United States District Court, D. Nevada
MIRANDA M. DU UNITED STATES DISTRICT JUDGE.
United States of America (“Government”) brought
this action seeking federal tax assessment judgment against
Defendant Spencer J. Steele (“Steele”) and to
foreclose federal tax liens against real property located at
1883 Genoa St., Gardnerville, NV 89410, Assessors Parcel No.
1022-29-201-012 (“Property”). This order
concerns the Government's motion and Steele's
cross-motion for summary judgment (ECF Nos. 28, 42) as well
as Defendant Jay Sordean's opposition to the
Government's motion for entry of clerk's default (ECF
Nos. 30, 49). Because the latter was filed after the Clerk
entered the requested default (see ECF No. 32), the
Court deems Sordean's opposition as a motion to set aside
the Clerk's entry of default. Ultimately, the Court
grants the Government's motion for summary judgment (ECF
No. 28), denies Steele's cross-motion (ECF No. 42), and
denies the motion to set-aside the Clerk's entry of
default (ECF No. 49).,  The Court also grants Steele's pending
motion to strike (ECF No. 46).
relevant facts are undisputed, unless otherwise indicated.
Defendants & Property
is alleged to be indebted to the Government for failing to
pay his personal federal income tax liabilities for tax years
2004, 2005, 2006, and 2009 and the Government contends he is
the true owner of the Property. (ECF No. 1.) Sordean was
named a party because he holds the nominal title to the
Property as the successor trustee of the Desert Lake Trust
(“DLT”). (ECF No. 28-12 at 31; ECF No. 28 at 2.)
Stewart Title Company is the successor in interest of the
Stewart Title of Douglas County (“Stewart
Title”). (ECF No. 1.) The latter is the named trustee
under the pertinent Deed of Trust with Assignment of Rents
(“DOT”) attached to the Property. (See,
e.g., ECF No. 28-12 at 58.)
Property is described as:
THE WEST 165 FEET OF THE NORTH 1/2 OF THE SOUTHWEST 1/4 OF
THE SOUTHEAST 1/4 OF THE NORWESTET 1/4 OF SECTION 29,
TOWNSHIP 10 NORTH, RANGE 22 EAST, M.D.B. & M.
(ECF No. 1 at 3; ECF No. 28-12 at 62.) DLT's asset
consists only of the Property and has no money and income
beyond what it receives from Steele as rent. (See,
e.g., ECF No. 28-9 (Steele Depo.) at 39; ECF No. 28-11
(Sordean Depo.) at 11-13.)
Steele's Tax Liabilities
last filed federal income tax returns in 2003. (ECF No. 28-3
(Steele Testimony) at 10.) Thereafter, he “became of
the opinion that [he] was not liable for federal income tax,
and therefore was not liable to keep [his] records or file
any returns.” (Id.)
the four years at issue, Steele received income from various
sources, which was reported to the Internal Revenue Service
(“IRS”) by third parties on various information
returns-1098, 1099-G, 1099-Misc, 1099-S, etc. (ECF No. 28-1
(Schubert Decl.) at 2; ECF No. 28-2; ECF No. 28-3.) Without
input from Steele, the Government calculated his income based
on the third-party information for the relevant four years.
(ECF No. 28-1 at 2; ECF No. 28-3; ECF No. 28-4 at 11-52.) The
IRS then sent Steele or DLT statutory notices of deficiency
pursuant to 26 U.S.C. § 6211-6212. (ECF No. 28-1 at 2-3;
ECF No. 28-4) These notices provided Steele's tax
liabilities and explained the IRS's calculation.
(Id.) The Government contends that because Steele
did not petition for redetermination of his noted
deficiencies under 26 U.S.C. § 6213, the IRS made timely
assessments against him for unpaid federal income taxes,
penalties, and interest set forth on the notices of
deficiency. (ECF No. 28 at 4; ECF No. 28-1 at 2; ECF No.
Purchase of the Property, Formation of DLT
testified to loaning DLT $422, 000.00 in fall 2005 to
purchase the Property. (ECF No. 28-9 at 33; ECF No. 28-12 at
Escrow Instructions for the Property, dated September 28,
2005, shows “title vested in: Spencer J. Steele.”
(ECF No. 28-12 at 64.) Stewart Title appears to have prepared
an Escrow Instructions Signature Page, which the sellers of
the Property, Clifford E. Clinton and Rena C. Clinton
(“Sellers”), signed. (Id. at 72.) On the
same signature page, a portion titled “Buyer (s)”
follows Sellers' signatures and provides “Spencer
J. Steele” under a signature line, but is not signed.
(Id.) Instead, a different-but substantively the
same-signature page, excluding Sellers' signature
provides DLT is the buyer, which Bill Driscoll
(“Driscoll”) signed as trustee of DLT.
(Id. at 73.) It appears Steward Title also prepared
the latter signature page. (Id.) Supplemental Escrow
Instructions, dated October 7, 2005, amended the prior
instructions and provides:
The Buyer in this transaction shall be amended to read: Bill
Driscoll, Trustee of the Desert Lake Trust Created October 1,
(Id. at 74.) This document was signed by Sellers and
Grant, Bargain, Sale Deed (“Deed of Sale”)
conveys title from Sellers to Bill Driscoll, Trustee of the
Desert Lake Trust created October 1, 2005. (ECF No. 28-12 at
56.) The Deed of Sale is dated September 20, 2005.
noted as “formed” on October 1, 2005, (ECF No.
28-12 at 15), but the certificate of its existence and
authority and other trusts documents were signed several days
later (id. at 15-33). The document creating DLT
shows Driscoll as DLT's trustee at the time of its
creation. (Id. at 15.) The same document shows J.
Dennis Scarbrough as DLT's creator. (Id.)
Sellers notarized the Deed of Sale on October 6, 2005, and it
was recorded on October 14, 2005. (Id. at 56.)
was asked about the creation of DLT at his deposition in this
Q Did you ask for it to be created? Did you direct it to be
created? Or did you discuss it with people who created it?
A It was recommended to me as an estate planning move in
anticipation of my death. And, you know, I lent money to the
trust to buy the property, so to that extent I was involved.
Q Do you know - - do you understand what it's supposed to
A My understanding is that the trust is supposed to be a
separate legal entity. So that if, for example, like
you're trying to do, somebody comes after me for money
they claim I owe, the trust will not be responsible for that.
(ECF No. 28-9 at 35-36.) Steele further testified that he
chose DLT's beneficiaries-his cousins. (Id. at
attached to the Property, dated “20th day of
September, 2005[, ]” but recorded on October 14, 2005,
notes that the DOT is made between the following entities and
Bill Driscoll, Trustee of the Desert Lake Trust created
October 1, 2005 . . . herein called “Trustor”,
Stewart Title of Douglas County, . . . herein called
“Trustee”, and Spencer John Steele, (whose
address is c/o Re/Max Bill Driscoll . . . herein called
(ECF No. 28-12 at 58.) The DOT additionally provides:
That Trustor irrevocably grants to Trustee in trust, with
power of sale, all interest of Trustor in that certain
property situate in Douglas County . . .
together with, the tenements, . . . and appurtenances . . .
and the reversion . . . . remainder . . . rents, issues and
profits . . . subject, however, to the right of the
Beneficiary, during any period of default hereunder,
and without waiver of ...