United States v. Weldon
| Decision Date | 22 January 2021 |
| Docket Number | 1:18-cv-01318-AWI-SKO |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. PAUL WELDON, STATE OF CALIFORNIA FRANCHISE TAX BOARD, THE COUNTY OF FRESNO, AND THE CITY OF FRESNO Defendants. |
| Court | U.S. District Court — Eastern District of California |
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
ORDER DENYING MOTION TO STRIKE
Plaintiff United States filed this action on September 25, 2018 pursuant to 26 U.S.C. §§ 7401, 7403 to reduce federal tax assessments against Defendant Paul D. Weldon to judgment and to foreclose federal tax liens on residential property owned by Weldon in Fresno, California. Doc. Nos. 1 40. The United States now brings a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure on both counts. Doc. No. 55. The motion also appears to seek attorneys' fees and costs. For the reasons set forth below, the Court will grant the motion in part and deny the motion in part.
BACKGROUND[1]
Weldon is a resident of Fresno, California. Doc. No. 55-2 ¶ 3. Weldon owns property located at 6519 West Olive Avenue, Fresno, California (the “Subject Property”). Id. ¶ 1. From about 2000 and through 2016, Weldon generated income as a medical transportation driver. Id. ¶¶ 4-5. Weldon did not file tax returns from the late 1990s until 2015. Id. ¶ 14.
Weldon never submitted Forms 1040 to the IRS for the 2000, 2002, 2003 or 2004 tax year, but the Internal Revenue Service (“IRS”) received third-party informational filings known as Forms 1099 indicating that he had taxable income in each of those tax years. Doc. No. 55-2 ¶¶ 1516. Further, Weldon confirmed or said it was likely that he did business in 2000, 2002, 2003 and 2004 with companies that submitted those filings. Id. ¶¶ 26-32. The IRS calculated Weldon's tax liabilities for 2000, 2002, 2003 and 20004 based on the filings and sent Weldon Letters 3219- also known as Statutory Notices of Deficiency-for his 2000, 2002, 2003 and 2004 income tax liabilities in 2007. Id. ¶ 17. Weldon did not take timely action in response to these notices, so the IRS assessed tax, interest and penalties for the 2000, 2002, 2003 and 2004 tax years. Id. ¶ 18.
In 2008, Weldon filed a Form 1040 for the 2007 tax year requesting a refund of $2,591,475. Doc. No. 55-2 ¶ 20. In 2015, Weldon filed a Form 1040 labeled “Corrected Return” for the 2007 tax year that reflected a tax liability of $6,688 but did not make payment. Id. The IRS adjusted Weldon's 2007 income tax liability to match his “Corrected Return” for the 2007 tax year. Id. In 2015, Weldon also filed Forms 1040 for the 2005, 2006, 2008, 2010, 2012 and 2013 tax years. Id. 55-2 ¶¶ 19, 23. The IRS's tax assessments against Weldon for the 2005, 2006, 2008, 2010, 2012 and 2013 tax years are based on the Forms 1040 that Weldon filed in 2015. Id.
Weldon has not made full payment to the United States for the assessments at issue in this case. Doc. No. 55-2 ¶ 34. As of August 31, 2020, Weldon's income tax liabilities totaled $767,041.19 for the 2000, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2010, 2012 and 2013 tax years. Id. ¶ 36. The IRS has recorded Notices of Federal Tax Lien (“NFTL”) with the Fresno County Recorder against the Subject Property in connection with these liabilities. Id. ¶ 35.
The United States moves the Court to reduce Weldon's federal income tax assessments to judgment; to determine the order in which the United States' tax liens and interests held by other parties to this action attach to the Subject Property; and to allow the United States 90 days to seek an order of sale. Doc. No. 55 at 3;[2] Doc. No. 55-1 at 11. The United States argues that summary judgment is warranted because it has carried its burden to show that the tax assessments for the tax years in question are accurate and Weldon has failed to make a showing to the contrary.[3] See Doc. No. 55-1. Weldon disputes the accuracy of the assessments and makes a number of other arguments in opposition to the motion relating to jurisdiction, timeliness, the enforceability of tax laws and such. See Doc. No. 62.
