United States v. Martin (In re in Revocable Trust Agreement Dated January 10, 1991, Anna Anh Martin)

• Decision Date: 25 September 2014
• Docket Number: CIVIL NO. 13-00503 LEK-KSC
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. ABRAHAM NGUYEN MARTIN, Individually and Trustee for the ABRAHAM NGUYEN MARTIN REVOCABLE TRUST AGREEMENT DATED JANUARY 10, 1991, ANNA ANH MARTIN, Individually and Trustee for the ANNA ANH MARTIN REVOCABLE TRUST AGREEMENT DATED JANUARY 10, 1991, JOANNE ANN MARTIN, WELLS FARGO BANK, N.A., LOANCARE, a Division of FNF SERVICING, INC., AND STATE OF HAWAII, DEPARTMENT OF TAXATION, , Defendants.
• Court: U.S. District Court — District of Hawaii

UNITED STATES OF AMERICA, Plaintiff, v. ABRAHAM NGUYEN MARTIN, Individuallyand Trustee for the ABRAHAM NGUYEN MARTIN REVOCABLETRUST AGREEMENT DATED JANUARY 10, 1991,ANNA ANH MARTIN, Individually and Trustee for theANNA ANH MARTIN REVOCABLE TRUST AGREEMENT DATED JANUARY 10,1991, JOANNE ANN MARTIN, WELLS FARGO BANK, N.A.,LOANCARE, a Division of FNF SERVICING, INC.,AND STATE OF HAWAII, DEPARTMENT OF TAXATION, , Defendants.

CIVIL NO. 13-00503 LEK-KSC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

September 25, 2014

ORDER GRANTING THE GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT ON COUNTS ONE AND TWO IN THE COMPLAINT

Before the Court is Plaintiff the United States of America's ("the Government") Motion for Summary Judgment on Counts One and Two in the Complaint ("Motion"), filed on June 9, 2014. [Dkt. no. 44.] Pro se Defendant Abraham Nguyen Martin ("Abraham Martin") filed his memorandum in opposition on August 11, 2014, and the Government filed its reply on August 18, 2014. [Dkt. nos. 62, 65.] This matter came on for hearing on September 2, 2014. After careful consideration of the Motion,supporting and opposing memoranda, and the arguments presented at the hearing, the Government's Motion is HEREBY GRANTED for the reasons set forth below.

BACKGROUND

On October 3, 2013, Plaintiff filed its Complaint to Reduce Federal Tax Assessments to Judgement and Foreclose Federal Tax Liens on Real Property ("Complaint") against: Abraham Martin, individually and trustee for the Abraham Nguyen Martin Revocable Trust Agreement dated January 10, 1991; Anna Anh Martin ("Anna Martin"), individually and trustee for the Anna Anh Martin Revocable Trust Agreement dated January 10, 1991; Joanne Ann Martin ("Joanne Martin"); Wells Fargo Bank, N.A.; LoanCare, a division of FNF Servicing, Inc.; and State of Hawai`i, Department of Taxation.

The Complaint centers on the Government's attempt to foreclose on the Martin home, located in Honolulu ("the Property"), and to ensure that the Government can satisfy Abraham and Anna Martin's (collectively, "the Martins") tax liabilities through the sale - by setting aside purported fraudulent transfers of the Property and adjudging title.

The Government alleges that Abraham Martin failed to pay certain tax liabilities in 1992, and the Martins jointly failed to pay additional liabilities in 1993 and 1994. [Complaint at ¶¶ 26, 32.] Together, the Government alleges that,with fraud and failure-to-pay penalties and interest, their debt amounted to over $700,000 as of August 2013. [Id.] The Government further alleges that, beginning in 1998, the Martins engaged in a series of fraudulent transfers of the Property between family trusts for no consideration, in an attempt to evade an audit by the federal government. [Id. at ¶¶ 15-18, 21-22, 45-55.]

The Complaint alleges the following claims: reduce to judgment federal tax assessments against Abraham Martin for tax year 1992 ("Count I"); reduce to judgment federal tax assessments against the Martins jointly for tax years 1993 and 1994 ("Count II"); foreclose on federal tax liens against the Property ("Count III"); determine that the suspect transfers of the Property do not affect the Government's ability to collect on the Martins' tax debts from the Property ("Count IV"); find that the suspect conveyances were fraudulent ("Count V"); and find that the current titleholders of the Property, Anna and Joanne Martin, are holding title as nominees of the Martins ("Count VI"). [Id. at ¶¶ 25-63.]

The Government seeks the following relief, that this Court: adjudge that Abraham Martin is indebted to the Government in the sum of $126,265.16, plus statutory interest, and the Martins are jointly indebted in the sum of $577,898.24, plus additional interest; adjudge and decree that the tax liens haveattached to the Property; in the alternative, adjudge and decree that the transfers were all made subject to the tax liens, were fraudulent, and should be set aside, and that Anna and Joanne Martin hold title as nominees of the Martins, and thus the liens subsist; order the tax liens foreclosed on the Property, the Property sold, and the proceeds applied to the Martins' tax debts; and award costs and all other appropriate relief. [Id. at pgs. 18-21.]

