United States v. Staton
| Decision Date | 31 August 2015 |
| Docket Number | Civil No. 12-00319 ACK-KSC |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. RONALD B. STATON, BRENDA STATON, NAVY FEDERAL CREDIT UNION, CAPSTEAD MORTGAGE CORPORATION, and STATE OF HAWAII, Defendants. |
| Court | U.S. District Court — District of Hawaii |
For the reasons set forth below below, the Court GRANTS Plaintiff United States' Motion for Summary Judgment on the Third Claim in the Complaint, ECF No. 109, ORDERS that Plaintiff's federal tax liens be foreclosed on the real property owned by Defendants Ronald Staton and Brenda Staton, located at 233 Kalalau Street, Honolulu, Hawaii 96825 (the "Residence"), and ORDERS the sale of the Residence free and clear of all liens, including the senior mortgage of Defendant Capstead Mortgage Corp. ("Capstead"). A separate Order of Foreclosure and Judicial Sale will follow this Order.
In addition, pursuant to Fed. R. Civ. P. 41(a)(2) and Plaintiff's request, the Court DISMISSES with prejudice Count I of Plaintiff's Complaint, ECF No. 1.
On or about August 19, 1987, Defendants Ronald Staton and Brenda Staton (the "Statons") entered into an Agreement of Sale to purchase the Residence, located at 233 Kalalau Street, Honolulu, Hawaii 96825. Decl. of Charles M. Duffy ("Duffy Decl.") ¶ 8, Ex. G, ECF Nos. 109-2, 109-4. The Statons were granted the Deed to the Residence on or about July 30, 1990. Duffy Decl. ¶ 9, Ex. H, ECF Nos. 109-2, 109-5. The Agreement of Sale and Deed indicate that the Statons purchased and own the Residence as tenants by the entirety. Duffy Decl. ¶¶ 8-9, Exs. G § 1.C, H § 3, ECF Nos. 109-2, 109-4, 109-5.
The Statons accrued assessments for unpaid federal income taxes between 2000-2007. As relevant to the instant motion, tax and related assessments were made against Ronald Staton individually for his 2001 through 2007 income tax years.1Despite the Government's notice and demand for payment, Mr. Staton did not pay the full assessment amounts. Compl. ¶¶ 16-19, ECF No. 1.
The Government filed notices of its federal tax liens ("NFTL's") related to its tax and related assessments made against Mr. Staton. The same NFTL's were filed with the State of Hawaii Bureau of Conveyances on April 3, 2006, December 5, 2006, July 10, 2007, April 7, 2009, and May 12, 2009. Duffy Decl. ¶¶ 2-3, 5-7, Exs. A-B, D-F, ECF Nos. 109-2, 109-3. The Government also filed a Notice of Pendency of Action regarding the instant lawsuit with the State of Hawaii Bureau of Conveyances on June 15, 2012. Duffy Decl. ¶ 11, Ex. I, ECF Nos. 109-2, 109-5.
Additional parties that appear to have an interest in the Residence are Defendants State of Hawaii, Capstead, and Navy Federal Credit Union ("NFCU"). Discovery responses submitted by Plaintiff indicate that Capstead owns, and NFCU services, a loan that was made to the Statons to allow them to purchase the Residence. Duffy Decl. Ex. K ¶¶ 4, 6, ECF No. 109-5. The original amount of the mortgage was $393,750.00. Declaration of Charles Duffy Ex. 2 at 3, ECF No. 138-2. Capstead reports thatas of July 31, 2015, the amount of principal and interest owed to Capstead under the Staton mortgage was $294,708.82, including a $26.00 recording fee. Defendant Capstead Mortgage Corp.'s First Supplemental Report Pursuant to Order of July 31, 2015 ("Capstead's Supp. Rpt.") at 2, ECF No. 151; Affidavit of D. Christopher Sieber ("Sieber Affd.") ¶ 5, ECF No. 156.2
The Court notes that Capstead's interest in the Residence was clarified through a recent assignment related to the subject mortgage. On April 6, 2015, Plaintiff was directed to file a Title Report for the Residence with the Court, which it did on April 7, 2015. See Minute Order, ECF No. 124; Notice of Filing Title Report Provided by Internal Revenue Service, ECF No. 125. That Title Report indicated that the Statons' mortgage had been assigned to an entity named Texas Commerce Bank N.A. ("Texas Commerce Bank") on September 25, 1993, without any further indication that the interest was assigned back to Capstead at anypoint. Minute Order, ECF No. 128. The Court therefore directed Plaintiff to file an updated Title Report. Id. Plaintiff did so on April 29, 2015, but the updated Title Report continued to show Texas Commerce Bank as the "custodian or trustee" of the mortgage. See Notice of Filing Updated Title Report, ECF No. 30; Declaration of Charles Duffy Ex. A at 3, ECF No. 130-2.
