Winebrenner v. U.S.

• Decision Date: 23 January 1991
• Docket Number: No. 89-16193,89-16193
• Citation: 924 F.2d 851
• Parties: -465, 91-1 USTC P 50,057 Earl WINEBRENNER, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 851

924 F.2d 851

67 A.F.T.R.2d 91-465, 91-1 USTC P 50,057

Earl WINEBRENNER, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 89-16193.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 14, 1990.

Decided Jan. 23, 1991.

Daniel L. Harralson, Harralson & Dyer, Fresno, Cal., for plaintiff-appellant.

John A. Dudeck, Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Eastern District of California.

Before HUG, BEEZER and BRUNETTI, Circuit Judges.

BRUNETTI, Circuit Judge:

Plaintiff/appellant Earl Winebrenner ("Winebrenner") filed an action against the United States and Elmer Kletke ("Kletke"), a District Director of the Internal Revenue Service ("IRS"), seeking a quiet title order and the removal of tax liens on their property pursuant to 28 U.S.C. Sec. 2410 and 26 U.S.C. Sec. 7426 and general damages. On July 27, 1988, the district court dismissed the wrongful levy action for failing to file within the limitations period and the claim for general damages. On May 1, 1989, the district court granted the government's motion for summary judgment on the remaining quiet title action and dismissed the action against Kletke. Winebrenner has appealed. We affirm.

FACTS AND PROCEEDINGS

The Internal Revenue Service made federal tax assessments against Dudley Steele ("taxpayer") in 1985 and 1986. Revenue Officer Douglas McDonald ("McDonald") believed the taxpayer owned certain real property at 1829 Val Verde Lane, Delano, California. The record owners of the property are Winebrenner and his wife, Emogene Winebrenner. In May, July, and August, 1986, the IRS recorded Nominee Notices of Federal Tax liens for the taxpayer's unpaid federal tax liabilities specifying the Delano property and naming Earl and Emogene Winebrenner as nominees of the taxpayer.

On March 12, 1987, McDonald served the taxpayer, at the Delano residence, with copies of a notice of levy and a notice of seizure. The taxpayer stated, in a declaration filed with Winebrenner's opposition to the government's summary judgment motion, that he

accumulated the grant deed and various other documents and presented them to Revenue Officer McDonald explaining that the Winebrenners were the true owners and the title holders of 1829 Val Verde Lane and had been since 1971.

On April 15, 1987, the Winebrenners were served with copies of the notice of levy and seizure. Winebrenner states on appeal that "he denied he and his wife were nominees of [the taxpayer] with respect to the property, and asserted that they were the owners of said property and had a right to its possession."

On January 24, 1988, Winebrenner filed a suit against the United States and Kletke to quiet title of the Delano property pursuant to 28 U.S.C. Sec. 2410 and seeking to remove the lien under 26 U.S.C. Sec. 7426. The suit also sought $20,000 in general damages. On July 27, 1988, the district court granted the government's motion to dismiss the wrongful levy action under 26 U.S.C. Sec. 7426 and the claim for general damages. The government's motion was denied as to the quiet title action. On March 31, 1989, the government filed an amended motion to dismiss the remaining claim to quiet title or in the alternative for summary judgment. The district court granted the motion on June 1, 1989. This appeal followed.

ANALYSIS

I.

The district court granted the government's motion for summary judgment on the question whether the district court lacked jurisdiction over Winebrenner's quiet title action because his exclusive remedy is a wrongful levy action under section 7426 of the Internal Revenue Code ("Section 7426"). We review de novo the district court's grant of summary judgment. Kruso v. International Telephone & Telegraph Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990).

Winebrenner's complaint sought an order quieting title to the Delano property pursuant to 28 U.S.C. Sec. 2410 ("Section 2410"). This section permits the naming of the United States as a party in any civil action seeking to quiet title to, or foreclose a lien upon, "property on which the United States has or claims a mortgage or other lien." 28 U.S.C. Sec. 2410(a). ¹ The government argues that in cases such as the present one when "the IRS levies upon property to satisfy unpaid tax liabilities, and a nontaxpayer claims that he has an interest in the property superior to that of the IRS," this section is subordinate to Section 7426. This section provides If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States....

26 U.S.C. Sec. 7426(a)(1) (1988). This statute was enacted as part of the Federal Tax Lien Act of 1966. ² Prior to its enactment, this court permitted quiet title actions under Section 2410 by nontaxpayers complaining of improper liens by the IRS. See Shaw v. United States, 331 F.2d 493, 496-97 (9th Cir.1964), United States v. Coson, 286 F.2d 453, 457 (9th Cir.1961). The government argues that the enactment of Section 7426 precludes, in cases in which it applies, suits for quiet title under Section 2410. We agree.

