United States Of America v. Parr et al

Filing 23

MEMORANDUM OPINION. Signed by Judge Norman K. Moon on 10/6/11. (hnw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
CHARLOTTESVILLE DIVISION

UNITED STATES OF AMERICA,

CASE NO. 3:10–cv–00061
Plaintiff,

v.

MEMORANDUM OPINION

JAMES JULIAN PARR,
JOAN H. PARR, AND
WELLS FARGO BANK, N.A.,

JUDGE NORMAN K. MOON

Defendants.

This matter is before the Court upon Plaintiff’s Motion for Default Judgment Against James
Julian Parr and Joan H. Parr (“Mr. Parr” and “Mrs. Parr,” individually, and collectively, “the Parrs”).
(docket no. 20). In particular, Plaintiff has moved the Court for “entry of default judgment in favor
of the United States: (1) against Defendant [Mr.] Parr for federal employment, unemployment, and
income taxes, interest and penalties for the taxable periods ending 6/30/2000, 9/30/[20]00,
12/31/[20]00, 3/31/[20]01, 6/30/2001, 12/31/[20]01, 3/31/[20]02, 6/30/2002, 12/31/[20]02,
12/31/2003, 3/31/2004, 6/30/2004, 9/30/2004, 12/31/2004, 3/31/[20]05, 9/30/[20]05, 12/31/2005,
3/31/[20]06, 6/30/[20]06, 9/30/[20]06, 12/31/[20]06, 3/31/[20]07, 6/30/[20]07, 9/30/[20]07,
12/31/[20]07, [and] 3/31/[20]08, in the amount of $476,943.45 as of September, 27, 2010, plus
penalties and interest pursuant to 28 U.S.C. § 1961(c) and 26 U.S.C. § 6621(a)(2) after that date until
the full amount is paid; (2) declaring that [Mrs.] Parr does not have an interest in the real property;
(3) ruling that [Mr.] Parr has an interest in the real property and that the federal tax liens attached to
the real property at issue; and (4) foreclosing the federal tax liens and directing the real property to

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be sold.” Id. Additionally, the United States moves the Court for an order foreclosing the federal
tax liens and an order permitting the sale of certain real property, described below. Id. Defendant
Wells Fargo Bank, N.A. does not object to the Motion. Id. The United States has not requested a
hearing, asking the Court to decide this matter on the submissions. For the reasons that follow,
Plaintiff’s Motion will be GRANTED in part and DENIED in part.
I. BACKGROUND
The United States filed its Complaint on November 4, 2010. (docket no. 1). On December
6, 2010, Mrs. Parr was personally served with a Summons and Complaint, and Mr. Parr was served
pursuant to a copy of the Summons and Complaint being left with Mrs. Parr at his residence.
(docket nos. 6, 7). The only subsequent filing coming from either Mr. or Mrs. Parr was Mr. Parr’s
pro se Motion for Extension of Time to File Answer, filed on January 24, 2011, by which he
requested a four month extension of time to file responsive pleadings. (docket. no. 8). By its Order
dated February 23, 2011 (docket no. 10), the Court granted the Motion in part, allowing the Parrs
sixty days to supply responsive pleadings. On May 26, 2011, pursuant to Federal Rule of Civil
Procedure 55(a), and having received no additional filings from the Parrs, the Clerk of the Court
entered default against them. (docket no. 19). On August 3, 2011, the United States moved the
Court to enter default judgment in its favor (docket no. 20) and filed an accompanying Memorandum
in Support of its Motion (docket no. 21).
II. APPLICABLE LAW
“Rule 55 of the Federal Rules of Civil Procedure authorizes the entry of a default judgment
when a defendant fails ‘to plead or otherwise defend’ in accordance with the Rules.” United States
v. Moradi, 673 F.2d 725, 727 (4th Cir. 1982). Although the clear policy of the Rules is to encourage
dispositions of claims on their merits, entry of default judgment is committed to the discretion of the
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court. Id. (citing Reizakis v. Loy, 490 F.2d 1132, 1135 (4th Cir. 1974)). Indeed, courts within the
Fourth Circuit have noted that default judgment is especially appropriate “when the adversary
process has been halted because of an essentially unresponsive party.” United States v. Martin, No.
1:10CV116, 2011 WL 1467387, at *2 (N.D.W. Va. Apr. 18, 2011) (quoting SEC v. Lawbaugh, 359
F. Supp. 2d 418, 421 (D. Md. 2005) (citation omitted)).
Upon default judgment, a plaintiff’s factual allegations, excluding determination of damages,
are accepted as true for all purposes. See Ins. Servs. of Beaufort, Inc. v. Aetna Cas. and Sur. Co.,
966 F.2d 847, 853 (4th Cir. 1992). “[U]nder [R]ule 54, a default judgment may not be entered
without a full hearing unless the damages are liquidated or otherwise uncontested.” Id. (emphasis
added); United Artists Corp. v. Freeman, 605 F.2d 854, 857 (5th Cir. 1979). Rule 55(b)(2), in turn,
provides that a court “may conduct” a hearing to “(A) conduct an accounting; (B) determine the
amount of damages; (C) establish the truth of any allegation by evidence; or (D) investigate any
other matter.” Fed. R. Civ. P. 55(b)(2).
III. DISCUSSION
A. Tax Liability
To establish a prima facie case of tax liability, the government need only “introduce[ ] into
evidence the certified copies of the certificates of assessment. United States v. Pomponio, 635 F.2d
293, 296 (4th Cir. 1980) (citation omitted). “Once the United States establishes a prima facie case,
the burden shifts to defendants to prove that the [government’s] determination was erroneous . . . .”
Id.
In this case, when it comes to establishing tax liability, the United States provided Account
Transcripts (docket no. 20, attach. 6) from the Internal Revenue Service (“IRS”) along with a
Declaration signed by Barbara Allen (“Ms. Allen”), a duly appointed Advisor Reviewer with the

