ROY B. DALTON, JR., District Judge.
Plaintiff United States of America ("
Mr. Kwitny failed to appear, so the Government successfully obtained an entry of default against him. (Docs. 6, 9.) Now, the Government requests default judgment against Mr. Kwitny. (See Doc. 14 ("
For the Tax Liability Recommendation, Magistrate Judge Smith found: (1) the well-pled factual allegations in the Complaint establish that Mr. Kwitny failed to pay his federal income taxes owed for tax years 2006-2014, as supported by certified copies of "Certificate of Assessments, Payments, and Other Specified Matters"; (2) due to Mr. Kwitny's failure to appear, he cannot overcome the presumption that his tax liability was properly assessed; and (3) the Government provided sufficient facts showing Plaintiff owes $572,671.80 plus penalties and interest that continue to accrue. (Id. at 1-5.) Therefore, Magistrate Judge Smith recommends the Court enter judgment for the Government and against Mr. Kwitny in the amount of $572,671.80 "plus statutory additions and post-judgment interest, pursuant to 28 U.S.C. § 1961(c)(1) and 26 U.S.C. §§ 6621-22." (Id. at 5 (quoting Doc. 14, p. 7).)
For the Foreclosure Recommendation, Magistrate Judge Smith found that the tax liens encumber the Subject Property and will continue to do so until Mr. Kwitny satisfies his obligation or it becomes legally unenforceable. (Id. (citing Griswold v. United States, 59 F.3d 1571, 1575 (11th Cir. 1995); then citing 26 U.S.C. §§ 6321, 6322).) He also found that Ditech's superior mortgage lien on the Subject Property does not impede the foreclosure sale because "the governing statute contemplates post-sale satisfaction of the parties' interests from the proceeds of sale." (Id. (quoting Banner Grp. Corp. v. United States, No. 6:06-cv-706-Orl-22KRS, 2008 WL 859037, at *1 (M.D. Fla. Jan. 7, 2008)).) So Magistrate Judge Smith recommends that the Court order and schedule a foreclosure sale of the Subject Property, with the net proceeds applied to the judgment as allowed by 26 U.S.C. § 7403(c).
The parties did not object to the R&R, and the time for doing so has now passed. As such, the Court has examined the R&R only for clear error. See Wiand v. Wells Fargo Bank, N.A., No. 8:12-cv-557-T-27EAJ, 2016 WL 355490, at *1 (M.D. Fla. Jan 28, 2016); see also Macort v. Prem, Inc., 208 F. App'x 781, 784 (11th Cir. 2006). Based on the procedural posture of this case, the Court takes issue with only one portion of the R&R: Magistrate Judge Smith's Foreclosure Recommendation.
As to the foreclosure of the Subject Property, the Government represented in the Motion, which Magistrate Judge Smith relied on, that "[w]ith no other competing claimants, the Court can now order the Subject Property sold to satisfy, in part, Kwitny's unpaid taxes." (Doc. 14, p. 6 (citing cases).) But there are two problems with this assertion. First, although the Government noted Ditech's then-pending motion to dismiss, which discussed Ditech's superior interest in the Subject Property and challenged the Government's ability to foreclosure its liens on the property (see id. at 6 n.2; see also Doc. 5), Ditech's since-filed affirmative defense in this case further reveals that it is a competing claimant.
Certainly 26 U.S.C. § 7403 provides the Court with discretion to order a foreclosure sale of the subject property:
26 U.S.C. § 7403(c). But the Government has yet to seek resolution of the claims stemming from Ditech's interest in the property by way of stipulation or motion. As a result, Ditech has not been able to defend its assertion that the tax liens are not valid against it and the Court has not yet determined the merits of Ditech's claims to and liens on the Subject Property. See id. ("The court shall . . . adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property. . . .").
What is more, the record lacks information about Ditech's interest in the Subject Property — other than that its interest is superior to that of the Government (see Doc. 10, p. 5 n.2; see also Doc. 5) — including whether the mortgage is in default and what balance, if any, remains. So the Court will not now order, as Magistrate Judge Smith recommends, that there be a "foreclosure sale of the Property at public sale with the proceeds to be applied first to the costs of sale, then to Ditech Financial, LLC's note and mortgage, and the remainder to the government's judgment." (See Doc. 15, p. 6); see also United State v. Boyd, 246 F.2d 477, 481 (5th Cir. 1957) ("[I]f the Federal tax lien is junior to undisputed prior liens which will exhaust the full value of the property, a decree of foreclosure would be neither appropriate nor effective."); cf. United States v. White, No. 5:09-cv-363-Oc-10GRJ, 2010 WL 11623548, at *5 (M.D. Fla. Nov. 23, 2010) ("Absent any evidence of default or legal authority to support the United States' request, if the Court were to allow the sale to go forward in the manner [with sale proceeds first to JP Morgan to satisfy the mortgage], it would be tantamount to an order declaring the mortgage in default — an issue that is not before the Court at this time").
Indeed, while Magistrate Judge Smith is correct that "[t]he governing statute contemplates post-sale satisfaction of the parties' interests from the proceeds of sale" (Doc. 15, p. 5 (quoting Banner Grp. Corp., 2008 WL 859037, at *1)) — meaning that Ditech's superior interest in the property does not necessarily preclude foreclosure and merely dictates distribution of proceeds from the foreclosure sale — the Court declines to order a foreclosure sale of the Subject Property by way of a motion for default judgment against Mr. Kwitny when the claims of another interest-holder in the Subject Property have yet to be resolved.
Accordingly, it is
In another case cited by the Government, the motion for default judgment specifically discussed payment to the non-defaulting defendant from the proceeds of the foreclosure sale and was entitled, "United States' Motion for Default Judgment Against Defendants . . . and for Foreclosure and Sale of Real Property," giving the non-defaulting defendant an opportunity to respond. See United States v. Ruetz, No. 6:08-cv-487-Orl-31DAB, 2008 WL 4501839 (M.D. Fla. Aug. 22, 2018). But here the Government has failed to discuss Ditech's interest in the property or any future payment to it from proceeds of the foreclosure sale. (See Doc. 14.) And unlike Ditech, the non-defaulting defendant in Ruetz did not challenge the validity of the tax liability against it. (See Doc. 17, p. 2.)