Village of Dimondale v. Grable

• Decision Date: 26 June 2000
• Docket Number: Docket No. 213277.
• Citation: 240 Mich. App. 553,618 N.W.2d 23
• Parties: VILLAGE OF DIMONDALE, Plaintiff-Appellee, v. Leslie A. GRABLE, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

618 N.W.2d 23

240 Mich. App. 553

VILLAGE OF DIMONDALE, Plaintiff-Appellee, v. Leslie A. GRABLE, Defendant-Appellant.

Docket No. 213277.

Court of Appeals of Michigan.

Submitted November 9, 1999, at Lansing.

Decided April 21, 2000, at 9:05 a.m.

Released for Publication June 26, 2000.

McGinty, Jakubiak, Frankland & Hitch, P.C. (by Thomas M. Hitch), East Lansing, for the plaintiff.

Leslie Grable, Dimondale, in propria persona.

Before SAWYER, P.J., and HOOD and WHITBECK, JJ.

PER CURIAM.

Defendant, Leslie A. Grable, appeals as of right from an order granting summary disposition in favor of Richard E. Albert, for whom the village of Dimondale has been substituted on appeal. Grable argues that the trial court erroneously quieted title to his land in Richard E. Albert, who later sold the land to Dimondale, because the tax deed Albert acquired to Grable's property was void. We agree and reverse.

I. Statutory Background

This case involves the application of three separate and distinct provisions of the Internal Revenue Code, each of which relate to the process by which the federal government forecloses on property in order to collect unpaid federal taxes. The first of these provisions is the "notice and demand" requirement of 26 U.S.C. 6303(a), which prescribes the process the Internal Revenue Service (IRS)¹ must follow to notify a taxpayer of an assessment of the tax following the taxpayer's failure to pay the tax and states:

Where it is not otherwise provided by this title, the Secretary [of Treasury] shall, as soon as practicable, and within 60 days after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person's last known address. [Emphasis supplied.]

The second provision is the "notice of seizure" requirement of 26 U.S.C. 6335(a), which delineates the process by which the IRS must notify a taxpayer of a seizure of property for failing to pay the tax and states:

As soon as practicable after seizure of property, notice in writing shall be given by the Secretary [of the Treasury] 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. [Emphasis supplied.]

As is readily apparent, the assessment and demand statute, 26 U.S.C. 6303(a), requires service by leaving the notice at the dwelling or usual place of business of the taxpayer or by mail. In contrast, the seizure statute, 26 U.S.C. 6335(a), requires the IRS to give notice by personal service or by leaving the notice at the usual place of abode or business of the taxpayer. Only if the IRS cannot readily locate that taxpayer or if the taxpayer has no dwelling or place of business within the internal revenue district can the IRS give notice through the mail to the taxpayer's last known address.

The third provision governs notice of a proposed sale of seized property, 26 U.S.C. 6335(b), and requires the IRS to give notice to the taxpayer of the proposed sale in the same way the Secretary of Treasury would give notice of the seizure under 26 U.S.C. 6335(a). Additionally, this sale provision requires the IRS to give notice to the public through publication or posting.

II. Factual Background

According to Grable, in 1974, he and his wife acquired real property at 120 North Bridge Street in Dimondale, Michigan. The property is described as:

The Southwesterly 24 feet in width of the northeasterly 56 feet in width of Lot 5, Block 21, Original Plat to the Village of Dimondale, Eaton County, Michigan, as recorded in Liber 1 of Plats, Page 65, Eaton County Records. Commonly known as 120 Bridge St; Dimondale, Michigan 48821; Parcel: XX-XXX-XXX-XXX-XXX.

Apparently, during calendar years 1980, 1981, 1983, 1984, 1985, and 1986, Grable did not pay his federal taxes, and the Internal Revenue Service began the process of assessing, seizing, and selling the property at 120 North Bridge Street. The record does not make clear when the IRS gave Grable a "notice and demand" related to a tax assessment under 26 U.S.C. 6303(a). However, the IRS gave the 26 U.S.C. 6335(a) "notice of seizure" to him on May 13, 1994, and gave the 26 U.S.C. 6335(b) "notice of sale" notice to him on November 26, 1994. While the IRS personally served Grable with the 26 U.S.C. 6335(b) "notice of sale," it is undisputed that the IRS mailed the 26 U.S.C. 6335(a) "notice of seizure" to Grable. Clearly, this was not in strict compliance with 26 U.S.C. 6335(a).

