United States v. Stiles, Civil Action No. 13-138
| Decision Date | 02 December 2014 |
| Docket Number | Civil Action No. 13-138 |
| Parties | UNITED STATES OF AMERICA, v. DAVID STILES, et al., Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
The United States of America ("United States" or "government") filed the above-captioned case against David Stiles and Virginia Stiles (collectively the "Stiles" or "defendants") to reduce to judgment tax assessments filed against the Stiles pursuant to 31 U.S.C. § 3713, for depleting the Estate of Julia Stiles ("estate") before paying the estate's tax liability. (ECF No. 33 at 1.) Presently before this court is the United States' motion for summary judgment. (ECF No. 32.) The United States argues that it is entitled to judgment as a matter of law with respect to the Stiles' tax liabilities and to satisfy the tax liabilities the court should order the foreclosure of a tax lien the United Stated filed on property owned by the Stiles. (ECF No. 32 at 1.) After considering all the submissions, the court concludes that there is no dispute that the Stiles depleted an estate before paying the estate's tax liability. The court will GRANT the United States' motion for summary judgment and order the foreclosure of the lien.
It should be noted that the Stiles failed to submit a responsive statement of facts as required by Local Rule of Civil Procedure 56 and this court's case management order dated April 24, 2014. W.D. Pa. LCvR 56; (ECF No. 29). The factual background is to be derived from the undisputed evidence of record and the disputed evidence of record viewed in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
After Julia Stiles died in 2002, David Stiles was appointed executor of her estate. (ECF No. 35 ¶ 9.) The tax return for the estate was not filed until June 2008. (Id. ¶ 10.) On June 9, 2008, a delegate of the Secretary of the Treasury Internal Revenue Service of the United States ("IRS") assessed federal income taxes, interest, and penalties against the estate in the amount of $2,093,091.2 (ECF No. 35 ¶ 11; ECF No. 35-4.) The estate also owed $12,936 to the Register of Wills and $110,635 to the Delaware Division of Revenue. (ECF No. 35 ¶ 12.) The estate's primary assets consisted of real estate in Wilmington, Delaware, and an investment account with Janney Montgomery Scott, LLC. (Id. ¶ 13.) Around the time of Julia Stiles' death her account with Janney Montgomery Scott, LLC., was worth $2,303,547. (Id. ¶ 14.) The real property in Delaware was sold in August 2002, for $379,000 and the proceeds were distributed shortly afterthe sale. (Id. ¶ 15.) The IRS did not receive any proceeds from the sale of real property located in Wilmington, Delaware. (Id. ¶ 16.)
Between 2002 and 2005, David Stiles distributed approximately $775,000 from the estate to himself, and $425,000 to each of his two sisters. (Id. ¶ 19) (citing Estate of Stiles v. Lilly, No. 09C-07-198 MJB, 2011 WL 5299295, at *5-6 (Del. Super. Ct. Oct. 27, 2011). At the beginning of April 2008, the estate's investment account with Janney Montgomery Scott, LLC., was worth $1,787,660. (ECF No. 35 ¶ 20; ECF No. 35-5). In April 2008, David Stiles distributed $110,635 from the estate to the Delaware Division of Revenue. (ECF No. 35 ¶ 21; ECF No. 35-5 at 7.) Michael Stumpo, a Revenue Officer for the IRS, stated that as of March 31, 2014, the estate still owes the United States $71,762.39. (ECF No. 35 ¶ 22); (Stumpo Decl. ¶ 6).
As of March 31, 2014, the IRS determined that the Stiles still owed the United States the following amounts for income tax assessments:
(ECF No. 35 ¶ 1); (Stumpo Decl. ¶ 1.)
Interest on the income tax assessments has been assessed under 26 U.S.C. §§ 6601(a) and (b), from the date that the Stiles' tax liabilities became due, at the rate set forth in 26 U.S.C. § 6621(a). (ECF No. 35 ¶ 2; ECF No. 35-1 at 2.) Penalties under 26 U.S.C. § 6651, for the years 2007, 2008, and 2009 have been assessed against the Stiles for their failure to timely pay the amount of tax due. (ECF No. 35 ¶ 3; ECF No. 35-1 at 2.) Penalties under 26 U.S.C. §6654, for the years 2008 and 2009 have been assessed against the Stiles for their failure to make required estimated tax payments. (ECF No. 35 ¶ 3; ECF No. 35-1 at 2, 4.) An accuracy-related penalty has been assessed against the Stiles under 26 U.S.C. § 6662, for the year 2007. (ECF No. 35 ¶ 3; ECF No. 35-1 at 4.)
