Opinion
3:21-cv-01869-JR
08-11-2023
SUSAN CYR, Plaintiff, v. UNITED STATES, Defendant. UNITED STATES, Counter- and Cross-Claim Plaintiff, v. SUSAN CYR, individually and in her capacity as beneficiary and personal representative of the estate of Steven M. Cyr, STATE OF OREGON, WASHINGTON COUNTY, KNEZ INSULATION COMPANY LLC, SAMPSON CONSTRUCTION COMPANY INC., WEST COAST BANK, and WELLS FARGO BANK, Counter- and Cross-Claim Defendants,
FINDINGS AND RECOMMENDATION
Jolie A. Russo United States Magistrate Judge.
Defendant and counter/crossclaim plaintiff the United States moves to appoint plaintiff and counter/crossclaim defendant Susan Cyr as the personal representative for the Estate of Steven M. Cyr pursuant to the All Writs Act, 28 U.S.C. § 1651, solely for the purposes of this litigation. For the reasons set forth below, the United States' motion should be granted.
BACKGROUND
Ms. Cyr and Steven Cyr began dating in 2001; they moved in together in 2011 and married in 2012. Cyr Aff. ¶¶ 9, 12 (doc. 71-1).
In April 2013, a criminal indictment was filed against Mr. Cyr in this District for Two Counts of Fraud and False Statements relating to his 2006 and 2007 tax returns. Cross-cl. & Countercl. ¶ 42 (doc. 28). In October 2013, Mr. Cyr plead guilty to Count Two of the Indictment and judgement was entered against him for the amount of restitution owed to the United States. Id. at ¶¶ 43-44.
In September 2016, Mr. Cyr filed a petition in the U.S. Tax Court for a redetermination of the deficiencies and related penalties assessed by the Internal Revenue Service. Id. at ¶ 45. Mr. Cyr died in April 2017. Compl. ¶ 6 (doc. 1-1). Following Mr. Cyr's death, Ms. Cyr and the United States jointly moved to substitute Ms. Cyr as Mr. Cyr's “successor in interest” - i.e., in Ms. Cyr's own words, “to act in the role of what was essentially that of ‘personal representative.'” Id. at ¶ 7.
In particular, the parties stipulated before the U.S. Tax Court that:
At the time of his death, [Mr. Cyr] was married to and residing with Susan L. Cyr . . . No probate proceedings have been filed with the State of Oregon or any other State and Susan Cyr has stated that she has no intention of filing any probate proceedings . . . [Mr. Cyr's 2014] will grants the personal representative with the power to settle and compromise any and all claims in favor of or against his estate . . . [Mr. Cyr's] will names Susan Cyr as his personal representative and bequests [his] entire estate to Susan Cyr, making her the sole heir . . . The parties request that the Court substitute Susan Cyr as successor-in-interest in this case.Def.'s Mot. Appoint Personal Rep. Ex. 1 (doc. 60-1); see also Def.'s Mot. Appoint Personal Rep. Ex. 2 (doc. 60-2) (Mr. Cyr's will).
Ms. Cyr now maintains via these proceedings that Mr. Cyr's will “appears to fail to meet the formalities required under Oregon Law [to] be proved and admitted to probate [so] it is possible that the Estate would be distributed under the laws of intestacy,” pursuant to which she would be “entitled to one-half of the net intestate estate” and Mr. Cyr's two children would share in the remaining half. Id.; but see id. at 16 (acknowledging that there are other methods to “prove” a will beyond notarization); Lund v. Chase Bank, 2014 WL 2949344, *4 (D. Or. June 26, 2014) (the plaintiff “cannot obtain an advantage in these proceedings by taking positions that contravene those asserted in [a prior lawsuit]”) (citing Milton H. Greene Archives, Inc. v. Marilyn Monroe LLC, 692 F.3d 983, 993 (9th Cir. 2012)).
Ms. Cyr and the United States subsequently resolved Mr. Cyr's tax case, which assessed tax deficiencies and penalties against Mr. Cyr in the collective amounts of $105,370 and $79,027.50, respectively. Compl. Ex. 2 (doc. 1-1).
