U.S. v. Cowan, Civ. No. 06-00330 HG BMK.
| Decision Date | 04 January 2008 |
| Docket Number | Civ. No. 06-00330 HG BMK. |
| Citation | 535 F.Supp.2d 1135 |
| Parties | UNITED STATES of America, Plaintiff, v. Richard J. COWAN, Katherine McClelland Cowan, Mitch C. Wallis, Trustee of Freebird Ventures, an unincorporated trust organization, Department of Taxation, State of Hawaii, Defendants. Mortgage Electronic Registration Systems, Inc., Countrywide Home Loans, Inc., Cross Claimant, v. Department of Taxation, State of Hawaii, United States of America, Richard J. Cowan, Katherine McClelland Cowan, Mitch C. Wallis, Trustee of Freebird Ventures, an unincorporated trust organization, Cross Defendants. |
| Court | U.S. District Court — District of Hawaii |
Edric Ming-Kai Ching, Office of the United States Attorney, Honolulu, HI, Jeremy N. Hendon, U.S. Department of Justice-Tax Division, Washington, DC, for Plaintiff.
Richard J. Cowan, Kilauea, HI, pro se.
Katherine McClelland Cowan, Kilauea, HI, pro se.
Mary H.Y. Bahng, Office of the Attorney General, Honolulu, HI, for Defendants.
ORDER GRANTING PLAINTIFFS MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANTS COWANS' MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANTS COWANS' MOTION FOR STAY OF JUDGMENT
The United States moves for summary judgment, requesting an order reducing to judgment the federal income tax assessments, including penalties and interest, and the frivolous return filing penalty assessments against both Richard Cowan and Katherine Cowan.
Additionally, the United States requests an order establishing that Freebird Ventures holds title to real property as the nominee of Richard and Katherine Cowan, and the foreclosure and the judicial sale of the real property.
Defendants Cowans move for summary judgment, requesting a finding that the Cowans do not owe taxes or penalties to the United States for the tax years in question.
Defendants Cowans, in light of the Court's Order of Foreclosure And Judicial Sale, (Doc. 99), also move for a stay of judgment.
The Court has reviewed and considered the pleadings and arguments advanced by the parties. The United States is entitled to summary judgment.
For the reasons set forth below, Plaintiffs motion for summary judgment is GRANTED, and Defendants Cowans' motion for summary judgment is DENIED. Defendant Cowans' motion for stay of judgment is DENIED.
On June 19, 2006, Plaintiff United States of America filed a Complaint To Reduce Federal Tax Assessments To Judgment And To Foreclose Federal Tax Liens On Real Property. (Doc. 1.)
On July 19, 2006, Defendants Richard J. Cowan and Katherine McClelland Cowan filed an Answer to the Complaint. (Doc. 6.)
On August 25, 2006, Defendant Director Of Taxation, State Of Hawaii filed an Answer to the Complaint and an Affirmative Statement Of Claim. (Doc. 9.)
On October 3, 2006, Defendants Mortgage Electronic Registration Systems, Inc. and Countrywide Home Loans, Inc. filed an Answer to the Complaint and an Affirmative Statement of Claim. (Doc. 13.)
On February 27, 2007, the Court signed the Stipulation and the Order Dismissing the United States' claims against Defendants Mortgage Electronic Systems, Inc. And Countrywide Home Loans, Incorporated. (Doc. 38 and 39.)
On May 18, 2007, The Court issued an Order Compelling Discovery requiring the Cowans to respond to Plaintiffs written discovery by June 12, 2007. (Doc. 46.)
On July 2, 2007, Plaintiff United States filed a Motion For Leave To File Concise Statement Of Facts In Excess Of Five Pages. (Doc. 56.)
On July 2, 2007, Plaintiff United States filed a Motion For Summary Judgment; United States' Memorandum in Support Of Its Motion For Summary Judgment; United States' Concise Statement Of Material Facts In Support Of Its Motion For Summary Judgment' Declaration Of Jeremy N. Hendon; Exhibits 1-41; Declaration Of Jeff Heller; and Exhibits 1-10. (Doc. 57.)
On July 3, 2007, the Government filed a Motion For Default Judgment as to Defendant Mitch C. Wallis, Trustee of Freebird Ventures. (Doc. 59.)
On July 5, 2007, the Court granted the Government's Motion For Leave. To File Concise Statement Of Material Facts In Excess Of Five Pages. (Doc. 63.)
On July 17, 2007, the Revised Stipulation As To Priority Of Claims As Between Defendant State Of Hawaii, Department Of Taxation, And Defendants Mortgage Electronic Registration Systems, Inc. And Countrywide Home Loans, Incorporated was approved and ordered by the Court. (Doc. 71.)
On August 9, 2007, Defendant State of Hawaii, Department of Taxation filed a Statement Regarding Plaintiff United States' Motion For Summary Judgment filed on July 2, 2007. (Doc. 78.)
