Gov't of Guam v. Guerrero

• Decision Date: 31 August 2021
• Docket Number: No. 19-16793,19-16793
• Citation: 11 F.4th 1052
• Parties: GOVERNMENT OF GUAM, Plaintiff-Appellee, v. Danny Leon GUERRERO; Jennifer Rose Rabago; Christine E. Evangelista; Freddie D. Aflague, Defendants-Appellants, and Monica Jane Aflague; Betty Jane Torre Blas, Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

11 F.4th 1052

GOVERNMENT OF GUAM, Plaintiff-Appellee,

v. Danny Leon GUERRERO; Jennifer Rose Rabago; Christine E. Evangelista; Freddie D. Aflague, Defendants-Appellants,andMonica Jane Aflague; Betty Jane Torre Blas, Defendants.

No. 19-16793

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 20, 2020 Honolulu, Hawaii

Filed August 31, 2021

Ronald I. Heller (argued), Torkildson Katz Hetherington Harris & Knorek, Honolulu, Hawaii; Michael J. Berman, Berman O'Connor & Mann, Hagåtña, Guam; for Petitioner.

Marianne Woloschuk (argued), Assistant Attorney General; Leevin Taitano Camacho, Attorney General; Office of the Attorney General, Tamuning, Guam; for Respondent.

Before: J. Clifford Wallace, Carlos T. Bea, and Mark J. Bennett, Circuit Judges.

Dissent by Judge Bennett

WALLACE, Circuit Judge:

Guam's Department of Revenue and Taxation (the Department) has concluded that Danny Leon Guerrero owes approximately $3.7 million in unpaid taxes to the United States Territory of Guam because he did not pay his full tax liability for the tax years 1999, 2000, 2001, and 2002 after belatedly filing his returns for these years. The parties dispute when the Department assessed Leon Guerrero's taxes because the official records are missing, likely due to water, mold, and termite damage at the storage facility where they were housed. After assessing Leon Guerrero's tax liability, the Government of Guam (Guam) filed tax liens on various parcels of real property that he owns with his former spouse in joint tenancy. Guam then commenced this action to collect Leon Guerrero's tax deficiencies through foreclosure of the tax liens.

Leon Guerrero does not contest that he owes Guam unpaid taxes. However, Leon Guerrero contends that the Department cannot prove that it timely assessed his taxes, timely levied the tax liens on his share of the parcels of real property, nor timely commenced its action. See 26 U.S.C. §§ 6501(a), 6502(a)(1). Guam acknowledges that it does not have the original certificates of assessment, but it invokes the presumption of regularity based on the Department's standard procedure and internal documents to establish that Guam acted within the statute of limitations. See United States v. Chem. Found. , 272 U.S. 1, 14–15, 47 S.Ct. 1, 71 L.Ed. 131 (1926) ("The presumption of regularity supports the official acts of public officers, and, in the absence of clear evidence to the contrary, courts presume that they have properly discharged their official duties"). After denying Leon Guerrero's motion for summary judgment, the district court conducted a bench trial. The district court heard testimony elicited over two days and partially ruled in favor of Guam, specifically on the issues of the presumption of regularity and the timeliness of the Department's actions. Leon Guerrero appeals from the district court's adverse judgment.

We review the district court's factual findings during a bench trial for clear error, and we review its legal conclusions de novo. Comm'r v. Duberstein , 363 U.S. 278, 291, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960). A court's findings are clearly erroneous if they are "illogical, implausible, or without support in inferences that may be drawn from the facts in the record." United States v. Hinkson , 585 F.3d 1247, 1262 (9th Cir. 2009). We review the district court's conclusion regarding an application of the statute of limitations de novo. United States v. Workinger , 90 F.3d 1409, 1412 (9th Cir. 1996). Finally, we review the district court's determination that Guam is entitled to the presumption of regularity for clear error as a mixed question of law and fact where the nature of our inquiry is essentially factual. See United States v. Lang , 149 F.3d 1044, 1047 (9th Cir. 1998) (acknowledging that the standard of review for mixed question is typically de novo "but, depending on the nature of the inquiry involved, may be reviewed under a more deferential clearly erroneous standard" such as where the issue is "an essentially factual inquiry"); cf. Kyhn v. Shinseki , 716 F.3d 572, 577 n.9 (Fed. Cir. 2013) (reasoning that, while the presumption of regularity is a rule of law, its application is triggered by preliminary factual findings). Based on the following reasoning, we hold that the district court did not commit clear error when it found that the presumption of regularity applied or that Leon Guerrero failed to rebut it. We also hold that Guam established the timeliness of its assessment of Leon Guerrero's unpaid taxes, its filing of the tax lien, and its commencement of this action through the internal documents and the witness testimony from the Department's employees.