On November 25, 2021, Ms. Cyr initiated a quiet title claim in Washington County Circuit Court, alleging that the United States' tax lien on their formally shared residence was invalid: “Upon [Mr. Cyr's] death, any interest that he had in the Real Property was extinguished . . . due to the right of survivorship provision in the deed [recorded in 2011 such that Ms. Cyr] has been the sole owner of the Real Property since April 2017.” Compl. ¶ 15 (doc. 1-1).
The United States timely removed Ms. Cyr's case to this Court pursuant to 28 U.S.C. § 1442(a)(1) and filed its Answer, along with a cross/counterclaim to: (1) reduce federal tax assessments against Mr. Cyr to judgment, (2) establish that Ms. Cyr is the nominee or alter ego of Mr. Cyr, (3) set aside any purported transfer to or encumbrance by Ms. Cyr as fraudulent, and (4) determine the validity and priority of all liens and other interests and order foreclosure of federal tax liens on the subject residence.
On May 19, 2023, the United States filed the present motion. Briefing was completed in regard to that motion on August 4, 2023.
STANDARD
The All Writs Act authorizes federal courts to “issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” 28 U.S.C. § 1651(a). “The broad power conferred by the All Writs Act is aimed at achieving ‘the rational ends of law.'” United States v. Catoggio, 698 F.3d 64, 67 (2d Cir. 2012) (quoting United States v. N.Y. Tel. Co., 434 U.S. 159, 172 (1977)). As such, “courts have significant flexibility in exercising their authority under the Act.” Id.
DISCUSSION
The United States argues that Ms. Cyr should be appointed as the personal representative of Mr. Cyr's estate for the limited purpose of resolving the underlying claims because “[i]ssuing the requested writ is necessary and appropriate in aid of the Court's jurisdiction,” “this case cannot move forward until a personal representative is appointed,” and “[t]he requested writ is consistent with Oregon probate law and does not run afoul of the probate exception to federal jurisdiction.” Def.'s Mot. Appoint Personal Rep. 2 (doc. 60). Alternatively, the United States contends Ms. Cyr can and should be substituted “as distributee and ‘successor-in-interest' to Mr. Cyr, which unquestionably is based on her own representations.” Id. at 8.
The precedent on which the United States relies to support its alternate argument concerns Fed.R.Civ.P. 25(a), such that the Court does not find these cases to be particularly instructive or persuasive. See, e.g., Def.'s Mot. Appoint Personal Rep. 8-9 (doc. 60); see also Def.'s Reply to Mot. Appoint Personal Rep. 4 (doc. 73) (United States recognizing that “Rule 25(a) does not apply directly to this circumstance”).
Ms. Cyr opposes the United States' motion on the grounds that she is not the beneficiary of Mr. Cyr's estate. See Pl.'s Resp. to Mot. Appoint Personal Rep. 5 (doc. 71) (“[a]s far as Susan is aware, the Estate is insolvent, which means its only potential beneficiaries are Steven's creditors”). Additionally, Ms. Cyr argues that the United States' motion is inapt because: (1) “[u]nder Oregon law, a personal representative may not be appointed without also admitting the decedent's estate into probate”; (2) she is “unwilling” and “not suitable” since “her interests are adverse to the interests of the Estate and its creditors”; (3) “there exists no law that imposes a duty on Susan to be Personal Representative”; (4) it “[r]uns afoul of the probate exception to federal jurisdiction” and, by extension, “would violate Susan's Fifth Amendment rights”; and (5) “this case can certainly move forward without the Requested Writ.” Id. at 5-6.
As a preliminary matter, Ms. Cyr's efforts, via her response and surreply, to argue the merits of her quiet title claim are premature. Discovery is ongoing and no substantive motions have been filed. As such, the sole issue before the Court at this stage in the proceedings is whether it is appropriate to appoint her as the personal representative of Mr. Cyr's estate under the All Writs Act for the limited purpose of resolving this litigation. To that end, it is beyond dispute that original jurisdiction exists under 28 U.S.C. § 1345 and/or 26 U.S.C. § 7402(a).
