United States District Court, C.D. California
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For United States of America, Plaintiff: Andrew Pribe, AUSA - Office of U.S. Attorney, Los Angeles, CA.
Joel L Boyce, Defendant, Pro se, Newbury Park, CA.
Delynn E Boyce, Defendant, Pro se, Newbury Park, CA.
For JPMorgan Chase Bank, Defendant: Jed P White, Bryan Cave LLP, Santa Monica, CA.
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING JOEL BOYCE'S AND DELYNN BOYCE'S MOTION TO DISMISS
MARGARET M. MORROW, UNITED STATES DISTRICT JUDGE.
A. Procedural Background
On January 28, 2013, the United States (" the government" ) filed this action against Joel L. Boyce (" Joel" ); Delynn E. Boyce (" Delynn" ) (collectively " the Boyces" ); Perfect Accord Unlimited (" Perfect" ); JPMorgan Chase Bank (" Chase" ); the State of California Franchise Tax Board; (" FTB" ); Bank of America, N.A.; the City of Thousand Oaks; and the Ventura County Tax Collector. The government seeks to reduce federal income tax assessments against Joel Boyce to judgment, to foreclose federal tax liens against all defendants, and to set aside an allegedly fraudulent conveyance of real property by the Boyces to Perfect. The government also asks the court to order the sale of the real
property that is the subject of this action; to determine the interest and priority of Chase, the FTB, Bank of America, the City of Thousand Oaks, and the Ventura County Tax Collector in the property; and to order distribution of the proceeds from the sale of the property accordingly.
On May 3, 2013, the court dismissed the City of Thousand Oaks, which disclaimed all interest in the property. That same day, it relieved the FTB and Bank of America of any obligation to participate further in the action pursuant to a stipulation between them and the government concerning the priority of their respective interests in the property. On May 2, 2014, the court relieved the Ventura County Tax Collector of any obligation to participate further in the action pursuant to a stipulation between it and the government concerning the priority of their respective interests. On May 9, 2013, the clerk entered Chase's and Perfect's defaults. Chase's default was set aside on June 18, 2013, pursuant to stipulation. Chase filed an answer on June 28, 2013, which raised as an affirmative defense the fact that it had a security interest in the property senior to the claim of the government and all defendants in the action.
On July 19, 2013, the court issued an order granting the government's motion for entry of default judgment against Perfect. In the order, the court stated that " [w]hen the action against the remaining parties [was] resolved, [it would] enter judgment finding that Perfect [was] the alter ego of the Boyces, that their transfer of the Property to it was fraudulent, and that the Government [was] entitled to foreclose on the federal tax liens that encumber the Property."  On November 13, 2013, the government filed a motion for summary judgment. Chase has not opposed the motion. The Boyces have filed opposition.
On November 27, 2013, the Boyces filed a motion to compel responses to interrogatories and the production of documents.
The Boyces sought, inter alia, production of notices of deficiency for 2003-2005; IRC § 6020(b) certifications, also known as " substitute for returns" (" SFRs" ) for 1998, 1999, 2004, and 2006-2008; and various documents substantiating the job titles, job descriptions, and duties of the individuals who prepared the notices of deficiency and SFRs.
On January 22, 2014, with their motion to compel pending and the government's summary judgment motion scheduled for hearing on January 27, 2014, the Boyces filed a motion to continue the hearing on the summary judgment motion, which the court granted on January 24, 2014. On February 11, 2014, Magistrate Judge John E. McDermott denied the Boyces' motion to compel. On February 21, 2014, they filed a motion for reconsideration of Judge McDermott's February 11 order. On May 2, 2014, the court issued an order granting in part and denying in part the Boyces' motion (the " May 2 Order" ). The court directed the government to conduct a good faith search for notices of deficiency for tax years 2003-2005, which the government had previously stated it was unable to locate, and to produce any responsive documents it identified. The court directed that, if the government was unable to locate the notices, it was to file and serve on the Boyces a declaration describing the efforts it had made to locate them. The court denied the Boyces' motion in all other respects. On May 22, 2014, the government filed a status report stating that it had been unable to locate the notices and describing its search for the missing documents.
