United States v. Mann

FILED
United States Court of Appeals
Tenth Circuit
February 10, 2010
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
FOR THE TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 09-4160
(D.C. No. 2:04-CV-00205-DB-BCW)
CLEALON B. MANN; NANELL H. (D. Utah)
MANN,
Defendants-Appellants,
RONALD J. PASKETT; MARSHA M.
PASKETT; CARDIFF ASSOCIATED
PROPERTY OWNERS; UTAH
STATE TAX COMMISSION,
Defendants.
ORDER AND JUDGMENT *
Before GORSUCH and ANDERSON, Circuit Judges, and BRORBY, Senior
Circuit Judge.
*
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)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Appellants Clealon and Nanell Mann, pro se, challenge two rulings related
to the district court’s distribution of proceeds from a federal tax foreclosure.
Specifically, the Manns contest the denial of Ms. Mann’s post-judgment challenge
to an IRS levy on her share of the foreclosure proceeds; they also contest the
district court’s directive that any residual proceeds be applied to Mr. Mann’s
outstanding restitution obligation. We have jurisdiction under 28 U.S.C. § 1291and affirm.
I
The government initiated this action to reduce to judgment federal income
tax assessments against the Manns and foreclose on liens registered against their
real property. After granting the government’s motion for summary judgment, the
district court confirmed the foreclosure sale of a cabin owned by the Manns and
distributed the proceeds. The distribution schedule gave Ms. Mann fourth priority
for her interest in the cabin and Mr. Mann last priority to any remaining proceeds.
The Manns did not appeal. The IRS subsequently levied Ms. Mann’s share of the
proceeds, however, to satisfy her outstanding tax liabilities from 1993, 1994, and
1995. The total amount levied was $42,083.50, but presumably because the
government did not include these liabilities in its complaint or litigate them in the
district court, Ms. Mann filed three post-judgment motions, all asserting the same
substantive challenge to the levy. Additionally, the government requested that
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residual proceeds be applied to an unsatisfied restitution order previously entered
against Mr. Mann. These motions were referred to a magistrate judge.
After a hearing, the magistrate judge granted the government’s motion to
apply excess proceeds to Mr. Mann’s outstanding restitution obligation. The
magistrate judge also denied as barred by sovereign immunity Ms. Mann’s
motions attacking the levy. The Manns objected, but the district court agreed that
sovereign immunity precluded Ms. Mann from contesting the levy and that any
residual proceeds should be applied towards restitution. These adverse rulings
are now the subject of this appeal. 1
II
We review the district court’s denial of post-judgment relief for an abuse of
discretion. See Smith v. United States, 561 F.3d 1090, 1097 n.8 (10th Cir. 2009),
cert. denied, ___ S. Ct. ___, 2010 WL 154973 (U.S. Jan. 19, 2010). In
conducting our review, we afford the Manns’ pro se materials a liberal
construction. See Van Deelen v. Johnson, 497 F.3d 1151, 1153 n.1 (10th Cir.
2007). This more generous construction, however, coupled with our examination
of the record and governing authorities, fails to disclose any abuse of discretion
by the district court.
1
In their reply brief, the Manns contend for the first time on appeal that the
district court erred in refusing to instruct the IRS to “remove all IRS clouds on
[Ms. Mann’s] credit report.” Reply Br. at 4-5. We generally do not consider
issues raised for the first time in a reply brief and decline to do so in this
instance. See Stump v. Gates, 211 F.3d 527, 533 (10th Cir. 2000).
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A. Levy
The district court denied Ms. Mann’s challenge to the levy because she
failed to show a valid waiver of sovereign immunity for bringing a wrongful levy
claim. 26 U.S.C. § 7426(a)(1) affords a limited waiver of sovereign immunity to
persons “other than the person against whom is assessed the tax out of which [the]
levy arose.” See Dieckmann v. United States, 550 F.2d 622, 624 (10th Cir. 1977)
(recognizing limited waiver of sovereign immunity for wrongful levy action under
§ 7426(a)(1)). Because the levy arose from taxes assessed against Ms. Mann,
R.O.A., Vol. 1 at 460, the court found this provision inapplicable. 2 On appeal,
the Manns initially contend the levy constitutes “triple taxation.” Aplt. Br. at 4.
