United States of America v. Briggs et al
ORDER DENYING 24 Motion to Dismiss for Failure to State a Claim. Signed by US District Judge Terrence W. Boyle on 10/10/2014. (Fisher, M.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
UNITED STATES OF AMERICA,
CLARENCE EVERETT BRIGGS, individually
and as fiduciary for the CLARENCE EVERETT
BRIGGS & VICKI LYNN BRIGGS
IRREVOCABLE TRUST, BRIGGS FAMILY
INVESTMENTS, LLC, and LISA A. BRIGGS
This matter is before the Court on defendants' motion to dismiss. [DE 24]. The motion is
ripe for adjudication. For the reasons stated below, defendants' motion to dismiss is DENIED.
This is a suit filed by the United States seeking (1) to reduce to judgment federal income
tax assessments made against the Charles Everrett Briggs & Vick Lynn Briggs Irrevocable Trust
(the Trust) and (2) to foreclose the related federal tax liens on the Trust's interest in Briggs
Family Investments, LLC (the LLC). [DE 1 at 4]. Defendants argue that the tax court's decisions
as to the tax liability preclude this Court from reducing the assessments to judgment, that the
government cannot foreclose on property owned by the LLC to satisfy the tax obligations of the
Trust, and that there are no claims against Clarence Briggs and Lisa Briggs as individuals, thus
they must be dismissed from the lawsuit.
A motion to dismiss under Federal Rule of Civil Procedure 12(b)( 6) tests the legal
sufficiency of a complaint. Francis v. Giacomelli, 588 F .3d 186, 192 (4th Cir. 2009). When
ruling on the motion, the court "must accept as true all of the factual allegations contained in the
complaint." Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citing Bell At!. Corp. v. Twombly, 550
U.S. 544, 555-556 (2007)). Specificity is not required; the complaint need only "give the
defendant fair notice of what the ... claim is and the grounds upon which it rests." Twombly, 550
U.S at 555 (quotation omitted). To survive a Rule 12(b)(6) motion, a complaint must contain
facts sufficient "to raise a right to relief above the speculative level" and satisfy the court that the
claim is "plausible on its face." Id. at 555, 570; see also Ashcroft v. Iqbal, 556 U.S. 662, 678
REDUCING ASSESSMENTS TO JUDGMENT
In this case, defendants concede that the tax court decided the amount of defendants'
liabilities by providing proposed assessments, to which defendants stipulated. [DE 25 at 7-8].
The IRS then assessed tax liability against the Trust in the amount proposed by the tax court.
[DE 1 at~ 12]. When the IRS tried to collect on these assessments, it was unsuccessful, and it
now sues to reduce its assessments to judgment. [DE 1 at~ 13, 24]. While the tax court's
decision determined a liability amount, it is the IRS's actual assessment that the government sues
to enforce in this case. See, e.g, United States v. Hansel, 999 F.Supp. 694, 696, 698-99
(N.D.N.Y. Mar. 14, 1998) (ordering summary judgment for the government where government
sued to reduce tax assessment to judgment following tax court's determination ofliability).
Here, the government is proceeding exactly as it proceeded in Hansel. It relied on the tax
court's determination of liability to formulate its own assessment, and now sues to reduce the
assessments to judgment. This is well within the government's power broad tax collection
powers and is specifically provided for in 26 U.S.C. § 7403. As such, defendants' motion to
dismiss claim one is denied.
Defendant next argues that the government cannot foreclose on property owned by the LLC
to satisfy the Trust's tax liability. The government's complaint actually "seeks to foreclose the
[Trust's] interest in the LLC," rather than the property owned by the LLC itself. [DE 1 at~ 19].
Defendants do not dispute that "a lien could attach to [the Trust's] interest in the LLC. [DE 31 at
3]. Instead, defendants rely on North Carolina law to argue that the IRS does not have the ability
to levy on the lien. [!d.].
The Internal Revenue Code is quite clear that "[i]f any person liable to pay any tax neglects
or refuses to pay the same after demand, the amount. .. shall be a lien in favor of the United
States upon all property, whether real or personal, belonging to such person. 26 U.S. C. § 6321.
The Court, however, must look to state law to determine whether one has a right to the property.
Aquilino v. United States, 363 U.S. 509, 513 (1960); Drye, Jr., et al. v. United States, 528 U.S.
49, 52 ( 1999). If the Court determines that, in this case, the Trust does have a property interest in
the LLC, "state law is inoperative to prevent the attachment of liens created by federal statutes in
favor ofthe United States." Drye, Jr., 528 U.S. at 52. The government's levy power is laid out in
26 U.S.C. § 6331(a). ("If any person liable to pay any tax neglects or refuses to pay the same ...
it shall be lawful for the Secretary to collect such tax ... by levy upon all property and rights to
property .... "). It clear that "although the definition of underlying property interests is left to
state law, the consequences that attach to those interests is a matter left to federal law." United
States v. Rodgers, 461 U.S. 677, 683 (1982).
Here, North Carolina law is clear that "[a]n ownership interest [in an LLC] is personal
property." N.C.REV.STAT. § 57D-5-01 (2013). State law therefore cannot prevent the attachment
of the federal liens to the LLC. Plaintiffs rely exclusively on state law in their motion to dismiss,
but state law cannot prevent the lien from attaching to the LLC nor does state law govern the
process by which the government can levy on the lien. As the government's claim is, at
minimum, plausible, dismissal is not warranted.
CLAIMS AGAINST INDIVIDUALS
Defendant argues that the complaint must be dismissed against Mr. and Ms. Briggs
individually because it alleges no claims against them. Section 7403(b) requires that "all persons
having liens upon or claiming any interest in the property involved in [an action to enforce a lien
of the United States] shall be made parties thereto. !d. The United States named them, pursuant
to 26 U.S.C. § 7403(b), because one or both may claim an interest in the property upon which it
is trying to foreclose. As such, Mr. and Mrs. Briggs are properly named in the suit, and
defendants' motion to dismiss both parties is denied.
For the foregoing reasons, defendants' motion to dismiss is DENIED.
SO ORDERED, this
__jQ day of October, 2014.
~~A.'w·¥T RENCE W. BOYLE
UNITED STATES DISTRICT JUDGE
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