United States of America v. Dorf et al.

Filing 28

REPORT AND RECOMMENDATIONS - IT IS THEREFORE RECOMMENDED THAT: 1. Plaintiff United States Of Americas Motion For Entry of Default Judgment (Doc. # 23 ) be GRANTED; and 2. The Court enter Default Judgment pursuant to Fed. R. Civ. P. 55(b)(2): a. a gainst Defendant Alice K. Dorf in the amount of $135,890.86, plus interest and other additional amounts that have accrued after February 9, 2016, and will continue to accrue as provided by law, with respect to unpaid federal income taxes (Form 1 040) for tax years ending December 31, 2004, 2005, 2006, 2007, 2008, and 2013; b. against Defendant Diversity Products, Inc. d/b/a Slot Machines, in the amount of $983,153.90, plus interest and other additional amounts that have accrued after F ebruary 9, 2016, and will continue to accrue as provided by law, with respect to unpaid federal corporate income taxes (Form 1120) for tax years ending December 31, 2001, 2002, 2003, 2004, 2005, and 2006; c. against Defendant Diversity Products, Inc . d/b/a Slot Machines, declaring that the Plaintiff United States of America holds valid and subsisting liens associated with its tax debts that attach to all property and rights to property belonging to said Defendant, ; and d. finding that Defenda nts Alice K. Dorf and National City Bank, now known as PNC Bank, National Association, have no right, title, claim, lien, or interest in the Property. Objections to R&R due by 11/10/2016. Signed by Chief Magistrate Judge Sharon L. Ovington on 10/21/2016. (srb)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON

UNITED STATES OF AMERICA,
Plaintiff,

:
:
:

vs.

Case No. 3:16cv00044
District Judge Walter H. Rice
Chief Magistrate Judge Sharon L. Ovington

MARTIN J. DORF, et al.,

:

Defendants.

:

REPORT AND RECOMMENDATIONS1

I.

Background
In May 2016, the Government filed an Amended Complaint “(1) against Defendant

Alice K. Dorf to reduce to judgment outstanding unpaid liability for federal internal revenue
taxes; (2) against Defendant Diversity Products, Inc., d/b/a Slot Machines to reduce to
judgment outstanding unpaid liabilities for federal income taxes; and (3) against all
Defendants to enforce the associated federal tax liens that have attached to the real property
located at 5262 Tall Oaks Court, Huber Heights, OH 45424 (‘the Property’), title to which is
currently held in the name of Allen M. Dorf.” (Doc. #5, PageID# 42). Summons was later
returned executed against Defendant Alice K. Dorf; Defendant Diversity Products, Inc.,

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Attached hereto is a NOTICE to the parties regarding objections to this Report and
Recommendations.

d/b/a Slot Machines (Defendant Diversity Products); and Defendant National City Bank now
known as PNC Bank, National Association (PNC Bank, National Assn.). These three
Defendants did not file an Answer or otherwise respond to the Government’s Amended
Complaint.
On June 13, 2016, the Clerk of Court filed an Entry of Default pursuant to Fed. R.
Civ. P. 55(a) against Defendant Alice K. Dorf and PNC Bank, National Assn.2 (Doc. #18).
One week later, the Clerk filed an Entry of Default under Rule 55(a) against Defendant
Diversity Products. (Doc. #20).
On June 21, 2016, the Government filed a Motion For Default Judgment Against
Defendants Alice K. Dorf, Diversity Products, and PNC Bank, National Assn. (Doc. #23).
These Defendants did not oppose or otherwise respond to the Government’s Motion.
Consequently, an Order to Show Cause issued, requiring each of these Defendants to show
cause—on or before September 27, 2016—why the Government’s Motion for Default
Judgment should not be granted. (Doc. #27). Neither Defendant Alice Dorf, Diversity
Products, nor PNC Bank, National Assn. has responded to the Order to Show Cause or the
Government’s Motion for Default Judgment.
II.

Default Judgment Is Warranted
Rule 55 of the Federal Rules of Civil Procedure provides for the entry of default and

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The third Entry of Default was against Defendant Allen M. Dorf. Mr. Dorf’s counsel filed an
unopposed Motion to Set Aside Default against Mr. Dorf. The Court granted the unopposed Motion and
set aside the Entry of Default against Mr. Dorf.

