Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-02237/USCOURTS-azd-2_05-cv-02237-0/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1346 Recovery of IRS Tax

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

GOLDEN WEST HOLDINGS TRUST,

Plaintiff, 

vs.

UNITED STATES OF AMERICA and

INTERNAL REVENUE SERVICE, 

Defendants.

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No. CV 05-2237-PHX-SMM

ORDER

Pending before the Court is Wachovia Bank, N.A.'s ("Wachovia") Motion to Intervene

pursuant to Rule 24 of the Federal Rules of Civil Procedure. (Dkt. 27) Wachovia moves to

intervene as of right or, in the alternative, for permission to intervene, in order to join in

Plaintiff William Wadman's claim against Defendants United States of America ("United

States") and the Internal Revenue Service ("IRS"). After considering the arguments in

Wachovia's Motion to Intervene (Dkt. 27), Defendants' Response (Dkt. 28), and Wachovia's

Reply (Dkt. 31), the Court issues the following Order.

BACKGROUND

Plaintiffs Wadman, Tri-Star Real Estate Investment Trust ("Tri-Star") and Golden

West Holdings Trust ("Golden West") brought consolidated actions against the IRS and

the United States pursuant to 26 U.S.C. § 1346(a)(1) and 26 U.S.C. § 7426, seeking a

declaration that the jeopardy assessment issued by the IRS against the assets of Wadman

was improperly issued and void. (Dkt. 27, ¶ 4-8) On or about April 13, 2005, Wachovia

received a Notice of Levy from the IRS ordering them to withhold funds from Wadman's

Case 2:05-cv-02237-SMM Document 34 Filed 11/03/06 Page 1 of 4
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accounts at Wachovia. (Dkt. 27, ¶ 11-13) Wadman then withdrew the money from those

accounts before Wachovia could place a hold on the funds. (Dkt. 27, 17-20) On or about

July 11, 2005, Wachovia paid the IRS the funds from the levied accounts due to their

liability under 26 U.S.C. § 6332. (Dkt. 27, ¶ 20-22) Wachovia has asserted a claim

against Wadman to recover the lost funds; however, Wadman has filed for bankruptcy. 

(Dkt. 27, ¶ 23-25).

STANDARD OF REVIEW

Federal Rule of Civil Procedure 24(a)(2) provides:

Upon a timely application, anyone shall be permitted to intervene in an action:

. . . (2) when the applicant claims an interest relating to the property or

transaction which is the subject of the action and the applicant is so situated

that the disposition of the action may as a practical matter impair or impede the

applicant's ability to protect that interest, unless the applicant's interest is

adequately represented by existing parties.

Fed. R. Civ. P. 24(a)(2). Rule 24(a)(2) is "construed broadly in favor of proposed

interveners and [the court is] guided primarily by practical considerations." United States

ex. rel. McGough v. Covington Techs. Co., 967 F.2d 1391, 1394 (9th Cir. 1992). An

order granting intervention as of right is appropriate if: (i) the application is timely; (ii)

the applicant has a significantly protectable interest relating to the property or transaction

involved in the pending lawsuit; (iii) the disposition of the lawsuit may adversely affect

the applicant's interest unless intervention is allowed; (iv) the existing parties do not

adequately represent the would-be intervenor's interests. League of United Latin

American Citizens v. Wilson, 131 F.3d 1297, 1302 (9th Cir. 1997). Although the party

seeking to intervene bears the burden of establishing all four elements, the Ninth Circuit

construes these factors liberally in favor of the applicant, and review is guided by

practical and equitable considerations, rather than technical distinctions. See United

States v. Alisal Water Corp., 370 F.3d 915, 919 (9th Cir. 2004); Southwest Center for

Biological Diversity v. Berg, 268 F.3d 810, 818 (9th Cir. 2001); Donnelly v. Glickman,

159 F.3d 405, 409 (9th Cir. 1998). 

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DISCUSSION

The Court finds that Wachovia satisfied the four-part test for intervention and is

entitled to intervention as of right. Wachovia's Motion to Intervene is timely because

nothing has yet occurred in this case other than the filing of an amended complaint by the

Plaintiff and a Motion to Dismiss by the Defendant. Wachovia's motion is also related to

a significant interest in the property involved in the pending suit; namely, the funds

Wachovia paid to the IRS. The disposition of this lawsuit may adversely affect

Wachovia's interests because if the suit is settled, or some alternative arrangement

reached, Wachovia may not recover the funds it seeks. Furthermore, the existing parties

do not adequately represent Wachovia's interests since Wachovia seeks relief against the

IRS beyond what Wadman has already pled. Based on these considerations, the Court

finds that Wachovia is entitled to intervene as a matter of right.

 The Government does not dispute that Wachovia has failed to meet the test for

intervention, but merely raises questions regarding jurisdiction and statute of limitations. 

Although the Government contends that the statute of limitations has run for a § 7426

claim by Wachovia, the Supreme Court in Williams v. U.S. held that a lawsuit under 26

U.S.C. § 7426 is not the exclusive remedy for someone who pays another's tax liability,

so Wachovia would be free to pursue and action under §1346(a)(1). According to the

Supreme Court, "a person who pays under compulsion the tax liability of another may

claim a refund under 28 U.S.C. § 1346(a)(1), and the fact that a wrongful lien compelled

payment of the tax does not require, as the exclusive remedy, a lawsuit under 26 U.S.C. §

7426." WWSM Investors v. U.S., 64 F.3d 456, 459 (9th Cir. 1995)(quoting Williams v.

United States, 514 U.S. 527). The Ninth Circuit also held that equitable tolling may be

applied to "extend the period for bringing a wrongful levy claim against the government

under 26 U.S.C. § 7426." Supermail Cargo, Inc. v. U.S., 68 F.3d 1204, 1207 (9th Cir.

1995). 

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The Government relies on the holdings in Fidelity and Deposit Co. of Maryland v.

City of Adelanto, 87 F.3d 334 (9th Cir. 1996) and Dahn v. U.S., 127 F.3d 1249 (10th Cir.

1997) to argue against Wachovia's inclusion in this lawsuit. However, Fidelity is

distinguishable from this case in that it is a narrow decision regarding §2410 quiet title

actions, not §1346 actions for wrongful taxation. Dahn is also distinguishable because

the plaintiff was not seeking a refund for his direct payment of another's taxes, as

Wachovia did in this case, but instead merely had interest in property on which a lien was

placed by his parents' creditors.

CONCLUSION

Accordingly, for the reasons set forth above,

IT IS HEREBY ORDERED Wachovia's Motion to Intervene (Dkt. 27) is

GRANTED.

IT IS FURTHER ORDERED that Wachovia shall have until November 17,

2006, to respond to any outstanding motions filed by Defendants. 

DATED this 2nd day of November, 2006.

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