These statutes vest district courts with original jurisdiction over civil actions “commenced by the United States” or that “may be necessary or appropriate for the enforcement of the internal revenue laws.” 28 U.S.C. § 1345; 26 U.S.C. § 7402(a).
I. Whether the Appointment of a Personal Representative is Necessary and Agreeable
According to Ms. Cyr, this case can move forward without the requested relief because the United States can “petition the probate court to appoint a personal representative.” Pl.'s Resp. to Mot. Appoint Personal Rep. 34 (doc. 71). However, as the United States aptly notes, this Court is asked only to “rule on specific questions related to the property at issue in the case Mrs. Cyr brought, not ‘assume general jurisdiction' over any state proceeding.” Def.'s Reply to Mot. Appoint Personal Rep. 4 (doc. 73). Stated differently, undertaking the lengthy state probate process simply to appoint an appropriate individual to defend against the United States' claims is neither obligatory nor an efficient use of time.
Indeed, it is undisputed that at least some of the United States' counts are asserted directly against Mr. Cyr's estate. As a result, this case cannot go forward until a personal representative has been appointed. See LN Mgmt., LLC v. JPMorgan Chase Bank, N.A., 957 F.3d 943, 956 (9th Cir. 2020) (an estate “is not a person or a legal entity and cannot sue or be sued; an estate can only act by and through a personal representative and therefore any action must be brought by or against the executor or representative of the estate”) (internal quotation marks and citations omitted).
Contrary to Ms. Cyr's assertion (and as discussed in greater detail below), the Court is not attempting via these proceedings to bypass Oregon's statutory probate procedures by allowing the United States to go forward with its counter and cross claims. Nevertheless, Oregon probate law is not inconsistent with the requested relief. That is, Oregon law authorizes a personal representative to, amongst other things, “[p]rosecute or defend actions, claims or proceedings in any jurisdiction for the protection of the estate and of the personal representative in the performance of duties as personal representative.” Or. Rev. Stat. § 114.305(19). Moreover, “upon the filing of the petition [to appoint a personal representative and probate a will under Or. Rev. Stat. § 113.035], if there is no will or if there is a will and it has been proved, the court shall appoint a qualified person the court finds suitable as personal representative, giving preference [to the] personal representative named in the will.” Or. Rev. Stat. § 113.085(1)(a).
And, while Oregon law generally vests the appointment of personal representatives with the probate court, precedent makes clear that district courts may make such appointments under the All Writs Act in furtherance of federal tax litigation. See Murphy v. United States, 2019 WL 13043047, *1-2 (N.D. Tex. Oct. 16, 2019) (granting the United States' motion to appoint a personal representative for the deceased's estate pursuant to the All Writs Act where the United States asserted counterclaims against the deceased and the plaintiff in a case surrounding overlapping tax liabilities, even though the deceased's will had not been submitted to probate); United States v. Pansier, 2020 WL 8299753, *1-2 (E.D. Wis. Dec. 7, 2020) (granting the United States' motion to appoint a personal representative for the deceased's estate, for which a “probate case ha[d] not been opened,” pursuant to the All Writs Act “for the limited purpose of defending against the Government's [tax] claims”).
II. Whether Ms. Cyr's Interests are Adverse to the Estate
Ms. Cyr contends that she cannot act as personal representative because doing so would force her “to sacrifice the interest of the estate, if any, in this property, or her own interests, and that is expecting too much of human nature to assume the latter.” Pl.'s Resp. to Mot. Appoint Personal Rep. 29-30 (doc. 71). In furtherance of this argument, Ms. Cyr offers the following sworn statement: “I have adverse interests to the Estate of Steven M. Cyr, which make me unsuitable to serve as personal representative . . . I do not believe that I can [stand indifferent between the estate and claimants to the property].” Cyr Aff ¶ 34 (doc. 71-1).
Initially, Ms. Cyr's sworn statement, which lacks any supporting facts, is insufficient to either establish a conflict of interest or otherwise render her limited purposes appointment improper. Cf. F.T.C. v. Publ'g Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir. 1997) (“[a] conclusory, self-serving affidavit, lacking detailed facts and any supporting evidence, is insufficient to create a genuine issue of material fact”); see also Bogner v. R & B Sys., Inc., 2011 WL 1832750, *3 (E.D. Wash. May 12, 2011) (court “is not bound by [a declarant's] legal conclusions” and “declarations [must only be considered] for the facts contained therein”).
