Late Payment- Levy
of Seized Property: Late Payment
USTC ¶50,014] Arthur Skipwith, Jr., and Amelia A. Skipwith, Plaintiffs
v. Gary Gover, Angela Gover and United States of America, Defendants
District Court, Dist. Mass., Civ. 93-40108-NMG,
, 868 FSupp 400, 868 FSupp 400
6331 and 6335 ]
Levy and distraint: Sale of seized property: Sufficiency of notice:
Real estate.--The seizure and sale of a couple's residence for
nonpayment of taxes was proper because a notice of intent to levy issued
three years earlier in connection with the seizure of other property
applied to all of the couple's property. Another notice with respect to
the residence was not needed. The IRS was not required to send a copy of
the seized property sale report to the couple, and it properly exercised
its discretion not to void the sale due to late payment by the buyer.
The sale price was not so low as to shock the conscience. Further, the
couple failed to file a claim for refund to receive the surplus sale
F. Gorman, Fletcher, Tilton & Whipple, P.C.,
370 Main St.
, for plaintiff. Henry J. Riordan, Department of Justice,
, for defendant. Jeffrey S. Raphaelson, Raphaelson & Raphaelson,
340 Main St.
, for defendant (Gover, A.)
J.: Arthur and Amelia Skipwith ("the Skipwiths") brought this
action against defendants, Angela and Gary Gover ("the
Govers") and the
, seeking to set aside a tax sale of their property on the grounds that
the government failed to comply with certain statutory and procedural
before this Court are the following motions:
motion of the
to dismiss, or, alternatively, for summary judgment,
motion of the Govers for summary judgment, and
motion of the Skipwiths for summary judgment.
the reasons stated below, the Court will allow the motions of defendants
for summary judgment, and will deny the motion of the Skipwiths.
relevant facts are recited in the light most favorable to the Skipwiths.
O'Conner v. Steeves, 994 F.2d 905, 907 (1st Cir.1993).
1988, the Internal Revenue Service ("the IRS") assessed the
Skipwiths with additional taxes of approximately $14,305 for tax year
1984 and approximately $1,500 for tax year 1985. The IRS served the
Skipwiths with a Notice of Intention to Levy for the 1984 taxes on
November 21, 1988
, and a similar notice to levy for the 1985 taxes on
January 23, 1989
February 24, 1992
, the IRS levied upon all of the Skipwiths' property for the total
amount due of $28,141.25 for the tax years 1984 and 1985. 1 In March,
1992, the IRS seized the Skipwiths' boat and sold it for $1,200. On
June 16, 1992
, after giving appropriate notice pursuant to 26 U.S.C. §6335(a) , the IRS seized
the Skipwiths' residence located at 10 Greenwood Avenue in Shrewsbury,
Massachusetts, ("the Property"), for nonpayment of taxes. That
seizure, along with the subsequent sealed bid sale, is the subject of
the IRS seized the Property, the Skipwiths and the IRS, through its
agent, Revenue Officer James Brennan ("Officer Brennan"),
attempted to negotiate a settlement whereby the Skipwiths would be able
to retain their residence. Those negotiations ultimately failed,
however, and, the IRS proceeded with the tax foreclosure.
IRS properly advertised the Property for sale in the Worcester Telegram
& Gazette on
September 6, 1992
, and held a sealed bid sale on
September 17, 1992
. At that sale, the Govers, who were the only party bidding on the
Property, submitted a bid for the minimum sale price of $29,296 (subject
to two mortgages totalling $41,611). The IRS accepted their bid, and the
Govers made a partial payment on the day of the sale.
IRS advised the Skipwiths of their rights after the tax sale, but the
Skipwiths chose not to exercise their right to redeem the Property. On
October 28, 1992
, the Govers received a Certificate of Sale of Seized Property, and, on
March 18, 1993
, they were granted a Quitclaim Deed to the Property. Although the
government granted the deed to the Govers in March, 1993, the IRS
apparently maintained a tax lien on the Skipwiths' former residence
until at least
February 22, 1994
Skipwiths initiated this action on
May 17, 1993
, to set aside the sale of the Property. They argue that the IRS did not
comply with 26 U.S.C. §6331(d) or Internal
Revenue Manual 56(12)1.1, because the second Notice of Intention to Levy
was delivered on
January 23, 1989
, prior to the seizure of their boat and more than three years before
the seizure of their house. They claim that, after their boat was
seized, both notices of intention to levy were extinguished and no other
property was subject to seizure. According to the Skipwiths, the IRS was
required to send out an additional notice expressing an intent to levy
upon their residence.
Skipwiths also argue that the government improperly depressed the
bidding by informing Mr. Gover on the morning of the sealed bid sale
that no one had yet submitted a bid to buy the subject property. 2 Officer
Brennan and Mr. Gover, however, both deny such a conversation took
place. The Skipwiths further allege that they failed to receive either
the Seized Property Sale Report, IRS Form 2436, or the $708.94 surplus
proceeds from the sale. Finally, they claim that the IRS improperly
extended the time within which the Govers were allowed to tender the
balance of the purchase price beyond the 30-day limit proscribed in 26
and (3) .