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IRS, who has reviewed the information concerning federal tax liability of, and balances due from,
Mr. Parr. Ms. Allen’s Declaration reveals that Mr. Parr is individually “indebted to the United
States for tax liabilities . . . in the total amount of $476,943.45, plus statutory additions that will
continue to accrue to the date of payment.” (docket no. 20, attach. 4). Moreover, the United States
has provided the Declaration of Christopher W. Sanders (“Mr. Sanders”), a trial attorney with the
Tax Division of the Department of Justice, who has declared, with personal knowledge pursuant to
his investigation under the Service Members Civil Relief Act, 50 U.S.C. App. § 501 et seq., that Mr.
Parr is not a service member currently on active duty status. (docket no. 20, attach. 5). Mr. Sanders
additionally declared that neither Mr. Parr nor Mrs. Parr are infants or otherwise incompetent. Id.
Ms. Allen’s Declaration clearly establishes the amount by which Mr. Parr is in arrears in
paying his federal tax obligations, and Mr. Sanders’s Declaration assures the Court that the United
States has diligently investigated whether any statutory or non-statutory barriers to default judgment
exist. Mr. Parr has not contested the amount of damages alleged,1 and the United States is
seemingly aware of no barriers to default judgment. Accordingly, the government has made a prima
facie case of Mr. Parr’s tax liability and shifted the burden to him to refute the government’s
position. Mr. Parr, however, has set forth no evidence whatsoever, and therefore his liability is
established for the unpaid taxes, penalties, and interest for the taxable periods contained in the
Complaint. A hearing is unnecessary to conduct an accounting for damages under Rule 55(b)(2),
and the Court may properly enter default judgment for the United States against Mr. Parr.
Notably, however, the government has not established any tax liability on behalf of Mrs.
Parr. On the contrary, Ms. Allen’s Declaration is expressly limited to “James Julian Parr,

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Indeed, in his Motion for Extension of Time to File an Answer, it appears that Mr. Parr acknowledges significant
liabilities to the United States. See docket no. 61 (implying that he hoped to sell properties that he then owned or
would soon acquire in order to satisfy his federal tax liabilities).

