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Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 

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In the

United States Court of Appeals

For the Seventh Circuit

No. 15‐3554

UNITED STATES OF AMERICA,

Plaintiff‐Appellee,

v.

JOYCE ADENT, et al.,

Defendants‐Appellants.

Appeal from the United States District Court for the

Eastern District of Wisconsin.

No. 2:12‐cv‐01286‐RTR — Rudolph T. Randa, Judge.

ARGUED APRIL 19, 2016 — DECIDED MAY 10, 2016

Before BAUER, POSNER, and FLAUM, Circuit Judges.

BAUER, Circuit Judge.    Following the ratification of the

United States Constitution, Benjamin Franklin wrote: “[I]n this

world nothing can be said to be certain, except death and

taxes.” These words are as true today as when Franklin wrote

them in 1789. And when taxes are not paid, the federal

government has many means to ensure prompt collection of

those taxes. So the defendants‐appellants found out the hard

way.

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Leonard and Joyce Adent failed to pay their taxes and the

government filed suit to foreclose on its tax liens attached to

the Adents’ property. The Adents, with their son Derek Adent,

who is also a defendant‐appellant (collectively the “Adents”),1

appeal the district court’s order granting the government’s

motion for summary judgment in its tax lien foreclosure action

with regard to two parcels of real property. The Adents argue

that the government failed to bring its foreclosure action

within the applicable statute of limitations period and that the

properties should not be forcibly sold because of the resulting

prejudice to innocent, non‐delinquent parties (Joyce and

Derek). We reject all of the Adents’ arguments and affirm the

district court’s order.

I.  BACKGROUND

Leonard and Joyce Adent, who are husband and wife, filed

joint federal income tax returns for the years 1998 and 2001,

showing they owed taxes which they did not pay. The Internal

Revenue Service (“IRS”) assessed the federal income taxes

owed for 1998 on December 2, 2002, and sent a demand for

payment to Leonard and Joyce on the same date. The IRS

assessed the federal income taxes owed for 2001 on

February 17, 2003, and sent a demand for payment to Leonard

and Joyce on the same date. As of October 15, 2012, Leonard

and Joyce owed a balance of $90,681.26 forthe personal income

taxes for 1998 and 2001. Leonard also owed federal employ‐

ment and unemployment taxes for various periods between

1

  Because all of the parties at issue here have the last name Adent, we will

refer to the interested parties individually by their first names.

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No. 15‐3554 3

October 2006 and April 2012. The IRS also assessed Leonard’s

federal employment and unemployment taxes; as of

October 15, 2012, Leonard owed a balance of $65,637.17 forthe

employment and unemployment taxes.

Leonard and Joyce jointly own a residential piece of

property, Parcel A, which is their residence. Leonard and

Derek jointly own a commercial piece of property, Parcel B,

which is mixed‐use condominium and commercial. Joyce has

office space for her business at Parcel B. By virtue of the IRS

assessments for Leonard’s and Joyce’s personal income taxes

andLeonard’s employment andunemploymenttaxes,tax liens

attached to Parcels A and B. See 26 U.S.C. §§ 6321, 6322.

The government filed suit on December 18, 2012, to reduce

the assessments to judgment, foreclose the liens, and obtain a

sale of Parcels A and B to satisfy the tax debts. The Adents filed

three separate answers to the complaint but did not raise the

statute of limitations as an affirmative defense. On July 11,

2014, Leonard and Joyce stipulated to entry of judgment based

upon the tax assessments; specifically, Leonard and Joyce

stipulated that they jointly and severally owe and are liable for

the unpaid personal income taxes to the IRS in the amount of

$90,681.26 as of October 15, 2012, with penalties and interest

until paid. Likewise, Leonard stipulated that he owes and is

liable forthe unpaid employment and unemployment taxes to

the IRS in the amount of $65,637.17 as of October 15, 2012, plus

penalties and interest until paid. The district court entered

judgmentin favor ofthe government basedon the stipulations.

Thereafter, the government moved for summary judgment

to foreclose on the liens and to obtain an order for the sale of

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Parcels A and B. The district court granted the government’s

motion. The district court found that because there were no

innocent party interests in Parcel A, it was required to order

the sale. With regard to Parcel B, the district court found Derek

had an innocent party interest.