DISCUSSION

On May 9, 2003, the United States Tax Court entered a stipulated decision ("Deficiency Decision") that found Abraham Martin had a deficiency of $18,349.00 from 1992, and that the Martins jointly had deficiencies of $69,731.00 and $23,763.00 from 1993 and 1994, respectively. The tax court also adjudged penalties of $13,762.00, $52,298.00, and $17,822.00 for fraud in each of those years. [Abrahams Martin's Concise Statement of Material Facts, filed 8/11/14 (dkt. no. 62-1) ("Martins' CSOF"), Exh. E (Deficiency Decision).¹]

The crux of Abraham Martin's argument in his memorandum in opposition, his declaration, and his Notice of Acts of Fraud upon the Court, which he filed on August 28, 2014, [dkt. no. 67,] is that the Deficiency Decision was fraudulent.² He argues that: he could not have stipulated to or executed the Deficiency Decision because he was in Vietnam at the time he purportedly executed it; Anna Martin was coerced into signing the Deficiency Decision; and the Martins' attorney, the IRS, and the tax court conspired against the Martins in reaching the Deficiency Decision. [Mem. in Opp. at 3, 5-8; Martins' CSOF at ¶¶ 1-10; Abraham Decl. at ¶¶ 6-12.]

However, these same arguments were rejected by the tax court in an order dated June 7, 2011 ("Vacatur Order"), denying a motion brought by the Martins to vacate the Deficiency Decisionmore than seven years after that decision became final. [Hendon Decl., Exh. 6 (Vacatur Order).] The Vacatur Order upheld the Deficiency Decision, and the Ninth Circuit affirmed on appeal. [Id., Exh. 7 ("Ninth Circuit Order").] Based on the Deficiency Decision, the Vacatur Order, and the Ninth Circuit Order, the Government argues that res judicata applies in this case, and any argument that Abraham Martin raises regarding the Martins' tax liabilities and fraud on the court, must be rejected. [Mem. in Supp. of Motion at 13-15.] This Court agrees that it is bound by res judicata as to these issues.

The Ninth Circuit has held:

Res judicata, also known as claim preclusion, applies only where there is "(1) an identity of claims, (2) a final judgment on the merits, and (3) privity between parties." Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 2003) (citation and internal quotation marks omitted). . . . We consider four factors in determining an "identity of claims":

(1) whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (2) whether substantially the same evidence is presented in the two actions; (3) whether the two suits involve infringement of the same right; and (4) whether the two suits arise out of the same transactional nucleus of facts.

Costantini v. Trans World Airlines, 681 F.2d 1199, 1201-02 (9th Cir. 1982) (citation omitted). "The last of these criteria is the most important." Id. at 1202 (citation omitted).

Turtle Island Restoration Network v. U.S. Dep't of State, 673 F.3d 914, 917-18 (9th Cir. 2012)

Courts regularly apply res judicata in the tax assessment context. For example:

"In the tax context, once a taxpayer's liability for a particular year is litigated, 'a judgment on the merits is res judicata as to any subsequent proceeding involving the same claim and the same tax year.'" In re Baker, 74 F.3d 906, 910 (9th Cir. 1996) (quoting Comm'r v. Sunnen, 333 U.S. 591, 598, 68 S. Ct. 715, 92 L. Ed. 898 (1948)). "For res judicata purposes, an agreed or stipulated judgment is a judgment on the merits." Id. (citing United States v. Int'l Bldg. Co., 345 U.S. 502, 505-06, 73 S. Ct. 807, 97 L. Ed. 1182 (1953); Lawrence v. Steinford Holding B.V. (In re Dominelli), 820 F.2d 313, 316-17 (9th Cir. 1987)).

United States v. Burrell, No. 2:11-CV-03079-GEB-EFB, 2013 WL 4710498, at *3 (E.D. Cal. Aug. 30, 2013).

The Court finds that res judicata applies in this case, and this Court is bound by the judgments of the tax court and the Ninth Circuit on these issues. As to the fraud on the court issue - the claims are the same, there has been a final judgment on the matter, and the parties are identical. See Turtle Island, 673 F.3d at 917. As to the tax assessments for the Martins for 1992-1994, which Abraham Martin has not specifically denied at any point, those have been litigated and determined in a stipulated judgment, and twice upheld. See Burrell, 2013 WL 4710498, at *3.

At the hearing on the Motion, the Court gave Abraham Martin an opportunity to present evidence and argument as to why the earlier decisions should be set aside. However, there was no admissible evidence presented that, even construed in the light most favorable to him, could raise a genuine issue of material fact that he was not liable for the amount at issue in the Deficiency Decision or that there had been fraud upon the court. See Crowley v. Bannister, 734 F.3d 967, 976 (9th Cir. 2013) (stating that, at summary judgment, the court "must determine, viewing the facts in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law" (citation and quotation marks omitted)). Thus, the Court CONCLUDES that the Martins were properly assessed tax liabilities according to the Deficiency Judgment and there was no fraud on the court.

Further, the Government has included three Certificates of Assessments, Payments, and Other Specified Matters (Forms 4340s), for the Martins for tax deficiencies from tax years 1992-1994. [Hendon Decl., Exhs. 3-5.] These Forms 4340, all dated September 13, 2013, show tax liabilities, penalties, and assessed interest up through late 2003, amounting to $77,575.59, $258,738.47,...