1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, Case No. 2:19-cv-01466-TLN-JDP 12 Plaintiff, FINDINGS AND RECOMMENDATIONS 13 THAT PLAINTIFF’S MOTION FOR v. DEFAULT JUDGMENT BE GRANTED 14 RICHARD E. BRADLEY, et al., OBJECTIONS DUE IN 14 DAYS 15 Defendants. ECF No. 16 16
17 18 19 Plaintiff United States of America seeks to reduce to judgment outstanding federal tax 20 assessments made against defendant Richard Bradley and foreclose federal tax liens upon real 21 property commonly known as 15696 Meridian Road, Chico, CA 95973 (“subject property”). 22 ECF No. 16-1 at 2.1 Richard Bradley has not answered the complaint or otherwise appeared. On 23 February 3, 2021, plaintiff moved for default judgment. ECF No. 16. The court held a hearing 24 on April 29, 2021, but only plaintiff’s counsel appeared. Because defendant Richard Bradley was 25 properly served and because the relevant discretionary factors point in favor of default judgment, 26 1 Plaintiff also named the State of California, Franchise Tax Board, and Troy Kidd, Butte 27 County Treasurer-Tax Collector as defendants in this action under 26 U.S.C. § 7403 as parties who may claim an interest in the subject property. Plaintiff reached separate stipulated 28 agreements with those defendants that have been ordered. ECF Nos. 8, 12. 1 I recommend that plaintiff’s motion be granted. 2 DISCUSSION 3 Federal Rule of Civil Procedure 55(b)(2) allows a court to enter judgment against a party 4 who has defaulted. While the decision to do so is “discretionary,” Aldabe v. Aldabe, 616 F.2d 5 1089, 1092 (9th Cir.1980), it is guided by several factors. As a preliminary matter, the court must 6 assess the adequacy of service on the party against whom the default judgment would be entered. 7 See Cranick v. Niagara Credit Recovery, Inc., No. 1:13-CV-671 LJO GSA, 2014 WL 325321, at 8 *1 (E.D. Cal. Jan. 28, 2014); see also Omni Capital Int’l., Ltd. v. Rudolf Wolff & Co., 484 U.S. 9 97, 104 (1987) (“[B]efore a federal court may exercise personal jurisdiction over a defendant, the 10 procedural requirement of service of summons must be satisfied.”). If service was sufficient, the 11 court looks to a number of factors, including: possible prejudice to the plaintiff, the merits of 12 plaintiff’s claim, the sufficiency of the complaint, the sum of money at stake, the possibility of a 13 factual dispute, whether the default was potentially due to excusable neglect, and the general 14 policy that cases be decided on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th 15 Cir.1986). Throughout this analysis, “the factual allegations of the complaint, except those 16 relating to the amount of damages, will be taken as true.” Geddes v. United Fin. Group, 559 F.2d 17 557, 560 (9th Cir. 1977). 18 Here, personal service on defendant Bradley was properly completed, ECF No. 6, and the 19 clerk of court entered a default on November 5, 2019, ECF No. 14. The Eitel factors also point in 20 favor of granting default judgment. Generally, a plaintiff has no means other than a default 21 judgment to recover against a defaulting defendant and would be prejudiced if judgment were not 22 entered. See Moroccanoil, Inc. v. Allstate Beauty Prods., 847 F. Supp. 2d 1197, 1200-01 (C.D. 23 Cal. 2012). Plaintiff’s complaint also states a straightforward claim that appears meritorious: 24 Richard Bradley owes federal income tax, penalties, interests, and fees for tax period years 2002, 25 2003, 2005, and 2006, collectively exceeding $300,000. ECF No. 16-2. Plaintiff thus seeks to 26 foreclose its tax liens against real property owned by Richard Bradley and located at 15696 27 Meridian Road, Chico, CA 95973. ECF No. 1 at 2. 28 As to plaintiff’s first claim, under 26 U.S.C. § 7402(a), the United States is entitled to 1 reduce outstanding tax liabilities to judgment. Here, plaintiff has provided IRS forms 4340 for 2 tax years 2002, 2003, 2005, and 2006. ECF No. 16-3 at 61-93. Forms 4340 are presumptive 3 proof of a valid assessment and are routinely used to prove that tax assessments have been made. 4 See Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993), cert. denied, 512 U.S. 1219 (1994). 5 Thus, defendant Bradley is indebted to the United States in the amount of $308,400.30, as of 6 January 29, 2021, less any subsequent payments or credits, plus interest and other statutory 7 additions, pursuant to 26 U.S.C. §§ 6601, 6621, and 6622, and 28 U.S.C. § 1961(c)(1), until the 8 judgment is fully paid. 9 On the second claim, when a taxpayer neglects or refuses to pay taxes that are due, federal 10 tax liens arise as of the date of assessment on all the taxpayer’s property and rights to property, 11 and those liens continue until the liabilities either are satisfied or become unenforceable. See 26 12 U.S.C. §§ 6321, 6322. Per the forms 4340, the IRS made federal tax assessments against 13 defendant Bradley, and the IRS appropriately issued and recorded notices of federal tax lien. 14 ECF No. 16-3 at 61-127. Tax liens “reach every interest in property that a taxpayer may have.” 15 United States v. National Bank of Commerce, 472 U.S. 713, 720 (1985). Under 26 U.S.C. 16 § 7403, once it is established that the United States has liens upon certain property, the United 17 States may foreclose those liens, sell the property, and apply the proceeds toward the tax liens at 18 issue. See United States v. Craft, 535 U.S. 274 (2002). Accordingly, the United States is entitled 19 to foreclose on the subject property owned by Mr. Bradley. 20 Notices and demands for these tax liabilities were sent to Mr. Bradley, reducing the risk 21 that there is some factual dispute. The amount assessed is governed by statute. And given that 22 defendant was properly served, there is no evidence before the court that his failure to appear is 23 due to excusable neglect. Eitel does make clear that “[c]ases should be decided upon their merits 24 whenever reasonably possible.” 782 F.2d at 1472. But, standing alone, this policy preference is 25 insufficient to deny default judgment against a defendant who has failed to appear and defend 26 himself. See PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). 27 With no appearance from the defendant, a decision on the merits is unworkable.