On August 29, 2007, Defendants Mortgage Electronic Registration Systems, Inc. and Countrywide Home Loans, Inc. filed a Statement of Position Re: Plaintiff United States' Motion For Summary Judgment filed on July 2, 2007. (Doc. 81.)
On September 4, 2007, the Court issued an order Adopting the Magistrate's Findings and Recommendations granting Plaintiffs motion for default judgment against Defendant Mitch C. Wallis, Trustee of Freebird Ventures (Doc. 80). (Doc. 82.)
On September 6, 2007, the United States filed a reply to Defendants Mortgage Electronic Registration Systems, Inc.'s and Countrywide Home. Loan, Inc.'s Statement of Position Re: United States' Motion far Summary Judgment. (Doc. 83.)
On September 10, 2007, Defendants Richard and Katherine Cowan filed "Motion For Summary Judgment, (Doc. 84); and an Opposition To USA's Motion For Summary Judgment (Doc. 86.)
On October 4, 2007, Defendants Mortgage Electronic Registration Systems, Inc. and Countrywide Home Loans, Inc. filed a Statement of No Position Re: Defendants Cowans' Motion For Summary Judgment filed on July 2, 2007. (Doc. 94.)
On October 11, 2007, Plaintiff United States filed United States' Reply Memorandum In Support Of Its Motion For' Summary Judgment And Response To Defendants Cowans' Motion For Summary Judgment, and a Second Declaration Of Jeremy N. Hendon in support of United States' motion for summary judgment, and Exhibit A. (Doc. 97.)
Immediately prior to the hearing on October 22, 2007, Defendants Cowan faxed a document entitled "Petitioners' Statement For October 22, 2007, Hearing" to the Court. The Defendants attached unverified, portions of various papers to the faxed document.1
The matter came on for hearing on October 22, 2007. The Cowans did not appear. The Court entered an oral order GRANTING Plaintiff United States' Motion for Summary Judgment, and DENYING Defendants Cowans' Motion for Summary Judgment. (Doc. 98.)
On October 22, 2007, the Court signed and issued the Order of Foreclosure And Judicial Sale. (Doc. 99.)
On November 7, 2007, Defendants Cowans filed a Notice of Appeal. (Doc. 105.)
On the same day, Defendants Cowans filed a Request for Stay of Execution of Order of Foreclosure. (Doc. 101.)
On November 16, 2007, the Court entered an Order Denying Defendants Cowans' Request for Stay of Execution of Order of Foreclosure. (Doc. 104.)
On December 17, 2007, Defendants Cowans' filed a Motion and Notice — For Stay of Judgment. (Doc. 114.)
On December 21, 2007, the Government filed a Response to Defendants Cowans' Motion for Stay of Judgment. (Doc. 115.)
Richard J. Cowan is a permanent resident of the United States and has been since October 4, 1988, as indicated on his permanent resident card. (July 2, 2007, Declaration of Jeremy N. Hendon ("Decl.Hendon"), at Exh. 29, permanent resident card, Doc. 57.) Katherine McClellan Cowan is a citizen of the United States as she indicated in her response to admission requests. (Decl. Hendon, Exh. 30, "at ¶ 4, and Exh. 33, at 1; Doc. 57.)
Richard Cowan filed verified United States federal income tax returns for nonresident aliens, Internal Revenue Service Form 1040NR-EZ for tax years 1995 1996, and 1997. In these tax returns Richard Cowan declared he had earned no income and owed no federal taxes, placing zeros on the corresponding lines of the tax forms. (Decl. Hendon, Exhs. 9 and 10, Doc. 57; Defendants' Opp. To USA's Motion For Summary Judgment, Statement Of Facts at ¶¶ 1-3, Doc. 86.)
In 1999, Katherine Cowan also filed verified United States federal income tax returns for non-resident aliens, Form 1040NREZ, for tax years 1995, 1996, and 1997. In these tax returns Katherine Cowan similarly declared she had earned no income and owed no federal taxes, placing zeros on the corresponding lines of the tax forms. Katherine also stated "Client [Katherine] is not a United States Citizen." (Decl. Hendon, Exhs. 11-13; Doc. 57; Cowans' Opp., Statement Of Facts at 4, Doc. 86.)
In support of the information in these returns, each of the Cowans attached a statement advancing the theory that no taxes were owed as no income had been earned in either the District of Columbia or in any territories of the United States:
Definitions: "It is a well established principle of law that all federal legislation applies only within the territorial jurisdiction of the United States unless a contrary intent appears." "The laws of Congress in respect to those matters (outside of Constitutionally delegated powers) do not extend into the territorial limits of the States, but have force only in the District of Columbia, and other places that are within the exclusive jurisdiction of the national government." The words United States have three distinct meanings: (1) The name of the sovereign (country) in the family of nations. (2) It may designate the territory over which sovereignty of the United States (federal government) extends, i.e. Washington DC, Guam, Puerto Rico, U.S. Virgin Islands, or (3) It may be the collective name of the states which are united under the Constitution. Citizenship. "When the Constitution was adopted; the people of the United States were the citizens of the several states for whom and for whose posterity the...
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