Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00431/USCOURTS-caed-1_05-cv-00431-3/pdf.json

Parties Involved:
Lidco Inc.
Defendant
Shirley Lundy
Defendant
Duane Reed
Defendant
George Loren Reed
Defendant
United States of America
Plaintiff

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1

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA, ) 

 )

Plaintiff, )

)

vs. )

)

GEORGE LOREN REED, )

Individually and as Trustee )

of the REED FAMILY TRUST; )

DUANE REED, Individually and )

as Trustee of the REED FAMILY )

TRUST; LIDCO INC.; and )

SHIRLEY LUNDY, )

 )

Defendants. )

)

) 

No. CV-F-05-0431 REC LJO

ORDER GRANTING UNITED

STATES’ MOTION FOR DEFAULT

JUDGMENT, FINAL JUDGMENT,

AND ORDER OF FORECLOSURE. 

(Doc. 36) 

On January 9, 2006, the Court heard the United States’

Motion for Default Judgment, Final Judgment, and Order of

Foreclosure (the “Motion”). Upon due consideration of the

written and oral arguments of the parties and the record herein,

the Court GRANTS the Motion as set forth herein. 

I. Background

In this action, the United States seeks to foreclose on

certain real property, which it identifies as Parcels 1, 2, and 3

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and the adjoining parcels (the “Adjoining Parcels”), to satisfy

federal tax liability. 

A. The Subject Property

The parcels are described as follows:

Parcel No. 1:

All that portion of west 1/2 of the southeast 1/4 of

the southeast 1/4 of section 10 Townsh[i]p 3 South,

Range 8 East, M.D.B. & M, which lies south of Lateral

No. 7 of Modesto Irrigation District.

Excepting therefrom all that portion of the west 1/2 of

the southeast 1/4 of the southeast 1/4 bounded and

particularly described as follows:

Commencing at the southeast corner of the west 1/2 of

the southeast 1/4 of the southeast 1/4 of said section

10, above Township and Range; thence running north

along the east line of said west 1/2 a distance of 20

feet to the north side of county road known as Beckwith

Road to the point of beginning of this description;

thence continuing north along the east line of said

west 1/2, a distance of 125 feet to a point; thence

west and parallel to the south line of said southeast

1/4 of said section 10, a distance of 135 feet to a

point; thence south and parallel to the east line of

the said west 1/2 of said southeast 1/4 of the

southeast 1/4 of said Section 10, a distance of 125

feet to a point on the north line of said county road;

thence east along the north line of said county road, a

distance of 135 feet to the point of beginning.

Also excepting therefrom all that portion of the west

1/2 of the southeast 1/4 of the southeast 1/4 bounded

and particularly described as follows:

Commencing at the southeast corner of the west 1/2 of

the southeast 1/4 of the southeast 1/4 of said section

10; thence north and along the east line of said west

1/2 of the southeast 1/4 of the southeast 1/4 to the

north side of the county road (Beckwith Road); thence

west and along the north line of said Beckwith Road, a

distance of 135 feet to the southwest corner of the

property conveyed to Wood Colony Grange, No. 522 by

deed, recorded December 24, 1937, as instrument no.

16207 and being the true pont of beginning of this

description; thence north and parallel to the east line

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of the west 1/2 of the southeast 1/4 of the southeast

1/4 of said section 10 and along the west line of said

Grange property 125 feet; thence continuing north and

parallel to the east line of the west 1/2 of the

southeast 1/4 of the southeast 1/4 of said section 10,

15 feet; thence west and parallel to the north line of

Beckwith Road 75 feet; thence south and parallel to the

east line of the west 1/2 of the southeast 1/4 of the

southeast 1/4 of section 10, 140 feet to a point in the

north line of said Beckwith Road; thence east and along

the north line of said Beckwith road, a distance of 75

feet to the true point of beginning of this

description.

