Opinion
Case No. CV-01-0092-E-BLW.
March 18, 2002.
MEMORANDUM DECISION AND ORDER
INTRODUCTION
The Court has before it the following motions: Defendants' Motion to Dismiss Under Federal Rule of Civil Procedure 12(b)(6) for Failure to State a Claim Upon Which Relief Can Be Granted (Docket No. 8); Defendants' Motion for Court to Open Period of Discovery (Docket No. 16); Defendants' Motion to Stay Pending Appeal (Docket No. 21); United States' Motion to Strike (Docket No. 23); United States' Motion for Entry of Default (Docket No. 25); Defendants' Motion to Compel Discovery from Plaintiff or in the Alternative Motion to Strike the Complaint (Docket No. 29); United States' Motion to Strike (Docket No. 30); Defendants' Motion to Seal (Docket No. 31); Defendants' Motion to Dismiss for Failure to State a Claim Upon Which Relief May Be Granted (Docket No. 32); Defendants' Motion to Dismiss Submitted Under Seal (Docket No. 33); United States' Motion to Strike (Docket No. 34); and Defendants' Motion for Leave to File Supplemental Brief Under Seal (Docket No. 38). The Government brought this action against Clyde W. Stock and Rea B. Stock to reduce to judgment various tax assessments and penalties levied against them and to foreclose the United States' federal tax liens against two parcels of property. The Court has reviewed the record and considered the parties' briefings and is now prepared to issue an order addressing these motions.
BACKGROUND
On March 2, 2001, the United States filed this civil action seeking to reduce to judgment a number of federal tax assessments and civil penalties against defendant-taxpayers Clyde W. Stock and Rea B. Stock, jointly, for the tax years 1993, 1994, 1995, and 1996. See United States' Response to Defendant Clyde W. Stock's Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6) at 2. The civil action also sought to reduce to judgment federal tax assessments and civil penalties against defendant-taxpayer Clyde W. Stock for the tax years 1994, 1995, and 1996. See id. Finally, the civil action sought to foreclose the federal tax liens against two parcels of real property. See id.
ANALYSIS
As a preliminary matter, the Court finds it necessary to direct the Stocks to file an answer to the Government's complaint. There is no indication the Stocks have done so.
1. Stocks' Motion to Dismiss (Docket No. 8).
On May 22, 2001, Defendants (hereinafter "Stocks") filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Because Stocks supported their motion with matters outside the pleadings, the Court shall treat the motion to dismiss as one for summary judgment. See Fed.R.Civ.P. 12(b).
Motions for sununary judgment are governed by Federal Rule of Civil Procedure. Rule summary provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
The party moving for summary judgment has the burden of proving the absence of any genuine issue of material fact, so that the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). "A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the parties' differing versions of the truth." S.E.C v. Seaboard Corp., 677 F.2d 1301, 1306 (9th Cir. 1982).
Once the moving party demonstrates the absence of a genuine issue of material fact, the burden shifts to the nonmoving party to produce evidence sufficient to support a jury verdict in its favor. See Anderson, 477 U.S. at 256-57. In meeting this burden, the non-moving party must go beyond the pleadings and show by affidavits, depositions, answers to interrogatories, or admissions on file that a genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). This evidence must be admissible because "only admissible evidence may be considered by the trial court in ruling on a motion for summary judgment." Beyene v. Coleman Sec. Services, Inc., 854 F.2d 1179, 1181 (9th Cir. 1988).
In ruling on summary judgment motions, the court does not resolve evidence with respect to disputed material facts, nor does it make credibility determinations. See T.W. Electrical Service, Inc. v. Pacific Electrical Contractors Ass'n., 809 F.2d 626, 630 (9th Cir. 1987). Furthermore, all inferences must be drawn in the light most favorable to the nonmoving party. See id. In other words, "if a rational trier of fact might resolve the issue in favor of the nonmoving party, summary judgment must be denied." Id. at 631. A mere "scintilla of evidence will not suffice to defeat a properly supported motion for summary judgment, see Anderson, 477 U.S. at 252; rather, the opposing party must introduce "significant probative evidence" supporting his or her complaint. Id. at 249 (quoting First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 290 (1968)).
After reviewing the record and drawing all inferences in the light most favorable to the Government, the Court finds the Stocks have not met their burden of proving the absence of any genuine issue of material fact. Federal tax liens do not have to be physically signed by the Secretary of the Treasury in order to be valid. Revenue Officer James Mason signed the notices of federal tax lien provided to the Stocks. The Secretary's authority to enforce the Internal Revenue laws is delegated to revenue officers. See 26 U.S.C. § 7701 (a)(11)(B) and (a)(12)(A)(i); 26 U.S.C. § 6331; 26 C.F.R. § 301.7701-9. It is, therefore, within the scope of Mr. Mason's official authority to collect taxes and file notices of federal tax lien against taxpayers that are delinquent. See Bershad v. Wood, 290 F.2d 714, 716-17 (9th Cir. 1961).
