Felkel v. US

• Decision Date: 05 May 1994
• Docket Number: Civ. A. No. 2:92-3433-18.
• Citation: 861 F. Supp. 507
• Court: U.S. District Court — District of South Carolina
• Parties: S.E. FELKEL, a/k/a Saint Elmo Felkel, individually and as alter ego-nominee agent of Angel Oak Corp. and Shonley Realty Co., Plaintiff, v. UNITED STATES of America and City of Charleston, a Municipal Corporation, Defendants.

861 F. Supp. 507

S.E. FELKEL, a/k/a Saint Elmo Felkel, individually and as alter ego-nominee agent of Angel Oak Corp. and Shonley Realty Co., Plaintiff, v. UNITED STATES of America and City of Charleston, a Municipal Corporation, Defendants.

Civ. A. No. 2:92-3433-18.

United States District Court, D. South Carolina, Charleston Division.

May 5, 1994.

Edward J. Dennis, IV, Goose Creek, SC, for plaintiff.

Jon D. Pifer, Washington, DC, Robert H. Hood, Charleston, SC, Dixon F. Pearce, II, Charleston, SC, for defendants.

ORDER

NORTON, District Judge.

This case is before the court upon the Motions to Dismiss of Defendants United States of America (United States) and City of Charleston (City). The United States contends that dismissal is appropriate because subject matter jurisdiction is lacking and because the allegations of Plaintiff's complaint, as amended, fail to establish a waiver of sovereign immunity. The City asserts that the complaint, as amended, fails to state a claim. For the reasons discussed below, the court grants such motions.

I. STATEMENT OF FACTS

This action was commenced on December 3, 1992 with the filing of a complaint by pro se Plaintiff S.E. Felkel (Felkel). After serving an answer raising the defenses of sovereign immunity, lack of subject matter jurisdiction, and failure to state a claim, the United States moved immediately for judgment of dismissal based upon the pleadings. The City also moved for dismissal, and the motions were referred to a United States Magistrate Judge. After granting Plaintiff's several requests for extensions of time in which to respond to the motions, the Magistrate Judge recommended dismissal on September 7, 1993. However, primarily because Plaintiff was proceeding pro se until August 20, 1993, this court denied the motions, without prejudice, by order dated January 20, 1994. The court directed Plaintiff to re-draft and re-file his complaint by March 18, 1994, and to specifically allege a basis for subject matter jurisdiction and a waiver of sovereign immunity. Felkel, through his counsel, filed a 48-paragraph amended complaint on March 18, 1994. The United States and the City thereafter filed the instant motions, renewing their requests for dismissal.

The facts alleged in the amended complaint are taken as true for purposes of the instant motions to dismiss. The allegations center around the seizure of certain real property on September 7, 1990 by the IRS for nonpayment of Felkel's tax liability and the subsequent sale of such property by the IRS to the City.

Felkel had outstanding income tax liabilities for the years 1968 through 1973, and notices of tax liens for such liabilities were recorded against Felkel in 1979.¹ On July 18, 1980, the United States obtained a judgment against Felkel in this Court for the delinquent tax liabilities, in Civil Action No. 79-2402-1. (Amended Compl. ¶ 6, 7.) On September 7, 1990, the IRS seized by administrative levy certain real property located in Charleston County, South Carolina, for the purpose of satisfying Felkel's unpaid tax liability.² The property was scheduled for sale, and was sold through a sealed bid auction to the City on December 4, 1990.³ The City received a deed to the property on June 10, 1991, which was recorded in Charleston County, on June 13, 1991.⁴ Felkel further alleges that in 1986, he had pledged the property as security for certain mortgages. (Amended Compl. ¶ 12.)

According to Felkel, the tax liens and the IRS' judgment against him were expired and unenforceable; procedural errors occurred at the sale; and the City failed to accept his attempt on July 2, 1991 to redeem his property.⁵ As relief, Felkel demands a series of declaratory orders, an award of damages, and a judgment returning both the purchase price and the property to Felkel.⁶

The bases for jurisdiction and a waiver of sovereign immunity cited by Felkel are as follows: 28 U.S.C. §§ 1340, 1346(a), 1346(b), 2410; 26 U.S.C. § 7433; and 5 U.S.C. § 702, and the Due Process clause of the United States Constitution. (Amended Compl. ¶ I). It is clear that none of the referenced statutory authority is applicable, that subject matter jurisdiction is lacking, and that sovereign immunity has not been waived.

II. CONCLUSIONS OF LAW

An analysis of the motion of the United States must begin from the following general precepts. The United States may be sued only with its consent, and any waiver of sovereign immunity must be strictly construed in favor of the United States. United States Dep't of Energy v. Ohio, ___ U.S. ___, 112 S.Ct. 1627, 118 L.Ed.2d 255 (1992); Shoulders v. U.S.D.A., 878 F.2d 141, 143 (4th Cir.1989). Plaintiff bears the burden to show that federal subject matter jurisdiction is present. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135 (1935).

