702 F.3d 1365 (Fed. Cir. 2012), 2012-5063, Road and Highway Builders, LLC v. United States

Docket Nº:2012-5063.
Citation:702 F.3d 1365
Opinion Judge:LOURIE, Circuit Judge.
Party Name:ROAD AND HIGHWAY BUILDERS, LLC, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
Attorney:Carl M. Hebert, Carl M. Hebert, LTD, of Reno, NV, argued for plaintiff-appellant. Martin F. Hockey, Jr., Senior Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. On the brief were Stuart F. Delery, ...
Judge Panel:Before RADER, Chief Judge, LOURIE, Circuit Judge, and DANIEL, Chief District Judge.[*]
Case Date:December 20, 2012
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1365

702 F.3d 1365 (Fed. Cir. 2012)

ROAD AND HIGHWAY BUILDERS, LLC, Plaintiff-Appellant,

v.

UNITED STATES, Defendant-Appellee.

No. 2012-5063.

United States Court of Appeals, Federal Circuit

December 20, 2012

Page 1366

Carl M. Hebert, Carl M. Hebert, LTD, of Reno, NV, argued for plaintiff-appellant.

Martin F. Hockey, Jr., Senior Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. On the brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, Harold D. Lester, Jr., Assistant Director, and Gregg Paris Yates, Trial Attorney.

Before RADER, Chief Judge, LOURIE, Circuit Judge, and DANIEL, Chief District Judge.[*]

LOURIE, Circuit Judge.

Plaintiff-Appellant Road and Highway Builders, LLC (" RHB" ) appeals from a judgment of the United States Court of Federal Claims holding that RHB failed to meet its burden of proof that the United States Internal Revenue Service (" IRS" ) acted in bad faith when it entered into a

Page 1367

release to redeem certain real property. See Rd. & Highway Builders, LLC v. United States, 102 Fed.Cl. 88 (2011). Because RHB failed to rebut the presumption that the IRS agents discharged their duties in good faith by clear and convincing evidence, we affirm the entry of judgment against RHB.

BACKGROUND

This appeal involves an agreement by the IRS to release its right to redeem certain real property at 2640 N. Las Vegas Boulevard, Las Vegas, Nevada (" the property" ) pursuant to I.R.C. § 7425(d) in return for RHB's payment of $100,000 (" the release" ).

In 2000, the IRS assigned a taxpayer identification number to then newly-incorporated Crystal Cascades, LLC. In May 2001, Crystal Cascades, LLC changed its name to Crystal Cascades Civil, LLC, but did not notify the IRS of the name change and continued using the originally-issued taxpayer identification number in its tax filings. In July 2004, deeds of trust were recorded in Clark County, Nevada against the property to secure certain loans made to Crystal Cascades Civil by a Nevada bank. Following failure by Crystal Cascades Civil to fully pay its employment taxes in 2003 and 2004, the IRS caused notices of federal tax liens to be filed in August 2004 and January 2005. However, the lien notices were filed under the taxpayer identification number as known to the IRS and thus directed to " Crystal Cascades, LLC" rather than " Crystal Cascades Civil, LLC." In February 2005, additional deeds of trust were recorded against the property as security for loans made to Crystal Cascades Civil by RHB. In June 2005, the trustee for the Nevada bank, acting as the senior secured creditor, initiated foreclosure proceedings because Crystal Cascades Civil had defaulted on its loan obligations. Crystal Cascades Civil then filed for Chapter 11 protection in the United States Bankruptcy Court for the District of Nevada (" bankruptcy court" ), and RHB subsequently filed an adversary proceeding against the IRS in February 2006 arguing seniority over the tax liens. During the contemporaneous foreclosure sale, RHB purchased the property for $1.43 million.

Pursuant to § 7452(d), the IRS has the right to redeem properties against which it has a valid tax lien. Following the February 2006 foreclosure sale, the IRS communicated to RHB that it was willing to release its right of redemption in exchange for suitable consideration. In June 2006, the parties negotiated a settlement agreement whereby RHB paid the IRS $100,000 and the IRS executed a " release of right of redemption" in favor of RHB.

In November 2007, the bankruptcy court held a two-day trial in the adversary proceeding between RHB and the IRS and concluded that the IRS's notices of federal tax liens did not impart constructive notice to third parties because they were improperly...

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