GONZALO P. CURIEL, District Judge.
Before the Court is Defendants Charles Le Beau and Victora LeBeau's, (collectively "Defendants") proceeding pro se, motion to dismiss the first amended complaint. (Dkt. No. 36.) In their motion, they also seek a motion for a stay of proceedings.
Charles and Victoria LeBeau were married, now legally separated and currently reside together at 1999 Via Segovia, La Jolla, CA 92037 (the "Property"). (Dkt No. 33, FAC ¶ 3.) The United States has judgment liens against both Charles and Victoria Le Beau, and the United States seeks to enforce its judgment liens against their interests in the Property. (
Between 1994 and 2008, a delegate of the Secretary of the Treasury made assessments against Charles and Victoria LeBeau for federal individual income taxes, penalties and interest for the tax years 1992, 1993, 1994, 1995, 1997, 1998 and 1999. (
On April 19, 2010, the United States brought a civil action against Victoria LeBeau, Charles LeBeau, and Charles LeBeau's sole proprietorship to reduce to judgment the federal tax assessments.
On August 18, 1980, Charles and Victoria LeBeau acquired the Property as "Husband and Wife, as joint tenants." (
By interspousal transfer grant deed dated March 22, 1991, Charles LeBeau again transferred his interest in the Property to his wife, Victoria LeBeau, for no consideration. (
Despite Victoria LeBeau's purported sole ownership in the Property, on July 24, 2014, Charles LeBeau executed a mortgage modification agreement for the Property with Bank of America, the trustee for the Property's mortgage, and he is listed as the borrower in documents recorded with the San Diego County Recorder's Office on August 1, 2014. (
The FAC claims that Charles and Victoria LeBeau continue to be the true and beneficial owners of the Property and Victoria LeBeau holds Charles LeBeau's interest in the Property as his nominee (
On March 14, 2013, the United States recorded an abstract of the two judgments obtained in Case No. 10cv817 with the San Diego County Recorder's Office. (
In sum, the United States asserts three causes of action seeking to "(1) determine that the United States' judgment lien attaches to all property held by Victoria LeBeau, including real property located at 1999 Via Segovia, La Jolla, CA 92037 (the "Property"); (2) determine that Victoria LeBeau holds Charles LeBeau's one-half interest in the Property as nominee for Charles LeBeau or, in the alternative, set aside the transfers of Charles LeBeau's interest in the Property to Victoria LeBeau and Casa de Erin, LLC as fraudulent conveyances; and (3) to enforce the United States' judgment lien against Charles and Victoria LeBeau upon the Property." (Dkt. No. 33, FAC at 2.)
Federal Rule of Civil Procedure ("Rule") 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.
A complaint may survive a motion to dismiss only if, taking all well-pleaded factual allegations as true, it contains enough facts to "state a claim to relief that is plausible on its face."
The Court notes that Defendants dispute the facts alleged by Plaintiff, by arguments, declarations and submitting documents outside the complaint, to support dismissal of the case. (Dkt. No. 36 at 6-7
Defendants also recognize their obligation to pay the taxes owed, but economic hardship and medical hardships prevent them from fulfilling their obligation to pay the taxes due and are recognized exceptions under the IRS Code. (Dkt. No. 36 at 7-9.) Again, the Court cannot consider facts outside the FAC on ruling on a motion to dismiss and declines to address these facts.
Where a plaintiff alleges fraud in the complaint, Rule 9(b) requires a plaintiff to "state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). A party must set forth "the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation."
Defendants generally argue that Plaintiff failed to plead fraud with particularity under Rule 9(b) but does not explain why the FAC fails to assert facts with specificity. Instead, their arguments are based on facts not contained in the FAC including an assertion that the U.S. Tax Court ruled, in 2014, that Victoria was not responsible for taxes during the years 2002 and 2004-2007. Therefore, the U.S. Tax Court ruling is res judicata or collateral estoppel to the claims in this case. Plaintiff notes that the Tax Court's decision concerned years 2002 and 2004-2007 which do not encompass the tax years of 1992-1999 for which this Court entered judgment in 2012. In any event, the U.S. Tax Court ruling has no applicability on Defendants' Rule 12(b)(6) motion to dismiss.
Defendants also improperly argue that Plaintiff has not alleged with specificity that Defendants had the requisite state of mind to intent to defraud the IRS. Under Rule 9(b), "a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). Plaintiff is only required to allege state of mind generally and not with particularity. Thus, Defendants' argument is without merit.
As to judgment liens, "[o]n proper application to a court, the court may order the United States to sell, in accordance with sections 2001 and 2002, any real property subject to a judgment lien in effect under this section." 28 U.S.C. § 3201(f).
