United States District Court, S.D. California
ORDER DENYING MOTIONS TO DISMISS
Honorable Larry Alan Burns UNITED STATES DISTRICT JUDGE
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.
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).
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).
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).
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.
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
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.
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. 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.
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.
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,