Also exception therefrom all that portion of the west

1/2 of the southeast 1/4 of the southeast 1/4 bounded

and particularly described as follows:

Commencing at the southeast corner of the west 1/2 of

the southeast 1/4 of the southeast 1/4 of said section

10; thence north, on the east line of said west 1/2 of

the southeast 1/4 of the southeast 1/4 of section 10, a

distance of 145 feet to the northeast corner of the

property conveyed to George Raymond Reed and Gladys

Reed, husband and wife, by grand deed recorded in Book

2021 of official records, at page 165, Stanislaus

County Recorders Office, and the point of beginning of

this description; thence west parallel with the south

line of the southeast 1/4 of said section 10, a

distance of 135 feet; thence north parallel with the

east line

of said west 1/2 of the southeast 1/4 of the southeast 1/4

of said section 10, a distance of 100 feet; thence east,

parallel with the south line of the southeast 1/4 of said

section 10, a distance of 135 feet to the aforesaid east

line of the west 1/2 of the southeast 1/4 of the southeast

1/4 of said section 10; thence south, on said east line of

the west 1/2 of the southeast 1/4 of the southeast 1/4 of

section 10, a distance of 100 feet to the point of

beginning.

Also excepting therefrom parcel A, as shown on a parcel

map filed December 16, 1969 in Book 8 of parcel maps,

at page 3, Stanislaus County Recorder, being a portion

of the southeast 1/4 of the southeast 1/4 of Section

10, Township 3 south, Range 8 East, M.D.B. & M.

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Parcel No. 2:

Parcel A:

All that portion of the west 1/2 of the southeast 1/4

of the southeast 1/4 bounded and particularly described

as follows:

Commencing at the southeast corner of the west 1/2 of

the southeast 1/4 of the southeast 1/4 of said Section

10, above township and range; thence running north

along the east line of said west 1/2 a distance of 20

feet to the north side of county road known as Beckwith

Road to the point of beginning of this description;

thence continuing north along the east line of said

west 1/2, a distance of 125 feet to a point; thence

west and parallel to the south line of said southeast

1/4 of said Section 10, a distance of 135 feet to a

point; thence south and parallel to the east line of

the said west 1/2 of said southeast 1/4 of the

southeast 1/4 of said Section 10, a distance of 125

feet to a point on the north line of said county road;

thence east along the north line of said county road, a

distance 135 feet to the point of beginning.

Parcel B: 

All that portion of the west 1/2 of the southeast 1/4

of the southeast 1/4 bounded and particularly described

as follows:

Commencing at the southeast corner of the west 1/2 of

the southeast 1/4 of the southeast 1/4 of said Section

10; thence north, on the east line of said west 1/2 of

the southeast 1/4 of the southeast 1/4 of Section 10, a

distance of 145 feet to the northeast corner of the

property conveyed to George Raymond Reed and Gladys

Reed, husband and wife, by grant deed recorded in Book

2021 of Official Records, at page 165, Stanislaus

County recorder’s office, and the point of beginning of

this description; thence west parallel with the south

line of the southeast 1/4 of said Section 10, a

distance of 135 feet; thence north parallel with the

east line of said west 1/2 of the southeast 1/4 of the

southeast 1/4 of said Section 10, a distance of 100

feet; thence east, parallel with the south line of the

southeast 1/4 of said Section 10, a distance of 135

feet to the aforesaid east line of the west 1/2 of the

southeast 1/4 of the southeast 1/4 of said Section 10,

thence south, on said east line of the west 1/2 of the

southeast 1/4 of the southeast 1/4 of Section 10, a

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distance of 100 feet to the point of beginning.

Parcel No. 3:

The west 120 feet of the east 642 feet of the south 170

feet of the southeast 1/4 of the southeast 1/4 of

Section 10, Township 3 south, Range 8 east M.D.B. & M.

Excepting therefrom the south 20 feet. 

