Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00192/USCOURTS-caed-2_07-cv-00192-1/pdf.json

Parties Involved:
Internal Revenue Service
Defendant
Bernadette Laubly
Defendant
Steve C. Laubly
Defendant
Norcal Gold, Inc.
Plaintiff
United States of America
Defendant

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

NORCAL GOLD, INC., a

California corporation,

 NO. CIV. 07-192 WBS KJM

Plaintiff-in-Interpleader,

v. MEMORANDUM AND ORDER RE:

MOTION FOR JUDGMENT ON THE

PLEADINGS OR SUMMARY

ADJUDICATION 

STEVE C. LAUBLY; BERNADETTE

LAUBLY; UNITED STATES OF

AMERICA; and INTERNAL REVENUE

SERVICE, 

Defendants-in-Interpleader.

----oo0oo----

This is an interpleader action involving a dispute over

the remaining balance plaintiff-in-interpleader Norcal Gold,

Inc., doing business as Re/Max Gold (“Norcal”), potentially owes

pursuant to an asset purchase agreement. Norcal filed this

action after receiving competing claims from defendants-ininterpleader Steve C. and Bernadette Laubly and the United States

and Internal Revenue Service (IRS). 

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I. Factual and Procedural Background

For the tax years of 1997, 1998, 2000, and 2001, Steve

Laubly individually filed income tax returns (Form 1040) and,

based on his signed tax returns, a delegate of the Secretary of

Treasury made assessments against him for unpaid federal income

tax liabilities, penalties, and interest. (U.S.’s Mem. in

Support of Motion for Jdmt. on the Pleadings (“U.S.’s Mem.”) Exs.

A-D.) As of December 20, 2006, the unpaid federal taxes,

assessed and accrued interest, and other statutory additions

totaled $69,946.22. (U.S.’s Answer ¶ 1.) The IRS recorded

Notices of the Federal Tax Liens in Fresno County on April 1,

2003 for the tax year of 1997 and on March 15, 2005 for the tax

years of 1998, 2000, and 2001. (U.S.’s Mem. Exs. E-F.) On July

28, 2004, IRS Officer Dennis D. Stiffler sent to Laubly, via

certified mail, a Notice of Intent to Levy for the tax years of

1997, 1998, 2000, and 2001. (Stiffler Decl. ¶ 4.) 

On August 4, 2006, Norcal and the Laublys entered into

an asset purchase agreement (“Agreement”) in which Norcal agreed

to pay the Laublys $100,000 in exchange for the Laublys’ tangible

and intangible assets used in their real estate brokerage

business, Sundance Real Estate. (U.S.’s Mem. Ex. G.) The

Agreement obligated Norcal to pay $50,000 on the August 24, 2006

closing date and the remaining $50,000 on January 15, 2007. 

(Stiffler Decl. ¶¶ 2, 6.) The Laublys also covenanted that they

had timely paid all taxes and that there were no liens or

encumbrances on the assets. (Id. at ¶ 4.) 

On November 21, 2006, Stiffler hand-delivered two tax

collection notices (IRS Letters 3174 and 3164(B)) to Laubly’s

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residence. (Id. at ¶ 5, Exs. 1-2.) In a phone conversation with

Laubly that same day, Stiffler informed him that the IRS would

issue a levy on the proceeds of the Laublys’ sale of their

business. (Id. at ¶ 6.) Eight days later, the IRS received a

seven-page letter from Laubly that attacked the government’s

authority to levy a tax on private employment income and to

enforce a lien to collect such tax. (Id. at Ex. 3.)

On November 22, 2006, the IRS issued a Notice of Levy

to Norcal, which stated that the IRS had a levy against Laubly

for $69,946.22. (Compl.-in-Interpleader ¶ 11; U.S.’s Mem. Ex.

H.) Four days later, Laubly sent Norcal a letter claiming that

the Notice of Levy was “unlawful, unconstitutional and improper.” 

(Id. at ¶ 13.) The letter also stated that if Norcal paid the

$50,000 balance to the IRS, Laubly would consider Norcal as

“choosing to engage in collusion and conspiracy, to defraud [him]

and engage in conversion of his personal property . . . .” (Id.) 

On January 19, 2007, the IRS issued a Final Demand for Payment to

Norcal. (U.S.’s Mem. Ex. I.) 

On January 30, 2007, Norcal initiated this interpleader

action seeking to force the defendants-in-interpleader to

litigate their rights to the $50,000 balance due under the

Agreement. Norcal also alleges claims for recision, restitution,

and damages for fraud against the Laublys. In its Answer, the

United States asserted a claim to any funds Norcal owes Laubly

pursuant to the Agreement. While the Laublys filed a pro se

answer to the complaint-in-interpleader, they neither asserted a

claim to the funds nor answered the United States’ cross-claim. 

