Annotations- Notice of
Notice of Adjournment- Levy
of Seized Property: Notice of Adjournment
United States of America
, Plaintiff v. Leonard M. Conry and Alene Conry, Defendants
S. District Court, No.
, No. C-73-2041 RFP,
[Code Sec. 6343]
Collection of tax: Authority to release levy: Effect on other
liens.--Where levies were filed on
January 9, 1973
April 25, 1973
by the government, a notice releasing the first levy did not have the
effect of also releasing the second levy.
[Code Sec. 6335(d)]
Collection of tax:
of seized property: 40-day limit.--The mere fact that seized
property was sold more than 40 days from the time of giving notice of
the sale did not invalidate the sale, where the delay was to benefit the
interest of the government or the taxpayer.
[Code Sec. 6335(b)]
Collection of tax:
of seized land: Notice of sale: Notice of adjournment.--The sale of
the taxpayer's property was held invalid because the government failed
to provide the property owner with notice of the sales adjournment.
[Code Sec. 7421]
Collection of tax: Suits enjoining assessment and collection of tax:
Suit by government: Lack of notice: Defense.--Where the suit is
initiated by the government to obtain possession of land, the taxpayer
may raise the defense of lack of notice. Code Sec. 7421 does not
prohibit this defense.
Sanchez, Department of Justice,
, D. C. 20530, for plaintiff. Richard Daly,
10850 Wilshire Blvd.
, Sixth Floor,
, for defendants.
federal government brings this action in an attempt to acquire
possession of a parcel of real property presently occupied by
defendants; the government asserts that it acquired valid title to this
property pursuant to a valid seizure and tax sale as authorized by 26 U.
S. C. §§ 6331, 6335.
April 25, 1973
, subsequent to an assessment of tax deficiencies against defendants in
the amount of $29,174.33, a notice of levy and seizure was served upon
May 2, 1973
, a notice of sale of the property was published in the local newspaper,
posted in three public buildings, and mailed to defendants (who admit
receipt thereof). The sale was set for
May 18, 1973
, but was blocked on that date by a temporary restraining order issued
from this court; accordingly, the revenue officer responsible for the
sale twice postponed the date of sale, first until
June 1, 1973
, and then until
June 15, 1973
June 8, 1973
, the temporary restraining order was lifted when defendants [plaintiffs
therein] agreed to dismiss their action with prejudice. On
June 15, 1973
, the sale was held; there were no bids, so the property passed to the
United States at the minimum price of $6000.00, under 26 U. S. C. §6335(e)(1).
Defendants failed to exercise their statutory right of redemption within
the allotted 120 days, and on
October 31, 1973
, a quitclaim deed was recorded in
in favor of the
assert three defenses to this action for possession, all based upon
alleged defects in the government's seizure and sale of the premises.
first two defenses may be rejected summarily. First is the contention
that there was no proper levy or seizure in effect at the time of sale,
since defendants received on May 2nd a notice releasing the prior levy,
and no subsequent levy was ever attempted. The notice of May 2nd was
clearly intended to release only the levy filed on
January 9, 1973
, and did not purport to have any effect upon the levy filed on
April 25, 1973
. Under 26 U. S. C. §6343, the Secretary or his delegate has the power
to release a prior levy, without prejudice to any subsequent levy which
might be entered; this court finds no reason or authority to support the
proposition that a release which, on its face, purports to release only
one of two existing levies should nevertheless be held to have the
effect of releasing the other as well.
second contention is that the sale did not occur within 40 days of the
original notice, as required by §6335(d). Treasury Department
Regulation §301.6335-1(c)(2) specifically permits the adjournment of a
sale for up to one month from the original date when such adjournment
would best serve the interest of the United States or that of the
taxpayer; specific statutory authority for the promulgation of
regulations of this very subject is found at 26 U. S. C. §6335(e)(2)(F).
Where the regulations have been complied with, the mere fact that the
statutory 40-day time limit has been exceeded is not sufficient to
invalidate the sale.
final contention is that they did not receive any notice of the
C. §6335(b) requires that notice of the sale be sent to the
property owner, and failure to comply with this notice has been held to
render the sale voidable at the option of the taxpayer/owner. Johnson
v. Gartlan [73-1 USTC ¶9150], 470 F. 2d 1104 (4th Cir. 1973); Margiotta
v. District Director of Internal Revenue [54-2 USTC ¶9540], 214 F.
