Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_04-cv-00739/USCOURTS-azd-3_04-cv-00739-1/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7401 IRS: Tax Liability

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America,

Plaintiff,

v.

Donald R. Richardson, Gerald

Richardson,

Defendants.

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CV04-0739 PCT-DGC

ORDER

Plaintiff has filed a motion to enforce settlement and an amended motion for entry of

default judgment. Dkt. #96. The Court has reviewed the memoranda submitted by the

parties. Dkt. ##96, 97, 99. For the reasons set forth below, the Court will grant in part

Plaintiff’s motion.

I. Background.

At the Final Pretrial Conference on February 14, 2007, the parties reached a

settlement. Dkt. #86. Counsel for Plaintiff stated the material terms of the settlement on the

record. Id. Defendant Donald Richardson (hereinafter “Defendant”) and his counsel

confirmed on the record that the terms had been stated accurately. Id. One of the terms was

that Defendant would agree to market and attempt to sell his house at 3623 Vega Lane, Lake

Havasu City, Arizona, within 180 days of the Final Pretrial Conference. Dkt. #93 at 6. If

Defendant did not sell the house within 180 days to a buyer and at a price agreed to by

Plaintiff, Plaintiff would be able to sell the property at auction. Id. The parties agreed that

after deducting real estate taxes and costs of sale, Plaintiff would receive 80% of the sale

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proceeds and Defendant would receive 20%. Id. at 7. The parties stated that they had

discussed, but did not want to state on the record, a reasonable sale price for the house. Id.

at 7-8.

Counsel for both parties and Defendant agreed that the settlement as stated on the

record was binding and that the Court would have authority to enforce the settlement if it

could not be reduced to writing. Dkt. #86 at 1. The parties further agreed that in enforcing

the settlement the Court would have the authority to resolve disagreements between the

parties by determining reasonable details for the settlement. Id.

On March 9, 2007, Plaintiff sent to Defendant’s counsel an Acknowledgment Letter

that contained the Government’s understanding of the settlement. Dkt. #96-7. The letter

contained the following term (hereinafter referred to as “Term 3”):

3. The sale proceeds, after reasonable costs of sale, would be distributed

as follows: 80% to the United States and 20% to Richardson. If the

sale proceeds are less than $400,000, the United States would receive

all the proceeds after the reasonable costs of sale.

Dkt. #96-7 at 1. The letter directed Defendant’s counsel to sign the letter “[i]f the foregoing

enumerated points comport with your understanding of the offer you have submitted.” Id.

at 2. Defendant’s counsel signed the letter, but the parties did not file the required settlement

documentation with the Court because of a dispute regarding the terms of the agreement.

Dkt. #96 at 1. Pursuant to an order the Court entered on April 12, 2007 (Dkt. #95), the

parties have filed memoranda setting forth their views of the settlement terms to be enforced

by the Court. The only disagreement voiced by the parties involves Term 3 of Plaintiff’s

Acknowledgment Letter.

II. Discussion.

Plaintiff asks the Court to approve the terms of the settlement as stated in the

Acknowledgment Letter. Dkt. #96. Defendant argues that it was agreed upon at the

February 14, 2007 hearing that there would be no minimum or maximum sale price of the

house, and that Term 3 violates the parties’ agreement. Dkt. #97 at 1. Plaintiff counters that

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the terms of the Acknowledgment Letter do not establish a minimum price requirement, but

nonetheless asks the Court to accept Term 3, which establishes a minimum price necessary

for Defendant to receive 20% of the proceeds from the sale. Dkt. #99.

The Court has reviewed the transcript of the February 14, 2007 hearing and concludes

that Term 3 of the Acknowledgment Letter fundamentally differs from the terms agreed upon

by the parties. At the hearing, Plaintiff’s counsel stated that “[t]he net equity from the sale

of the house, which would be after payment of real property taxes and costs of sale, would

be split between Mr. Richardson and the United States; 80 percent to the United States, and

20 percent to Mr. Richardson.” Dkt. #93 at 7. The parties further stated that they would

agree to a reasonable price, and that Plaintiff “could not reject out of hand a reasonable

offer[.]” Id. Nothing in the transcript indicates that Plaintiff would receive 100% of the sale

proceeds if the property was sold for less than a certain sum. Rather, the transcript states that

Plaintiff’s recourse upon receipt of a less-than-reasonable offer was to block the sale, and if

Defendant was unable to sell the house after 180 days, Plaintiff could put the house up for

auction. Under this agreement, both parties have an incentive to sell the house for the highest

price possible.

