. Hopkins is indebted to the United
States for $732,811.61, as of October 19, 2010, for the federal income taxes assessed against him
for the tax years 1996, 1997, 1999, 2000 and 2001, plus interest and all statutory additions provided
by law until paid.”. SJ MOO at 100. The Court also ordered that, granting summary judgment
in the United States’ favor against Defendant Sharon Hopkins, “S. Hopkins is indebted to the
United States for $123,670.98, as of October 19, 2010, for the federal income taxes assessed
against her for the tax years 1996 and 1997, plus interest and all statutory additions provided by
law until paid.”. SJ MOO at 100. The Court remains persuaded that its SJ MOO ruling is
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appropriate. Accordingly, the Court will not alter its prior ruling. Consequently, the Court will
deny the Motion.
FACTUAL BACKGROUND
The Court recites the factual background as stated in the SJ MOO. The footnotes
associated with the quoted text -- footnotes 2-6 -- are also quoted in full from the SJ MOO. The
SJ MOO stated:
In support of its motion, the United States relies on specific pleadings, admitted
United States exhibits, and trial transcripts from the Hopkins’ criminal case,
United States v. Hopkins. 2 Additionally, the United States relies upon a
declaration and its IRS exhibits. Finally, the United States relies upon the
following undisputed facts:3
1.
Federal Income Tax Liabilities and Liens Against Hopkins.
M. Hopkins worked as an emergency room physician and earned significant
income. Before 1996, the Hopkins filed federal income tax returns and incurred
2
The United States filed concurrently with its Motion for Summary Judgment a Brief in
Support of the motion, exhibits, and an Appendix, and incorporates all of these documents by
reference into its SJ Motion. See United States’ Brief Supporting its Motion for Summary
Judgment at 1, filed July 16, 2012 (Doc. 66-1)(“MSJ Brief”). In the Appendix are specific
pleadings, admitted United States exhibits, and trial transcripts in the Hopkins’ criminal case. A
declaration and the United States’ IRS exhibits are also in the Appendix. Specifically, the United
States included copies of specific pleadings and exhibits in the Hopkins’ criminal case. The
United States incorporates the allegedly undisputed facts and documents in the Appendix into its
Brief. The Court will term those pleadings as “Hopkins Crim. Doc.”; exhibits admitted into
evidence at the Hopkins’ criminal case are termed “Hopkins Crim. Gov. Ex.”
3
Although the Hopkins disagree with the United States almost entirely in their opposition
to the United States’ Motion for Summary Judgment, at the hearing on the Motion for Summary
Judgment, the Hopkins clarified that their disagreement is a legal disagreement rather than a factual
one. The Hopkins stated that their disagreement with the United States’ facts that the United
States sets forth as undisputed is “that [the United States] ha[s] limitations and [] can tax [only]
what [it] ha[s] authority over” and that the United States does not have the authority to tax the
“fundamental right to work.” Transcript of Trial at 39:13-24 (taken January 3, 2012)(M.
Hopkins)(“Tr.”)(the Court’s citations to the transcript of the hearing refer to the court reporter’s
original, unedited version; any final transcript may contain slightly different page and/or line
numbers.). The Hopkins conceded that “if we are not exempt everything Mr. Lena [counsel for
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tax debt that they failed to pay fully. See IRS Notices of Tax Liens, Hopkins
Crim. Gov. Ex. 39, filed July 16, 2012 (Doc. 69-1). In 1996, the Hopkins took
steps to avoid liability and payment. They met and consulted with several
individuals and groups that advocate recognized tax protestor arguments and
tactics, and made multiple library visits.
In 1997, M. Hopkins filed an “Affidavit of Citizenship and Domicile” with the
Chaves County, New Mexico, Clerk, stating that he is a citizen of the “Texas
Republic,” is a nonresident alien of the United States, and is not required to pay
federal income tax. M. Hopkins’ Affidavit of Citizenship and Domicile,
Hopkins Crim Gov. Ex. 35, filed July 16, 2012 (Doc. 69-2). S. Hopkins filed a
similar document. See S. Hopkins’ Affidavit of Citizenship and Domicile,
Hopkins Crim Gov. Ex. 36, filed July 16, 2012 (Doc. 69-3).
The Hopkins asserted to the IRS that their compensation for labor earned was not
income subject to federal income tax. See, e.g., Hopkins’ 1996 Form 1040,
Hopkins Crim. Gov. Ex. 152, filed July 16, 2012 (Doc. 69-4). In furtherance of
their arguments, the Hopkins filed a joint federal income tax “return” that listed
“zero income” for tax year 1996, while attaching W-2’s showing M. Hopkins’
wages as $81,000.00 and S. Hopkins’ wages as $9,000.00. Hopkins’ 1996 Form
1040. The Hopkins’ Form 1040, filed jointly, for tax year 1996 reported “0”
income, and attached letters and documents to support their tax positions. See
Hopkins’ 1996 Form 1040 at 5. Hopkins altered the jurat, and attached three
signed statements containing tax protest language: “Affidavit of Claims for
Exemption and Exclusion from Gross Income of Remuneration, Wages and
Withholding,” “Affidavit of Citizenship and Domicile,” and “Contract and
Declaration of Citizenship.” Hopkins’ 1996 Form 1040 Attachments, Hopkins
the United States] has said is correct.” Tr. at 39:4-6 (M. Hopkins). The Court responded:
What I’m hearing is that we really don’t need a trial on any issue, there’s no genuine
issue of material fact, but there’s a legal issue that you’re raising that you want the
court to determine. Am I understanding your position correctly . . . . I’m not
hearing there’s really a dispute about the facts. What there’s a dispute about is the
validity of the assessment from a legal standpoint. Am I -- Is that a correct
assessment of your argument?
Tr. at 44:9-19 (Court)(emphasis added). The Hopkins responded: “That’s correct, Your Honor.”
Tr. at 44:20 (M. Hopkins). The facts that the United States set forth in its United States’ Brief
Supporting its Motion for Summary Judgment, filed July 7, 2012 (Doc. 66-1)(“MSJ Brief”), are
therefore largely, if not completely, undisputed. Where the Hopkins nevertheless continued to
dispute a fact on other than the legal grounds that their labor is exempt from taxation at the hearing,
however, the Court considers the fact disputed and determines whether there is a genuine issue of
material fact in the footnotes in this factual background section.
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Crim. Gov. Ex. 152, filed July 16, 2012 (Docs. 69-5 and 69-6). Statements
attached to the Hopkins 1996 tax return stated: “The income tax is voluntary.
We do not wish to volunteer.” Hopkins’ 1996 Form 1040 Attachments at & 8,
at 6. Also, the Hopkins stated: “We are natural born sovereigns, preamble, de
jure Citizen of one of the 50 sovereign Republic, freely associated compact
American states.” Hopkins’ 1996 Form 1040 Attachments at & 5, at 9. The
Hopkins stated that they were sovereign citizens of one of the fifty states, were
“not citizen[s] of the United States,” and were “not subject to jurisdiction of the
United States,” and filed a “Notice of Election to Terminate U.S. Taxpayer
Status” and a “Declaration of Independence.” Hopkins Crim. Gov. Ex. 270,
filed July 16, 2012 (Docs. 70, 70-1, 70-2, and 70-3); Hopkins Crim Gov. Ex. 37,
filed July 16 2012 (Doc. 70-4).
As part of their activities designed to avoid the IRS receiving any of their income
for their tax liabilities, the Hopkins set up nominees including two trust -Guadalupe Medical Service Trust (“GMST”) and Grace Trust -- and corporate
shells -- Shalom Enterprises, Inc. and House of Royale, Inc. Shalom Enterprises
is an Oregon corporation, whose officers were M. Hopkins and S. Hopkins.
House of Royale is a Nevada corporation, whose only officer was S. Hopkins.
See Default Judgment Against Defendants House of Royale, Inc. and Shalom
Enterprises, Inc. at 1-2, filed December 7, 2011 (Doc. 36)(ordering, adjudging
and decreeing that House of Royale and Shalom Enterprises are “nominee[s]/alter
ego[s] of Mark Hopkins and Sharon Hopkins”).
Hopkins instructed the hospitals or physician staffing groups for which he worked
to send his earnings directly to GMST and, later, to Shalom Enterprises. TransMountain Emergency Physicians Group decided to honor an IRS levy for the
Hopkins’ unpaid income taxes that seized his May 1997 paycheck. M. Hopkins
protested, saying his income was exempt. The Trans-Mountain Group’s Chief
Executive Officer rejected that argument, and M. Hopkins quit. See Hopkins
Crim. Doc. 340; Crim. Trial Tr. at 555-560 (Sept. 23, 2010)(Dr. Beohm), filed
July 16, 2012 (Doc. 71-5). The Hopkins used these nominee entities for their
personal living expenses or transferred funds to other nominees, including Grace
Trust and House of Royale. See Mark & Sharon Hopkins, Checks & Cash
Written Between Nominee Bank Accounts, Hopkins Crim. Gov. Exs. 313, 314,
filed July 16, 2012 (Docs. 71 and 71-1).
Based in part on law that zero returns are not legally considered to be tax returns,
see United States v. Rickman, 638 F.2d 182, 184 (10th Cir. 1980)(holding that a
tax return asserting that a taxpayer had zero income is not a valid return), the IRS
disregarded the Hopkins’ return and assessed the couple a frivolous filing penalty
of $500.00, see Hopkins Crim. Doc. 340; Crim. Tr. at 625 (Sept. 23,
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2010)(Sigler).4 Hopkins appealed the penalty based on the same arguments that
they had made earlier. Despite IRS correspondence and contact, the Hopkins
refused to correctly file their 1996 federal income tax return and never filed
another income tax return. See Hopkins’ Form 4340s, Hopkins Crim. Gov. Exs.
102-103, 105-107, 117-118, filed July 16, 2012 (Docs. 72, 72-1, 72-2, 72-3, 724, 73, and 73-1).
To discover the Hopkins’ income and assets, the IRS commenced its investigation
and audit that included third-party summons of bank records, financial and legal
documents, third parties’ Form 1099s, and witness interviews. Reviewing the
bank deposits, related financial documents and the Form 1099s, the IRS prepared
substitutes for return on the Hopkins’ behalf, and sent audit results for tax years
1996, 1997, 1999, 2000, and 2001 to the Hopkins. See Hopkins Crim. Gov. Exs.
190-195, filed July 16, 2012 (Docs. 73-2, 73-4, 77, 74-1, 74-2, 74-3, 75, 75-1, 752, 75-3, 75-4, 75-5, 75-6, 76, 76-1, and 76-2). The IRS sent notices of deficiency
(“NODs”) to both M. Hopkins and S. Hopkins for each of the years at issue. See
Hopkins Crim. Gov. Ex. 193 at 6; Hopkins Crim. Gov. Ex. 194 at 16; Hopkins
Crim. Gov. Ex. 195 at 16; Hopkins Crim. Gov. Ex. 207. In response to the NODs
for 1996 and 1997, the Hopkins asserted, through their representative, that they
had not filed returns or submitted to jurisdiction, and therefore had no income
subject to tax. See Letter from John B. Kotmair Jr. Re: Notice of Deficiency to
4
In addition to the United States Court of Appeals for the Tenth Circuit’s opinion in United
States v. Rickman, the Tenth Circuit, in deciding the Hopkins’ appeal of their sentences in their
criminal case, noted that the Hopkins’ tax returns were “frivolous.” United States v. Mark E.
Hopkins and Sharon J. Hopkins, No. 11-2114, Order and Judgment, at *37 (10th Cir. Feb. 5, 2013),
filed in this civil case February 6, 2013 (Doc. 162-1). Rule 32.1 of the Tenth Circuit’s Rules of
Appellate Procedure provides:
Precedential value. The citation of unpublished decisions is permitted to the full
extent of the authority found in Fed. R. App. P. 32.1. Unpublished decisions are
not precedential, but may be cited for their persuasive value. They may also be cited
under the doctrines of law of the case, claim preclusion, and issue preclusion.
Citation to unpublished opinions must include an appropriate parenthetical
notation. E.g., United States v. Wilson, No. 06-2047, 2006 WL 3072766 (10th Cir.
Oct. 31, 2006) (unpublished); United States v. Keeble, 184 F. App’x. 756 (10th Cir.
2006)(unpublished).
10th Cir. R. 32.1(A). Under the doctrine of issue preclusion, the Tenth Circuit’s finding that the
Hopkins’ tax returns were frivolous is thus binding on the Hopkins’ civil case here. See In re
Corey, 583 F.3d 1249, 1251 (10th Cir. 2009)(“The doctrine of issue preclusion prevents a party
that has lost the battle over an issue in one lawsuit from relitigating the same issue in another
lawsuit.”). The Court concludes, therefore, that the Hopkins’ tax returns that reflected “0” income
were invalid and frivolous.
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James Walsh, IRS District Director (dated Sep. 5, 2000), Hopkins Crim. Gov. Ex.
208, filed July 16, 2012 (Doc. 76-4).
A delegate of the Secretary of Treasury assessed against, and gave notice and
demand to, the Hopkins for unpaid income taxes, penalties, statutory additions,
and interest for tax years 1996, 1997, 1999, 2000, and 2001. See Hopkins’ Form
4340s, Hopkins Crim. Gov. Exs. 102, 103, 105-107, 117, 118. To date, the
Hopkins have neglected, failed, and refused to pay the full amount of the federal
income tax assessments for these years. Hopkins Crim. Ex. 315, filed July 16,
2012 (Doc. 77), shows that IRS computer transcripts stated the tax liabilities in
the amount of $732,811.61 that M. Hopkins owes under Count Two of the
Indictment as of October 19, 2010 -- the time of his criminal trial. See Hopkins
Crim. Ex. 315. The table below shows the tax period, the assessment date, the
amounts assessed, and the total liabilities that M. Hopkins owes for these periods
to October 19, 2010.
TAX PERIOD
DATE
ASSESSED
ASSESSED
AMOUNT
AMOUNT
DUE AS
10/19/2010
1996
12/25/2000
$146,925.70
$264,967.60
1997
12/25/2000
$133,650.22
$247,364.21
1999
12/25/2000
$48,271.85
$73,108.56
2000
12/25/2000
$50,205.71
$72,626.54
2001
06/05/2004
$50,338.72
$74,744.70
TOTAL
$732,811.61
The balance due has increased since that date, and shall continue to increase by
statutory additions and accruals until paid.
During 1996 and 1997 tax years, S. Hopkins had income requiring her to file
federal income tax returns. As New Mexico is a community property state, S.
Hopkins also received taxable income computed on a community property basis.
S. Hopkins did not, however, file federal income tax returns for the 1996 and
1997 tax years. Accordingly, after reviewing the bank deposits, related financial
documents, and the Form 1099s, the IRS prepared substitutes for return on behalf
of S. Hopkins, and sent audit results and NODs for tax years 1996 and 1997 to
the Hopkins. See Notice of Deficiency, Hopkins Crim. Gov. Ex. 207, filed July
16, 2012 (76-3).
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A delegate of the Secretary of the Treasury assessed against, and gave notice and
demand to, S. Hopkins for unpaid income taxes, penalties, statutory additions,
and interest for tax years 1996 and 1997. See IRS Form 4340s, Hopkins Crim.
Gov. Exs. 117, 118. To date, S. Hopkins has neglected, failed, and refused to
pay the full amount of the federal income tax assessments for these years. The
table below shows the tax period, the assessment date, the amounts assessed, and
the liabilities that S. Hopkins owes for these periods to October 19, 2010. See
Hopkins Crim. Gov. Ex. 315 (stating the tax liabilities at issue in Count Two of
the Indictment that S. Hopkins owed at the time of her criminal trial).
