United States District Court, D. Hawaii
ORDER GRANTING THE GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT ON COUNTS ONE AND TWO IN THE COMPLAINT
LESLIE E. KOBAYASHI, District Judge.
Before the Court is Plaintiff the United States of America's ("the Government") Motion for Summary Judgment on Counts One and Two in the Complaint ("Motion"), filed on June 9, 2014. [Dkt. no. 44.] Pro se Defendant Abraham Nguyen Martin ("Abraham Martin") filed his memorandum in opposition on August 11, 2014, and the Government filed its reply on August 18, 2014. [Dkt. nos. 62, 65.] This matter came on for hearing on September 2, 2014. After careful consideration of the Motion, supporting and opposing memoranda, and the arguments presented at the hearing, the Government's Motion is HEREBY GRANTED for the reasons set forth below.
On October 3, 2013, Plaintiff filed its Complaint to Reduce Federal Tax Assessments to Judgement and Foreclose Federal Tax Liens on Real Property ("Complaint") against: Abraham Martin, individually and trustee for the Abraham Nguyen Martin Revocable Trust Agreement dated January 10, 1991; Anna Anh Martin ("Anna Martin"), individually and trustee for the Anna Anh Martin Revocable Trust Agreement dated January 10, 1991; Joanne Ann Martin ("Joanne Martin"); Wells Fargo Bank, N.A.; LoanCare, a division of FNF Servicing, Inc.; and State of Hawaii, Department of Taxation.
The Complaint centers on the Government's attempt to foreclose on the Martin home, located in Honolulu ("the Property"), and to ensure that the Government can satisfy Abraham and Anna Martin's (collectively, "the Martins") tax liabilities through the sale - by setting aside purported fraudulent transfers of the Property and adjudging title.
The Government alleges that Abraham Martin failed to pay certain tax liabilities in 1992, and the Martins jointly failed to pay additional liabilities in 1993 and 1994. [Complaint at ¶¶ 26, 32.] Together, the Government alleges that, with fraud and failure-to-pay penalties and interest, their debt amounted to over $700, 000 as of August 2013. [Id.] The Government further alleges that, beginning in 1998, the Martins engaged in a series of fraudulent transfers of the Property between family trusts for no consideration, in an attempt to evade an audit by the federal government. [Id. at ¶¶ 15-18, 21-22, 45-55.]
The Complaint alleges the following claims: reduce to judgment federal tax assessments against Abraham Martin for tax year 1992 ("Count I"); reduce to judgment federal tax assessments against the Martins jointly for tax years 1993 and 1994 ("Count II"); foreclose on federal tax liens against the Property ("Count III"); determine that the suspect transfers of the Property do not affect the Government's ability to collect on the Martins' tax debts from the Property ("Count IV"); find that the suspect conveyances were fraudulent ("Count V"); and find that the current titleholders of the Property, Anna and Joanne Martin, are holding title as nominees of the Martins ("Count VI"). [Id. at ¶¶ 25-63.]
The Government seeks the following relief, that this Court: adjudge that Abraham Martin is indebted to the Government in the sum of $126, 265.16, plus statutory interest, and the Martins are jointly indebted in the sum of $577, 898.24, plus additional interest; adjudge and decree that the tax liens have attached to the Property; in the alternative, adjudge and decree that the transfers were all made subject to the tax liens, were fraudulent, and should be set aside, and that Anna and Joanne Martin hold title as nominees of the Martins, and thus the liens subsist; order the tax liens foreclosed on the Property, the Property sold, and the proceeds applied to the Martins' tax debts; and award costs and all other appropriate relief. [Id. at pgs. 18-21.]
On May 9, 2003, the United States Tax Court entered a stipulated decision ("Deficiency Decision") that found Abraham Martin had a deficiency of $18, 349.00 from 1992, and that the Martins jointly had deficiencies of $69, 731.00 and $23, 763.00 from 1993 and 1994, respectively. The tax court also adjudged penalties of $13, 762.00, $52, 298.00, and $17, 822.00 for fraud in each of those years. [Abrahams Martin's Concise Statement of Material Facts, filed 8/11/14 (dkt. no. 62-1) ("Martins' CSOF"), Exh. E (Deficiency Decision).]
The crux of Abraham Martin's argument in his memorandum in opposition, his declaration, and his Notice of Acts of Fraud upon the Court, which he filed on August 28, 2014, [dkt. no. 67, ] is that the Deficiency Decision was fraudulent. He argues that: he could not have stipulated to or executed the Deficiency Decision because he was in Vietnam at the time he purportedly executed it; Anna Martin was coerced into signing the Deficiency Decision; and the Martins' attorney, the IRS, and the tax court conspired against the Martins in reaching the Deficiency Decision. [Mem. in Opp. at 3, 5-8; Martins' CSOF at ¶¶ 1-10; Abraham Decl. at ¶¶ 6-12.]
However, these same arguments were rejected by the tax court in an order dated June 7, 2011 ("Vacatur Order"), denying a motion brought by the Martins to vacate the Deficiency Decision more than seven years after that decision became final. [Hendon Decl., Exh. 6 (Vacatur Order).] The Vacatur Order upheld the Deficiency Decision, and the Ninth Circuit affirmed on appeal. [ Id., Exh. 7 ("Ninth Circuit Order").] Based on the Deficiency Decision, the Vacatur Order, and the Ninth Circuit Order, the Government argues that res judicata applies in this case, and any argument that Abraham Martin raises regarding the Martins' tax liabilities and fraud on the court, must be rejected. [Mem. in Supp. of Motion at 13-15.] This Court agrees that it is bound by res judicata as to these issues.
The Ninth Circuit has held:
Res judicata, also known as claim preclusion, applies only where there is "(1) an identity of claims, (2) a final judgment on the merits, and (3) privity between parties." Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency , 322 F.3d 1064, 1077 (9th Cir. 2003) (citation and internal quotation ...