Motion to Dismiss
government argues that this Court should dismiss this case for lack of
jurisdiction and failure to state a claim, pursuant to Fed.R.Civ.P.
12(b)(1), (2) and (6). In essence, the government contends that this
Court lacks jurisdiction because the
has not waived its sovereign immunity under 28 U.S.C. §2410.
government relies on a recent line of cases decided by the Ninth Circuit
Court of Appeals which has held that:
a taxpayer may contest the procedural validity of a tax lien under [28
U.S.C.] §2410, he may do so only if, at the time the action is
commenced, the government still claims a lien or a mortgage on the
property. If the government has sold the property prior to the filing of
the suit, and no longer claims any interest in the property, §2410 does
v. United States [92-1
USTC ¶50,086 ], 953 F.2d 531, 538 (9th Cir.1992); see
also Hansen v.
, 7 F.3d 137, 138, n.1 (9th Cir.1993); Farr v. United States
USTC ¶50,229 ], 990 F.2d 451, 453 (9th Cir.1993). Because
the government has, in this case, already transferred title to the
Property to the Govers, it argues that §2410 does not apply and this
Court, therefore, does not have jurisdiction over the
law in this area is unsettled. The Third Circuit Court of Appeals has
held that under §2410 the government waives sovereign immunity even in
cases where it has already transferred the subject property to a third
party. Aqua Bar & Lounge, Inc. v. Internal Revenue Service [76-2 USTC ¶9554 ],
539 F.2d 935, 939-40 (3d Cir.1976). Similarly, this United States
District Court has ruled that "[s]ection 2410 deals with law suits
in which the
either claims a mortgage or lien in the property, or in which the
plaintiff challenges the validity of the tax auction sale." Lawrence
v. Beaman, 90-2
USTC ¶50,514 at ¶85,731 (n.5) (D.Mass. 1990); See also
Freedom Mission Church v. Green Bay Packaging, Inc. [93-1
USTC ¶50,148 ], 816 F.Supp. 513 (E.D.Ark. 1993).
is another line of cases, however, that holds that the United States has
not waived sovereign immunity in a suit challenging a tax sale if it has
already transferred the subject property to a third party. See Hughes
USTC ¶50,086 ], 953 F.2d at 538; Bay Savings Bank, F.S.B.
v. I.R.S., 837 F.Supp. 150, 153 (E.D.Va. 1993); Erickson v.
, 780 F.Supp. 733 (W.D.Wash. 1990).
reasoning of the Hughes decision is persuasive because it appears
to be founded on the unambiguous language of the statute. Nevertheless,
this Court declines to choose between the two divergent lines of
interpretation of §2410 for two important reasons:
There is evidence that the government was still maintaining a tax lien
on the Property at the time that the Skipwiths initiated this action.
When confronted with an identical situation, the Ninth Circuit Court of
Appeals recently declined to address the question of whether the
government had waived its sovereign immunity. Hansen, 7 F.3d at
138-39, n.1. That court, which, of course, was bound to follow Hughes,
refused to decide the issue because the record did not "contain any
evidence to show that the IRS, in addition to selling the property, no
longer claim[ed] a mortgage or lien interest in the property."
This Court is reluctant to rely upon a proposition of law that is not
generally accepted to dispose of a case, especially where there are
other, more compelling grounds on which to base its ruling.
Motions for Summary Judgment
and the Govers, have moved for summary judgment. They argue that the
Skipwiths have failed to present any evidence showing that either the
seizure or the sale of the Property was invalid. In addition, the
Skipwiths have filed a cross-motion for summary judgment.
Summary Judgment Standard
Judgment shall be rendered where the pleadings, discovery on file and
affidavits, if any, show "there is no genuine issue as to any
material fact and . . . the moving party is entitled to a judgment as a
matter of law." Fed.R.Civ.P. 56(c). The Court must view the entire
record in the light most favorable to the Skipwiths, the nonmoving
party, and indulge all reasonable inferences in their favor. O'Conner,
994 F.2d at 907.
respect to a motion for summary judgment, the burden is on the moving
party to show that "there is an absence of evidence to support the
non-moving party's case." FDIC v. Municipality of Ponce, 904
F.2d 740, 742 (1st Cir.1990), quoting Celotex Corp. v. Catrett,
317, 325, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the movant satisfies
that burden, it shifts to the non-moving party to establish the
existence of a genuine material issue.
In deciding whether a factual dispute is genuine, this Court must
determine whether "the evidence is such that a reasonable jury
could return a verdict for the nonmoving party." Andersen v.
Liberty Lobby, Inc., 477
242, 248 (1986); accord Aponte-Santiago v. Lopez-Rivera, 957 F.2d
40, 41 (1st Cir.1992) (citing Andersen ). The nonmovant's
assertion of mere allegation or denial of the pleadings is insufficient
on its own to establish a genuine issue of material fact. Fed.R.Civ.P.
Defendants' Motions for Summary Judgment
this case, the Court finds that the defendants have carried their burden
of proving that there are no material facts in issue, and that the
defendants are entitled to judgment as a matter of law.