The Adjoining Parcels:

All that portion of the Southeast 1/4 of Section

Township 3, South Range 8 East M.D.B. & M, as follows:

Commencing at the Southeast corner of said Section 10;

thence North 20 feet to the North side of Beckwith

Road; thence West along North side said road 642 feet

to the point of beginning; thence continuing along

North side road 15.85 feet more or less; thence North

776 feet more or less to the South line of a canal;

thence Southeast along South line canal 15.85 feet more

or less; thence South 776 feet or more or less to the

point of beginning.

EXCEPTING THEREFROM the North 450 feet.

Kane Decl. ¶ 3.

B. The Prior Actions

In a previous action before this Court, United States v.

George Raymond Reed, Civ. No. F-88-106 EDP, the United States

secured money judgments against George Raymond Reed and Gladys

Reed (collectively the “Taxpayers”) in the amount of $283,272.33,

plus penalties and interest since February 22, 1988. Ham Decl.

Ex. A. In those proceedings, the United States also secured a

money judgment against George Loren Reed in the amount of

$356,778.28, which it is not currently seeking to enforce. Id. 

On October 2, 1991, abstracts of these judgments were recorded

with the County Recorder’s Office for Stanislaus County. Ham

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The naming of the parcels is different in the United States’ 1

briefs in this action from the Order and Decree of Foreclosure (the

“Order and Decree”) in the previous case. Parcel 2 in this action

is made up of the parcels referred to as Parcel 1 and Parcel 2 in

the previous action. Parcel 3 in this action is the same as Parcel

3 in the previous action. Parcel 1 and the Adjoining Parcels in

this action were recently discovered, and so they are not described

in the previous Order and Decree.

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Decl. Exs. B, C & D. As of September 15, 2003, George Raymond

Reed and Gladys Reed remain indebted to the United States in the

amounts of $1,003,132.86 and $1,004,999.17, respectively. Reece

Decl. ¶¶ 6-7. 

In the previous action, the Court found that the transfer of

two parcels of land, Parcels 2 and 3, was fraudulent and 1

therefore a nullity with respect to the United States. Ham Decl.

Ex. A at 2. On March 11, 1992, the Court allowed the United

States to enforce its money judgments against the Taxpayers by

foreclosing its federal tax liens on Parcels 2 and 3. Ham Decl.

Ex. F. The foreclosure was not completed because of the

Taxpayers’ age and occupancy of the parcels and the poor real

estate market at that time. Reece Decl. ¶ 8.

On July 28, 2004, upon the deaths of the Taxpayers, the

United States filed its motion for an amended order of

foreclosure, seeking to enforce its money judgments against

Parcels 2 and 3. The United States has discovered Parcel 1 and

the Additional Parcels that are held by the Reed Family Trust

(the “Trust”) or by George Raymond Reed. Kane Decl. ¶¶ 3-4. The

Taxpayers issued three deeds of trust on March 23, 1987, and one

deed of trust on April 29, 1992, each of which lists Shirley M.

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Lundy, Duane C. Reed, and George L. Reed as beneficiaries.

C. This Action

On March 31, 2005, the United States initiated this action. 

It seeks to enforce its money judgments against the Taxpayers

against Parcels 1, 2 and 3 and the Adjoining Parcels

(collectively the “Subject Property”). The suit does not name

George Raymond Reed or Gladys Reed, as they are deceased. The

defendants in this action were George Loren Reed and Duane Reed,

both individually and as trustees of the Reed Family Trust,

Lidco, Inc. (“Lidco”), and Shirley Lundy. On May 3, 2005, the

United States filed its First Amended Complaint (“FAC”).

On June 8, 2005, Lidco, which holds a judgment lien, entered

into a stipulation with the United States dismissing Lidco from

the action and establishing the relative priorities of their

claims to the Subject Property. 

On June 10, 2005, the Clerk of the Court entered a default

as to Duane Reed and George Loren Reed. On September 27, 2005,

the Clerk entered a default as to Shirley Lundy. On November 2,

2005, the United States filed a Motion for Default Judgment,

Final Judgment, and Order of Foreclosure (the “Motion”),

supported by declarations and exhibits. On December 8, 2005,

Duane Reed, George Loren Reed, and Shirley Lundy (collectively

“Defendants”) moved for an extension in order to seek counsel. 