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judgment by default against a party who fails to plead or otherwise defend as provided for
under the Civil Rules. See O.J. Distrib., Inc. v. Hornell Brewing Co., 340 F.3d 345, 352 (6th
Cir. 2003).
In the present case, each entry of default against Defendants Alice Dorf, Diversity
Products, and PNC Bank, National Assn. was warranted under Fed. R. Civ. P. 55(a) due
their respective failures to Answer or otherwise respond to the Government’s Amended
Complaint. These entries also properly preceded the Government’s Motion for Default
Judgment. See O.J. Distrib., 340 F.3d at 352; see also Johnson v. Dayton Elec. Mfg. Co.,
140 F.3d 781, 783 (8th Cir. 1998). Review of the returns of service establishes that the
Government properly effected service of summons upon these Defendants by personally
serving Alice K. Dorf with the summons, by personally serving the registered agent for
Diversity Products, and by personally serving a specific person designated to accept service
on behalf of PNC Bank, National Assn. See Doc. #s 9, 13, 15; see also Fed. R. Civ. P.
4(e)(2). Consequently, there is no controversy regarding the fact that these Defendants are
in default: Each was properly served with a summons, and each has not filed an answer or
otherwise responded to the Complaint.
The issue thus becomes whether the entries of default ripened into default judgments
under Fed. R. Civ. P. 55(b)(2) against Defendants Alice Dorf, Diversity Products, or PNC
Bank, National Assn. These Defendants’ failures to respond to the Amended Complaint
does not automatically mean default judgment must be entered against them. There are

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other considerations first, such as reviewing the Amended Complaint to determine if the
well-pleaded facts taken as true present a “‘sufficient basis’ ... entitling Plaintiff to judgment
pursuant to Rule 55(b).” United States v. Allen, No. 2:12-cv-1034, 2014 WL 5305518, at *2
(S.D. Ohio Oct. 15, 2014) (Smith, D.J.); see also LaSalle Bank Nat'l Ass'n v. Appleton, No.
1:07-CV-175, 2007 WL 2344708, at *2 (S.D. Ohio Aug. 15, 2007) (“Once the default has
been entered, the well-pleaded facts of the complaint relating to liability must be accepted as
true.”). To obtain a default judgment under Rule 55(b)(2), the Government—as a plaintiff
seeking default judgment—bears the burden of establishing both liability and damages. See
Ayers v. Receivables Performance Mgmt., L.L.C., No. 2:15-CV-12082, 2016 WL 5402962,
at *3 (E.D. Mich. Sept. 28, 2016).
The Government’s well-pleaded factual allegations and the substance of the claims it
asserts against Defendants Alice Dorf, Diversity Products, and PNC Bank, National Assn.
establish that this Court has subject matter jurisdiction over the instant case under federal
question jurisdiction, 28 U.S.C. § 1331, and as provided by 28 U.S.C. §§ 1440 and 1445.
The Court also has jurisdiction under certain provisions of the United States Tax Code. See
26 U.S.C. §§ 7402(a) and 7403. Venue in this judicial district is proper because Defendants
reside within this judicial district and because the property at issue is located within this
judicial district. See 28 U.S.C. §§ 1391(b) and 1396.
Accepting as true the well-pleaded facts asserted in the Government’s Amended
Complaint establishes, through Count I, that Defendant Alice Dorf is jointly and severally

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liable for unpaid federal tax liability for tax years 2004, 2005, 2006, 2007, 2008, and 2013
totaling, along with accruals and costs, $135,890.86.3 Defendant Alice Dorf was provided
with notice and a demand for payment of these tax liabilities. Despite the notice and
demand, Defendant Alice Dorf has failed, neglected, or refused to pay in full these tax
liabilities. As a result, Defendant Alice Dorf remains jointly and severally indebted to the
United States of America for unpaid internal revenue taxes, statutory penalties, and interest
in the amount of $135,890.86, plus such additional amounts as may have accrued from
February 9, 2016 as provided by law, including interest pursuant to 26 U.S.C. §§ 6601,
6621, and 6622, and 28 U.S.C. § 1961(c).
Next, accepting as true the well-pleaded facts asserted in the Government’s Amended
Complaint further establishes, through Count II, that Defendant Diversity Products is liable
for unpaid federal corporate income taxes for tax years 2001 through 2006 totaling, with
accruals and costs, $983,153.90. Defendant Diversity Products was provided with notice of
these tax liability and demand for payment. Despite such notice and demand, Defendant
Diversity Products has failed, neglected, or refused to pay in full these tax liabilities. After
all abatements, payments, and credits, as of February 9, 2016, Defendant Diversity Products
remains indebted to the United States of America for unpaid internal revenue taxes, statutory
penalties, and interest in the amount of $983,153.90, plus such additional amounts as may
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The Amended Complaint alleges that Defendant Alice K. Dorf is jointly and several liable with
her husband, Martin J. Dorf, who died in November 2015. The Amended Complaint does not name
Martin J. Dorf as a Defendant, and the Government’s Motion for Default Judgment explains, “Martin J.
Dorf is no longer a party to the case.” (Doc. #23, PageID# 143).

