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United States v. Bell

September 17, 2008

UNITED STATES OF AMERICA, PLAINTIFF,
v.
GLENN D. BELL, JEANETTE BELL, ET AL. DEFENDANTS.



The opinion of the court was delivered by: Oliver W. Wanger United States District Judge

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This case came before the Court for trial commencing April 25, 2008, in Courtroom 3, the Hon. Oliver W. Wanger presiding. The Court heard evidence during a one-day bench trial. The parties submitted trial briefs and proposed Findings of Fact and Conclusions of Law. Plaintiff United States ("US" or "the United States") is represented by G. Patrick Jennings of the U.S. Department of Justice. Defendant Dumas International, LLC ("Dumas") is represented by Frank T. Zumalt, of The Zumalt Law Firm, APC. After hearing all the evidence, legal submissions and arguments of the parties, the following Findings of Fact and Conclusions of Law are entered.

PRELIMINARY MATTERS

A. LEGAL STANDARD

In trials without juries, Fed. R. Civ. P. 52(a) requires a court to find the facts specially and state separately its conclusions of law thereon. See Barnett v. Sea Land Service, 875 F.2d 741, 744 (9th Cir. 1989). Even upon review, due regard is given to the district court's judgment as to the credibility of the witnesses, Fed. R. Civ. P. 52(a) and Courts of Appeal will give deference to a district court's choice between two permissible views of evidence provided it is not clearly erroneous. Moody v. Proctor, 986 F.2d 239, 241 (8th Cir. 1993).

B. EVIDENCE

The following exhibits were admitted into evidence during trial:

EXHIBIT NO. DESCRIPTION

1 Declaration of Darrell Souza, on behalf of Dumas, Dated 6/12/2005

2 Loan Purchase and Sale Agreement, Dated 12/10/2003

3 Adjustable Rate Note, Dated 8/9/1984

4 Deed of Trust, Dated 8/9/1984

5 Guaranty Residential Lending Payoff Statement, Dated 10/23/2003

6 12/9/2003, Loan No. 72888-000527-001 and Dated Two Residential Mortgage Loan Statements, Dated 12/15/2003, Loan No. 72888-000527-001 ADV

7 Jeanette Bell Bankruptcy Petition, Dated 3/10/2006

8 Tentative Ruling from Bankruptcy Court, Dated 12/27/1999

9 Employee, Kathryn Irene Lewis, Dated 9/18/1996 Portions of Deposition of Stockton Savings

10 Guaranty Bank Letter of Assignment to the Bells, Dated 12/15/2003

11 Notice of Sale, Dated 12/18/2003

12 Notice of Sale, Dated 12/30/2003

13 Dumas's Calculation of Mortgage Balance

14 Letter from Souza to Jennings, Dated 3/12/2004

15 Letter from Souza to Jennings, Dated 12/23/2004

16 2/10/1989 Notices of Federal Tax Lien, Earliest Date

17 US Calculation of Mortgage Balance

18a Individual Joint Tenancy, Dated 3/19/1984

18b Deed of Trust, Dated 3/19/1984

19 12/13/1999 Voluntary Petition for Bankruptcy, Dated

20 Loan No. 1036207 Residential Mortgage Statement, Dated 12/9/2003,

21 Guaranty Bank Letter of Assignment to the Bells, and Guaranty Bank envelope addressed to Mr. Souza, Dated 12/15/2003

22 Loan No. 1036207ADV Residential Mortgage Statement, Dated 12/15/2003,

23 Notice of Sale, Dated 12/18/2003

24 Notice of Sale, Dated 12/30/2003

25a Judicial Notice of Sale, Dated 3/7/2007

25b Judicial Notice of Sale (Internet Version ), Dated 3/7/2007

26 Dated 1/24/2007 Affidavit of Death of Glen Bell, Joint Tenant,

27 Letters to Guaranty Bank from Darrell Souza

28 Dated 4/1/2004 Letter to Souza from U.S. Department of Justice,

29 Dated 4/14/2004 Letter to U.S. Department of Justice from Souza,

30 Letter to Souza from U.S. Department of Justice, Dated 5/25/2004

31 Letter to U.S. Department of Justice from Souza, Dated 12/23/2004

32 Letter of Acceptance to Souza from U.S. Department of Justice, Dated 9/9/2005

33 11/17/2006 Notice of Entry of Order of Dismissal, Dated

34 Bankruptcy Proof of Claim, Dated 6/12/2006

35 Dated 1/24/2007 Separate Release of Funds and Sale Agreement,

36 Letter to U.S. Department of Justice from Souza, Dated 2/21/2007

37 Report of Richard L. Goldstein, Dated 4/18/2008

FINDINGS OF FACT

To the extent that any Findings of Fact can be interpreted as a Conclusion of Law, it is intended.

