Anderson v. U.S., 93-16114

• Decision Date: 05 January 1995
• Docket Number: No. 93-16114,93-16114
• Parties: -472, 95-1 USTC P 50,048 Norman E. ANDERSON; The Zeitgeist Co., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 795

44 F.3d 795

75 A.F.T.R.2d 95-472, 95-1 USTC P 50,048

Norman E. ANDERSON; The Zeitgeist Co., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.

No. 93-16114.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 15, 1994.

Decided Jan. 5, 1995.

David M. Kirsch, San Jose, CA, for plaintiffs-appellants.

Joan I. Oppenheimer, (Argued); Gary R. Allen (On the Briefs), U.S. Dept. of Justice, Washington, DC, for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before: HUG, CANBY, and KLEINFELD, Circuit Judges.

KLEINFELD, Circuit Judge:

The Internal Revenue Service ("IRS"), in an internal manual, has created a means of delaying the sale of seized property beyond what the statute, 26 U.S.C. Sec. 6335, and associated regulations allow. The additional delay is impermissible.

I. FACTS

The IRS assessed Mr. Anderson in 1984 for unpaid income taxes for tax years 1978 and 1979. It did not proceed with the collection efforts at issue in this case until the statute of limitations was about to run, in 1990. On October 24, 1990, five days before the limitations period would have expired on the assessments, the IRS seized a five acre parcel of land in California in which Mr. Anderson apparently owned the beneficial interest. The revenue officer was unable to locate the property, a remote parcel in the Santa Cruz mountains, so he accomplished the seizure by filing a notice of lien and mailing notices of levy and seizure. The IRS did not attempt to sell the property until almost a year later.

On August 21, 1991, the assigned revenue officer established that the minimum acceptable bid would be $61,807.43, much less than fair market value of the land. Title was clouded because Mr. Anderson had conveyed the land to his companion after receiving his assessment in 1984, and she had conveyed it in a revocable trust to the Zeitgeist Company. The IRS regarded Mr. Anderson, who lived on the land and payed the mortgage and taxes, as the true owner despite bare legal title in Zeitgeist.

On September 29, 1991, the IRS advertised that the property would be sold at auction on October 16, 1991. Thirty-seven prospective bidders came to the sale, but none of them had with them the necessary 20 percent cash or equivalent down payment. The revenue officer decided not to buy the property for the government, and announced that the sale would be postponed until November 14, 1991. The new sale was advertised on October 25, 1991, but no prospective bidders except for the revenue agent came. The revenue officer again decided to postpone the auction rather than bid-in the property for the government. The second postponement was until March 11, 1992. The revenue officer took the position that he had never "commenced a sale," which he understood to mean "gathering people around and announcing that the sale is beginning."

Mr. Anderson filed suit to enjoin the March sale. The district court granted summary judgment to the IRS, but the government has agreed to cancel the sale until this litigation is over. Mr. Anderson appeals.

II. ANALYSIS

All that the parties have put at issue is whether the second postponement of the sale was authorized by law and, if not, whether the property must be released. ¹ Mr. Anderson argues that because the sale did not take place within 40 days of the public notice, or a month thereafter, the government was bound to release it back to him. He is right. That is what the law says. 26 U.S.C. Sec. 6335(d) & (e).

Here are the relevant portions of the statute governing the sale of seized property, highlighting the portions necessary to understand the required order of events:

(a) Notice of Seizure. As soon as practicable after seizure of property, notice in writing shall be given by the Secretary to the owner of the property (or, in the case of personal property, the possessor thereof), or shall be left at his usual place of abode or business if he has such within the internal revenue district where the seizure is made. If the owner cannot be readily located, or has no dwelling or place of business within such district, notice may be mailed to his last known address. Such notice shall specify the sum demanded and shall contain, in the case of personal property, an account of the property seized and, in the case of real property, a description with reasonable certainty of the property seized.

