Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-02483/USCOURTS-caed-2_04-cv-02483-5/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7403 Suit to Enforce Federal Tax Lien

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

Plaintiff,

v. NO. CIV. S-04-2483 LKK/DAD

RODNEY L. CUNNINGHAM;

PAMELA L. CUNNINGHAM; and

GUILD MORTGAGE CO.,

Defendants.

 /

Pending before the court is plaintiff’s motion for final

judgment and order of foreclosure. The motion is currently set to

be heard on the June 12, 2006 law and motion calendar. For the

reasons discussed herein, the hearing date is hereby VACATED and

the motion is decided on the papers and without oral argument. 

At the outset, the court must clarify its previous order. On

March 24, 2006, the court granted plaintiff’s motion for summary

judgment based solely on defendants’ failure to file an opposition

or statement of non-opposition in accordance with Local Rule 11-

110. Upon further review, the court now recognizes that granting

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1

 The facts are taken from plaintiff’s statement of

undisputed facts. Defendants failed to file any opposition, so

these facts are taken as undisputed. 

2

the motion for summary judgment solely on the grounds that

defendants failed to oppose, was in error. The court should have

reached the merits of the motion even without an opposition from

defendants. For this reason, the March 24 order is amended so as

to address the merits of the motion for summary judgment. As

explained below, the outcome is still the same: the motion for

summary judgment must be granted for the government. 

I.

FACTS & BACKGROUND

A. FACTS1

The United States (“plaintiff”) seeks to reduce to judgment

(or make the liens and tax liabilities enforceable) the following

matters: (1) the outstanding federal income tax liabilities, plus

penalties and interest, of Rodney L. Cunningham and Pamela L.

Cunningham (“defendants”), jointly and severally, for the 1991-1995

tax years; and (2) the outstanding federal employment related tax

liabilities, plus penalties and interest, assessed against Rodney

Cunningham involving the 1997-2000 and 2002-03 calendar years.

Plaintiff’s Statement of Undisputed Facts (“SUF”) 1. Plaintiff

also seeks to foreclose its tax liens securing the outstanding

federal taxes against real property at 3730 Rodgers Avenue, Chico,

California 95928 (“subject property”). Pl.’s SUF 1. 

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2

 The tax periods in question are: (1) Form 1040 - Dec. 31,

1991 - 1994; (2) Form 941 - Periods ending June 30, 1998; Sept. 30,

1998; Dec. 31, 1998; Sept. 30, 2002; Dec. 31, 2002; June 30, 2003;

Sept. 30, 2003; and Dec. 31, 2003; and (3) Form 940 - Periods

ending Dec 31, 2000. Statement of Undisputed Facts (“SUF”) at 7.

3

Plaintiff has entered into stipulation with defendant Guild

Mortgage Company, agreeing that Guild Mortgage Company’s claim

against the subject property through its deed of trust is senior

to plaintiff’s claim against the subject property. Pl.’s SUF 2.

Based on Internal Revenue Service assessments, defendants owe,

jointly and severally, the sum of $140,683.72 plus accrued

interest, penalties and other statutory additions as provided by

law from the date of assessment. Pl.’s Mot. For Final J., Dec. of

Mike Norris. Rodney Cunningham also owes $63,820.13 plus accrued

interest, penalties and other statutory additions as provided by

law from the date of assessment. Id. 

The assessments made against defendants are derived from their

self-reported tax liabilities on their tax returns and additions

to their tax liabilities.2 Pl.’s SUF 6. Defendants agreed to

these assessments pursuant to an audit examination. Pl.’s SUF 6.

The only tax periods that still remain in controversy are: (1) Form

1040 - December 31, 1995; and (2) Form 940 - Periods ending

December 31, 1997-99. Pl.’s SUF 7. 

Defendants currently hold title to the subject property as

husband and wife, in joint tenancy, as proven by the Grant Deed

recorded with the Butte County Recorder’s Office on September 6,

1994. Pl.’S SUF 7. On several different dates for several

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3

 The exact dates and tax periods can be found on page 7 of

plaintiff’s SUF.

4

different tax periods, plaintiff recorded a Refiled Notice of

Federal Tax Lien with the Butte County Recorder.3

 Pl.’s SUF 7-8.

Lastly, plaintiff has made assessments against the defendants

related to their federal income tax liabilities for the 1999-2002

tax years, but chose not to include them in the complaint. Pl.’s

SUF 9.

B. PROCEDURAL HISTORY

On November 22, 2004, plaintiff brought this action, seeking

to establish the unpaid tax liabilities against defendants. In

addition, plaintiff sought to foreclose its tax liens securing

these tax liabilities against the subject property. 

Defendants filed an answer to the complaint and claimed

insufficient knowledge as to some tax periods and several

affirmative defenses, including expiration of statute of

limitations for collection of tax liabilities, doctrine of laches,

and setoff. Defs.’ Answer at 1-2.