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, Case No. 2:19-cv-01466-TLN-JDP 12 Plaintiff, FINDINGS AND RECOMMENDATIONS 13 THAT PLAINTIFF’S MOTION FOR v. DEFAULT JUDGMENT BE GRANTED 14 RICHARD E. BRADLEY, et al., OBJECTIONS DUE IN 14 DAYS 15 Defendants. ECF No. 16 16
17 18 19 Plaintiff United States of America seeks to reduce to judgment outstanding federal tax 20 assessments made against defendant Richard Bradley and foreclose federal tax liens upon real 21 property commonly known as 15696 Meridian Road, Chico, CA 95973 (“subject property”). 22 ECF No. 16-1 at 2.1 Richard Bradley has not answered the complaint or otherwise appeared. On 23 February 3, 2021, plaintiff moved for default judgment. ECF No. 16. The court held a hearing 24 on April 29, 2021, but only plaintiff’s counsel appeared. Because defendant Richard Bradley was 25 properly served and because the relevant discretionary factors point in favor of default judgment, 26 1 Plaintiff also named the State of California, Franchise Tax Board, and Troy Kidd, Butte 27 County Treasurer-Tax Collector as defendants in this action under 26 U.S.C. § 7403 as parties who may claim an interest in the subject property. Plaintiff reached separate stipulated 28 agreements with those defendants that have been ordered. ECF Nos. 8, 12. 1 I recommend that plaintiff’s motion be granted. 2 DISCUSSION 3 Federal Rule of Civil Procedure 55(b)(2) allows a court to enter judgment against a party 4 who has defaulted. While the decision to do so is “discretionary,” Aldabe v. Aldabe, 616 F.2d 5 1089, 1092 (9th Cir.1980), it is guided by several factors. As a preliminary matter, the court must 6 assess the adequacy of service on the party against whom the default judgment would be entered. 7 See Cranick v. Niagara Credit Recovery, Inc., No. 1:13-CV-671 LJO GSA, 2014 WL 325321, at 8 *1 (E.D. Cal. Jan. 28, 2014); see also Omni Capital Int’l., Ltd. v. Rudolf Wolff & Co., 484 U.S. 9 97, 104 (1987) (“[B]efore a federal court may exercise personal jurisdiction over a defendant, the 10 procedural requirement of service of summons must be satisfied.”). If service was sufficient, the 11 court looks to a number of factors, including: possible prejudice to the plaintiff, the merits of 12 plaintiff’s claim, the sufficiency of the complaint, the sum of money at stake, the possibility of a 13 factual dispute, whether the default was potentially due to excusable neglect, and the general 14 policy that cases be decided on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th 15 Cir.1986). Throughout this analysis, “the factual allegations of the complaint, except those 16 relating to the amount of damages, will be taken as true.” Geddes v. United Fin. Group, 559 F.2d 17 557, 560 (9th Cir. 1977). 18 Here, personal service on defendant Bradley was properly completed, ECF No. 6, and the 19 clerk of court entered a default on November 5, 2019, ECF No. 14. The Eitel factors also point in 20 favor of granting default judgment. Generally, a plaintiff has no means other than a default 21 judgment to recover against a defaulting defendant and would be prejudiced if judgment were not 22 entered. See Moroccanoil, Inc. v. Allstate Beauty Prods., 847 F. Supp. 2d 1197, 1200-01 (C.D. 23 Cal. 2012). Plaintiff’s complaint also states a straightforward claim that appears meritorious: 24 Richard Bradley owes federal income tax, penalties, interests, and fees for tax period years 2002, 25 2003, 2005, and 2006, collectively exceeding $300,000. ECF No. 16-2. Plaintiff thus seeks to 26 foreclose its tax liens against real property owned by Richard Bradley and located at 15696 27 Meridian Road, Chico, CA 95973. ECF No. 1 at 2. 28 As to plaintiff’s first claim, under 26 U.S.C. § 7402(a), the United States is entitled to 1 reduce outstanding tax liabilities to judgment. Here, plaintiff has provided IRS forms 4340 for 2 tax years 2002, 2003, 2005, and 2006. ECF No. 16-3 at 61-93. Forms 4340 are presumptive 3 proof of a valid assessment and are routinely used to prove that tax assessments have been made. 4 See Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993), cert. denied, 512 U.S. 1219 (1994). 