IRS must adhere to the strict statutory requirements governing the
seizure and sale of a taxpayer's property. Kulawy v. United States
USTC ¶50,565 ], 917 F.2d 729, 735 (2d Cir.1990). Where a
taxpayer's allegations of a failure to comply with the notice
requirements set forth in §6335 are proven, the tax
sale must be set aside.
USTC ¶50,514 ], ¶50,514 USTC at ¶85,732. The Skipwiths
argue that her. the IRS did not comply with those strict requirements
and that the tax sale should, therefore, be set aside.
Court concludes, however, that the government, in this case, did comply
with the various requirements imposed by Congress. The record reflects
that the Skipwiths received notice that their property was subject to
seizure. They may have believed incorrectly that the notice applied only
to their boat and other personal property, but the notice stated on its
face that the government levied on all property and rights to
property, "either real or personal, as may be necessary to pay the
unpaid balance of assessment shown." IRS Form 668-B,
June 2, 1992
. The Internal Revenue Code does not require the IRS to send multiple
notices to the taxpayer. See Hansen, 7 F.3d at 138 (holding that
IRS Form 4340 is probative evidence that plaintiff had notice of tax
sale). Indeed, there is no evidence or logic that can support the
Skipwiths' belief that the notice of intent to levy for $28,141.25 was
extinguished upon the seizure of a $1,500 boat.
addition, there is no evidence to support the Skipwiths' mere
allegations that the sealed bid sale was invalid. See
Fed.R.Civ.P. 56(e) (an adverse party may not rest upon mere allegation
to oppose a summary judgment motion). The Skipwiths allege (without
support) that the IRS revealed to the Govers that no one else had bid on
the Property, but both the IRS and the Govers deny that charge.
Furthermore, even if the Court accepts the Skipwiths' allegations as
true, section 6335 provides for a
"public" sealed bid sale. 26 U.S.C. §6335 . Thus, any party
was entitled to attend the sealed bid sale in this case and to witness
the submission, or the non-submission, of bids.
Skipwiths' remaining allegations also lack merit. Although the IRS
claims that it sent a copy of the Seized Property Sale Report to them,
the Skipwiths contend that they never received it. Even if they did not
receive it, however, there is no statutory requirement compelling the
IRS to send the Report to the taxpayers. 3 In addition,
the Skipwiths complain of not receiving the surplus proceeds of $708.94
from the tax sale, but do not contend that they filed a claim for refund
as required by tax regulations. They also seek to nullify the tax sale
because the Govers paid the balance of the purchase price late, but the
IRS properly exercised its discretion not to void the sale on account of
that late payment. See 26 U.S.C. §6335(e)(3) (stating that,
if there is late payment, "in the discretion of the [IRS],
the sale may be declared . . . to be null and void"
(emphasis added)). Finally, the Court finds that the purchase price was
not so low as to "shock the conscience" of the Court and
thereby provide grounds for setting aside the sale. See Ringer v.
Basile [87-1 ustc ¶9229 ],
645 F.Supp. 1517 (D.
Skipwiths' Motion for Summary Judgment
Skipwiths have filed a cross-motion for summary judgment. They argue
that this Court should set aside the tax sale of their property because
the IRS did not comply with the relevant tax regulations. Because the
Court finds that the IRS did, in fact, comply with those regulations,
and because the Court will allow the defendants' motions for summary
judgment, the Skipwiths' motion for summary judgment will be denied.
on the facts recited in the light most favorable to the plaintiffs, the
Court finds no evidence tending to show that the government violated the
statutory requirements governing the seizure and sale of the Skipwiths'
property. Moreover, even if there were some irregularities, they would
be insufficient to support the Skipwiths' claim against the defendants. See
USTC ¶50,514 ], ¶50,514 USTC at ¶85,734 (where plaintiff's
actual knowledge of the tax sale estopped her from challenging the
government's noncompliance with the notice requirements of 26 U.S.C. §6335 ); See also
Howard v. Adle [82-1
USTC ¶9176 ], 538 F.Supp. 504 (E.D.Mich. 1982). This Court,
therefore, will allow the defendants' motions for summary judgment and
deny the plaintiffs' motion for summary judgment.
the foregoing reasons, the motion of defendant
for summary judgment is ALLOWED, the motion of defendants Govers
for summary judgment is ALLOWED and the motion of plaintiffs
Skipwiths for summary judgment is DENIED.
The IRS increased the original assessments to account for interest and
other statutory additions.
The Skipwiths contend that the property was assessed for property taxes
at $123,000. They allege that the total purchase price received through
the tax sale was $70,880 (which includes the bid of $29,269 plus the
mortgages of approximately $41,611). The government places a higher
value on the mortgages and thus estimates the purchase price at $79,125.
The Internal Revenue Manual provides that the IRS should mail a copy of
the Sale Report to the taxpayer, but, as the government correctly
asserts, the Internal Revenue Manual is not mandatory and does not
create a right of action for the plaintiff. United States v. Horne
[83-2 ustc ¶9548 ],
714 F.2d 206, 207 (1st Cir.1983).