In view of Texas Commerce Bank's apparent interest in the Residence, the Court directed on May 1, 2015 that it should be made a party to this lawsuit. Minute Order, ECF No. 134. However, Plaintiff informed the Court on May 22, 2015 that Texas Commerce Bank, now apparently part of JP Morgan Chase Bank, was "transferring any interest that it may have in the subject mortgage" to Capstead. Status Report at 2, ECF No. 135. On July 29, 2015, Plaintiff provided the Court with a certified copy of a July 6, 2015 Assignment of Mortgage and a July 24, 2015 revised Title Report confirming this assignment of interest to Capstead. See Declaration of Charles Duffy Ex. 1-2, ECF Nos. 138-1, 138-2.
The Government and Defendant State of Hawaii, meanwhile, have stipulated that the United States' federal tax liens shall be completely satisfied before any liens of the State of Hawaii, in the event that the Court orders the foreclosure of the Residence. See Stipulation regarding Priority between the United States of America and the State of Hawaii ¶ 3, ECF No.70.3
On June 4, 2012, Plaintiff United States of America (the "Government") filed its Complaint against the Statons, Capstead, NFCU, and the State of Hawaii. The Complaint seeks to reduce to judgment the federal tax assessments against the Statons filing jointly (Count I) and Ronald Staton filing individually (Count II). It also seeks to foreclose the Government's federal tax liens on the Residence (Count III). Compl. ¶¶ 20-32, ECF No. 1. Plaintiff's Complaint further requests that the Residence be sold at a judicial sale and that the sales proceeds be distributed "in accordance with the Court's findings as to the validity and priority" of the parties' interests in the Residence. Id. at 10.
On June 27, 2014, Plaintiff filed a partial motion for summary judgment ("MSJ") related to Counts I and II of the Complaint. ECF No. 89 ("Plf.'s First MSJ"). Plf.'s First MSJ indicated that Count I "should be dismissed," because the Statons' joint tax assessments, related solely to their filing for the 2000 tax year, have been paid in full. Mem. in Supportof Mot. at 2, ECF No. 89-1. As to Count II, Plf.'s First MSJ sought entry of judgment against Ronald Staton for the tax and related assessments made against him for his 2001 through 2007 separate income tax years. Id. at 14-15. Plf.'s First MSJ did not address Count III of the Complaint.
On September 30, 2014, pursuant to a stipulation filed by Plaintiff and Ronald Staton, the Court entered judgment against Mr. Staton with respect to his 2001, 2002, 2003, and 2005 income tax liabilities. ECF No. 104. The amount of that judgment is $273,715.67, plus interest accruing after July 1, 2014 and less any payments made or credits applied after that date. Id. at 2. On November 25, 2014, pursuant to another stipulation filed by Plaintiff and Ronald Staton, the Court entered judgment against Mr. Staton with respect to his remaining 2004, 2006, and 2007 income tax liabilities at issue in the Complaint. ECF No. 108. The amount of that judgment is $81,811.07, plus interest accruing after October 31, 2014 and less any payments made or credits applied after that date. Id. at 2.
Mr. Staton's total outstanding liability reduced to judgment is therefore $355,526.74, plus accrued interest and minus any payments and credits. Documentation filed by Plaintiff on August 18, 2015 shows that the current balance owed on the judgments against Mr. Staton, with interest calculated toSeptember 1, 2015, is $370,437.03. See United States' Notice of the Updated Balance Due on the Judgments Previously Entered by the Court (Interest Calculated to September 1, 2015) at 1, ECF No. 154.
On December 29, 2014, Plaintiff filed its Motion for Summary Judgment on the Third Claim in the Complaint. ECF No. 109 ("Plf.'s Second MSJ"). Plf.'s Second MSJ requests that the Government's federal tax liens and judgments be foreclosed and that the Residence be sold pursuant to the terms set forth in Plaintiff's Proposed Order of Foreclosure and Judicial Sale, submitted concurrently with Plf.'s Second MSJ. Although Plaintiff has not submitted any formal valuation of the Residence, it reports that counsel's "Internet search" showed that the fair market value of the Residence is at least $1 million. Mem. in Support of Mot. at 6, 11, ECF No. 109-1. The latest Title Report submitted by Plaintiff also shows the Residence's assessed value for 2015 for real property tax purposes as $979,600.00. Title Report at 11, ECF No. 138-2.
Plf.'s Second MSJ further requests the proceeds of its requested foreclosure sale be used first to cover the costs of sale and any outstanding property taxes on the Residence. Plaintiff suggests that the remaining proceeds should then be distributed among the parties through a stipulation or order of the Court, after the parties are given an opportunity to brieftheir arguments regarding priority.4 Id. Plf.'s Second MSJ also reiterates the Government's request that Count I of its Complaint, relating to assessments for tax year 2000 which have since been paid by the Statons, should be dismissed. Id. at 2.
Plf.'s Second MSJ was set for hearing on April 6, 2015.5 On March 25, 2015, having received no response to Plf.'s Second MSJ from any Defendant, the Court directed Defendants to file oppositions or statements of no opposition, pursuant toLocal Rule 7.4, by March 27, 2015. ECF No. 116.6
On March 25, 2015, Defendant State of Hawaii filed a Statement of No Opposition to...
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