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United States v. Birdsong

United States District Court, D. Montana, Missoula Division

December 4, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
MALCOLM WAYNE BIRDSONG; M.W. BIRDSONG; WAYNES' GROUP; MISSOULA COUNTY; and ENOCH INVESTMENTS, LLC, Defendants.

          OPINION & ORDER

          DONALD W. MOLLOY, DISTRICT JUDGE

         Introduction

         The United States sued Malcolm Birdsong to reduce an alleged $438, 146.94 in unpaid taxes and statutory accruals to judgment, to determine that Birdsong owns two properties in Lolo, Montana, and to foreclose the federal tax liens on those properties. The parties filed cross-motions for summary judgment. (Doc. 27; Doc. 29.) Birdsong argues that the action is barred because the United States failed to send the notice of deficiency in the form required by law. He has moved under Federal Rule of Civil Procedure 37(c) to exclude evidence that the notice of deficiency was sent by certified mail. (Doc. 35.) The United States argues that it is entitled to judgment as a matter of law because there are no genuine issues of material fact. A hearing was held on December 3, 2018. Birdsong's motion to exclude evidence and his motion for summary judgment are denied; the United States' motion for summary judgment is granted.

         Statement of Facts[1]

         Malcolm Birdsong, also known as M. W. Birdsong, failed to file federal income tax returns from 2003 to 2008, resulting in a $438, 146.94 tax assessment against him. Under 26 U.S.C. § 6321, the tax assessment automatically gave rise to a tax lien on Birdsong's real and personal property. On May 23, 2017, the United States sued to reduce the tax assessment to judgment and to enforce the tax lien against two properties in Lolo, Montana, legally described as:

Subdiv.-LAV LAKE VIEW ADD Lot-001, Block-00A 12N 20W 26 LAKE VIEW-PARCEL A LOT 1 BLK A, SUID #2050301

         and

Subdiv.-LAV LAKE VIEW ADD Lot-002 Block-00A 12N 20W 26 LAKE VIEW ADD, LKVW LOT 2 OF LAKE VIEW ADD, LKVW LOT 2 OF LAKE VIEW ADDITION BLK A 26-12-20, SUID #1026859.

         Because Missoula County claims an interest in these properties for unpaid property taxes, it has been named a party, along with its assignee Enoch Investments, LLC. See 26 U.S.C. § 7403(b). Missoula County, Enoch Investments, and the United States have stipulated to the priority of their respective interests in the properties. (Doc. 10; Doc. 26.)

         Birdsong conveyed his interest in the properties to Defendant Waynes' Group through a quitclaim deed on September 4, 2004. Waynes' Group was incorporated in Nevada in 2005 as an unincorporated Religious Scriptural Society. Birdsong is the sole officer, manager, and owner of Waynes' Group. The United States seeks to have Birdsong's conveyance to Waynes' Group set aside as fraudulent. Alternatively, the United States seeks a determination that Waynes' Group holds title to the properties as either Birdsong's nominee or alter ego, such that Birdsong is the true owner.

         For his part, Birdsong argues that this suit is barred because the United States cannot establish that it properly sent the notice of deficiency under 26 U.S.C. § 6212, which is a prerequisite to a valid tax assessment. Section 6212 requires notices of deficiency to be sent by certified or registered mail or, if sent by other means, that they are actually received by the taxpayer.

         Discovery has been a challenge, particularly regarding the notice of deficiency. Birdsong invoked his Fifth Amendment privilege against self-incrimination in response to the United States' discovery requests and to many substantive deposition questions. On August 24, 2018, one week after discovery closed, Birdsong filed a motion for summary judgment and a declaration. In the declaration, Birdsong claimed that he unnecessarily invoked the Fifth Amendment in response to deposition questions about whether he recognized and received the notice of deficiency. For those questions, Birdsong retracted his Fifth Amendment invocation and amended his answers to state "I do not recognize [the notice of deficiency] and do not believe I ever received [it]." (Doc. 31-4 at 3-4.)

         On July 31, 2018, the United States produced copies of the envelope in which the notice of deficiency was mailed with the Bates numbers U.S. APROD2-001263 to USAPROD2-001264. (Doc. 32-3 at 22-23.) The United States claims that the envelope showed part of a certified mail label. Birdsong denies that any of the documents produced on July 31, 2018, included a certified mail envelope.

         On August 24, 2018, one week after discovery closed, the United States filed a motion for summary judgment with an attached Declaration of Jennifer Graham, a technical services advisor with the Internal Revenue Service. Graham's declaration states that the notice of deficiency was sent to Birdsong by certified mail. On August 30, 2018, 13 days after discovery closed and six days after the parties filed cross-motions for summary judgment, the United States produced a supplemental response with copies of the envelope that clearly showed a certified mail label with the Bates numbers USAPROD3-000050-51. (Doc. 32-2 at 6-7.) The United States claimed that the copy produced on July 31, 2018, was incomplete due to an internal scanning error. (Doc. 44-1 at 11.)

         Based on the August 30 disclosure, Birdsong requested, and was granted, an extension to file his response to the United States' motion for summary judgment. (Doc. 33; Doc. 34.) In the meantime, Birdsong was able to view the original envelopes. (Doc. 44 at 7-8.) He then filed a motion to exclude evidence that the notice of deficiency was sent by certified mail, including the envelopes produced in the supplemental disclosure and Jennifer Graham's declaration.

         Legal Standard

         A "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The movant has the initial burden to show the absence of any genuine dispute of material fact. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102-03 (9th Cir. 2000). The burden then shifts to the nonmoving party to produce specific facts that show a material issue remains to be tried. Id. at 1103. The court must view all evidence and draw all inferences in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

         Analysis

         I. Evidentiary Issues

         There are two evidentiary issues to consider before reaching the merits of the cross-motions for summary judgment: (1) Birdsong's motion to exclude evidence that the notice of deficiency was sent by certified mail and (2) Birdsong's invocation and partial retraction of the Fifth Amendment privilege against self-incrimination.

         A. Birdsong's Motion ...


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