COURT ORDERS FORECLOSURE OF TAX LIENS AGAINST COUPLE'S PROPERTY.

At the outset, the court must clarify its previous order. On March 24, 2006, the court granted plaintiff's motion for summary judgment based solely on defendants' failure to file an opposition or statement of non-opposition in accordance with Local Rule 11-110. Upon further review, the court now recognizes that granting the motion for summary judgment solely on the grounds that defendants failed to oppose, was in error. The court should have reached the merits of the motion even without an opposition from defendants. For this reason, the March 24 order is amended so as to address the merits of the motion for summary judgment. As explained below, the outcome is still the same: the motion for summary judgment must be granted for the government.

The United States ("plaintiff") seeks to reduce to judgment (or make the liens and tax liabilities enforceable) the following matters: (1) the outstanding federal income tax liabilities, plus penalties and interest, of Rodney L. Cunningham and Pamela L. Cunningham ("defendants"), jointly and severally, for the 1991-1995 tax years; and (2) the outstanding federal employment related tax liabilities, plus penalties and interest, assessed against Rodney Cunningham involving the 1997-2000 and 2002- 03 calendar years. Plaintiff's Statement of Undisputed Facts ("SUF") 1. Plaintiff also seeks to foreclose its tax liens securing the outstanding federal taxes against real property at 3730 Rodgers Avenue, Chico, California 95928 ("subject property"). Pl.'s SUF 1.

Plaintiff has entered into stipulation with defendant Guild Mortgage Company, agreeing that Guild Mortgage Company's claim against the subject property through its deed of trust is senior to plaintiff's claim against the subject property. Pl.'s SUF 2.

Based on Internal Revenue Service assessments, defendants owe, jointly and severally, the sum of $140,683.72 plus accrued interest, penalties and other statutory additions as provided by law from the date of assessment. Pl.'s Mot. For Final J., Dec. of Mike Norris. Rodney Cunningham also owes $63,820.13 plus accrued interest, penalties and other statutory additions as provided by law from the date of assessment. Id.

The assessments made against defendants are derived from their self-reported tax liabilities on their tax returns and additions to their tax liabilities.² Pl.'s SUF 6. Defendants agreed to these assessments pursuant to an audit examination. Pl.'s SUF 6.

The only tax periods that still remain in controversy are: (1) Form 1040 - December 31, 1995; and (2) Form 940 - Periods ending December 31, 1997-99. Pl.'s SUF 7.

Defendants currently hold title to the subject property as husband and wife, in joint tenancy, as proven by the Grant Deed recorded with the Butte County Recorder's Office on September 6, 1994. Pl.'S SUF 7. On several different dates for several different tax periods, plaintiff recorded a Refiled Notice of Federal Tax Lien with the Butte County Recorder.³ Pl.'s SUF 7-8. Lastly, plaintiff has made assessments against the defendants related to their federal income tax liabilities for the 1999-2002 tax years, but chose not to include them in the complaint. Pl.'s SUF 9.

B. PROCEDURAL HISTORY

On November 22, 2004, plaintiff brought this action, seeking to establish the unpaid tax liabilities against defendants. In addition, plaintiff sought to foreclose its tax liens securing these tax liabilities against the subject property.

Defendants filed an answer to the complaint and claimed insufficient knowledge as to some tax periods and several affirmative defenses, including expiration of statute of limitations for collection of tax liabilities, doctrine of laches, and setoff. Defs.' Answer at 1-2.

On July 27, 2005, plaintiff served defendants its first request for admissions, first set of interrogatories, and first request for the production of documents. Pl.'s SUF 8. Plaintiff then gave defendants an extension of time, up to September 9, 2005, to respond to its discovery requests. Pl.'s SUF 8. Plaintiff's first request for admissions included requests that the defendants admit that they were liable for the assessments made against them for the tax periods at issue, plus accrued interest, penalties, and other statutory additions. Pl.'s SUF 9. Defendants failed to reply to any of the discovery requests. Pl.'s SUF 9.

On November 29, 2005, plaintiff filed a motion for summary judgment, requesting adjudication that: (1) the defendants remain liable to the government for the assessments made against them for the tax periods at issue; (2) the government's federal income tax liens attach to the subject property; and (3) the federal tax liens securing these federal tax liabilities should be foreclosed against the subject property.⁴

Defendants failed to file an opposition or statement of nonopposition to the motion for summary judgment. On February 22, 2006, the court ordered defendants to show cause why sanctions should not be imposed for their failure to file any opposition or statement of non-opposition. The court also granted defendants until March 10, 2006 to file an opposition or statement of nonopposition. Defendants yet again failed to respond to the court's orders.

On March 24, 2006, the court granted the motion for summary judgment based on defendants' failure to file an opposition or statement of non-opposition in accordance with Local Rule 11-110. Defendants' counsel was also sanctioned and ordered to show cause why he should not be further sanctioned for his failure to respond to the court's February 22, 2006 order. To date, defendants' counsel has failed to respond to any of the court's orders.

A. STANDARD FOR MOTIONS FOR SUMMARY JUDGMENT THAT IS UNOPPOSED

Summary judgment is appropriate when it is demonstrated that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); See also Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Secor Limited v. Cetus Corp., 51 F.3d 848, 853 (9th Cir. 1995). The moving party bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of the record that it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). In attempting to establish the existence of this factual dispute, the opposing party may not rely upon the denials of its pleadings, but must tender evidence of specific facts in the required form, in support of its contention that the dispute exists. Fed. R. Civ. P. 56(e); See Matsushita, 475 U.S. at 586 n.11. The opposing party must demonstrate that the fact in contention is material and that the dispute is genuine. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986).

