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United States of America v. Donald R. Whitman; Cynthia L. Cherry

May 13, 2013

UNITED STATES OF AMERICA, PLAINTIFF,
v.
DONALD R. WHITMAN; CYNTHIA L. CHERRY, FORMERLY KNOWN AS CYNTHIA L. WHITMAN; WILLIAM RYAN FOWLER, IN HIS CAPACITY AS TRUSTEE OF RUBY TRUST; WHITEWATER LLC; STATE OF CALIFORNIA FRANCHISE TAX BOARD;
DEFENDANTS.



FINDINGS AND RECOMMENDATIONS

This case was referred to the undersigned pursuant to Eastern District of California Local Rule 302(c)(19) and 28 U.S.C. § 636(b)(1) for hearing on plaintiff's motion for entry of default judgment against defendant Cynthia L. Cherry, formerly known as Cynthia L. Whitman ("Cherry") on Claims Two and Three of plaintiff's complaint. Dckt. No. 15; see also Dckt. No. 1 (Compl.). Although she was served with a copy of the motion for default judgment, id. at 4, Cherry did not file any opposition or statement of non-opposition to the motion, as required by Eastern District of Local Rule 230.*fn1 See E.D. Cal. L.R. 230(c) (providing that opposition to the granting of a motion, or a statement of non-opposition thereto, must be served upon the moving party, and filed with this court, no later than fourteen days preceding the noticed hearing date).*fn2 For the reasons that follow, the court recommends that plaintiff's application for entry of default judgment be granted.

I. BACKGROUND

On September 10, 2012, plaintiff filed a complaint to reduce tax assessments against Donald R. Whitman, Cynthia L. Cherry, formerly known as Cynthia L. Whitman, and against Donald R. Whitman and Cynthia L. Whitman jointly to judgment and to foreclose federal tax liens. Compl., Dckt. No. 1. The complaint alleges that this Court has jurisdiction pursuant to 28 U.S.C. §§ 1340 and 1345 and 26 U.S.C. (Internal Revenue Code) §§ 7402 and 7403. Id. ¶ 3.

Venue is proper in this district pursuant to 28 U.S.C. § 1396 because defendants' 2004 joint federal income tax return was filed within this judicial district and because the federal tax liabilities at issue arose in this judicial district. Id. ¶ 4.

Defendants Donald R. Whitman and Cynthia L. Whitman, also known as Cindy Cherry ("taxpayers") have been assessed, both separately and jointly, with unpaid federal income taxes. Id. ¶ 5. Plaintiff's second claim for relief seeks to reduce to judgment federal tax assessments individually against Cherry for tax periods 1997 and 1999 in the amount of $30,937.85 plus statutory interest and other statutory additions that continue to accrue as provided by law.*fn3 Id.

¶¶ 23-25. Plaintiff contends that on November 24, 2003, a duly authorized delegate of the Secretary of Treasury made timely federal tax assessments against Cherry for federal income taxes (Form 1040), penalties, and other statutory additions. Id. ¶ 23. Timely notice of and demand for payment of those assessments has been given to Cherry as required by Section 6303 of the Internal Revenue Code. Id. ¶ 24. Despite notice and demand for payment of the assessments, Cherry has neglected, refused, or failed to pay the tax assessments against her and, calculated to September 2, 2012, there remains due and owing to the United States on those assessments the total sum of $30,937.85, plus statutory interest and other statutory additions that continue to accrue as provided by law. Id. ¶ 25.

The third claim for relief seeks to reduce to judgment federal tax assessments jointly against Donald R. Whitman and Cherry for tax year 2004 in the amount of $2,324.39 plus statutory interest and other statutory additions that continue to accrue as provided by law. Id.

¶¶ 26-29. Plaintiff contends that on May 30, 2005, a duly authorized delegate of the Secretary of Treasury made a timely federal tax assessment against Whitman and Cherry for federal income taxes (Form 1040), penalties, and other statutory additions. Id. ¶ 27. Timely notice of and demand for payment of those assessments has been given to Whitman and Cherry as required by Section 6303 of the Internal Revenue Code. Id. ¶ 28. Despite notice and demand for payment of the assessments, Whitman and Cherry have neglected, refused, or failed to pay the tax assessments against them and, calculated to September 2, 2012, there remains due and owing to the United States on those assessments the total sum of $2324.39, plus statutory interest and other statutory additions that continue to accrue as provided by law. Id. ¶ 29.

On December 31, 2012, plaintiff filed a summons returned executed as to defendant Cherry, indicating that service was effected on December 6, 2012, by leaving a copy of the complaint and summons at defendant's dwelling house or usual place of abode at 905 North Pine Street in Truth or Consequences, New Mexico with a person of suitable age and discretion then residing therein (Jerry Trumbull). Dckt. No. 12. Cherry failed to respond to the complaint and, on December 31, 2012, plaintiff requested entry of Cherry's default. Dckt. No. 13. That default was entered on January 3, 2013. Dckt. No. 14. On February 22, 2013, plaintiff moved for default judgment against Cherry, Dckt. No. 15, and mail served a copy of the motion on Cherry, Dckt. No. 15 at 4.

Plaintiff seeks a default judgment against Cherry as to Counts Two and Three of the complaint. Specifically, plaintiff seeks a judgment as to Count Two in the amount of $30,937.85 for her 1997 and 1999 individual income tax liabilities, and a judgment as to Count Three in the amount of $2,324.39 for her 2004 joint federal income tax liabilities, calculated to March 1, 2013. Id. at 2.

II. DISCUSSION

A. Default Judgment Standard

It is within the sound discretion of the district court to grant or deny an application for default judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court considers the following factors:

(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning the material facts, (6) whether the default was due to excusable neglect, and (7) the strong ...


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