* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-20865

Summary Calendar

OXY USA INC.

Plaintiff-Appellee

v.

JAMES HOLDEN, Trustee for Dirt Cheap Mine Trust; RONALD LEATHERS

Defendants-Appellants

v.

INTERNAL REVENUE SERVICE, an agency of the United States

Government

Defendant-Appellee

Appeal from the United States District Court 

for the Southern District of Texas

USDC No. 4:07-CV-683

Before SMITH, STEWART, and SOUTHWICK, Circuit Judges.

PER CURIAM:*

James Holden and Ronald Leathers appeal the district court’s summary

judgment in favor of the Internal Revenue Service (“IRS”) in an interpleader

United States Court of Appeals

Fifth Circuit

F I L E D

January 5, 2009

Charles R. Fulbruge III

Clerk
No. 07-20865

1 Because multiple members of the Leathers family are involved in this dispute, they

are referred to by first name. 

2

action to determine who was the lawful recipient of certain mineral royalty

payments. We AFFIRM.

I. BACKGROUND

A. Leathers’s Land Dispute

In November 2005, Ronald Leathers and his brother, Michael Leathers,1

corresponded concerning a dispute over their respective rights to royalty

payments generated by mineral interests from land in Kansas that formerly

belonged to their late mother. Ronald wrote to Michael informing him that

Michael was receiving mineral royalty payments that Ronald believed were

rightfully his. In response, Michael wrote to remind Ronald that Ronald had

signed a quitclaim deed for the Kansas property in 1998, and that deed did not

reserve any mineral rights Ronald once had. Michael further noted that he had

informed Ronald about the “quit claim problem” in October 2001 but failed to

take any action to correct it. 

In October 2006, Ronald Leathers and James Holden filed a petition in

Texas state court against Michael, his wife Nancy Leathers, the administrator

of the Kansas royalty payments–OXY USA, Inc. (“OXY”), and other petroleum

companies. The petition asserted that Holden, trustee for the Dirt Cheap Mine

Trust, a Colorado entity, was the assignee of “certain claims for recovery of real

property and mineral royalties,” including the disputed royalties from the

Kansas land. Ronald and Holden sought a reconveyance of the mineral

interests, as well as an accounting and restitution of royalties OXY improperly

paid to Michael or Nancy. 

In January 2007, Michael filed a petition in Kansas state court to quiet

title to the property at issue. Michael alleged that he and Ronald had owned the

land with their mother, Louise Leathers, in a partnership called the “Leathers
No. 07-20865

2 Specifically, counsel for Michael and Nancy Leathers told the court that they were

“willing to release it. . . [d]ollarwise, it’s not worth the fight.”

3

Land Company.” He further alleged that during litigation following their

mother’s death, Michael exercised a “buy out” provision in the partnership

agreement to purchase the land in question. As part of the buy out, Ronald

signed a quitclaim deed for the land to Michael. There was no express

reservation of mineral rights in the deed.

B. Notice of Levy and Interpleader Action

By letter dated February 9, 2007, the IRS sent a notice of levy to OXY,

informing the company that Ronald owed over $800,000 in delinquent federal

income taxes. The notice instructed OXY to identify all property and rights to

property belonging to Ronald and to then turn over to the IRS any “property and

rights to property (such as money, credits, and bank deposits) that you have or

which you are already obligated to pay this person.”

On February 26, 2007, OXY brought this action against Holden (trustee

for the Dirt Cheap Mine Trust), Ronald, Michael, Nancy, and the Internal

Revenue Service (“IRS”), to interplead $25,784.27 in royalty payments. Citing

the Texas state court lawsuit filed by Holden and Ronald, as well as the IRS

notice of levy, OXY stated that it could be the subject of multiple suits by the

various interpleader defendants, all claiming an interest in the mineral royalty

payments. OXY also moved to deposit the royalty funds into the registry of the

court, which was granted. 

Three answers were filed to OXY’s interpleader complaint, from Holden

and Ronald (who moved to dismiss), the IRS, and Michael and Nancy. During

a conference between counsel for the parties and the district court on September

17, 2007, Michael and Nancy conceded their claim to the funds.2 The district

court then found Holden to be a “fake trustee,” which the IRS agreed with, and

a characterization to which Holden and Ronald’s counsel acquiesced. The court
No. 07-20865

3 There was no transcript or recording of the prior conference conducted by the court on

July 8, 2007.

4

also stated “[w]e established last time, didn’t we, that there is no substance to

the trust . . . [s]o [Ronald] Leathers is the real . . . non-taxpayer.”3 Again,

counsel to Holden and Ronald did not dispute this statement, but requested the

opportunity to take depositions and other discovery to determine the proper

amount of funds that OXY was holding.

Based on the parties’ concessions at the conference, the district court

entered a final judgment directing the funds to be disbursed to the United States

Treasury and credited to Ronald’s account with the IRS. Holden and Ronald

moved for a new trial, which the district court denied, and they now appeal the

judgment. 

II. DISCUSSION

A. Standard of Review

We review the district court’s grant of summary judgment de novo. See

Crawford v. Formosa Plastics Corp., 234 F.3d 899, 902 (5th Cir. 2000).