On April 29, 2014, the Boyces filed a motion to dismiss for lack of subject matter jurisdiction. The court took the motion under submission on May 29, 2014.
B. Factual Background
Joel Boyce failed to file federal income tax returns for tax years 1998 through 2008. Based on Form 1099s it
had received reflecting Joel's receipt of taxable income during the period, the government computed his taxable income and sent him notices of deficiency and demands for payment. Joel made only three voluntary payments totaling $1,050 toward his federal tax liability for these years. As of November 22, 2013, the total outstanding balance of all federal tax liabilities assessed against Joel for tax years 1998-2008 was $501,872.41.
To satisfy Joel Boyce's outstanding federal tax debt, the government seeks to foreclose federal tax liens against real
property located at 163 Fallbrook Avenue, Newbury Park, California (" the Property" ). On September 13, 1988, the Boyces acquired a one-half interest in the Property as joint tenants. The other one-half interest was acquired by Todd H. Smith and Karrie O. Smith (collectively " the Smiths" ). On October 11, 1988, the Boyces and the Smiths executed a deed of trust in favor of Great Western Bank;  Chase now holds Great Western's interest in the Property. On November 3, 1988, the Smiths quitclaimed their interest in the Property to the Boyces as joint tenants.
Joel filed no federal income tax returns for the 1991, 1992, and 1993 tax years. On December 7, 1995, at a time when Joel was liable to the United States for unpaid federal income tax, the Boyces recorded a quitclaim deed transferring their interest in the Property to Perfect as sole owner. The quitclaim deed stated that the transfer was " [f]or valuable consideration received," but also contained the statement that " [t]his conveyance is a gift and is exempt pursuant to Ordinance 2585." 
Perfect is not registered in any capacity with the California Secretary of State or the Internal Revenue Service (IRS). In May 2001, Joel submitted an application seeking approval of a building modification at the Property; on the application, he identified himself as Perfect's manager, and stated, under penalty of perjury, that he had power of attorney for Perfect. In June 2011, Joel once again identified himself as Perfect's manager on a Form 911, which is a request for taxpayer advocate service assistance that is submitted to the IRS.
Despite transferring the Property to Perfect, the gas and electric utilities for the Property remain in Joel's name; he also continues to receive mail at the Property's address. Furthermore, Joel continues to pay the mortgage on the Property and has sent correspondence to the bank stating that he was the purchaser of the property. On a federal tax return he filed in July 1998, Joel identified the Property as his address.
A. Whether the Court Should Dismiss the Action for Lack of Subject Matter Jurisdiction
The court begins by addressing the Boyces' contention in their two opposition briefs and motion to dismiss that the court lacks subject matter jurisdiction to hear the action. The Boyces contend that the
court lacks subject matter jurisdiction because no valid notices of deficiency have been produced. As the court explained in its May 2 order on the Boyces' motion for reconsideration, the court has jurisdiction to hear this case under 26 U.S.C. § 7402 and 28 U.S.C. § § 1340 and 1345 notwithstanding the missing notices of deficiency. See United States v. Miljus, No. CV. 06-1832-PK, 2007 WL 3171591, *1 (D. Or. Oct. 28, 2007) (stating, in an action by the government to foreclose federal tax liens, that the court had jurisdiction, inter alia, under 26 U.S.C. § 7402 and 28 U.S.C. § § 1340 and 1345); see also United States v. Buaiz, No. 3:07-CV-83, 2010 WL 3517075, *4 (E.D. Tenn. Sept. 3, 2010) (same).
26 U.S.C. § 7402(a) provides, in relevant part: " The district courts of the United States at the instance of the United States shall have such jurisdiction to . . . render such judgments and decrees as may be necessary or appropriate for the enforcement of the internal revenue laws." 28 U.S.C. § 1340 states, in relevant part: " The district courts shall have original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue[.]" Finally, 28 U.S.C. § 1345 provides: " Except as otherwise provided by Act of Congress, the district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States, or by any agency or officer thereof expressly authorized to sue by Act of ...