United States of America v. Nichols et al

Filing 51

ORDER GRANTING UNITED STATES MOTION FOR ENTRY OF FORECLOSURE AND JUDICIAL SALE. Granting 46 Plaintiff's Motion for Order of Sale. Signed by Judge Thomas O. Rice. (LLH, Courtroom Deputy)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WASHINGTON

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UNITED STATES OF AMERICA,
NO: 2:13-CV-0167-TOR
Plaintiff,

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v.
DON O. NICHOLS and TERRY A.
NICHOLS, and LAST DAY TRUST,

ORDER GRANTING UNITED
STATES’ MOTION FOR ENTRY OF
FORECLOSURE AND JUDICIAL
SALE

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Defendants.
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BEFORE THE COURT is Plaintiff’s motion for order of sale (ECF No. 46).

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This matter was submitted for consideration without oral argument. The Court has

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reviewed the briefing and the record and the files herein, and is fully informed.

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BACKGROUND

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On May 29, 2013, the United States filed its first amended complaint

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seeking: (1) judgment against Defendants Don and Terry Nichols (“the Nichols”)

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for unpaid federal income taxes and civil penalties for the years 1999; 2001-2009;

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(2) a determination that real property purchased by the Nichols and located near
ORDER GRANTING UNITED STATES’ MOTION FOR ENTRY OF
FORECLOSURE AND JUDICIAL SALE ~ 1

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Reardon, Washington (the “subject property”), had been fraudulently transferred to

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Defendant Last Day Trust; (3) in the alternative, a determination to what extent

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Last Day Trust holds title to the subject property as the nominee or alter ego of the

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Nichols; (4) a determination that the United States has valid tax liens against the

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Nichols’ property; and (5) an order foreclosing on the subject property to satisfy

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the tax liens. ECF No. 3.

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On September 25, 2015, after stipulation, the Court entered judgment in

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favor of the United States and against Defendants in the amount of $155,018.83,

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plus interest accruing after July 14, 2015 as provided by law. ECF No. 44; see 26

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U.S.C. § 6621. See also 28 U.S.C. § 1961(c)(1) (explaining that § 6621 applies in

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“any internal revenue tax case”).

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The United States now moves the Court for an order of foreclosure and

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judicial sale. ECF No. 46. The Nichols filed a response in partial opposition.

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ECF No. 48.

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DISCUSSION

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The Nichols’ request that the Court deny the United States’ motion and

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direct the United States to “enter into a reasonable monetary plan for defendants to

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make payments on their tax debt.” Id. at 3.

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Under 26 U.S.C. § 7403, the United States Government is empowered to
enforce its tax liens against a delinquent taxpayer by requesting the judicial sale of
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FORECLOSURE AND JUDICIAL SALE ~ 2

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the taxpayer’s real property. United States v. Rodgers, 461 U.S. 677, 691-92

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(1983). A district court “may decree a sale of such property.” 26 U.S.C. §

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7403(c). “Section 7403 affords district courts limited equitable discretion in

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determining whether to order the sale of property to satisfy delinquent tax

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liabilities.” United States v. Gibson, 817 F.2d 1406, 1407 (9th Cir. 1987) (citing

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Rodgers, 461 U.S. at 680). “District courts may exercise this limited discretion in

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individual cases to take into account both the government’s interest in prompt and

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certain collection of delinquent taxes and the possibility that innocent third parties

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will be unduly harmed by that effort.” Id. A district court’s “limited discretion

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accorded by § 7403 should be exercised rigorously and sparingly.” Rodgers, 461

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U.S. at 711.

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The Nichols have presented no evidence that any third party would be

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unduly harmed by the Plaintiff’s foreclosure of the subject property. The Nichols

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contend they will suffer hardship if the sale is to go forward. See ECF No. 48 at 2.

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(arguing that the Nichols are prejudiced by a forced sale because, among other

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things, they are in their late sixties, retired, have health issues, and have lived in the

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home for many years). However, the Supreme Court has stated that there are

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“virtually no circumstances … in which it would be permissible to refuse to

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authorize a sale simply to protect the interests of the delinquent taxpayer himself or

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herself.” Rodgers, 461 U.S. at 709. Thus, the Nichols do not provide the Court
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with a valid reason to exercise its “limited discretion” to deny the United States’

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motion.

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Here, the United States has complied with the requirements of § 7403 for

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entry of an order of judicial sale. Defendants have failed to pay their federal tax

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liabilities, and the Court has entered judgment against Defendants. ECF Nos. 44;

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45. The United States commenced this action in the district court, and all parties

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“having liens upon or claiming any interest in the property involved in such

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action,” 26 U.S.C. § 7403(b), have been named as Defendants. See ECF No. 1 ¶¶

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5-10. Accordingly, the United States is entitled to foreclose its valid federal tax

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liens on the real property at issue as a matter of law. The Court will issue a

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separate order of sale.

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ACCORDINGLY, IT IS HEREBY ORDERED:

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The District Court Executive is hereby directed to enter this Order and

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furnish copies to the parties.
DATED November 6, 2015.

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THOMAS O. RICE
United States District Judge

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ORDER GRANTING UNITED STATES’ MOTION FOR ENTRY OF
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