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United States v. Tobey

United States District Court, D. Minnesota

December 19, 2017

United States of America, Plaintiff,
v.
Darren D. Tobey, et al., Defendants.

          REPORT AND RECOMMENDATION

          LEO I. BRISBOIS UNITED STATES MAGISTRATE JUDGE.

         This matter comes before the undersigned United States Magistrate Judge pursuant to an Order of Reference, [Docket No. 38], made in accordance with the provisions of 28 U.S.C. § 636, and upon Plaintiff's Motion for Default Judgments Against Defendants Darren D. Tobey, Dex Media, Inc., and SWS Credit Services, Inc. [Docket No. 30]. The Court held a hearing on the present motion on November 13, 2017, after which Plaintiff's Motion was taken under advisement. (Minute Entry [Docket No. 41]). Gregory Mokodean appeared at the November 13, 2017, motions hearing for and on behalf of the Plaintiff. (Id.). There were no appearances at the November 13, 2017, motions hearing on behalf of any Defendant.

         For the reasons discussed herein, the Court recommends that Plaintiff's Motion for Default Judgment Against Defendants Darren D. Tobey, Dex Media, Inc., and SWS Credit Services, Inc., [Docket No. 30], be GRANTED.

         I. PROCEDURAL HISTORY

         Plaintiff filed the present case on December 6, 2016. (Compl. [Docket No. 1]). On December 8, 2016, Plaintiff sent Defendants the Minnesota Department of Revenue (“MNDOR”); Dex Media, Inc. (“Dex Media”); and SWS Credit Service (“SWS Credit”) each a waiver of service, and each waiver of service was respectively signed and returned. [Docket Nos. 4, 5, 6]. Accordingly, Defendants MNDOR's, Dex Media's, and SWS Credit's response to the present Complaint were due on or before February 6, 2017.

         On January 6, 2017, Plaintiff sent Defendant Beltrami County a waiver of service, and the waiver of service was signed and returned. [Docket No. 7]. Accordingly, Defendant Beltrami County's response to the present Complaint was due on or before March 7, 2017.

         On January 19, 2017, Plaintiff and Defendant Beltrami County filed a Stipulation, [Docket No. 8], which was approved by the Honorable John R. Tunheim on January 30, 2017. [Docket No. 11]. That Stipulation provided that Plaintiff and Defendant Beltrami County had resolved the priority of their respective liens against the real property at issue in the present case, and it excused Defendant Beltrami County from further participation in the present case. [Docket No. 11].

         On February 1, 2017, Plaintiff filed a return of service indicating that Defendant Darren Tobey had been personally served on February 1, 2017. [Docket No. 12]. Accordingly, Defendant Tobey's response to the present Complaint was due February 22, 2017.

         On March 16, 2017, after their respective times to respond had lapsed without any response or appearances on their behalves, Plaintiff filed Applications for Clerk's Entry of Default against Defendants Tobey, SWS Credit, and Dex Media, as well as, documents in support of those applications. [Docket Nos. 17-22]. On March 17, 2017, the Clerk of Court entered a Clerk's Entry of Default against Defendant SWS Credit and Defendant Dex Media. [Docket Nos. 24, 25]. On March 20, 2017, the Clerk of Court entered a Clerk's Entry of Default against Defendant Tobey. [Docket No. 26].

         On July 11, 2017, Plaintiff and Defendant the MNDOR filed a Stipulation, [Docket No. 27], which was approved by Chief Judge Tunheim on July 13, 2017. [Docket No. 29]. That Stipulation provided that Plaintiff and Defendant the MNDOR had resolved the priority of their respective liens against the real property at issue in the present case, and it excused Defendant the MNDOR from further participation in the present case. [Docket No. 29].

         On August 14, 2017, Plaintiff filed the present Motion for Default Judgment Against Defendants Tobey, Dex Media, and SWS Credit, [Docket No. 30], along with various documents supporting that motion. [Docket No. 31-33]. No Defendant has responded to the present motion.

         On September 19, 2017, Chief Judge Tunheim referred the present motion to the undersigned United States Magistrate Judge. (Order of Reference [Docket No. 38]).

