USA v. Donohoe et alMOTION for Summary JudgmentD.N.H.December 2, 2016 14505714.1 UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE United States of America, ) ) Plaintiff, ) ) v. ) Case No.: 1:16-cv-00067-SM ) Andrew J. Donohoe, Jr. et al., ) ) Defendants. ) United States’ Motion for Summary Judgment The United States moves for summary judgment against Donna Schipani for the reasons set forth in the accompanying memorandum of law. Dated: December 2, 2016 s/Michael R. Pahl Michael R. Pahl Trial Attorney, Tax Division U.S. Department of Justice Post Office Box 7238 Ben Franklin Station Washington, DC 20044 Telephone: (202) 514-6488 Facsimile: (202) 514-6770 michael.r.pahl@usdoj.gov Attorney for the United States Case 1:16-cv-00067-SM Document 25 Filed 12/02/16 Page 1 of 1 14785469.1 UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE United States of America, ) ) Plaintiff, ) ) v. ) Case No.: 1:16-cv-00067-SM ) Andrew J. Donohoe, Jr. et al., ) ) Defendants. ) United States’ Memorandum of Law in Support of Motion for Summary Judgment Introduction Because federal tax liens attach to Donohoe’s half-interest in property that he transferred to his ex-wife, Donna Schipani, should the United States’ motion for summary judgment be granted?1 Facts On May 6, 1987, Donohoe and his now ex-wife, Donna Schipani, purchased real property located in Rockingham County, New Hampshire (the “property”) as joint tenants with rights of survivorship.2 On February 4, 1999, Donohoe and Schipani 1 The United States also named RBS Citizens, National Association as a party because it holds a mortgage encumbering the property. Government counsel has sent RBS Citizen’s counsel a proposed stipulation regarding the mortgage. The United States has also moved for entry of default against RBS Citizen because it has not filed an answer to the complaint after waiving service on May 5, 2016. Dkt. 24. Thus, the question of RBS Citizen’s interest should be resolved either through stipulation or, if the United States’ request for default is granted, at a damages hearing for a default judgment. 2 Dkt. 7, Answer, ¶ 11. Case 1:16-cv-00067-SM Document 25-1 Filed 12/02/16 Page 1 of 8 2 established The Donohoe Family Revocable Trust of 1999.3 On June 7, 1999, Donohoe and Schipani purported to deed their respective half-interests in the property to Andrew J. Donohoe and Donna T. Schipani-Donohoe, Trustees of the The Donohoe Family Revocable Trust, for consideration of less than $100.4 Because the trust was revocable, Donohoe retained a one-half interest in the property within the meaning of 26 U.S.C. § 6321. Donohoe failed to pay federal income due for 2002 and 2003. On November 6, 2006, and January 1, 2007, federal income taxes were assessed against Donohoe for the 2002 and 2003 tax years,5 and federal tax liens arose on those dates in favor of the United States upon all property and rights to property belonging to Donohoe, including his half-interest in the property that was then held in his name as a trustee of The Donohoe Family Revocable Trust.6 On January 30, 2008, Schipani filed for divorce, stating that she and Donohoe “own a home at 8 Saddlepath Road, Raymond, New Hampshire,” that is, the property, and that the “home does not have a mortgage but . . . has a substantial tax lien on it asserted by the United States Treasury7 on account of [Donohoe’s] failure to pay taxes 3 Pahl Decl. Ex. 1. 4 Pahl Decl. Ex. 2. 5 Pahl Decl. Ex. 5. 6 Pahl Decl. Ex. 5. 7 This reference is to the original federal tax lien recorded on June 5, 2006 against Donohoe for the 2002 and 2003 tax years. Pahl Decl. Ex. 3. The IRS subsequently determined that the original assessments were in error and re-assessed tax against Donohoe for the 2002 and 2003 tax years on November 6, 2006 and January 1, 2007. Pahl Decl. Ex. 5. Case 1:16-cv-00067-SM Document 25-1 Filed 12/02/16 Page 2 of 8 3 associated with his business.”8 Schipani further requested that the Court order Donohoe “to be solely responsible for the present tax lien asserted by the United States Treasury/IRS.”9 While the divorce case was pending, on June 9, 2008, the IRS filed a notice of federal tax lien with the Rockingham County Registry of Deeds regarding the assessments against Donohoe discussed above.10 The IRS also filed a notice of federal tax lien with the Rockingham County Registry of Deeds naming the Andrew J. Dohohoe & Donna Schipani Realty Trust of 1999 as the nominee of Andrew J. Donohoe.11 This filing was in error because the proper name of the trust was the The Donohoe