This court has not directly addressed this issue. ³ Other circuits have. In United Sand and Gravel Contr., Inc. v. United States, 624 F.2d 733 (5th Cir.1980), the appellant had a right to certain funds held by another. The IRS levied on the funds to satisfy the tax liability of a third party. The appellant filed suit against the United States "for enforcement of assignment proceeds and for return of property wrongfully levied." Id. at 735. The district court dismissed the suit for failure to file within the nine month period specified in Section 6532(c). On appeal the appellant argued that Section 2410 provided an alternative means to recover the property. Id. at 737. The Fifth Circuit disagreed, and reasoned, Section 2410

merely establishes an outside limit. Nothing in its language precludes Congress from enacting a shorter limitation period for certain classes of actions....

If persons who claim an interest in property seized by the United States to satisfy a third person's taxes can challenge an I.R.S. levy by a cause of action which falls within 28 U.S.C. Sec. 2410, the intent of Congress to set a short time limit for wrongful levy actions will be completely undercut.

Id. at 738. The court concluded,

When someone other than the taxpayer claims an interest in property or rights to property which the United States has levied upon, his exclusive remedy against the United States is a wrongful levy action under I.R.C. Sec. 7426.

Id. at 739. United Sand and Gravel was followed in Texas Commerce Bank Fort-Worth, N.A. v. United States, 896 F.2d 152, 156 (5th Cir.1990) ("Section 7426(a)(1) ... affords the exclusive remedy for an innocent third party whose property is confiscated by the IRS to satisfy another person's tax liability."). See also Trust Company of Columbus, 735 F.2d 447, 448 (11th Cir.1984) ("The only remedy available to a taxpayer who possesses an interest in property upon which the government has levied is a civil suit to regain the property. 26 U.S.C. Sec. 7426(a)(1)."); Rosenblum v. United States, 549 F.2d 1140, 1144-45 (8th Cir.), cert. denied, 434 U.S. 818, 98 S.Ct. 58, 54 L.Ed.2d 74 (1977) (Section 7426 is the only jurisdictional basis for claims that IRS wrongfully seized property); Morris v. United States, 652 F.Supp. 120, 122 (M.D.Fla.1986), aff'd, 813 F.2d 343 (11th Cir.1987) ("Since plaintiff claims an interest in property that has been levied upon by defendants, his exclusive remedy is a wrongful levy action under 26 U.S.C. Sec. 7426"); Haywood v. United States, 642 F.Supp. 188, 191 (D.Kan.1986) (Section 7426 is the "exclusive remedy where the IRS has wrongfully levied upon property"); Expoimpe v. United States, 609 F.Supp. 1098, 1100 (S.D.Fla.1985) ("The exclusive remedy for a third party who claims an interest in property that has been levied by the United States is an action for wrongful levy pursuant to 26 U.S.C. Sec. 7426."); Douglas v. United States, 562 F.Supp. 593, 594 (S.D.Ga.1983) (same). Winebrenner can cite no case decided after the enactment of Section 7426 permitting a quiet title action by a third party seeking to remove a federal tax lien on their property.

Winebrenner concedes that if Section 7426 is his exclusive remedy against the United States then his claim for general damages and his action against District Director Kletke were properly dismissed. ⁴ Because we find that the exclusive remedy by a third party whose property has been levied upon or sold by the Internal Revenue Service is an action pursuant to Section 7426, Winebrenner's claims for quiet title under Section 2410, his action against Kletke, and his claim for general damages are barred.

II.

Winebrenner argues that the district court erred by dismissing his cause of action under Section 7426 for failure to file his complaint within the applicable statute of limitations. A ruling on the appropriate statute of limitations is a question of law reviewed de novo. In re Hawaii Federal Asbestos Cases, 871 F.2d 891, 893 (9th Cir.1989).

Section 7426(h) provides that the period of limitation for filing a cause of action under the section is governed by section 6532(c) of the Internal Revenue Code. Section 6532(c) states a general rule that "no suit or proceeding under section 7426 shall be begun after the expiration of 9 months from the date of the levy or agreement giving rise to such action." 26 U.S.C. Sec. 6532(c)(1) (1988). Section 6532 does not define "date of the levy." The regulations promulgated under that section, however, refer to Section...