Weldon appears to challenge the Court's subject matter jurisdiction over this action. Doc. No. 62 at 1:18-21. The Court cannot claim to understand all aspects of Weldon's arguments with respect to jurisdiction but finds that it has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1340 (), 28 U.S.C. § 1345 (providing district courts with original jurisdiction over suits brought by the United States), 26 U.S.C. § 7402(a) (providing district courts with jurisdiction “to render such judgments and decrees as may be necessary or appropriate for the enforcement of internal revenue laws”) and 26 U.S.C. § 7403 ().
Similarly, Weldon appears to assert, pursuant to 26 U.S.C. § 7401, that this action is not properly before the Court because it was not commenced at the direction of the Attorney General or authorized by the Secretary of the Treasury. Doc. No. 62 at 1. The United States, however, has provided a copy of the August 18, 2017 letter from the Treasury Department authorizing this action. Doc. No. 63-1. Further, “[t]here is a presumption of regularity that attaches to the actions of public officials,” and Weldon makes no showing as to why that presumption should not apply here. See United States v. Little, 2005 WL 2334705, at *3 (E.D. Cal. Sept. 23, 2005) (citing Palmer v. I.R.S., 116 F.3d 1309, 1311 (9th Cir.1997)).
The Court therefore finds that it has subject matter jurisdiction over this action.
Pursuant to Rule 56,[4] summary judgment is appropriate when it is demonstrated that there exists no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); See Fortyune v. Am. Multi-Cinema, Inc., 364 F.3d 1075, 1079-80 (9th Cir. 2004). The moving party bears the burden of establishing the absence of a genuine issue of material fact, generally by “citing to particular parts of materials in the record” such as depositions, interrogatory answers, declarations, and documents. Fed.R.Civ.P. 56(c); see also, Cline v. Indus. Maint. Eng'g & Contracting Co., 200 F.3d 1223, 1229 (9th Cir. 2000) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)). If the moving party does not meet this burden, “[s]ummary judgment may be resisted and must be denied on no other grounds than that the movant has failed to meet its burden of demonstrating the absence of triable issues.” Henry v. Gill Indus., 983 F.2d 943, 950 (9th Cir. 1993).
If the moving party does meet this burden, the burden then shifts to the opposing party to show a genuine issue of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); see also, Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Companies, 210 F.3d 1099, 1103 (9th Cir. 2000). “[A] party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleadings, but ... must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (quoting First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89 (1968)) (internal quotation marks omitted). If the nonmoving party does not produce enough evidence to create a genuine issue of material fact after the burden has shifted, the moving party is entitled to summary judgment. Fritz, 210 F.3d at 1103. In other words, “[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine issue for trial.' ” Matsushita, 475 U.S. at 587 (citing Cities Service, 391 U.S. at 289).
Pursuant to 26 U.S.C. § 7402(a), district courts have the power to render judgments “as may be necessary or appropriate for the enforcement of the internal revenue laws.” “In an action to collect taxes, the government bears the initial burden of proof.” In re Olshan, 356 F.3d 1078, 1084 (9th Cir. 2004) (citation and internal quotation marks omitted); see also, United States v. Stonehill, 702 F.2d 1288, 1293 (9th Cir. 1983). This burden is satisfied, however, by the production of “deficiency determinations and assessments for unpaid taxes,” which are presumed correct “so long as they are supported by a minimal factual foundation.” In re Olshan, 356 F.3d at 1084 (citation and internal quotation marks omitted). If such assessments by the government have been issued and presented in court, the burden shifts to the taxpayer to show, by a preponderance of the evidence, “that a [deficiency] determination is arbitrary, excessive or without foundation.” Id. (citing Helvering v. Taylor, 293 U.S. 507, 515-16 (1935)); Rockwell v. Comm'r, 512 F.2d 882, 885 (9th Cir.1975) (). Only if the taxpayer can meet this burden must the government produce additional proof to substantiate their assessments. See Keogh v. Comm'r, 713 F.2d 496, 501 (9th Cir. 1983).
Thus, the government satisfies its evidentiary burden as the party moving for summary judgment once deficiency determinations and assessments are produced. See Palmer, 116 F.3d at 1312. If the taxpayer fails to rebut the presumption that these documents are correct, the government is entitled to judgment as a matter of law. See Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993).
The United States has supported its tax assessments for the tax years in...
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