Family Revocable Trust of 1999, not the Andrew J. Dohohoe & Donna Schipani Realty Trust of 1999 (a separate trust that purportedly was set up for estate-planning purposes). On September 22, 2008, Donahoe and Schipani, as co-trustees of the trust, recorded a quitclaim with the Rockingham County Registry of Deeds purporting to convey their respective half-interests in the property to Schipani.12 A few weeks later, on October 21, 2008, a final decree of divorce was entered based on the agreement of the parties—Donohoe and Schipani.13 The final decree of divorce provides that Donahoe “shall be solely responsible for the IRS lien attached to the marital home while [Schipani] 8 Pahl Decl. Ex. 6 at 1. 9 Pahl Decl. Ex. 6 at 3. 10 Pahl Decl. Ex. 5. On February 22, 2016, the IRS refiled the lien for these tax years, showing an amount due of approximately $187,000. Bishop Decl. Ex. 9. 11 Pahl Decl. Ex. 4. 12 Pahl Decl. Ex. 7. 13 Pahl Decl. Ex. 8. Case 1:16-cv-00067-SM Document 25-1 Filed 12/02/16 Page 3 of 8 4 shall be responsible for the payment of any mortgage, equity line, insurance, real estate taxes, or other expenses of the property.”14 The current assessed value of the property is $209,000.15 As of November 28, 2016, Donohoe’s federal income tax debt for the 2002 and 2003 tax years, including penalties and interest, is $315,031.55.16 Argument Summary judgment is appropriate if there is no genuine issue as to any material fact and the undisputed facts show that the moving party is entitled to judgment as a matter of law.17 The vocabulary of summary judgment is well-defined. An issue is “genuine” if the evidence of record permits a rational factfinder to resolve it in favor of either party.18 A fact is “material” if its existence or nonexistence has the potential to change the outcome of the suit.19 The moving party bears the initial burden of informing the trial court of the basis for his motion and identifying the portions of the pleadings, depositions, answers to interrogatories, admissions, and affidavits, if any, that demonstrate the absence of any genuine issue of material fact.20 Once the moving party has accomplished this feat, the burden shifts to the nonmoving party, who must, with respect to each issue on which she would bear the burden of proof at trial, demonstrate that a trier of fact could reasonably 14 Pahl Decl. Ex. 8. 15 Bishop Decl. ¶ 8. 16 Bishop Decl. ¶ 3. 17 Fed.R.Civ.P. 56(c)(2). 18 See Medina–Muñoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990). 19 See Martínez v. Colón, 54 F.3d 980, 984 (1st Cir. 1995). 20 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Case 1:16-cv-00067-SM Document 25-1 Filed 12/02/16 Page 4 of 8 5 resolve that issue in her favor.21 As a general rule, that requires the production of evidence that is “significant[ly] probative.”22 If the nonmovant fails to make this showing, then summary judgment is appropriate.23 When a taxpayer fails to pay an assessed tax liability after notice of the assessment and demand for payment, a lien for the unpaid taxes automatically arises in favor of the United States on all property or rights to property belonging to the taxpayer and continues until the tax liability is satisfied or the statute of limitations bars collection.24 Once a federal tax lien attaches to property, any subsequent transfer of the property is subject to that lien until the lien is satisfied.25 The facts are undisputed that on November 6, 2006 and Janury 1, 2007, federal tax liens arose and attached to Donohoe’s property,26 including his half-interest in the property held in his name in the revocable trust. The federal tax lien continued to attach to Donohoe’s half-interest after it was transferred to Schipani by the quit-claim deed dated September 22, 2008. Indeed, the final decree of divorce recognizes as such, noting that the parties—Dohohoe and Schipani—had agreed that Donahoe “shall be solely responsible for the IRS lien attached to the marital home while [Schipani] shall be 21 Id. at 324, 106 S.Ct. 2548; DeNovellis v. Shalala, 124 F.3d 298, 306 (1st Cir.1997). 22 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). 23 Celotex, 477 U.S. at 324. 24 26 USC §§ 6321, 6322; Glass City Bank v. United States, 326 U.S. 265, 267 (1945). 25 See United States v. Bess, 357 U.S. 51, 57 (1958) (“The transfer of the property subsequent to the attachment of the lien does not affect the lien, for it is the very nature of the lien, that no matter into whose hands the property goes, it passes cum onere.”); see also 26 U.S.C. § 6322. 