Summary judgment should be granted only if the moving party has satisfied the Rule 56 requirements. See Celotex, 477 U.S. at 323. The court may not grant a motion for summary judgment merely because the opposing party violated a local rule by failing to file an opposition or for an untimely opposition. See Martinez v. Stanford, 232 F.3d 1178, 1182 (9th Cir. 2003) (stating "a nonmoving party's failure to comply with local rules does not excuse the moving party's affirmative duty under Rule 56 to demonstrate its entitlement to judgment as a matter of law. . . . Short of that, we turn the summary judgment rule into a mere sanction for noncompliance with local rules"). A court cannot grant a motion for summary judgment solely on the grounds of non-compliance with local rules alone. Id. at 1183. Therefore, although the pending motion for summary judgment is unopposed, the court must still reach the merits of the motion and may not simply grant the motion for failure to oppose or for failure to file a statement of nonopposition.

B. ANALYSIS

As a threshold matter, the court notes that defendants failed to provide any evidence of specific facts that would support any contention that factual disputes remain. Defendants have not submitted any declarations, depositions, or affidavits, or any other type of admissible evidence that would establish a disputed fact.

It is well settled that:

In an action to collect taxes, the government bears the initial burden of proof. Palmer v. Internal Revenue Service, 116 F.3d 1309, 1312 (9th Cir. 1997). Plaintiff seeks adjudication on the following: (1) that defendants remain liable to the government for the assessments made against them for the tax periods at issue; (2) the government's federal income tax liens attach to the subject property; and (3) the federal tax liens securing these federal tax liabilities should be foreclosed against the subject property. Pl.'s Mot. For Summ. J. at 4.

Tax assessments are presumptively correct, so long as they are supported by a minimal factual foundation. See Palmer, 116 F.3d at 1312. Once the factual foundation has been made, the burden shifts to the taxpayers to show that the determination is incorrect. Id. A showing by the taxpayer that a determination is arbitrary, excessive or without foundation shifts the burden of proof back to the government. Id. at 1312 (citing Helvering v. Taylor, 293 U.S. 507, 515-516 (1935)).

In the instant case, plaintiff has provided numerous assessments and certificates outlining the defendants' tax liability. Pl.'s Mot. for Summ. J. at 5-6. These assessments provide more than minimal factual foundation for assessing defendant's tax liability. The burden then shifts to defendants to establish that the assessments are incorrect. Here, defendants have failed to file any kind of opposition. As previously noted, defendants cannot rely on their pleadings to show evidence of a material factual dispute. They must tender evidence of specific facts in the proper form, supporting their contention that there is a material factual dispute. Defendants have failed to tender any new evidence, beyond what was contained in their answer to the complaint, which is insufficient to put facts into dispute. Even when viewing the evidence in the light most favorable to defendants, and drawing all reasonable inferences in favor of defendants, it is clear that the assessments are presumptively correct.

Plaintiff also points to defendants' own self-reported tax liabilities on their tax returns for several years to establish that defendants have already admitted liability for most of the assessments. Pl.'s Mot. for Summ. J. at 6. Viewing this evidence in a light most favorable to defendants, the court finds that the defendants, at least partially, admitted some of their tax liabilities.

Defendants also admitted to their tax liabilities when they failed to respond to plaintiff's request for admissions. Pursuant to Rule 36(a) of the Federal Rules of Civil Procedure, if a party fails to answer a request for admissions within 30 days, the requested items are deemed admitted. By failing to respond to plaintiff's requests for admissions, defendants admit to the matters contained in them by default. Any matter thus admitted is conclusively established. Fed. R. Civ. P. 37(b); Hadley v. United States, 45 F.3d 1345, 1348 (9th Cir. 1995). Plaintiff's first request for admissions included requests that the defendants admit they are liable for the assessments made against them for the tax periods at issue. Defendants failed to respond, even after plaintiff granted them an extension. Pl.'s Mot. for Summ. J. at 7. Thus, pursuant to Rule 36(a), defendants are deemed to have admitted their tax liability.

Plaintiff has also properly recorded tax liens in the necessary county. Id. at 8. Plaintiff argues that the assessments against defendants attach to the subject property. Defendants have failed to provide any evidence of specific facts that support any contention that there is a material factual dispute as to this matter. They have failed to meet their Rule 56 burden. Given the evidence in the record, and viewing it in the light most favorable to defendants, the assessments clearly attach to the subject property.

For the above mentioned reasons, the motion for summary judgment is GRANTED.

For these reasons, the court orders as follows:

1. The March 24, 2006 order granting summary judgment is AMENDED as detailed in this order.

2. Concurrently with this order, the court also issues the final judgment and order of foreclosure.

3. The hearing currently set for June 12, 2006 is hereby VACATED.

IT IS SO ORDERED.

DATED: June 6, 2006.

² The tax periods in question are: (1) Form 1040 - Dec. 31, 1991 - 1994; (2) Form 941 - Periods ending June 30, 1998; Sept. 30, 1998; Dec. 31, 1998; Sept. 30, 2002; Dec. 31, 2002; June 30, 2003; Sept. 30, 2003; and Dec. 31, 2003; and (3) Form 940 - Periods ending Dec 31, 2000. Statement of Undisputed Facts ("SUF") at 7.

³ The exact dates and tax periods can be found on page 7 of plaintiff's SUF.

⁴ Initially, the motion was denied as untimely. Plaintiff had noticed the motion for summary judgment after the law and motion cut-off date. On January 3, 2006, plaintiff filed a request for leave to file for another motion for summary judgment. The request was granted, and the court ordered defendants to file an opposition or statement of non-opposition by February 6, 2006.