696 Fed.Appx. 362 (10th Cir. 2017), 15-4166, Geophysical v. United States

Docket Nº:15-4166
Citation:696 Fed.Appx. 362
Opinion Judge:Nancy L. Moritz Circuit Judge
Party Name:ARLIN GEOPHYSICAL; Laura Olson, Plaintiffs, v. UNITED STATES of America, Defendant Counterclaimant-Appellee, v. John E. Worthen; Fujilyte Corporation, Counterclaim Defendants-Appellants.
Attorney:David E. Ross, II, Esq., David E. Ross II, LC, Park City, UT, for Plaintiffs Paul Andrew Allulis, Joan I. Oppenheimer, U.S. Department of Justice, Tax Division, Appellate Section, Washington, DC, for Defendant Counterclaimant-Appellee David E. Ross, II, Esq., David E. Ross II, LC, Park City, UT, ...
Judge Panel:Before HOLMES, PHILLIPS, and MORITZ, Circuit Judges.
Case Date:August 17, 2017
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 362

696 Fed.Appx. 362 (10th Cir. 2017)

ARLIN GEOPHYSICAL; Laura Olson, Plaintiffs,

v.

UNITED STATES of America, Defendant Counterclaimant-Appellee,

v.

John E. Worthen; Fujilyte Corporation, Counterclaim Defendants-Appellants.

No. 15-4166

United States Court of Appeals, Tenth Circuit

August 17, 2017

Editorial Note:

UNPUBLISHED OPINION (See Fed. Rule of Appellate Procedure 32.1. See also U.S.Ct. of App. 10th Cir. Rule 32.1.)

Page 363

(D.C. No. 2:08-CV-00414-DN-EJF) (D. Utah)

David E. Ross, II, Esq., David E. Ross II, LC, Park City, UT, for Plaintiffs

Paul Andrew Allulis, Joan I. Oppenheimer, U.S. Department of Justice, Tax Division, Appellate Section, Washington, DC, for Defendant Counterclaimant-Appellee

David E. Ross, II, Esq., David E. Ross II, LC, Park City, UT, for Counterclaim Defendants-Appellants

Before HOLMES, PHILLIPS, and MORITZ, Circuit Judges.

ORDER AND JUDGMENT[*]

Nancy L. Moritz Circuit Judge

Nearly one decade ago, the Internal Revenue Service filed a notice of federal tax lien to recover over $12 million in unpaid taxes from John Worthen. In 2015, the district court granted final judgment for the government on its action to enforce the tax lien. To satisfy the judgment, the court also ordered the sale of two properties in Utah owned by Worthen’s company, Fujilyte Corporation (Fujilyte). Because the district court granted final judgment without providing Worthen and Fujilyte an adequate opportunity to respond to the government’s assertion that Fujilyte holds title to those properties as Worthen’s alter ego or nominee, we vacate the judgment and the order of sale and remand for further proceedings.

I

In February 2008, the IRS filed a notice of federal tax lien identifying Laura Olson, Arlin Geophysical Company (Arlin), and Fujilyte as Worthen’s alter egos or nominees.1 The lien encumbered 10 properties

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owned by Arlin, three properties owned by Olson, and two properties (Properties 14 and 15) owned by Fujilyte. Olson and Arlin filed the underlying quiet-title action to discharge the lien and quiet title in their properties.

The government filed an answer and counterclaim. In its Fifth Amended Counterclaim, the government asserted two claims; only the second claim is at issue in this appeal.2 In that claim, the government sought to enforce the lien as to all 15 properties and named over 30 counterclaim defendants with potential interests in those properties. See 26 U.S.C. § 7403(b) (" All persons having liens upon or claiming any interest in the property involved in [a lien enforcement] action shall be made parties thereto." ). As relevant to this appeal, the government named Worthen, Fujilyte, John F. Green, and Stephen Homer as counterclaim defendants holding interests in Properties 14 and 15.

