Howard v. Adle

• Citation: 538 F. Supp. 504
• Decision Date: 13 January 1982
• Docket Number: Civ. No. 80-74444.
• Parties: Thomas HOWARD and Margaret Howard, Plaintiffs, v. Donald L. ADLE, a/k/a Dudley Adle, and United States of America, Department of Treasury, Internal Revenue Service, Defendants.
• Court: U.S. District Court — Western District of Michigan

538 F. Supp. 504

Thomas HOWARD and Margaret Howard, Plaintiffs, v. Donald L. ADLE, a/k/a Dudley Adle, and United States of America, Department of Treasury, Internal Revenue Service, Defendants.

Civ. No. 80-74444.

United States District Court, E. D. Michigan, S. D.

January 13, 1982.

Alan M. Valade, Valade, MacKinnon & Higgins, Detroit, Mich., for plaintiffs.

Leonard R. Gilman, U. S. Atty., Detroit, Mich., Ronald F. Fischer, Tax Div., Dept. of Justice, Washington, D. C., for IRS.

Charles A. Murphy, Southfield, Mich., for Adle.

MEMORANDUM OPINION AND ORDER

COHN, District Judge.

This is an action seeking to set aside a federal tax sale of a parcel of real estate on the grounds that (1) the notices of seizure and sale were defective, and (2) plaintiffs properly redeemed following the sale. Defendants are the purchasers at the tax sale, Donald Adle, and the United States in the person of the Internal Revenue Service (IRS). Jurisdiction is based on 28 U.S.C. § 1340¹ and 28 U.S.C. § 2410(a).² Before the Court are cross motions for summary judgment by plaintiffs and the United States.

I.

The following facts are uncontroverted.

A.

In 1972 plaintiffs purchased on land contract the parcel in question: a house and lot in Redford Township, Michigan. Prior to the seizure and sale involved in this case the parcel was seized and sold in 1979 for unpaid federal income taxes; however, plaintiffs redeemed on the final day of the redemption period.

On March 26, 1980 the parcel was again seized for unpaid federal income taxes. Notice of the seizure was personally served on plaintiffs' daughter at their residence³ and mailed to plaintiff Thomas Howard's office. Notice that the property would be sold on May 22, 1980 was mailed to plaintiffs' residence and to Thomas Howard's office May 8, 1980. The May 22 sale went forward but was subsequently declared void when the high bidder failed to tender the full bid price.

Thereafter, notice of a June 16, 1980 sale date was sent by certified mail on June 3, 1980 to plaintiffs' residence and Thomas Howard's office. The notice sent to Thomas Howard's office was received June 4, 1980; however the notice to plaintiffs' residence was returned unclaimed after several attempts at delivery. Plaintiffs had actual prior notice of the June 16, 1980 sale.⁴ On June 16 the parcel was sold to defendant Donald L. Adle, the vendor under the land contract on the parcel.

B.

In a letter dated September 30, 1980, the Detroit District Director of the IRS notified plaintiffs of the sale and their right to redeem. The letter contained the following statement:

"Under Section 6337 of the Internal Revenue Code, as amended by the Federal Tax Lien Act of 1966, you have 120 days within which to redeem the property. The redemption period expires on the above date."

The "above date" appearing at the letter's heading was October 15, 1980. On October 15 a Nick Zaika appeared at the Dearborn, Michigan IRS office and tendered a cashier's check payable to defendant Adle to redeem the parcel. On November 13, 1980 the IRS returned the check to plaintiffs with an explanation that the September 30 letter incorrectly stated that October 15, 1980 was the last day of the 120 day statutory redemption period but in fact the 120th and final day was October 14, 1980.

C.

On November 16, 1980 the IRS executed a deed of the parcel to defendant Adle. This action was filed November 25, 1980.

II.

A.

The Internal Revenue Code requirements for notice of seizure and sale of property are as follows:

"(a) Notice of seizure.—As soon as practicable after seizure of property, notice in writing shall be given by the Secretary or his delegate 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, the 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 or his delegate shall as soon as practicable after the 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.

