*

 After examining the briefs and appellate record, this panel has determined unanimously that oral

argument would not materially assist the determination of this appeal. See Fed. R. App. P. 34(a); 10th Cir.

R. 34.1.9. The cause is therefore ordered submitted without oral argument.

PUBLISH

UNITED STATES COURT OF APPEALS

Filed 5/9/96

TENTH CIRCUIT

________________________

ALVIN STJERNHOLM; ELSIE STJERNHOLM, )

)

Plaintiffs-Appellants, )

)

v. ) No. 95-1197

)

BARBARA PETERSON, DOROTHY BAN, )

DEBBIE J. BROWN, individually and in their )

official capacities; CECIL CLARK; BILL CLARK; )

BILL SMITH; CLARK A. SMITH; PAUL SMITH; )

ANN D. SMITH; CLARK AND ANN SMITH )

ESTATE AND AUCTION COMPANY, )

)

Defendants-Appellees. )

__________________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OFCOLORADO

(D.C. No. 94-S-1065)

_________________________

Submitted on the briefs.*

Alvin Stjernholm and Elsie Stjernholm, Denver, Colorado, pro se.

Loretta C. Argrett, Assistant Attorney General, Ann B. Durney and Roger E. Cole, Department of

Justice, Washington, D.C.; Henry Lawrence Solano, United States Attorney, of counsel, Denver,

Colorado, for Defendants-Appellees Barbara Peterson, Dorothy Ban, and Debbie J. Brown.

Bill Smith, Clark A. Smith, Paul Smith, Ann D. Smith, and Clark and Ann Smith Estate and Auction

Company, Cheyenne, Wyoming, pro se.
2

Before BRORBY, EBEL and HENRY, Circuit Judges.

_________________________

BRORBY, Circuit Judge.

_________________________

Plaintiffs Alvin and Elsie Stjernholm brought this action against three Internal Revenue

Service agents, Barbara Peterson, Dorothy Ban, and Debbie Brown (referred to collectively as "the

federal defendants"), Clark and Ann Smith Estate and Auction Company (hereafter "Smith Estate

and Auction"), and six of Smith Estate and Auction's employees, Cecil Clark, Bill Clark, Bill Smith,

Clark A. Smith, Paul Smith, Ann D. Smith, alleging violations of the Fourth and Fifth Amendments,

as well as state law, arising out of the Internal Revenue Service's seizure and sale of certain personal

property belonging to the Stjernholms to satisfy a tax lien. The Stjernholms' primary contention is

that the defendants conspired to sell their personal property "below fair market value to punish the

Plaintiffs" and actually "caused property of the Plaintiffs[] to be sold far below its true value."

The clerk of the district court entered a notice of default against Bill Smith, Clark A. Smith,

Paul Smith, Ann D. Smith, and Smith Estate and Auction. Bill Smith, Clark A. Smith, Paul Smith,

Ann D. Smith, and Smith Estate and Auction later filed a motion to set aside the entry of default and

a "response" to the Stjernholms' complaint. The district court granted the motion to set aside the

entry of default and treated the "response" as a formal answer to the Stjernholms' complaint. In the

same order, the district court, sua sponte, ordered the Stjernholms to show cause why the case should

not be transfered to the United States District Court for the District of Wyoming, on the ground

venue was improper in the United States District Court for the District of Colorado. After receiving
1

 The Stjernholms raise two other issues on appeal, neither of which have merit. First, they contend

the district court erred when it dismissed their claims against the federal defendants pursuant to Fed. R. Civ.

P. 12(b)(6). Our unpublished decision in their related appeal is dispositive. Stjernholm v. Peterson, No. 95-

1435. They also contend the district court erred when it granted the motion to set aside the entry of default.

See Fed. R. Civ. P. 55(c) (district court may set aside entry of default for good cause). We find no abuse of

discretion. Nikwei v. Ross Sch. of Aviation, Inc., 822 F.2d 939, 941 (10th Cir. 1987) ("Setting aside a default

entry or default judgment is addressed to the sound discretion of the trial court, and they are given 'a great

deal of latitude' in exercising their discretion.") (footnote omitted)).

3

the Stjernholms' response to the order to show cause, the district court concluded venue was

improper and dismissed plaintiffs' action. This appeal followed.

The Stjernholms contend it was error for the district court to raise the issue of venue sua

sponte and dismiss their claims against Bill Smith, Clark A. Smith, Paul Smith, Ann D. Smith, and

Smith Estate and Auction.1

 The Stjernholms are correct, at least in part. A party waives the right

to challenge venue if he fails to raise that defense either in his responsive pleading or in a motion to

dismiss under Fed. R. Civ. P. 12(b)(3). Fed. R. Civ. P. 12(h)(1). However, at any time before the

defendants waive the defense of improper venue, "a district court may raise on its own motion an

issue of defective venue or lack of personal jurisdiction; but the court may not dismiss without first

giving the parties an opportunity to present their views on the issue." Lipofsky v. New York State

Workers Comp. Bd., 861 F.2d 1257, 1259 (11th Cir. 1988). The district court may do so by ordering

the plaintiff to show cause why the case should not be dismissed or transfered on the ground venue

is improper, provided the district court gives all parties adequate notice and an opportunity to

respond. Costlow v. Weeks, 790 F.2d 1486, 1488 (9th Cir. 1986). This procedure gives the plaintiff

an opportunity to contest the dismissal or transfer and allows the defendant the opportunity to

prevent dismissal or transfer by waiving venue. Id.
4

In this case, however, the district court did not raise the defense of improper venue before

Bill Smith, Clark A. Smith, Paul Smith, Ann D. Smith, and Smith Estate and Auction waived that

issue. In the same order in which it directed the Stjernholms to show cause why their case should

not be transfered or dismissed for improper venue, the district court accepted these defendants'

"response" as their formal answer to the complaint. The defendants' response did not raise the

defense of improper venue in their response, nor did the defendants seek to file an amended answer

thereafter. See Fed. R. Civ. P. 12(h)(1) (venue not waived if raised "in a responsive pleading or an

amendment thereof permitted by [Fed. R. Civ. P.] 15(a) to be made as a matter of course")

(emphasis added). Accordingly, in a single ruling, the district court both confirmed these defendants'

waiver of the defense of improper venue, Fed. R. Civ. P. 12(h), and directed the Stjernholms to show

cause why their case should not be transfered or dismissed for improper venue. In light of the

defendants' waiver, it was error for the district court to order the Stjernholms to show cause, and it

was also error for the district court to dismiss the Stjernholms' action against Bill Smith, Clark A.

Smith, Paul Smith, Ann D. Smith, and Smith Estate and Auction for improper venue some six

months later.

REVERSED AND REMANDED.