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United States v. Palmer

United States District Court, E.D. Virginia, Norfolk Division

March 26, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
RIC ANTHONY PALMER, Defendant. Tax Period Date of Assessment Unpaid Balance of Assessment Accrued Interest (I) and Penalty (P) as of 4/17/2017 Amount Due as of 4/17/2017 TOTAL $171, 353.80

          UNITED STATES MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION

          ROBERT J. KRASK, UNITED STATES MAGISTRATE JUDGE.

         This matter is before the Court on plaintiffs motion for default judgment as to defendant Ric Anthony Palmer. ECF No. 7. This matter was referred to the undersigned United States Magistrate Judge pursuant to a February 13, 2018 referral order from United States District Judge Arenda L. Wright Allen. ECF No. 9; see also 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P. 72(b); E.D. Va. Local Civ. R. 72. For the reasons discussed below, the undersigned recommends that the Court GRANT plaintiffs motion for default judgment.

         I. PROCEDURAL HISTORY

         On April 20, 2017, the United States filed a complaint against defendant Ric Anthony Palmer ("Palmer"), seeking, among other things, to reduce to judgment and collect federal income taxes assessed against him for five tax years. Complaint ("Compl."), ECF No. 1 at 1. On June 30, 2017, the United States filed a proof of service, accompanied by a declaration from the process server, indicating that the summons and complaint were served on June 1, 2017. ECF Nos. 5, 5-1. In the absence of any appearance by Palmer or the filing of a response to the complaint, the United States requested, and the Clerk entered, a default as to Palmer on July 17, 2017. ECF No. 6. On September 8, 2017, the United States moved for entry of a default judgment. ECF No. 7. Palmer has not responded to the motion and the time for doing so has expired.

         Following the Court's referral order, on February 15, 2018, the undersigned issued an order directing that a hearing be scheduled on the motion for default judgment on or before March 19, 2018 and that the United States file a pre-hearing brief addressing the sufficiency of service of process. ECF No. 10 at 1-2 (also directing that a copy of the order be sent to the address specified for plaintiff in the previously filed proof of service, ECF No. 5). On March 9, 2018, the United States filed a brief contending that the government properly served Palmer with the summons and complaint. ECF No. 11. On March 14, 2018, the Court issued a notice of hearing on the motion for entry of default judgment and directed that the notice be mailed to Palmer at the Virginia Beach address noted in the process server's declaration filed by the United States. ECF No. 12; ECF No. 5-1.

         The Court held an evidentiary hearing on March 19, 2018, at which counsel for the United States appeared. ECF No. 13. Neither Palmer nor any representative appeared on his behalf. At the hearing, the United States presented testimony from two witnesses (process server Douglas W. Wemer, Jr., and Internal Revenue Service ("IRS") Revenue Officer Lynette Summerton) and the Court admitted one exhibit into evidence.

         II. FACTUAL BACKGROUND

         A. The Complaint, Tax Assessments, and Statutory Additions

         The one-count complaint seeks to reduce to judgment and collect federal income tax assessments against Palmer and contains the following allegations. Compl. at 1. Palmer, a resident of Virginia Beach, VA, failed to file federal income tax returns for tax years 2004, 2006, 2007, 2008, and 2012. Id. at ¶¶ 4-5. As a result, the IRS prepared returns for Palmer and a delegate of the Secretary of the Treasury prepared assessments against him for federal income tax and statutory additions to tax (such as accrued interest and penalties). Id. at ¶ 5; see 26 U.S.C. § 6601(a) (providing for accrual of interest on unpaid taxes); 26 U.S.C. § 6020(b)(1) (authorizing the Secretary to prepare returns when a taxpayer does not file them). As of April 17, 2017, the unpaid balance of the assessments and accrued interest and penalties against Palmer totaled: (1) $114, 070.48 for 2004; (2) $38, 544.97 for 2006; (3) $6, 426.49 for 2007; (4) $11, 723.13 for 2008; and (5) $588.73 for 2012. Id. The aggregate amount due as of April 17, 2017 was $171, 353.80, plus statutory additions to tax as provided by law. Id. at ¶ 6. The complaint seeks a judgment declaring that Palmer is indebted to the United States for such sum, with additions as authorized by statute continuing until payment occurs, as well as the costs associated with prosecuting this suit. Id. at 2-3.

         To substantiate the factual information contained in the complaint, the United States appended to its motion for default judgment a sworn and signed declaration from IRS Revenue Officer Jeffrey D. Willingham ("Willingham"), who worked on the Palmer matter and had access to IRS records pertaining to his reported income tax and related obligations. ECF No. 7-1 at ¶¶ 1-3. Willingham's declaration confirms that Palmer failed to file federal income tax returns for the five years specified in the complaint. Id. at ¶ 4. Willingham further states that the IRS prepared tax returns for Palmer for those years, based upon the income Palmer received for each of the years in question. Id. Following the preparation and examination of such returns, Willingham recites that a delegate of the Secretary of the Treasury lodged assessments against Palmer for federal income tax and statutory additions thereto identical to those set forth in the complaint and that the aggregate amount due as of April 17, 2017, after applying any payments, is the $171, 353.80 sum, plus statutory additions, sought in the complaint. Id.[1] To further corroborate such sums, Willingham also attached true copies of IRS transcripts for Palmer's taxpayer account for each of the tax years in question. Id. at 3-16. These transcripts contain, among other things, selected information from the tax returns prepared by the IRS for the years in question, information about the account balances, interest, and any penalties due as of April 17, 2017, and a chronological history of transactions pertaining to Palmer's account for each tax year at issue. Id.