On December 13, 2005, the Court continued the hearing until

January 9, 2006. Defendants did not give notice that they have

obtained counsel, file any response to the Motion, or appear at

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oral argument.

II. Discussion

A. Legal Standards

Rule 55 of the Federal Rules of Civil Procedure provides 

that the Court may enter a default judgment “[w]hen a party

against whom a judgment for affirmative relief is sought has

failed to plead or otherwise defend . . . .” A party must file

an answer or motion to dismiss within 20 days of service of the

summons and complaint. Fed. R. Civ. P. 12. Rule 55 provides

that default judgment may be granted to a party entitled to it by

either the Clerk or the Court. In cases in which damages are not

for a “sum certain,” a party must seek default through the Court

pursuant to Rule 55(b)(2). Upon default, the allegations of a

well-pleaded complaint are taken as true. Adriana Int’l Corp. v.

Lewis & Co., 913 F.2d 1406, 1414 (9th Cir. 1990) (citing Geddes

v. United Fin. Group, 559 F.32d 557, 560 (9th Cir. 1977)).

B. Res Judicata Regarding the Taxpayers’ Tax Liabilities

The United States seeks an adjudication of the tax

liabilities of George Raymond Reed and Gladys Reed based on res

judicata. 

Res judicata, or claim preclusion, bars

claims that should have been raised and

resolved in earlier litigation between the

same parties. Generally, a claim is barred

under this doctrine if the earlier

litigation: (1) concerned the same claim as

the current action, (2) reached final

judgment on the merits, and (3) involved the

same parties.

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Communic’ns Telesystems Int’l v. Cal. Pub. Util. Comm’n, 196 F.3d

1011, 1017 (9th Cir. 1999) (citing Nordhorn v. Ladish Co., 9 F.3d

1402, 1404 (9th Cir. 1993)). To determine whether a case

concerns the same claim as a previous action, the Ninth Circuit

primarily examines “‘whether the two suits arise out of the same

transactional nucleus of fact,’ though [it] also consider[s]

other factors as necessary.” United States v. Northrop Corp.,

147 F.3d 905, 910 (9th Cir. 1998) (quoting Costantini v. Trans

World Airlines, 681 F.2d 1199, 1201-02 (9th Cir. 1982)). To

determine whether two events arise from the same transaction,

courts consider whether they are “related to the same set of

facts and whether they could conveniently be tried together.” 

Int’l Union of Operating Eng’rs-Employers Constr. Indus. Pension,

Welfare and Training Trust Funds v. Karr, 994 F.2d 1426, 1429

(9th Cir. 1993) (quoting W. Sys., Inc. v. Ulloa, 958 F.2d 864,

870 (9th Cir. 1992)). Other factors courts consider are “(1)

whether rights or interests established in the prior judgment

would be destroyed or impaired by prosecution of the second

action; (2) whether substantially the same evidence is presented

in the two actions; [and] (3) whether the two suits involve

infringement of the same right.” Costantini, 681 F.2d at 1201-02

(citing Harris v. Jacobs, 621 F.2d 341, 343 (9th Cir. 1980)). 

“In the tax context, once a taxpayer’s liability for a particular

year is litigated, ‘a judgment on the merits is res judicata as

to any subsequent proceeding involving the same claim and the

same tax year.’” Baker v. IRS, 74 F.3d 906, 910 (9th Cir. 1996)

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(quoting Commissioner v. Sunnen, 333 U.S. 591, 598, 68 S. Ct.

715, 92 L. Ed. 898 (1948)).