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individually . . . .” (docket no. 20, attach. 4) (emphasis added). I have reviewed the Complaint as
well as the documentation attached to the government’s Motion for Default Judgment, and I have
found nothing to indicate otherwise. As described below in Part B, the fact that only Mr. Parr—and
not Mrs. Parr—is the proper subject of a default judgment on the matter of tax liability is immaterial
when it comes to the government’s request that the Court order the sale of certain real property to
satisfy the default judgment. Nevertheless, Mrs. Parr’s status as a non-liable party, coupled with her
possibly having a possessory interest in the real property, bears on my determination of the proper
distribution of any sale proceeds. I therefore endeavor to accurately describe the nature of the rights
at stake before issuing a default judgment and accompanying order.
B. Foreclosing Federal Tax Liens and Ordering a Sale
The government alleges that Mr. Parr acquired “Parcel One” in 1999 and “Parcel Two” in
1988. Compl. ¶¶ 19–20. Having established the tax liability of at least Mr. Parr, the United States
seeks to foreclose the federal tax liens attached to the two parcels vis-à-vis Mr. Parr’s tax
delinquency and sell both parcels. Such foreclosure is contingent upon the Court declaring, as the
government requests, (1): that federal tax liens have indeed validly attached to the real property; (2)
that Mr. Parr has an interest in the real property; and (3): that Mrs. Parr has no such interest (or at
least no interest that would preclude the United States from moving forward with the foreclosure and
sale).
Looking first to condition (1) above, Section 6321 of Title 26 provides that the amount of
any delinquent taxes shall be “a lien in favor of the United States upon all property and rights to
property, whether real or personal, belonging to such person.” 26 U.S.C. § 6321; United States v.
Bowser, 768 F. Supp. 2d 846, 849 n.1 (E.D. Va. 2011). Moreover, a “lien imposed by section 6321
shall arise at the time the assessment is made and shall continue until the liability for the amount so
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assessed (or a judgment against the taxpayer arising out of such liability) is satisfied . . . .” 26
U.S.C. § 6322.
Until recently, there may have been a colorable argument that federal tax liens could not
attach to the two parcels by virtue of the Parrs holding both parcels as tenants by the entirety. See
United States v. Am. Nat’l Bank of Jacksonville, 255 F.2d 504, 506 (5th Cir. 1958); United States v.
Hutcherson, 188 F.2d 326, 331 (8th Cir. 1951) (both holding that no tax lien could attach to
tenancies by the entirety because neither spouse possessed an individual interest in the property). In
United States v. Craft, 535 U.S. 274, 276 (2003), however, the Supreme Court of the United States
reversed a Sixth Circuit decision and held that “despite the fiction [of the tenancy by the entirety],
each tenant possesses individual rights in the estate sufficient to constitute ‘property’ or ‘rights to
property’ for the purposes of the lien . . . .” After Craft, then, tax liens can attach to property held
by spouses in the form of a tenancy by the entirety. Id.; see also Kirsten O’Leary, Note, Section
6321 Tax Liens on Tenancies by the Entirety after United States v. Craft, 56 Tax Law. 917 (2003).
By operation of Sections 6321 and 6322 after Craft, it is clear that federal tax liens arose out
of Mr. Parr’s well established delinquency, and continue to exist today. It is also clear that condition
(2) mentioned above, i.e., that Mr. Parr has an interest in the property at issue, is satisfied by virtue
of the deeds to the two parcels that the government has included as Exhibits. (docket no. 20, attachs.
7, 8). What is not immediately clear, however, is whether it would be permissible for the Court to
declare that Mrs. Parr has no interest in the real property sufficient to block the foreclosure and sale,
such that the government can meet condition (3) mentioned above. As already noted, I have seen no
contention from the government that Mrs. Parr is jointly or individually liable for tax delinquencies,
so I must take care to ensure that the order of sale that the government requests can be issued
without infringing on Mrs. Parr’s possessory interest in the real property.