Further, the Declaratory Judgment Act, 28 U.S.C. § 2201, removes subject matter jurisdiction with respect to suits to "declare the rights and other legal relations of any interested party" with respect to federal taxes, and the Anti-Injunction Act, 26 U.S.C. § 7421, precludes suits "for the purpose of restraining the assessment or collection of any tax." These two statutory provisions have been held to reflect congressional intent to require taxpayers to litigate tax controversies either in Tax Court, see 26 U.S.C. § 6213(a), or to "pay first, litigate later" through a suit for a tax refund, see 28 U.S.C. § 1346(a)(1); 26 U.S.C. § 7422, whenever disputes arise regarding the payment of taxes. Flora v. United States, 362 U.S. 145, 164, 80 S.Ct. 630, 640, 4 L.Ed.2d 623 (1960); Bob Jones University v. Simon, 416 U.S. 725, 736-37, 94 S.Ct. 2038, 2045-46, 40 L.Ed.2d 496 (1974). Thus, dismissal should be ordered unless Plaintiff can properly show a waiver of sovereign immunity and a basis for jurisdiction.

A. Sections 2410 and 1340 are Inapplicable

Contrary to Felkel's assertions, this action cannot be construed as a quiet title suit for which the United States has waived its sovereign immunity under Section 2410(a)(1) of Title 28, United States Code.

The "Quiet Title Act" is a waiver of sovereign immunity for certain types of actions commenced with respect to property "on which the United States has or claims a lien or mortgage." Federal law recognizes that in certain instances where taxpayers seek to challenge the "procedural" validity of a federal tax lien or sale, the taxpayer may commence a suit to quiet title. See, e.g., Aqua Bar & Lounge, Inc. v. United States, 539 F.2d 935, 937 (3d Cir.1976); Elias v. Connett, 908 F.2d 521 (9th Cir.1990); Stoecklin v. United States, 943 F.2d 42 (11th Cir.1991). Notwithstanding Felkel's assertions that the seizure and sale of his property for delinquent taxes was procedurally improper, his action must fail.

The Fourth Circuit has held that a necessary prerequisite to a quiet title action under Section 2410(a)(1) is plaintiff's title, possession, or constructive possession, with respect to the subject property. Kasdon v. United States, 707 F.2d 820 (4th Cir.1983); affirming Kasdon v. Zierden Landscaping Inc., 541 F.Supp. 991 (D.Md.1982). It is patent from the allegations of the amended complaint that Felkel did not have possession, constructive possession, nor title to the subject property as of the commencement of this action in December of 1992. The property was sold to the City on December 4, 1990, and the deed conveying the property to the City was recorded on June 13, 1991.⁷

Further, since the property was sold two years before the filing of this action the United States no longer has nor claims a lien on the property, as required by the plain language of Section 2410. The majority of courts have held that a suit to quiet title will not lie where the subject property has already been sold. See Hughes v. United States, 953 F.2d 531, 538 (9th Cir.1992) ("While a taxpayer may contest the procedural validity of a tax lien under § 2410, he may do so only if, at the time the § 2410 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 § 2410 suit, and no longer claims any interest in the property, § 2410 does not apply"); Elias v. Connett, supra at 527 (9th Cir.1990), citing Bank of Hemet v. United States, 643 F.2d 661, 664 (9th Cir.1981); Bertie's Apple Valley Farms v. United States, 476 F.2d 291, 292 (9th Cir.1973); Murray v. United States, 520 F.Supp. 1207, 1210 (D.N.D.1981) (no jurisdiction to entertain quiet title action where the IRS allegedly failed to honor redemption because the United States had sold the property and no longer claimed an interest therein), aff'd, 686 F.2d 1320 (8th Cir.1982), cert. denied, 459 U.S. 1147, 103 S.Ct. 788, 74 L.Ed.2d 994 (1983); see also Kulawy v. United States, 917 F.2d 729, 733-734 (2d Cir.1990) (Section 2410 applicable, even though property had been sold, because Government still had lien on property at time suit was commenced); Aqua Bar & Lounge, Inc. v. United States, 539 F.2d 935, 937 (3d Cir.1976) (at the time of commencement of proceedings, title remained in plaintiff's name); cf. Cummings v. United States, 648 F.2d 289, 292 (5th Cir.1981) (United States must specifically claim a lien interest, not title or other interest, for Section 2410 to apply). It is undisputed that the property at issue in this action was sold long before Felkel commenced this suit: thus the United States neither has, nor claims, any interest in such property and Section 2410 is inapplicable.

Further, Felkel has not established that sovereign immunity has been waived for the various forms of declaratory relief he demands. Section 2410 does not authorize, and Plaintiff cites no other relevant authority, for this Court's issuance of a declaratory and injunctive relief establishing the priorities of the tax liens against him vis-a-vis other alleged interests therein, directing the IRS to...