The Court, by its order of December 11, 1989, has already

adjudged in the previous action that the Taxpayers’ are liable to

the United States in the amount of $283,272.33, plus interest and

penalties since February 22, 1988. Ham Decl. Ex. A at 2. As of

September 15, 2003, George Raymond Reed remains liable to the

United States in the amount of $1,003,132.86, and Gladys Reed

remains liable for $1,004,999.17. Reece Decl. ¶¶ 6-7. Reece

Decl. ¶ 6. The current proceedings are an effort to enforce a

judgment on the same claims in the previous action. The United

States is free to enforce the earlier tax judgment at any time. 

See United States v. Overman, 424 F.2d 1142, 1147 (9th Cir.

1970). 

The Court’s order of December 11, 1989, is res judicata as

to the Taxpayers’ tax liabilities in this action. Accordingly,

the Court finds that, as of September 15, 2003, George Raymond

Reed remains indebted to the United States for outstanding

federal tax liabilities in the amount of $1,003,132.86. As of

September 15, 2003, Gladys Reed remains indebted to the United

States for outstanding federal tax liabilities in the amount of

$1,004,999.17.

C. Collateral Estoppel Regarding the Fraudulent Conveyance

of Parcels 2 and 3

The United States asks the Court to find, based on

Defendants’ default, that George Loren Reed and Duane Reed

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(collectively “Successors”) are collaterally estopped from

contesting the Court’s finding that the Taxpayers fraudulently

transferred Parcels 2 and 3 to the Trust. “Offensive collateral

estoppel” allows the plaintiff to foreclose the defendant from

litigating an issue that it has already unsuccessfully litigated

in an action with another party. Pena v. Gardner, 976 F.2d 469,

472 (9th Cir. 1992). Offensive collateral estoppel is

appropriate only where 

(1) there was a full and fair opportunity to

litigate the issue in the previous action;

(2) the issue was actually litigated in that

action; (3) the issue was lost as a result of

a final judgment in that action; and (4) the

person against whom collateral estoppel is

asserted in the present action was a party or

in privity with a party in the previous

action.”

Id. 

In the previous action, the Court found that Parcels 2 and 3

were fraudulently conveyed. Ham Decl. Ex. A at 2. Consequently,

the Court held that the transfers “void” and “of no effect, as to

the rights of the United States.” Id. The Taxpayers had an

opportunity to fully and fairly litigate this issue because it

was decided on a motion for summary judgment that Taxpayers

opposed. 

In determining whether the issue was actually litigated in

those proceedings, the Court must determine whether Taxpayer

substantially participated in the proceedings by engaging in

“obstructive tactics” to protect their interests in the

litigation. IRS v. Palmer (In re Palmer), 207 F.3d 566, 568 (9th

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Cir. 2000) (citing FDIC v. Daily (In re Daily), 47 F.3d 365, 368

(9th Cir. 1995)). After reviewing the docket and file in United

States v. George Raymond Reed, Civ. No. F-88-106 EDP, the Court

concludes that the issue was actually litigated. Taxpayers

retained counsel, filed an answer to the complaint denying that

the conveyances were fraudulent, and filed a memorandum of points

and authorities and a statement of disputed facts in opposition

to the motion for summary judgment. Docket, United States v.

George Raymond Reed, Civ. No. F-88-106 EDP. The Taxpayers

actually litigated the United States’ claim that the conveyances

of Parcels 2 and 3 were fraudulent.

The United States also must show that the persons against

whom collateral estoppel is asserted, the Successors, are in

privity with the Taxpayers. The United States asserts that they

are in privity with the Taxpayers because, as direct heirs, they

were substituted as the new trustees of the Trust upon the

Taxpayers’ deaths. FAC ¶¶ 6, 17-20. “‘Privity’ . . . is a legal

conclusion ‘designating a person so identified in interest with a

party to former litigation that he represents precisely the same

right in respect to the subject matter involved.’” Headwaters

Inc. v. U.S. Forest Serv., 399 F.3d 1047, 1052-53 (9th Cir.

2005). 

