United States v. Bogart
| Decision Date | 27 October 2017 |
| Docket Number | No. 16-1451,No. 15-2363,15-2363,16-1451 |
| Parties | UNITED STATES OF AMERICA v. DUSTIN B. BOGART; SOUTHERN COUNTRY RANCH; MARCY A. BOGART Dustin B. Bogart; Marcy A. Bogart, Appellants |
| Court | U.S. Court of Appeals — Third Circuit |
NOT PRECEDENTIAL
On Appeal from the United States District Court for the Middle District of Pennsylvania
(M.D. Pa. No. 4-12-cv-00347)
Submitted Pursuant to Third Circuit LAR 34.1(a)
on June 22, 2017
Before: AMBRO, KRAUSE, and NYGAARD, Circuit Judges
Dustin and Marcy Bogart appeal from the orders of the United States District Court for the Middle District of Pennsylvania granting the United States' motions for summary judgment and for order of sale, and denying their post-judgment motions for relief. For the following reasons, we will affirm the grant of summary judgment and order of sale, but will vacate, in part, the order denying the post-judgment motions, and will remand the matter.
Appellee United States made assessments against Dustin Bogart for unpaid taxes for the years 2000-2003. Bogart failed to pay the assessments, and the Government filed suit in the Middle District of Tennessee to reduce to judgment the assessments, to foreclose on federal tax liens against real property located in Tennessee, and to force a sale of the property, pursuant to 26 U.S.C. § 7403. It also named as defendants Bogart's wife, Marcy, and Southern Country Ranch (SCR), an unincorporated business trust organization (UBTO), because they might claim an interest in the property. See 26 U.S.C. § 7403(b).
In July 2014, the District Court granted summary judgment in favor of the United States. See United States v. Bogart, No. 3:12-cv-179, 2014 WL 3670043 (M.D. Tenn. July 24, 2014). It determined that the Government had established, through Certificates of Assessments and Payments, that Bogart had a tax liability exceeding $300,000 (including penalties and interest). It rejected the Bogarts' "tax protester" arguments and their attacks on the reliability of the Certificates of Assessments and Payments. It credited the Government's evidence in support of its claim that Bogart had engaged in atax-evasion scheme to shield his income and assets from the Government by creating several UBTOs, including SCR, to hide his income. The District Court concluded that Bogart was the equitable owner of the Tennessee property and that SCR held title to the property as Bogart's nominee or alter ego.1
Meanwhile, the United States filed this companion action against the same defendants2 in the Middle District of Pennsylvania, seeking a declaration regarding the validity of tax liens against real property located at 792 Brush Valley Road (also known as RR 5 Box #1100), Sunbury, Pennsylvania ("the Pennsylvania property"), and a judicial sale of the property. The District Court, adopting the Magistrate Judge's Report and Recommendation ("R&R"), granted summary judgment in favor of the Government. The Court rejected the Bogarts' arguments that the tax liability was unlawful and improper as barred by res judicata resulting from the District Court's judgment in Tennessee. It also found that the Bogarts failed to dispute the Government's evidence, which established the Bogarts were the equitable owners of the Pennsylvania property, and that SCR held title to the property as their nominee/alter ego. As a result, the Court held that the United States was entitled to satisfy the tax liabilities by foreclosing on the Pennsylvania property. The Government subsequently filed a motion for entry of anorder of sale pursuant to 28 U.S.C. §§ 2001 and 2002, which the District Court granted. The Bogarts appealed.3
After the Pennsylvania property was sold, the District Court granted the Government's motion for distribution of the sales proceeds. Pursuant to the Judgment of Sale, all proceeds from the sale (less expenses) were distributed to the United States in satisfaction of the lien. The Bogarts filed post-judgment motions, including a motion to vacate the order authorizing distribution of sale proceeds. The District Court denied the motions, and the Bogarts appealed. The two appeals have been consolidated for purposes of disposition.
We have jurisdiction pursuant to 28 U.S.C. § 1291. We review de novo a grant of summary judgment. Groman v. Township of Manalapan, 47 F.3d 628, 633 (3d Cir. 1995). Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56; Kaucher v. County of Bucks, 455 F.3d 418, 422-23 (3d Cir. 2006). We "view the facts and draw inferences in the light most favorable to the nonmoving party," and, as the Bogarts proceed pro se, we must liberally construe their filings. Ray v. Township of Warren, 626 F.3d 170, 173 (3d Cir. 2010); Renchenski v. Williams, 622 F.3d 315, 337 (3d Cir. 2010).
On appeal, the Bogarts persist with their challenges to the District Court's jurisdiction and to the legality of the tax assessments. They also argue that they were denied discovery and a "mandatory" hearing pursuant to Fed. R. Civ. P. 12(i). It is clear that the District Court had subject matter jurisdiction over this case. See 26 U.S.C. § 7402(a) (); 28 U.S.C. § 1340 (); 28 U.S.C. § 1345 (); see also United States v. Sloan, 939 F.2d 499, 501 (7th Cir. 1991) (). And we agree with the District Court that they are barred by res judicata from arguing the validity of the tax liabilities for the years 2000-2003. See C.I.R. v. Sunnen, 333 U.S. 591, 598 (1948) (). Accordingly, the District Court did not abuse its discretion in denying discovery of evidence related to the tax assessments.
The IRS is authorized to attach a lien on all "property and rights to property" of any taxpayer who fails to pay federal taxes. 26 U.S.C. § 6321. Federal courts must look to state law to determine the taxpayer's ownership interest in the property, including the question whether the titleholder is merely a nominee. See Drye v. United States, 528 U.S. 49, 58 (1999); United States v. Rodgers, 461 U.S. 677, 683 (1983). The District Court considered the following factors in determining whether SCR was Bogart's nominee:
(1) whether little or no consideration or inadequate consideration [was] paid by the nominee for an asset; (2) whether the property was placed in the name of the nominee in anticipation of a suit or occurrence of liabilities while the transferor continues to exercise control over the property; (3) the existence of a close relationship between transferor and the nominee; (4) any failure to record conveyance; (5) the retention of possession by the transferor; (6) continued enjoyment by the transferor of benefits of the transferred property; and (7) whether the taxpayer expended personal funds to purchase and maintain the property.
R&R at 30 (citing United States v. Klimek, 952 F. Supp. 1100, 1113 (E.D. Pa. 1997)). These factors, which were also considered by the Sixth Circuit in determining whether SCR was Bogart's nominee with respect to the Tennessee property, parallel those considered by Pennsylvania courts in determining whether a transfer of property is fraudulently made to evade debts or other obligations. See e.g. Mid Penn Bank v. Farhat,74 A.3d 149, 153-54 (Pa. Super. Ct. 2013); see also Great Oak Building & Loan Ass'n v. Rosenheim, 19 A.2d 95, 96 (Pa. 1941) ().
The District Court properly applied the above factors to the uncontested facts in determining that "the bewildering array of UBTOs used by the Bogarts were simply nominees and alter ego entities designed to frustrate a lawful tax levy."5 There is little we can add to the Magistrate Judge's thorough report on this issue. Although the record contains self-serving affidavits from the Bogarts, and an affidavit from Jerry Speer, averring that Speer has been the Trustee of SCR since 2004, this evidence is insufficient to...
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