26 Pahl Decl. Ex. 5. Case 1:16-cv-00067-SM Document 25-1 Filed 12/02/16 Page 5 of 8 6 responsible for the payment of any mortgage, equity line, insurance, real estate taxes, or other expenses of the property.”27 While Donohoe may be contractually obligated to pay Schipani back, as asserted in Schipani’s cross-claim against Donohoe,28 that contract cannot affect the government’s ability to sell the property. Moreover, a tax assessment is presumptively valid in a foreclosure proceeding and a third party like Schipani may not collaterally attack a federal tax assessment.29 Thus, Schipani cannot oppose summary judgment by challenging the $315,031.55 assessment against Donohoe.30 The undisputed facts, controlling authority, and Donohoe and Schipani’s admissions, as set forth in the agreed upon final decree of divorce, establish that federal tax liens continue to attach to Donohoe’s half-interest in the property. Accordingly, the Court should order the sale of the property under Section 7403 to satisfy Donohoe’s federal tax obligations. Under 26 U.S.C. § 7403, the United States may seek a forced sale of a property in which a delinquent taxpayer has an interest even where innocent others also have an interest in the property. In United States v. Rodgers,31 the Supreme Court held that under Section 7403 “some limited room is left in the statute for the exercise [by the district 27 Pahl Decl. Ex. 8. 28 Dkt. 7. 29 See In re Kail, 2011 WL 2982644, 9-11 (Bkrptcy D. Vt. 2011); Middlesex Sav. Bank v. Johnson, 777 F. Supp. 1024, 1029-30 (D. Mass. 1991). 30 Id. 31 461 U.S. 677 (1983). Case 1:16-cv-00067-SM Document 25-1 Filed 12/02/16 Page 6 of 8 7 court] of reasoned discretion” in deciding whether to authorize a forced sale of property in which a third party holds an interest under the following factors: (1) “the extent to which the Government's financial interests would be prejudiced if it were relegated to a forced sale of the partial interest actually liable for the delinquent taxes”; (2) “whether the third party with a non- liable separate interest in the property would, in the normal course of events ..., have a legally recognized expectation that [her] separate property would not be subject to forced sale by the delinquent taxpayer or his ... creditors”; (3) “the likely prejudice to the third party, both in personal dislocation costs and in ... practical undercompensation”; and (4) “the relative character and value of the non-liable and liable interests held in the property.”32 Here, the property’s assessed value is $209,000,33 minus a mortgage of approximately $25,000, leaving approximately $184,000 in equity. This Court should order the sale of the property so that United States can collect on Donohoe’s tax debt. Under the first factor, the United States would be prejudiced if it were forced to sell Donohoe’s half-interest, as it is likely this half-interest would be unmarketable as it would force the buyer to share the house with Schipani. Under the second factor, the final decree of divorce demonstrates that Schipani knew that the property was encumbered by a federal tax lien, and presumably that the personal residence could be sold to satisfy creditors. Under the third factor, while Schipani and her daughter, who also resides at the residence, would have to find other housing in the event of a sale, Schipani would receive her share for her half-interest in the house and and presumably could find a suitable alternative residence. Under the fourth factor, the IRS has been unable to collect Donohoe’s federal tax debt. Without a forced sale, there is no way for the United States 32 Id. at 709–11. 33 Bishop Decl. ¶ 7. Case 1:16-cv-00067-SM Document 25-1 Filed 12/02/16 Page 7 of 8 8 to tap Donohoe’s equity to apply to his tax debt. Under these factors, the Court should order the sale of the property. Conclusion For the reasons set forth above, the United States’ motion for summary judgment should be granted. Dated: December 2, 2016 s/Michael R. Pahl Michael R. Pahl Trial Attorney, Tax Division U.S. Department of Justice Post Office Box 7238 Ben Franklin Station Washington, DC 20044 Telephone: (202) 514-6488 Facsimile: (202) 514-6770 michael.r.pahl@usdoj.gov Attorney for the United States Certificate of Service I CERTIFY that service of the foregoing United States’ Motion for Summary Judgment, United States’ Memorandum of Law in Support of Motion for Summary Judgment, United States’ Statement of Undisputed Material Facts, Pahl Declaration with attached exhibits, and Bishop Declaration with attached exhibit has been made on all counsel of record on December 2, 2016 by ECF. s/Michael R. Pahl Michael R. Pahl Trial Attorney, Tax Division Case 1:16-cv-00067-SM Document 25-1 Filed 12/02/16 Page 8 of 8 UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE United States of America, ) ) Plaintiff, ) ) v. ) Case No.: 1:16-cv-00067-SM ) Andrew J. Donohoe, Jr. et al., ) ) Defendants. ) Declaration of Michael R. Pahl I am the attorney for the United States in this case and have personal knowledge of the following facts: 1. Attached as Exhibit 1 is the trust indenture of the Donohoe Family Revocable Trust of 1999. 