Puls v. United States

• Decision Date: 21 March 1974
• Docket Number: No. C-72-1404 RFP.,C-72-1404 RFP.
• Citation: 387 F. Supp. 760
• Court: U.S. District Court — Northern District of California
• Parties: Vera PULS, Plaintiff, v. UNITED STATES of America, Defendants.

387 F. Supp. 760

Vera PULS, Plaintiff, v. UNITED STATES of America, Defendants.

No. C-72-1404 RFP.

United States District Court, N. D. California.

March 21, 1974.

Bruce W. Hyman, Alan L. Fox, Byron J. Massey, Landels, Ripley & Diamond, San Francisco, Cal., for plaintiff.

Richard J. Sideman, Asst. U. S. Atty., San Francisco, Cal., for defendants.

MEMORANDUM AND ORDER

PECKHAM, District Judge.

Plaintiff brings this action against defendant in order to settle the parties' respective rights in certain residential property located in Hayward, California. Specifically, plaintiff seeks declaratory relief adjudging that certain federal tax liens on the property were discharged by a trustee's sale and quieting title to the property in plaintiff and, in addition, asks for injunctive relief prohibiting the seizure, levy, and sale of the property by the defendant.

Both plaintiff and defendant have filed motions asking for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons stated infra, plaintiff's motion is denied, and defendant's motion is granted.

FACTS

Plaintiff and defendant have stipulated to certain facts in connection with their cross-motions for summary judgment. A synopsis of these facts follows.

Jack M. Turrentine owned certain residential real property located in Hayward, California. His property was subject to various liens, including a promissory note and deed of trust in favor of plaintiff Vera Puls and two separate federal tax liens of defendant United States. Turrentine petitioned for bankruptcy in connection with his personal assets and obligations in March 1970.

Plaintiff commenced non-judicial foreclosure proceedings on the Turrentine property pursuant to a power of sale in the deed of trust secured by the property in the fall of 1971. Title Insurance and Trust Company, which handled the foreclosure for plaintiff, sent the Director of Internal Revenue on October 1, 1971 by certified mail a letter noticing the trustee's sale for October 15, 1971. Richard Warn, an employee of Title Insurance and Trust Company, sent the Director of Internal Revenue on October 8, 1971 by regular mail a second letter postponing the sale to November 1, 1971. Plaintiff purchased the property at the rescheduled trustee's sale on November 1, 1971.

Plaintiff offers the affidavit of Richard Warn as a supplement to the stipulated set of facts. The affidavit states that Warn, after mailing the first letter of notice, realized that the company had failed to provide sufficient notice to the government; that he phoned R. Jack Lucas, Advisor of the Special Procedures section of the San Francisco office of the Internal Revenue Service, to discuss notice; that Lucas orally and specifically agreed that if the contemplated sale were postponed from October 15, 1971 to November 1, 1971, the Service would consider the notice of sale proper; and that he mailed the second letter of notice as a response to the government's representation.

Defendant does not stipulate to the facts alleged in the Warn affidavit. Defendant's employee, R. Jack Lucas, in a deposition does not contradict the Warn version, since he has no recollection of a phone call allegedly made more than two years ago. However, Lucas does challenge the implicit assumption that he had either the authority or the inclination to waive statutory notice requirements by phone.

DISCUSSION

Plaintiff and defendant agree that the trustee's foreclosure sale satisfied all procedural requirements and regulations necessary to extinguish the government's interest in the property other than the procedural requirement of timely notice. The parties only disagree on the questions of the legal efficacy of plaintiff's two letters in furnishing defendant with notice and of the legal effect of the representations allegedly made by defendant's employee to plaintiff. Thus, in considering the parties' respective motions for summary judgment, this court need only determine 1) whether plaintiff complied with the statutory requirement of timely notice and 2) whether the doctrine of equitable estoppel precludes defendant's raising the issue of timely notice as a defense to plaintiff's action.

For the purposes of this discussion, this court views both the facts and the inferences to be drawn from the facts in a light most favorable to plaintiff. See United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962).

1. Notice

26 U.S.C. § 7425(b) provides that a sale of property on which the United States has a lien, made pursuant to an instrument creating a lien on the property —

shall . . . be made subject to and without disturbing such lien . . . if notice of such lien was filed . . . in the place provided by law for such filing . . . more than 30 days before such sale and the United States is not given notice of such sale in the manner prescribed in subsection (c) (1) . . .

Plaintiff and defendant agree that the United States held valid liens against the Turrentine property which had been filed more than 30 days prior to the trustee's sale. They also agree that the sale by Title Insurance and Trust Company of the property was made pursuant to an instrument creating a lien on the property. Therefore, the trustee's sale would not affect the government's liens unless plaintiff provided defendant with the notice prescribed by statute.

26 U.S.C. § 7425(c)(1) provides that notice of a sale of property to which 26 U.S.C. § 7425(b) applies —

. . . shall be given (in accordance with regulations prescribed by the Secretary or his delegate) in writing, by registered or certified mail or by personal service, not less than 25 days prior to such sale, to the Secretary or his delegate.

26 C.F.R. § 400.4-1 provides the regulations prescribed by the Secretary concerning the notice requirements for a nonjudicial sale of property of the type in question in this case. 26 C.F.R. § 400.4-1(c) specifies that notice shall be given "in writing by registered or certified mail or by personal service, not less than 25 days prior to the date of sale" and, thus, repeats the basic language of the statutory scheme. 26 C.F.R. § 400.4-1(f) delineates the proper content of the notice of sale, specifically requiring a taxpayer to furnish detailed information concerning the taxpayer, the property, and the nature of the proposed nonjudicial sale.

Plaintiff, through the Title Insurance and Trust Company, sent the first notice of the sale to defendant in a letter dated October 1, 1971. This notice contained the information required by 26 C.F.R. § 400.4-1(f). However, the notice announced the sale for October 15, 1971 and, thus, failed to comply with the 25 day notice requirement of 26 C.F.R. § 400.4-1(c). Clearly, the first notice does not satisfy the statutory requirements as amplified by the regulations.

Plaintiff, allegedly after the phone conversation with the Internal Revenue Service official, mailed a second notice in a letter sent by regular mail and dated October 8, 1971. This notice did not provide the information required by the regulations and was not sent by special mail: plaintiff obviously intended the brief letter to be merely a modification of the date of sale presented in the first, more complete, letter. Also, this notice did not give defendant 25 days notice of the nonjudicial sale. The second notice, then does not meet the statutory requirements.

Plaintiff asks this court to consider the two notice letters together in determining whether plaintiff met statutory and regulatory requirements. In essence, plaintiff contends that Title Insurance and Trust Company provided defendant with full information in a series of communications which began October 1, 1971 — more than 25 days before the November 1, 1971 sale. Plaintiff's argument fails for a single reason. At no time did plaintiff furnish defendant with proper notice of the correct date of the nonjudicial sale at least 25 days in advance.

Plaintiff attempts to escape the legal effect of the failure to give timely notice in two ways. First, plaintiff notes that the regulations provide for the amendment of a first notice through the use of a less detailed second notice. See 26 C.F.R. § 400.4-1(c) (2). However, a close reading of the regulations indicates that such amendment is effective only if the original notice fully complied with the requirements of the regulations. See 26 C.F.R. § 400.4-1(c) (2) (i). Thus, plaintiff cannot bootstrap two ineffective notices into one effective notice of sale. Second, plaintiff contends that the regulations require the District Director of the Internal Revenue Service to inform a taxpayer of any deficiencies in the notice and that the District Director's failure to inform plaintiff in the present case cures any defects in her notice. However, a reading of the relevant regulation clearly...