Summary judgment is appropriate where “the pleadings, the discovery and

disclosure materials on file, and any affidavits show that there is no genuine

issue as to any material fact and that the movant is entitled to a judgment as a

matter of law.” FED. R. CIV.P. 56(c). All reasonable doubts and inferences must

be resolved in the light most favorable to the non-movant. Crawford, 234 F.3d

at 902.

B. Sua Sponte Summary Judgment for the IRS

The district court is authorized to grant summary judgment sua sponte,

provided that the losing party receives ten days’ notice to come forward with all

of its evidence in opposition to summary judgment. Love v. Nat’l Med. Enters.,

230 F.3d 765, 770 (5th Cir. 2000). Failure to provide ten days notice is harmless

where either the “nonmovant has no additional evidence or if all of the
No. 07-20865

5

nonmovant’s additional evidence is reviewed by the appellate court and none of

the evidence presents a genuine issue of material fact.” Ross v. Univ. of Texas

at San Antonio, 139 F.3d 521, 527 (5th Cir. 1998) (quoting Nowlin v. Resolution

Trust Corp., 33 F.3d 498, 504 (5th Cir. 1994)). 

In this case, although the record shows that Holden and Ronald were not

given any notice before the district court made its summary judgment ruling,the

lack of notice was harmless. At the conclusion of the conference it was apparent

that no material facts remained at issue in the suit. Michael and Nancy, and

stakeholder OXY, disclaimed any ownership of the $25,784.27. The parties

conceded that Dirt Cheap Mine Trust was a fake trust, and therefore Holden did

not have an interest in the funds superior to Ronald and the IRS. At that point,

the only remaining ownership dispute as to the funds was between Ronald and

the IRS. The district court then concluded that the IRS notice of levy meant that

its claim to the funds was superior to Ronald’s. No party disputes that the IRS

properly served OXY with a notice of levy, which requires OXY to turn over any

property owned by Ronald to the IRS. Once it is established that a taxpayer has

property rights under state law to which a federal tax lien attaches, the priority

of competing interests asserted againstthat property is governed by federal law.

United States v. Nat’l Bank of Commerce, 472 U.S. 713, 722 (1985). The district

court found, after considering the concessions of the parties, that Ronald had

property rights to the funds at issue. There was no error in the district court

directing the disbursement of funds to the U.S. Treasury, because only Ronald

and the IRS were left asserting a claim to the royalty payment and there is a

valid IRS levy on his royalty income from OXY.

Holden and Ronald do not state how they were prejudiced by the lack of

notice or what evidence they/he would have produced to create a material fact

issue. Ronald asserted that he did not owe the IRS as much as the nearly

$900,000 claimed by the government, but he did not contend that he owed less
No. 07-20865

4 Holden and Ronald’s argumentthatthe district court“coerced” a settlementiswithout

merit. The court simply ascertained the positions of the various parties and found that there

was no material fact preventing it from determining that the IRS had the superior claim to the

funds and was entitled to judgment as a matter of law. 

6

than the $25,784.27 in royalty payments at issue. Finally, Holden and Ronald

did not dispute the court’s finding at the conference that there was no substance

to the Dirt Cheap Mine Trust and that “[Ronald] Leathers is the real . . . nontaxpayer.” While they contest this assessment on appeal, they offer no evidence

to demonstrate a fact issue on this point. Instead, they requested discovery only

regarding whether the $25,784.27 was truly the amount collected by OXY, an

issue that does not require resolution in this case because the IRS sought all of

the funds that OXY put at issue in its interpleader complaint. 

Although Holden and Ronald requested a new trial, that request did not

state what evidence they offered to create a material fact issue as to the

ownership of the disputed funds.4 Similarly, Holden and Ronald Leathers have

not specified on appeal what evidence they would produce to preclude summary

judgment for the IRS. Holden and Ronald argue that they should be given the

opportunity for discovery. However, Rule 56 does not require that any discovery

take place before summary judgment can be granted. Washington v. Allstate Ins.

Co., 901 F.2d 1281, 1285 (5th Cir. 1990). Further, Holden and Ronald still fail

to articulate what evidence in support of their claims would be found with

additional discovery. Finally, contrary to Holden and Ronald’s assertions, the

district court was not required to enter additional formalized Findings of Fact

and Conclusions of Law. The relevant legal and factual bases for the judgment,

while thin, are sufficiently clear in the conference transcript to allow review of

their appeal. See Gupta v. East Texas State Univ., 564 F.2d 411, 415 (5th Cir.

1981) (“Scanty findings and conclusions such as those in the instant case are not

advisable and, in another case, might well require a reversal and remand. In

this instance, however, the failure to meet the technical requirements of Rule
No. 07-20865

7

52(a) is not fatal because the purposes behind the rule have been effectuated. .

. . After reading the record, we are able to discern that the trial judge did not

clearly err in making her findings and did not apply erroneous principles of law

in reaching her conclusions.”). 

III. CONCLUSION

For the foregoing reasons, the judgment of the district court is

AFFIRMED.