Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Staton

United States District Court, D. Hawaii

April 10, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
RONALD B. STATON, BRENDA STATON, NAVY FEDERAL CREDIT UNION, CAPSTEAD MORTGAGE CORPORATION, and STATE OF HAWAII, Defendants.

          ORDER CONFIRMING SALE, APPROVING COMMISSIONER'S REPORT, AND DETERMINING PRIORITY OF FUTURE DISBURSEMENTS

          Alan C. Kay Sr. United States District Judge.

         For the reasons discussed below, the Court GRANTS Plaintiff's Motion for an Order Confirming Sale, Approving Commissioner's Report and Distributing Proceeds as follows:

1) The sale is confirmed;
2) The Commissioner's Report is approved; and
3) The proposed order of priority for future disbursements is approved.

         As to the distribution of sale proceeds, the Court will reserve consideration of that issue pending a final determination of: (a) the reasonable amount of attorneys' fees and costs to which Defendant Capstead Mortgage Corporation is entitled; and (b) the amount of interest and penalties, as part of Defendant Ronald Staton's federal tax liabilities, to which Plaintiff is entitled. The Court will rule on the ultimate amount of sale proceeds to be distributed to each party, and order distribution, following a separate hearing.

         BACKGROUND

         On or about August 19, 1987, Defendants Ronald Staton (“Mr. Staton”) and Brenda Staton (“Mrs. Staton, ” and together with Mr. Staton, the “Statons”) entered into an Agreement of Sale to purchase a property (the “Residence”) located at 233 Kalalau Street, Honolulu, Hawaii 96825, and identified by Tax Map Key No. (1)3-9-023-039. ECF Nos. 109-2, 109-4. The Statons were granted the Deed to the Residence on or about July 30, 1990. ECF Nos. 109-2, 109-5. The Agreement of Sale and Deed indicate that the Statons purchased and own the Residence as tenants by the entirety. ECF Nos. 109-2, 109-4, 109-5.

         The Statons failed to pay federal income taxes from 2000 through 2007. Tax and related assessments were made against Ronald Staton individually for the 2001 through 2007 income tax years.[1] Despite the Plaintiff United States' (the “Government”) notice and demand for payment, Mr. Staton did not pay the full assessment amounts. ECF No. 1. Mr. Staton's total liability reduced to judgment is $355, 526.74, without considering accrued interest or applicable payments and credits.[2]

         The Government filed notices of its federal tax liens (“NFTL's”) related to its tax and related assessments made against Mr. Staton. It also filed the NFTL's with the State of Hawaii Bureau of Conveyances on April 3, 2006, December 5, 2006, July 10, 2007, April 7, 2009, and May 12, 2009. ECF Nos. 109-2, 109-3. The Government also filed a notice of lis regarding this action with the State of Hawaii Bureau of Conveyances on June 15, 2012. ECF Nos. 109-2, 109-5.

         Additional parties with an interest in the Residence are Defendants Capstead Mortgage Corporation (“Capstead”), Navy Federal Credit Union (“NFCU, ” and together with Capstead, the “Lender Defendants”), and the State of Hawaii. Capstead represents that the amount owed to it is $423, 254.65 (consisting of $289, 949.89 in principal, $4, 357.59 in interest as of March 1, 2018, and $128, 947.19 in attorneys' fees and costs). ECF No. 282. The Court entered a minute order on March 15, 2018, referring to Magistrate Judge Kevin Chang the determination of the attorneys' fees and costs to which the Lender Defendants are entitled. ECF No. 295. Accordingly, an amount sufficient to cover the attorneys' fees and costs the Lender Defendants have requested will be withheld from the initial disbursement of the foreclosure sale proceeds. Id.

         The State of Hawaii, meanwhile, represents that the amount Defendant Ronald Staton owes it for unpaid taxes is $156, 098.14, [3] but it also “acknowledges that the Defendants' [Residence owned as tenants by the entirety] is not subject to [its claims] because the state tax liens are solely against Defendant Ronald Staton.” ECF No. 281 at 5. Thus, the State of Hawaii “does not seek to collect from the sale proceeds of the Defendant's [Residence][.]” Id. at 7.

