United States District Court, D. Minnesota
In re Struemke Enterprises, LLC, United States, Counterclaimant and Cross-claim Plaintiff,
Struemke Enterprises, LLC, Charles Struemke, Ricarda Struemke, Otago, Inc., and CIT Small Business Lending Corporation, Defendants.
Erin Lindgren, Esq., United States Department of Justice Tax Division, Washington, DC, on behalf of Plaintiff.
Charles Struemke, pro se.
MEMORANDUM OPINION AND ORDER
ANN D. MONTGOMERY, District Judge.
On June 16, 2014, the undersigned United States District Judge heard oral argument on the United States' Motions for Summary Judgment and for Default Judgment against Defendants CIT Small Business Lending Corporation, Otago, Inc., and Struemke Enterprises, LLC [Docket Nos. 50-53]. In addition, Charles Struemke appeared pro se to argue his Motion for Release of Funds [Docket No. 42]. Following the hearing, on July 22, 2014, Struemke filed a Motion to Dismiss [Docket No. 69]. For the reasons set forth below, the United States' motions are granted and Struemke's motions are denied.
Struemke Enterprises, LLC (a Wisconsin LLC) ("Struemke Enterprises") as seller and Otago, Inc. (a Minnesota corporation) ("Otago") as buyer entered into a Business Sale Agreement in November 2002. Not. of Removal [Docket No. 1] at 10. Pursuant to that Agreement, and a subsequent agreement dated February 7, 2003, Otago's attorney Daniel Trost deposited $32, 056.55 into his firm's trust account. Id . Ex. 1 (State Court Pet.). The February 7, 2003 Agreement provided as follows:
[T]hese funds shall be paid from the sums due from [Otago] into the Trust Account of Schreiber & Jarstad, Daniel R. Trost, Attorney for [Otago], to be held pending resolution of the Federal Tax Lien recorded with the Minnesota Secretary of State's Office as Document #XXXXXXXXX. Said amount shall be held in said Trust Account, bearing no interest until:
1. Written agreement of the parties directing its disbursement; or
2. A valid court order directing its disbursements; or
3. [Struemke Enterprises] establishes a valid interest bearing escrow account subject to the disbursement limitation set forth in (1) and (2) above.
Id. (emphasis added).
On May 13, 2013, Trost petitioned to have the funds deposited with the Wabasha County District Court, stating that: no agreement had been reached between Struemke Enterprises and Otago regarding disbursement of the funds; Struemke Enterprises had been administratively dissolved on May 12, 2010; the IRS Lien Unit had contacted Trost twice claiming an interest in the funds; and CIT Small Business Lending Corporation had also contacted Trost asserting an interest in the funds. Id . William Struemke,  the son of Charles and Ricarda Struemke-owners of Struemke Enterprises-had also contacted Trost about the funds. Id. at 6. The state district court accepted custody of the funds. Id. at 4.
The United States removed the matter to federal district court because the IRS was named as a party in interest and because the United States claimed a lien on the funds deposited with the state court. Id. at 2. On July 11, 2013, the United States moved to transfer the funds from the state district court to the Clerk of Court for the District of Minnesota [Docket No. 6]. This Court granted that motion on July 22, 2013 [Docket No. 8].
In a pleading filed on July 29, 2013, the United States seeks an order of foreclosure on the interpled funds, claiming the administratively dissolved entity, Struemke Enterprises, owed the United States for unpaid federal employment taxes. United States' Answer to the Interpleader Pet. and Countercl./Cross-Cl. [Docket No. 9] 2-8. Struemke Enterprises, Charles Struemke, Ricarda Struemke, Otago, and CIT Small Business Lending Corporation were named as counterclaim and cross-claim defendants. Id.
On November 6, 2013, the United States applied to the Clerk of Court's office for entry of default against Struemke Enterprises [Docket No. 23]. In support of its application, the United States submitted the declaration of Erin Lindgren, an attorney from the Tax Division of the Department of Justice. Id . Ex. 1 (Decl. of Erin Lindgren). Lindgren stated that "Struemke Enterprises, LLC has failed to plead or otherwise defend against the United States' counterclaims/cross-claims within ...