A. THE PARTIES

1. Plaintiff is the United States of America, or the US. The US filed this action to reduce a tax assessment to judgment and to enforce tax liens against real property, known as the Bell Ranch.

2. Defendant Dumas International LLC, is a Delaware limited liability company, with its principal place of business in Modesto, California. Ron Malleck, is the principal of Dumas.

3. Dumas is in the business of purchasing "troubled" properties - those with outstanding liens or other defective-title problems - and clearing up those problems, and then re-selling the properties. Dumas becomes the owner of these distressed properties, with the intent to clear the problems associated with the properties and to later sell the properties at a profit.

4. Darrell Souza, is a managing member of Dumas who negotiated the purchase of the Deed of Trust from Guaranty Federal Bank ("Guaranty Bank"), successor-in-interest to Stockton Savings and Loan Association, a Federal Savings and Loan Association ("Stockton Savings"). He is a commercial real estate broker and so licensed in California.

5. Mr. Souza previously owned a real estate company, J Bar, from 1989 through 1996. During the course of Mr. Souza's experience as a realtor, he has dealt with mortgage loans and deeds of trust and familiarized himself with lienholders and their interests. He has acquired deeds of trust from banks from 1982 to the present time.

6. Mr. Souza has participated in judicial sales, such as probate sales, but had not participated in an IRS sale prior to the Bell Ranch judicial sale.

7. Dumas disputes the balance due under the Adjustable Rate Note and Deed of Trust owed by the judgment debtors, Glen and Jeanette Bell, which is senior in priority to the tax liens, as to the original loan amount and interest and penalties thereon.

8. Guaranty Bank was the previous holder of the Adjustable Rate Note and Deed of Trust, and the successor to the original Defendant to this suit, Stockton Savings.

9. Glen D. Bell and Jeanette Bell (the "Bells"), defendants and taxpayers, were legal owners of the Bell Ranch, having obtained legal title on May 1, 1984 from Paul and Rose Warda. The Bells paid $350,000 for the entire property and then constructed a residence on parcel A, 3549 Kiernan Road. United States v. Bell, 27 F.Supp.2d 1191, 1195 (E.D. Cal. 1998); 4/24 Tr. Transcript 106:20-23.

I. Bell Ranch

10. The "Bell Ranch" is commonly known as 3549 Kiernan Road, Modesto, California, APN 003-19-13-803; 3513 Kiernan Road & 3513 1/2 Kiernan Road, APN 003-19-14-803 and APN 003-19-15-807. The property has 29.233 acres in the County of Stanislaus, State of California. The acreage is divided into parcels A, B, and C, and is more particularly described as follows:

35 OF PARCEL MAPS, AT PAGE 18, BEING A DIVISION OF LOTS THAT CERTAIN PARCEL MAP FILED APRIL 26, 1984 IN VOLUME PARCELS "A", "B", AND "C", AS SHOWN AND DESIGNATED ON 9, 10, 15, AND 16 OF EDEN COLONY ACCORDING TO THE OFFICIAL MAP THEREOF, FILED IN THE OFFICE OF THE 1909 IN VOLUME 4 OF MAPS, AT PAGE 32.

RECORDER OF STANISLAUS COUNTY, CALIFORNIA ON AUGUST 14,

11. The large residence, located at 3549 Kiernan Road, parcel A, was constructed on the property following the Bells' purchase. Id. The two other houses on the Bell Ranch are older and have little value.

12. Mr. Souza first became aware of the Bell Ranch through a 2001 public auction of the property, a judicial or tax sale, that was noticed in the newspaper and the internet.

