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United States v. Austin

United States District Court, D. New Mexico

June 12, 2017




         THIS MATTER comes before the Court on Defendants Mark and Catherine Austin's (“Defendants”) Provisional Answer to the Complaint, filed April 19, 2016 [Doc. 29]. Because the Court has construed Defendants' Provisional Answer to contain arguments that this Court lacks subject matter jurisdiction and/or that this Court is an improper venue, the Court treats Defendants' Provisional Answer as a Motion to Dismiss for Lack of Subject Matter Jurisdiction and/or Improper Venue. The Court, having considered the motion, briefs, relevant law, and being otherwise fully informed, finds that the motion is not well taken and will be denied.


         On November 24, 2015, the United States filed a Complaint against Defendants to recover delinquent taxes. [Doc. 1 at 1]. The United States asserts that Defendants owe the Internal Revenue Service (“IRS”) $1, 578, 601.70 in delinquent taxes from 1999 through 2012, that Defendant Catherine Austin owes a civil penalty of $5, 321.10, and that Defendants owe accruing interest and statutory additions. Id. at 2-3. The Complaint lists seven instances in which the IRS sent a notice to Defendants demanding payment, to which Defendants did not respond. Id. at 3-4. The Complaint also states that in August 2000 and August 2002, Defendants acquired two properties, where they do not reside or have a homestead interest in, and that pursuant to 26 U.S.C. §§ 6321 and 6322, statutory liens arose and attached to these properties. Id. at 4-5. Throughout 2012 through 2014, the United States filed notices of federal tax lien against these two properties in the Office of the County Clerk in San Juan County, New Mexico. Id. at 5-6. In 2002, Defendants entered into a mortgage for one of the properties with IndyMac Bank F.S.B., which is serviced by Ocwen Loan Servicing. Id. at 6.

         The Complaint lists three causes of action. First, the United States seeks to reduce the federal tax assessments amounting over $1.5 million to judgment, including interest and statutory additions. Second, the United States seeks a judgment foreclosing the federal tax liens on Defendants' two non-residential properties, as well as a deficiency judgment against Defendants. Third, if the United States must use the remedies under Subchapters B or C of the Federal Collections Procedure Act, the United States seeks an award of 10% surcharge as authorized under 28 U.S.C. § 3011. Id. at 6-8.

         On January 7, 2016, Defendants filed an Answer [Doc. 13] stating that they “hereby confess the truth of the facts recited in the instant Complaint and admit the apparent truth of Plaintiff's allegations and right of action” but asserting that this Court does not have subject matter jurisdiction. Id. at 2. Defendants state that “[t]he Court has yet to disclose to Defendants under which particular form of law the Court is seated or the constitutional authority that gives the court the capacity to take jurisdiction and enter judgments orders, and decrees in favor of the United States arising from a civil or criminal proceeding regarding a debt, in San Juan County, New Mexico-which omission constitutes a denial of due process of law.” Id. at 4.

         On January 8, 2016, Ocwen filed an Answer to the Complaint and a Crossclaim against Defendants for a judgment in the amount of the remainder of the mortgage, plus interest and any expenses undertaken by Ocwen, as well as a foreclosure of the property on which Ocwen has a lien. [Doc. 15]. The Court entered Default Judgments against IndyMac F.S.B., OneWest Bank and Discover Bank for failing to appear [Doc. 27]. On April 19, 2016, Defendants filed the instant “Provisional Answer to the ‘United States' Complaint'” [Doc. 29], which, because the United States filed a Response on April 20, 2016 [Doc. 30], Ocwen filed a Response in Opposition to Defendants on May 6, 2016 [Doc. 31], and Defendants filed a Reply on May 9, 2016 [Doc. 32], the Court construes as a Motion to Dismiss for Lack of Subject Matter Jurisdiction and/or Improper Venue. Defendants' Motion restates, using the same language from their original Answer, that the Court lacks subject matter jurisdiction or proper “constitutional authority.” [Doc. 29 at 2].


         The Complaint states that this Court has subject matter jurisdiction pursuant to 26 U.S.C. §§ 7402 and 7403 as well as 28 U.S.C. §§ 1331, 1340, and 1345. [Doc. 1 at 1]. The Complaint also states that venue is proper pursuant to 28 U.S.C. §§ 1391(b) and 1396 because Defendants reside in and the property at issue is located in San Juan County, New Mexico. Id. at 1-2. The Court agrees that it has subject matter jurisdiction in this case and that venue is proper.

         I. Subject Matter Jurisdiction

         Starting at first principles, so that Defendants clearly understand the source of this Court's authority, Article III of the Constitution grants the federal judiciary power over suits arising out of federal law and over suits in which the United States is a party. See U.S. Const. art. III § 2. Article II of the Constitution grants Congress the power to define the jurisdiction of courts that are “inferior” to the Supreme Court, including federal district courts. See U.S. Const. art. II § 1. Pursuant to this authority, Congress conferred on district courts jurisdiction to adjudicate matters arising under federal law, 28 U.S.C. § 1331, and specifically, “original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue.” 28 U.S.C. § 1340. Furthermore, under 28 U.S.C. § 1345 “the district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States, or by any agency or officer thereof expressly authorized to sue by Act of Congress.”

         The instant Complaint seeks judgment on federal tax assessments. This Court is clearly authorized to issue such judgments under the above provisions as well as 26 U.S.C. § 7402(a) (“The district courts of the United States at the instance of the United States shall have such jurisdiction . . . to render such judgments and decrees as may be necessary or appropriate for the enforcement of the internal revenue laws.”). The Complaint also calls for the enforcement of tax liens to foreclose two of Defendants' properties, which the Court is authorized to order under 26 U.S.C. § 7403(a):

In any case where there has been a refusal or neglect to pay any tax, or to discharge any liability in respect thereof, whether or not levy has been made, the Attorney General or his delegate, at the request of the Secretary, may direct a civil action to be filed in a district court of the United States to enforce the lien of the United States under this title with respect to such tax or liability or to subject any property, of whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax or liability.

         Finally, the Complaint calls for enforcement of the government's entitlement to a surcharge under 28 U.S.C. § 3011, if applicable, which the Court has authority to enforce under 28 U.S.C. § 1340. Accordingly, because Congress has authorized the district courts to exercise subject matter jurisdiction over the causes of action stated in the ...

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