But in their reply brief, they contend for the first time that Mr. Mann—not
Ms. Mann—is actually disputing the levy. Asserting he is not the person against
whom the taxes were assessed, the Manns argue that the district court erred in
denying Ms. Mann’s motions.
Setting aside the Manns’ failure to raise this argument in their opening
brief, see Stump v. Gates, 211 F.3d 527, 533 (10th Cir. 2000), we cannot ignore
their failure to advance this theory in the district court. This court is not “a
‘second-shot’ forum . . . where secondary, back-up theories may be mounted for
the first time.” Tele-Commc’ns, Inc. v. Comm’r., 104 F.3d 1229, 1233 (10th Cir.
2
The court observed that Ms. Mann’s proper remedy was to file a tax refund
claim. See 28 U.S.C. § 1346(a); 26 U.S.C. § 7422(a).
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1997). All three of Ms. Mann’s motions denied by the magistrate judge contested
the levy on her behalf. See R.O.A., Vol. 1 at 439-42 (Motion to Set Aside
Unlawful Taking); id. at 443-44 (Motion to Compel); id. at 487-91 (Motion for
Contempt). Her objections to the magistrate judge’s ruling likewise contested the
levy on her own behalf. See id. at 577-79. Mr. Mann did not allege the
government wrongfully levied his property to satisfy her liabilities. Because the
Manns did not advance their new theory in the district court, we will not consider
it now. See Dahn v. United States, 127 F.3d 1249, 1252-53 (10th Cir. 1997)
(refusing to consider new theory for asserting wrongful levy claim). To the
extent Ms. Mann is challenging the levy directly, we agree that sovereign
immunity precludes her claim. See Aspinall v. United States, 984 F.2d 355, 357
(10th Cir. 1993); Dieckmann, 550 F.2d at 624.
B. Residual Proceeds
Turning next to the issue of residual proceeds, the district court’s initial
distribution schedule gave Mr. Mann last priority to any leftover funds from the
foreclosure sale. The government subsequently asked that those funds be applied
to Mr. Mann’s unsatisfied criminal restitution order, and the magistrate judge
granted the request. In the interim, the IRS mistakenly notified Mr. Mann that he
still owed back taxes, all of which prompted him to demand, among other things,
that any outstanding tax liabilities be satisfied with the residual proceeds first,
before anything was paid towards restitution. The government eventually
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discovered the error, however, and explained that all of Mr. Mann’s relevant tax
liabilities had been satisfied. Accordingly, the district court’s revised distribution
order acknowledged that the IRS notice had been sent in error, and thus the order
directed the excess proceeds to be applied towards restitution. R.O.A., Vol. 1 at
615-16, 621.
Despite these circumstances, Mr. Mann maintains that the revised
distribution schedule misappropriates funds to a junior obligation (restitution)
while his senior tax liability remains unsatisfied. Purporting to preserve the
integrity of a senior debt, Mr. Mann seeks to reinstate the initial distribution
schedule, which gave him last priority to any leftover proceeds. It is evident from
the record, however, that Mr. Mann’s relevant tax liabilities were satisfied with
the proceeds from the foreclosure sale. See id. at 621. There is thus no merit to
Mr. Mann’s contention. His suggestion that the district court ought to retain the
residual proceeds until Ms. Mann prevails on her wrongful levy action is likewise
meritless. And, to the extent he simply seeks reversal of the district court’s
application of excess proceeds to his restitution order, he fails to show an abuse
of discretion.
The judgment of the district court is AFFIRMED. All outstanding motions
are denied as moot.
Entered for the Court
Wade Brorby
Senior Circuit Judge
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