USA v. Talmage et al

Filing 203

MEMORANDUM DECISION AND ORDER denying 67 Motion to Dismiss for failure to join party; granting in part and denying in part 67 Motion to Dismiss for Failure to State a Claim - the second cause of action is dismissed with prejudice. Signed by Judge David Nuffer on 12/13/18 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, NORTHERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,

MEMORANDUM DECISION AND
ORDER GRANTING AND DENYING
IN PART MOTION TO DISMISS

v.

Case No. 1:16-cv-00019-DN

RONALD B. TALMAGE, et al.,

District Judge David Nuffer

Defendants.

Plaintiff United States of America filed a motion (the “Motion”) 1 to dismiss the
counterclaim 2 of Defendants Western Land & Livestock LLC and Western Reserve Mortgage
LLC (collectively, the “Western Entities”) for failure to state a claim upon which relief can be
granted and failure to join a necessary party. 3 For the reasons stated below, the Motion1 is
granted in part and denied in part.
BACKGROUND
The United States commenced this lawsuit to reduce to judgment federal tax assessments
against Defendants Ronald B. Talmage and Annette C. Talmage and to foreclose federal tax liens
against certain real property (the “Liberty Property”) in which the Western Entities assert an

1

United States’ Motion to Dismiss Counterclaim (“Motion”), docket no. 67, filed December 21, 2016; see
Memorandum in Opposition to the Government’s Motion to Dismiss the Western Parties’ Counterclaims
(“Opposition”), docket no. 76, filed January 12, 2017; United States’ Reply to Response to Motion to Dismiss
Counterclaim (“Reply”), docket no. 80, filed January 25, 2017; Supplement to United States’ Motion to Dismiss,
docket no. 160, filed December 19, 2017.
2

Western Defendants’ Answer and Counterclaim (“Counterclaim”), docket no. 49, filed October 28, 2016.

3

See FED. R. CIV. P. 12(b)(6) (failure to state claim); id. 12(b)(7) (failure to join party).

interest. 4 Unlike the Talmages, who failed to appear or defend themselves in this case, 5 the
Western Entities filed a counterclaim, which asserts two causes of action against the United
States. 6 The Western Entities’ first cause of action seeks to quiet title to the Liberty Property as
against the United States only. 7 And their second cause of action seeks civil damages from the
United States for not releasing liens affecting the Liberty Property. 8
DISCUSSION
The Western Entities’ First Cause of Action
The United States argues that the Western Entities’ first cause of action (quiet title)
should be dismissed under Fed. R. Civ. P. 12(b)(7) because the Western Entities did not join Liu
Hsiu Chen as a party. 9 A person generally must be joined as a party if:
(A)
(B)

in that person’s absence, the court cannot accord complete relief among
existing parties; or
that person claims an interest relating to the subject of the action and is so
situated that disposing of the action in the person’s absence may:
(i)
as a practical matter impair or impede the person’s ability to
protect the interest; or
(ii)
leave an existing party subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations because of
the interest. 10

4

See Complaint to Reduce Federal Tax Assessments to Judgment and Foreclose Federal Tax Liens on Real Property,
docket no. 2, filed February 18, 2016.

5

Default Certificate, docket no. 25, entered July 18, 2016; Order Granting United States’ Motion for Default
Judgment Against Defendants Ronald B. Talmage and Annette C. Talmage, docket no. 38, entered August 26, 2016.

6

Counterclaim, supra note 2, at 8-15.

7

Id. ¶¶ 23-24.

8

Id. ¶¶ 26-28.

9

Motion, supra note 1, at 6-13.

10

FED. R. CIV. P. 19(a)(1).

2

As the proponent of the Motion under rule 12(b)(7), the United States “has the burden of
producing evidence showing the nature of the interest possessed by [Chen] and that the
protection of that interest will be impaired by [her] absence.” 11 Rather than satisfy this burden,
the United States concedes that it has no evidence that Chen has an interest in the Liberty
Property, 12 and admits that it “has no reason to believe that [Chen] can or would claim an
independent interest in the Liberty Property, especially since she appears nowhere in the chain of
title.” 13
Because the United States has failed to show that Chen is a necessary party to this
litigation, the Motion will be denied as to the Western Entities’ first cause of action.
The Western Entities’ Second Cause of Action
The United States argues that the Western Entities’ second cause of action (failure to
release liens) should be dismissed under Fed. R. Civ. P. 12(b)(6) because the Western Entities
failed to exhaust administrative remedies. 14 In response, the Western Entities stipulate to the
dismissal of their second cause of action “[b]ecause 26 U.S.C. § 7432 only applies to taxpayers
and does not apply to third parties.” 15 Based on this stipulation, the Western Entities’ second
cause of action will be dismissed.
The Western Entities’ counterclaim includes a “prayer for relief,” in which they ask “[f]or
attorney fees and costs as may be authorized by statute, including without limitation 26 U.S.C.

11

Citizen Band Potawatomi Indian Tribe v. Collier, 17 F.3d 1292, 1293 (10th Cir. 1994) (citations omitted).

12

Motion, supra note 1, at 12 & n.57.

13

Reply, supra note 1, at 4.

14

Motion, supra note 1, at 13-19.

15

Opposition, supra note 1, at 2, 11.

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§ 7430.” 16 Despite their stipulation to dismiss their second cause of action, the Western Entities
“reassert their right to pursue attorney fees and costs against the [United States] pursuant to
26 U.S.C. § 7430.” 17 Because the Western Entities’ request for fees and costs is not, as pleaded,
exclusively tied to their second cause of action, the Motion will be denied as to that request at the
present time.
ORDER
THEREFORE, IT IS HEREBY ORDERED that the Motion 18 is GRANTED in part
and DENIED in part as follows:
1.

The Motion18 is DENIED as to the first cause of action (quiet title) of the

Western Entities’ counterclaim. 19
2.

The Motion18 is GRANTED as to the second cause of action (failure to release

liens) of the Western Entities’ counterclaim.19
3.

The Motion18 is DENIED as to the request for attorneys’ fees and costs in the

“prayer for relief” of the Western Entities’ counterclaim.19
IT IS FURTHER HEREBY ORDERED that the second cause of action (failure to
release liens) of the Western Entities’ counterclaim19 is DISMISSED with prejudice.
Signed December 13, 2018.
BY THE COURT:

David Nuffer
United States District Judge

16

Counterclaim, supra note 2, at 15.

17

Opposition, supra note 1, at 2, 11.

18

Docket no. 67, filed December 21, 2016.

19

Docket no. 49, filed October 28, 2016.

4