On October 29, 2012, the Court entered a money judgment against Charles and Victoria LeBeau with respect to the federal income tax liabilities in the amount of $1,157,165.85 plus statutory interest accruing after July 1, 2012, and a money judgment against Charles LeBeau, with respect to the employment tax liabilities, in the amount of $371,257.66 plus statutory interest accruing after July 1, 2012. (Dkt. No. 33, FAC ¶¶ 18, 20.) Accordingly, Plaintiff has alleged a claim to seek the sale of Defendant's Property based on the Court's prior judgment. Thus, the Court DENIES Defendants' motion to dismiss on this claim.
The IRS may impose a federal tax lien "upon all property and rights to property . . . belonging to" a taxpayer who has failed to pay taxes owed after the IRS has made an assessment and demand. 26 U.S.C. § 6321. "The Supreme Court has interpreted section 6321 to apply to all property of a taxpayer, including property that is held by a third party as the taxpayer's nominee or alter ego."
While California courts recognize nominee ownership, they have not provided factors to determine whether a person or entity is holding title as a nominee.
Here, Plaintiff has sufficiently alleged facts asserting a claim that Victoria is holding the property as Charles' nominee. First, Charles Le Beau did not receive adequate consideration for the transfers to Victoria Le Beau. (Dkt. No. 33, FAC ¶ 32). During the years he was accruing federal tax liabilities, Charles Le Beau executed title transfers of the Property to and from his wife and to an entity that he had incorporated. (
The Court concludes that Plaintiff has alleged sufficient facts that Charles Le Beau has a one-half interest in the Property that is currently held by Victoria Le Beau as his nominee. Thus, the Court DENIES Defendants' motion to dismiss on this claim.
Fraudulent transfer under the Federal Debt Collection Procedures Act occurs when a debtor to the United States makes a transfer or incurs the obligation with actual intent to hinder, delay or defraud a creditor. 28 U.S.C. § 3304(b).
Under the statute, to determine actual fraud, the Court may consider the following,
28 U.S.C. § 3304(b).
The FAC claims that Charles and Victoria LeBeau were married and now legally separated but reside together at the Property. (Dkt. No. 33, FAC ¶ 3.) On specific dates between April 1, 1987 to January 12, 2007, the time during which they were accruing federal tax liabilities, Charles and Victoria fraudulently transferred the Property to and from each other without exchanging adequate consideration. (
The Court concludes that Plaintiff has alleged facts to support a claim for fraudulent transfer under Rule 12(b)(6) and Rule 9(b).
The LeBeaus also seek a stay of the proceeding until Victoria's administrative claim for innocent spouse relief is determined by the IRS. Plaintiff agrees to a stay concerning Plaintiff's claims to enforce liens against Victoria but only for the tax years 1995, 1997-1999 and not as to tax years 1992-1994.
On August 30, 2017, Victoria filed a claim for innocent spouse relief for tax years 1992-1995, 1997-1999, the years for which judgment was entered in the underlying case. (Dkt. No. 36-4, Ds' RJN, Ex. 1.) In the underlying case, Victoria had already sought innocent spouse relief as to the 1992-1994 tax years which was denied by the IRS. (Case No. 10cv817-GPC(NLS), Dkt. No. 57 at 5;
The Internal Revenue Code ("IRC") provides that any IRS collection action should be suspended until the IRS makes a determination on an equitable claim plus 90 days to petition the Tax Court to review the IRS's determination. 26 U.S.C. § 6015(e)(1)(B). The Code allows the IRS six months from the date of filing to make a determination before a requesting spouse can petition the Tax Court. 26 U.S.C. § 6015(e)(1)(A). Therefore, since the petition was filed on August 30, 2017, a decision by the IRS will likely be made by the end of March, and if not, Victoria has 90 additional days to petition the Tax Court. Because Defendants contend that Victoria is the sole owner of the Property, the stay should affect the whole proceeding. However, Plaintiff argues that Charles holds a one-half interest in the Property either through a nominee or fraudulent conveyance theory and the case should proceed as to Charles as well as to Victoria concerning tax years 1995 and 1997-1999. The Court agrees with Plaintiff. Plaintiff has alleged a claim that Charles holds a one-half interest in the Property either through a nominee or fraudulent conveyance theory. Therefore, a determination concerning Charles' interest in the Property has no bearing on the innocent spouse relief before the IRS. Moreover, because the IRS has already denied Victoria's innocent spouse relief for the tax years 1992-1994, a stay as to those years is not appropriate. Accordingly, the Court STAYS the case only as to Victoria LeBeau for tax years 1995, 1997-1999. The remainder of the case shall proceed.
Based on the above, the Court DENIES Defendants' motion to dismiss and GRANTS in part Defendant's motion to stay proceedings as to Victoria LeBeau for the tax years 1995, 1997-1999. The hearing set for December 15, 2017 shall be
The Court may take judicial notice of a fact "(1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201. Defendants do not seek judicial notice in response to the motion to dismiss but in support of their motion for a stay.
Defendants seek judicial notice of eight documents. Exhibit 1 is Victoria LeBeau's request for innocent spouse relief filed on August 30, 2017 and Exhibit 5 is the Ninth Circuit case of