Contrary to Plaintiff’s assertion in its reply, Term 3 eliminates Plaintiff’s incentive

to seek the highest price for the property. For example, if the property sold for $400,000,

Plaintiff would receive $320,000 and Defendant would receive $80,000. If the property sold

for $390,000, Plaintiff would receive the entire amount. Plaintiff would have an incentive

to pursue a sale price between $320,000 and $400,000, rather than wide range of sale prices

over $400,000. This result is unreasonable and contrary to the terms of the agreement

entered into at the hearing. 

 The Court notes that Defendant’s counsel, who is now arguing that Term 3 should not

apply, signed the Acknowledgment Letter indicating that the terms comported with his

understanding of the agreement. Dkt. #96-7 at 3. While ordinarily such a signature might

bind Defendant, the Court will decline to enforce the Acknowledgment Letter because it

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clearly contradicts the material terms of the agreement reached at the February 14, 2007

hearing. Defendant does not object to any other terms in the Acknowledgment Letter, so the

Court will recognize the remaining terms as part of the agreement. For purposes of resolving

the dispute over Term 3, the Court will leave the first sentence of Term 3 intact and strike

the second sentence. Term 3 should now read: “The sale proceeds, after reasonable costs of

sale, will be distributed as follows: 80% to the United States and 20% to Richardson.”

The parties must still agree on a reasonable price for the sale of the house. The Court

will grant Plaintiff’s request to have the property listed by a licensed real estate agent of

Plaintiff’s choosing until such time as Defendant’s 180 day sale period ends and Plaintiff

decides to auction the house. See Dkt. #96 at 2. Defendant does not oppose this request. 

The Court acknowledges that the settlement stated on the record provided that “the taxpayer

would agree to market and sell [the house] for the best reasonable price within [180] days”

of February 14, 2007. Dkt. #93 at 6. The Court finds, however, that allowing Plaintiff to

employ the real estate agent would not alter the material terms of the agreement, would aid

the parties in obtaining a reasonable sale price for the house, and would “reduce the chance

that [Defendant] engages directly in transactions with a buyer that would be outside the terms

of the settlement.” Dkt. #96 at 2. 

Finally, Plaintiff requests that the Court enter default judgment against Defendant

Gerald Richardson. The Court previously denied the same motion on the grounds that the

“entry of default judgment against Gerald could produce inconsistent judgments if Donald

can prove at trial that Gerald is not his nominee.” Dkt. #62 at 12. In agreeing to the sale of

the property held in Gerald’s name at 3623 Vega Lane, and delivery of a majority of the

proceeds to Plaintiff, Defendant Donald Richardson necessarily agreed that Gerald was his

nominee. The Court will therefore grant Default Judgment against Gerald Richardson.

IT IS ORDERED:

1. Plaintiff’s motion to enforce settlement and amended motion for entry of

default judgment (Dkt. #96) is granted in part and denied in part as set forth

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above.

2. The Clerk shall enter Default Judgment against Defendant Gerald Richardson.

3. Plaintiff and Defendant are bound by the terms set forth in the

acknowledgment letter, with the exception of Term 3, which the Court has

modified as set forth above.

4. Plaintiff shall retain a licensed real estate agent to list for sale the property at

3623 Vega Lane. After the 180 day sale period, which began on February 14,

2007, Plaintiff shall have the option to sell the property with a licensed real

estate agent or to auction the property. 

5. Pursuant to the terms of the Acknowledgment Letter, Defendant shall sign a

stipulation for entry of judgment in favor of Plaintiff and the Collateral

Agreement prepared by Plaintiff. These documents shall be submitted to the

Court no later than July 14, 2007. Upon receipt of these documents, the Court

will enter judgment against Defendant.

DATED this 18th day of June, 2007.

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