The Court takes as true the United States’ allegations that

the Successors became trustees of the Trust upon Gladys Reed’s

death on July 26, 2002. FAC ¶ 19. As successor trustees,

Successors necessarily have identical interests and an identical

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relationship to the Subject Property as their predecessors did. 

See First Nat’l Bank v. Ickes, 154 F.2d 851, 853 (D.C. Cir. 1946)

(successor fiduciary is in privity with predecessor); cf. Rives

v. Franklin Life Ins. Co., 792 F.2d 1324, 1329 (5th Cir. 1986)

(finding that based on the “well established rule” that “a

successor fiduciary of an estate is in privity with his

predecessor,” the court’s ruling against the current trustee

would be binding against a successor trustee). Therefore,

Successors are in privity with Taxpayers.

Because all of the requirements for collateral estoppel are

met, the Court finds that Successors are collaterally estopped

from contesting the Court’s findings in the previous action that

the conveyances of Parcels 2 and 3 to the Trust were fraudulent

and therefore a nullity with respect to the United States.

D. Default Judgment Regarding Parcel 1

The United States urges the Court to find that the

Taxpayers’ transfer of Parcel 1 to themselves as trustees of the

Trust is a nullity with respect to the United States based on the

claims in its FAC. The United States further alleges that George

Loren Reed and Duane Reed, as the Taxpayers only known direct

heirs, succeeded the Taxpayers as trustees of the Trust after

Taxpayers’ deaths. Because Defendants are in default, the Court

takes well-pleaded allegations in the FAC as true in analyzing

this claim. See Adriana Int’l, 913 F.2d at 1414. 

The United States claims that the transfer is a fraudulent

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Section 3439.04 provides, in relevant part, 2

(a) A transfer made or obligation incurred by

a debtor is fraudulent as to a creditor,

whether the creditor’s claim arose before or

after the transfer was made or the obligation

was incurred, if the debtor made the transfer

or incurred the obligation as follows:

(1) With actual intent to hinder, delay,

or defraud any creditor of the debtor.

. . .

Section 3439.05 provides, in full, 3

A transfer made or obligation incurred by a

debtor is fraudulent as to a creditor whose

claim arose before the transfer was made or

the obligation was incurred if the debtor made

the transfer or incurred the obligation

without receiving a reasonably equivalent

value in exchange for the transfer or

obligation and the debtor was insolvent at

that time or the debtor became insolvent as a

result of the transfer or obligation.

The United States also claims that the transfer of Parcel 1 4

is a nullity with respect to its claims on two other grounds: (1)

the Trust is the alter ego or nominee of the Taxpayers and (2) the

Trust was a revocable trust under California law during the

lifetimes of the taxpayers. Because the transfer of Parcel 1 is

invalid under California Civil Code sections 3439.04 and 3439.05,

the Court need not decide the United States’ alternative arguments.

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conveyance pursuant to California Civil Code sections 3439.042

and 3439.05. In the FAC, the United States claims that the 3

conveyance of Parcel 1 “was made with the intent to hinder,

delay, or defraud” creditors. FAC ¶ 34. This allegation

establishes that the conveyance was fraudulent under section

3439.04, allowing the United States to avoid the transfer to the

extent necessary to satisfy its claim. See Cal. Civ. Code

§ 3439.07(a)(1). Accordingly, the purported transfer of Parcel 4

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1 from George Raymond Reed and Gladys Reed to the Trust is a

nullity with respect to the United States.

E. Default Judgment Regarding Deeds of Trust

The United States seeks a default judgment that the deeds of

trust in favor of Shirley Lundy, George Loren Reed, and Duane

Reed against the Subject Property are fraudulent and do not

create any interest in the purported beneficiaries. The FAC

alleges that the deeds of trust that encumber the Subject

Property were made to “hinder, delay, or defraud the present and

future creditors of George Raymond Reed, Gladys Reed, and George

Loren Reed, including the United States, in the collection of

debts lawfully due or to be due.” FAC ¶ 40. Taking this

allegation as true, the encumbrances are fraudulent pursuant to

Civil Code section 3439.04. Consequently, the deeds of trust are

a nullity with respect to the United States’ claim. See Cal.

