United States District Court, W.D. Washington, Tacoma
ORDER GRANTING: (1) PLAINTIFF'S MOTION TO AMEND UNITED STATES' AMENDED COMPLAINT; (2) PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST ALOHA JOHNSON; AND (3) PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT AGAINST ERIN JOHNSON, GINA CAMPBELL, AND ALPHABIOTIC LIFE CENTER
ROBERT J. BRYAN, District Judge.
This matter comes before the Court on the government's Motion for Summary Judgment Against Aloha Johnson (Dkt. 66) and Default Judgment Against Erin Johnson, Gina Campbell, and Alphabiotic Life Center ( Id. ) and on the government's Motion to Amend United States' Amended Complaint (Dkt. 67). The Court has considered the pleadings filed in support of, and in opposition to, the motions and the file herein.
Proceeding on a first amended complaint, the government seeks to reduce to judgment unpaid federal income tax assessments against Mr. Clyde Johnson ("Clyde Johnson") and to foreclose the related federal tax liens. Dkt. 14.
On February 24, 2015, the government filed a motion for summary judgment against Ms. Aloha Johnson ("Aloha Johnson"), Clyde Johnson's widow, and a motion for default judgments against Clyde Johnson's alleged surviving heirs, Ms. Erin Johnson and Ms. Gina Campbell, and his purported entity, Alphabiotic Life Center. Dkt. 66.
In addition, on March 12, 2015, the government filed a motion to amend its first amended complaint. Dkt. 67. Neither defendant has filed any objections to the government's motion to amend.
On March 16, 2015, Aloha Johnson filed a response to the government's motion for a summary judgment (Dkt. 68), and on March 20, 2015, the government filed a reply (Dkt. 71).
Aloha Johnson and Clyde Johnson met in 1982. Dkt. 66-1, at 8. In August 1987, after they had been dating for five years, they married. Id., at 9. Shortly before they married, on March 25, 1987, Clyde Johnson purchased the property, which the government seeks to enforce its tax liens against, located at 31708 82nd Avenue East, Eatonville, Washington 98328 ("the Eatonville Property") from Ms. Edith Lewis for $119, 000.00, taking title in his name only. Id., at 33, 41, 64, 75. He signed an installment promissory note for $108, 000.00 payable to Ms. Lewis and secured by a deed of trust. See Id., at 76-77. Aloha Johnson did not sign the note (Dkt. 69, at 2); nor did she contribute any funds towards to the purchase (Dkt. 66-1, at 34).
They married at the Eatonville Property and lived there together until May 2012 when Clyde Johnson passed away. Dkt. 66-1, at 10. During their marriage, Clyde Johnson paid off the Eatonville Property with the money from his chiropractic practice ( Id., at 34). Although Aloha Johnson alleges that she contributed approximately $12, 000.00 she had inherited from her father towards a remodeling project Clyde Johnson performed on the property ( Id., at 42-43; Dkt. 69, at 2), she remembers no details and has no documentation for the contribution (Dkt. 66-1, at 42-43).
On June 10, 1999, even though Aloha Johnson had no recorded interest in the Eatonville Property, she executed a quit claim deed ("Quitclaim Deed"), transferring any interest she may have had to Clyde Johnson "as his separate estate." Id., at 70. Aloha Johnson stated in her declaration that Ms. Lewis wanted the balance on the note paid, so Clyde Johnson obtained a loan from a bank to pay the balance, eventually paying off the loan in 2012. Dkt. 69, at 2. In addition, Aloha Johnson stated in her declaration that she had no involvement in the refinance transaction, but that she was asked to sign the Quitclaim Deed, which she claims was "somehow necessary for the refinance to go through." Id., at 2-3. She stated that she had "no independent recollection of actually signing the deed, " conceding that the signature on the Quitclaim Deed was hers. Id., at 2. Further, the real estate tax affidavit filed with the Quitclaim Deed states that the "explanation" for the transaction is to "separate community property." Dkt. 66-1, at 72.