         On June 4, 2012, the Government filed its Complaint against the Statons, the Lender Defendants, and the State of Hawaii. The Complaint sought to reduce to judgment the federal tax assessments against the Statons filing jointly (Count I) and Ronald Staton filing individually (Count II). It also sought to foreclose the Government's federal tax liens on the Residence (Count III). ECF No. 1.

         On June 27, 2014, the Government filed a motion for partial summary judgment on Counts I and II of the Complaint. ECF No. 89 (the “First MSJ”). The First MSJ indicated that Count I “should be dismissed, ” because the Statons' joint tax assessments, related solely to their filing for the 2000 tax year, were paid in full. ECF No. 89-1. But it sought entry of judgment against Ronald Staton on Count II for the tax and related assessments made against him for his 2001 through 2007 income tax years. Id. at 14-15.

         On September 30, 2014, pursuant to a stipulation the Government and Ronald Staton filed, the Court entered judgment against Mr. Staton with respect to his 2001, 2002, 2003, and 2005 income tax liabilities. ECF No. 104. The amount of that judgment is $273, 715.67, plus interest accruing after July 1, 2014 and less any payments made or credits applied after that date. Id. at 2. On November 25, 2014, pursuant to another stipulation the Government and Ronald Staton filed, the Court entered judgment against Mr. Staton with respect to his remaining 2004, 2006, and 2007 income tax liabilities at issue. ECF No. 108. The amount of that judgment is $81, 811.07, plus interest accruing after October 31, 2014 and less any payments made or credits applied after that date. Id. at 2. Thus, as the Government asserts, Mr. Staton's total outstanding liability reduced to judgment is $355, 526.74, which the Government represents increases to an aggregate amount of $412, 166.31 when accrued interest and penalties calculated through March 30, 2018 are added. ECF No. 271 at 2.

         On December 29, 2014, the Government filed a Motion for Summary Judgment on the Third Claim in the Complaint. ECF No. 109 (the “Second MSJ”). The Second MSJ requested that the Government's federal tax liens and judgments be foreclosed and that the Residence be sold free and clear of all liens pursuant to the terms of Plaintiff's Proposed Order of Foreclosure and Judicial Sale. Id.; see also ECF No. 109-1. It further requested that the proceeds of the foreclosure sale first be applied to the costs of sale and any outstanding property taxes on the Residence, and thereafter be distributed among the parties through a stipulation or order of the Court. ECF No. 109.

         The Court issued an order granting the Second MSJ on August 31, 2015, ECF No. 157, which thoroughly set forth why the inclusion of the foreclosure of Lender Defendants' mortgage was proper, id. at 16-23. That same day, the Court issued an Order of Foreclosure and Judicial Sale (“Foreclosure Order”) of the Residence, ordering that the Residence be sold free and clear of all liens, including Lender Defendants' mortgage. ECF No. 158.

         On September 1, 2015, however, Mr. Staton filed a petition for relief under 11 U.S.C. § 301 in the United States Bankruptcy Court for the District of Hawaii. ECF No. 160-1. In view of Mr. Staton's bankruptcy petition, the Court stayed this case. ECF No. 161. The Court reinstated the Foreclosure Order on December 7, 2015, in response to the Bankruptcy Court's Order Granting United States' Motion for Relief from Automatic Stay. ECF No. 168.

         On November 16, 2016, Mr. Staton filed a second petition for relief under 11 U.S.C. § 301 in the United States Bankruptcy Court for the District of Hawaii. ECF No. 208. Again, in view of Mr. Staton's bankruptcy petition, the Court stayed this case. ECF No. 209. Mr. Staton's second petition for relief under 11 U.S.C. § 301 was dismissed, however, and on April 24, 2017, the Court reinstated its Foreclosure Order and directed the parties to proceed in accordance therewith. ECF No. 212.

         The day before the scheduled foreclosure sale auction, on June 20, 2017, Mrs. Staton filed a petition for relief under 11 U.S.C. § 301 in the United States Bankruptcy Court for the District of Hawaii. ECF No. 214. Based on Mrs. Staton's bankruptcy petition, the Court stayed this case. ECF No. 215.