On July 27, 2005, plaintiff served defendants its first

request for admissions, first set of interrogatories, and first

request for the production of documents. Pl.’s SUF 8. Plaintiff

then gave defendants an extension of time, up to September 9, 2005,

to respond to its discovery requests. Pl.’s SUF 8. Plaintiff’s

first request for admissions included requests that the defendants

admit that they were liable for the assessments made against them

for the tax periods at issue, plus accrued interest, penalties, and

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4

 Initially, the motion was denied as untimely. Plaintiff

had noticed the motion for summary judgment after the law and

motion cut-off date. On January 3, 2006, plaintiff filed a request

for leave to file for another motion for summary judgment. The

request was granted, and the court ordered defendants to file an

opposition or statement of non-opposition by February 6, 2006.

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other statutory additions. Pl.’s SUF 9. Defendants failed to

reply to any of the discovery requests. Pl.’s SUF 9. 

On November 29, 2005, plaintiff filed a motion for summary

judgment, requesting adjudication that: (1) the defendants remain

liable to the government for the assessments made against them for

the tax periods at issue; (2) the government’s federal income tax

liens attach to the subject property; and (3) the federal tax liens

securing these federal tax liabilities should be foreclosed against

the subject property.4

Defendants failed to file an opposition or statement of nonopposition to the motion for summary judgment. On February 22,

2006, the court ordered defendants to show cause why sanctions

should not be imposed for their failure to file any opposition or

statement of non-opposition. The court also granted defendants

until March 10, 2006 to file an opposition or statement of nonopposition. Defendants yet again failed to respond to the court’s

orders.

 On March 24, 2006, the court granted the motion for summary

judgment based on defendants’ failure to file an opposition or

statement of non-opposition in accordance with Local Rule 11-110.

Defendants’ counsel was also sanctioned and ordered to show cause

why he should not be further sanctioned for his failure to respond

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to the court’s February 22, 2006 order. To date, defendants’

counsel has failed to respond to any of the court’s orders.

III.

MOTION FOR SUMMARY JUDGMENT

The court’s order dated March 24, 2006 is hereby AMENDED to

include the following language: 

A. STANDARD FOR MOTIONS FOR SUMMARY JUDGMENT THAT IS UNOPPOSED

Summary judgment is appropriate when it is demonstrated that

there exists no genuine issue as to any material fact, and that the

moving party is entitled to judgment as a matter of law. Fed. R.

Civ. P. 56(c); See also Adickes v. S.H. Kress & Co., 398 U.S. 144,

157 (1970); Secor Limited v. Cetus Corp., 51 F.3d 848, 853 (9th

Cir. 1995). The moving party bears the initial responsibility of

informing the court of the basis for its motion, and identifying

those portions of the record that it believes demonstrate the

absence of a genuine issue of material fact. Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986). 

If the moving party meets its initial responsibility, the

burden then shifts to the opposing party to establish that a

genuine issue as to any material fact actually does exist.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

586 (1986). In attempting to establish the existence of this

factual dispute, the opposing party may not rely upon the denials

of its pleadings, but must tender evidence of specific facts in the

required form, in support of its contention that the dispute

exists. Fed. R. Civ. P. 56(e); See Matsushita, 475 U.S. at 586

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n.11. The opposing party must demonstrate that the fact in

contention is material and that the dispute is genuine. Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986).

Summary judgment should be granted only if the moving party

has satisfied the Rule 56 requirements. See Celotex, 477 U.S. at

323. The court may not grant a motion for summary judgment merely

because the opposing party violated a local rule by failing to file

an opposition or for an untimely opposition. See Martinez v.

Stanford, 232 F.3d 1178, 1182 (9th Cir. 2003) (stating “a nonmoving

party's failure to comply with local rules does not excuse the

moving party's affirmative duty under Rule 56 to demonstrate its

entitlement to judgment as a matter of law. . . . Short of that,

we turn the summary judgment rule into a mere sanction for

noncompliance with local rules”). A court cannot grant a motion

for summary judgment solely on the grounds of non-compliance with

local rules alone. Id. at 1183. Therefore, although the pending

motion for summary judgment is unopposed, the court must still

reach the merits of the motion and may not simply grant the motion

for failure to oppose or for failure to file a statement of nonopposition.

B. ANALYSIS

As a threshold matter, the court notes that defendants failed

to provide any evidence of specific facts that would support any

contention that factual disputes remain. Defendants have not

submitted any declarations, depositions, or affidavits, or any

other type of admissible evidence that would establish a disputed

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fact. 

It is well settled that:

In attempting to establish the existence of this factual

dispute, the opposing party may not rely upon the

denials of its pleadings, but is required to tender

evidence of specific facts in the form of affidavits,

and/or admissible discovery material, in support of its

contention that the dispute exists.

Fed. R. Civ. P. 56(e). Here, defendants failed to meet their Rule

56 burden. For this reason, and for the reasons explained below,

the motion for summary judgment must be granted.

In an action to collect taxes, the government bears the

initial burden of proof. Palmer v. Internal Revenue Service, 116

F.3d 1309, 1312 (9th Cir. 1997). Plaintiff seeks adjudication on

the following: (1) that defendants remain liable to the government

for the assessments made against them for the tax periods at issue;

(2) the government’s federal income tax liens attach to the subject

property; and (3) the federal tax liens securing these federal tax

liabilities should be foreclosed against the subject property.