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have accrued from February 9, 2016, as provided by law, including interest pursuant to 26
U.S.C. §§ 6601, 6621, and 6622, and 28 U.S.C. § 1961(c).
Turning to the property at issue, the well-pleaded allegations in the Government's
Amended Complaint establishes, through Count III, that it seeks to enforce its tax liens upon
property located at 5262 Tall Oaks Court, Huber Heights, OH 45424, in Montgomery
County (the Property). The Property is legally described as follows:
Situated in the City of Huber Heights, County of Montgomery, State of Ohio,
and being all of Lot number 67 of Heathermere Section Two as the same is
numbered and delineated upon the recorded plat thereof, of record in Plat
Book 191, Page 1-1A of the Montgomery County Recorder’s Office.
Being property conveyed to Allen M. Dorf by deed of The Drees Company,
dated December 2, 2004, and recorded with the Recorder’s Office of
Montgomery County as Instrument 2005-00013010.
(Doc. #47, PageID#s 46-47, ¶23).
As a result of Diversity Products’ failure to pay the tax liabilities described in Count
II of the Amended Complaint, federal tax liens in the amount of the original assessments,
plus interests and other statutory additions, arose on the date of the assessments, and
attached to all property and rights to property belonging to Defendant Diversity Products.
See 26 U.S.C. §§ 6321 and 6322. This includes all property and rights belonging to
Defendant Diversity Products in the Property. Care must be take here, however, because the
Government did not have the benefit of Defendant Allen M. Dorf’s Answer until after it
filed its Motion for Default Judgment. The Court may not, at this time, accept as true the
well-pleaded factual allegations, or the legal conclusions, in the Amended Complaint related
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to Defendant Allen M. Dorf’s ownership or nominal ownership of the Property. This is so in
light of Defendant Allen Dorf’s denials to at least some of the Government’s allegations
concerning his nominal ownership of the Property. Compare, e.g., Doc. #5 with Doc. #25
(¶s 26, 29, 30, 31, 33, 34, 38, 39, 40, 42, 43). Those denials create, at this point in the case,
unresolved issues concerning whether Defendant Diversity Products or Defendant Allen
Dorf hold legally enforceable ownership interests in the Property.
On March 8, 2010, the Internal Revenue Service filed a Notice of Federal Tax Lien
for the tax assessments made against Defendant Diversity Products for the Form 1120
federal income tax years ending 2001, 2002, 2003, 2004, and 2005, in the Montgomery
County Recorder's Office. On June 11, 2010, the Internal Revenue Service filed a Notice of
Federal Tax Lien for the tax assessment made against Defendant DP for the Form 1120
federal income tax year ending 2006, in the Montgomery County Recorder’s Office.
Accordingly, for the reasons set forth above, the Government’s Motion for Default
Judgment is well taken.

IT IS THEREFORE RECOMMENDED THAT:
1.

Plaintiff United States Of America’s Motion For Entry of Default Judgment
(Doc. #23) be GRANTED; and

2.

The Court enter Default Judgment pursuant to Fed. R. Civ. P. 55(b)(2):
a.

against Defendant Alice K. Dorf in the amount of $135,890.86,
plus interest and other additional amounts that have accrued after
February 9, 2016, and will continue to accrue as provided by
law, with respect to unpaid federal income taxes (Form 1040) for
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tax years ending December 31, 2004, 2005, 2006, 2007, 2008,
and 2013;
b.

against Defendant Diversity Products, Inc. d/b/a Slot Machines,
in the amount of $983,153.90, plus interest and other additional
amounts that have accrued after February 9, 2016, and will
continue to accrue as provided by law, with respect to unpaid
federal corporate income taxes (Form 1120) for tax years ending
December 31, 2001, 2002, 2003, 2004, 2005, and 2006;

c.

against Defendant Diversity Products, Inc. d/b/a Slot Machines,
declaring that the Plaintiff United States of America holds valid
and subsisting liens associated with its tax debts that attach to all
property and rights to property belonging to said Defendant, ;
and

d.

finding that Defendants Alice K. Dorf and National City Bank,
now known as PNC Bank, National Association, have no right,
title, claim, lien, or interest in the Property.

October 21, 2016
s/Sharon L. Ovington
Sharon L. Ovington
Chief United States Magistrate Judge

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NOTICE REGARDING OBJECTIONS
Pursuant to Fed. R. Civ. P. 72(b), any party may serve and file specific, written
objections to the proposed findings and recommendations within FOURTEEN days after
being served with this Report and Recommendations. Pursuant to Fed. R. Civ. P. 6(d), this
period is extended to SEVENTEEN days because this Report is being served by one of the
methods of service listed in Fed. R. Civ. P. 5(b)(2)(C), (D), (E), or (F). Such objections shall
specify the portions of the Report objected to and shall be accompanied by a memorandum
of law in support of the objections. If the Report and Recommendation is based in whole or
in part upon matters occurring of record at an oral hearing, the objecting party shall promptly
arrange for the transcription of the record, or such portions of it as all parties may agree
upon or the Magistrate Judge deems sufficient, unless the assigned District Judge otherwise
directs. A party may respond to another party’s objections within FOURTEEN days after
being served with a copy thereof.
Failure to make objections in accordance with this procedure may forfeit rights on
appeal. See Thomas v. Arn, 474 U.S. 140 (1985); United States v. Walters, 638 F.2d 947,
949-50 (6th Cir. 1981).

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