2. Attached as Exhibit 2 is a copy of the quitclaim deed recorded on June 7, 1999 by which Donohoe and Schipani deeded their respective half-interests in the property to the trust for consideration of less than $100. 3. Attached as Exhibit 3 is a copy of a notice of federal tax lien against Donohoe recorded in the Rockingham County Registry of Deeds on June 5, 2006. 4. Attached as Exhibit 4 is a copy of a notice of federal tax lien naming the Andrew J. Donohoe & Donna Schipani-Donohoe Realty Trust of 1999 as the nominee of Andrew J. Donohoe recorded with the Rockingham County Registry of Deeds on June 4, 2008. Case 1:16-cv-00067-SM Document 25-2 Filed 12/02/16 Page 1 of 2 2 5. Attached as Exhibit 5 is a copy of a notice of federal tax lien against Donohoe recorded with the Rockingham County Registry of Deeds on June 9, 2008. 6. Attached as Exhibit 6 is a copy of the Petition for Divorce filed by Schipani on January 30, 2008. 7. Attached as Exhibit 7 is a copy of quitclaim deed dated September 22, 2008 under which Donohoe and Schipani, as co-trustees of the trust, purported to convey their respective half-interests in the property to Schipani. 8. Attached as Exhibit 8 is the final decree of divorce dated October 21, 2008. Under 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge. Dated: December 2, 2016 s/Michael R. Pahl Michael R. Pahl Trial Attorney Case 1:16-cv-00067-SM Document 25-2 Filed 12/02/16 Page 2 of 2 Case 1:16-cv-00067-SM Document 25-3 Filed 12/02/16 Page 1 of 2 Case 1:16-cv-00067-SM Document 25-3 Filed 12/02/16 Page 2 of 2 2378 *** REFILED NOTICE ** REFILED NOTICE *** COURT RECORDING DATA -------------------------------------------------------------------------------- INTERNAL REVENUE SERVICE | Lien Recorded : 02/22/2016 - 00:00AM FACSIMILE FEDERAL TAX LIEN DOCUMENT | Recording Number: | UCC Number : | Liber : 5693 | Page : 832 ----------------------------------------+--------------------------------------- Area: SMALL BUSINESS/SELF EMPLOYED #1 | Original IRS Serial No.: 447113808 Lien Unit Phone: (800) 913-6050 | Lien Recorded : 06/09/2008 -------------------------------------------------------------------------------- This Lien Has Been Filed in Accordance with Internal Revenue Regulation 301.6323(f)-1. -------------------------------------------------------------------------------- Name of Taxpayer : ANDREW J DONOHOE ALS Entity Type: Individual -------------------------------------------------------------------------------- Residence : 8 SADDLE PATH RD RAYMOND, NH 03077-1808 -------+----------+-------------+------------+-----------------+--------------- Form | Period | ID Number | Assessed | Refile Deadline | Unpaid Balance (a) | (b) | (c) | (d) | (e) | (f) -------+----------+-------------+------------+-----------------+--------------- 1040 12/31/2002 XXX-XX-5095 11/06/2006 12/06/2026 152919.31 1040 12/31/2003 XXX-XX-5095 01/01/2007 01/31/2027 34003.67 +---------------------------------------------------------------------------+ | NOTICE OF FEDERAL TAX LIEN REFILING | | Serial ID: 198276216 Refiled At: ROCKINGHAM | | New TP Name: SAME AS ABOVE New TIN: SAME AS ABOVE | | Taxpayer's Address : SAME AS ABOVE | | | | | | Authorizing Official: DATE : 02/09/2016 | | MARY BISHOP Title: ADVISOR | | (603) 402-5706 21-97-6626 | -------------------------------------------------------------------------------- Filed at: Register of Deeds | ROCKINGHAM County Total | $ 186922.98 Kingston, NH 3848 | -------------------------------------------------------------------------------- This notice was prepared and executed at MANHATTAN, NY on this, the 28th day of May, 2008. -------------------------------------------------------------------------------- Authorizing Official: | Title: STEPHEN A. JEROME | REVENUE OFFICER | 21-04-1462 -------------------------------------------------------------------------------- Case 1:16-cv-00067-SM Document 25-4 Filed 12/02/16 Page 1 of 1