Pl.’s Mot. For Summ. J. at 4.

1. Defendants’ Tax Liabilities

Plaintiff maintains that the assessments made against the

defendants are correct for the following reasons: (1) the

assessments are presumptively correct; (2) defendants already admit

that they are indebted to the government for most of the tax

assessments made against them; and (3) defendants have failed to

respond to the government’s First Request for Admissions and

consequently, defendants’ tax liability is deemed admitted by

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default. Pl.’s Mot. for Summ. J. at 5. 

Tax assessments are presumptively correct, so long as they are

supported by a minimal factual foundation. See Palmer, 116 F.3d

at 1312. Once the factual foundation has been made, the burden

shifts to the taxpayers to show that the determination is

incorrect. Id. A showing by the taxpayer that a determination is

arbitrary, excessive or without foundation shifts the burden of

proof back to the government. Id. at 1312 (citing Helvering v.

Taylor, 293 U.S. 507, 515-516 (1935)).

In the instant case, plaintiff has provided numerous

assessments and certificates outlining the defendants’ tax

liability. Pl.’s Mot. for Summ. J. at 5-6. These assessments

provide more than minimal factual foundation for assessing

defendant’s tax liability. The burden then shifts to defendants

to establish that the assessments are incorrect. Here, defendants

have failed to file any kind of opposition. As previously noted,

defendants cannot rely on their pleadings to show evidence of a

material factual dispute. They must tender evidence of specific

facts in the proper form, supporting their contention that there

is a material factual dispute. Defendants have failed to tender

any new evidence, beyond what was contained in their answer to the

complaint, which is insufficient to put facts into dispute. Even

when viewing the evidence in the light most favorable to

defendants, and drawing all reasonable inferences in favor of

defendants, it is clear that the assessments are presumptively

correct. 

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Plaintiff also points to defendants’ own self-reported tax

liabilities on their tax returns for several years to establish

that defendants have already admitted liability for most of the

assessments. Pl.’s Mot. for Summ. J. at 6. Viewing this evidence

in a light most favorable to defendants, the court finds that the

defendants, at least partially, admitted some of their tax

liabilities. 

Defendants also admitted to their tax liabilities when they

failed to respond to plaintiff’s request for admissions. Pursuant

to Rule 36(a) of the Federal Rules of Civil Procedure, if a party

fails to answer a request for admissions within 30 days, the

requested items are deemed admitted. By failing to respond to

plaintiff’s requests for admissions, defendants admit to the

matters contained in them by default. Any matter thus admitted is

conclusively established. Fed. R. Civ. P. 37(b); Hadley v. United

States, 45 F.3d 1345, 1348 (9th Cir. 1995). Plaintiff’s first

request for admissions included requests that the defendants admit

they are liable for the assessments made against them for the tax

periods at issue. Defendants failed to respond, even after

plaintiff granted them an extension. Pl.’s Mot. for Summ. J. at

7. Thus, pursuant to Rule 36(a), defendants are deemed to have

admitted their tax liability. 

2. Foreclosure of the Federal Tax Lien

Plaintiff seeks foreclosure of the federal tax liens against

the subject property pursuant to 26 U.S.C. § 6321. When a taxpayer

neglects or refuses to pay a federal tax liability after

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assessment, notice, and demand for payment, § 6321 imposes a tax

lien in favor of the government for “all property and rights to

property, whether real or personal,” belonging to the taxpayer.

See 26 U.S.C. § 6321; see also Drye v. United States, 528 U.S. 49,

55 (1999). Plaintiff notes that defendants hold title to the

property at issue in the case. Pl.’s Mot. for Summ. J. at 8.

Plaintiff has also properly recorded tax liens in the necessary

county. Id. at 8. Plaintiff argues that the assessments against

defendants attach to the subject property. Defendants have failed

to provide any evidence of specific facts that support any

contention that there is a material factual dispute as to this

matter. They have failed to meet their Rule 56 burden. Given the

evidence in the record, and viewing it in the light most favorable

to defendants, the assessments clearly attach to the subject

property. 

For the above mentioned reasons, the motion for summary

judgment is GRANTED.

IV. 

MOTION FOR FINAL JUDGMENT

The court, in its March 24, 2006 amended order on the motion

for summary judgment determined: (1) defendants remained indebted

to the government for the tax periods at issue; (2) the federal tax

liens attached to the subject property; and (3) the federal tax

liens securing those federal tax liabilities should be foreclosed

against the subject property. As such, plaintiff may seek relief

against defendants by foreclosing its tax lien against the subject

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property for the tax periods at issue. As already noted, the

defendants have failed to provide any reason why the subject

property should not be foreclosed. Final judgment in this case is

proper, given all the evidence in record, the court’s granting of

summary judgment, and defendants’ complete failure to meet their

legal burdens. 

For these reasons, the court orders as follows: 

1. The March 24, 2006 order granting summary judgment is

AMENDED as detailed in this order. 

2. Concurrently with this order, the court also issues the

final judgment and order of foreclosure.

3. The hearing currently set for June 12, 2006 is hereby

VACATED. 

IT IS SO ORDERED.

DATED: June 6, 2006.

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