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After considering the relevant case law on the matter, I find that although Mrs. Parr
apparently holds the real property at issue in this matter as a tenant by the entirety, that status does
not preclude the Court from ordering that the property be sold to satisfy her spouse’s federal tax
liability. That said, because Mrs. Parr does appear to have a possessory interest in the property—
and the government has not alleged facts to the contrary in its Complaint—the extent to which that
interest requires her to be compensated from the proceeds of the sale will require a hearing at a later
date.
1. Tenancy by the Entirety in Virginia
Federal courts look to state law to determine a person’s rights in real property that the United
States seeks to reach. United States v. Bowser, 768 F. Supp. 2d 846, 849 (E.D. Va. 2011) (citing
Drye v. United States, 528 U.S. 49, 58 (1999)). Virginia law recognizes tenancy by the entirety as a
form of concurrent ownership. Bowser, 768 F. Supp. 2d at 849. In order for a court to find a
tenancy by the entirety, it must find that the five “unities” are met. Id. The five unities are: title,
estate, time, possession, and marriage. Id. (citing In re Bunker, 312 F.3d 145, 151 (4th Cir. 2002)).
Under Virginia law, though, a thorough investigation of the five unities is not always required, since
“a conveyance to a husband and wife together coupled with the intent that there be survivorship
rights always creates a tenancy by the entirety.” Id. (quoting In re Zella, 202 B.R. 712, 714 (E.D.
Va. 1996)).
The deeds to the two pieces of real property at issue use nearly identical language to
expressly convey real property to both Mr. and Mrs. Parr as “tenants by the entireties with the right
of survivorship at common law . . . .” (docket no. 20, attachs. 7, 8). The 1999 deed, moreover,
describes Mr. and Mrs. Parr as “husband and wife.” While the 1988 deed does not use the “husband
and wife” language, it still indicates that the parties shared the same last name at the time of the
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conveyance. Under either Zella or the five unities test, therefore, it is sufficiently established that
the Parrs own both parcels today as tenants by the entirety.
2. Forced Sale of Tenancies by the Entirety for One Tenant’s Tax Liability
Although state law controls in determining the nature of the legal interest which a taxpayer
has in the property, Aquilino v. United States, 363 U.S. 509, 513 (1960), the consequences that
attach to those state-defined property rights are matters “left to federal law.” United States v. Nat’l
Bank of Commerce, 472 U.S. 713, 722 (1985) (quoting United States v. Rodgers, 461 U.S. 677, 683
(1983)). To that point, “[i]t is undisputed that the statutory language of 26 U.S.C. § 7403 allows a
district court to order the sale of property that is jointly owned by a tax debtor and his or her
spouse.” United States v. Ramirez, 2009 WL 1293593, at *3 (S.D.W. Va. May 8, 2009) (citing
Rodgers, 461 U.S. at 705)).
“[K]eeping in mind the Government’s paramount interest in prompt and certain collection of
delinquent taxes[,]” Rodgers, 461 U.S. at 711, the Supreme Court outlined four factors that a district
court should consider in determine whether to exercise its discretion and order a sale of jointly
owned property. Id. at 710–11. The factor test purports to balance the government’s financial
interest against the prejudice that would be suffered by a third party with a non-liable interest in the
property. The third party with just such an interest in this matter, of course, is Mrs. Parr; however,
because Mrs. Parr has failed to timely respond to any matter in the instant litigation, and has
presented no evidence of any prejudice that might affect her interest, I need not engage in such
prospective balancing on her behalf. I find instead that the government’s financial interest in
acquiring the back taxes owed by Mr. Parr is sufficient to order a sale under Rodgers, and in
accordance with Ramirez. That said, I am reluctant to order that Mrs. Parr’s tenancy by the entirety
interest to go uncompensated following the sale of the real property. Pursuant to the accompanying
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Order, the amount of the sale proceeds due to Mrs. Parr, if any remain after the satisfaction of
Defendant Wells Fargo Bank, N.A.’s lien on the property is satisfied, will be determined at a later
hearing.
IV. CONCLUSION
While I decline to use the phrasing offered by the government in its Motion for Default
Judgment, I conclude that the sale of the Parrs’ real property is permissible by law. It is sufficiently
established that Mr. Parr owes nearly half a million dollars in past tax liability (plus interest and
penalties), and a default judgment against him for that amount is proper. Moreover, federal tax liens
have attached to the real property despite Mrs. Parr’s status as a non-liable tenant by the entirety.
Finally, while I do not find that Mrs. Parr has “no rights” in the property, I do find that her rights, if
any, as a tenant by the entirety are insufficient to preclude the United States from moving ahead with
a sale of the property. Once the sale is conducted, if the proceeds exceed the value of the mortgage
lien on the property held by Defendant Wells Fargo, Bank, N.A., then the Court will determine
which portion of the remaining proceeds, if any, should go to the United States to satisfy Mr. Parr’s
tax delinquency, and which portion should be returned to Mrs. Parr to compensate her for her nonliable possessory interest in the property.
For the reasons stated above, the United States’ Motion for Default Judgment is GRANTED
in part and DENIED in part. The Clerk of the Court is directed to enter default judgment as follows:
(1) As against Defendant James Julian Parr, default judgment is hereby entered for the
United States in the amount of $476,943.45 as of September 27, 2010, plus penalties and interest
pursuant to 28 U.S.C. § 1961(c) and 26 U.S.C. § 6621(a)(2) after that date until the full amount is
paid;