TAX PERIOD
DATE
ASSESSED
ASSESSED
AMOUNT
1996
12/25/2000
$39,914.38
$72,496.21
1997
12/25/2000
$27,794.92
$51,174.77
TOTAL
AMOUNT
DUE AS
10/19/2010
$123,670.98
The balance due has increased since that date, and shall continue to increase by
statutory additions and accruals until paid. Thus, the IRS required the Hopkins
to file federal income tax returns for the tax years at issue: $242,070.00 in tax
year 1996; $202,662.00 in 1997; $64,233.00 in 1999; $74,357.00 in 2000; and
$93,157.00 in 2001. See Hopkins Crim. Gov. Ex. 192 at 4; Hopkins Crim. Gov.
Ex. 192 at 4; Hopkins Crim. Gov. Ex. 193 at 9; Hopkins Crim. Gov. Ex. 194 at
2; Hopkins Crim. Gov. Ex. 194 at 2.5
5
Although there was contention at the hearing regarding whether res judicata precludes the
Hopkins from relitigating the amount of tax reflected in the Hopkins’ Forms 4340, the Court cannot
soundly conclude that the validity of the Hopkins’ Forms 4340 was necessary to the jury’s guilty
verdict, but that somehow the amount of tax liability in the tax assessments was not necessary.
Moreover, the Hopkins do not take issue with the amounts reflected on the Hopkins’ Forms 4340,
but rather, as discussed in Section I of the Analysis above, and in footnote 2, supra, contend that
their income, as a whole, is “exempt” from the United States’ taxing power. See e.g., Hopkins’
MSJ Response ¶ F, at 4 (“Plaintiff alleges that Defendants owe the amounts due in the tables[]
totaling $856,481.00. Defendants dispute this amount as such is ‘exempt’ income as per 26
U.S.C. § 61 as lodged in ‘except as otherwise provided in this subtitle.’”); Tr. at 44:9-20 (M.
Hopkins answering that the Court is correct that they do not dispute the facts of the legal
assessment; rather, their “dispute [is] about the validity of the assessment from a legal
standpoint.”)(emphasis added). The Court thus concludes that the amount of tax liability state in
the Hopkins’ Forms 4340 attached to the United States’ Motion for Summary Judgment was
necessary to the jury’s judgment in the criminal case against the Hopkins, and the Hopkins,
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On July 6, 2004, August 3, 2004, July 12, 2005, and December 13, 2005, the IRS
filed Notices of Federal Tax Lien for M. Hopkins’ federal income tax liabilities
for the tax years at issue with the County Clerk of Eddy County, New Mexico.
On September 3, 2009, the IRS filed a Notice of Federal Tax Lien for S. Hopkins’
federal income tax liabilities for tax years 1996 and 1997 with the County Clerk
of Eddy County. See Hopkins Form 668s, Notices of Federal Tax Liens, filed
July 16, 2012 (Doc. 77-2).
In May, 2010, the IRS filed Notices of Federal Tax Lien against the Hopkins’
nominees -- Shalom Enterprises and House of Royale -- as the Hopkins’ nominees
and/or alter egos for the Hopkins’ federal income tax liabilities for the years at
issue with the County Clerk of Eddy County. See Nominees Form 668s, Notices
of Federal Tax Liens, filed July 16, 2012 (Doc. 77-3).
2.
The Hopkins’ Real Property on Which the United States Wants to
Foreclose.
At a time when they owed income taxes and federal tax liens existed, the Hopkins
acquired properties in the names of nominee entities to avoid IRS collection. As
part of the tax conspiracy and evasion for which they were convicted in the United
States’ criminal case against them, M. Hopkins and S. Hopkins used nominees to
acquire their home and adjoining real properties as a way of keeping their assets
and ownership interests hidden from the IRS. See Hopkins Crim. Gov. Ex. 331,
filed July 16, 2012 (Doc. 77-4)(a plat map with the Hopkins’ real estate at issue).
The nominees -- Shalom Enterprises and House of Royale -- held title in their
name to the four real estate tracts at issue in this case. In April 22, 1997, M.
Hopkins filed or caused to be filed with the Chaves County, New Mexico, Clerk
several documents, each of which is identified as a “common law contract and
declaration,” and purports to establish several trusts, including the Grace Trust.
See Grace Trust, Hopkins Crim. Gov. Ex. 42, filed July 16, 2012 (Doc. 78).
a.
Tract #1-601 N. Canyon.
In November 2001, when the Hopkins owed federal income taxes, M. Hopkins
wrote a check for $14,589.23 from the Grace Trust account as a down payment
to acquire 601 N. Canyon in Carlsbad, New Mexico. Tract #1, located at 601 N.
Canyon, is more fully described as follows: “Lots 11 and 13, Block 66, Lowe
Addition to the City of Carlsbad, Eddy County, New Mexico as shown on the
official plat thereof on file in the office of the County Clerk of Eddy County, New
Mexico,” referring to MAP # 246-66-13, LOC 601 N. Canyon Street. They used
Grace Trust to hold title to the property, which served as their principal residence.
therefore, are precluded from relitigating the amount owing in this civil lawsuit.
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In the Fall of 2007, the Hopkins’ attempt to refinance their home was temporarily
delayed when the title company refused to issue a clear title, because Grace Trust
was a “pure trust,” and not insurable as a borrower or as an owner. According
to the title company, the home first needed to be transferred into an entity, a
person, or an entity like a corporation. S. Hopkins then directed the nominal
trustees of Grace Trust to transfer title to a different nominee -- House of Royale
-- to effect the mortgage acquired from Interbay Funding, LLC, and the title to
601 N. Canyon ultimately vested from Grace Trust to House of Royale. See
Hopkins Crim. Doc. 340; Crim. Trial Tr. at 607 (Sept. 23, 2010)(Cliff Currier),
filed July 16, 2012 (Doc. 78-1); Hopkins Crim Gov. Ex. 34 (Docs. 78-2, 78-3,
78-4, 78-5, and 78-6). On May 28, 2010, a nominee Notice of Federal Tax lien
was filed in the Eddy County property records against House of Royale as the
Hopkins’ nominee and/or alter ego for their unpaid federal income tax liabilities
for tax years 1996, 1997, 1999, 2000, and 2001. See Entity Form 688s, Notices
of Federal Tax Lien.
b.
Tract #2: 605 N. Canyon.
In October, 2002, M. Hopkins purchased 605 N. Canyon Road in Carlsbad in the
name of Shalom Enterprises for a $1,000.00 down payment on a $21,500.00
purchase price. See Hopkins Crim. Doc. 340; Hopkins Crim. Gov. Ex. 32; Crim.
Trial Tr. at 535-536 (Sept. 23, 2010), filed July 16, 2012 (Doc. 79). Tract #2 is
more fully described as follows: Lowe Addition, Block 65, LOT 9, MAP# 24666-9, 605 N. CANYON.
c.
Tract #3: 607 N. Canyon.
In April, 2002, M. Hopkins purchased 607 N. Canyon Road in Carlsbad in the
name of Shalom Enterprises. See Crim. Trial Tr. at 533-534 (Sept. 23,
2010)(Hopkins Crim. Doc. 340), filed July 16, 2012 (Doc. 79-2); Hopkins Crim.
Doc. Ex. 31, filed July 16, 2012 (Doc. 79-3). Tract #3, located at 607 N. Canyon
Road in Carlsbad, is more fully described as follows: Lowe Addition, Block 65,
LOT 7, MAP# 246-66-7, 607 N. CANYON. On May 28, 2010, a nominee
Notice of Federal Tax lien was filed in the Eddy County property records against
Shalom Enterprises, as nominee/alter ego of M. Hopkins and/or S. Hopkins for
the Hopkins= unpaid federal income tax liabilities for tax years 1996, 1997, 1999,
2000, and 2001. See Nominees Form 688s, Notices of Federal Tax Lien.
d.
Tract #4: 602 N. Canyon/108 & 110 W. Bonbright.
In November, 2003, M. Hopkins sought to acquire 602 N. Canyon Road, as well
as 108 and 110 W. Bonbright, in Carlsbad, in the name of Shalom Enterprises.
Tract #4, located at 602 N. Canyon Street and 108 & 110 W. Bonbright, is more
fully described as follows: Lowe Addition, Block 65, LOT 14, Book 532, Page
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230, MAP# 246-65-14, 602 N. CANYON. Advanced Electronics, a New
Mexico partnership, owned the land on a commercially zoned tract consisting of
a two-bedroom home and two two-bedroom homes on one commercial corner lot.
Hopkins entered into a New Mexico real estate contract with Advanced
Electronics for the property; the original note was $45,000.00 at 7% interest with
a balloon payment due November 15, 2012. On November 15, 2010, WestStar
Escrow, on behalf of Advanced Electronics, sent a default notice to Shalom
Enterprises for nonpayment; Shalom Enterprises owed $35,789.19 at the time and
did not cure the default.
3.
Defendants New Mexico Department of Taxation and Revenue and
Bayview Loan Servicing, LLC.
On August 15, 2006, Taxation & Revenue filed a Notice of Claim of Lien against
M. Hopkins. Bayview Loan intends to establish the validity and default on a
promissory note that House of Royale made, signed in November, 2007, by S.
Hopkins as director, which, under New Mexico law, was a properly perfected
security interest on the real property located at 601 North Canyon. Bayview
Loan has a pending state court action against House of Royale, S. Hopkins, and
the United States (IRS) in the Fifth Judicial District Court, Eddy County, State of
New Mexico. See Fifth Judicial District Court of New Mexico, Case No. D-503CV-201100096.
4.
Criminal Case.
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The Hopkins were indicted and convicted of conspiracy and tax evasion. The
grand jury indicted the Hopkins on one count of conspiracy and multiple counts
of tax evasion. The tax evasion counts related to tax years 1996, 1997, 19992007. In particular, Count Two of the Indictment charged the Hopkins with tax
evasion for tax years 1996, 1997, 1999, 2000, and 2001. To gain the conviction
on tax evasion, the United States proved beyond a reasonable doubt all elements.
In particular, to prove the first element of tax evasion, the United States proved
that the Hopkins had income, subject to tax, in each year charged. Further, with
its investigations and audits, the United States provided evidence of the amounts
of income that the Hopkins earned and the specific tax that was due on that
income. The IRS also introduced its Form 4340s and evidence that it made valid
assessments of tax. Hence, the jury necessarily decided that the Hopkins owe
substantial income tax.
To prove tax evasion, the United States also proved the third element: that the
Hopkins used nominees to evade or to defeat the tax owed. Again, the United
States was successful in presenting the evidence of the Hopkins’ use of “pure”
trusts and corporate shells while retaining dominion and control of these entities
to funnel monies and to conceal their assets, including their home and real estate.
The jury’s verdict in finding the Hopkins guilty of Count Two=s tax evasion
necessarily determined that the entities were nominees that the Hopkins used.
At the Hopkins’ criminal trial, the United States proved that the Hopkins earned
significant income, but failed to report it and used nominees in their illegal
attempt to avoid paying any income tax. The Hopkins testified at their trial. In
the Hopkins’ criminal trial, the jury instructions, essential to the verdict, were
provided to the jury as follows:
INSTRUCTION NO. 3
2. From at least 1996 to the present, MARK E. HOPKINS worked as an
emergency room doctor for various medical staffing companies in New Mexico.
Since January 1, 1996, MARK E. HOPKINS has earned at least $3,616,134 in
business income from these medical staffing companies, including the
Schumacher Group, which paid him for services that he performed as an
emergency room physician at hospitals in the region that includes Carlsbad
Medical Center.
....
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4. MARK E. HOPKINS and SHARON J. HOPKINS have failed to file
personal federal tax returns since tax year 1997.
5. To assist in their tax evasion scheme, MARK E. HOPKINS and
SHARON J. HOPKINS created a number of entities that the couple used to
conceal their assets, including:
i) Shalom Enterprises, Inc. (“Shalom Enterprises”), an Oregon corporation,
whose officers were MARK E. HOPKINS and SHARON J. HOPKINS.
ii) House of Royale, Inc. (“House of Royale”), a Nevada Corporation, whose only
officer was SHARON J. HOPKINS.
....
v) The Grace Trust, a purported trust whose purported trustees were V.A.
and S.S.
....
Manner and Means
....
10. It was a part of the conspiracy for MARK E. HOPKINS to direct his
business income to a nominee to conceal his income.
11. It was a further part of the conspiracy that MARK E. HOPKINS and
SHARON J. HOPKINS would transfer funds between bank accounts held in
nominee names.
12. It was a further part of the conspiracy for MARK E. HOPKINS and
SHARON J. HOPKINS to title real property in the names of nominees to conceal
their ownership of the property.
13. It was a further part of the conspiracy that MARK E. HOPKINS and
SHARON J. HOPKINS would send threatening correspondence to IRS
employees to impede the ascertainment and collection of the federal income taxes
that they owed.
Overt acts
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In furtherance of the conspiracy, and to effect the objects thereof, the following
overt acts, among others, were committed in the District of New Mexico, and
elsewhere:
....
16. On or about April 15, 1997, MARK E. HOPKINS and SHARON J.
HOPKINS filed an IRS Form 1040, U.S. Individual Income Tax Return, falsely
stating that they had an adjusted gross income of zero and requesting a refund of
all federal income tax withheld.
17. On or about April 22, 1997, MARK E. HOPKINS filed or caused to be filed
with the Chaves County Clerk seven documents, each of which was identified as
a “common law contract and declaration”, which documents purported to
establish the Grace Trust, the Shalom Trust, the Solomon Educational Trust, the
Maranatha Trust, the Esteem International Trust, the Bethlehem Trust, and the
Guadalupe Medical Services Trust.
....
24. In December 1998, MARK E. HOPKINS directed his new employer, the
Schumacher Group, to pay his business income to Shalom Enterprises.
....
29. On or about November 15, 2001, MARK E. HOPKINS wrote a check
for $14,589.23 from the Grace Trust account #xxxxxx8409 as a down payment
for 601 N. Canyon in Carlsbad, New Mexico. Said property was used as the
personal residence of MARK E. HOPKINS and SHARON J. HOPKINS through
the date of this indictment.
30. On or about April 15, 2002, MARK E. HOPKINS purchased 607 N.
Canyon Road in the name of Shalom Enterprises.
31. On or about October 16, 2002, MARK E. HOPKINS purchased 605
N. Canyon Road in the name of Shalom Enterprises.
32. On or about July 28, 2003, SHARON J. HOPKINS filed an
Amendment to the Annual Report of Shalom Enterprises, Inc. with the Secretary
of State for Oregon, listing MARK E. HOPKINS as president and SHARON J.
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HOPKINS as secretary.
33. On or about November 14, 2003, MARK E. HOPKINS purchased 602
N. Canyon Road as well as 108 and 110 W. Bonbright in the name of Shalom
Enterprises.
34. On or about November 14, 2003, MARK E. HOPKINS and SHARON
J. HOPKINS applied for an American Express credit card in the name of House
of Royale, Inc.
35. On or about January 30, 2004, MARK E. HOPKINS and SHARON J.
HOPKINS opened a bank account at Wells Fargo Bank, NA in the name of House
of Royale, Inc., account #xxxxxx0076.
36. On or about December 29, 2006, SHARON J. HOPKINS filed articles
of incorporation for the House of Royale, Inc. with the Secretary of State for
Nevada.
....
Count 2
37. Paragraphs 1 through 6, and 14 through 36, above, are hereby are
incorporated by reference as if realleged and recited in full.
38. From in or about 1996 up to and including the date of this indictment,
in
the District of New Mexico, the defendants, MARK E. HOPKINS and SHARON
J.
HOPKINS, did willfully attempt to evade and defeat the payment of a large part
of the income tax due and owing by them to the United States of America for the
tax years set forth below and in the amounts set forth below, by, among other
things, using nominees to conceal their income, bank accounts, and ownership of
assets.
....
In violation of 26 U.S.C. § 7201.
Counts 3-8
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39. Paragraphs 1 through 6, and 14 through 36, above, are hereby
incorporated by reference as if realleged and recited in full.
40. For each year set forth below, MARK E. HOPKINS and SHARON J.
HOPKINS, had received taxable income in the amounts set forth below,
computed on a community property basis for calendar years 2002 through 2007.
