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United States of America v. Clarke D. Davis

November 15, 2011


The opinion of the court was delivered by: Stephan P. Mickle Senior United States District Judge


This cause comes before the Court on Plaintiff's Motion for Summary Judgment Against Clarke D. Davis and Default Judgment Against James W. Batson, Jr. (Doc. 18). Plaintiff brought this action pursuant to 26 U.S.C. § 7403 to foreclose federal tax liens against two parcels of real property (hereinafter Lots 3 and 6) held by Defendants as co-successor trustees and the sole beneficiaries of the Mary E. Batson Inter-Vivos Trust dated March 14, 1995 (Trust). Upon judicial sale of the subject property, the United States seeks to apply the proceeds attributable to the interest of Davis to satisfy his federal income tax liabilities and Federal Trust Fund Penalty liabilities.

Batson was named as a party as required by § 7403 because he may claim an interest in the subject property. Batson failed to file a responsive pleading and default was entered against him individually and as co-successor trustee of the Trust. (Doc. 9). Accordingly, Plaintiff also seeks a default judgment against Batson ordering the sale of the subject property.

Davis, proceeding pro se, was advised of his burden in opposing summary judgment, but failed to respond as required under Northern District of Florida Local Rules 56.1 and 7.1(C). (Doc. 21). Failure to respond is alone "sufficient cause to grant the motion." N.D. Fla. Loc. R. 7.1(C). Regardless, for the reasons explained below, the Court still finds that the Government sufficiently met its burden on summary judgment. Accordingly, the Plaintiff's motion for summary judgment and default judgment will be granted.


IRS records indicate that Davis failed to pay federal income tax liabilities and Federal Trust Fund Recovery Penalty liabilities in connection with his partial ownership and operation of Scarborough Land Roller & Machine, Inc. (Scarborough) and Morningstar Industrial Maintenance, Inc., d/b/a Hungry Howie's (Morningstar). From 2003 to 2006, Davis owned 49% of the stock in both companies, with his wife owning the remaining 51%. (Doc. 19-4). During this time, Davis, as an officer, director, and employee, had signature authority over each corporation's bank accounts and the capacity to direct the cash flow of each. Neither corporation filed federal employment tax returns during these years. (Doc. 19-5).

According to Certificates of Assessments, Payments, and Other Specified Matters, as well as sworn declarations provided by the IRS, as of May 17, 2011, Davis owes: $70,629.46 plus interest for 1999, 2000, and 2003 in federal income tax liabilities (Docs. 19-3, -4) and $115,288.93 plus interest for 2003-2006 Federal Trust Fund Recovery Penalty assessments in connection with his partial ownership and operation of Scarborough and Morningstar. (Docs. 19-5, 6). The taxes were assessed between November of 2006 and March of 2008. The IRS provided Davis with a Notice of Balance Due and Notice of Intent to Levy for each of the years in question, as required by 26 U.S.C. § 6303. (Docs. 19-3, -4)

After continued nonpayment the IRS recorded Notices of Federal Tax Lien concerning Davis' income tax liabilities and Trust Fund Liability Penalties. (Docs. 19-12, to -16). The Government alleges that these liens attached to all of Davis' property and rights to property. The Government specifically seeks to foreclose on Davis' interest in two parcels of real property, known as Lots 3 and 6,*fn1 held in trust for the benefit of the Defendants.

On March 14, 1995, Mary E. Batson created the Mary E. Batson InterVivos Trust by executing a Memorandum and Declaration of Trust. The Trust provided that any property deeded to her as trustee would be held for her benefit for her lifetime and subsequently held for the benefit of the beneficiaries named in the Trust. (Doc. 19-8). On that same date, Ms. Batson conveyed Lots 3 and 6 by quitclaim deed to herself as trustee. (Docs. 19-9, -10).

The Trust designated her sons, half-brothers Clarke D. Davis and James W. Batson, Jr., as the beneficiaries of any residual trust assets, including Lots 3 and 6. The Trust also designated the Defendants as co-successor trustees upon her death, incapacity, or resignation. (Doc. 19-8). On December 17, 2002, Mary E. Batson died, making Defendants co-successor trustees on that date. Defendants subsequently executed a Memorandum of Trust dated July 21, 2003, acknowledging their status as co-successor trustees. (Doc. 19-11).


I. Summary Judgment Against Clarke D. Davis Summary judgment will be granted "if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In determining whether the movant made this showing the Court must view the evidence and factual inferences arising from it in the light most favorable to the non-moving party. Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)). Accordingly, "if reasonable minds could differ on the inferences arising from undisputed facts, then a court should deny summary judgment." Miranda v. B & B Cash Grocery Store, Inc., 975 F.2d 1518, 1534 (11th Cir. 1992) (citing Mercantile Bank & Trust v. Fidelity & Deposit Co., 750 F.2d 838, 841 (11th Cir. 1985)).

In an action for foreclosure under 26 U.S.C. § 7403, a district court must "adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property." 26 U.S.C. § 7403(c). If it is established that the United States has a valid interest or claim, then the Court "may decree a sale of such property . . . and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States." Id.

The Court finds A) that Defendant Davis is liable for federal income taxes and Federal Trust Fund Penalties as assessed against him; B) that valid and subsisting federal tax liens arose ...

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