Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_03-cv-01989/USCOURTS-caed-2_03-cv-01989-3/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7401 IRS: Tax Liability

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26 1 The property is specifically described as:

Parcel A: Parcel 3, as shown on the Parcel Map of a position of the

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

JOSEPH VERNI, JUANITA SMITH, 

RICH BELLON in his capacity as the

trustee of “Appy Acres Trust,” 

et al.,

 Defendants.

CIV. S-03-1989 LKK PAN PS

FINDINGS AND RECOMMENDATION

-o0oThe government began this action September 23, 2003, to

reduce to judgment the outstanding federal tax liabilities of

defendants Joseph Verni and Juanita Smith and to foreclose the

attendant federal tax liens against their residential property at

79 Rolling Hills Court, Oroville, California 95966.1 As required

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West half of Section 26, Township 19 North, Range 4 East, M.D.B. & M.,

which map was filled in the office of the Recorder of the County of

Butte, State of California, on August 1, 1979 in Book 71 of Parcel Maps,

at page 71.

Parcel B: A non-exclusive easement for road and public utility

purposes over Parcels 2 and 3 of Parcel Map filed November 5, 1975

in Book 53 of Parcel Maps, at pages 90, 91 and 92. 

2 This court’s July 28, 2005, findings and recommendations erroneously

stated Juanita Smith’s liability as $113,164.50. That figure was a

typographical error. The correct calculation is as follows: 

On January 6, 1997, the Treasury Department made the following

assessments against defendant Juanita Smith for tax years 1986 and

1988:

TAX TAX PERIOD ASSESSED AMOUNTS

1040 12/31/86 $ 20,643.00 Tax

 $ 38,174.01 Interest

 $ 5,161.00 Accuracy Penalty

 $ 33,636.00 Fraud Penalty

 $ 48.00 Fees and costs

 $ 0.01 Failure to Pay Penalty

1040 12/31/88 (1)$ 9,271.00 Tax

 (2)$ 18,960.22 Interest

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by 26 U.S.C. § 7403(b), the government named as defendants all

other parties with any interest in the property: Rich Bellon as

trustee of “Appy Acres Trust,” the California Franchise Tax

Board, the Butte County Tax Collector, First Union Mortgage

Corporation (now known as Wachovia Corporation), Federal Home

Loan Mortgage Corporation (aka Freddie Mac Corporation), and

Wells Fargo Home Mortgage.

Verni is indebted to the United States for $623,775.78

taxes for years 1986, 1987, 1988 and 1996, plus accrued but

unassessed interest and penalties. Juanita Smith is indebted to

the United States for $135,164.502 taxes for years 1986 and 1988,

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 (3)$ 2,318.00 Accuracy Penalty

 (6)$ 6,953.25 Fraud Penalty

 (7)$ 0.01 Failure to Pay Penalty

As of April 22, 2003, there remained due and owing on this

assessment the sum of $135,164.50, plus accrued but unassessed

interest and other statutory additions as provided by law.

3 Specifically, the California Franchise Tax Board filed a disclaimer

October 16, 2003; Butte County filed a notice of disclaimer November 7, 2003;

First Union Mortgage Corporation was dismissed by court-approved stipulation

filed October 31, 2003; and the government entered into a court-approved

stipulation with Wells Fargo Home Mortgage and Federal Home Loan Corporation

filed October 29, 2003. 

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plus accrued but unassessed interest and penalties. 

On September 13, 2005, the court entered default judgment

against defendants Verni, Smith and Rich Bellon as trustee of

“Appy Acres Trust,” which held title to the Rolling Hills

property pursuant to a sham transfer intended to defraud the

United States. All remaining defendants have entered into courtapproved stipulations regarding their respective interests or

filed disclaimers of any right, title or interest in the

property.3

The United States moves for entry of final judgment as to

all defendants pursuant to Fed. R. Civ. P. 54(b) and seeks an

order of judicial sale to permit enforcement of the default

judgment against Verni, Smith and Bellon. As oral argument was

unnecessary to resolve this matter, I vacated the hearing

scheduled for November 16, 2005, and make these findings and

recommendation.

Failure of any person to pay outstanding taxes creates a

lien in the amount owed “in favor of the United States upon all

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property and rights to property, whether real or personal,

belonging to such person.” 26 U.S.C. § 6321. The court may

decree the sale of a debtor’s residential property to enforce a

federal tax lien. 26 U.S.C. §§ 7403(c), 7402(a); 28 U.S.C. §§

2001, 2002; United States v. Rodgers, 461 U.S. 677 (1983). The

court may set the terms and conditions of sale as necessary and

appropriate to the circumstances. 26 U.S.C. § 7402(a); 28 U.S.C.

§§ 2001. The following terms and conditions of sale are based

upon those proposed by the government, which the court finds

reasonable, necessary and appropriate to these circumstances.

Accordingly, I recommend the district judge issue an

order entitled “Final Judgment and Order of Judicial Sale”

directing the Clerk of Court to enter final judgment and

authorizing the Internal Revenue Service (IRS) to foreclose on

the Rolling Hills property subject to the following terms and

conditions:

1. Joseph Verni and Juanita Smith, and any other persons

occupying the property shall vacate the property permanently

within thirty (30) days after entry of the Final Judgment

and Order of Judicial Sale, unless the United States agrees

otherwise in writing. Each person shall take with them

their personal property, but leave all improvements,

buildings, fixtures, and appurtenances.