Based upon said taxable income, the defendants had a substantial tax due and
owing to the United States. Knowing and cognizant of the foregoing facts and the
legal duty deriving therefrom, MARK E. HOPKINS and SHARON J. HOPKINS,
in the District of New Mexico, did willfully attempt to evade and defeat the
assessment and payment of income taxes due and owing by them to the United
States of America for each of the following calendar years by committing the
following affirmative acts of tax evasion, among others: by failing to file any
income tax returns on or before the due date of the tax returns, as required by law;
by failing to pay those income taxes, and by, among other things, using nominees
to conceal their income, bank accounts, and ownership of assets.
....
In violation of 26 U.S.C. § 7201.
....
INSTRUCTION NO. 7
The defendants are charged in Counts 2 through 8 with violating Title 26, Section
7201 of the United States Code. This law makes it a crime for anyone willfully to
attempt to evade or defeat the payment of federal income tax. To find a defendant
guilty of this crime you must be convinced that the government has proved each
of the following beyond a reasonable doubt:
First: the defendant or another person owed substantial income tax;
Second: the defendant intended to evade and defeat payment of that tax;
Third: the defendant committed an affirmative act in furtherance of this intent,
that is the defendant used nominees to conceal their income, bank accounts, and
ownership of assets; and
Fourth: the defendant acted willfully, that is, with the voluntary intent to violate
a known legal duty.
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To “evade and defeat” the payment of tax means to escape paying a tax due other
than by lawful avoidance. The Indictment alleges a specific amount of tax due.
The proof, however, need not show the exact amount of the additional tax due.
The government is required only to prove, beyond a reasonable doubt, that the
additional tax due was substantial. Whether the amount is “substantial” turns on
whether under the surrounding circumstances the amount of the deficiency would
be significant to an ordinary person.
....
INSTRUCTION NO. 9
The government has contended that the defendants owed taxes to the
United States. For Count 2, the government contends that the defendants evaded
the payment of their federal income tax liability for tax years 1996, 1997, 1999,
2000, and 2001. The government has put forth evidence of assessments for each
of these years.
An assessment is simply a bookkeeping entry by the IRS that shows that
the defendant owed money to the United States. In this case, an IRS agent
prepared a substitute for return for the defendants for years 1996, 1997, 1999,
2000, and 2001. After the substitute for return was prepared, the IRS was able to
prepare an assessment, which included unpaid federal income taxes and certain
penalties.
Once some evidence is introduced demonstrating that the defendants
received unreported income, the jury may consider this as evidence of a tax due
and owing. The defendants may then put forth evidence that shows that this tax
liability does not exist.
For Counts 3 through 8, the government contends that the defendants
evaded the payment of their federal income tax liability for tax years 2002, 2003,
2004, 2005, 2006, and 2007. You may find the defendants had a tax due and
owing based on the testimony at trial. . . .
United States v. Mark E. Hopkins and Sharon J. Hopkins, No. 09-0863 MCA,
Court’s Jury Instructions at 4-12, and 19-20, filed Sept. 28, 2010 (Doc.
260)(“Court’s Jury Instruction in No. 09-0863 MCA”). On September 29, 2010,
after a seven-day trial, the jury found both M. Hopkins and S. Hopkins guilty of
tax evasion -- Counts 2-8 of the Indictment, Hopkins Crim. Gov. Ex. 315, filed
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in No. 09-0863 Apr. 9, 2009 (Doc. 2), filed in this civil case July 16, 2012 (Doc.
67-4). See United States v. Mark E. Hopkins and Sharon J. Hopkins, No. 090863 MCA, Redacted Verdict as to M. Hopkins at 1-2, filed in No 09-0863 Sept.
29, 2010 (Doc. 270), filed in this civil case July 16, 2012 (Doc. 67-2); United
States v. Mark E. Hopkins and Sharon J. Hopkins, No. 09-0863 MCA, Redacted
Verdict as to S. Hopkins at 1-2, filed in No. 09-0863 Sept. 29, 2010 (Doc. 272),
filed in this civil case July 16, 2012 (Doc. 67-3).
The jury actually and necessarily decided that the Hopkins owed federal income
taxes for years 1996, 1997, 1999, 2000, and 2001that the IRS had assessed. In
proving that the Hopkins willfully attempted to evade and defeat payment of
income taxes, the United States established another element of tax evasion: that
the Hopkins used nominees to conceal their income, bank accounts, and
ownership of assets.
M. Hopkins and S. Hopkins each testified, and presented witnesses and evidence.
The Hopkins had a “full and fair opportunity to litigate.” The Honorable M.
Christina Armijo, United States District Court Chief Judge for the District of New
Mexico, entered judgment and sentenced the Hopkins. See Judgment, Hopkins
Crim. Doc. 308, filed July 16, 2012 (Doc. 79-4). Judge Armijo ordered
restitution to be paid to the IRS in the amount of $1,744,222.26. See Judgment
at 1.
Importantly, the Hopkins appealed only their sentences, and not their convictions,
to the United States Court of Appeals for the Tenth Circuit. See M. Hopkins’
Opening Brief at 2, Case 11-2114 (10th Cir.)(Doc. 01018784918)(stating that the
sole issue presented for review is “[w]hether the district court erred in imposing
a two level enhancement under U.S. Sentencing Guidelines § 3C1.1 for
obstruction of justice”); S. Hopkins’ Opening Brief at 1-2, Case 11-2115 (10th
Cir.)(Doc. 1018800195)(positing three issues: two for enhancement and one for
right to counsel). In light of the fact that the Hopkins did not appeal their tax
evasion or conspiracy conviction to the Tenth Circuit, but appealed only the
enlargement of their sentences, their tax conviction is final.6
SJ MOO at 3-20.
6
Pursuant to rule 201 of the Federal Rules of Evidence, the Court takes judicial notice of
specific pleadings and exhibits in the Hopkins’ criminal case. The Court may take judicial notice
of docket entries, because rule 201 authorizes a court to take judicial notice of an adjudicative fact
not subject to reasonable dispute. See e.g., In re Indian Palms Assoc., 61 F.3d 197, 205 (3d Cir.
1995).
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PROCEDURAL BACKGROUND
In the SJ MOO, the Court described the early procedural history of this case:
The United States commenced this lawsuit against the Hopkins and the
other co-Defendants pursuant to 26 U.S.C. §§ 7401, 7402, and 7403, to reduce to
judgment the outstanding tax assessments against the Hopkins, “and to recover
the unpaid federal taxes, penalties and interest assessed against them by
foreclosure of federal tax liens encumbering their interest in certain real property
located in Eddy County, New Mexico.” United States’ Complaint ¶ 1, at 1, filed
May 13, 2011 (Doc. 1)(“Complaint”). The Court granted the United States
default judgment in this case against both entities as nominees. Specifically, on
December 7, 2011, the Court granted the United States’ Motion for Default
Judgment against House of Royale and Shalom Enterprises. See Default
Judgment Against Defendants House of Royale, Inc. and Shalom Enterprises, Inc.
(Doc. 36)(“Default Judgment”). According to the Default Judgment, House of
Royale is the Hopkins’ nominee/alter-ego that is holding title only to Tract #1,
the residential property for the real owners, the Hopkins. Also according to the
Default Judgment, Shalom Enterprises is the Hopkins’ nominee/alter ego that is
holding title only to the properties Tract #2, Tract #3, and Tract #4 -- without
prejudice to Advanced Electronics -- for the real owners, the Hopkins. See
Default Judgment at 2.
The United States, on behalf of the IRS, filed its Motion for Summary
Judgment pursuant to rule 56 of the Federal Rules of Civil Procedure and moves
the Court to grant summary judgment as follows: (i) that the United States grant
the United States judgment such that M. Hopkins is indebted to the United States
for $732,811.61 as of October 19, 2010, for the federal income taxes assessed
against him for the years 1996, 1997, 1999, 2000, and 2001, plus interest and all
statutory additions provided by law until paid; (ii) that the Court grant the United
States judgment such that S. Hopkins is indebted to the United States for
$123,670.98 as of October 19, 2010, for the federal income taxes assessed against
her for the tax years 1996 and 1997, plus interest and all statutory additions
provided by law until paid; (iii) that the Court order, adjudge, and decree that the
House of Royale, Shalom Enterprises, and the Grace Trust, are the Hopkins’
nominees, alter egos, transferees, agents, and/or holders of their beneficial
interest in Tracts 1, 2, and 3; (iv) that the Court order, adjudge, and decree that
the United States has valid liens in Tracts 1, 2, and 3; (v) that the Court order the
foreclosure of such IRS tax liens, that Tracts 1, 2, and 3 be sold in accordance
with the law and the Court’s practices, and that the proceeds of the sale be
distributed in accordance with the Court’s findings and the United States[’] rights;
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and (vi) that Advanced Electronics and not Shalom Enterprises or the Hopkins,
who failed to pay the amounts required under the contract, owns Tract 4, located
at 602 N. Canyon, Carlsbad, and 108 & 110 W. Bonbright, Carlsbad, and that
Shalom Enterprises and the Hopkins have no rights or interests in the property.
See Motion for Summary Judgment at 1-2.
The United States contends that it is entitled to summary judgment as a
matter of law, because there is no genuine issue of material fact. See Motion for
Summary Judgment at 1. In support of their Motion for Summary Judgment, the
United States argues that res judicata applies to any assertion by the Hopkins that
they do not owe substantial income tax, pointing out that to have proved that the
Hopkins were guilty of tax “evasion,” one of the elements that the United States
was required to prove was that the Hopkins owe substantial income tax. MSJ
Brief ¶ 1, at 1-2. The United States asserts that it proved that the Hopkins used
the nominees to conceal their income, bank accounts, and ownership of assets -another element of tax evasion -- in the Hopkins’ criminal case by proving that
the Hopkins “willfully attempted to evade and defeat payment of income taxes.”
MSJ Brief ¶ 2, at 2. The United States contends that res judicata thus applies to
any assertion by the Hopkins that the United States cannot foreclose on the tracts
of land held by the nominees -- Shalom Enterprises and House of Royale. See
MSJ Brief ¶ 2, at 2-3. The United States asserts: “With the Hopkins’ convictions
and the fact that this Court has granted the United States default judgment in this
case against both entities as nominees, the United States is entitled to summary
judgment on the two issues presented.” MSJ Brief ¶ 2, at 3.
The United States argues that it is entitled to judgment under the res
judicata doctrine, as the jury found in convicting the Hopkins of tax evasion that
the United States proved beyond a reasonable doubt that the Hopkins committed
tax evasion and also that the United States proved the validity of the IRS’ tax
assessments on which the IRS now seeks to foreclose. See MSJ Brief at 13-15.
The United States asserts:
The Tenth Circuit has adopted the “transactional” approach to
determine what constitutes a “cause of action” for res judicata.
Wilkes[ v. Dep’t of Emp’t Div. of Labor Standards], 314 F.3d []
[501] 504 [(10th Cir. 2002)]. Under this approach, a cause of
action encompasses “all rights of the plaintiff to remedies against
the defendant with respect to all or any part of the transaction, or
series of connected transactions, out of which the action arose.”
Id.
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MSJ Brief at 14 n.46. The United States thus contends that the only issue left
for the Court is whether the IRS’ liens are valid and that the IRS can foreclose on
the liens, as to which, it asserts, there is no material dispute.
The United States points out that, under the Internal Revenue Code, Title
26 of the United States Code (“IRC”), the IRS Forms 4340s for the Hopkins for
tax years 1996, 1997, 1999, 2000, and 2001 are prima facie evidence of tax
liability. See MSJ Brief at 16 (citing United States v. Silkman, 220 F.3d 935,
937 (8th Cir. 2000); United States v. Voorhies, 658 F.2d 710, 715 (9th Cir.
1981)). The United States cites to 26 U.S.C. § 6321 for the proposition that
Hopkins’ federal tax liens arose automatically against them on the day the IRS
made the assessment, and that the liens are effective against all of the Hopkins’
property rights whether existing or acquired after the liens arose, and that they
remain valid and enforceable until the underlying debt is satisfied. See MSJ
Brief at 16 (citing Texas Commerce Bank-Fort Worth, N.A. v. United States, 896
F.2d 152, 161 (5th Cir. 1990)). The United States contends that it is thus entitled
to summary judgment in its favor for the amounts reflected in the 4340s for the
Hopkins. See MSJ Brief at 17-18. The United States asserts that, because the
§ 6321 statutory lien attaches to all interests in property whether owned in
December 2000, the time at which the IRS lien for the amount owing from 1996
and 1997 attached, or acquired afterward, it is entitled to foreclose on the
following tracts of land to satisfy the liens: (i) 601 N. Canyon, acquired in
November 2001; (ii) 605 and 607 N. Canyon, acquired in October and April of
2002 respectively, and (iii) 602 N. Canyon St., 108 W. Bonbright, and 110 W.
Bonbright, acquired in November 2003. See MSJ Brief at 17-19. In regards to
the rights of the Hopkins’ other creditors -- Taxation & Revenue and Bayview
Loan -- the United States notes:
[T]he IRS liens predate those of the State of New Mexico; the
state’s claims, therefore, are junior to the IRS claims and would
take after the IRS liens have been satisfied -- an unlikely event. As
to Bayview’s claims that arise from its refinancing efforts in 2007
with respect to Tract #1 at 601 N. Canyon, the United States and
Bayview have agreed that the IRS liens are entitled to and shall be
foreclosed against the property, but that distribution of sale
proceeds after costs, await further stipulation of these parties for a
future order of the Court.
MSJ Brief at 19.
In regards to the Hopkins’ arguments, the United States asserts that M.
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Hopkins takes the position that, “since the IRS has not pointed to a single statute
that he recognizes, [M.] Hopkins has refused to file federal income tax returns.”
MSJ Brief at 20. The United States argues that the Court should find that the
Hopkins’ tax arguments lack a sound basis in the law, because “[t]he Tenth
Circuit in particular has dispatched with tax protestors repeatedly for clinging to
arguments like those made by the Hopkins.” MSJ Brief at 20 (citing Wheeler v.
C.I.R., 521 F.3d 1289 (10th Cir. 2008); Lonsdale v. United States, 919 F.2d 1440
(10th Cir. 1990)). The United States contends that the Hopkins’ tax arguments
“fall into most of the[] categories” of arguments against taxing income that the
Tenth Circuit has analyzed and rejected, and thus so should the Court. MSJ Brief
at 21. The United States argues that “[e]very taxpayer has a legal duty to
maintain accounting records which enable him to file a tax return . . . . [, and] [a]
taxpayer who has abandoned the advantage of mathematical precision by failing
to keep adequate records cannot complain [about] the Commissioner’s
assessment[s].” MSJ Brief at 21-22 (quoting Jones v. Commissioner, 903 F.2d
1301, 1303 (10th Cir. 1990)). The United States thus asks the Court to reject
any such arguments the Hopkins may assert.
On August 6, 2012, Bayview Loan filed its Defendant Bayview Loan
Servicing’s Response to Plaintiff’s Motion for Summary Judgment. See Doc.
95 (“Bayview’s MSJ Response”). Bayview Loan does not oppose the Plaintiff’s
relief sought in paragraphs one and two of their Motion for Summary judgment - that judgment should be entered against the Hopkins to reflect their indebtedness
to the United States. Bayview’s MSJ Response ¶ 1, at 1. It argues, however,
that it opposes the United States’ relief sought in paragraph three of its Motion
for Summary Judgment. See Bayview’s MSJ Response ¶ 2, at 1. Bayview
Loan notes that the United States relies upon the Default Judgment, which the
Court entered to support its contention that House of Royale and Shalom
Enterprises M. Hopkins’ nominees and/or alter-egos, but points out that the Court
did not enter the Default Judgment against it. See Bayview’s MSJ Response ¶
2, at 1. Bayview Loan asserts that there is thus no evidence in the record that the
United States sought or obtained judgment against Bayview Loan establishing
that M. Hopkins’ pre-existing IRS tax liens should be prior and superior as against
Bayview Loan concerning the property at 601 N. Canyon. See Bayview’s MSJ
Response ¶ 1, at 1-2. It contends that the original lender, InterBay Funding,
could not have known that the borrower, House of Royale, was M. Hopkins’ alter
ego or nominee, because, “[a]s evidenced by the copy of Bayview’s Note and
Mortgage . . . , the borrower on the subject loan was House of Royale, Inc.,
through Sharon Hopkins as its director . . . . [and] the loan was guaranteed by
Sharon J. Hopkins, individually.” Bayview’s MSJ Response ¶ 2, at 2. Bayview
Loan asserts that, because there is no indication in the loan documents that M.