In considering the factors prescribed by United States v.

Rodgers, 461 U.S. 677 (1983), the district court weighed the

resultant prejudice to the government of a partial sale and the

resultant prejudice to Derek of a total sale. It found in favor of

the government: that a total sale of Parcel B was proper.

Leonard, Joyce, and Derek appeal the district court’s decision

ordering the sale of Parcels A and B.

II.  DISCUSSION

We have jurisdiction to hearthe Adents’ appeal: the district

court’s order is a final decision. United States v. Davenport, 106

F.3d 1333, 1334–35 (7th Cir. 1997), citing Forgay v. Conrad, 47

U.S. 201, 204 (1848). See also United States v. Williams, 796 F.3d

815, 817 (7th Cir. 2015) (citations omitted). We review the

district court’s order granting the government’s motion for

summary judgment de novo and construe all facts and reason‐

able inferences in the Adents’ favor. Venters v. City of Delphi,

123 F.3d 956, 962 (7th Cir. 1997) (citations omitted); Davenport,

106 F.3d at 1334 (citation omitted). Summary judgment is

proper when “the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a). The Adents

raise two main issues on appeal, a statute of limitations

argument and an innocent third‐party interest argument,

which we address individually.

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No. 15‐3554 5

We first consider the Adents’ argument that the govern‐

ment failed to file its foreclosure suit within the applicable ten‐

year statute of limitations period as prescribed by 26 U.S.C.

§ 6502(a)(1). The running of the statute of limitations as a bar

to suit is an affirmative defense and must be pleaded in a

defendant’s answer to the complaint. Fed. R. Civ. P. 8(c);

Venters, 123 F.3d at 967. It has long been recognized that a

defendant’s failure to plead the statute of limitations as an

affirmative defense in his or her answer to the complaint

constitutes a waiver of that defense. Venters, 123 F.3d at 967–68

(citations omitted)(statute oflimitationsdefense waived where

not pleaded in answer and raised for first time in response to

motion for summary judgment without motion to amend

answer). All three Adents failed to plead the statute of limita‐

tions as an affirmative defense in their individual answers to

the complaint. They also failed to argue the statute of limita‐

tions as a bar to suit in opposition to the government’s sum‐

mary judgment motion. And, none of the Adents ever moved

to amend their answers to include the statute of limitations as

an affirmative defense. Therefore, all three Adents have

waived any statute of limitations argument on appeal.

Next, we consider the Adents’ argument that the district

court should have exercised its discretion and not ordered the

sale of Parcels A and B. There is no dispute that the tax liens

properly attached to both properties. Section 7403 of the

Internal Revenue Code allows the government to file a civil

suit to enforce its lien(s) and recover payment in any case

where taxes have not been paid. 26 U.S.C. § 7403(a). Further,

“[t]he court ... in all cases where a claim or interest of the

United States therein is established may decree a sale of such

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property ... and a distribution of the proceeds of such sale

according to the findings of the court in respect to the interests

of the parties and of the United States.” 26 U.S.C. § 7403(c).

There is no provision for innocent, non‐liable third‐party

interests in the statutory framework.

The United States Supreme Court addressed the issue of an

innocent third‐party interest in the context of a forced sale in

United States v.Rodgers, 461 U.S. 677 (1983). There,the Supreme

Courtfound that the plain language of § 7403 contemplates the

sale of the entire property, including innocent third‐party

interests in that property, and that the Supremacy Clause

precludes protection of innocent third‐party interests via state

law. Id. at 693–94, 703–04. Further, § 7403 protects an innocent

third party’s interest by providing for distribution of the

proceeds from the court‐ordered sale to the innocent third

party to compensate them for their interest. Id.

The Supreme Court did not stop there. It recognized the

district court’s discretion to not order a forced sale, but

emphasized that this discretion is not “unbridled.” Id. at 706,

709; see also Davenport, 106 F.3d at 1338. The district court’s

“limited discretion” under § 7403 is to be “exercised rigorously

and sparingly, keeping in mind the Government’s paramount

interest in prompt and certain collection of delinquent taxes.”