III. Federal Procedural History

At roughly the same time the IRS gave these two notices to Grable in 1994, it also began the process of assessing, seizing, and selling property owned by Grable & Sons Metal Products, Inc. (Grable Corporation) to enforce a levy for $2,916,474.58 in unpaid taxes. Apparently, the IRS took action with respect to property located at 116 Bridge Street, Dimondale, Michigan, and 601-701 Plains Road, Eaton Rapids, Michigan. The Grable Corporation contested the matter and, on June 3, 1994, the United States District Court for the Western District of Michigan, Gordon J. Quist, J., issued an opinion categorizing the case, along with several additional cases involving Grable, the Grable Corporation, and others, as "tax protester" cases (the court later deemed the cases against these individuals and corporations as "tax evader" cases). In any event, the court determined, among other things, that the government had given the proper "notice and demand" under 26 U.S.C. 6303(a) to the Grable Corporation. In an unpublished opinion, the United States Court of Appeals for the Sixth Circuit affirmed the judgment of the district court.

This federal litigation, however, has little relevance to this action to quiet title for three reasons. First, the litigation involved the Grable Corporation and not Grable himself. Second, the litigation did not, as Dimondale conceded during oral argument before this Court, explicitly involve the property at 120 North Bridge Street. Third, the litigation involved the "notice and demand" requirement of 26 U.S.C. 6303(a), not the "notice of seizure" requirement of 26 U.S.C. 6335(a).

IV. The Instant Quiet Title Action

In December 1994, Grable filed a notice (hereinafter the Grable notice) with the Register of Deeds for Eaton County to inform all bidders that he would challenge any sale of enumerated pieces of property in the United States District Court for the Western District of Michigan. According to the village of Dimondale, among the properties described in the Grable notice was the property at 120 North Bridge Street. Rather clearly, then, in December 1994, Grable had received some type of actual notice of, in the words of the Grable notice, "the sale of personal or real property of Grable and Sons Metal Products, Inc. and Leslie A. Grable." (Emphasis supplied.)

The IRS sold the property at 120 North Bridge Street at auction to James T. Holberg in December 1994. Holberg obtained a tax deed to the property in November 1995 and, in June 1997, Holberg conveyed the property at 120 North Bridge Street to Richard E. Albert. Albert filed this action to quiet title in September 1997. Grable answered the complaint and asserted his affirmative defense that the tax sale to Holberg was invalid from its inception because the IRS failed to comply with the notice requirements in 26 U.S.C. 6335. In his answer to the complaint, Grable asked the court to dismiss the complaint and grant "such further relief as is just and proper."

In early 1998, Albert and Grable filed cross-motions for summary disposition. Grable moved for summary disposition under MCR 2.116(C)(10), again claiming that because the sale was void, Albert had no valid title to the property. In this motion, for the first time, Grable requested that the trial court quiet title to the property at 120 North Bridge Street in him.

Albert moved for summary disposition under MCR 2.116(C)(9), asserting three main arguments. First, Albert argued that because the federal courts had repeatedly held Grable's challenges to the IRS procedures to be meritless, res judicata barred this latest defense, which was or could have been raised in the federal litigation. Second, Albert claimed that a tax deed is prima facie evidence of the facts stated therein and effective to convey all rights, title, and interest of the delinquent taxpayer, leaving Albert with title superior to any interest Grable had in the property. Third, Albert contended that Grable had actual notice and every opportunity to raise the issue of the inadequate notice before the tax sale but had failed to redeem the property within a reasonable amount of time, which was inequitable. In a supplemental brief, Albert also argued that this Court had held that "under 26 U.S.C. 5335[sic] service of notice of sale by mail was entirely permissible."²

Grable responded that none of the litigation in the federal courts involved issues raised in the present litigation because (1) those cases did not involve the notice requirements of 26 U.S.C. 6335(a), (2) those cases concerned only personal property owned by a corporation, and (3) the IRS did not sell the property in issue in this case until after that litigation was final in the federal district court, and, up to the time of the sale, the IRS could have complied with the...