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Hopkins was associated with the House of Royale or the loans, there is a genuine
issue of material fact whether the IRS’ lien is superior to that of Bayview Loan’s.
See Bayview’s MSJ Response ¶ 2, at 2. Bayview Loan states that, in an effort
to resolve their differences without adding to the expense of this litigation, it has
agreed with the United States “that Plaintiff and Bayview are both entitled to
foreclose on their liens against [] 601 N. Canyon, and have agreed upon an
equitable division of the proceeds of the sale of the property.” Bayview’s MSJ
Response ¶ 3, at 2. Should the Court not approve the terms of this settlement
agreement, Bayview Loan ask the Court for an additional opportunity to present
evidence whether the IRS’ liens are superior to those of Bayview Loan’s. See
Bayview’s MSJ Response ¶ 4, at 2-3. Bayview Loan states that it does not
further object to any relief that the United States is seeking in its Motion for
Summary Judgment. See Bayview’s MSJ Response ¶ 4, at 3.
On August 13, 2012, the Hopkins filed their Defendant’s Rebuttal to
Plaintiff’s Motion for Summary Judgment. See Docs. 96 and 97 (“Hopkins’
MSJ Response”). The Hopkins assert that their Hopkins’ MSJ Response shows
that: (i) there are genuine factual disputes; (ii) there are issues in the case which
were not litigated at the Hopkins’ criminal trial and are not precluded under the
doctrine of res judicata; (iii) there are inconsistencies in the United States’
arguments; (iv) the United States misapplies tax laws to the phrase “exempt
income;” (v) the jury did not find the amount of tax owed as S. Union Co. v.
United States, No. 11-94, 132 S. Ct. 2344 (June 12, 2012), requires; (vi) the
discovery necessary for the case has not been completed; (vii) the Hopkins’
criminal trial excluded witnesses that would be allowed in the trial here; (viii) the
Hopkins’ criminal trial disallowed evidence that would be admissible and
relevant here; and (ix) the United States mischaracterizes rights as “Tax Protestor
argument.” Hopkins’ MSJ Response at 1. The Hopkins note that the Tenth
Circuit has stated that in “a Motion for Summary Judgment, evidence, including
testimony, must be based on more than mere speculation, conjecture, and
surmise.” Hopkins’ MSJ Response at 2 (quoting Bones v. Honeywell Int’l, Inc.,
366 F.3d 869, 875 (10th Cir. 2004)). They also point out that the Court, as a
district court deciding a summary judgment motion, “must construe the facts ‘in
the light most favorable to the non-moving party.’” Hopkins’ MSJ Response at
2 (quoting Duvall v. Ga-Pac. Consumer Prods. L.P., 607 F.3d 1255, 1259 (10th
Cir. 2010)).
The Hopkins argue that the United States’ assertion that the indebtedness
the Hopkins allegedly owe arose from income is without a sound basis in the law,
because they contend that the income that they received from 1996 on was taxable
income, but was exempt from taxation under the United States Constitution. See
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Hopkins’ MSJ Response ¶ A, at 2-3. They argue that the United States’ failure
to recognize the income as exempt contradicts the United States’ position: “Every
Substitute for Return [], Notice of Deficiency [], Notice of Assessment and
Demand for Payment [], liens, levies, indictment, conviction, and attempt at
foreclosure has been tainted by a flagrant disregard of a claimed exemption on
income earned when exercising a constitutionally guaranteed fundamental right.”
Hopkins’ MSJ Response ¶ A, at 3 (citing 26 C.F.R. § 1.861-8T(e)(ii) and (iii)).
The Hopkins contend that, where the United States asserts the Hopkins effectively
did not file tax returns as the filed tax returns were legally invalid, they “have
never ‘avoided liability’ for any taxable income. Defendants proved that the
income in question was ‘exempt.’” Hopkins’ MSJ Response ¶ D, at 3. The
Hopkins dispute that they owe the United States the amounts listed in the tables
in its MSJ Brief, asserting that “this amount . . . is ‘exempt’ income as per 26
U.S.C. § 61, as lodged in ‘except as otherwise provided in this subtitle.’”
Hopkins’ MSJ Response ¶ F, at 4. The Hopkins contend that, because M.
Hopkins was taxed for 1996 and 1997 on 100% of his taxable income, and S.
Hopkins was taxed on her 50% as community property, they “have been taxed at
150% of the allowable statutory amount on the alleged ‘taxable income’ which
forms the basis of the tables in the years 1996 and 1997.” Hopkins’ MSJ
Response ¶ I, at 4.
The Hopkins argue that res judicata does not apply, because the criminal
forum was not a proper forum in which the Hopkins could litigate the issue “as
to what income is considered ‘Exempt’ . . . nor was evidence put forth to support
Defendants’ arguments . . . .” Hopkins’ MSJ Response ¶ 2, at 4. They assert
that they were not allowed at their criminal trial to put forth evidence regarding
the amount of their income that is exempt, as 26 C.F.R. § 19.22(b)-1 uses that
term. See Hopkins’ MSJ Response ¶ 2, at 5.
The Hopkins point to various statements in the United States’ Motion for
Summary Judgment and the corresponding MSJ Brief that they contend are
inconsistent. See Hopkins’ Response ¶ 3, at 5. The Hopkins contend that the
United States’ factual assertion that “Hopkins filed a joint federal income tax
return that listed zero income,” and that “Hopkins refused to correctly file their
1996 federal income tax return and never filed another federal income tax return,”
is inconsistent with its statement that “Sharon Hopkins failed to file federal
income tax returns for the 1996 and 1997 tax years.” Hopkins’ MSJ Response ¶
3, at 5. The Hopkins also contend that the United States’ assertion that it is
“settled law that zero returns are not legally considered to be tax returns,” MSJ
Brief ¶ 6, at 6 (citing United States v. Rickman, 368 F.2d 182 (10th Cir. 1980)),
is incorrect, in that the law is not settled that a zero return is not legally a tax
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return, see Hopkins’ MSJ Response ¶ 3, at 5 (citing United States v. Long, 618
F.2d 74 (9th Cir. 1980); United States v. Moore, 627 F.2d 830 (7th Cir. 1980)).
The Hopkins note that, in response to the United States’ contention “that
every dollar earned by [the Hopkins] was ‘taxable income,’” the Hopkins note
that they “will argue in their Case-in-Chief that all or a portion of such may be
‘exempt income’ as per . . . Follett v. McCormick, 321 U.S. 573 (1944) and
Murdock v. Pennsylvania, 63 S. Ct. 870 (1943).” Hopkins’ MSJ Response ¶ 4,
at 6. They assert that their income is exempt from gross income under the
Sixteenth Amendment, 26 U.S.C. § 61, 26 U.S.C. § 861, and 26 C.F.R. § 1.8618T(d)(2)(ii). See Hopkins’ MSJ Response ¶ 4 at 6-7. The Hopkins also argue
that, pursuant to the Supreme Court of the United States’ 2012 opinion in S.
Union Co. v. United States, 132 S. Ct. at 2344, requiring a jury trial on any
imposition of criminal fines, the jury did not find the amount of tax owed and the
issue has therefore not been adjudicated. See Hopkins’ MSJ Response ¶ 5, at 7.
They assert further that, because they have only recently received “a very limited
discovery” five months after it was requested, the United States, in bad faith, has
placed the Hopkins at a disadvantage. Hopkins’ MSJ Response ¶ 6, at 7-8. The
Hopkins contend that, as the United States’ filing of its Motion for Summary
Judgment only eight days after serving the discovery evince, the delay in
discovery was in bad faith. See Hopkins’ MSJ Response ¶ 6 at 8.
The Hopkins additionally argue that the Court should deny the Motion for
Summary Judgment, because Joe Banister, a witness that they tried to call at their
criminal trial, but who was excluded after a hearing under Daubert v. Merrell
Parms., Inc., 509 U.S. 579 (1993), will be allowed to testify in this civil case
under rule 28 of the Federal Rules of Civil Procedure. See Hopkins’ MSJ
Response ¶ 7, at 8. They assert that they will also be allowed evidence in this
civil trial, “including affidavits and historical (law) evidence, which was
disallowed by the Court” in their criminal trial. Hopkins’ MSJ Response ¶ 8, at
9. Last, they argue that the United States, “in its attempt to dispose of
Defendant’s tax protestor arguments,” mischaracterizes their rights and imputes
alleged arguments which they assert are mischaracterizations of their arguments.
See Hopkins’ MSJ Response ¶ 9, at 9-10. The Hopkins point out that, where the
United States asserts that the Hopkins espouse that the United States does not
have the power to tax wages or individuals, they argue, rather, that the United
States “can tax all taxable income. BUT it CANNOT tax ‘exempt income.’”
Hopkins’ MSJ Response ¶ 9, at 10. Similarly, the Hopkins assert that, where the
United States argues that they contend that wages are not income, the Hopkins
concede that “[w]ages are income,” but they contend that “not all income is
taxable income.” Hopkins’ MSJ Response ¶ 10, at 11. In response to the
assertion that the Hopkins espouse that tax is voluntary, the Hopkins’ reply:
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“Income tax is not voluntary. Income tax is mandatory on all taxable income.”
Hopkins’ MSJ Response ¶ 10, at 11. The Hopkins assert:
Plaintiff claims that Defendant’s arguments fail in most of
‘these categories’ (Lonsdale arguments) and thus should be
rejected. Defendant agrees that IF Defendant was making those
arguments, they should be rejected. However, Defendants
HAVE NOT ACCEPTED SUCH ARGUMENTS. Plaintiff has
assumed incorrectly, and has predicated [its] entire argument on a
misconception and error.
Plaintiff has been misinformed because Defendants have
NEVER had the opportunity to bring THEIR true arguments
before the Court or a jury. Plaintiff’s ignorance of Defendants’
real arguments on this matter is evident.
Hopkins’ MSJ Response ¶ 10, at 11. The Hopkins ask that the Court not grant
the Motion for Summary Judgment, because, as discovery has not been
completed, it is not ripe, and because “a trier of fact [could] resolve this case
either way . . . .” Hopkins’ MSJ Response at 12.
On August 22, 2012, the United States filed its MSJ Reply. The United
States argues that the Hopkins’ compensation earned as a physician is income
subject to tax and not exempt. See MSJ Reply at 1. The United States asserts
that the Hopkins hold the “erroneous belief,” held by many tax protestors, that
there is allegedly no taxable profit or gain when a person exchanges labor for
money, because earnings from labor do not come within the statutory definition
of gross income. MSJ Reply at 1. The United States contends that, like many
tax protestors, the Hopkins support their argument with “inapplicable statutes or
Treasury regulations, some dealing with corporate tax or the 1939 tax code long
since replaced, as well as a smattering of lines from dicta in ancient court
decisions.” MSJ Reply at 1 (citing, as an example, the Hopkins’ MSJ Reply ¶
4). The United States argues that the idea that earnings from labor is not taxable
income, or is exempt income, has been “universally rejected by courts
everywhere and the Tenth Circuit in particular.” MSJ Reply at 1-2 (citing
Lonsdale v. United States, 919 F.2d at 1440).
The United States asserts that, for federal income tax purposes, gross
income means income from whatever source derived and expressly includes
compensation for services, no matter what form payment for services may take.
See MSJ Reply at 2 (citing 26 U.S.C. § 61(a)(1)). The United States refers the
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Court to M. Hopkins’ testimony at his criminal trial as an example of M. Hopkins’
tax protestor argument:
Well, due to the fact that I was exercising a fundamental right to
work, and that work was an even exchange, there was no increase
or gain. And, according to what I understood, that was exempt
income. That was money coming in that was exempt and was to
be excluded before you ever got to gross receipts. When you
exercise your fundamental right, those are nontaxable.
Government can’t tax your right to work or the exchange that you
get for labor.
....
We know that compensation for labor in the private sector by a
citizen of one of the 50 sovereign states is not income as lawfully
defined. Income as defined in law is limited to gains and profits
severed from capital and reinvested.
Hopkins Crim. Doc. 336, Trial Transcript at 50:3-7, 51:11-19 (taken Sept. 27,
2010)(M. Hopkins), filed August 22, 2012 (Doc. 102-1). The United States
contends that these tax protestor arguments were fully contested before the jury
in the course of the Hopkins’ criminal trial, and the jury found that the United
States had proven, beyond a reasonable doubt, “each element . . . including the
first element of tax evasion -- that the Hopkins had income subject to tax, and
owed substantial income tax.” MSJ Reply at 3. The United States asserts that
the jury also found that the Hopkins “had $242,070 in gross income in tax year
1996; $202,662 in 1997; $64,233 in 1999; $74,357 in 2000; and $93,157 in
2001.” MSJ Reply at 3-4. These arguments, having been raised and decided by
the jury in their criminal trial, the United States contends, should be res judicata
and collaterally estop the Hopkins’ efforts to assert to the contrary in this civil
case. See MSJ Reply at 4.
In response to the Hopkins’ assertion that the United States is incorrect
that they failed to file a 1996 income tax return, the United States “admits that
such a form was submitted to the IRS and produced a copy of it . . . . It was not a
valid income tax return . . . .” MSJ Reply at 5. The United States points to
Bachman v. Commissioner, 283 F. App’x 636 (10th Cir. 2008), contending that
the Tenth Circuit held that federal income tax returns indicating that the taxpayer
had no income were not valid returns “because a return that asserts no income is
not a valid return.” MSJ Reply at 5. The United States asserts that, pursuant to
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Bachman v. Commissioner and United States v. Rickman, 638 F.2d 182 (10th
Cir. 1980), “the Court may hold that Hopkins’ Form 1040 for 1996 was not a
valid return . . . .” MSJ Reply at 6. The United States argues that, because the
IRS at all times considered the 1996 Form 1040 invalid, whether the Court finds
the 1996 return valid is not a material issue in the resolution of the case. See MSJ
Reply at 6.
The United States argues that the “Hopkins’ Form 1040 for 1997 Is A
Myth.” MSJ Reply at 6. It points out that the Hopkins fail to refer to evidence
in the record to support that they filed a tax return in 1997, whereas, the United
States relies upon the declaration of an IRS agent that the IRS never received such
a tax form from the Hopkins or their attorneys. See MSJ Reply at 6. The United
States asserts that, because any tax return filed by the Hopkins would have
represented a zero return and the IRS would have thus treated it as another invalid
return, whether the Hopkins filed a 1997 tax return is not material to the Court’s
determination of summary judgment. See MSJ Reply at 6.
In reply to the Hopkins’ contention that they never avoided liability for
any taxable income, the United States asserts that Judge Armijo noted at their
sentencing hearing that “the trusts were created . . . to avoid payment and as part
of a scheme to avoid payment of the federal and state taxes and also to evade the
tax laws.” MSJ Reply at 7 (quoting Transcript of Sentencing Hearing 14:7-16
(taken May 17, 2011)(Court), filed August 22, 2012 (Doc. 102-3)). The United
States contends that, “[w]hether they accept the term ‘avoid’ or not, it remains
that Hopkins’ tax evasion has been confirmed and their denials do not create
genuine issues of material fact here.” MSJ Reply at 7. In response to the
Hopkins’ contention that the United States never proved the substance of any
discussions at any alleged tax defier meetings that the Hopkins attended, the
United States asserts that “the testimony of Mark and Sharon Hopkins at the
criminal trial was more than sufficient to detail what was discussed by the tax
defier groups and meetings.” MSJ Reply at 7. The United States argues that,
regardless whether the United States has met its burden to prove what was said at
these meetings, what was discussed at these meetings is not material to any
genuine issue in the case, and the Court nevertheless should grant summary
judgment in its favor. See MSJ Reply at 7.