I.

Leon Guerrero late filed his Guam Territorial income tax returns for the tax years 1999 and 2000 on March 21, 2003, and the tax years 2001 and 2002 on April 17, 2003. Sometime thereafter, the Department assessed Leon Guerrero's tax liability on the late returns. Ultimately, the Department determined that Leon Guerrero owed Guam approximately $3.7 million in unpaid taxes. Pursuant to 26 U.S.C. § 6501(a), Guam was required to assess Leon Guerrero's taxes within three years after he filed his returns. As such, the Department was required to sign an assessment of Leon Guerrero's 1999 and 2000 tax returns by March 21, 2006, and an assessment of his 2001 and 2002 tax returns by April 17, 2006. But, as previously mentioned, the Department cannot locate the original certificates of assessment after the warehouse storing the documents experienced water damage, termites, and mold.

As a result, Guam's evidence that the Department timely assessed Leon Guerrero's taxes instead consists only of the Department's internal documents rather than the certificates of assessment. Guam argues that these internal documents are sufficient evidence that the Department assessed Leon Guerrero's unpaid taxes in January 2006 and sent the relevant notices before the three-year statute of limitations expired. Guam relies on the Department's internal registers (record lists of delinquent taxpayers) known as TY53 and TY69 registers, as well as an internal transmittal sheet sent to the collections branch after the TY53 and TY69 notices were sent to Leon Guerrero, to demonstrate both that it followed standard procedure for purposes of the presumption of regularity and to show the assessment dates.

The Department learned from Leon Guerrero at a meeting on March 10, 2006, that the certificates and notice had not reached him because they were sent to his ex-wife's address rather than his current address. During the meeting, Leon Guerrero was given a final demand notice of the Department's intent to levy a tax lien on each of his real properties, which he signed to confirm receipt. The March 10, 2006, meeting occurred before the three-year statute of limitations was set to expire on March 21. Leon Guerrero met with Department officials again in August 2006 to discuss a repayment plan, but the Department eventually decided to file a tax lien to protect Guam's interests. On August 15, 2006, the Department filed a tax lien with the Department of Land Management.

The Department's tax liens were filed on six parcels of land that Leon Guerrero purchased between November 2000 and May 2002. On January 8, 2016, Guam brought its action against Leon Guerrero to reduce his unpaid Guam income tax liabilities to judgment. Guam also sought foreclosure of Leon Guerrero's interest in the six parcels of land. Leon Guerrero did not contest the amount assessed.¹ Instead, Leon Guerrero's primary argument has been that Guam cannot prove that the Department acted within the statute of limitations period because it cannot provide the relevant certificates of assessment to prove the assessment date, even though Leon Guerrero was personally served the final notice of assessment within the three-year period.

The district court denied Leon Guerrero's motion for summary judgment where he had argued that Guam's action was time-barred due to the absence of the signed certificates of assessment. Instead, the district court held that there was a genuine dispute of material fact about whether the Department followed its routine practices and completed the tax assessments with the three-year period of limitations.

The district court next conducted a two-day bench trial. Employees for the Department testified about the Department's procedure for processing and assessing tax returns, as well as its notice process for delinquent taxes. One witness explained that a certificate of assessment is a Guam tax document that is akin to the United States Internal Revenue Service's (IRS) Form 4340, and that both are consistent with IRS regulations although they are not interchangeable. The employees detailed that the principal difference between a Form 4340 and a certificate of assessment is that the former includes a summary of tax assessments with payments and the latter contains only an assessment. In addition, the employees explained that a certificate of assessment contains summary information pertaining to all the taxpayers listed on the corresponding TY53 (for example, if the return was for spouses who filed jointly) whereas a Form 4340 is personal to the taxpayer and not a summary.

According to testimony, the Department's internal process starts after a taxpayer submits a return and the processing branch of the Department enters the data from the return into the system. Next, the return is sent to the tax assessment branch to confirm the accuracy of the self-assessment by the taxpayer. If the tax assessment technician determines that a taxpayer owes more than the amount assessed in the tax return, the technician enters this information into an accounts receivable in the Department's computer system. Entering the accounts receivable information into the system generates a TY53 entry which is compiled within the overall TY53 register and records the date entered. The TY53 register is a list of...