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United States v. Behren

United States District Court, C.D. Illinois, Springfield Division

August 12, 2016

UNITED STATES OF AMERICA, Plaintiff,
v.
KEVIN M. VON BEHREN, BRENDA K. VON BEHREN, KVB ELECTRIC LLC, WILLIAMSVILLE STATE BANK & TRUST, ILLINOIS DEPARTMENT OF REVENUE, TD AUTO FINANCE, LLC, f/k/a DAIMLER CHRYSLER FINANCIAL, CAPITAL ONE BANK, and COUNTY OF SANGAMON, ILLINOIS, Defendants.

          OPINION

          SUE E. MYERSCOUGH UNITED STATES DISTRICT JUDGE

         This cause is before the Court on the Corrected Motion for Relief from Default Judgment (d/e 62) filed by Defendant KVB Electric LLC and the Motion for Leave to File an Amended Answer and Amended Affirmative Defenses (d/e 70) filed by Defendants Kevin M. Von Behren and Brenda K. Von Behren. Because KVB has shown good cause for its default, quick action to correct the default, and a meritorious defense, the Motion for Relief from Default Judgment is GRANTED. The Court also, in an exercise of its discretion, GRANTS the Von Behrens leave to file an amended answer and affirmative defenses.

         I. BACKGROUND

         On December 3, 2014, Plaintiff United States filed suit against Defendant Kevin M. Von Behren seeking a money judgment for unpaid federal income taxes and for the trust fund portion of federal income and Federal Insurance Contributions Act (FICA) taxes withheld from the wages of employees of KVB Electric LLC. Compl. (d/e 1). On April 23, 2015, Plaintiff filed an Amended Complaint (d/e 6) containing three counts. In Count I, Plaintiff sought a money judgment against Kevin and Brenda K. Von Behren, jointly and severally, for unpaid federal income taxes. In Count II, Plaintiff sought a money judgment against Kevin Von Behren for the unpaid trust fund portion of federal income and FICA taxes withheld from the wages of the employees of BDK Industries, Inc. In Count III, Plaintiff sought to enforce federal tax liens resulting from liabilities owed by Kevin and/or Brenda against property located at 2196 Cantrall Creek Road, Cantrall, County of Sangamon, Illinois, 62625 (the Cantrall property). Plaintiff also named as additional defendants entities that might have a claim or interest in the Cantrall property, including KVB Electric LLC, Williamsville State Bank & Trust, the Illinois Department of Revenue, Daimler Chrysler Financial, Capital One Bank, and County of Sangamon, Illinois.

         The Amended Complaint alleges that the Cantrall property was transferred to Kevin and Brenda Von Behren as joint tenants in April 1991. Am. Compl. ¶ 10. In June 2005, the Cantrall property was conveyed to KVB by way of a Sheriff’s Deed pursuant to the Judgment of Foreclosure and Sale entered in Sangamon County Case No. 2003 CH 238. Id. ¶ 13. Plaintiff alleges that KVB holds record title to the property as the alter ego of Kevin Von Behren, who is the true and equitable owner of the property. Id. ¶ 26.

         Requests for Waiver of Service and Notice of Lawsuit were mailed to Kevin, Brenda, and KVB on May 28, 2015. See d/e 7, 8, 9. On July 28, 2015, Kevin, Brenda, and KVB filed pro se Motions for Extension of Time to File Answer. See d/e 15, 16, 17. In its motion, KVB claimed that it was discussing representation and a retainer with attorney David Reid and believed the issues would be resolved soon. See KVB Motion ¶ 8 (d/e 17).

         United States Magistrate Judge Tom Schanzle-Haskins granted Kevin’s and Brenda’s motions, but denied KVB’s motion because corporations may not appear pro se in federal court. See July 31, 2015 Text Orders. On August 6, 2015, Plaintiff filed a Second Amended Complaint (d/e 19) to change the name of Defendant Daimler Chrysler Financial to reflect the company’s current name, TD Auto Finance, LLC.

         The Von Behrens hired Mr. Reid, who they believed was also representing the interests of KVB. See Mem. of Law in Support of Def. KVB Electric LLC’s Mot. for Relief from Default J. at 3 (d/e 63). Mr. Reid represented the interest of all three defendants in settlement negotiations with Plaintiff. Id. On August 26, 2015, after those attempts at settlement were unsuccessful, Mr. Reid filed an Answer to the Second Amended Complaint on behalf of the Von Behrens but not KVB. Id.; see Answer (d/e 25).

         In the Answer, Kevin and Brenda “allege[d] that the equitable owners of the subject property are Kevin M. Von Behren and Brenda K. Von Behren.” Answer ¶ 26. They also “admit[ted] that the Plaintiff is entitled to enforce its liens against the Defendants.” Id. at ¶ 29.

         On October 21, 2015, Plaintiff and the Von Behrens filed a Joint Report of Parties’ Planning Meeting (d/e 28). The parties agreed that the Von Behrens were jointly liability for unpaid federal income tax liabilities, that Kevin was liable for the “Trust Fund Recovery Penalty, ” and that the United States’ tax liens attach to all property and rights to property belonging to the Von Behrens, including their Cantrall, Illinois residence. Id. The parties agreed to a sale of the Cantrall property with the proceeds being used to pay the tax liabilities and any other perfected liens against the property. Id. On October 22, 2015, Judge Schanzle-Haskins granted the parties until November 20, 2015 to file a proposed stipulated judgment. See October 22, 2015 Minute Entry.

         In November 2015, the Von Behrens sought and received an extension of time to submit a proposed stipulated judgment. See d/e 36 (seeking an extension due to the Illinois Department of Revenue’s notice of tax lien in excess of $100, 000). Additional extensions of time were sought and received in January (d/e 40) (requesting time to review 2003 bankruptcy records to determine whether the Department of Revenue’s tax lien was enforceable in this action) and February 2016 (d/e 41) (noting that the Department of Revenue tax liens were not discharged in bankruptcy but seeking additional time to review an Internal Revenue Service notice regarding federal tax liabilities).

         On March 11, 2016, Mr. Reid filed a motion to withdraw as counsel for the Von Behrens and KVB (d/e 43). Mr. Reid stated there was substantial disagreement between Mr. Reid and the defendants as to the proposed terms of the stipulation regarding entry of judgment. Id. at 1.

         On March 14, 2016, Mr. Reid filed an amended motion to withdraw (d/e 45), clarifying his original motion. In the amended motion, Mr. Reid sought to withdraw as counsel for the Von Behrens. Mr. Reid also sought to withdraw “from any representation of the Defendant, KVB Electric LLC.” Mr. Reid explained that while he did not formally enter his appearance on behalf of KVB, he included KVB in certain pleadings and the proposed Stipulation of Judgment documents. Id. at 2. The Court also identified Mr. Reid as KVB’s counsel on the civil docket sheet.

         Judge Schanzle-Haskins granted the motion to withdraw as counsel as to all three defendants. See Order (d/e 46). Judge Schanzle-Haskins advised KVB that it must retain counsel because a ...


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