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United States v. Mengedoht

United States District Court, D. Nebraska

January 9, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
JAN M. MENGEDOHT, Individually, and as Executor of the Carl A. Mengedoht Estate and as Trustee of the H C J Holdings Trust; and WASHINGTON COUNTY TREASURER, Defendants.

          MEMORANDUM AND ORDER

          Joseph F. Bataillon Senior United States District Judge

         This matter is before the Court on motion of the United States of America (“United States or “the Government”) for summary judgment, Filing No. 37.[1] This is a civil action to reduce tax assessments to judgment and to enforce a tax lien. The Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1340 and 1345 and 26 U.S.C. §§ 7402 and 7403.

         I. BACKGROUND

         The Government sued Jan M. Mengedoht, in his individual capacity and in his official capacities as Executor of the Carl M. Mengedoht Estate (“the Estate”) and as Trustee of HCJ Holdings Trust (the “Trust”), and the Washington County Treasurer in order to enforce its Internal revenue service (“IRS”) tax liens against the Estate. The Washington County Treasurer and Jan Mengedoht, individually and as trustee of the Trust, were sued only so that they could protect any interest they may claim in the property at issue. The United States and Washington County Treasurer have since agreed that any real property taxes that are owed to Washington County Treasurer on the property are entitled to priority over the federal tax liens. Filing No. 30, Stipulation. The record shows defendant Mengedoht, as the executor (and as trustee and in his individual capacity), was personally served with a summons and copy of the complaint on July 27, 2017. Filing No. 7.

         The property on which the United States seeks to enforce its federal tax lien is located in Washington County, Nebraska.[2] In its Complaint and Amended Complaint, [3] the Government alleges that federal taxes have been assessed on the Estate, a tax lien was issued and filed, and interest continues to accrue. Filing No. 1 & Filing No. 24. The Court denied Mengedoht's motion to dismiss for failure to state a claim, rejecting the defendant's contention that statute of limitations in the Uniform Trust Code barred the action. Filing No. 22, Memorandum and Order at 6.

         Neither the Estate nor the Trust properly appeared or answered in this suit, and the Court entered default judgment against them on December 12, 2017. Filing No. 15, Memorandum and Order at 3. The remaining issue in this case is whether Jan Mengedoht has a personal interest in the subject real property that is superior to the federal tax liens that attached to the subject real property. See Filing No. 22, Memorandum and Order at 1.

         The Government moves for summary judgment, asking the Court to enter judgment in favor of the United States and against Jan M. Mengedoht, Executor of the Carl A. Mengedoht Estate, for federal estate tax liabilities in the amount of $2, 635, 555.16, plus statutory interest and additions accruing after June 13, 2017. It also seeks a judgment that the United States has a valid and subsisting federal tax lien for the liabilities described herein against all property and rights to property of the Carl A. Mengedoht Estate, including the subject property and an order enforcing the federal tax lien attaching to the subject property.[4]

         In response, defendant Jan Mengedoht alleges the default judgment was the result of the Government's knowing and deliberate misrepresentations to the Court. See Filing No. 46, Notice of Fraud on the Court. In related filings, he requests production of documents, seeks additional time under Federal Rule of Civil Procedure 56(d), seeks to extend discovery, contends he has never received notices of deficiencies or assessments, and moves to compel a fact witness to answer interrogatories. Filing Nos. 40, 48, 50, 52, 53 and 54. He has not shown good cause for any of those requests.[5] He does not challenge the factual statements or legal arguments presented by the Government.

         II. FACTS

         In support of its motion, the Government has shown that Carl A. Mengedoht died May 29, 1998. Filing No. 39-1, Affidavit of Shawn Kennedy (“Kennedy Aff.”), Exhibit (“Ex.”) A, Death Certificate. Carl Mengedoht's Estate failed to file a federal estate tax return (Form 706) with the IRS. Id., Ex. B, Certification of Lack of Record (Form 3050). Jan Mengedoht is the Executor of the Estate and Trustee of the Trust. Filing No. 27, Answer, Attachment # 1 at 3, 11, & 19. The IRS examined the Estate's tax liabilities and a delegate of the Secretary of Treasury assessed federal estate tax, penalties and interest against the Estate on April 18, 2011. Filing No. 39-1, Kennedy Decl. at 2; Filing No. 39-2, Ex. C. The amount due with interest and statutory additions through October 1, 2018, is over 2.7 million dollars. Filing No. 39-1, Kennedy Aff. at 2. The tax assessments are shown in the certified IRS transcript of the Estate's tax account. Filing No. 39-1, Kennedy Decl. at 3; Filing No. 39-2, IRS Form 4340, Certificate of Assessments and Payments (“certified IRS transcript”).

         The Government has also shown that the assessments were based on the value of the Estate's property at the time of Carl Mengedoht's death. Filing No. 39, Kennedy Decl. at 3; Filing No. 39-2, Ex C, certified IRS transcript. The major asset of the Estate, constituting more than 90% of the Estate's value, is the subject property. Id., Kennedy Decl. at 3. The present titleholder to the property is the Trust. Filing No. 27, Answer, Attachment # 2 at 24-25.

         The subject property was found to be property of the Estate, and included for estate tax computational purposes, under the Internal Revenue Code (“IRC”) because documents associated with the Trust showed that the decedent, Carl Mengedoht, retained the full use, possession, and enjoyment of the subject property and its income during his lifetime and conveyed it to the Trust for less than full and adequate consideration.[6] Filing No. 39-1, Kennedy Aff. at 3. Under the terms of the Trust, Carl Mengedoht retained the power to alter, amend, revoke, or terminate the transfer of the subject property at the time of his death. Under 26 U.S.C. §§ 2036 and 2038, such property is part of the estate.

         The record also shows that a notice of the federal lien associated with the estate tax liabilities was filed with the Register of Deeds of Washington County, Nebraska, on October 7, 2011. Filing No. 39-1, Kennedy Aff. at 3; Filing No. 39-3, Ex. D, Notice of Federal Tax Lien; see also Ex. E, Assignment. Attached to his answer to the Government's Amended complaint, defendant Jan Mengedoht filed copies of documents associated with the Trust, including the Trust Registration, the Trust Agreement, Co-Trustee Appointment Acceptances, various Assignments and Bills of Sale associated with the trust property, the Grant Deed for the subject real property, and the Last Will and Testament of Carl A. Mengedoht. Filing No. 27, Answer, Attachments # 1 & # 2. Those documents are also contained in the IRS administrative file associated with the examination of the Carl Mengedoht Estate's taxes. Filing No. 39-1, Kennedy Aff. at 4.

         Defendant Jan Mengedoht was deposed in this case. See Filing No. 39-4, Declaration of Martin M. Shoemaker (“Shoemaker Decl.”); Filing No. 39-5, Ex. F, Transcript of the Deposition of Jan Mengedoht (“Mengedoht Dep. Tr.”). When asked if he had a personal interest in the property, Jan Mengedoht refused to answer and stated, “I don't want to waive my natural right to not be compelled to be a witness ...


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