Turning to the federal income tax assessments, the Government routinely uses Certificates of Assessments and Payments to prove tax assessments have been made. See Geiselman v. United States, 961 F.2d 1, 6 (1st Cir. 1992). The Certificates serve as presumptive proof of a valid assessment. See Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993). Finally, the Court finds issues of fact exist as to whether the federal tax liens attach to the two parcels of real property identified in the Complaint. Based on the evidence, a rational trier of fact could determine that the federal tax liens and the federal income tax assessments are valid and that the Stocks are liable for the unpaid taxes, penalties, and interest shown on the Certificates of Assessments and Payments.
2. Stocks' Motion for Court to Open Period of Discovery (Docket No. 16).
The Stocks have moved the Court to allow discovery prior to proceeding to trial. The Court shall grant the motion. The Federal Rules of Civil Procedure provide for discovery under Rule 26. The period of discovery will be established by the Court's forthcoming scheduling order, which will be issued after the telephone scheduling conference takes place. The Court will schedule that conference right away. In compliance with Federal Rule of Civil Procedure 26(f), the parties will be directed to hold a meet-and-confer conference at least fourteen (14) days prior to the scheduling conference.
3. Stocks' Motion to Stay Pending Appeal (Docket No. 21).
On September 4, 2001, the Stocks filed a motion to stay this action pending appeal in the case of Clyde W. Stock v. Commissioner, CV-00-467-E-BLW (D. Id.). The Stocks previously moved this Court to stay this action (Docket No. 14) for the same reasons they are asking the Court to stay this action now. The Court denied the previous motion to stay in its Memorandum Decision and Order, filed August 15, 2001 (Docket No. 20). For the same reasons as before, the Court denies the pending motion to stay. The Court's August 15, 2001 Memorandum is incorporated herein by reference.
4. United States' Motion to Strike (Docket No. 23).
The Government has moved this Court to strike the Stocks' motion to stay because the Court has already ruled upon a similar motion. Since the Court is going to deny the motion to stay the pending appeal, the Court will deem this motion moot.
5. United States' Motion for Entry of Default (Docket No. 25).
In order to resolve the United States' Motion for Entry of Default, the Court must determine which Defendants are represented in this matter. In each of the motions filed by Defendants, Clyde W. Stock and Rea B. Stock have attached their signatures indicating they are representing themselves in this action pro se. A non-attorney may only appear on his or her own behalf. See C.E. Pope Equity Trust v. United States, 818 F.2d 696, 697 (9th Cir. 1987). The Government argues this rule of law precludes the Stocks from appearing on behalf of The Dollar Trust and Corporation Sole at Common Law, a Church.
In Defendants' motion to dismiss (Docket No. 8), Rea B. Stock failed to attach her signature; however, the Stocks filed Errata to Motion to Dismiss (Docket No. 13) in order to correct that oversight.
If the pro se litigant is a beneficiary of The Dollar Trust, then it is possible for him or her to represent the trust. See id. Based on the record, the Court was unable to make this determination. Once the Government provides evidence that the Stocks are not beneficiaries of The Dollar Trust, the Government should move the Court again to enter default against The Dollar Trust.
Unincorporated associations and corporations must appear through an attorney. See Church of the New Testament v. United States, 783 F.2d 771, 773 (9th Cir. 1986). Because Corporation Sole at Common Law, A Church is represented by the Stocks, the Court will treat that organization as not having been represented by counsel in this litigation. Federal Rule of Civil Procedure 55(a) states that whenever a party has been served and fails to file an answer or otherwise plead, the clerk shall enter the party's default. Because Corporation Sole at Common Law, A Church is not represented by counsel, it has, in effect, not filed an answer or otherwise pled in this case. Since the Stocks are pro se litigants and the Court is only now informing them that they must obtain an attorney to represent Corporation Sole at Common Law, A Church, the Court will provide the Stocks until April 30, 2002, to obtain an attorney for that organization. By that same deadline, the attorney must file an answer or otherwise defend this action. If this deadline is not met, the Government can move the Court again to enter default against Corporation Sole at Common Law, A Church.
Stocks argue the Government cannot claim Corporation Sole at Common Law, A Church is both an alter ego of the Stocks and a valid, existing entity that must be represented by counsel. That stance, they contend, "is much like that of having their cake and eating it too." The Court does not find this argument persuasive. In fact, this argument cuts both ways. The Stocks want to be protected from liability by using a corporation as a shield, but they do not want to follow Ninth Circuit law by obtaining counsel to represent that organization. In any event, the Court finds the Government's argument is appropriate. The Court will deny this motion.
6. Stocks' Motion to Compel Discovery from Plaintiff or in the Alternative Motion to Strike the Complaint (Docket No. 29).
The Court has addressed this issue by ruling on Stocks' Motion for Court to Open Period of Discovery (Docket No. 16); therefore, the Court will deem this motion moot.
7. United States' Motion to Strike (Docket No. 30).
The Court has addressed this issue by ruling on the United States' Motion for Entry of Default (Docket No. 25); therefore, the Court will deem this motion moot.