Civ. Code § 3439.07(a)(1).

F. Current Ownership of the Property

On October 2, 1991, abstracts of the judgement in the

previous action were recorded with the County Recorder’s Office

for Stanislaus County against the Subject Property. FAC ¶ 28. 

Any interest in these parcels held by Taxpayers’ heirs, by

intestacy or bequest, is subject to the United States’ claim. 

The Court takes as true the United States’ allegations that the

Successors are the only persons who may claim any interest in

property nominally held by the Trust, including the Subject

Property. FAC ¶ 19. Additionally, Successors are the only heirs

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of Taxpayers that would receive property formerly held by

Taxpayers, under applicable law. Id. at ¶ 20. The judgments

from the prior action continue to attach to the Adjoining Parcels

by virtue of George Raymond Reed’s ownership. The judgments

continue to attach to Parcels 1, 2, and 3, despite the purported

transfer to the Trust because the transfer was fraudulent, as

concluded above.

G. Lidco’s Interest

Defendant Lidco is the judgement lien creditor under an

abstract of judgment recorded with the County Recorder’s Office

for Stanislaus County on January 11, 1987, and renewed on October

29, 1996. The United States and Lidco stipulate that Lidco’s

judgment is senior to the United States’ judgments. Pursuant to

the stipulation, the proceeds from the judicial sale of the

Subject Property shall be distributed to Lidco to satisfy its

judgment lien before distribution to the United States to satisfy

the Taxpayers’ federal tax liabilities. 

H. Validity of the Tax Liens

The federal tax liens underlying the money judgments entered

against Taxpayers are valid. The tax liens give the United

States an interest in the Subject Property. Under 26 U.S.C.

sections 7402 and 7403, this Court may order the sale of the

property in question and the distribution of the proceeds.

 ACCORDINGLY:

The federal tax liens underlying the money judgments are

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hereby enforced against Parcels 1, 2, and 3 and the Adjoining

Parcels, and all improvements, buildings, and appurtenances

thereon or thereto (collectively the “Subject Property”). The

Internal Revenue Service is authorized and directed to offer for

public sale the Subject Property. This final judgment and order

shall act as a special writ of execution and no further orders or

process from the Court shall be required. The terms and

conditions of sale shall comply with 28 U.S.C. sections 2001 and

2002 and Local Rule A-570, as follows:

1. The Internal Revenue Service is authorized to have free

access to the Subject Property and to take all actions

necessary to preserve the Subject Property, including

without limitation, retaining a locksmith or other

person to change or install locks or other security

devices on any part of the Subject Property, until the

deed of the Subject Property is delivered to the

ultimate purchaser.

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

George Loren Reed, Duane Reed, Shirley Lundy, and all

other parties named in this case.

3. 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.

4. The public sale of the Subject Property shall be held

either at the courthouse of the county in which the

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realty is located, or on the premises.

5. The date and time for sale are to be announced by the

Internal Revenue Service.

6. 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 Stanislaus County, where the realty is

situated, and at the discretion of the Internal Revenue

Service, by any other notice that it deems appropriate. 

The notice shall contain a description of the Subject

Property and shall contain the essential terms and

conditions of sale in this Final Judgment and Order of

Foreclosure.

7. A reasonable minimum bid shall be determined by the

United States. If the minimum bid is not met or

exceeded, the Internal Revenue Service may, without

further permission of this Court, and under the terms

and conditions in this order of sale, hold a new public

sale, if necessary, and reduce the minimum bid.

8. The successful bidder shall be required to deposit at

the time of sale with the Internal Revenue Service a

minimum of ten (10) percent of his or her bid, with the

deposit to be made by cashiers or certified check made

payable to “United States Treasury.” Before being

permitted to bid at the sale, bidders shall display to

the Internal Revenue Service proof that they are able

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to comply with this requirement. No bids will be

received from any person who has not presented proof

that, if they are the successful bidder, they can make

the deposit required by this judgment.

