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United States v. The Hall Family Trust Dated June 8

United States District Court, S.D. California

March 27, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
THE HALL FAMILY TRUST DATED JUNE 8, 2001, et al., Defendants.

          ORDER DENYING MOTIONS TO DISMISS

          Honorable Larry Alan Burns UNITED STATES DISTRICT JUDGE

         The United States filed this action to reduce certain tax obligations to judgment and to foreclose on certain tax liens on real property in Solana Beach, within this District. The complaint named various possible claimants to the property as Defendants. Some Defendants have disclaimed interest in the subject property and have been dismissed. But Defendants A & F Family Pure Trust, Estate of Neil Alan Scott, Frances V. Scott, and Michael A. Scott filed an answer. (Docket no. 5.) Also Defendants Amy Hedwig Hall, Russell Merton Hall, and The Hall Family Trust Dated June 8, 2001 filed a motion to dismiss for failure to state a claim (Docket no. 15), as did Union Bank, N.A. (Docket no. 20.) Defendant California Coast Credit Union joined in the earlier motion to dismiss. The two motions raise the same arguments.

         Legal Standards

         A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Under Fed.R.Civ.P. 8(a)(2), only “a short and plain statement of the claim showing that the pleader is entitled to relief, ” is required, in order to “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554-55 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level . . . .” Id. at 555. “[S]ome threshold of plausibility must be crossed at the outset” before a case is permitted to proceed. Id. at 558 (citation omitted). The well-pleaded facts must do more than permit the Court to infer “the mere possibility of misconduct”; they must show that the pleader is entitled to relief. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

         The Court accepts all allegations of material fact in the complaint as true and construes them in the light most favorable to the non-moving party. Cedars-Sinai Medical Center v. National League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007) (citation omitted). The Court is “not required to accept as true conclusory allegations which are contradicted by documents referred to in the complaint, ” and does “not . . . necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations.” Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (citations and quotation marks omitted). In addition to the pleaded facts, the Court may consider facts of which it has taken judicial notice. Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1016 n.9 (9th Cir. 2012).

         Arguments not raised in the opening brief are ordinarily waived. Mesa Grande Band of Mission Indians v. Salazar, 657 F.Supp.2d 1169, 1173 (S.D. Cal. 2009).

         Discussion

         The Court accepts the following alleged facts as true for purpose of ruling on the motions. In late 1999, the A&F Family Pure Trust acquired the Solana Beach property. At the time, Neil Alan Scott was the Trustee. The property was bought with funds from bank accounts he controlled. From around 2006 to 2008, the IRS assessed tax liabilities and interest against Neil Alan Scott for tax years 1999 through 2002. These and other liabilities were adjudicated in favor of the IRS in Neil Alan Scott v. Commissioner, United States Tax Court Case Number 14825-06. He failed to pay these obligations. These obligations are substantial; as of the end of 2015, they amounted to nearly $7 million.

         In 2008, the IRS filed a notice of federal tax lien (“NFTL”) with the San Diego County recorder's office giving the taxpayer's name as “A & F Family Pure Trust, as nominee, transferee or alter ego of Neil Alan Scott”. Neil Alan Scott died on April 10, 2013. On September 6, 2013, Russell Merton Hall and Amy Hedwig Hall (collectively, the “Halls”), trustees of the Hall Family Trust Dated June 8, 2001 bought the property from the A & F Family Pure Trust for $1.4 million. For purposes of this sale, Michael Alan Scott, Neil Alan Scott's son represented himself as managing trustee of the A & F Family Pure Trust. Michael Alan Scott never presented documents showing that he had been validly appointed as trustee. The Hall Family Trust now owns the property.

         Neil Alan Scott was a tax protester who purchased a “pure trust” from Gregory Karl. Karl was later convicted in federal court of selling “pure trusts” that purported to shield income from federal income tax. The A & F Family Pure Trust was Neil Alan Scott's nominee, i.e., the trust held legal title for his benefit.

         Judicial Notice

         The Defendants who filed the two motions raise the same argument, and cite the same case in support of that argument. They also ask the Court to take notice, under Fed.R.Evid. 201, of certain documents, including a grant dated October 15, 1999 transferring the property to the A & F Family Pure Trust; a grant deed dated September 6, 2013 transferring the property from Michael Alan Scott, “successor trustee of the A & F Family Pure Trust” to the Halls; and two NFTLs.[1] The United States also asked the Court to take notice of a different version of the grant deed from A & F Family Pure Trust to the Halls.[2]

         The government has not opposed the moving Defendants' requests for notice, except that it argues the September 6, 2013 grant deed may have been altered after it was signed and notarized. The fact that this grant deed was recorded is not disputed, however. The moving Defendants' request for notice is GRANTED.

         The moving Defendants object to the government's request. The government does not suggest that the alternate grant deed it proffers is a public record. The declaration in support of the request for notice shows that this document was produced to the IRS by the escrow company that handled transfer of the property. The government offers this document to show that the recorded grant deed was altered. The government points out that its grant deed and the deed recorded September 6, 2013 are identical, except that in the recorded deed the typewritten name of the grantor, A & F Family Pure Trust, ...


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