The IRS properly submitted notice and demand for payment to the Stiles. (ECF No. 35 ¶ 6; ECF No. 35-1). The Stiles failed to fully pay the tax assessments. (ECF No. 35 ¶ 7.) The total income taxes owed by the Stiles for tax years 2007, 2008, 2009, and 2010 as of March 31, 2014, is $52,445.04. (ECF No. 35 ¶ 8); (Stumpo Decl. ¶ 5).
In May 1994, Walter R. Allen, Jr. and Donna M. Allen conveyed to the Stiles real property located at 3840 Route 40 in Washington, Pennsylvania ("Washington Property"). (ECF No. 35 ¶ 23) (citing ECF No. 35-10). In September 2009, the Stiles entered into an oil, gas, and coalbed methane gas lease with Range Resources - Appalachia, LLC. ("Range Resources"). (ECF No. 35 ¶ 24) (citing ECF No. 25 ¶ 1.) Under the lease, the Stiles receive an annual payment from Range Resources until the property begins to produce commercially viable natural resources, then the Stiles will receive one-eighth of the sales proceeds paid to Range Resources. (ECF No. 35 ¶ 25) (citing ECF No. 25-1 and ECF No. 25-2.) On June 18, 2010, the United States filed a Notice of Federal Tax Lien with the Prothonotary in Washington County, Pennsylvania against the Stiles with respect to their income tax liabilities for tax years 2007 and 2008. (ECF No. 35 ¶ 26.)
On January 28, 2013, the government filed a complaint against the Stiles, PNC Bank, the Washington County Tax Claim Bureau, and Range Resources. (ECF No. 1.) PNCBank, the Washington County Tax Claim Bureau, and Range Resources have been dismissed from this case as discussed in more detail below.
On May 28, 2013, a motion to extend time to effect service on PNC Bank was filed. (ECF No. 8.) On May 29, 2013, this motion was granted and the deadline for effecting service on PNC Bank was extended to June 27, 2013. On June 27, 2013, a waiver of service was returned on behalf of PNC Bank. (ECF No. 9.) On November 8, 2013, the United States requested an entry of default against PNC Bank for failing to plead or otherwise defend as provided by Federal Rule of Civil Procedure 55(a). (ECF No. 10.) On November 12, 2013, the Clerk of the Court entered default against PNC Bank. (ECF No. 11.) On December 19, 2013, the United States moved for entry of a default judgment against PNC Bank to terminate its interest in the Washington Property. (ECF No. 12.) On December 20, 2013, the court entered judgment against PNC Bank, which terminated its interest in the Washington Property. (ECF No. 14 & 15 respectively.) As a result, on December 20, 2013, PNC Bank was dismissed from this action.
After an order to show cause with respect to Washington County Tax Claim Bureau's failure to file a responsive pleading in this case, the Clerk of this court entered default against the Washington County Tax Claim Bureau for failure to appear. (ECF No. 16 & 19 respectively.) On May 22, 2014, the United States moved for an entry of default judgment against the Washington County Tax Claim Bureau to terminate its interest in the Washington Property. (ECF No. 30.) On May 28, 2014, the court granted the government's motion for a default judgment against the Washington County Tax Claim Bureau. (ECF No. 36.) On May 29, 2014, the Washington County Tax Claim Bureau was dismissed from this action.
On April 1, 2013, Range Resources filed an answer to the government's complaint. (ECF No. 5.) On April 3, 2014, Range Resources filed a stipulation and consent order with the United States concerning the oil, gas, and coalbed methane lease on the Washington Property entered into by Range Resources and the Stiles. (ECF No. 25.) On April 4, 2014, the stipulation and consent order was adopted by the court accepting the respective parties understanding that the government's tax lien against the Stiles did not attach to the property rights conveyed to Range Resources. (ECF No. 26 ¶ 9(a).) As a result, during a status conference held on April 7, 2014, Range Resources was dismissed from this action.
On May 23, 2014, the United States filed a motion for summary judgment and a brief in support of its motion for summary judgment, (ECF No. 32 and 33), and a concise statement of material facts. (ECF No. 35.) On July, 28, 2014, the Stiles filed their response in opposition to the government's motion for summary judgment and a brief in support of their opposition to the government's motion for summary judgment. (ECF No. 42 and 43 respectively.) On July 30, 2014, the United States filed a reply in support of their motion for summary judgment. (ECF No. 45.) Having been fully briefed, the government's motion for summary judgment is ripe for disposition.
Summary judgment is appropriate if the record shows that there is no genuine dispute with respect to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The mere existence of a factual dispute, however, will not necessarily defeat a motion for summary judgment. Only a dispute over a material fact—that is, a fact that would affect the outcome of the suit under the governing substantive law—will preclude theentry of summary judgment. Anderson v. Liberty Lobby,...
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