 

2. If any person occupying the property fails or refuses to

leave and vacate the property within thirty days after entry

of the Final Judgment and Order of Judicial Sale, or within

a later departure time agreed to by the United States, the

IRS, with or without the assistance of the U.S. Marshal, is 

authorized and directed to take all actions reasonably

necessary to evict those persons. If any person fails or

refuses to remove his or her personal property by the time

specified, the personal property remaining on the subject

real property is deemed forfeited and abandoned. The IRS is

authorized to remove and dispose of such personal property

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in whatever manner it sees fit, including sale with the

proceeds applied first to the expenses of sale and the 

remainder according to the priorities set forth in Paragraph

Fourteen. 

3. Pending foreclosure, Joseph Verni, Juanita Smith and

Rich Bellon shall take all reasonable steps necessary to

preserve the property (including all buildings,

improvements, and fixtures) in its current condition

including, without limitation, maintaining fire and casualty

insurance policies on the property. They shall not commit

waste against the property or reduce its value or

marketability, nor shall they cause or permit anyone else to

do so. Defendants shall not record any instruments, publish

any notice, or take any other action that may directly or

indirectly adversely affect the value of the property or

deter potential bidders from participating in the public

auction.

4. The IRS shall have free access to the property when all

occupants have vacated it or upon expiration of the period

within which to vacate the property, whichever is earlier,

and shall take all actions necessary to preserve the

property, including changing or installing locks or other

security devices until the deed is delivered to the

purchaser.

5. The date and time for the sale shall be announced by the IRS.

6. The sale of the property shall be held on the premises or at the

Butte County courthouse.

7. The sale shall be subject to all laws, ordinances, and

governmental regulations (including building and zoning

ordinances), affecting the premises, and easements and

restrictions of record, if any.

8. The sale shall be free and clear of the interests of

Joseph Verni, Juanita Smith, Rich Bellon and all other

parties named in this case. The sale shall be made without

right of redemption.

9. Notice of the sale shall be published once a week for at

least four (4) consecutive weeks before the sale in at least

one newspaper regularly issued and of general circulation in

Butte County and by any other notice the IRS deems

appropriate. The notice shall contain a description of the

property and the essential terms and conditions of sale.

10. A reasonable minimum bid shall be determined by the

United States. If the minimum bid is not met or exceeded,

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the IRS may, without further permission of this Court, hold

a new public sale and reduce the minimum bid.

11. The successful bidder shall be required to deposit with

the IRS at the time of sale a minimum of ten (10) percent of

his or her bid, with the deposit to be made by cashiers or

certified check payable to “United States Treasury.” All

potential bidders shall display to the IRS proof they are

able to comply with this requirement.

12. The balance of the purchase price for the property

shall be paid to the IRS by certified or cashier's check

payable to the “United States Treasury” within sixty (60)

days after the date the bid is accepted. If the bidder

fails to fulfill this requirement, the deposit shall be

forfeited and applied to cover the expenses of the sale,

with any amount remaining to be applied to the outstanding

tax liability, and the property shall again be offered for

sale under the terms and conditions of this order. The

United States may bid as a creditor against its judgment

without tender of cash.

13. The sale of the property shall be subject to

confirmation by this Court as required by E. D. Cal. L. R.

A-570. Absent a written objection filed within three days

of sale, or the purchaser’s default, the sale shall stand

confirmed without any action by the Court. On confirmation

of the sale and receipt of payment in full, the IRS shall

execute and deliver a Certificate of Sale and Deed conveying

the property to the purchaser. On confirmation of the sale,

all interests in, liens against, or claims to, the property

that are held or asserted by the plaintiff or the defendants

in this action are discharged and extinguished.

14. After the sale is confirmed by this Court, the IRS

shall distribute the amount paid by the purchaser as

follows:

a. First, to the IRS for the expenses of sale, including

any expenses incurred in securing or maintaining the

property pending sale and confirmation;

b. Second, to Butte County for all matured and unpaid

real property taxes;

c. Third, to Wells Fargo Home Mortgage for all amounts

owed under its assigned deed of trust;

d. Fourth, to the IRS to be applied on a pro rata basis

towards Joseph Verni’s federal tax liabilities, plus

penalties and interest, for tax years 1986, 1987, 1988,

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and 1996, and Juanita Smith’s federal tax liabilities,

plus penalties and interest, for tax years 1986 and 1988.

e. Fifth, the remainder, if any, to defendants Verni and

Smith on a pro rata basis.

These findings and recommendations are submitted to the

Honorable Lawrence K. Karlton, the United States District Judge

assigned to this case. 28 U.S.C. § 636(b)(l). Written

objections may be filed within ten days after being served with

these findings and recommendations. The document should be

captioned “Objections to Magistrate Judge’s Findings and

Recommendations.” The failure to file objections within the

specified time may waive the right to appeal the District Court’s

order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

Dated: November 28, 2005. 

 /s/ Peter A. Nowinski 

 PETER A. NOWINSKI

 Magistrate Judge

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