9. The balance of the purchase price for the Subject

Property is to be paid to the Internal Revenue Service

by a 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 shall be applied to cover the expenses of

the sale, with any amount remaining to be applied to

the outstanding tax liability, and the Subject Property

shall be again 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.

10. The sale of the Subject Property shall be subject to

confirmation by this Court as required by Local Rule A570. Absent a written objection filed within three

days of the sale, or the purchaser’s default, the sale

shall stand confirmed without any action by the Court. 

On confirmation of the sale of the Subject Property,

and receipt of payment in full, the Internal Revenue

Service shall execute and deliver a Certificate of Sale

and Deed conveying the Subject Property to the

purchaser. On confirmation of the sale, all interests

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in, liens against, or claims to, the Subject Property

that are held or asserted by the plaintiff or the

defendants in this action are discharged and

extinguished.

11. The sale is ordered pursuant to 28 U.S.C. section 2001,

and is made without right of redemption. Possession of

the property sold shall be yielded to the purchaser

upon the production of a copy of the Certificate of

Sale and deed. If there is a refusal to so yield, a

Writ of Assistance may, without further notice, be

issued by the Clerk of this Court to compel delivery of

the Subject Property to the purchaser.

12. Until the sale date, George Loren Reed, Duane Reed, and

Shirley Lundy shall take all reasonable steps necessary

to preserve the Subject 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 Subject

Property, nor shall they cause or permit anyone else to

do so. They shall not do anything that tends to reduce

the value or marketability of the Subject Property, nor

shall they cause or permit anyone else to do so. The

taxpayers and the defendants shall not record any

instruments, publish any notice, or take any other

action (such as running newspaper advertisements) that

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may directly or indirectly tend to adversely affect the

value of the Subject Property or that may tend to deter

or discourage potential bidders from participating in

the public auction.

13. George Loren Reed and any other persons occupying the

Subject Property shall leave the property permanently

within 30 days of the date of the Final Judgment and

Order of Foreclosure, unless the United States agrees

otherwise in writing. Each shall take with them their

personal property, but leave all improvements,

buildings, fixtures, and appurtenances. If any person

occupying the property fails or refuses to leave and

vacate the property by the time specified in this

order, the U.S. Marshal and his deputies and/or the

Internal Revenue Service are authorized and directed to

take all actions that are reasonably necessary to bring

about the ejectment of those persons. If any person

fails or refuses to remove his or her personal property

from the property by the time specified herein, the

personal property remaining on the Subject Property is

deemed forfeited and abandoned. The Internal Revenue

Service is authorized to remove and dispose of such

personal property in whatever manner the Internal

Revenue Service sees fit, including sale with the

proceeds applied first to the expenses of sale and the

remainder to the tax liabilities giving rise to the

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lien upon which foreclosure is hereby ordered.

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

Revenue Service shall distribute the amount paid by the

purchaser as follows:

a. First, the Internal Revenue Service

shall retain an amount sufficient to cover

the expenses of the sale, including an amount

sufficient to cover the expenses of any steps

taken to secure or maintain the Subject

Property pending sale and confirmation by the

Court;

b. Second, to all taxes unpaid and matured that

are owed for real property taxes on the Subject

Property;

c. Third, to all amounts owed under the judgment

lien held by Lidco, Inc.

d. Fourth, the remainder to be applied towards George

Raymond Reed’s and Gladys Reed’s underlying federal tax

liabilities as reflected on the money judgments entered

against them (jointly and severally) on December 12,

1989, in the amount of $283,272.33, plus penalties and

interest since February 22, 1988.

15. Any balance remaining after the above payments shall be

held by the Clerk pending further order of the Court.

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IT IS SO ORDERED.

Dated: February 2, 2006 /s/ Robert E. Coyle 

810ha4 UNITED STATES DISTRICT JUDGE

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