The government alleged that (1) Fujilyte holds title to Properties 14 and 15, (2) Fujilyte granted Green a trust deed with respect to both properties in 1996, and (3) Homer was appointed as successor trustee under the trust deed in 1997. Worthen and Fujilyte admitted the truth of these allegations. The government further alleged that Fujilyte’s interests in Properties 14 and 15 arise from either (1) Fujilyte’s status as a nominee or alter ego of Worthen, or (2) Worthen’s fraudulent transfer of the subject properties to Fujilyte. Worthen and Fujilyte denied the truth of these allegations.

In 2011, Homer filed a motion for partial summary judgment (the Homer motion) purportedly on behalf of himself and Green.3 Homer asserted that he and Green had " ‘trust deed mortgage’ interests" in Properties 14 and 15, and that those interests had priority over any interests the government might have through its tax lien. R. vol. 1, 134.

In its response opposing the Homer motion, the government disputed or partially disputed all but one of Homer’s asserted material facts, asserted several additional material facts, and urged the court to deny the motion for several reasons. As relevant to this appeal, the government argued that because the statute of limitations for foreclosing on the trust deed expired in 2003, Homer and the Green heirs4 had no enforceable interests in Properties 14 and 15.

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In contrast, the government argued, it has an enforceable interest in those properties because (1) Worthen owes unpaid taxes; (2) " the real estate transactions purportedly engaged in by Fujilyte [to obtain title to those properties] created both a resulting and a constructive trust in favor of Worthen" under Utah law, R. vol. 2, 27; (3) Fujilyte is therefore Worthen’s nominee under federal law; and (4) the government’s " federal tax lien [therefore] reaches the assets held by Fujilyte," id. at 29. Thus, the government argued, it could rely on its lienholder status to assert the statute-of-limitations defense against Homer and Green on Worthen’s behalf.

In a series of three docket text orders, the district court sought further input from Homer before resolving the Homer motion. First, on March 24, 2014, the district court notified Homer that he had until April 7, 2014, to file a reply to the government’s response. Homer didn’t file a reply. Next, on July 11, 2014, the court notified Homer that it might grant summary judgment to the government based on the statute-of-limitations defense. And it gave Homer until August 1, 2014, to file a response. See Fed.R.Civ.P. 56(f)(1) (permitting court to grant summary judgment for nonmovant " [a]fter giving notice and a reasonable time to respond" ). Homer didn’t file a response. Finally, on August 25, 2014, the court directed the government to prepare a proposed order denying the Homer motion and granting summary judgment for the government under Rule 56(f)(1). The court gave Homer seven days from the filing of the proposed order to file objections. Again, Homer failed to file any objections, while Worthen and Fujilyte did file objections.

But Worthen and Fujilyte didn’t object to the denial of the Homer motion or the grant of summary judgment for the government based on the statute of limitations. Instead, they objected to the first 10 facts in the proposed order and the portion of the proposed order’s legal analysis resolving that " Fujilyte’s property is held by it under several theories of alter ego, constructive trust, nominee, etc. for the benefit of John Worthen." R. vol. 5, 26. In support, they argued that (1) the legal analysis wasn’t necessary to resolve the statute-of-limitations issue; (2) the first 10 facts weren’t material to that issue; and (3) the government didn’t support those facts with evidence as required by Fed.R.Civ.P. 56(c).

After receiving a response from the government, the district court overruled Worthen and Fujilyte’s objections. The court then entered a separate order largely adopting the government’s proposed order. In that order (the summary judgment order), the court denied the Homer motion and granted summary judgment to the government under Rule 56(f)(1). In adopting the government’s facts, the court noted both that (1) the government supported those facts with evidence, and (2) Homer’s failure to reply to the government’s response " le[ft] the [government’s] facts undisputed." R. vol. 5, 41 n.13. And in adopting the government’s legal analysis, the court concluded that any claims Homer and the Green heirs may have had arising from their interests in the subject properties were time-barred. Critically, for purposes of this appeal, the court further concluded that Fujilyte holds title to Properties 14 and 15 as Worthen’s nominee and that the government therefore has an enforceable lien against those properties.

In June 2015, the government moved for final...

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