Pursuant to Federal Rule of Civil Procedure 12(c), the

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1 On January 31, 2008, nine days after opposition to the

United States’ motion was due, the Laublys filed a “Demand for a

Jury Trial and Objection to the United State[s’] Request for

Summary Judgment.” The entirety of the Laublys’ objection to the

United States’ motion consisted of one conclusory sentence: 

“Defendants[in-interpleader] hereby respectfully move the court

to deny the summary judgment requested by the United States on

the basis that it will deny the defendants[in-interpleder] their

civil rights, and their right to due process.” (Laublys’ Demand

for Jury Trial & Objection to U.S.’s Mot. for Summ. J. 2:6-9.)

The United States submitted its motion “upon the record

and briefs on file” and requested that the court issue its order

without oral argument. E. Dist. of Cal. Local R. 78-230(h). The

court has determined that it does not need to hear oral argument,

and accordingly decides the motion on the papers. The Laublys

were not entitled to oral argument because, even if the court

construes their January 31, 2008 filing as an opposition to the

United States’ motion, it was not timely filed. See id. at Rule

78-230(c) (“No party will be entitled to be heard in opposition

to a motion at oral arguments if opposition to the motion has not

been timely filed by that party.”).

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United States now moves for judgment on the pleadings to

establish that 1) the levy the IRS asserts against Laubly is

lawful and 2) the United States assumes all rights Laubly has

under the Agreement. Alternatively, the United States moves for

summary adjudication on the same issues. Norcal filed a nonopposition to the United States’ motion.1

II. Discussion

Pursuant to Federal Rule of Civil Procedure 12(c),

“[a]fter the pleadings are closed but within such time as not to

delay the trial, any party may move for judgment on the

pleadings.” Fed. R. Civ. P. 12(c). For purposes of Rule 12(c),

the pleadings are “closed” only when the parties have filed all

of the pleadings Rule 7(a) contemplates. See id. Rule 7(a)

(“There shall be a complaint and an answer; . . . an answer to a

cross-claim, if the answer contains a cross-claim . . . .”); In

re Villegas, 132 B.R. 742, 745 (B.A.P. 9th Cir. 1991) (“Pleadings

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are not closed until at least an answer has been filed ....

Judgment on the pleadings may not be entered where no answer has

been filed.”). Accordingly, because the Laublys have not

answered the United States’ cross-claim, Rule 12(c) does not

permit the United States to move for judgment on the pleadings. 

A party can, however, move for summary adjudication “at

any time after the expiration of 20 days from the commencement of

the action . . . .” Fed. R. Civ. P. 56(a). The standard that

applies to a motion for summary adjudication is the same as that

which applies to a motion for summary judgment. See id. Rule

56(a), (c); Mora v. Chem-Tronics, Inc., 16 F. Supp. 2d 1192, 1200

(S.D. Cal. 1998). 

Summary adjudication is proper “if the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(c). A material fact is one that could affect the outcome of

the suit, and a genuine issue is one that could permit a

reasonable jury to enter a verdict in the non-moving party’s

favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986). 

The party moving for summary adjudication bears the

initial burden of establishing the absence of a genuine issue of

material fact and can satisfy this burden by presenting evidence

that negates an essential element of the non-moving party’s case. 

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). 

Alternatively, the movant can demonstrate that the non-moving

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party cannot provide evidence to support an essential element

upon which it will bear the burden of proof at trial. Id.

Once the moving party meets its initial burden, the

non-moving party must “go beyond the pleadings and by her own

affidavits, or by ‘the depositions, answers to interrogatories,

and admissions on file,’ [and] designate ‘specific facts showing

that there is a genuine issue for trial.’” Id. at 324 (quoting

Fed. R. Civ. P. 56(e)). The non-movant “may not rest upon the

mere allegations or denials of the adverse party’s pleading.” 

Fed. R. Civ. P. 56(e); Valandingham v. Bojorquez, 866 F.2d 1135,

1137 (9th Cir. 1989). However, any inferences drawn from the

underlying facts must be viewed in the light most favorable to

the non-moving party. Matsushita Elec. Indus. Co. v. Zenith

Radio Corp., 475 U.S. 574, 587 (1986). Additionally, the court

must not engage in credibility determinations or weigh the

evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255

(1986).

“In an action to collect tax, the government bears the 

initial burden of proof. The government, however, may satisfy

this initial burden by introducing into evidence its assessment

of taxes due” and providing a “minimal factual foundation” for

the assessment. Oliver v. U.S., 921 F.2d 916, 919-20 (9th Cir.

1990) (internal citations omitted). Unless the assessment is

“without rational foundation or is arbitrary,” “introduction of

the assessment establishes a prima facie case” for the

government. Id. Once “the government satisfies its initial

burden by introducing the assessment . . . , the taxpayer then

has the burden of proof” to challenge the government’s claim that

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the tax is due. Id.

The United States has produced Certificates of

Assessments, Payments, and Other Specific Matters (Form 4340)

(“Certificates of Assessments”) for the tax years of 1997, 1998,

2000, and 2001. (U.S.’s Mem. Exs. A-D; see also U.S.’s Answer 7 

(Laubly owes $69,946.22 as of December 20, 2006).) Factually,

the assessments were based on liabilities established in Laubly’s

individually-filed income tax returns (Form 1040), which he

signed under penalty of perjury. (U.S.’s Mem. Exs. A-D.) The

Certificates of Assessments also establish that the tax

liabilities were properly assessed by a duly authorized Secretary

of Treasury, 26 U.S.C. §§ 6201-6203, and that the notices and

demands for payment of the liabilities were properly sent to

Laubly and included the “23c date.” Id. §§ 6303(a), 6321; Huff

v. United States, 10 F.3d 1440, 1145-46 (9th Cir. 1993)

(requiring that Certificates of Assessments include the “23C

date”). 