         The following month, on August 7, 2017, the Government filed a Motion for Relief from Automatic Stay in the Bankruptcy Court. The Bankruptcy Court entered an order on October 6, 2017, granting the Government's Motion for Relief from Automatic Stay. Accordingly, the Court unstayed this case and reinstated its Foreclosure Order, directing the parties to proceed in accordance therewith. ECF No. 219.

         The foreclosure sale of the Residence was set for December 20, 2017. ECF No. 230. But on December 8, 2017, Mr. Staton filed an Emergency Motion to Strike Notice of Lis Pendens (NOPA), ECF No. 226, along with a Supplement to the Emergency Motion, ECF No. 227. Mr. Staton represented that he obtained financing in the amount of $1, 032, 000-sufficient to satisfy all liens on the property-with a closing date set for December 8, 2017. ECF No. 226. The Court held a hearing on this matter on December 11, 2017 and ordered the parties to have a settlement conference with Magistrate Judge Chang. ECF No. 234.

         On December 18, 2017, Magistrate Judge Chang held the settlement conference, which he ended when the Statons could not produce a loan commitment from the lender for the above-described financing. ECF No. 244. The Statons filed an Emergency Motion Regarding Foreclosure and Request for a Hearing and Stay Pending Hearing later that day. ECF No. 241. And- still on December 18, 2017-the Court held a hearing on the Statons' motion, concluding that once again the Statons failed to obtain a loan commitment which would pay off all the liens on the Residence and that the foreclosure of the Residence would proceed on December 20, 2017. ECF No. 243.

         The day before the foreclosure sale, on December 19, 2017, the Statons filed a Notice Re: Conditional Loan Approval Letter and requested a stay of the foreclosure sale.[4] ECF No. 245. The Court held a hearing the morning of December 20, 2017 regarding the Statons' Notice, [5] at which the Court denied the Statons' request for a stay and ordered the foreclosure sale to proceed. ECF No. 251.

         The foreclosure sale occurred on December 20, 2017 around 12:00 p.m. on the steps of the United States District Court for the District of Hawaii. Following the foreclosure sale, on December 21, 2017, the Commissioner filed a Notice of Sale, informing the Court that the Residence was sold one day earlier for $1, 135, 000.00, subject to confirmation by the Court. ECF No. 254.

         On December 21, 2017, however, the Government filed a Notice of Defendant Ronald Staton's Bankruptcy Case, which stated that: (1) Mr. Staton filed a new bankruptcy case on December 20, 2017 and (2) the Government intended to seek relief from the stay in that case so that the Commissioner's sale could be confirmed. ECF No. 253.

         On December 22, 2017, Mrs. Staton filed a notice of lis pendens, asserting that she was contesting the validity of the foreclosure sale as having been filed in violation of Mr. Staton's bankruptcy, which she contended was filed at 11:54 a.m. before the foreclosure sale. ECF No. 255. She also asserted that the foreclosure sale failed “to protect defendant interests in the property.” ECF No. 255 at 2. The Court entered a minute order on January 5, 2018, setting a hearing on Mrs. Staton's claim for January 31, 2018 and directing the parties to file briefs. ECF No. 258.

         On January 17, 2018, the Statons filed a Brief in Support of Claim of Failure to Protect Defendant Interests in Real Property. ECF No. 260. On January 23, 2018, the United States filed a Memorandum in Response to the Statons' December 22, 2017 and January 17, 2018 briefs. ECF No. 261. On January 24, 2018, the Lender Defendants filed a Response to Brenda Staton's Brief in Support of Claim of Failure to Protect Defendant Interests in Real Property. ECF No. 262.

         The Bankruptcy Court granted the Government's Motion for Relief from Automatic Stay on January 31, 2018, and applied the lifting of the stay retroactively to December 20, 2017. This Court continued the hearing on Mrs. Staton's claim originally scheduled for January 31, 2018 until February 16, 2018 because the Government: (1) did not seek a waiver of the 14-day stay provided under Fed.R.Bankr.P. 4001(a)(3) in Mr. Staton's bankruptcy case; and (2) failed to record the Bankruptcy Court's Order in Mrs. Staton's prior bankruptcy case granting relief from the stay, which provided for “‘in rem' relief, i.e. this order is binding with respect to the subject property for 240 days after the date of the entry of this order in any other bankruptcy ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.