United States District Court, E.D. California
AMENDED FINDINGS AND RECOMMENDATIONS
ALLISON CLAIRE, UNITED STATES MAGISTRATE JUDGE
to Local Rule 302(c)(19), this matter came before the court
on May 11, 2016 for hearing on plaintiff's motion for
default judgement, ECF No. 33. Attorney Paul Butler appeared
telephonically on behalf of the plaintiff. There was no
appearance by defendants. On May 17, 2016, the court issued
Findings and Recommendations. ECF No. 38. On May 24, 2016,
the plaintiff filed objections to the Findings and
Recommendations, ECF No. 39, seeking correction of a
typographical error, clarification of a non-party's
status, and alternative language for the recommended
judgment's interest provision.
review of the motion, the documents filed in support,
plaintiff's objections, and good cause appearing
therefor, the undersigned will vacate the previously-issued
Findings and Recommendations, and makes the following
Findings and Recommendations in their place.
action, the United States seeks a money judgment for federal
estate tax unpaid by the Estate of Cipriano Espinor
("the Estate") from the Estate, Michael C. Espinor
(co-executor and heir), Toni Hicks (co-executor and heir),
heirs John Espinor, Richard Espinor, Pauline DiBattista,
Martha Espinor, and S&P Sheet Metal, LLC., and Wells Fargo
Bank, N.A. ECF No. 1 (Complaint) at ¶1. Jurisdiction is
properly founded upon 28 U.S.C. sections 1340 and 1345, 26
U.S.C. §§ 6324(a), 7402 and 7403, and 31 U.S.C.
§ 3713. Venue is proper in this judicial district under
28 U.S.C. § 1391(b) since the tax liabilities accrued,
decedent resided, and proceeds of the Estate were distributed
Court's record reflects that all defendants were properly
served with the complaint between March 25 and April 26,
2014. ECF Nos. 6-12. Defendants Martha Espinor and Wells
Fargo have both answered the complaint through counsel, but
the other named defendants have not appeared and have
expressed no intention to appear either in propria
persona or through counsel. Wells Fargo has been
dismissed from the action. ECF No. 34. Default was entered by
the Clerk of this Court on September 26, 2014, against all
remaining defendants except Martha Espinor. ECF No. 23.
Plaintiff filed the instant Motion for entry of Default
Judgment on March 18, 2016. ECF No. 33.
Espinor died testate on October 13, 2004. ECF No. 1
(Complaint) at ¶12. After Cipriano's death,
co-executors Michael C. Espinor and Toni Espinor Hicks
administered the estate informally, without court
supervision, and they took actions without court approval.
Id. at ¶¶ 14, 16. Decedent's will
contained a "pour-over" clause directing that
residuary assets were to be transferred into a Family Trust
executed on April 22, 1997, and distributed in accordance
with its terms. Cipriano and his wife Nora, who predeceased
him, were grantors and initial trustees and they were
succeeded by Michael C. Espinor and Toni Hicks as trustees.
Id. at ¶¶17-19. The Family Trust directed,
among other things, that upon death of the grantors the
trustee was required to set aside sufficient assets to be
used to pay federal estate tax debts and obligations of
either of the grantors due and owing, and directed the
disposition of the remaining assets to the named defendants.
Id. at ¶¶ 20-29.
complaint identifies real property, business assets and
retirement accounts that were under the control of the
co-trustee defendants at the time of Cipriano's death.
Id. at ¶¶ 30-31. The Form 706 Estate Tax
Return filed by the co-executors listed fair market values of
all assets of the Estate, reflecting a total estate value of
$5, 120, 869. Id. at ¶ 32. On or about June 26,
2006, executor Michael Cipriano filed an election to defer
payment of estate taxes five (5) years and thereafter to pay
the remaining tax liability in ten (10) annual installments.
Id. at ¶ 33. In this election, he admitted that
the estate tax liability totaled $1, 586, 551.00, of which
the Estate elected to defer $622, 563. Id. at ¶
about August 16, 2005, the executors made a request for an
extension to pay federal estate taxes that had been due a
month earlier, that request was granted, and the duly
authorized delegate of the Secretary of Treasury continued to
make timely assessments itemized in the Complaint from
January 17, 2006 through December 17, 2012. Id. at
35-36. Other agreements to secure the debt to the United
States, to defer payments and enter liens to assure
satisfaction, were negotiated between the Estate and the
United States over the next few years. Id. at
¶¶ 37-39. On June 14, 2012, the IRS declared the
Estate to be in default of the installment agreement and
terminated it. Id. at ¶ 43. On November 8,
2012, the Service sent notice and demand for payment,
id. at ¶ 44, and by July 31, 2013, federal
estate taxes that remained due and owing amounted to $621,
850.85 and continued to accrue interest, id. at
complaint asserts, id. at ¶ 48, that with the
tax burden unsatisfied, the following assets were distributed
by the co-executors/co-trustees, Michael Espinor and/or Toni
1. A car valued at $35, 000 and cash payments and loans of
$210, 922 to defendant Michael Espinor;
2. A pick-up truck valued at $35, 000 and cash payments and
loans of $440, 944 to defendant Toni Hicks;
3. A Truck valued at $20, 000 and $212, 228.00 in cash
payments and loans to defendant Richard Espinor;
4. Two (2) Ford automobiles valued at $80, 000 and $60, 000,
and $755, 826 in cash payments and loans to defendant John
5. Cash payments to Pauline DiBatttista of $33, 840;
6. Cash payments of $27, 500 to Craig
7. A cash loan of $120, 000, and cash deposits in the amount
of $170, 145 to S&P Sheet Metal, LLC.
transfers are described as having been made at a time when
the Estate did not have sufficient assets to pay its
outstanding liabilities, including its federal estate tax
liability, and, at the time of filing, the Estate was in
deficit with regard to its outstanding liabilities overall.
Id. at ¶¶ 51-53.
United States of America seeks entry of a default judgment
against the Estate of Cipriano Espinor, Michael C. Espinor
and Tony Hicks as co-executors of the Estate and Trustees of
the Espinor Family Trust and for the value of property they
received from the estate before taxes were paid, John S.
Espinor, Richard S. Espinor, Pauline DiBattista, and S & P
Sheet Metal, LLC, for the value of property they received
from the estate before taxes were paid, penalties and
interest on that unpaid obligation under 26 U.S.C. section
6324(a). The alleged liability of the individual
non-executors is limited to the value of the assets each
received from the Estate as trasnferees, trustees, and/or
beneficiaries, up to the date of judgment. The ...