In addition, the record before the Court intimates that Ms. Cyr's interests are aligned with those of Mr. Cyr's estate. If Mr. Cyr's will is valid, then she stands to inherit his entire estate (after debts and taxes). If Mr. Cyr's will is invalid, then she still shares in a substantial portion of his net estate under Oregon intestacy law. Or. Rev. Stat. § 112.025. It is undisputed that the United States has also asserted claims against Ms. Cyr in her personal capacity and in her capacity as a beneficiary of Mr. Cyr's estate in light of her claimed interest in their formerly shared residence. Cross-cl. & Countercl. ¶¶ 6, 38 (doc. 28). And Ms. Cyr's own complaint alleges that she was Mr. Cyr's wife and continues to reside in the subject property.
Accordingly, Ms. Cyr does not have interests “so antagonistic” to Mr. Cyr's Estate “that they cannot be represented by the same person.” Mills v. Mills, 22 Or. 210, 212. 29 P. 443 (1892); see also Wharff v. Rohrback, 152 Or.App. 68, 72, 952 P.2d 87 (1998) (a personal representative in probate court “has a fiduciary duty to the beneficiaries of the estate”). In fact, the U.S. Tax Court proceedings make clear Mr. Cyr nominated Ms. Cyr as his personal representative in his will, and that she is his primary heir.
While Ms. Cyr is thus correct that “[a] spouse has no duty under Oregon statute, federal statute, or common law to be the personal representative of their deceased spouse's estate,” she cannot avoid a global resolution of the issues and claims attendant to her request to quiet title by broadly resisting a limited appointment. Pl.'s Resp. to Mot. Appoint Personal Rep. 14 (doc. 71). The precedent on which Ms. Cyr relies (Plum Creek Lumber Co. v. Hutton, 608 F.2d 1283 (9th Cir. 1979)) concerned significantly different circumstances - namely, the U.S. Secretary of Labor's efforts to force an employer to rescind a company policy so that the Occupational Safety and Health Administration could more efficiently conduct an investigation - and therefore is not instructive in the present case.
III. Whether the Probate Exception Applies
While federal courts lack jurisdiction to probate a will or administer an estate, it is long-established that they can adjudicate claims against a decedent's estate “so long as the federal court does not interfere with the probate proceedings or assume general jurisdiction of the probate or control of the property in the custody of the state court.” Markham v. Allen, 326 U.S. 490, 494 (1946). The Supreme Court has since clarified that “interference” with probate proceedings is “essentially a reiteration of the general principle that, when one court is exercising in rem jurisdiction over a res, a second court will not assume in rem jurisdiction over the same res.” Marshall v. Marshall, 547 U.S. 293, 311 (2006); see also Goncalves By & Through Goncalves v. Rady Children's Hosp. San Diego, 865 F.3d 1237, 1253 (9th Cir. 2017) (explaining that this principle “has little to do with probate; rather, it is an application of the prior exclusive jurisdiction doctrine”).
Following Marshall, most appellate courts considering the probate exception, including the Ninth Circuit, have emphasized the narrowness of this exception, finding it applicable only where the federal court is actually “endeavoring to (1) probate or annul a will, (2) administer a decedent's estate, or (3) assume in rem jurisdiction over property that is in the custody of the probate court.” Goncalves, 865 F.3d at 1252 (citation and internal quotations omitted); see also Silk v. Bond, 65 F.4th 445, 450-57 (9th Cir. 2023) (collecting cases).
Specifically in regard to the latter, “the probate exception does not divest a federal court of subject-matter jurisdiction unless a probate court is already exercising in rem jurisdiction over the property at the time that the plaintiff files her complaint in federal court.” Chevalier v. Estate of Barnhart, 803 F.3d 789, 804 (6th Cir. 2015); see also Curtis v. Brunsting, 704 F.3d 406, 409-10 (5th Cir. 2013) (“[a]s a threshold matter, the probate exception only applies if the dispute concerns property within the custody of a state court”); United States v. Hyland, 2007 WL 836801, *1 n.1 (W.D. Wash. Mar. 14, 2007) (generally observing that “the probate exception to federal court jurisdiction is unlikely to be implicated if the Court appoints a representative for the limited purpose of this litigation and while no probate matter is proceeding or contemplated”).
