Little v. U.S., 82-5387
| Decision Date | 26 April 1983 |
| Docket Number | No. 82-5387,82-5387 |
| Citation | 704 F.2d 1100 |
| Parties | 83-1 USTC P 9343 William LITTLE, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Kenneth G. Gordon, Hochman, Salkin & DeRoy, Beverly Hills, Cal., for plaintiff-appellant.
Thomas M. Preston, Tax Div., Dept. of Justice, Washington, D.C., for defendant-appellee.
Appeal from the United States District Court for the Central District of California.
Before ELY, SCHROEDER, and PREGERSON, Circuit Judges.
At issue in this quiet title action is the validity of the title acquired by the United States in certain improved real property when the United States redeemed such property from the plaintiff pursuant to Section 7425 of the Internal Revenue Code of 1954 (26 U.S.C.). The District Court held that the Government properly exercised its right of redemption and thereby acquired all rights, title and interest in the property free and clear of any claims thereto of the plaintiff. We affirm the judgment of the District Court except as to the correctness of the amount tendered by the United States to the plaintiff in redemption of the subject property. As to such matter, the case is remanded to the District Court for further proceedings not inconsistent with this opinion.
William Little (plaintiff) commenced this action on March 23, 1981, by filing a Complaint for Temporary Restraining Order, Preliminary Injunction and Order to Quiet Title in which he sought to prevent the United States from redeeming certain real property. Little also sought a declaration that the title to the subject property rested solely on him. The property, which consists of a 28-unit apartment building, known as 1110 W. Washington Boulevard, Los Angeles, California, was acquired by Alexander Rojas by grant deed dated April 18, 1973. Thereafter, Rojas encumbered the property by a first deed of trust recorded August 25, 1978, naming Commonwealth Land Title Company as trustee with a power of sale. Rojas further encumbered the property by a second trust deed dated November 7, 1978, naming Title Insurance Trust Company trustee with a power of sale.
On July 2, 1979, the property was conveyed via a tax deed to the State of California to satisfy delinquent property taxes for the fiscal year 1973-74. This tax deed was recorded in the Office of the County Recorder for Los Angeles County on July 17, 1979. By grant deed dated May 6, 1980, Rojas transferred a one-half undivided interest in the property to Bell Builders Supply, Inc., a California corporation. The deed was duly recorded on May 8, 1980. Thereafter, on September 17, 1980, the Internal Revenue Service recorded a notice of federal tax lien with the Los Angeles County Recorder in the name of Bell Builders Supply, Inc., for unpaid federal employment taxes owed by that corporation for the tax period ended March 31, 1980, in the amount of $12,587.37. The Internal Revenue Service subsequently filed a second notice of federal tax lien against Bell Builders Supply, Inc. on November 4, 1980, for unpaid federal employment taxes due for the period ended June 30, 1980, in the total amount of $12,220.96.
On December 16, 1980, the subject property was sold by the trustee under the second deed of trust to Jess Mendoza for $23,670. The trustee's deed transferring the property to Mendoza was recorded on January 21, 1981. By grant deed dated December 17, 1980 (recorded January 28, 1981) Mendoza transferred his interest in the subject property to William Little, the plaintiff herein.
On March 19, and 20, 1981, the Internal Revenue Service seized the subject property pursuant to its previously recorded tax liens. Thereafter, plaintiff commenced this action seeking to restrain the Government On April 15, 1981, the final day of the 120-day statutory period for redeeming the subject property after the December 16, 1980 sale under the second deed of trust (Section 7425(d)), this court stayed the injunctive order of the District Court pending appeal and the Government timely redeemed the subject property from the plaintiff. 1 A certificate of redemption was properly recorded with the Office of the County Recorder in Los Angeles on April 17, 1981.
from exercising its right of redemption pursuant to Section 7425(d) of the Internal Revenue Code. On April 14, 1981, the District Court entered its findings of fact and conclusions of law. The District Court held that the privilege of redeeming the subject property from the State of California by payment of the delinquent property taxes for the years 1973 and 1974 constituted sufficient "property interests" to provide plaintiff's standing to bring this action pursuant to Section 6321 of the Internal Revenue Code. In addition, the District Court held that this privilege of redemption was the interest transferred to Bell Builders Supply, Inc. to which the federal tax liens subsequently attached. The District Court also specifically held that the privilege of redemption, under California law, is transferable, has value, and, therefore, constitutes "property or rights to property" within the meaning of Section 6321 of the Internal Revenue Code. The District Court also found, however, that the plaintiff would suffer irreparable injury if the Government exercised its right to redeem the property under the Internal Revenue Code, and entered an order granting a preliminary injunction restraining the Government from exercising its right of redemption.