(b) Notice of sale. The Secretary shall as soon as practicable after seizure of the property give notice to the owner, in the manner prescribed in subsection (a), and shall cause a notification to be published in some newspaper published or generally circulated within the county wherein such seizure is made, or, if there be no newspaper published or generally circulated in such county, shall post such notice at the post office nearest the place where the seizure is made, and in not less than two other public places. Such notice shall specify the property to be sold, and the time, place, manner, and conditions of the sale thereof. Whenever levy is made without regard to the 10-day period provided in section 6331(a), public notice of sale of the property seized shall not be made within such 10-day period unless section 6336 (relating to sale of perishable goods) is applicable.

* * * * * *

(d) Time and place of sale. The time of sale shall not be less than 10 days nor more than 40 days from the time of giving of public notice under subsection (b). The place of sale shall be within the county in which the property is seized, except by special order of the Secretary.

(e) Manner and conditions of sale. (1) In general. (A) Determinations relating to minimum price. Before the sale of the property seized by levy, the Secretary shall determine--

(i) a minimum price for which such property shall be sold (taking into account the expense of making the levy and conducting the sale), and

(ii) whether, on the basis of criteria prescribed by the Secretary the purchase of such property by the United States at such minimum price would be in the interest of the United States.

* * * * * * (D) Release to owner in other cases. If, at the sale, the property is not declared sold under subparagraph (B) or (C) [to the highest bidder or to the United States], the property shall be released to the owner thereof and the expenses of the levy and sale shall be added to the amount of tax for the collection of which the levy was made. Any property released under this subparagraph shall remain subject to any lien imposed under subchapter C.

(2) Additional rules applicable to sale. The Secretary shall by regulation prescribe the manner and other conditions of the sale of property seized by levy. If one or more alternative methods or conditions are permitted by regulations, the Secretary shall select the alternatives applicable to the sale. Such regulations shall provide:

* * * * * *

(F) Under what circumstances the Secretary may adjourn the sale from time to time (but such adjournments shall not be for a period to exceed in all 1 month).

* * * * * *

(f) Right to request sale of seized property within 60 days. The owner of any property seized by levy may request that the Secretary sell such property within 60 days after such request (or within such longer period as may be specified by the owner). The Secretary shall comply with such requests unless the Secretary determines (and notifies the owner within such period) that such compliance would not be in the best interests of the United States.

26 U.S.C. Sec. 6335(a)-(f) excerpts (emphasis added).

Congress has here told the IRS that "as soon as practicable after the seizure," it shall give notice to the owner, and shall give public notice of the time, place, manner and conditions of sale. "The time of sale shall not be less than 10 days nor more than 40 days from the time of giving public notice." 26 U.S.C. Sec. 6335(d). That Congress intended to impose a mandatory time limit of 40 days from public notice to sale is shown by its use of the word "shall." If the property is not sold to a bidder or purchased by the United States at the sale, then "the property shall be released to the owner." 26 U.S.C. Sec. 6335(e)(1)(D). Congress phrased this too as mandatory.

Congress left but one means of delaying the sale beyond 40 days, after publication of notice. The method for delay allowed by Congress is that the Secretary "shall by regulations" provide "under what circumstances the Secretary may adjourn the sale from time to time (but such adjournments shall not be for a period to exceed in all 1 month)." 26 U.S.C. Sec. 6335(e)(2)(F). This language requires that the Secretary provide for any such delays "by regulations." It expressly limits such delays to one month.

The Secretary adopted regulations in accord with the statutory authorization. They paraphrase the statute, and do not allow for delays of more than a month:

(1) Time and place of sale. The time of sale shall not be less than 10 days nor more than 40 days from the time of giving public notice....

(2) Adjournment of sale. When it appears to the district director that an adjournment of the sale will best serve the interest of the United States or that of the taxpayer, the district director may adjourn, or cause the internal revenue officer conducting the sale to adjourn, the sale from time to time, but the date of the sale shall not be later than one month after the date fixed in the original notice of sale.

26 C.F.R. Sec. 301.6335-1(c).

These regulations add nothing to the statute for purposes of the case at bar. Neither the statute nor the regulations authorize the second delay of the sale, from November to the following March.

The government argues that after the 40 days and the month adjournment expire, it can issue a new notice of sale and advertise again, without time limit. It would have us distinguish an "adjournment" of a sale beyond the statutory...