UNITED STATES OF AMERICA v. BALICE et al

Filing 270

OPINION. Signed by Judge Kevin McNulty on 3/5/2019. (ld, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No. 14-3937 (KM)(JBC)

UNITED STATES OF AMERICA,
Plaintiff,

MEMORANDUM OPINION

v.
MICHAEL BALICE,
Defendant.

This matter comes before the Court on the motion of the United States
under 26 U.S.C.

§

7402(a) and 7403(c)

(a) to confirm the sale of the real property located at 70 Maple Ave.,
Metuchen, New Jersey (the “Property”), pursuant to a prior order of
the Court (DE 228), and
(b) to order distribution of the sale proceeds, which are in the custody of
the clerk of the court.
(DE 264)
At the time the motion was filed, the defendant’s appeal to the U.S. Court
of Appeals for the Third Circuit was pending. That appeal was denied, this
Court’s orders and judgment were affirmed, and the Court of Appeals filed its
mandate on November 13, 2018. I therefore am directing the clerk to reopen
the file solely for the purpose of disposing of this motion.
On October 16, 2017, after granting the government’s motion for
summary judgment, the Court entered an order authorizing the U.S. Marshal
to evict Mr. Balice from the Property and sell it at public auction. (DE 228)
The auction was scheduled for August 23, 2018. The IRS advertised the
sale for four consecutive weeks in the Star Ledger. (Deci. of T. Smith (“Smith
Deci.”) ¶ 2, DE 264-2) Advertisements also appeared daily in the New York
1

Times from July 26, 2018, until the date of sale, in the online classified ads on
222.centraljersey.com, and on the IRS website. (Second Decl. of T. Smith
(“Smith DecI. II”) ¶ 5, DE 267-2) All of these advertisements carried the correct
date of the sale. A physical sign on the property initially had the erroneous date
of August 24, 2018, but this was corrected shortly before the sale. (Id. ¶ 4)
The auction of the property took place on August 23, 2018. (Smith Decl.
¶ 3) Eight bidders attended, and a ninth submitted a bid by mail. The winning
bid, in the amount of $420,000, was placed by AVS Properties, LLC. (Smith
Decl.

¶

2)

AVS Properties’ initial deposit of $30,000 and its payment of the
$390,000 balance were deposited with the clerk of the court. (DE 261; DE 2642 at p. 10; Smith Dccl. ¶ 5, 6) In its submissions, the IRS documents costs of
$2388.65. (Smith Dccl. ¶ 7)
The IRS has submitted a payoff letter establishing that the balance of the
first mortgage on the Property, held by Investors Bank, as of November 5,
2018, is $29,122.40. Interest continues to accrue at a rate of$1.64 per diem.
(Smith Dccl.

¶

8; DE 264-3)

the
The IRS has submitted a payoff letter establishing that the balance of
of
home equity line of credit secured by the Property, held by Amboy Bank, as
November 5, 2018, is $24,094.27. Interest continues to accrue at a rate of
$4.50 per diem. (Smith Decl.

¶

9; DE 264-4)

The IRS also submits a declaration of Revenue Agent McGillivray
ber
updating the full amount of tax, penalties, and interest owing as of Septem
22, 2018, totaling $386,563.41. (DE 264-5)
In response, Mr. Balice has filed an objection (DE 266) containing several
arguments, none of them effectual.

§

The first argument is that the sale violated the procedures of 28 U.S.C.
3201, 3202, and 3203. Those statutes apply to judgment liens. This, by

contrast, is an action for foreclosure based on federal tax liens, conducted
pursuant to Title 26 and the procedures of 28 U.S.C. § 2001 and 2002.

2

The second argument is that this court lacks jurisdiction under U.S.
Const. art. I, sec. 8, ci. 17. That clause, contained in a laundry list of powers of
the legislative branch, is not exclusive, but is stated in addition to the taxing
power of clause 1, the interstate commerce power of clause 3, the broad
“necessary and proper” power of clause 18, and so forth. Clause 17 (not
actually numbered as such) concerns the territorial jurisdiction of the United
States, which generally encompasses the creation of the District of Columbia as
the nation’s capital and certain federal enclaves owned by the federal
government, such as military installations. To defendant’s way of thinking,
those are the only areas in which the federal government can exercise power,
all other jurisdiction being reserved to the states which must give their
consent. That discussion transitions to the defendant’s oft-expressed theory,
based on pre-Sixteenth Amendment case law, that that the United States lacks
the power to lay and collect the income tax.1 In this specific context, the
defendant is arguing that the United States cannot exercise jurisdiction over 70
and
Maple Avenue unless it obtains that property with the consent of the State
incorporates it into the federal territorial jurisdiction. Not so. The federal

government has the statutory power, under the taxing authority of U.S. Const.
the
art. I, sec. 8 and the Sixteenth Amendment, to seize private property for
prior
satisfaction of an adjudicated tax liability. That has been established by
ge to
orders in the case, and I will not reopen it in connection with a challen
distribution of the proceeds.
CONCLUSION
For the foregoing reasons, I will enter the proposed order submitted by
the United States.

Kevin McNulty
United States District Judge
I have dealt with related tax-protestor arguments in numerous prior opinions,
and the Third Circuit has rejected them on appeal. (See, e.g., DE 247)
3