8. Stocks' Motion to Seal (Docket No. 31).
On December 31, 2001, the Stocks filed a motion to seal their motion to dismiss for failure to state a claim (Docket No. 32) and to seal their motion to dismiss (Docket No. 33). The moving party has the burden to overcome the presumption in favor of public access to the records of judicial proceedings. See United States v. Amodeo, 71 F.3d 1044, 1047 (2d Cir. 1995). In this case, the Stocks have not provided a reason to support their motion to seal; therefore, the Court will deny the motion.
9. Stocks' Motion to Dismiss for Failure to State a Claim (Docket No. 32).
Courts may not dismiss a complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) unless it appears "to a certainty that the plaintiff would not be entitled to relief under any set of facts that could be proved." Rothman v. Vedder Park Mgt., 912 F.2d 315, 316 (9th Cir. 1990). In addition, when considering a motion to dismiss, courts must "accept the allegations of the complaint as true and construe them in the light most favorable to the plaintiff." Nasa v. Hiraoka, 920 F.2d 1451, 1455 (9th Cir. 1990). Having reviewed the Government's Complaint, the Court finds the Government has stated claims upon which relief could be granted under the law. These include that the Stocks are liable to the United States for unpaid federal income taxes, that the Government holds valid liens against two parcels of land belonging to the Stocks, and that those parcels of land were fraudulently transferred. The Court will deny the motion to dismiss.
10. Stocks' Motion to Dismiss Submitted Under Seal (Docket No. 33)
The Court has addressed this issue by ailing on the Stocks' Motion to Dismiss for Failure to State a Claim (Docket No. 32); therefore, the Court will deem this motion moot.
11. United States' Motion to Strike (Docket No 34).
The Court has addressed this issue by ruling on the United States' Motion for Entry of Default (Docket No. 25); therefore, the Court will deem (his motion moot.
12. Stocks' Motion for Leave to File Supplemental Brief Under Seal (Docket No. 38),
The moving party has the burden to overcome the presumption in favor of public access to the records of judicial proceedings. See Amodeo, 71 F.3d at 1047. In this case, the Court finds that the Stocks have not overcome that burden. The Court will grant the motion for leave to file a supplemental brief, but the Court will deny the motion to file it under seal.
ORDER
NOW THEREFORE IT IS HEREBY ORDERED THAT the Stocks' Motion to Dismiss wider Federal Rule of Civil Procedure (12)(b)(6) for Failure to State a Claim Upon Which Relief Can Be Granted (Docket No. 8) shall be, and the same is hereby, DENIED.
IT IS FURTHER ORDERED THAT the Stocks' Motion for Court to Open Period of Discovery (Docket No. 16) shall be, and the same is hereby, GRANTED. The period of discovery will be established by the Court's forthcoming scheduling order. In compliance with Federal Rule of Civil Procedure 26 (f), the parties are directed to hold a meet-and-confer conference at least fourteen (14) days prior to the upcoming telephone scheduling conference.
IT IS FURTHER ORDERED THAT the Stocks' Motion to Stay Pending Appeal (Docket No. 21) shall be, and the same is hereby, DENIED.
IT IS FURTHER ORDERED THAT the United States' Motion to Strike (Docket No. 23) shall be, and the same is hereby, denied MOOT.
IT IS FURTHER ORDERED THAT the United States' Motion for Entry of Default Against Defendants (Docket No. 25) shall be, and the same is hereby, DENIED. Once the Government provides evidence that the Stocks are not beneficiaries of The Dollar Trust, the Government should again move the Court to enter default against The Dollar Trust. The Court will provide the Stocks until April 30, 2002, to obtain an attorney for Corporation Sole at Common Law, A Church. By that same deadline, the attorney must tile an answer or otherwise defend this action. If this deadline is not met, the Government can move the Court again to enter default against Corporation Sole at Common Law, A Church.
IT IS FURTHER ORDERED THAT the Stocks' Motion to Compel Discovery from Plaintiff or in the Alternative Motion to Strike the Complaint (Docket No. 29) shall be, and the same is hereby, deemed MOOT.
IT IS FURTHER ORDERED THAT the United States' Motion to Strike (Docket No. 30) shall be, and the same is hereby, deemed MOOT.
IT IS FURTHER ORDERED THAT the Stocks' Motion to Seal (Docket No. 31) shall be, and the same is hereby, DENIED.
IT IS FURTHER ORDERED THAT the Stocks' Motion to Dismiss for Failure to State a Claim (Docket No. 32) shall be, and the same is hereby, DENIED.
IT IS FURTHER ORDERED THAT the Stocks' Motion to Dismiss Submitted Under Seal (Docket No. 33) shall be, and the same is hereby, deemed MOOT.
IT IS FURTHER ORDERED THAT the United States' Motion to Strike (Docket No. 34) shall be, and the same is hereby, deemed MOOT.
IT IS FURTHER ORDERED THAT the Stocks' Motion for Leave to File Supplemental Brief Under Seal (Docket No. 38) shall be, and the same is hereby, GRANTED in part and DENTED in part. The Court grants the motion to file the supplemental brief, but denies the motion to file it under seal.
IT IS FURTHER ORDERED THAT Stocks shall file an answer to the Government's Complaint twenty-one (21) days prior to the telephone scheduling conference.