         II. PLAINTIFF'S MOTION FOR DEFAULT JUDGMENTS AGAINST DEFENDANTS DARREN D. TOBEY, DEX MEDIA, INC., AND SWS CREDIT SERVICES, INC. [DOCKET NO. 30].

         The United States' present motion seeks an Order entering default judgements against Defendant Tobey, Defendant Dex Media, and Defendant SWS Credit. (Plf.'s Mot. [Docket No. 30]). “Specifically, the United States seeks judgment on Counts I-IV of the complaint against” Defendant “Tobey in the total amount of $201, 924.28, plus interest and other statutory additions that have accrued since July 14, 2017, ” and judgement on Count V of the Complaint against Defendant Tobey declaring that the federal tax liens at issue are valid and subsisting liens which attach to all property of Defendant “Tobey, including the real property at issue in the present case, and which should be enforced against the real property. (Id.). The Motion further seeks a declaration that the real property at issue in the present case “may be sold free and clear of any lien, claim, or interest any party, including” Defendants Dex Media and SWS Credit and that the proceeds should be distributed according to the agreements between the United States and the Defendant which have appeared. (Id.).

         Under Federal Rule of Civil Procedure 55, there is a two-step process for the entry of default judgment. Johnson v. Dayton Elec. Mfg. Co., 140 F.2d 781, 783 (8th Cir. 1988). First, the moving party must seek default from the Clerk of Court, and the Clerk must enter default based on proof that the opposing party has failed to plead or defend against the action. Fed.R.Civ.P. 55(a). Second, the moving party must seek entry of default judgment based on either Rule 55(b)(1) or Rule 55(b)(2). Entry of default must precede entry of default judgment. Johnson, 140 F.2d at 783.

         In the present case and as explained above, Plaintiff seeks default judgment as to all Counts in its Complaint pursuant to Rule 55(b)(2). The Clerk of Court has entered default against Defendants Tobey, Dex Media, and SWS Credit. [Docket No. 24-26].

         Plaintiff's Complaint through its five Counts “seeks to: reduce to judgment (a) federal income tax, interest, and penalty assessments made against” Defendant Tobey “for tax years 2004, 2005, 2006, 2007, and 2014, (b) federal employment tax, interest, and penalty assessments made against” Defendant Tobey “for tax periods from the second quarter of 2006 through the fourth quarter of 2008, (c) federal unemployment tax, interest, and penalty assessments made against” Defendant Tobey “for tax year 2007, and (d) civil penalty and related interest assessments for tax years 2005, 2006, and 2008.” (Compl., [Docket No. 1], at ¶ 1). Plaintiff also seeks to “enforce the federal tax liens against real property located as 2500 Lake Avenue NE, Bemidji, Minnesota 56601 (the “Property”);”[1] to “obtain an order directing the sale of the Property; and to have the proceeds from the sale distributed” appropriately. (Id.). Plaintiff named Defendants Dex Media, MNDOR, SWS Credit, and Beltrami County as Defendant because each of those parties may claim an interest in the Property on which Plaintiff seeks to enforce its tax lien. (Id. at ¶¶ 7, 8, 9, 10).

         The Court addresses each Count in turn.

         A. Count I: Reduce Income Tax Assessment to Judgment Against Defendant Tobey

         As noted above, the United States filed the present action on December 6, 2016. (Compl. [Docket No. 1]). Count I of Plaintiff's Complaint seeks to reduce to judgment the federal income tax assessments assessed against Defendant Tobey. (Id. at ¶¶ 11-16). Defendant Tobey has failed to respond to the Complaint within the time required under the Federal Rules of Civil Procedure. See, Fed.R.Civ.P. 12. The time has long since expired for Defendant Tobey to file an answer or otherwise respond to the United States' claim. On March 16, 2017, the United States filed a Motion for Entry of Default, [Docket No. 17], which the Clerk of Court entered on March 20, 2017. [Docket No. 26]. By virtue of the default, Defendant Tobey is deemed to have admitted the truth of the well-pleaded allegation within the Complaint. Murray ...


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