Clyde Johnson supported the family financially with his chiropractic practice. Id., at 12; Dkt. 69, at 3. Although he worked as a chiropractor between 1994 and 2003 (Dkt. 66-1, at 12), he failed to pay his tax liabilities for at least these years (Dkt. 66-1, at 100-109; Dkt. 66-2, at 2-66) as he appears to have ascribed to unconventional beliefs about the federal tax system (Dkt. 66-2, at 135-148). In September 2000, unable to bring Clyde Johnson into voluntary compliance, the IRS started issuing notices of deficiencies to him. Dkt. 66-3; Dkt. 66-4, at 2-38. In addition, between November 2002 and March 2012, the IRS made several assessments against Clyde Johnson for unpaid taxes, penalties, and interest for the years in question. Dkt. 66-2, at 2-66. Aloha Johnson alleges that Clyde Johnson excluded her from any business and related matters, including the purchase of the Eatonville Property and income taxes. Dkt. 69, at 3.
On December 1, 2000, a few months after he received his first notice of deficiency, Clyde Johnson transferred his interest in the Eatonville Property to a new purported entity Alphabiotic Life Center ("Alphabiotic"). Dkt. 66-1, at 66. This transfer was a "Gift...for love and affection as consideration..." ( Id., at 66), involving no monetary consideration ( Id., at 68). Aloha Johnson stated in her deposition that Alphabiotic was a technique of adjustment Clyde Johnson intended to practice following his retirement. Id., at 26. Neither corporate charter, bylaws, articles of incorporation, nor any other document related to Alphabiotic was ever located. Id., at 30. Nor was Aloha Johnson aware at the time of her deposition whether Alphabiotic had any operations, managers, or annual meetings. Id., at 31-31. In fact, she stated that "[Alphabiotic] hadn't done anything yet. That was just what [Clyde Johnson] was - from what I understood was going to be the name of his practice." Id., at 32.
On October 10, 2007, the IRS recorded a Notice of Federal Tax Lien in Pierce County, Washington against the Eatonville Property for $288, 937.42, securing Clyde Johnson's unpaid tax liabilities for the 1994-2003 tax years. Id., at 79. Similarly, on August 1, 2008, the IRS recorded another Notice of Federal Tax Lien in Pierce County, Washington, for the same tax years against the Eatonville Property for $287, 373.06, naming Alphabiotic "as nominee or alter ego of Clyde B Johnson." Id., at 84. Finally, between 2012 and 2014, the IRS re-filed notices as to certain tax years, naming both Clyde Johnson and Alphabiotic. Id., at 81-83, 85-86.
After the IRS referred Clyde Johnson's unpaid tax liabilities to the Department of Justice and before the government initiated the present action, Clyde Johnson died. Dkt. 66, at 12.
In this action, the government seeks to collect Clyde Johnson's unpaid tax liabilities for the 1994-2003 tax years by enforcing its liens against the Eatonville Property.
A. Plaintiff's motion to amend first amended complaint
On March 12, 2015, the government filed a motion to amend its first amended complaint on the basis that it identified a drafting error therein. Dkt. 67. Specifically, the government states that it erroneously listed a civil penalty assessed against Clyde Johnson for the 2008 tax year. Id. The government seeks relief only as to the federal tax liens arising from Clyde Johnson's tax liabilities, interest, and penalties for the 1994-2003 years. Id.
Neither defendant has filed any response to the government's motion to amend its first amended complaint. The Court should consider such lack of response as an admission that the motion has merit. See LCR 7(b). In addition, no apparent reason exists to deny leave to amend such as undue delay, bad faith, or dilatory motive. See Foman v. Davis, 371 U.S. 178, 182 (1962). In fact, the government seeks to remove a basis for liability.
Nor has either defendant shown any prejudice resulting from such an amendment.
Accordingly, the Court should grant the government's motion to amend its first amended complaint, which does not alter the Court's analysis on the government's ...