5 Thus, defendant Bradley is indebted to the United States in the amount of $308,400.30, as of 6 January 29, 2021, less any subsequent payments or credits, plus interest and other statutory 7 additions, pursuant to 26 U.S.C. §§ 6601, 6621, and 6622, and 28 U.S.C. § 1961(c)(1), until the 8 judgment is fully paid. 9 On the second claim, when a taxpayer neglects or refuses to pay taxes that are due, federal 10 tax liens arise as of the date of assessment on all the taxpayer’s property and rights to property, 11 and those liens continue until the liabilities either are satisfied or become unenforceable. See 26 12 U.S.C. §§ 6321, 6322. Per the forms 4340, the IRS made federal tax assessments against 13 defendant Bradley, and the IRS appropriately issued and recorded notices of federal tax lien. 14 ECF No. 16-3 at 61-127. Tax liens “reach every interest in property that a taxpayer may have.” 15 United States v. National Bank of Commerce, 472 U.S. 713, 720 (1985). Under 26 U.S.C. 16 § 7403, once it is established that the United States has liens upon certain property, the United 17 States may foreclose those liens, sell the property, and apply the proceeds toward the tax liens at 18 issue. See United States v. Craft, 535 U.S. 274 (2002). Accordingly, the United States is entitled 19 to foreclose on the subject property owned by Mr. Bradley. 20 Notices and demands for these tax liabilities were sent to Mr. Bradley, reducing the risk 21 that there is some factual dispute. The amount assessed is governed by statute. And given that 22 defendant was properly served, there is no evidence before the court that his failure to appear is 23 due to excusable neglect. Eitel does make clear that “[c]ases should be decided upon their merits 24 whenever reasonably possible.” 782 F.2d at 1472. But, standing alone, this policy preference is 25 insufficient to deny default judgment against a defendant who has failed to appear and defend 26 himself. See PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). 27 With no appearance from the defendant, a decision on the merits is unworkable. 28 Finally, the United States requests that this court retain jurisdiction over this case but 1 delay ordering sale of the subject property because plaintiff believes that the subject property is 2 Bradley’s primary residence and does not wish to displace him from his home during a global 3 pandemic. Plaintiff seeks permission to update the court periodically with a status report until it 4 eventually files a motion for order of sale. 5 FINDINGS AND RECOMMENDATIONS 6 I recommend that this court grant plaintiff’s motion, ECF No. 16, and enter default 7 judgment as follows: 8 9 (A) Defendant Richard E. Bradley is indebted to the United States 10 in the amount of $308,400.30, as of January 29, 2021, less any 11 subsequent payments or credits, plus interest and other statutory 12 additions, pursuant to 26 U.S.C. §§ 6601, 6621, and 6622, and 28 13 U.S.C. § 1961(c)(1), until the judgment is fully paid; 14 (B) The United States has valid federal tax liens against all of 15 defendant Richard E. Bradley’s property and rights to property, 16 including the subject property; 17 (C) The United States may foreclose its liens upon the subject 18 property, with the proceeds to be distributed per the court’s 19 findings as to the validity and priority of the liens and 20 claims of all parties; 21 (D) The court retains jurisdiction over this action pending the 22 United States’ filing of a motion for order of sale and the court 23 later confirming any judicial sale; and 24 (E) The United States shall file a status report every 90 days 25 addressing whether proceeding with a forced sale of the subject 26 property is appropriate until a motion for order of sale is filed. 27 28 These recommendations will be submitted to the U.S. district judge presiding over the 1 | case under 28 U.S.C. § 636(b)(1)(B) and Local Rule 304. Within 14 days of the service of the 2 | findings and recommendations, the parties may file written objections to the findings and 3 || recommendations with the court and serve a copy on all parties. That document must be 4 | captioned “Objections to Magistrate Judge’s Findings and Recommendations.” The presiding 5 | district judge will then review the findings and recommendations under 28 U.S.C. $ 636(b)(1)(C). 6 7 IT IS SO ORDERED.
Dated: _ June 8, 2021 9 JEREMY D. PETERSON 10 UNITED STATES MAGISTRATE JUDGE
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