The United States’ recorded tax liens are also valid. 

(See U.S.’s Mem. Exs. E, F.) “When a taxpayer neglects or

refuses to pay a federal tax liability after assessment, notice,

and demand for payment, § 6321 imposes a tax lien in favor of the

government for ‘all property and rights to property, whether real

or personal’ belonging to the taxpayer.” United States v.

Cunningham, No. 04-2483, 2006 WL 1628010, at *5 (E.D. Cal. June

7, 2006) (quoting § 6321) (citing Drye v. United States, 528 U.S.

49, 55 (1999)). 

While Laubly does not oppose the United States’ motion

for summary adjudication, he has stated his position regarding

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the IRS levy in the Answer he filed with his wife. Laubly

alleges that the “IRS has no authority to make plaintiff[-ininterpleader] or defendant[-in-interpleader] Laubly liable for

the subject tax within the several states” and that the levy is

an “unlawful security filed in the public record against

defendant[-in-interpleader] Laubly.” (Laublys’ Answer ¶¶ 4-5.) 

In his detailed letter to the IRS, Laubly also elaborates that 1)

“Congress does not have the authority to levy a direct tax on”

private employment income; 2) the Secretary of the Treasury does

not have the authority to assess private employment earnings as

income; and 3) the IRS does not have the authority to place a

lien on property or enforce income and employment tax laws. 

(Stiffler Decl. Ex. 3.)

However, because Laubly does not attack the procedural

validity of the assessments, any claims that can be attributed to

him are not cognizable in this action. Specifically, 28 U.S.C. §

2410 permits “‘actions challenging the procedural aspects of tax

liens, but not the merits of the underlying tax assessments.’” 

Huff, 10 F.3d at 1145-46 (quoting Arford v. United States, 934

F.2d 229, 232 (9th Cir. 1991)). “To the extent that [Laubly]

challenge[s] the merits of [his] underlying requirement to pay

[the] taxes[,] . . . the district court . . . does not have

jurisdiction.” James v. United States, 970 F.2d 750, 754 (10th

Cir. 1992); see also id. (“‘[W]hatever narrow jurisdiction may

lie under § 2410 does not extend to an omnibus challenge to the

authority of the Internal Revenue Service to function.’”)

(citation omitted). 

Laubly’s arguments do not attack the procedural

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validity of the assessments because he neither denies that he

received the Certificates of Assessments and requisite notices

nor “present[s] evidence suggesting that the information in the

[Certificates of Assessments or notices was] inaccurate.” See

Huff, 10 F.3d at 1145 (“This court has held that claims regarding

both the failure by the IRS properly to assess a tax and to

provide a taxpayer with a copy of an assessment under § 6203, and

the failure to send a notice of assessment and a demand for

payment under § 6303(a) present procedural challenges to the

validity of a lien and are therefore cognizable under § 2410.”);

see also id. (“[The Certificates of Assessments] provide[] at

least presumptive evidence that a tax has been validly assessed

under § 6203.”) (citations omitted). 

Laubly is also not entitled to seek an injunction

against the IRS because “it has been established law that payment

of the tax followed by a suit for refund constitutes an adequate

remedy at law.” Cool Fuel, Inc. v. Connett, 685 F.2d 309, 314

(9th Cir. 1982) (citing Bailey v. George, 259 U.S. 16 (1922));

see also Pulliam v. Allen, 466 U.S. 522, 537 (1984) (an

inadequate remedy at law is a prerequisite to an injunction). 

Accordingly, because there is no genuine issue of

material fact with respect to the United States’ claim that the

IRS levy is lawful, this court must grant the United States’

motion for summary adjudication on that issue. 

“In a levy proceeding, the IRS ‘“steps into the

taxpayer's shoes,”’ [and it] acquires whatever rights the

taxpayer himself possesses.” U.S. v. Nat’l Bank of Commerce, 472

U.S. 713, 725-26 (1985) (citations omitted). When a taxpayer has 

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claims entitling him to money or property, “the government may

foreclose upon the taxpayers’ causes of action just as it could

any other real or personal property. A taxpayer’s chose in

action represents one of the taxpayer’s assets, and the

government has the right to pursue the action to judgment . . .

.” U.S. v. Stonehill, 83 F.3d 1156, 1160 (9th Cir. 1996).

Accordingly, because there is no genuine issue of

material fact that the United States assumes all rights Laubly

has under the Agreement, the court must also grant the United

States’ motion for summary adjudication on that issue.

IT IS THEREFORE ORDERED that the United States’ motion

for summary adjudication with respect to the validity of the IRS

levy and its entitlement to any funds Laubly may recover under

the Agreement be, and the same hereby is, GRANTED. 

DATED: February 1, 2008

 

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