On May 14, 1981, the trustee under the first deed of trust filed a notice of a trustee's sale with respect to the first deed of trust to be held on May 28, 1981. At the sale, the plaintiff's assignee purchased the property for the sum of $42,611.50, thereby discharging the debt secured by the first deed of trust. 2 The United States, which at that time had title to the subject property pursuant to its redemption of April 15, 1981, was not notified as to the foreclosure and sale.
Thereafter, plaintiff filed, by leave of court, his first amended and supplemental complaint. 3 In his amended complaint, plaintiff again alleged that the United States did not have a federal statutory right of redemption because Bell Builders Supply, Inc. did not acquire from Rojas a "property interest" to which the federal tax lien attached. Plaintiff also asserted, in the alternative, that if the alleged right of redemption had been properly exercised, the Government failed to tender the proper amount upon redemption pursuant to 28 U.S.C. Sec. 2410(d) and Treasury Regulations on Procedure and Administration (1954 Code) Sec. 301.7425-4(b) (26 C.F.R.). Finally, plaintiff contended that if the redemption was proper, the Government acquired title to the property subject to a senior encumbrance, i.e., the first deed of trust, and that the subsequent foreclosure and sale on May 28, 1981, at which plaintiff's assignee purchased the property, divested the Government of the title it had acquired through redemption. Additionally, plaintiff offered to Cross motions for summary judgment were filed by both parties. The District Court granted the Government's motion and, consequently, dismissed plaintiff's complaint. In its findings of fact and conclusions of law, the District Court held that the Government had properly exercised its right of redemption with respect to the real property involved in this action, and therefore, had acquired title to the property from the date of redemption by operation of Section 7425(d) of the Internal Revenue Code of 1954. The District Court also specifically rejected the plaintiff's request to quiet title to the property which was based on the foreclosure of the first deed of trust and the May 28, 1981 trustee's sale at which plaintiff allegedly acquired title to the subject property through his assignee. The District Court held, in this regard, that the Government's title to the property was derived from the enforcement of a lien, and that the nonjudicial sale of the subject property to satisfy a senior lien under the first deed of trust, without specific notice to the United States as required by Section 7425(c)(1), was made subject to and without disturbing the Government's title. Consequently, the District Court declared that the title in the United States was free and clear of any and all rights, title and interest of the plaintiff with respect to the redeemed property. From this adverse judgment plaintiff appeals.
pay in full the remaining tax lien against Bell Builders Supply, Inc. recorded on November 4, 1980, asserting that satisfaction of that lien would remove any Government ownership or lien interest in the subject property.
This appeal raises three issues. First, whether, in granting summary judgment for the United States and dismissing the plaintiff's complaint, the District Court correctly held that the taxpayer (Bell Builders Supply, Inc.) had a property interest, within the meaning of Section 6321 of the Internal Revenue Code of 1954, in the subject real property and that, consequently, the Government's tax liens attached to that interest. Second, whether the District Court correctly determined that the United States properly exercised its right of redemption with respect to the subject real property and, thereby, acquired all rights, title and interest in the property free of any claims thereto of the plaintiff. Third, whether the United States, in exercising its right of redemption, tendered the proper amount to plaintiff.
First, whether, in granting summary judgment for the United States and dismissing the plaintiff's complaint, the District Court correctly held that the taxpayer (Bell Builders Supply, Inc.) had a property interest, within the meaning of Section 6321 of the Internal Revenue Code of 1954, in the subject real property and that, consequently, the...
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