26 U.S.C. § 6335(a), (b).

B.

On October 5, 1981 the Court ruled that notice of the seizure was properly given.⁵

No claim is made that the IRS failed to comply with the publication and posting requirements for the notice of sale. Plaintiffs' sole complaint is that the notice of the June 16, 1980 sale was neither "given" to them nor "left" at their place of abode or business.

C.

The United States admits that it was required to provide notice of sale to plaintiffs in compliance with the first sentence of § 6335(a), but argues that the statutory language includes certified mailing. It reasons that notice of sale was left at Howard's usual place of business, albeit by a postal rather than an IRS employee. This is simply an implausible reading of the statute.

Notice must be given by "the Secretary or his delegate". The Secretary, of course, is the Secretary of the Treasury; "or his delegate" means:

"any officer, employee, or agency of the Treasury Department duly authorized by the Secretary of the Treasury directly, or indirectly by one or more re-delegations of authority, to perform the function mentioned or described in the context."

26 U.S.C. § 7701(a)(12)(A)(i). An employee of another executive department, such as the Post Office, does not meet the definition of "delegate".⁶ That Congress did not contemplate that mailing was synonymous with "giving" notice to an owner or "leaving" it at his home or business is apparent from the second sentence of § 6335(a). Where the owner cannot be readily located or has no dwelling or business in the district, the notice "may be mailed to his last known address". The United States argues that the only difference between the first and second sentence is that the latter permits mailing to "the last known address" rather than to the usual place of abode or business. Had Congress so intended, surely it would have used the word "mailed" in both sentences, rather than requiring that notice be "left" by the Secretary or his delegate in the first sentence.

The IRS itself has, by regulation, interpreted § 6335 to require delivery of the notice rather than mailing unless the owner cannot be readily located or has no place of abode or business in the district.

"As soon as practicable after seizure of the property, the district director shall give notice of sale in writing to the owner. Such notice shall be delivered to the owner or left at his usual place of abode or business if located 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, the notice may be mailed to his last known address."

26 C.F.R. § 301.6335-1(b)(1) (1981). The internal operations manual of the IRS is even more specific:

"The original notice of sale will be delivered to the taxpayer personally. If personal service has been attempted but could not be accomplished, the notice will be sent by Certified Mail, Return Receipt Requested to the taxpayer's last known address."

Internal Revenue Manual § 5356.1(2) (1980). The United States does not claim that it attempted to serve the notice of sale personally or that plaintiffs could not be readily located within the district.

D.

The Court's inquiry, however, does not end with the finding that notice of sale was not made in literal compliance with the statute. This is, in essence, an action to quiet title. Because plaintiffs seek equitable relief, they must show that they themselves have done equity. McAndrews v. Belknap, 141 F.2d 111, 115 (6th Cir. 1944); Johnson v. Gartlan, 470 F.2d 1104, 1106 (4th Cir. 1973). Because the parcel is located in Michigan, Michigan law applies. McAndrews, supra; see also 28 U.S.C. § 2410(c).⁷

The general rule in Michigan is:

"Where ... a serious defect occurs in the tax sale, it may be attacked by the owner of the premises, provided he acts promptly and does equity."

Detroit Trust Co. v. Lieberwitz, 275 Mich. 429, 436, 266 N.W. 406 (1936). See also Simasko v. Township of Harrison, 15 Mich. App. 534, 166 N.W.2d 635 (1969).

In Blondin v. Griffin, 133 Mich. 647, 95 N.W. 739 (1903), the Michigan Supreme Court declined to set aside a technically defective tax sale because of the owner's failure to act promptly on facts strikingly similar to this case.

"Petitioner knew that his taxes were unpaid, and that proceedings were instituted in 1901 for the sale of his land. The county treasurer had written him of the pendency of the suit, and that his land would be sold unless his taxes were paid. To this he paid no attention, did not appear in the suit, or even at the sale, to make protest. Nearly three months after the sale and after confirmation he applies to the court to have the sale set aside for the reason that the

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