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Duckett v. Enomoto

United States District Court, D. Arizona

June 6, 2016

Nancy K. Duckett, as Personal Representative for the estate of Miyoko Enomoto, Plaintiff,
Dennis M. Enomoto; United States Internal Revenue Service; Kurt A. Tittelbach, Trustee; Defendants.


          Neil V.Wake United States District Judge

         Before the Court is the IRS’s Motion to Alter or Amend Judgment and to Distribute Interpleaded Funds (Doc. 97) and the accompanying briefs. For the reasons that follow, the Motion will be denied.

         I. BACKGROUND

         Dr. Dennis Enomoto is the beneficiary of a testamentary trust created by his mother. In relevant part, the trust instructs the trustee to pay Dr. Enomoto whatever amount the trustee deems necessary for Dr. Enomoto’s support and education:

The Trustee shall pay to [Dr. Enomoto] so much or all of the net income and principal of the trust as in the sole discretion of the Trustee may be required for support in the beneficiary’s accustomed manner of living, for medical, dental, hospital, and nursing expenses, or for reasonable expenses of education, including study at college and graduate levels. . . . In the Trustee’s sole discretion and to the extent the Trustee deems advisable, the Trustee may consider or disregard the funds available to the beneficiary from other sources or the duty of anyone to support the beneficiary.

(Doc. 49-1 at 9.)

         The IRS seeks distribution of the trust funds to the United States to satisfy Dr. Enomoto’s tax deficiencies. Dr. Enomoto opposes this distribution. The parties previously presented the Court with cross-motions for summary judgment (Docs. 48, 58, 89, 91) on the issue of "whether the United States has federal tax liens on the [trust] funds" (see Doc. 49 at 2).

         In a lengthy order (Doc. 95), the Court divided the issue into three parts: (1) What are Dr. Enomoto’s rights in the trust funds? (2) Does the federal tax lien attach to those rights? (3) If so, is the tax lien presently enforceable?

         The Court answered as follows: (1) Dr. Enomoto has a conditional right in the trust funds. He can compel payment only when the trustee’s withholding of funds would be an abuse of discretion in applying the standard of payment set forth in the trust for Dr. Enomoto’s support. (2) The federal tax lien attaches to this right. (3) The tax lien is not presently enforceable because Dr. Enomoto’s right in the trust funds "has no permanently fixed dollar value" and "is variable according to [his] needs." (Doc. 95 at 15 (quoting United States v. Taylor, 254 F.Supp. 752, 756 (N.D. Cal. 1966).) This variability poses "practical problems of enforcing the lien" that cannot be resolved without evidence of Dr. Enomoto’s "current needs and living demands." (Id. at 15-16 (quoting Taylor, 254 F.Supp. at 756).)

         In reaching these conclusions, the Court noted the absence of binding federal appellate case law and explained that district courts had reached "mixed results" that were "difficult to harmonize . . . in a principled way." (Id. at 10-11.) Both Dr. Enomoto and the IRS relied on factually distinguishable district court cases from other circuits. (Id. at 11-14.) The Court, however, followed a more analogous and more persuasive case from within this circuit: United States v. Taylor, 254 F.Supp. 752 (N.D. Cal. 1966).

         Accordingly, the Court entered judgment (1) declaring that the tax lien extends to Dr. Enomoto’s right in the trust funds, (2) declaring that the lien is enforceable only as to the amount to which Dr. Enomoto’s right extends, (3) prohibiting the trustee from distributing any of the funds, (4) permitting the IRS to request post-judgment discovery and noting that the Court "may order distributions upon the parties’ stipulation or a party’s separate motion, " and (5) retaining jurisdiction to enforce the judgment. (Doc. 96.)

         The IRS now moves, pursuant to Federal Rule of Civil Procedure 59(e), to "alter or amend the Judgment so that the federal tax liens against [Dr. Enomoto] extend over all of the [trust] funds" and to order the trustee "to distribute all of the Funds to the United States." (Doc. 97 at 1-2.)


         Altering or amending a judgment under Rule 59(e) is "an extraordinary remedy which should be used sparingly." Allstate Ins. Co. v. Herron, 634 F.3d 1101, 1111 (9th Cir. 2011) (citation omitted). It is generally limited to four purposes: (1) to correct "manifest errors of law or fact upon which the judgment rests, " (2) to present "newly discovered or previously unavailable evidence, " (3) to prevent "manifest injustice, " or (4) to respond to "an intervening change in controlling law." Id. It "may not be used to relitigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment." Exxon Shipping Co. v. Baker, 554 ...

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