2d 518 (2d Cir. 1954); Bartell v. Riddell [62-1 USTC ¶9290], 202
F. Supp. 70 (S. D. Cal. 1962). The instant case, however, presents no
dispute as to the initial notice; the sole issue is whether notice of
adjournment need be given.
statute itself and the regulations governing adjournment cited supra,
are silent on this point. Internal Revenue Manual 5353.2(3) apparently
directs the revenue officer to post written notices of adjournment to
the original notices of sale, and the government contends that this was
done in the instant case, at least as to the notices posted in public
buildings. It is not clear whether the Manual requires actual notice to
the property owner himself; at and rate, it is undisputed that in the
instant case, no such notice was given.
government contends that even if the Manual did require such notice, its
provisions should be treated as merely "directory" rather than
mandatory, and hence binding only as to internal IRS matters. There is
no need to reach that question in the present case, however; for in
light of the clear Congressional concern for the rights and interest of
the property owner, as demonstrated by the notice provision of §6335(b),
1 the grant of
authority in §6.335(e)(2)(F) must be read as subject to an implied
restriction that any regulations concerning the adjournment of tax sales
must provide for reasonable notice of adjournment to the property owner.
Accordingly, since Treas. Reg. §301.6335-1(c)(2) fails to provide for
any such notice, the regulation would have to fall for noncompliance
with the statutory grant of authority.
before this court can rule in favor of the taxpayer, Mr. Conry, it feels
bound to consider the possible applicability of 26 U. S. C. §7421,
prohibiting suits to restrain the assessment or collection of any tax,
with certain exceptions not relevant here.
its face, of course, the present action was initiated by the government
itself, as a property owner seeking to enforce its right to possession,
rather than by the taxpayer. An argument could be made on behalf of the
government, however, that to allow the taxpayer to raise inadequate
notice as a defense to the government's action to recover possession of
the property would be to allow him to do indirectly what he clearly
could not do directly, namely, to seek or obtain injunctive relief
against the government's efforts to collect upon the tax liability owing
is clear that the taxpayer must, at some point, have the right to
challenge the government's failure to comply with notice requirements as
to a tax sale. In fact, several reported cases have permitted challenges
to the validity of title acquired at an inadequately noticed tax sale,
under the guise of an action to quiet title. See, e.g., Johnson v.
Gartlan, supra; Margiotta v. District Director, supra; and Bartell
v. Riddell, supra. It is true that each of these cases involved an
action against a third-party purchaser rather than against the
government itself, and the normal remedy is to permit the taxpayer to
recover the disputed property upon payment of the sale price, with
interest, to the purchaser. Thus the government is not directly
involved, and its collection of taxes through the forced sale remains
undisturbed. Nevertheless, it is simply inconceivable that the
taxpayer's sole recourse under the circumstances, where the government
has clearly failed to give the statutorily required notice of a sale or
adjournment, must be simply to abandon the premises, permit the
government to sell the property, and then seek to reacquire it from the
purchaser at the sale price plus interest. Such a result would bring
serious mischief or even chaos to the realm of tax sales. The
multiplication of transactions seems extremely wasteful; moreover, the
prospect or repurchase by the taxpayer would undoubtedly constitute a
serious cloud on any title the government might seek to convey upon
resale. Finally, the potential disruption to the affairs of the
presumably innocent third-party purchaser is manifest, when the taxpayer
or his heirs may one day resurface and seek to reacquire the property.
in view of the possible effects of a holding to the contrary, this court
feels obliged to decline to extend the reach of §7421 beyond its clear
terms; where, as here, the suit is initiated by the government and the
taxpayer seeks to raise the notice issue simply as a defense to the
government's action, §7421 should not be read to bar assertion of that
the reasons stated above, the sale of defendants' real property on
June 15, 1973
, must be held invalid for failure to provide the property owner with
the notice implicitly required by §6335 for adjournment of a sale.
Therefore, the sale could not operate to convey title to the
, and the government has no present right to possession. The order to
show cause must ve discharged and the complaint dismissed.
Cf. Bartell v. Riddell, supra, at 75-76.