Here, the United States' counter/crossclaims do not require this Court to probate or annul Mr. Cyr's will, or administer Mr. Cyr's estate. Indeed, Mr. Cyr died in 2017, but no estate has been opened for the decedent. Further, Ms. Cyr has made it clear that she has no intention of initiating any kind of probate proceeding on Mr. Cyr's behalf. In other words, there were no probate proceedings anticipated or pending in state court at the time this case was commenced. It is also worth noting that litigation surrounding federal tax deficiencies and liens is commonplace in federal court.
Under these circumstances, the probate exception is simply not implicated as a bar to federal jurisdiction. Cf. Chevalier, 803 F.3d at 800-04 (probate exception did not bar quasi in rem foreclosure claim where, “at the time [the plaintiff] filed the federal complaint, the property that she seeks to foreclose was not in the custody of a state probate court”); Goncalves, 865 F.3d at 1252 (probate exception did not apply where, amongst other reasons, state court proceedings concerning the underlying property had been initiated but not finally resolved, such that “[t]he property was held by Goncalves's attorney in a trust account”); see also Silk, 65 F.4th at 452-54 (rejecting the defendant's argument premised on the state's comprehensive statutory scheme regulating estates, observing “the question is not whether we would somehow be duplicating the function of the probate court, or deciding a question the probate court will (or might) need to decide” and otherwise noting that “neither ordering an appraisal nor entering a money judgment against the Estate would ‘dispose' of assets in the control of the [state court]”).
In sum, the United States made income tax assessments against Mr. Cyr prior to his death and justice requires this case be permitted to proceed to adjudication against his estate. The Court, however, takes special care to note that this is not a probate proceeding. That is, the Court will not probate Mr. Cyr's will, administer Mr. Cyr's estate, or dispose of property in the custody of any state probate court. Rather, the Court appoints plaintiff as personal representative for Mr. Cyr's estate merely for the limited purpose of defending against the United States' claims.
Yet the United States has not cited, and the Court is not aware of, any authority that requires Ms. Cyr to act in this capacity. Namely, both Mr. Cyr's will and Oregon law contemplate that an individual may decline a personal representative appointment. Thus, in the event Ms. Cyr refuses her appointment, the personal representative shall be selected from the following list, in this order of priority:
Ms. Cyr's filings make clear that she is unwilling to serve as the personal representative of Mr. Cyr's estate, but these objections are made in the context of opposing the United States' motion and otherwise arguing that the United States' claims against the estate cannot go forward absent a personal representative.
1. Lindsay A. Siler (Mr. Cyr's daughter),
2. Miles L. Cyr (Mr. Cyr's son), or
3. Any other person.Or. Rev. Stat. § 113.085; Def.'s Mot. Appoint Personal Rep. Ex. 2 (doc. 60-2); see also Pansier, 2020 WL 8299753 at *2; Murphy, 2019 WL 13043047 at *2 (providing for alternate personal representative appointments consistent with the preferences afforded under state law upon receipt of the surviving spouse's refusal). The United States is directed to effectuate service on each individual in turn. If the served party accepts the appointment, they must file a pleading that responds to the United States' Amended Answer, Crossclaim, and Counterclaim within 21 days of being served. Refusal of the appointment may be effectuated by filing a statement with the Court. Any person who refuses this appointment is directed to identify any other individuals who might qualify for appointment as personal representative of the Estate of Steven M. Cyr under Oregon law.
RECOMMENDATION
For the foregoing reasons, the United States' Motion to Appoint a Personal Representative for the Estate of Steven M. Cyr (doc. 60) should be granted as stated herein. Ms. Cyr's request for oral argument is denied as unnecessary. Any refusal of this appointment must be filed within ten days of the District Judge's order.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.