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United States v. Kees

United States District Court, W.D. Louisiana, Lake Charles Division

August 15, 2019

UNITED STATES OF AMERICA
v.
BRUCE KEES, ET AL

          KAY MAGISTRATE JUDGE.

          MEMORANDUM RULING

          JAMES D. CAIN, JR. UNITED STATES DISTRICT JUDGE.

         Before the Court is a "Renewed Motion of the United States for Entry of Default Judgment Against Bruce C. Kees" (Doc. 18) wherein the United States moves pursuant to Federal Rule of Civil Procedure 55(b)(2) to enter a Default Judgment against Mr. Kees. This lawsuit was brought by the United States to recover unpaid taxes allegedly owed by Mr. Kees and for penalties for filing frivolous tax returns. Specifically, the United States seeks to reduce to judgment the outstanding federal tax liabilities assessed and to foreclose federal tax liens against property owned by Mr. Kees. For the reasons that follow, the motion will be granted.

         Procedural History

         The United States filed the instant lawsuit against Brenda Sue Courmier, Chester Arthur Courmier and Bruce Kees on August 16, 2016.[1] Pursuant to a Joint Motion to Dismiss, [2] defendants, Brenda Sue Courmier and Chester Arthur Courmier, [3] were dismis 5ed with prejudice.[4] Mr. Kees was personally served with a summons and the Complaint on August 24, 2016, [5] but did not file an answer.

         On November 10, 2016, because Mr. Kees failed to timely plead or otherwise defend the Complaint, the United States moved for an entry of default[6] and the Clerk of Court noticed the entry of default.[7] On June 6, 2017, the United States filed a "Motion of the United States for Entry of Default Judgment Against Bruce C. Kees."[8] In that motion, the United States asserted that Mr. Kees was indebted to it for unpaid federal income tax liabilities for tax years 2003, 2004, 2005, 2006, 2007, 2008, 2010, and 2012, plus frivolous tax submission penalties for tax years 2003 and 2005 in the amount of $365, 022.38 as of April 26, 2017, plus prejudgment and post judgment interest thereon and statutory additions there, minus any credits or payments applied thereto after April 26, 2017, prior to judgment.

         The United States sought (1) a judgment that it has valid federal tax liens to and upon all property and property rights of Kees, (2) an order that the tax liabilities be foreclosed upon the property, and (3) an order that the property be sold in accordance with the law and practice of the court.

         The motion was referred to Magistrate Judge Kay who issued a Report and Recommendation[9] recommending denial of the motion.[10] The Magistrate Judge denied the motion because the United States' filings were deficient in that the United States failed to file affidavits as to whether Mr. Kees is a military service member, [11]minor, or incompetent, and the United States has not shown the basis for the Secretary's determination that Mr. Kees filed frivolous tax returns.[12]

         The Judgment was adopted by United States District Judge Terry A. Doughty on September 18, 2018.[13] Due to no activity to further prosecute the case, a Notice of Intent to Dismiss was issued on April 30, 2019, after which the United States responded with a "Motion for Extension of Time to Take Appropriate Action by Filing Renewed Motion for Entry of Default Judgment."[14] That motion was granted, [15] and the United States filed the instant renewed motion for default.[16] In the meantime, the case was reassigned to the undersigned.[17]

         Mr. Kees filed a response[18] which was marked deficient by the Clerk of Court. The Notice of Deficiency stated that the only proper response to a motion for default is a motion to set aside the default.[19] Mr. Kees, a pro se defendant, filed a letter[20] which this Court will consider as a motion to set aside the default. The Court notes that the record reflects that Mr. Kees chose not to correct his prior deficient response.[21] Finally, on July 25, 2019, the United States filed its "Opposition of the United States to Motion to Set Aside Entry of Default"[22] which makes the motion for entry of default ripe for consideration.

         LAW AND ANALYSIS

         The Secretary's authority

         The Secretary of the Treasury has the authority to assess federal income tax liabilities, penalties and interest under Internal Revenue Code § § 6211-6213 [26 U.S.C. §§ 6211-6213] and frivolous submission penalties under Internal Revenue Code § 6702 [26 U.S.C. § 6702]. The Secretary follows the deficiency procedures under §§ 6211-6213 when an examination results in a determination that additional tax is owed.

         Internal Revenue Code § 6020 [26 U.S.C. § 6020] permits the Secretary to make a return "from his own knowledge and from such information as he can obtain through testimony or otherwise" Id. when a taxpayer fails to file a required return or makes, willfully or otherwise, a false or fraudulent return(s). The Secretary uses the deficiency procedures under §§ 6211-6213 to proceed to assess the tax liability reflected on such a return. "Any return so made and subscribed by the Secretary shall be prima facie good and i sufficient for all legal purposes."26 U.S.C. § 6020.

         If the Internal Revenue Service ("IRS") is assessing a liability reported by a taxpayer on her/her return, it can proceed under Internal Revenue Code §§ 6201-6205 [26 U.S.C §§ 6201-6205] as opposed to the deficiency procedures under §§ 6211-6213..

         Under 26 U.S.C. § 6321, the United States has a lien for unpaid taxes on all property and rights to property of a taxpayer. This lien arises when an assessment is made and continues until the liability for the amount so assessed, or a judgment against the taxpayer arising out of such liability, is satisfied, or the lien becomes unenforceable by reason of lapse of time. 26 U.S.C. § 6322.United States v. Wilkes, 946 F.2d 1143 (5th Cir. 1991); Texas Commerce Bank-Fort Worth v. United States, 896 F.2d 152, 161 (5th Cir. 1990]. Motion to Set Aside Default In its renewed motion for default, the United States asserted that Mr. Kees is indebted to it for federal income tax liabilities for tax years 2003, 2004, 2005, 2006, 2007, 2008, 2010, and 2012. The United States also seeks penalties for frivolous tax return filings for tax years 2003 and 2005. As of May 31, 2019, the United States submits that Kees owes $403, 255.20.[23]

         The United States asserts that federal valid tax liens arose against all property and rights to property owned by Kees for these unpaid taxes and the two (2) civil penalties on the dates they were assessed. The United States seeks to (1) reduce to judgment the unpaid federal income tax liabilities, (2) foreclose on the Property described in paragraph 9 of the Complaint, (3) have the Property sold in accordance with the law and practice of this Court, (4) distribute the proceeds to the United States, and (5) apply those proceeds to Kees' unpaid federal tax liabilities, with any surplus to be paid to Kees.

         Should the Court grant the motion, the United States requests that it be given the opportunity to submit a proposed Final Judgment and a separate proposed Decree of Foreclosure and Order of Sale ...


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