The United States asserts that the Hopkins’ contention that the United
States did not credit the $130,000.00 seized by the IRS and the $32,383.00 paid
to the IRS to the amount they owe is without a sound basis in the facts, because
the amount reflected in the United States’ pleadings is the amount owed as of
October 19, 2010, and the seizure of $130,000.00 was applied in December of
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2010. See MSJ Reply at 8. The United States notes that the $32,383.00 paid to
the IRS in 1996 was posted and is reflected in the IRS Transcripts and the IRS
Forms 4340 as a withholding credit with $16,191.00 credited to each of the
Hopkins’ account. See MSJ Reply at 8. In response to the Hopkins’ contention
that the IRS assessments for tax years 1996 and 1997 are incorrect, because they
tax each of the Hopkins on one hundred percent of their individual income and
fifty percent of the spouse’s income, the United States asserts that it is the correct
accounting method used by the IRS where a couple fails to file a valid tax return
and thus fails to file as married filing jointly. See MSJ Reply at 8-9. The United
States contends:
Each IRS assessment is legally correct where neither defendant filed
a valid tax return, combining their income and electing to be taxed
on a “married, filing joint” tax rate and to be jointly and severally
liable for the taxes. To gain that option, Hopkins must file a valid
Form 1040 and elect the “married, filing joint” tax status.
Consequently, the Hopkins’ argument does not create a genuine
issue of material fact and the United States is entitled to summary
judgment against Mark Hopkins for the taxes assessed against him
and is entitled to summary judgment against Sharon Hopkins for the
taxes assessed against her.
MSJ Reply at 9-10 (internal footnote omitted).
The United States argues that the Hopkins’ argument that res judicata does
not apply to the amount owing under S. Union Co. v. United States, 132 S. Ct. at
2344, because the jury did not find the amount owing, is without a sound basis in
the facts. See MSJ Reply at 10. The United States asserts that Count II of the
Indictment expressly required the jury to find, and the jury did in fact find, that
the Hopkins “did willfully attempt to evade and defeat the payment of a large part
of the income tax due and owing by them to the United States,” for the exact
amounts that the United States lists in its MSJ Brief. MSJ Reply at 10-11. Even
if res judicata did not apply to the amount owing, the United States asserts that it
has provided competent summary judgment evidence of the Hopkins’ income,
the IRS assessments, and the tax liabilities due to carry its burden. See MSJ
Reply at 11. The United States contends: “In contrast, the Hopkins have not filed
a valid return, nor offered competent summary judgment evidence to challenge
the assessments and create a genuine issue of material fact, but, instead, have
made only self-serving statements with their faulty, tax defie[s] belief that they
had no taxable income to report.” MSJ Reply at 11.
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The United States replies to the Hopkins’ objection to the Court granting
summary judgment when there are still unresolved discovery issues, arguing that
these issues “do[] not create a genuine issue of material fact to bar summary
judgment.” MSJ Reply at 11. Similarly, as to the Hopkins’ contention that the
Court should not grant summary judgment because the Hopkins can have
witnesses testify in this civil case whom they were not allowed to present at the
criminal trial, the United States responds that “this argument presents no fact
issue to deprive the United States of its entitlement to summary judgment.” MSJ
Reply at 11-12. The United States asserts that the Hopkins’ contention that their
arguments are separate and distinct from the arguments made by the defendants
in Lonsdale v. United States is without a sound basis in the law or the facts, as M.
Hopkins made those same arguments at the Hopkins’ criminal trial, and the
distinctions that the Hopkins makes in their response to the Motion for Summary
Judgment are not substantive legal, distinctions, but rather pedantic. See MSJ
Reply at 12-13. The United States thus argues that there is no dispute as to any
material fact in the case and that it is entitled to judgment based on the record as
a matter of law. See MSJ Reply at 13.
On September 4, 2012, the Hopkins filed their Motion for Surreply, which
the Court granted during the hearing on the Summary Judgment Motion, see Tr.
at 7:23-9:19 (Court, Lena, M. Hopkins, S. Hopkins), and included the surreply
within the Motion for Surreply. The Hopkins assert that the surreply is
necessary, because the United States did not quickly respond to the Hopkins’
requests to provide the Hopkins with the requested IRS employee information.
Had they done so, the Hopkins note, the arguments set forth in the Motion for
Surreply would have been asserted in their Hopkins’ MSJ Response. See
Motion for Surreply at 1-3. The Hopkins assert that the instructions provided to
IRS employees regarding Form 1040 returns does not require them to mail a Form
1040 to taxpayers and does not state that taxpayers are required to file Forms
1040. See Motion for Surreply at 4. The Hopkins assert that the instructions do
not so provide, because the Hopkins are not, pursuant to 26 U.S.C. § 6001, liable
for the tax imposed. See Motion for Surreply at 4-5.
The Hopkins point out that the United States “once again can not argue
the issues at hand without resorting to several pejoratives in the first sentence.
The Government immediately mischaracterizes our beliefs.” Motion for
Surreply ¶ A, at 5-6. The Hopkins state:
[P]lainly . . . . Compensation for Labor - any kind of labor exercised
in a common occupation in one of the 50 contiguous states is
“Exempt” from Federal taxation because it is earned while engaging
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in a Constitutionally protected fundamental right to labor. The
fundamental right to labor in an occupation of common right is not
a Government granted privilege nor a revenue taxable activity, and
therefore “Exempt.”
Motion for Surreply ¶ A, at 6. The Hopkins assert that, although they have stated
their position “in every conceivable way, what has been most conspicuous is how
the Government consistently avoids the acknowledgement of the existence of a
fundamental right to work as if it is the 3rd rail.” Motion for Surreply ¶ A, at 6.
The Hopkins assert that the fundamental right to labor existed before the
Sixteenth Amendment. See Motion for Surreply ¶ A, at 7 (citing Butchers’
Union Co. v. Crescent City Co., 111 U.S. 746 (1884); Yick Wo v. Hopkins, 118
U.S. 356, 370 (1886)). The Hopkins contend that the Supreme Court affirmed
the fundamental right to work after enactment of the Sixteenth Amendment in
Smith v. Texas, 233 U.S. 630, 641 (1914), and Truax v. Raich, 239 U.S. 33
(1915). See Motion for Surreply ¶ A, at 9-10. The Hopkins argue that “neither
the Constitution nor the 16th Amendment can abrogate any of the fundamental
rights that include the right to work.” Motion for Surreply ¶ A, at 10 (citing
Miranda v. Arizona, 384 U.S. 436, 491 (1966)(“Where rights secured by the
Constitution are invoked, there can be no rule making or legislation which would
abrogate them.”)). The Hopkins argue that the Sixteenth Amendment conferred
upon Congress no new power of taxation, but relieved all income tax from the
apportionment requirement. See Motion for Surreply ¶ A, at 11 (citing
Brashaber v. Union Pac. R.R. Co., 240 U.S. at 1; Stanton v. Baltic Mining Co.,
240 U.S. 103 (1916)). The Hopkins assert:
The Government (state) may not impose a fee or charge in order to
enjoy any fundamental right. It is for this reason that compensation
for labor is exempt, not the reason stated by [the United States] and
which he tries over and over again to ascribe to us; that wages and
compensation received from personal services are an equal
exchange. I believe this to be true but don’t rest my claim of
“exemption” upon this fact, but instead upon the fundamental right
issue.
Motion for Surreply ¶ A, at 11 (emphasis in original).
The Hopkins point out that the IRS manual directs IRS employees to
follow Supreme Court decisions and that they are given the same weight as the
IRC. See Motion for Surreply at 12. The Hopkins assert: “We believe the IRC
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must accommodate Supreme Court decisions in the area of taxation for to violate
these would render the Code unconstitutional which it is not; so an area of
accommodation exists -- ‘except as provided in this subtitle.’” Motion for
Surreply ¶ A, at 12-13. The Hopkins contend that, to understand the IRC, one
must begin with the code as enacted in 1939, which, even then, used an allinclusive definition of income for “purposes of comprehensiveness and
efficiency,” but still provided for “ ‘exemptions and exclusions’ from gross
income . . . .” Motion for Surreply ¶ A, at 13-14. The Hopkins assert that these
exemptions and exclusions continue to exist in 26 U.S.C. § 61(a), where, in the
definition of what is gross income, the IRS states “except otherwise provided in
this subtitle.” Motion for Surreply ¶ A, at 14 (quoting 26 U.S.C. § 61(a)). The
Hopkins contend that this language has existed in the tax code from the beginning
to allow for the fundamental right to work to be exempt from taxation, but has
been lost through the United States’ “disparaging ancient Court decisions and
Regulations, and instead [] provid[ing] Supreme Court cases overturning
decisions we had relied upon . . . .” Motion for Surreply ¶ A, at 14-15.
The Hopkins state that the United States “rightly makes the point that any
income from whatever source is presumed to be income under 26 U.S.C. § 61
unless the taxpayer can prove that it is specifically exempt or excluded.” Motion
for Surreply at 16 (emphasis in original). They assert, however, “this we have
done by the aforementioned discussion of fundamental rights and compensation
through labor, and through [the 1939 tax code]; the entire compensation arising
from an hourly rate received while working as an Emergency Room Physician.”
Motion for Surreply ¶ A, at 16. The Hopkins then point out that, rather than
replying to the Hopkins’ assertion of their income being exempt because they are
exercising the fundamental right to work, the United States refers the Court to a
litany of cases that merely dismiss taxpayer’s lawsuits as tax defier arguments.
See Motion for Surreply ¶ A, at 17. The Hopkins show that the facts underlying
the cases cited by the United States are easily distinguishable, as none of the cited
cases discusses the argument that labor from working at an hourly rate is exempt
as exercising a fundamental right. See Motion for Surreply ¶ A, at 17-18. The
Hopkins contend, rather, that the United States’ taxation of their fundamental
right to work is more closely analogous to the Supreme Court’s finding
unconstitutional taxing the exercise of fundamental rights in Murdock v.
Pennsylvania, 319 U.S. 105 (1943), Follett v. McCormick, 321 U.S. 573 (1944),
and Grosjean v. Am. Press Co., 297 U.S. 233 (1936). See Motion for Surreply
¶ A, at 19-21.
The Hopkins assert that this fundamental right to work being exempt from
taxation “is the paramount issue that the Defendants were prohibited from
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developing in the criminal trial and which the jury was not instructed to consider;
the issue of exempt income that arises out of the exercise of a Fundamental
Right.” Motion for Surreply ¶ A, at 21-22. This exemption, the Hopkins
contend, is the reason why res judicata does not apply to the United States’
Motion for Summary Judgment. See Motion for Surreply ¶ A, at 23. In regard
to res judicata’s finality requirement, the Hopkins note that the “Court appointed
appeals attorney . . . vehemently opposed raising any Constitutional issues on
appeals for fear of being sanctioned and informed us that those issues were better
left to [another] pleading.” Motion for Surreply ¶ A, at 23-24.
The Hopkins then state:
The remainder of the reply becomes [moot] due to Constitutional
issues . . . if the Court accepts and affirms that the Hopkins have a
fundamental right to work and that compensation for labor when
exercising that right is exempt, and that the claim of exemption is
not only valid but integrated within the code. The Hopkins have
ample evidence of this long held belief as far back as April 15, 1997
which would encompass all years in dispute, and upon which they
stringently adhered and acted upon in a good faith belief.
Motion for Surreply ¶ B, at 24. They reiterate their argument that the Form 1040
that they filed for 1996 indicating that they had zero income is a valid return under
the law. See Motion for Surreply ¶ B, at 24-25. The Hopkins distinguish
Bachmann v. C.I.R., 283 F. App’x 636 (10th Cir. 2008), and United States v.
Rickman, to which the United States cites to support that the tax returns were
invalid, by noting that, whereas the taxpayers in those cases did not offer valid
justification for submitting a zero return, the Hopkins’ argument that their income
is exempt from taxation is a valid justification. See Motion for Surreply ¶ B, at
25-26. In paragraph C, the Hopkins contend that the letter they filed with the
Court that accompanied their Form 1040 for tax year 1996 shows that they filed
a Form 1040 for that year, regardless whether the United States contends that they
did not. See Motion for Surreply ¶ C, at 28-29. The Hopkins also assert that
they have not avoided liability, because “the Hopkins had only ‘Exempt’ income
and could therefore have had no liability to avoid.” Motion for Surreply ¶ D, at
29-30. The Hopkins note that the meetings to which the United States refers as
tax defier meetings discussed tax issues, but also discussed the Declaration of
Independence and the Constitution more broadly, encouraging people to research
and confirm what was discussed to become more knowledgeable about the
Constitution and the government overall. See Motion for Surreply ¶ E, at 30.
The Hopkins state:
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In the issue of $130,000 seized, the Hopkins are satisfied that the
$130,000 was credited to TY 1996 although the Hopkins still hold
to the belief that there should have been zero income as they attested
to under penalty of perjury. Likewise, the $32,383 which was
reported on the TY 1996 - 1040 Form which the united States claims
as “invalid return;” the Hopkins are satisfied with its accounting also
under the same qualification . . . .
Motion for Surreply ¶ F, at 31.
The Hopkins contend that taxing the Hopkins separately, each on onehundred percent of their individual income and then again on fifty percent of the
spouse’s income, then converting that sum to judgment, “is a license to print
money out of thin air and further obligate the Hopkins for a tax burden that should
have never existed in the first place.” Motion for Surreply ¶ G, at 32-33. The
Hopkins take issue with the United States’ contention that they had a full and fair
hearing on the merits of their constitutional argument at their criminal trial. See
Motion for Surreply ¶ H, at 33. The Hopkins note that they still believe the
issues are not ripe for summary judgment, as they have not completed discovery
and are awaiting the Court’s ruling on their discovery motions. See Motion for
Surreply ¶ I, at 34. The Hopkins concede that the issues regarding whether
witnesses will be able to testify at trial should wait until the appropriate time as
trial nears. See Motion for Surreply ¶ J, at 35. The Hopkins conclude by
reiterating their position that “the government has no rebuttal to the simple claim
or even an acknowledgment of a citizen’s Constitutionally guaranteed
fundamental right to work or whether the Government may tax that right or any
right.” See Motion for Surreply ¶ K, at 35-37.
At the Court’s hearing on the Motion for Summary Judgment, Bayview
Loan asked the Court to be excused from further pretrial proceedings, because it
does not need to be involved in the case until after the foreclosure sale takes place
and distribution of the proceeds is made. See Tr. at 3:2-22 (Court, Jaramillo).
All parties still remaining in the case agreed to Bayview Loan’s request to be
excused from further pretrial proceedings, and the Court granted Bayview Loan’s
request, excused them from the hearing, and will excuse them from further
pretrial proceedings. See Tr. at 5:23-6:15 (Court, Jaramillo, Lena, M. Hopkins,
S. Hopkins). Before taking up the motion, the Court also granted the Hopkins’
Motion for Telephonic Appearance Re: Motion Hearing on January 3, 2013, filed
December 21, 2012 (Doc. 141), to which the United States did not object. See
Tr. at 7:7-21 (Court, Lena). The Court then also granted the Hopkins’ Motion
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for Leave of Court to Reply to Plaintiffs’ [sic] Reply to Hopkins’ Response to
Motion for Summary Judgment, filed September 4, 2012 (Doc. 106), and noted
that it took the United States’ response to the Hopkins’ motion -- the United
States’ Response to Hopkins’ Motion for Leave to File Sur-Reply, filed
September 24, 2012 (Doc. 110) -- into account in its decision to grant the motion.
See Tr. at 9:1-22, 11:12-22 (Court, M. Hopkins, S. Hopkins, Lena).
The United States stated:
[T]he Constitution of the United States at Article I Section 8 allows
Congress to lay and collect taxes and put simply, the Supreme Court,
when it was looking at the Affordable Care Act recently [had] this
to say . . . : “put simply, Congress may tax and spend. This grant
gives the Federal Government considerable influence even in areas
where it cannot directly regulate. The Government may enact a tax
on an activity that it cannot authorize, forbid or otherwise control.”