B. CONSTRUCTION LOAN- ADJUSTABLE RATE NOTE (AUGUST 1984)

13. The Bells obtained a construction loan from Stockton Savings in the amount of $251,000 in 1984 to construct a home on parcel A, 3549 Kiernan Road.

14. An adjustable rate note ("Adjustable Rate Note") dated August 9, 1984, evidenced the construction loan, in the principal amount of $310,000. United States v. Bell, 27 F.Supp.2d 1191, 1195 (E.D. Cal. 1998). Dumas is the current holder of the Adjustable Rate Note.

15. The Adjustable Rate Note matures in 2015.

16. The Adjustable Rate Note for Loan No. 72888-000527-001, bearing the signatures of Glen Bell and Jeanette Bell, provides for an interest rate 2.25 percentage points above the "monthly weighted average cost of funds index for Eleventh District Savings and Loan Associations." Ex. 3.

17. A note has not been located that references Loan No. 72888-000527-001 ADV, which Dumas contends refers to an advance loan on the construction loan. No checks evidencing payment on an advance have been located. 4/24 Tr. Transcript 118:14-16.

18. Many of the loan documents appear to have been misplaced in the transitions that have occurred since Stockton Savings was acquired by Guaranty Bank.

19. The only promissory note provided in evidence that references the Deed of Trust, is the Adjustable Rate Note, Exhibit 3. 4/25 Trial Tr. 100:21-25; 101:1-3; 107:18-20; Ex. 3, Adjustable Rate Note.

20. Both parties assume that the Bells stopped paying on the construction loan after 1998 to date.

C. DEED OF TRUST (AUGUST 1984)

21. In conjunction with the construction loan and Adjustable Rate Note, the Bells granted a first deed of trust interest in Parcel A of the real property to Stockton Savings, as trustee for Stockton Federal Savings and Loan Association ("Deed of Trust"). Ex. 4, Deed of Trust.

22. The Deed of Trust was dated August 9, 1984, executed by the Bells, and recorded in the Official Records of Stanislaus County, California on August 15, 1984, as Instrument No. 7773.

23. This Deed of Trust recites that the Bell Ranch, parcel A, and easement over parcel C, has been encumbered as security for a $310,000 construction loan.

I. FUTURE ADVANCES

24. Paragraph 21 of the Deed of Trust allows for future advances at the option of the lender: As "repayment of any future advances, with interest thereon, made to Borrower by Lender pursuant to paragraph 21 hereof (herein "future advances")." Ex. 4.

25. The Deed of Trust provides that such future advances, with interest, shall be secured by the Deed of Trust when evidenced by promissory notes. Ex. 4, ¶ 21, Future Advances.

26. Paragraph 21 states:

Upon request of Borrower, Lender, at Lender's option, prior to reconveyance of the property to Borrower, may make Future Advances to Borrower. Such Future Advances, together with interest thereon, shall be secured by this deed of trust when evidenced by promissory notes stating that said notes are secured hereby.

27. To the extent that it secures the repayment of the construction loan to the Bells, the Deed of Trust is senior in lien priority to the federal tax liens against the property of defendants the Bells. United States v. Bell, 27 F.Supp.2d 1191, 1200 (E.D. Cal. 1998).

D. THE BELL'S BANKRUPTCIES/TITLE TRANSFERS (1985-1987)

28. Through a variety of stratagems, including multiple bankruptcy filings, and fraudulent transfers, the Bells delayed and frustrated efforts by the IRS to collect taxes owed by the Bells to the United States Government. These activities are described, in part, in United States v. Bell, 27 F. Supp. 2d 1191, 1193-1197 (E.D. Cal. 1998).

29. The Bells made transfers of the Bell Ranch beginning less than one year after their purchase in August, 1984.

(1) On June 12, 1985, the Bells deeded the Bell Ranch to "Glen D. Bell and Jeanette Bell as trustees of the Glen D. Bell Family Trust." Id. at 1195.

(2) On September 25, 1985, Glen D. Bell recorded a "paper mortgage" to an entity he invented, the "International Bank of the South Pacific" in the amount of $300,000.

Id.

(3) On May 27, 1986, the Bells as trustees transferred title to the Bell Ranch to ...


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