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United States v. Harold

United States District Court, E.D. Michigan, Southern Division

June 21, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
PATRICE L. HAROLD, LESLIE DRURY, as SUCCESSOR TRUSTEE of the SARA ROSE REVOCABLE LIVING TRUST u/a/d May 21, 1997, as may be now or hereafter amended, STATE OF MICHIGAN, and TREASURER OF WAYNE COUNTY, Defendants. Tax Year Assessment Date Assessment Type Assessed Amount Balance Due as of 1/5/2018

          Mona K. Majzoub United States Magistrate Judge

          OPINION AND ORDER GRANTING PLAINTIFF UNITED STATES OF AMERICA'S MOTION FOR SUMMARY JUDGMENT (ECF #24)

          Paul D. Borman United States District Judge

         I. BACKGROUND

         On January 18, 2018, Plaintiff United States of America initiated this action against Defendant Patricia Harold, Leslie Drury as Successor Trustee of the Sara Rose Revocable Living Trust u/a/d May 21, 1997, the State of Michigan, and the Treasurer of Wayne County, seeking to recover $403, 801.66 in Harold's unpaid income tax liabilities. (ECF #1.) On August 29, 2018, Plaintiff filed a one-count Amended Complaint, requesting enforcement of federal tax liens that it had filed against real property in which Harold has an interest of approximately $425, 000 through a land purchase contract. (ECF #16.)

         Related to this matter, on January 20, 2016, Harold filed for Chapter 7 bankruptcy, In re Patrice Harold, No. 16-40659 (Bankr. E.D. Mich. 2016). On November 15, 2016, Plaintiff United States of America initiated an adversary proceeding in the Bankruptcy Court, alleging nondischargeability of the income tax debts, inter alia, in a three-count “Complaint to Determine Dischargeability.United States of America v. Harold (In rem Harold), No. 16-5041, ECF #1. Plaintiff filed a Motion for Partial Summary Judgment on Counts I (“Nondischargeability of Tax Debt for Tax Years 2012 and 2014 Pursuant to 11 U.S.C. §§ 523(a)(1)(A) and 507(a)(8)(A)(i)”) and II (“Nondischargeability of Tax Debt for Tax Years 2008 and 2010 Pursuant to 11 U.S.C. § 523(a)(1)(B)”), noting that if the motion was granted, years 2004-2009 and 2011 would remain for adjudication pursuant to Section 523(a)(1)(C) (Count III, “Nondischargeability of Tax Debt for Tax Years 2004-12 and 2014 Pursuant to 11 U.S.C. §§ 523(a)(1)(C)”). (Id. at ECF ##1, 75.) The Parties' arguments in the adversary proceeding motion, a substantial portion of which is devoted to tax years 2008 and 2010 (Count II), is repeated in the briefing on the instant Motion. (See, e.g., Pl.'s Br., ECF #75, Ex. 4.) On August 20, 2018, Plaintiff's Motion for Partial Summary Judgment was granted by the Bankruptcy Court in the adversary proceeding as to both Counts I and II. (ECF #105.)[1]

         On November 21, 2018, Plaintiff filed the instant Motion for Summary Judgment. (ECF #24.)[2] Harold filed her Response on December 28, 2018. (ECF #42.)[3] On March 4, 2019, Plaintiff filed its reply. (ECF #51.) The Court held a hearing on the matter on June 5, 2019.

         II. FACTS

         A. Property At-Issue

         On or around August 19, 2005, Harold entered into a land contract (the “Land Contract”) with Robert J. Drury, the attorney-in-fact for Sara Rose, Trustee of the Sara Rose Revocable Living Trust u/a/d May 21, 1997, as may now be or hereafter amended (“Trust”) regarding the property commonly known as Part of 9100-9110 Dwight, Detroit (the “Property”). (Pl.'s Mot., Ex. B, ECF #24-1, PgID 228.) The Land Contract, as originally executed, provided for the sale of the Property to Harold for $625, 000 in installments over the course of eight years. (Id.) On or around October 31, 2013, Harold, and Leslie Drury, Successor Trustees of the Trust, agreed to amend the Land Contract, providing for the remaining balance to be paid in installments over approximately nine years as of September 13, 2013. (Id. at PgID 233-35.) The principal balance remaining on the Land Contract at that time was $401, 410.29. (Id. at PgID 234.)