Rodgers, 461 U.S. at 711. The Supreme Court indicated that a

district court has no discretion to deny a forced sale when no

innocent third‐party interests are at issue: “We can think of

virtually no circumstances, for example, in which it would be

permissible to refuse to authorize a sale simply to protect the

interests of the delinquent taxpayer himself or herself.” Id. at

709.

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Additionally, the Supreme Court provided a non‐exhaus‐

tive list of four factors to consider when an innocent third

party has an interest in the property to be sold, recognizing

that “financial compensation may not always be a completely

adequate substitute for a roof over one’s head.” Id. at 704.

These factors include: (1) the prejudice to the government’s

interest as the result of a partial, rather than a total, sale;

(2) “whetherthe third party with a non‐liable separate interest

in the property would, in the normal course of events ... have

a legally recognized expectation that that separate property

would not be subject to forced sale by the delinquent taxpayer

or his or her creditors”; (3) the prejudice to the third party as

the result of a total sale; and (4) “the relative character and

value of the non‐liable and liable interests held in the prop‐

erty.” Id. at 710–11.

With regard to Parcel A, the district court had no discretion

to deny a sale because no innocent third‐party interests were

implicated. It is undisputed that Leonard and Joyce are the

only owners of Parcel A. It is undisputed that Leonard and

Joyce are jointly and severally liable for the delinquent per‐

sonal income taxes, as Leonard and Joyce stipulated to such.

Because there are no innocent third‐party interests in Parcel A,

the district court was correct when it determined it had no

discretion to deny the sale.

With regard to Parcel B, Derek has an innocent half‐

ownership interest in the property, as he is not liable for any of

Leonard’s tax debts. However, there are no circumstances of

undue hardship to Derek that overcome “the Government’s

paramount interest in prompt and certain collection” of the

unpaid taxes. Id. at 711. First, the government’s interest would

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be severely prejudiced by denying the sale of Parcel B. As we

have noted, § 7403 contemplates only a total sale of the entire

property; § 7403 does not provide for a partial sale, and a

partial sale is not a viable, practical option. See e.g., Williams,

796 F.3d at 818; Davenport, 106 F.3d at 1337; United States v.

Trilling, 328 F.2d 699, 703 (7th Cir. 1964). If the sale were to be

denied, the government would be precluded from any pro‐

ceeds from Parcel B.

The other Rodgersfactors also weigh in favor of the govern‐

ment. Derek, the non‐delinquent co‐owner of Parcel B, has no

“legally recognized expectation” that his interest would not be

subject to a forced sale due to Leonard’s delinquency. Also, the

prejudice to Derek as the result of a sale is minimal; Derek does

not reside in Parcel B, so dislocation is not a consideration.

After the sale, Derek will be compensated for his half interest.

Further, Derek may bid on Parcel B at the foreclosure auction,

either to gain the property outright or to attempt to increase

the final sale price. Finally, the “relative character and value of

the non‐liable and liable interests” does not weigh in any

party’s favor. The non‐liable interest of Derek is equal to the

liable interest of Leonard.

In weighing the Rodgers factors, we find that the Adents

have presented no exceptional circumstances that overcome

the severeprejudice to the government’s “paramount” interest.

The district court was justified in declining to exercise its

extremely limited discretion to deny the sale of Parcel B. In

other words, the Adents have not presented any evidence that

would justify anything less than the sale of Parcel B. We have

repeatedly affirmed the district courts’ sound discretion in

ordering sales where innocent third‐party interests are impli‐

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No. 15‐3554 9

cated. See, e.g., Williams, 796 F.3d at 818; Davenport, 106 F.3d at

1338; Trilling, 328 F.2d at 703. The facts of this case are germane

to tax lien foreclosure actions and do not justify a change in

course in our precedent. Because there is nodispute of material

fact, summary judgment in favor of the government was

proper.

All other arguments made by the Adents are meritless and

need not be addressed. United States v. Cunningham, 429 F.3d

673, 678 (7th Cir. 2005) (citations omitted).

III.  CONCLUSION

For the foregoing reasons, we AFFIRM the order of the

district court.

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