Opinion
12905-20
03-08-2023
CINDAT MANHATTAN HOTEL PORTFOLIO LLC, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
L. Paige Marvel, Judge.
On January 13, 2023, respondent filed a Motion for Order to Show Cause Why Proposed Facts and Evidence Should Not Be Accepted as Established Pursuant to Rule 91(f) (Rule 91(f) Motion). On January 17, 2023, we granted respondent's Rule 91(f) Motion and ordered petitioner to show cause why the matters set forth in respondent's proposed stipulation of facts (attached to respondent's Rule 91(f) Motion as Exhibit A) should not be accepted as established for purposes of this case. On February 6, 2023, petitioner filed its Response to the Court's Order to Show Cause. On March 2, 2023, respondent filed a Reply to Petitioner's Response to Respondent's Rule 91(f) Motion.
All Rule references are to the Tax Court Rules of Practice and Procedure.
Rule 91(a) provides in part that "[t]he parties are required to stipulate, to the fullest extent to which complete or qualified agreement can or fairly should be reached, all matters not privileged which are relevant to the pending case, regardless of whether such matters involve fact or opinion or the application of law to fact." Rule 91(f)(1) provides in part that if a party has refused or failed to make a stipulation of any matter within the terms of Rule 91, the party proposing to stipulate may file a motion with the Court for an order directing the delinquent party to show cause why the matters covered in the motion should not be deemed admitted for the purposes of the case. The motion shall set forth, inter alia, "the sources, reasons, and basis for claiming, with respect to each such matter, that it should be stipulated". Rule 91(f)(1). The Court may then issue an order to show cause, and the party to whom the order is directed shall file a response showing why the proposed facts and documents should not be deemed admitted. Rule 91(f)(2). "Where the response claims that there is a dispute as to any matter in part or in whole, or where the response presents a variance or qualification with respect to any matter in the motion, the response shall show the sources, reasons, and basis on which the responding party relies for that purpose." Id. If no response is timely filed, or if the response is evasive or not fairly directed to the proposed stipulation or portion thereof, that matter or portion thereof will be deemed stipulated for purposes of the case. Rule 91(f)(3). The Court does not weigh opposing claims of evidence under Rule 91(f) unless evidence is patently incredible, nor does it determine genuinely controverted or doubtful issues of fact in advance of trial. Rule 91(f)(4).
Petitioner concedes that paragraphs 1-11, 21-22, and 30 of respondent's proposed stipulation of facts may be stipulated. Respondent concedes that paragraphs 12-15 of the proposed stipulation of facts need not be stipulated at present. The parties dispute whether paragraphs 16-20 and 23-29 of the proposed stipulation of facts may be deemed accepted as established for purposes of this case.
In Exhibit B of his Rule 91(f) Motion, respondent set forth the sources, reasons, and basis for claiming that, inter alia, paragraphs 16-20 and 23-29 of his proposed stipulation of facts should be stipulated. Exhibit B reflects that the rationale for claiming that the facts and evidence in these paragraphs should be stipulated are certain deemed admissions. Contemporaneously with this Order, we have denied without prejudice petitioner's Motion to Withdraw or Modify the Deemed Admitted Admissions Pursuant to Rule 90(f), filed February 6, 2023, which concerned in part the deemed admissions on which respondent relies in Exhibit B to support the proposed stipulation of facts. Respondent therefore may rely on those deemed admissions as a basis for claiming that the matters set forth in paragraphs 16-20 and 23-29 of his proposed stipulation of facts should be stipulated.
Petitioner argues that paragraphs 16-20 and 23-29 of the proposed stipulation of facts "are either factually inaccurate . . . or an extreme oversimplification of the transaction that only serves to muddy the waters. The facts will come out at trial, and the Court will hear and see in great detail the underlying facts surrounding the interest expense deduction at issue." Nonetheless, Rule 91(f)(2) requires that when a party claims a dispute to any matter in whole or in part, "the response shall show the sources, reasons, and basis on which the responding party relies for that purpose." Petitioner's Response to the Court's Order to Show Cause does not contain any documents or other facts in support of its assertions that paragraphs 16-20 and paragraphs 23-29 of the proposed stipulation of facts are inaccurate, and it does not otherwise set out the sources, reasons, or basis on which petitioner relies for making those assertions. Merely stating that certain matters will be proven later at trial is not a sufficient basis for us not to deem those facts as established for purposes of this case under Rule 91.
In addition, Rule 91(f)(3) provides that a matter or portion thereof will be deemed stipulated when a response is evasive or not fairly directed to the proposed stipulation or portion thereof. Petitioner's Response to the Court's Order to Show Cause is evasive and not fairly directed to paragraphs 16-20 and 23-29 of the proposed stipulation of facts because it does not provide any factual support for the proposition that these paragraphs are inaccurate. Instead, it relies only on an assertion that petitioner will demonstrate the inaccuracy of these facts at trial. More is needed at this stage of the proceedings, which petitioner commenced by filing its Petition on November 5, 2020, to avoid deeming the facts or evidence in paragraphs 16-20 and 23-29 as established. Paragraphs 16-20 and 23-29 concern actions of which petitioner should have knowledge, namely the actions of petitioner itself and related entities. We determine that it is appropriate to deem the matters set forth in paragraphs 16-20 and 23-29 of the proposed stipulation of facts as accepted for purposes of this case.
Petitioner argues that it "would be severely prejudiced by being forced to go to trial under a Stipulation that includes proposed facts that are incorrect, irrelevant, or misleading. Contrarywise, the Respondent suffers no prejudice by having to work cooperatively with the Petitioner in agreeing to facts and documents when they can, and presenting disputed facts and documents at trial when the parties cannot." Petitioners' assertions that the proposed stipulation of facts contain inaccuracies, however, are unaccompanied by any factual support. We also have not seen any indication that respondent has not attempted to work cooperatively with petitioner to agree on a stipulation of facts, as required by Rule 91(a). To the contrary, it is petitioner who has not produced any factual basis for its failure to stipulate. Nonetheless, we recognize that petitioner has recently retained new counsel and that facts or proposed evidence to support petitioner's assertions of inaccuracies in the proposed stipulation of facts may emerge at a later date. This Order is therefore without prejudice as to petitioner's ability to file a motion to vacate or set aside this Order at a later date should facts or proposed evidence emerge supporting petitioner's assertions. Therefore, it is
ORDERED that the Court's January 17, 2023, Order to Show Cause is made absolute in part and discharged in part. It is further
ORDERED that paragraphs 1 through 11 and paragraphs 16 through 30 of the proposed stipulation of facts (including the associated exhibits) attached to respondent's January 13, 2023, Rule 91(f) Motion as Exhibit A are deemed accepted as established. It is further
ORDERED that paragraphs 12 through 15 of the proposed stipulation of facts attached to respondent's January 13, 2023, Rule 91(f) Motion as Exhibit A are not deemed accepted as established.