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(2) As against Defendant Joan H. Parr, it is hereby declared that Mrs. Parr’s interest in the
subject property, if any, does not preclude the United States from moving forward with the sale of
the property, pursuant to the accompanying Order. The extent to which Mrs. Parr’s interest, if any,
requires that she receive a distribution of any sale proceeds will be determined at a later hearing, to
be scheduled after the sale of the property;
(3) The federal tax liens are foreclosed against the two pieces of real property at issue in this
action, with Parcel One particularly described as:
All that certain tract or parcel of land described in the
Nelson County Land Books as containing 1.00 acre, more or
less, (TM 64-a-79), together with all buildings, fixtures and
improvements thereon and rights, privileges and
appurtenances thereunto belonging, lying in the Massies
Mill District of Nelson County, Virginia, being a portion of a
tract originally containing 24.85 acres.
Being the same property conveyed to James J. Parr and Joan
H. Parr, husband and wife, as tenants by the entirety with
the right of survivorship, by Deed dated March 5, 1999 from
Christine C. Parr, widow by John C. Parr, her attorney-in-fact,
which deed is recorded in Deed Book 436, page 641 in
the Clerk’s Office of the Circuit Court for the County of
Nelson, Virginia.
And Parcel Two more particularly described as:
All that certain tract or parcel of land with buildings and
improvements thereon, lying and being situated in the
Massies Mill Magisterial District of Nelson County, Virginia,
fronting on State Route 151 and State route 675, and being
all the residue of that certain tract of land that contains 25.85
acres by survey, conveyed unto M.J. Parr by deed dated
February 3, 1930 recorded in the Clerks’ Office for the
Circuit Court of Nelson County in Deed Book 57, at page 39,
LESS AND EXCEPT the following off conveyances:
1. ½ acre to John Smith by deed dated January 14, 1931,
recorded in the aforesaid Clerk’s Office in Deed Book 58,
at page 227, lying near Shady Lane, and

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2. 0.446 acres conveyed to George Woodson by deed dated
February 5, 1931, recorded in aforesaid Clerk’s Office in
Deed Book 58, at page 2276, and
3. That certain lot conveyed unto Josephine Campbell by deed
dated September 10, 1934 recorded in aforesaid Clerk’s
Office in Deed Book 61, at page 325, and
4. .016 acres conveyed to J.H. Quinn by deed dated June 7,
1937, recorded in aforesaid Clerk’s Office in Deed Book 65,
at page 401, and
5. 1 acre conveyed to Ivanhoe Cashwell by deed dated July
18, 1940, recorded in aforesaid Clerk’s Office in Deed
Book 68, at page 512, lying near Shady Lane, and
6. A lot described as 50 feet by 150 feet conveyed unto
Lowell H. Thompson by deed dated January 8, 1943,
recorded in aforesaid Clerk’s Office in Deed Book 71, at page
291, lying near Shady Lane, and
7. 4.29 acres conveyed to James J. Parr, the male Grantee
herein, by deed dated October 2, 1959, recorded in aforesaid
Clerk’s Office in Deed Book 94, at page 123, and
8. That certain lot described as 70 feet by 175 feet conveyed
to M.A. Druskin by deed dated July 15, 1966, recorded in
aforesaid Clerk’s Office in Deed Book 108, at page 379, and
9. 2 acres conveyed unto James J. Parr, the male Grantee
herein, by deed dated May 14, 1969, recorded in aforesaid
Clerk’s Office in Deed Book 117, at page 197, and
10. Perpetual right of way for water line to J.D. Woods, et
als by deed dated February 15, 1940, recorded in aforesaid
Clerk’s Office in Deed Book 68, at page 45.
The said M.J. Parr departed this life on June 22, 1970 and by
his will dated April 23, 1965, probated September 22, 1970,
recorded in aforesaid Clerk’s Office in Will Book S, at page
467, devised all of his real and personal property unto his
wife, Christine C. Parr, the Grantor herein. This property is
subject to an Appalachian Electric Power company easement
recorded in aforesaid Clerk’s Office in Deed Book 58, at page
72 and is subject to the mineral rights of Reading Iron
company reserved in a deed to T.B. Kennedy recorded in
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aforesaid Clerk’s Office in Deed Book 29, at page 150.
Pursuant to the accompanying Order, the United States may sell the above-referenced
property, and distribute the proceeds to Defendant Wells Fargo Bank, N.A. to satisfy Wells Fargo’s
mortgage lien on Parcel One; however, the Court will conduct a later hearing to determine the proper
distribution of residual sale proceeds among the remaining parties.
It is so ORDERED.
The Clerk of the Court is directed to send certified copies of this Memorandum Opinion and
accompanying Order to all parties and all counsel of record.
Entered this _____ day of October, 2011.
6th

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