Tr. at 13:18-14:4 (Lena)(quoting Nat’l Fed’n of Indep. Bus. v. Sebelius, 132 S.
Ct. 2566, 2579 (2012)). The United States noted that the particular argument
that a person has a basis in his or her labor equal to the fair market value of the
compensation received -- and the many variations of that argument -- in addition
to having been rejected by multiple Circuit courts and district courts, “have
officially been identified . . . as legally frivolous federal tax return positions for
the purposes of the $5,000.00 frivolous tax return policy . . . [found at] 26 U.S.C.
section 6702(A).” Tr. at 14:8-20 (Lena). The United States pointed out that,
while the United States Constitution explicitly allows Congress to impose duties
and taxes, the Constitution provides no exemptions or exceptions. See Tr. at
14:24-15:3 (Lena).
The United States referred the Court to federal cases from around the
country that have rejected the argument that compensation from labor is exempt
from wages. See Tr. at 15:6-21:24 (Lena)(citing Funk v. C.I.R., 687 F.2d 264
(8th Cir. 1982); Lonsdale v. C.I.R., 661 F.2d 71 (5th Cir. 1981); Lonsdale v.
United States, 919 F.2d 1440 (10th Cir. 1990); United States v. Lawson, 670 F.2d
923 (10th Cir. 1982); United States v. Connor, 898 F.2d 942 (3d Cir. 1990);
United States v. Francisco, 614 F.2d 617 (8th Cir. 1980); Broughton v. United
States, 632 F.2d 706 (8th Cir. 1980); United States v. Russell, 585 F.2d 368 (8th
Cir. 1978); Perkins v. C.I.R., 746 F.2d 1187 (6th Cir. 1984)). The United States
pointed out that the United States Court of Appeals for the Fifth Circuit in
Lonsdale v. C.I.R., and then subsequently the Tenth Circuit, in Lonsdale v. United
States, rejected the same arguments from the plaintiff that the Hopkins are
asserting in this case. See Tr. at 15:21-17:10 (Lena). The United States noted
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that in Funk v. C.I.R., where the taxpayers filed zero income tax returns, as the
Hopkins did here, the United States Court of Appeals for the Eighth Circuit found
that the tax returns were invalid and that the taxpayers’ argument that their
income from their labor was not taxable was without merit. See Tr. at 18:1419:10 (Lena). The United States referred the Court to United States v. Lawson,
wherein the Tenth Circuit held: “[T]he defendant[’]s wages for personal services
are income under the Internal Revenue Code. The Congress has specifically
provided that gross income means all income from whatever source derived,
including, but not limited to, the following items. Number one, compensation for
services, including fees, commissions, and similar items.” Tr. at 19:20-20:1
(Lena)(citing United States v. Lawson, 670 F.2d at 925). The United States
noted that, in United States v. Connor, the United States Court of Appeals for the
Third Circuit stated that every court that has considered the issue has
“unequivocally rejected the argument that wages are not income.” Tr. at 20:1318 (Lena)(citing United States v. Connor, 898 F.2d at 943-44). The United States
pointed out that in United States v. Russell the Eighth Circuit rejected the
taxpayer’s argument that it was unconstitutional to tax his common-law right to
work. See Tr. at 21:8-16 (Lena).
The Court stated that it believes the Hopkins’ argument to be that there is
an inherent conflict in Supreme Court precedent, with a handful of older cases
saying that there is a protected, fundamental right to work, and the power to tax
such a right in light of Justice Marshall’s statement, in McCulloch v. Maryland,
17 U.S. 316 (1819), that a right to tax is a right to destroy. The Court inquired
of the United States whether any court has analyzed the issue whether taxing
income is constitutional in light of these apparently conflicting constitutional
propositions. See Tr. at 21:25-23 (Court). The United States responded that, in
its experience, the courts have looked to the Constitution providing Congress the
power to tax and thus the power to enact statutes to carry out that power, and to
whether 26 U.S.C. §§ 61 and 62, providing for taxation of compensation for labor
and services, is within Congress’ power. See Tr. at 22:16-23:16 (Lena). The
United States stated that it could not, however, provide the Court with a case on
point at that time. See Tr. at 23:19-25 (Lena).
The Court moved to the United States’ argument that the Hopkins are
precluded from asserting their arguments against the United States in this civil
trial based on the res judicata doctrine, and asked the United States whether the
issues in the case fall under res judicata or collateral estoppel. See Tr. at 24:2025:2 (Court). The United States stated that it is asserting that, because it had to
prove as an element of criminal tax evasion against the Hopkins that they owed
tax, and a certain amount, the Hopkins are precluded from arguing contrary to the
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jury’s findings in their criminal case. See Tr. at 25:2-19 (Lena). The Court
asked whether the United States contends that all issues material for summary
judgment are precluded by res judicata or collateral estoppel, or whether it
concedes that there are some issues as to which the United States must present
undisputed evidence before the Court can grant summary judgment. See Tr. at
25:20-25 (Court). The United States responded that the Court must determine
the actual amount owing, because, while the jury determined that the Hopkins
owed a “substantial amount,” the jury instructions did not require the jury to find
the actual amount owing. Tr. at 26:1-27:11 (Court, Lena). The United States
stated that the exhibits it submitted as attachments with its motion, in light of the
Hopkins’ responses, show that there is no genuine issue of material fact as to the
amounts which the Hopkins owe that the United States seeks in the case. See
Tr. at 27:12-20 (Lena).
The Court asked, in regard to finding that Shalom Enterprises and House
of Royale were the Hopkins’ nominees or alter-egos, whether the United States
agreed that the criminal trial established that the Hopkins used nominees as part
of the conspiracy, but not Shalom Enterprises and House of Royale particularly.
See Tr. at 27:21-28:10 (Court). The United States responded that the Court is
correct that the jury found only that the Hopkins used two entities as nominees,
but pointed out that the Court has already entered default judgments against both
Shalom Enterprises and House of Royale as defendants in this civil case. See
Tr. at 28:18-29:20 (Court, Lena). The United States asserted that it is thus “on
firm ground, particularly with this additional summary judgment evidence . . . [to
prove] both of those specific entities were specifically used as nominees to gain
title in the property and hold property to conceal income and assets from the
Government by the Hopkins.” Tr. at 29:21-30:5 (Lena). The United States
noted that the Hopkins’ criminal conviction is on appeal at the Tenth Circuit, that
the Hopkins do not have the ability to mount an impermissible collateral attack
on their criminal conviction, and that the Court also should not entertain an
argument contrary to anything that was proved beyond a reasonable doubt in their
criminal trial. See Tr. at 30:14-31:11 (Lena). In regards to the $130,000.00 tax
lien, the United States pointed out that the Honorable William P. Johnson, United
States District Judge for the District of New Mexico, stated in a decision from
this district court that the federal tax liens arose against M. Hopkins on December
25, 2005, when tax assessments were made for tax years 1996 and 1997, and that
the jury convicted M. Hopkins guilty for those tax years. See Tr. at 31:16-32:4
(Lena). In response to the Court’s inquiry whether the United States had
anything further to add on the motion, the United States referred the Court to the
portions of the record that supported its factual assertions as to the amounts that
the Hopkins owe. The United States asked the Court to pay particular attention
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to the IRS’ records of its investigation into the Hopkins’ earnings, which it has
submitted with the Motion for Summary Judgment, the declaration of Special
Agent Jennifer and her exhibits, and the declaration of IRS agent Sandra Villareal.
See Tr. at 32:16-34:12 (Lena).
The Court turned to the Hopkins for their response to the United States’
Motion for Summary Judgment, and asked the Hopkins whether they were
disputing the United States’ factual assertions, including the amount of money
that they owe or the propriety of the United States’ liens, or whether they are
seeking to make a bigger argument: that “there shouldn’t be any assessment at all
for wages and income.” Tr. at 37:15-38:2 (Court). M. Hopkins responded that
the Court is correct, and that they are making a bigger constitutional argument, a
“legal argument that [the United States] cannot tax constitutionally [the] right to
work, . . . that there’s no gain, there’s no profit, because [one is] making an equal
exchange of [] work for a certain amount of income . . . .” Tr. at 38:3-11 (M.
Hopkins, Court). M. Hopkins stated that his argument is that, under McCulloch
v. Maryland, there are certain subjects over which the power of the state to tax
cannot extend and that those subjects are exempt from taxation. This
proposition, he asserted, “may almost be pronounced self-evident.” Tr. at 38:2139:3 (M. Hopkins). M. Hopkins conceded that “if we are not exempt everything
Mr. Lena [attorney for the United States] has said is correct.” Tr. at 39:4-6 (M.
Hopkins). The Court responded whether it understood M. Hopkins correctly that
the issue the Court needs to decide to enter summary judgment is whether
McCulloch v. Maryland makes unconstitutional the IRS’ position that wages are
taxable income. See Tr. at 39:7-12 (Court). M. Hopkins responded that “I’m
claiming that [the United States] ha[s] limitations and [] can tax [only] what [it]
ha[s] authority over,” and that the United States does not have the authority to tax
the “fundamental right to work.” Tr. at 39:13-24 (M. Hopkins). The Hopkins
asserted that, “just because the 16 Amendment came along and said Congress
shall have the power to lay and collect taxes on income from whatever source
derived does not take away any fundamental rights . . . .” Tr. at 39:25-40:7 (M.
Hopkins). The Hopkins stated that the IRC is written so that it taxes “anything
and everything out there . . . . but then there are exemptions that are carved out.”
Tr. at 40:8-11 (M. Hopkins). The Hopkins asserted that, although “Congress
may not have specifically mentioned a fundamental right to work” as being
exempted under the IRC, because the Ninth Amendment to the Constitution
“states even if those items are not specifically mentioned they still exist, and one
of those items, the most valuable item you have is your property, your ability to
contract, so you can provide for your family.” Tr. at 41:7-12 (M. Hopkins).
They further stated that this exemption under the Ninth Amendment for
compensation for labor as property was a right exempt from taxation before the
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Sixteenth Amendment, and “we still have it. Everybody in the world does.” Tr.
at 41:15-18 (M. Hopkins). The Hopkins asserted:
[W]e were never served any document by the secretary requiring us
nor by the district director requiring us to keep records, written
statements, or make returns. We didn’t file 1040 forms because we
felt that the income that we had was exempt and we had filed
affidavits to that effect multiple times and never got any response.
And there is no specific regulation that makes us liable.
Tr. at 42:18-24 (M. Hopkins).
The Hopkins noted that the exemptions mentioned in 26 U.S.C. § 61 and
in the Treasury Regulations, including 26 C.F.R. § 1.861, exempt income and
assets from other sources, and “so the idea of an exemption and exempt income
and exempt assets are still in the code over the years . . . . They can’t do away
with a fundamental right.” Tr. at 42:25-43:18 (M. Hopkins). The gravamen of
their argument, they asserted, is that, because the IRS is an agency that works
under and pursuant to the IRC’s statutory scheme, the IRS is invalid, and the
assessments and determination of liability that the IRS made as to the Hopkins
are also invalid. See Tr. at 43:19-44:8 (M. Hopkins). The Court responded:
What I’m hearing is that we really don’t need a trial on any issue,
there’s no genuine issue of material fact, but there’s a legal issue
that you’re raising that you want the court to determine. Am I
understanding your position correctly . . . . I’m not hearing there’s
really a dispute about the facts. What there’s a dispute about is the
validity of the assessment from a legal standpoint. Am I -- Is that a
correct assessment of your argument?
Tr. at 44:9-19 (Court)(emphasis added). The Hopkins responded: “That’s correct,
Your Honor.” Tr. at 44:20 (M. Hopkins). They asserted that the civil
proceeding is therefore of a very different nature from the criminal proceeding
against them. The Hopkins asserted that, while the proceedings involve the same
parties, the United States only had to prove that a substantial amount was owing
in the criminal trial; whereas, in the civil case, the Court may analyze whether the
assessments made which caused the Hopkins to owe a substantial amount are
constitutional. See Tr. at 44:20-45:2 (M. Hopkins). The Hopkins pointed out
that, with regard to the “laundry list of cases” to which the United States refers in
its argument, those cases have no application to the Hopkins’ civil case unless the
Court determines that, under the Constitution, the Hopkins are liable for tax on
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M. Hopkins’ income. See Tr. At 45:19-46:4 (M. Hopkins). In response to the
Court’s inquiry, the Hopkins agreed that foundational to any such liability is the
Supreme Court cases, including McCulloch v. Maryland, which “broadly lay[]
out that the Government state can’t impose a tax on any fundamental right.” Tr.
at 46:9-17 (M. Hopkins). The Hopkins concluded that as “the summary
judgment goes, I think I’ve laid the case out throughout all of our filings and . . .
the road splits [whether] the Government indeed does have total authority over
what they [claim to] have authority over, but if [the fundamental right to work is
exempt,] they definitely don’t.” Tr. at 46:18-22 (M. Hopkins). In response to
the Court’s question whether there was anything that the M. Hopkins had to add,
he responded that he did not, and that “I do agree that . . . this is [] more of a legal
issue. I don’t see a need for a jury trial . . . .” Tr. at 48:3-5 (M. Hopkins). S.
Hopkins added that one “has to look at what the definition of income is, and
income is clearly defined under Eisner v. Macomber[, 252 U.S. 189 (1920)] and
[C.I.R. v. ]Glenshaw Glass[, 348 U.S. 426 (1955)]. It is not everything that
comes in.” Tr. at 48:9-16 (S. Hopkins). She asserted that “just because it is -you can tax income from whatever source derived, the source derived isn’t the
issue. The issue is [], is it taxable income?” Tr. at 48:14-16 (S. Hopkins).
The United States referred the Court to its United States’ Response to
Untimely Hopkins’ Interrogatories 7-19, see Certificate of Service of United
States’ Response to Untimely Hopkins’ Interrogatories 7-19, filed December 28,
2012 (Doc. 144), at page six, as an example of its contention that multiple courts
have rejected the Hopkins’ argument that, for tax purposes, there is a basis of zero
in a person’s labor. See Tr. at 51:4-22 (Lena). The United States asserted that
“the taxpayer can only have a zero basis amount in his or her own labor because
the [real] personal living expenses incurred to generate the labor is both noncapitalizable[,] and under 26 U.S.C. section 262[,] not deductible.” Tr. at 52:48 (Lena). The United States contended that, while a person may have the
fundamental right to work, once the person receives income for exercising that
right to work, the IRS, pursuant to Congressional statutes, has the ability to tax
that income. See Tr. at 56:23-58 (Lena). In response to the Court’s question
whether the United States can point the Court to a case that provides the
proposition that once a person is paid for the right to work, the United States then
has the ability to tax that payment, the United States referred the Court, once
again, to United States v. Russell, and to the Circuit Court opinions that have
looked to the Constitution, and held that “Congress has the ability to define
compensation from services as income, [] taxable [under] sections 62, 63, [and
section 61] of the Internal Revenue [Code].” Tr. at 57:21-58:1 (Lena). The
United States concluded by stating:
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[T]he United States is merely asking for the ability to have the court
grant summary judgment in its favor and [] ask the Court to reduce
the Assessments to judgment for the tax years 96, 97, 99, 2000, and
2001, and [] ask that the court grant the United States’ summary
judgments such that it can foreclose its federal tax liens in all
property and rights to property owned by the Hopkins.
Tr. at 61:20-62:2 (Lena).
The Court stated that it would take the Motion for Summary Judgment
under advisement, that it looks like the facts are largely undisputed, and that the
issue appears to be legal rather than factual. See Tr. at 62:4-16 (Court). The
Hopkins stated:
In our response back -- it was number document 96 and it’s our
response to that motion for summary judgment, I would like you
when you are considering this, please look at pages 9 and 10 and 11.