         B. Federal Tax Liens

         Patrice Harold has incurred over $400, 000 in federal income tax liabilities since 2004. The chart below illustrates the assessments made by a delegate of the Secretary of the Treasury owed to the Internal Revenue Service (“IRS”) on the amounts Harold reported on joint federal income tax returns for those tax years. The chart reflects the balance due as of January 5, 2018 and includes any payment or other credits:[4]

Tax Year
Assessment Date
Assessment Type
Assessed Amount
Balance Due as of 1/5/2018

2004

11/27/06 11/27/06 11/27/06 11/27/06 11/27/06 8/15/11 8/11/14

Federal Income Tax

Estimated Tax Penalty

Late Filing Penalty

Late Payment Penalty

Interest

Late Payment Penalty

Interest

$12, 177.00

$348.95

$2, 289.82

$857.54

$1, 216.03

$925.95

$4, 545.26

$16, 909.82

2005

1/8/07 12/11/06 1/8/07 1/8/07 1/8/07 8/15/11 8/11/14

Federal Income Tax

Estimated Tax Penalty

Late Filing Penalty

Late Payment Penalty

Interest

Late Payment Penalty

Interest

$48, 606.00

$61.00

$10, 936.35

$2, 187.27

$3, 470.92

$9, 142.59

$23, 238.68

$89, 762.46

2006

11/26/07 11/26/07 11/26/07 11/27/07 8/15/11 8/11/14

Federal Income Tax

Estimated Tax Penalty

Late Payment Penalty

Interest

Late Payment Penalty

Interest

$22, 810.00

$1, 079.00

$910.00

$1, 149.91

$4, 777.49

$8, 257.56

$43, 874.67

2007

11/17/08

11/17/08

11/17/08

11/17/08

11/24/08

5/17/10

5/17/10

8/15/11

8/13/12

8/11/14

Federal Income Tax Estimated Tax Penalty Late Payment Penalty Interest Interest

Miscellaneous Penalty Federal Income Tax Late Payment Penalty Late Payment Penalty Interest

$28, 548.00

$1, 154.00

$1, 131.92

$954.67

$36.50

$1, 786.00

$8, 932.00

$6, 966.87

$893.20

$10, 136.34

$64, 962.14

2008

4/4/16 4/4/16 4/4/16 4/4/16 4/4/16

Federal Income Tax Estimated Tax Penalty Late Filing Penalty Late Payment Penalty Interest

$38, 604.00

$797.80

$7, 089.97

$6, 762.67

$8, 674.10

$53, 462.24

2009

11/15/111/15/111/15/111/15/1 8/15/11 8/13/12 8/11/14 8/11/14

Federal Income Tax

Estimated Tax Penalty

Late Payment Penalty

Interest

Late Payment Penalty

Late Payment Penalty

Interest

Late Payment Penalty

$41, 625.00

$498.63

$860.19

$583.16

$1, 966.16

$2, 940.24

$3, 633.39

$364.15

$37, 363.12

2010

4/4/16 4/4/16 4/4/16 4/4/16 4/4/16

Federal Income Tax Estimated Tax Penalty Late Filing Penalty Late Payment Penalty Interest

$29, 559.00

$633.92

$6, 470.77

$7, 121.72

$5, 647.19

$51, 099.29

2011

11/26/111/26/111/26/111/26/1 8/11/14 8/11/14

Federal Income Tax

Estimated Tax Penalty

Late Payment Penalty

Interest

Interest

Late Payment Penalty

$25, 759.00

$415.91

$870.99

$405.31

$1, 174.06

$4, 026.37

$30, 188.65

2012

12/9/13 12/9/13 12/9/13 12/9/13 8/11/14 8/11/14

Federal Income Tax

Estimated Tax Penalty

Late Payment Penalty

Interest

Interest

Late Payment Penalty

$21, 655.00

$50.00

$217.69

$107.42

$113.58

$391.63

$6, 833.40

2014

2/22/16 2/22/16 2/22/16 2/22/16

Federal Income Tax Estimated Tax Penalty Late Payment Penalty Interest

$27, 424.00 $79.00 $624.77 $295.57

$9, 345.87

TOTAL

$403, 801.66

(Am. Dec. of Christopher Smith, Nov. 27, 2018, ECF #26, ¶6, PgID 386-88.)

