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United States v. Denneny

United States District Court, Third Circuit

December 18, 2013

UNITED STATES OF AMERICA,
v.
MICHAEL DENNENY, et al.

MEMORANDUM

JUAN R. SANCHEZ, District Judge.

The United States of America brings this action pursuant to 26 U.S.C. §§ 7401 and 7403 to foreclose its federal tax liens against real property located at 4900 Horseshoe Pike in Downingtown, Pennsylvania (the Property). Defendant Michael Denneny, the Property's former owner, failed to pay federal income taxes, resulting in the tax liens at issue. After the tax liens arose and attached to the Property, Defendant Robert Thomas purchased the Property at an upset tax sale in Chester County, where the Property is located. The United States filed this action in July 2012, naming as defendants both Denneny, whose tax liability is at issue, and Thomas, the current owner of the Property. Denneny failed to answer the Complaint, and in April 2013, this Court entered a default judgment against him, precluding him from asserting any interest in the Property. The United States now asks this Court to grant summary judgment in its favor, recognizing the validity of its tax liens against the Property and ordering the sale of the Property to satisfy the liens, with any excess proceeds over the expense of the sale and amount of the liens, going to Thomas. For the reasons set forth below, the motion will be granted.

BACKGROUND[1]

On January 20, 1995, Denneny purchased the Property for $114, 000. See Gov't Ex. 103. Between February 2006 and September 2008, a delegate of the Secretary of the Treasury made assessments of federal income taxes, penalties, and interest against Denneny for the 2001, 2002, and 2003 tax years. In February 2006, Denneny was assessed a total of $25, 327 in taxes and $19, 555 in penalties and interest for tax year 2001, and $23, 122 in taxes and $14, 406 in penalties and interest for tax year 2002. Gov't Ex. 101, ECF No. 22-3 at 7, 13; see also Stumpo Decl. ¶ 10. In February 2007, Denneny was assessed a total of $11, 202 in taxes and $7, 280 in penalties and interest for tax year 2003. Gov't Ex. 101, ECF No. 22-3 at 2; see also Stumpo Decl. ¶ 10. Additional penalties were assessed against Denneny for the 2001 and 2002 tax years in October 2007, and for the 2003 tax year in September 2008. See Gov't Ex. 101, ECF No. 22-3 at 2, 7, 13 (reflecting assessment of additional penalties of $380 for tax year 2001, $1, 734 for tax year 2002, and $896 for tax year 2003).[2]

In accordance with 26 U.S.C. § 6303, Denneny was given notice and demand for payment of the foregoing assessments, Stumpo Decl. ¶ 12; however, he has failed to pay the amounts owed. As of May 27, 2013, the unpaid balance of the assessments, including interest accrued since the assessments were made, was $118, 596.56, consisting of $52, 501.16 for tax year 2001, $46, 869.27 for tax year 2002, and $19, 226.13 for tax year 2003. Id. ¶ 11; Gov't Ex. 102.[3]

On May 22, 2009, the United States filed a notice of federal tax liens for the unpaid balance of the assessments for tax years 2001, 2002, and 2003 against Denneny with the Chester County prothonotary.[4] Stumpo Decl. ¶ 13; Gov't Ex. 104.

On September 13, 2010, Thomas purchased the Property for $17, 067.38 at a Chester County upset tax sale.[5] Gov't Ex. 105. A deed reflecting Thomas's purchase of the Property was recorded on February 7, 2011. Id.

In July 2012, the United States commenced this action to foreclose its tax liens against the Property by filing a complaint against Denneny and Thomas.[6] Thomas, proceeding pro se, answered the complaint in October 2012. Because the Government was unable to locate Denneny, it filed a motion to serve him by publication, which this Court granted in November 2012. After service by publication was made, the Court held a Rule 16 conference on February 22, 2013, at which Thomas appeared but Denneny did not. Following the Rule 16 conference, the Court entered a scheduling order, setting a discovery deadline of April 29, 2013.

When Denneny failed to respond to the complaint, the United States pursued default remedies against him. On April 22, 2013, this Court granted the United States' motion for default judgment and directed the Clerk of Court to enter judgment against Denneny precluding him from asserting any interest in the Property.

On May 30, 2013, after the end of the discovery period, the United States filed the instant motion for summary judgment. Thomas filed a response on June 24, 2013.

DISCUSSION

Under Federal Rule of Civil Procedure 56, a court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "Material" facts are those facts "that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

"The initial burden is on the party seeking summary judgment to point to the evidence which it believes demonstrate[s] the absence of a genuine issue of material fact.'" United States v. Donovan, 661 F.3d 174, 185 (3d Cir. 2011) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). If the moving party satisfies this initial burden, "the nonmoving party must come forward with specific facts showing that there is a genuine issue for trial, " which requires the nonmoving party to do more than "simply show that there is some metaphysical doubt as to the material facts." Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)). A party asserting that a fact is genuinely disputed must support the assertion by citing to particular record materials, by "showing that the materials cited [by the moving party] do not establish the absence... of a genuine dispute, " or by showing the moving party "cannot produce admissible evidence to support the fact." Fed.R.Civ.P. 56(c)(1). "If a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact..., the court may... consider the fact undisputed for purposes of the motion." Fed.R.Civ.P. 56(e)(2).

The United States seeks to foreclose its tax liens pursuant to 26 U.S.C. § 7403, which permits a district court to order a sale of property subject to a federal tax lien to satisfy the lien.[7] Under the federal tax lien statute, "[i]f any person liable to pay any tax neglects or refuses to pay the same after demand, the amount... shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." 26 U.S.C. § 6321. This statutory lien arises at the time the assessment is made and continues until the liability for the assessed amount "is satisfied or becomes unenforceable by reason of lapse of time." Id. § 6322; see also In ...


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