We have been painted with this broad brush of having come down
out the side of what [we] were [truly] saying in all of their separate
arguments, and in that you will see what we believe -- [] [] what our
beliefs are as opposed to what the U.S. Attorney is . . . saying [] we
believe. I really believe that [it] could [] shed some light on us and
the [stance] that we are taking. We do not believe those 11 stances
that the U.S. Attorney keeps telling . . . telling you [that we believe],
sir.
Tr. at 62:20-63:7 (S. Hopkins). The Court asked the United States whether, if
the Court granted the summary judgment, the United States would at that point
need a final judgment entered in the matter or whether the United States would
need something further from the Court. See Tr. at 67:12-16 (Court). The
United States responded that the Summary Judgment would allow the United
States to go forward with foreclosure and the foreclosure sale, but Bayview Loan
and the United States would then have to file a stipulation with the Court to
memorialize their agreement as to the proceeds. See Tr. at 68:4-14 (Court, Lena).
SJ MOO at 21-51.
After the Court filed the SJ MOO, the Hopkins’ filed the Motion. See Motion at 1. In
the Motion, the Hopkins’ begins by asserting that, in the SJ MOO on page 100, the Court rules
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that M. Hopkins is indebted to the United States in the amount of $732,811.61 “as of October 19,
2010, for the Federal income tax assessed against him for the tax years 1996, 1997, 1999, 2000,
2001, plus interest and all statutory additions provided by law until paid.” Motion at 2. The
Hopkins’ note that, on page 4 of the United States’ Complaint, filed May 13, 2011 (Doc.
1)(“Complaint”), a table lists amount due through December 31, 2010, for tax years 1996, 1997,
1999, 2000, and 2001, for a total amount of $732,811.61. Motion at 2. The Hopkins’ then state
that, in the United States’ Reply to Hopkins’ Response to United States’ Motion for Summary
Judgment at 8, filed August 22, 2012 (Doc. 102)(“MSJ Reply”), the United States responded to
the Hopkins’ allegation that M. Hopkins did not receive credit against the amount due by him as
of October 19, 2010, for $130,000.00 that the Honorable Christina M. Armijo, United States
District Judge for the District of New Mexico, held pursuant to a pretrial order and later attached
after summary judgment in favor of the United States in interpleader case District of New Mexico
v. Hopkins, No. 10-CV-00644 WJ/RLP, 2010 WL 5497195 (D.N.M. Dec. 17, 2010)(Armijo, J.).
See Motion at 3. The Hopkins’ contend that, when Judge Armijo ordered the $130,000.00 to be
released to the IRS on December 17, 2010, M. Hopkins’ tax liability for 1996 reduced -- because
of that payment and other payments -- from $264,967.60, see Complaint at 4, to $143,085.59, see
MSJ Reply at 8. See Motion at 3. The Hopkins’ also assert that, in the conclusion to the MSJ
Reply, the United States acknowledges that the total amount M. Hopkins owes in federal income
tax, as of August 15, 2012, for 1996, 1997, 1999, 2000, and 2001, is $635,147.76. See Motion at
3-4 (citing MSJ Reply at 13). The MSJ Reply states, at page 13: “Therefore, the United States is
entitled to summary judgment against Mark Hopkins for the federal income taxes assessed against
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him for the tax years 1996, 1997, 1999, 2000 and 2001 in the amount of $635, 147.76 as of August
15, 2012, plus statutory additions and accruals until fully paid.”. MSJ Reply at 13.
The Hopkins’ argue that the Court erred in granting summary judgment in favor of the
United States in the amount of $732,811.61, because it neglected to account for the $130,000.00
seized in the interpleader case, which should be credited against the amount M. Hopkins owes.
See Motion at 4. The Hopkins’ argue that the United States acknowledges this reduction as
correct, by assessing a total amount doe of $635,147.76 against Mark Hopkins as of August 15,
2012. See Motion at 405. Accordingly, the Hopkins’ ask that the Court modify the SJ MOO to
reflect a total amount due for M. Hopkins of $635,147.76 as of August 15, 2012, for tax years
1996, 1997, 1999, 2000, and 2001, plus interest and other statutory additions provided by law until
paid. See Motion at 5.
The United States responds in United States’ Response to Hopkins’ Motion for Relief From
Order, filed March 13, 2013 (Doc. 172)(“Response”). The United States responds that the Court
committed no error, and correctly granted the United States summary judgment against M.
Hopkins “such that he was indebted to the United States for $732,811.61 as of October 19, 2010.”
Response at 1. The United States contends that the Motion does not contradict that $732,811.61
is the total amount due and owing for M. Hopkins as of October 19, 2010. See Response at 1.
The United States asserts that, after October 19, 2010, on December 27, 2010, the Internal Revenue
Service (“IRS”) applied $130,000.00 from an IRS levy, to M. Hopkins’ tax liabilities for tax year
1996. See Response at 1. Accordingly, the United States asserts, M. Hopkins’ tax liability for
that year reduced to $142,085.59, as of August 15, 2012. See Response at 1. The United States
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notes that, if the judgment specified M. Hopkins’ liability as of August 15, 2012, the United States
would be entitled to summary judgment against him in the amount of $635,147.76 as of August
15, 2012, plus statutory additions and accruals until fully paid. See Response at 1. The United
States states: “While a judgment for that amount and date would be equally correct, it is not the
amount and date pled by the United States in its motion for summary judgment.” Response at 12. The United States argues that the Court’s judgment is correct and need not be amended under
rule 60(b) of the Federal Rules of Civil Procedure. See Response at 2. The United States argues
that the “IRS is only entitled to the correct amount due and owing, and that amount was correctly
recited as of October 19, 2010. The balance due changes with daily compounded interest and
with subsequent payments (if any).” Response at 2. The United States argues that the Court
should not be expected to revise its judgment to match each change, and that, although the amount
due and owing of $637,147.76 as of August 15, 2012, is correct, the amount that the SJ MOO
stated of $732,811.61 as of October 19, 2010, is also correct, so the Court need not amend its
correct judgment to reflect the change the Motion requests. See Response at 2.
LAW REGARDING RULE 60(b)
Rule 60(b) allows a court to relieve a party from a judgment or order for “mistake,
inadvertence, surprise, or excusable neglect,” Fed. R. Civ. P. 60(b)(1), or “any other reason that
justifies relief,” Fed. R. Civ. P. 60(b)(6). “Rule 60(b) is an extraordinary procedure permitting
the court that entered judgment to grant relief therefrom upon a showing of good cause within the
rule.” Cessna Fin. Corp. v. Bielenberg Masonry Contracting, Inc., 715 F.2d 1442, 1444 (10th Cir.
1983). Rule 60(b) “is not a substitute for appeal and must be considered with the need for finality
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of judgment.” Cessna Fin. Corp. v. Bielenberg Masonry Contracting, Inc., 715 F.2d at 1444
(citing Brown v. McCormick, 608 F.2d 410, 413 (10th Cir. 1979)). The rule was designed to
strike a “delicate balance” between respecting the finality of judgment and, at the same time,
recognizing the court’s principal interest of executing justice. Cessna Fin. Corp. v. Bielenberg
Masonry Contracting, Inc., 715 F.2d at 1444. Once a case is “unconditionally dismiss[ed],”7 the
7
Rule 41(a)(2), which governs all dismissals undertaken by way of a court order, grants
courts discretion to condition dismissal “on terms that the court considers proper,” Fed. R. Civ. P.
41(a)(2), formerly, “on terms and conditions as the court deems proper,” Smith v. Phillips, 881
F.2d 902, 904-05 (10th Cir. 1989)(quoting Fed. R. Civ. P. 41(a)(2) (1988)). Such conditions
“could include retention of some jurisdiction by the court.” Smith v. Phillips, 881 F.2d at 905
(citing McCall-Bey v. Franzen, 777 F.2d 1178, 1188-90 (7th Cir. 1985)). The United States Court
of Appeals for the Tenth Circuit has stated that, if the dismissal is pursuant to rule 40(a)(1)(A)(ii),
undertaken without a court order, then the court “is powerless to condition dismissal . . . upon a
retention of jurisdiction.” 881 F.2d at 905. This rule is likely no longer true; the district court
can probably attach a condition retaining jurisdiction, but only if the parties agree.
Even when . . . the dismissal is pursuant to Rule 41(a)(1)(ii) [now rule
41(a)(1)(A)(ii)] (which does not by its terms empower a district court to attach
conditions to the parties’ stipulation of dismissal) we think the court is authorized
to embody the settlement contract in its dismissal order or, what has the same effect,
retain jurisdiction over the settlement contract) [sic] if the parties agree.
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. at 381-82.
The only factors counseling hesitation in endorsing the view that a court may retain
jurisdiction of a case dismissed pursuant to rule 41(a)(1)(A) are: (i) the proclamation in Kokkonen
v. Guardian Life Insurance Co. of America was dicta, and “[i]t is to the holdings of [the Supreme
Court’s] cases, rather than their dicta, that we must attend,” 511 U.S. 375, 379; and (ii) the Court
refers to “embody[ing] the settlement contract in its dismissal order,” but rule 41(a)(1)(A) provides
-- in its very title -- that it pertains to dismissals effectuated “Without a Court Order,” Fed. R.
Civ. P. 41(a)(1)(A) (emphasis in original). Smith v. Phillips must, however, be interpreted in light
of the Supreme Court’s subsequent decision in Kokkonen v. Guardian Life Insurance Co. of
America, 511 U.S. 375 (1994), in which the Supreme Court held that a district court’s ancillary
jurisdiction does not extend to the post-dismissal enforcement of federal case settlement
agreements, unless: (i) there is an independent basis of federal subject-matter jurisdiction to hear
the claims; (ii) the court incorporated the terms of the settlement agreement into its order of
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Court loses all jurisdiction over the case other than the ability to hear motions under rule 60(b).
Smith v. Phillips, 881 F.2d 902, 904 (10th Cir. 1989)(“We agree with the Seventh Circuit that ‘[a]n
unconditional dismissal terminates federal jurisdiction except for the limited purpose of reopening
and setting aside the judgment of dismissal within the scope allowed by [Fed. R. Civ. P.] 60(b).”
(alterations in original)(quoting McCall-Bey v. Franzen, 777 F.2d 1178, 1190 (7th Cir. 1985))).
Motions to obtain relief from a judgment or order based on “mistake, inadvertence,
surprise, or excusable neglect” must be brought “within a reasonable time . . . no more than a year
after the entry of the judgment or order or the date of the proceeding.” Fed. R. Civ. P. 60(c)(1).
See Blanchard v. Cortes-Molina, 453 F.3d 40, 44 (1st Cir. 2006)(“[R]elief from judgment for
reasons of ‘mistake, inadvertence, surprise, or excusable neglect,’ must be sought within one year
of the judgment.”). This deadline may not be extended and is not subject to the court’s discretion.
See Fed. R. Civ. P. 6(b)(2) (“A court must not extend the time to act under Rules 50(b) and (d),
52(b), 59(b), (d), and (e), and 60(b).” (emphasis added)). The pendency of an appeal does not toll
the time requirement for pursuing a motion under rule 60(b). See Fed. R. Civ. P. 60(c)(1); Griffin
v. Reid, 259 F. App’x 121, 123 (10th Cir. 2007)(unpublished)8; Tool Box, Inc. v. Ogden City
dismissal; or (iii) the court includes a term “‘retaining jurisdiction’” in its order of dismissal.
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. at 381. That decision continues to permit
district courts to condition dismissals under rule 41(a)(2), see 511 U.S. at 381, and appears to have
no bearing on courts’ power to reopen cases pursuant to rule 60(b), see 511 U.S. at 378 (noting,
without opining on, the practice of “[s]ome Courts of Appeals” to “reopen[ ] . . . dismissed suit[s]
by reason of breach of the agreement that was the basis for dismissal”).
8
Griffin v. Reid is an unpublished opinion, but the Court can rely on an unpublished opinion
to the extent its reasoned analysis is persuasive in the case before it. See 10th Cir. R. 32.1(A), 28
U.S.C. (“Unpublished decisions are not precedential, but may be cited for their persuasive value.”).
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Corp., 419 F.3d 1084, 1088 (10th Cir. 2005)(“[A]n appeal does not toll or extend the one-year
time limit of Rule 60(b).”). No time limit applies to rule 60(b)(6), other than that the motion be
made within a reasonable time. See Fed. R. Civ. P. 60(c)(1).
1.
Rule 60(b)(1).
The Tenth Circuit uses three factors in determining whether a judgment may be set aside
in accordance with rule 60(b)(1): (i) whether the moving party’s culpable conduct caused the
default; (ii) whether the moving party has a meritorious defense; and (iii) whether setting aside the
judgment will prejudice the nonmoving party. See United States v. Timers Preserve, 999 F.2d
452, 454 (10th Cir. 1993). Under some circumstances, a party can rely on rule 60(b)(1) for a
mistake by their attorney or when their attorney acted without their authority. See Yapp v. Excel
Corp., 186 F.3d 1222, 1231 (10th Cir. 1999)(“Rule 60(b)(1) motions premised upon mistake are
The Tenth Circuit has stated:
In this circuit, unpublished orders are not binding precedent, . . . and we have
generally determined that citation to unpublished opinions is not favored.
However, if an unpublished opinion or order and judgment has persuasive value
with respect to a material issue in a case and would assist the court in its disposition,
we allow a citation to that decision.
United States v. Austin, 426 F.3d 1266, 1274 (10th Cir. 2005). The Court concludes that Griffin
v. Reid has persuasive value with respect to a material issue, and will assist the Court in its
disposition of this Memorandum Opinion. The Court makes similar findings in this
Memorandum Opinion regarding Argota v. Miller, 424 F. App’x 769 (10th Cir. 2011), McKay v.
United States, 207 F. App’x 892 (10th Cir. 2006), Pyeatt v. Does, 19 F. App’x 785 (10th Cir.
2001), United States v. McMahan, 8 F. App’x 272 (10th Cir. 2001), Chavez v. Primus Auto. Fin.
Servs., 125 F.3d 861, 1997 WL 634090 (10th Cir. 1997), and Beetle Plastics, Inc. v. United Ass’n
of Journeymen & Apprentices of Plumbing & Pipefitting Indus., 97 F.3d 1464, 1996 WL 531924
(10th Cir. Sept. 19, 1996).
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intended to provide relief to a party . . . when the party has made an excusable litigation mistake
or an attorney has acted without authority . . . .”). Mistake in this context entails either acting
without the client’s consent or making a litigation mistake, such as failing to file or comply with
deadlines. See Yapp v. Excel Corp., 186 F.3d at 1231. If the alleged incident entails a mistake,
then it must be excusable, meaning that the party was not at fault. See Pioneer Inv. Servs. v.
Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 394 (1993)(“This leaves, of course, the Rule’s
requirement that the party’s neglect be ‘excusable.’”); Cashner v. Freedom Stores, Inc., 98 F.3d
572, 577 (10th Cir. 1996)(“If the mistake alleged is a party’s litigation mistake, we have declined
to grant relief under Rule 60(b)(1) when the mistake was the result of a deliberate and counseled
decision by the party.”); Pelican Prod. Corp. v. Marino, 893 F.2d 1143, 1146 (10th Cir.
1990)(holding attorney carelessness is not a basis for relief under Rule 60(b)(1)).
Courts will not grant relief when the mistake of which the movant complains is the result
of an attorney’s deliberate litigation tactics. See Cashner v. Freedom Stores, Inc., 98 F.3d at 577.
This rule exists because a party
voluntarily chose [the] attorney as his representative in the action, and he cannot
now avoid the consequences of the acts or omissions of this freely selected agent.
Any other notion would be wholly inconsistent with our system of representative
litigation, in which each party is deemed bound by the acts of his lawyer agent and
is considered to have notice of all facts, notice of which can be charged upon the
attorney.