         On September 25, 2008, the IRS recorded a Notice of Federal Tax Lien (“NFTL”) relating to the income tax liabilities for the years 2004, 2005, and 2006 with the Wayne County Register of Deeds.[5] (Dec. of Philip Bednar, Nov. 21, 2018, Ex. C, PgID 241, ECF #24-1.) On February 13, 2009, the IRS recorded an NFTL for the 2007 tax year liabilities. (Id. at PgID 242.) The NFTL for tax years 2009 and 2011 was recorded on August 5, 2013, (id. at PgID 243), and the NFTL relating to 2012 was recorded on April 3, 2015 (id. at PgID 244). The IRS timely refiled the NFTL for tax years 2004, 2005 and 2006. (Id. at PgID 245.) Plaintiff stated that there is not an NFTL filed with respect to the 2008, 2010 and 2014 tax years, as the assessment liens for those years were made after Harold filed for Chapter 7 bankruptcy. However, Plaintiff has included the assessments for tax years 2008, 2010 and 2014, citing 26 U.S.C. § 6321 (lien arises on assessment and demand), in this lawsuit.

         In her Response Brief, Harold states that she is not “challenging the IRS' tax assessments” but rather argues that the IRS misapplied refunds due from tax returns filed in 1993, 1995, 1996, and 1998 - well over 20 years ago - to her spouse's tax liabilities. (Def.'s Resp., ECF #42, PgID 970.) Harold also states that the 1996 and 1998 transaction were “reversed, ” yet she never received a refund for the 1998 tax year. (Id.) Yet, at no point did Harold contact the IRS regarding these alleged missing multi-thousand dollar refunds.

         Harold also states that the IRS “misapplied” payments that she directed toward her 2003 tax liability. (Id. at 980.) Harold was assessed in June 2005 and July 2008 for income tax liability relating to 2003. (Dec. of Christopher Smith, Feb. 22, 2019, Ex. D., ECF #51, PgID 1080-81.) She points to her unauthenticated QuickBooks ledger and her unauthenticated chart, apparently generated for purposes of this litigation, to demonstrate a “code” that Harold and her spouse used to “detect whether payments for certain periods were properly applied properly as directed or misapplied without her authorization.” Harold does not, however, attach any cancelled checks demonstrating this “system.”

         III. STANDARD OF REVIEW

         Summary judgment is appropriate where the moving party demonstrates that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Fed.R.Civ.P. 56(a). A fact is “material” for purposes of a summary judgment motion where proof of that fact “would have [the] effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties.” Midwest Media Prop., L.L.C. v. Symmes Twp., Ohio, 503 F.3d 456, 469 (6th Cir. 2007) (quoting Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984)). A dispute over a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         “Rule 56(e) identifies affidavits, depositions, and answers to interrogatories as appropriate items that may be used to support or oppose summary judgment.” Alexander v. CareSource, 576 F.3d 551, 558 (6th Cir. 2009). “Of course, [the moving party] always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Taft Broadcasting Co. v. United States, 929 F.2d 240, 247 (6th Cir. 1991) (internal quotation marks omitted) (quoting Celotex, 477 U.S. at 323). If this burden is met by the moving party, the non-moving party's failure to make a showing that is “sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial, ” will mandate the entry of summary judgment. Celotex, 477 U.S. at 322. “[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Id. at 323.

         “The test is whether the party bearing the burden of proof has presented a jury question as to each element in the case. The plaintiff must present more than a mere scintilla of the evidence. To support his or her position, he or she must present evidence on which the trier of fact could find for the plaintiff.” Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000) (internal citations and quotation marks omitted). The non-moving party may not rest upon the mere allegations or denials of his pleadings, but the response, by affidavits or as otherwise provided in Rule 56, must set forth specific facts which demonstrate that there is a genuine issue for trial. Fed.R.Civ.P. 56(e). “When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts . . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586- 587 (1986) (footnote and internal quotations omitted).

         In making the determination on summary judgment whether there are genuine issues of material fact for trial, the court must draw all reasonable inferences in favor of the non-moving party. See Moran v. Al Basit LLC, 788 F.3d 201, 204 (6th Cir. 2015). “‘The central issue is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'” Binay v. Bettendorf, 601 F.3d 640, 646 (6th Cir. 2010) (quoting In re Calumet Farm, Inc., 398 F.3d 555, 558 (6th Cir. 2005)).

         At the same time, plaintiff must produce enough evidence to allow a reasonable jury to find in his favor by a preponderance of the evidence, Anderson, 477 U.S. at 252, and “[t]he ‘mere possibility' of a factual dispute is not enough.” Martin v. Toledo Cardiology Consultants, Inc., 548 F.3d 405, 410 (6th Cir. 2008) (quoting Mitchell v. Toledo Hosp., 964 F.2d 577, 582 (6th Cir. 1992)). “If the evidence is merely colorable, or is ...


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