         B. Service of Process

         After filing the complaint, the United States filed a proof of service, along with a signed declaration from process server Douglas W. Wemer, Jr. ("Wemer"). ECF Nos. 5, 5-1. Under penalty of perjury, Wemer recites that his employer, after being retained by the United States Department of Justice, assigned him to serve the summons and complaint upon Palmer at the Virginia Beach residential address noted in the declaration. ECF No. 5-1 at ¶¶ 1-2 (reciting the same residential address listed for the defendant in the summons and the style of the case on page one of the complaint). Wemer, who is over 18 years of age, reports that from May 15 to June 1, 2017, he made seven attempts to personally serve Palmer at his residence. Id. at ¶¶ 4, 6. These efforts were unsuccessful. Id. at ¶¶ 7-13.

         When Wemer went to the residential address on May 16, 2017, however, he met a woman who answered the door, identified herself as Palmer's mother, and stated that Palmer no longer resided there and "she did not know where he was." Id. at ¶ 8. At the hearing, Wemer elaborated upon this encounter, stating that he asked if Palmer was home and advised that he had legal documents to give to him, at which point the mother exhibited a change of attitude towards him. He also testified that the mother stated that she had no way to contact Palmer. Rather than attempting to serve her, Wemer testified that he returned to his car and sought direction from his supervisor, who directed by telephone that he continue to attempt to personally serve Palmer for another week.

         Wemer's declaration further recites that he returned to the same residential address on five subsequent occasions, only to find that no one was home (on four occasions) and no one would answer the door (on the last occasion). Id. at ¶¶ 9-13. On the last occasion on June 1, 2017, Wemer went to the same address, observed a vehicle parked in the driveway, and heard the voice of an adult male speaking to someone else inside the house. Id. at ¶ 13. During the hearing, Wemer elaborated that he heard adult males speaking to one another inside the house and that, after he knocked on the door, their conversation stopped. While reporting that he then heard shuffling noises, Wemer testified that no one came to the door. In response, Wemer testified that he announced his presence by providing his name and noting that he was there to serve legal documents on Palmer. Wemer testified that he again consulted telephonically with his supervisor about how to proceed. After doing so, Wemer then taped the summons and complaint to the front door. Id. Thereafter, Wemer also mailed a copy of the summons and complaint to the same residential address. Id. Although his declaration does not specify the date, Wemer testified to mailing the documents shortly after posting service on the door and doing so before signing the declaration on June 26, 2017.

         During the March 19, 2017 hearing, the United States also elicited testimony from IRS Revenue Officer Lynette Summerton ("Summerton"). Summerton testified that, prior to Wemer's efforts to serve process, she was assigned to visit the same Virginia Beach residential address noted above to try to locate Palmer. While sitting in her car outside of that location on February 14, 2017, Summerton observed a man drive up in a truck, get out, and walk towards the house. Summerton identified herself to the man, who identified himself as Palmer, and accompanied him inside to discuss the IRS's effort to collect the assessed taxes and the balance due on his taxpayer account. During this discussion, Summerton noted biographical (social security number and date of birth) and other information voluntarily supplied by Palmer on an IRS form 443-A (a collection information statement). See Government Exhibit ("GX") 1, ECF No. 14. Summerton testified that Palmer advised her that he and his girlfriend, Robin Hansell, co-owned and resided together at the house. See GX 1 at 1-2 (noting "address owned by [b]oth"). Palmer advised that they bought the house in 2015, using funds obtained from Hansell's trust fund. Id. at 2-3. During their discussion, Palmer admitted to knowing that the IRS was seeking to collect unpaid taxes from him and knowing that the IRS intended to file returns for him, due to a telephone call with an IRS representative. Summerton testified that she and Palmer discussed ways he could resolve the matter with the IRS and she supplied the name and telephone number for the IRS revenue officer (in Florida) with responsibility over his matter. She testified that Palmer stated that he would call this person the next day and she departed the residence.

         As part of its March 9, 2018 brief regarding service of process, the United States attached a sworn and signed declaration from Michael J. Martineau, a trial attorney from the Tax Division of the United States Department of Justice assigned to this case. ECF No. 11-1. Both the Martineau declaration, and exhibits B, C, D, and E attached thereto, contain information about the ownership of the Virginia Beach residential address where Wemer taped the summons and complaint. Id.

         Exhibit B to the Martineau declaration is a copy of a deed conveying the real property at such address to Ric Anthony Palmer and Robin Hansell, "as joint tenants by the entirety with the right of survivorship, " that was recorded with the Circuit Court of Virginia Beach on August 11, 2015. Id. at 11-14.

         Exhibit C to the Martineau declaration, a March 8, 2017 real estate tax account information statement apparently obtained from a City of Virginia Beach public website, indicates that the Treasurer's Office lists "Palmer Rick Anthony" as the owner of the property located at the residential address referred to above and whose property tax bills for 2016 and 2017 totaled $1, 352.54 and $2, 445.72, respectively. Id. at 16.

         Exhibit D to the Martineau declaration reflects that, on February 28, 2017, the United States recorded a tax lien at the Circuit Court of Virginia Beach against the property located at the residential address noted above to attempt to recover federal income taxes, interest, and penalties due from Palmer for the tax years discussed above. Id. at 18-19.

         Exhibit E to the Martineau declaration reflects that, soon after the filing of this tax lien, on April 19, 2017, a "quit claim deed of gift" was filed in the circuit court records, which purported to convey the real property at the residential address noted above from Ric Palmer ("I/R/T/A Rick Anthony Palmer") and Robin Hansell to Robin Hansell. Id. at 21-23. The third page of this deed of gift indicates that Ric ...


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