Pioneer Inv. Servs. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. at 397 (internal quotation marks
omitted)(quoting Link v. Wabash R.R., 370 U.S. 626, 633-34 (1962)). The Tenth Circuit has held
that there is nothing “novel” about “the harshness of penalizing [a client] for his attorney’s
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conduct” and has noted that those “who act through agents are customarily bound,” even though,
when “an attorney is poorly prepared to cross-examine an expert witness, the client suffers the
consequences.” Gripe v. City of Enid, 312 F.3d 1184, 1189 (10th Cir. 2002). The Court has
previously stated:
There is a tension between how the law treats attorney actions that are without
authority, thus permitting relief under rule 60(b), and how the law treats those
attorney actions which are inexcusable litigations decisions, thus failing to qualify
for relief; although the distinction between those actions may not always be logical,
it is well established.
Wilson v. Jara, No. CIV 10-0797 JB/WPL, 2012 WL 1684595, at *7 (D.N.M. May 10,
2012)(Browning, J.).9
9
The Supreme Court has recognized that individuals must be “held accountable for the acts
and omissions of their chosen counsel,” and that the “proper focus is upon whether the neglect of
respondents and their counsel was excusable.” Pioneer Inv. Servs. Co. v. Brunswick Assoc. Ltd.
P’ship, 507 U.S. at 397 (emphasis in original). At the same time, the Tenth Circuit has held that,
when counsel acts without authority, rule 60(b)(1) provides relief from judgment. See Cashner
v. Freedom Stores, Inc., 98 F.3d at 576 (“[A]s a general proposition, the ‘mistake’ provision in
Rule 60(b)(1) provides for the reconsideration of judgment only where . . . an attorney in the
litigation has acted without authority from a party . . . .”)(quoting Fed. R. Civ P. 60(b)(1). “There
is a tension between these decisions, because, ordinarily, a client will not authorize his or her
attorney to act in a negligent manner or to make a mistake.” Wilson v. Jara, No. CIV 10-0797
JB/WPL, 2012 WL 1684595, at *7 n.7. When the client acknowledges that he or she has hired
the attorney, there is a difference between decisions which terminate the litigation, such as
settlement or a stipulation of dismissal, and other litigation decisions, because decisions to
terminate the litigation are ordinarily left to the client. See Chavez v. Primus Auto. Fin. Servs.,
125 F.3d 861, 1997 WL 634090, at *4-5 (10th Cir. 1997)(unpublished table decision)(citing
Navajo Tribe of Indians v. Hanosh Chevrolet-Buick, Inc., 1988-NMSC-010 ¶ 3, 749 P.2d 90, 92;
Bolles v. Smith, 1979-NMSC-019 ¶ 11, 526, 591 P.2d 278, 280). “Otherwise the Court has
difficulty explaining attorney decisions which are made without authority and attorney decisions
for which it is acceptable that the client suffer the consequences.” Wilson v. Jara, No. CIV 100797 JB/WPL, 2012 WL 1684595, at *7 n.7.
In Chavez v. Primus Automotive Financial Services, the Tenth Circuit recognized that “the
mere employment of an attorney does not give him the actual, implied or apparent authority to
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compromise his client’s case.” 1997 WL 634090, at *4. Few Tenth Circuit cases analyze
whether an attorney has acted without authority. The cases in which the Tenth Circuit has found
a lack of authority appear to fall into two categories: (i) cases in which the attorney entered an
appearance without the client’s knowledge, see FDIC v. Oaklawn Apts., 959 F.2d 170, 175-76
(10th Cir. 1992)(finding that there were factual issues which the district court needed to resolve
where “[t]here is nothing in the record indicating when Appellants became aware of the lawsuit
and of Newcombe’s purported representation”); and (ii) cases in which the attorney’s actions
terminate the litigation, see Thomas v. Colo. Trust Deed Funds, Inc., 366 F.2d 136, 139-40 (10th
Cir. 1966)(finding that, as to one of the plaintiffs, “the record shows that he did not participate in
the transactions and negotiations with the S.E.C. and did not consent to the execution of the
stipulation of the judgment”); Cashner v. Freedom Stores, Inc., 98 F.3d at 577 (citing with approval
Surety Ins. Co. of Cal. v. Williams, 729 F.2d 581, 582-83 (8th Cir. 1984), which held that a
“judgment entered upon an agreement by the attorney may be set aside on affirmative proof that
the attorney had no right to consent to its entry”). Because decisions that terminate the litigation
are ordinarily the client’s prerogative, those decisions fit more squarely within rule 60(b)(1)’s
“lack of consent” prong.
Decisions where the purported client is unaware of the litigation, or of the attorney’s
attempt to act on his or her behalf, would also fit within rule 60(b)(1)’s “lack of consent” prong,
because an individual has the right to choose his or her own attorney, or to decide whether he or
she wishes to have any attorney. Other litigation decisions are made jointly or are within the
attorney’s control, see Model Code of Prof’l Conduct R. 1.2 cmt. 1 (2011)(“With respect to the
means by which the client’s objectives are to be pursued, the lawyer shall consult with the client .
. . and may take such action as is impliedly authorized to carry out the representation.”); Pittman
ex rel. Sykes v. Franklin, 282 F. App’x 418, 427 n.6 (6th Cir. 2008)(unpublished)(“[T]he decision
to allege comparative fault as an affirmative defense falls within a narrow band of circumstances
in which an attorney may act without consulting his or her client.”), and, thus, to give final
judgments meaning and allow cases to terminate, it is logical that those decisions must fall within
the “excusable litigation mistake” prong, or be based on a substantive mistake of law or fact.
Although the Tenth Circuit does not appear to have expressed its views on where the line
is drawn between attorneys acting without consent and litigation mistakes, or acknowledged the
tension between these two categories, the Court concludes that the appropriate division is, when
the client is aware that the attorney is acting on his or her behalf, between decisions which dispose
of the case and ordinarily require client consent, and other routine attorney decisions which take
place over the course of the case. The Court also notes that rules of professional conduct require,
“[i]n a criminal case,” for a lawyer to “abide by the client’s decision, after consultation with the
lawyer, as to the plea to be entered, whether to waive a jury trial and whether the client will testify.”
Model Rules of Prof’l Conduct R. 1.2(a). While a decision on the plea to be entered in a criminal
case is comparable to whether to settle a civil case, the Court has not located any decisions
permitting rule 60(b) relief when a civil attorney waives his or her client’s right to jury trial. One
unpublished decision from the United States Court of Appeals for the Fourth Circuit discusses
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2.
Rule 60(b)(6).
Rule 60(b)(6) provides that a court may relieve a party from final judgment, order, or
proceeding for “any other reason that justifies relief.” Fed. R. Civ. P. 60(b)(6). No time limit
applies to rule 60(b)(6), save that the motion be made within a reasonable time. See Fed. R. Civ.
P. 60(c)(1). “Thus, to the extent it is applicable, clause (6) appears to offer a means of escape
from the one-year limit that applies to motions under clauses (1), (2), and (3).” 11 Charles Alan
Wright, Arthur R. Miller & M. Kane, Federal Practice & Procedure § 2864, at 490 (2d ed. 2012).
In Pioneer Investment Services Co. v. Brunswick Associates Ltd., the Supreme Court reasoned
that, to avoid abrogating the one-year time limit for rule 60(b)(1) to (3), rule 60(b)’s “provisions
are mutually exclusive, and thus a party who failed to take timely action due to ‘excusable neglect’
may not seek relief more than a year after the judgment by resorting to subsection (6).” 507 U.S.
at 393 (citing Liljeberg v. Health Services Acquisition Corp., 486 U.S. 847, 863 & n.11 (1988)).
“If the reasons offered for relief from judgment could be considered under one of the more specific
clauses of Rule 60(b)(1)-(5), those reasons will not justify relief under Rule 60(b)(6).” 12 James
Wm. Moore et al., Moore’s Federal Practice, Civil § 60.48[2], at 60-182 (3d ed. 2013). Accord
Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 863 n.11 (1988)(“This logic, of course,
extends beyond clause (1) and suggests that clause (6) and clauses (1) through (5) are mutually
exclusive.”).
briefly a scenario where, without resolving the issue’s merits, a criminal defendant raised through
a rule 60(b) motion in a habeas preceding that “his trial counsel had prevented him from testifying
in his defense.” United States v. McMahan, 8 F. App’x 272, 274 (4th Cir. 2001)(unpublished).
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Rule 60(b)(6) is a “grand reservoir of equitable power to do justice in a particular case.”
Van Skiver v. United States, 952 F.2d 1241, 1244 (10th Cir. 1991)(internal quotation marks
omitted). “The Rule does not particularize the factors that justify relief, but we have previously
noted that it provides courts with authority ‘adequate to enable them to vacate judgments whenever
such action is appropriate to accomplish justice,’ while also cautioning that it should only be
applied in ‘extraordinary circumstances.’” Liljeberg v. Health Servs. Acquisition Corp., 486 U.S.
at 863 (quoting Klapprott v. United States, 335 U.S. 601, 614-15 (1949)). Generally, the situation
must be one beyond the control of the party requesting relief under rule 60(b)(6) to warrant relief.
See Ackermann v. United States, 340 U.S. 193, 202 (1950)(“The comparison [of prior precedent]
strikingly points up the difference between no choice and choice; imprisonment and freedom of
action; no trial and trial; no counsel and counsel; no chance for negligence and inexcusable
negligence. Subsection 6 of Rule 60(b) has no application to the situation of petitioner.”). Legal
error that provides a basis for relief under rule 60(b)(6) must be extraordinary, as the Tenth Circuit
discussed in Van Skiver v. United States:
The kind of legal error that provides the extraordinary circumstances justifying
relief under Rule 60(b)(6) is illustrated by Pierce [v. Cook & Co., 518 F.2d 720,
722 (10th Cir. 1975)(en banc)]. In that case, this court granted relief under
60(b)(6) when there had been a post-judgment change in the law “arising out of the
same accident as that in which the plaintiffs . . . were injured.” Pierce, 518 F.2d at
723. However, when the post-judgment change in the law did not arise in a related
case, we have held that “[a] change in the law or in the judicial view of an
established rule of law” does not justify relief under Rule 60(b)(6). Collins v. City
of Wichita, 254 F.2d 837, 839 (10th Cir. 1958).
Van Skiver v. United States, 952 F.2d at 1244-45.
“Courts have found few narrowly-defined situations that clearly present ‘other reasons
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justifying relief.’” Wright et al., supra, § 2864, at 483. The Supreme Court expounded:
To justify relief under subsection (6), a party must show “extraordinary
circumstances” suggesting that the party is faultless in the delay. If a party is partly
to blame for the delay, relief must be sought within one year under subsection (1)
and the party’s neglect must be excusable. In Klapprott [v. United States, 335 U.S.
601 (1949)], for example, the petitioner had been effectively prevented from taking
a timely appeal of a judgment by incarceration, ill health, and other factors beyond
his reasonable control. Four years after a default judgment had been entered
against him, he sought to reopen the matter under Rule 60(b) and was permitted to
do so.
Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd., 507 U.S. at 393 (citing Liljeberg v. Health
Services Acquisition Corp., 486 U.S. 847, 863 & n.11; Ackerman v. United States, 340 U.S. at
197-200; Klapprott v. United States, 335 U.S. at 613-14). See Gonzalez v. Crosby, 545 U.S. 524,
535 (2005)(“[O]ur cases have required a movant seeking relief under Rule 60(b)(6) to show
‘extraordinary circumstances’ justifying the reopening of a final judgment”)(quoting Fed. R. Civ.
P. 60(b))). In Gonzalez v. Crosby, the Supreme Court found a change in the law during the
pendency of a habeas petition was not an extraordinary circumstance. See 545 U.S. at 537.
When the Supreme Court first addressed rule 60(b)(6) a year after it was introduced to the
federal rules, while the Justices were sharply divided on other issues, no dispute arose from Justice
Black’s statement: “[O]f course, the one year limitation would control if no more than ‘neglect’
was disclosed by the petition. In that event the petitioner could not avail himself of the broad
‘any other reason’ clause of 60(b).” Klapprott v. United States, 335 U.S. at 613 (quoting Fed. R.
Civ. P. 60(b)). See Wright et al., supra, § 2864, at 493.
Examples where courts apply rule 60(b)(6) include “settlement agreements when one party
fails to comply” and courts use the rule “to return the parties to the status quo,” or in cases where
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fraud is used by a “party’s own counsel, by a codefendant, or by a third-party witness,” which does
not fit within rule 60(b)(3)’s provision for fraud by an adverse party. Wright et al., supra, § 2864,
at 485, 487. The most common application is to grant relief “when the losing party fails to receive
notice of the entry of judgment in time to file an appeal.”10 Wright et al., supra, § 2864, at 488.
When moving for relief pursuant to rule 60(b)(6), it is not enough to argue the same issues that a
court has already addressed.
See Pyeatt v. Does, 19 F. App’x 785, 788 (10th Cir.
2001)(unpublished)(“[A] motion to reconsider [that] simply reasserts information considered by
the district court in its initial determination . . . does not meet the extraordinary circumstances
standard required for Rule 60(b)(6) relief.”).
ANALYSIS
The Court denied the Motion. Relief under rule 60(b) “is extraordinary and may only be
granted in exceptional circumstances.” Bud Brooks Trucking, Inc. v. Bill Hodges Trucking Co.,
909 F.2d 1437, 1440 (10th Cir. 1990). See also Cashner v. Freedom Stores, Inc., 98 F.3d 572,
576 (10th Cir. 1996)(quotation omitted). The Hopkins’ do not specify under which rule 60(b)
10
Professors Charles Wright and Arthur Miller note that
[m]ost of those cases, however, predate the 1991 amendment to Appellate Rule
4(a)(6), which now provides relief from the strict appellate filing rule if the party
did not learn of the entry of the judgment. In light of that change, most courts have
held that resort to Rule 60(b) as a means of extending the appeal time no longer is
appropriate, although the Rule 60(b) approach is still utilized in some courts,
primarily in the Sixth Circuit.
Wright et al., supra, § 2864, at 489-90 (citations omitted). See Clark v. Lavallie, 204 F.3d 1038,
1041 (10th Cir. 2000)(“Rules 4(a)(6) and 77(d) ‘preclude[] the use of Fed. R. Civ. P. 60(b)(6) to
cure problems of lack of notice.’” (citations omitted)).
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subsection they brings their Motion, but, as they asserts that the Court made a mistake in its SJ
MOO, the Court considers their Motion in light of the two rule 60(b) sections addressing relief
because of mistake -- rule 60(b)(1), and rule 60(b)(6). Under rule 60(b)(1), relief is available only
“(1) when the party has made an excusable litigation mistake or an attorney in the litigation has
acted without authority; or (2) when the judge has made a substantive mistake of law or fact in the
final judgment or order.” Yapp v. Excel Corp., 186 F.3d at 1231. Under rule 60(b)(6), relief is
available “only if we find a complete absence of a reasonable basis and are certain that the . . .
decision is wrong.” Yapp v. Excel Corp., 186 F.3d at 1232. See also State Bank of S. Utah v.
Gledhill (In re Gledhill), 76 F.3d 1070, 1080 (10th Cir. 1996). Both parties agree that the amount
due and owing as of August 15, 2012, is $637,147.76, and that the amount stated in the SJ MOO
of $732,811.61 as of October 19, 2010, is also correct as of October 19, 2010. Because both
parties agree that, as of October 19, 2010, the amount due and owing is $732,811.61, the Court
need not amend its judgment to reflect the change the Motion requests. As the United States
notes, the “balance due changes with daily compounded interest and with subsequent payments (if
any).” Response at 2. Rule 60(b) does not permit relief from judgment simply because the Court
does not update its judgment to match each change. Accordingly, the Court denied the Motion.
________________________________
UNITED STATES DISTRICT JUDGE
Counsel:
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Kenneth J. Gonzalez
United States Attorney
Albuquerque, New Mexico
--and-Manuel Paul Lena
Herbert W. Linder
United States Department of Justice, Tax Division
Dallas, TX
Attorneys for the Plaintiff
Mark E. Hopkins
Federal Correctional Institution La Tuna
Anthony, Texas
Defendant pro se
Sharon J. Hopkins
Federal Correctional Institution Phoenix
Phoenix, Arizona
Defendant pro se
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