In the
United States Court of Appeals
For the Seventh Circuit
No. 15‐3554
UNITED STATES OF AMERICA,
Plaintiff‐Appellee,
v.
JOYCE ADENT, et al.,
Defendants‐Appellants.
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 2:12‐cv‐01286‐RTR — Rudolph T. Randa, Judge.
ARGUED APRIL 19, 2016 — DECIDED MAY 10, 2016
Before BAUER, POSNER, and FLAUM, Circuit Judges.
BAUER, Circuit Judge. Following the ratification of the
United States Constitution, Benjamin Franklin wrote: “[I]n this
world nothing can be said to be certain, except death and
taxes.” These words are as true today as when Franklin wrote
them in 1789. And when taxes are not paid, the federal
government has many means to ensure prompt collection of
those taxes. So the defendants‐appellants found out the hard
way.
2 No. 15‐3554
Leonard and Joyce Adent failed to pay their taxes and the
government filed suit to foreclose on its tax liens attached to
the Adents’ property. The Adents, with their son Derek Adent,
who is also a defendant‐appellant (collectively the “Adents”),1
appeal the district court’s order granting the government’s
motion for summary judgment in its tax lien foreclosure action
with regard to two parcels of real property. The Adents argue
that the government failed to bring its foreclosure action
within the applicable statute of limitations period and that the
properties should not be forcibly sold because of the resulting
prejudice to innocent, non‐delinquent parties (Joyce and
Derek). We reject all of the Adents’ arguments and affirm the
district court’s order.
I. BACKGROUND
Leonard and Joyce Adent, who are husband and wife, filed
joint federal income tax returns for the years 1998 and 2001,
showing they owed taxes which they did not pay. The Internal
Revenue Service (“IRS”) assessed the federal income taxes
owed for 1998 on December 2, 2002, and sent a demand for
payment to Leonard and Joyce on the same date. The IRS
assessed the federal income taxes owed for 2001 on
February 17, 2003, and sent a demand for payment to Leonard
and Joyce on the same date. As of October 15, 2012, Leonard
and Joyce owed a balance of $90,681.26 for the personal income
taxes for 1998 and 2001. Leonard also owed federal employ‐
ment and unemployment taxes for various periods between
1
Because all of the parties at issue here have the last name Adent, we will
refer to the interested parties individually by their first names.
No. 15‐3554 3
October 2006 and April 2012. The IRS also assessed Leonard’s
federal employment and unemployment taxes; as of
October 15, 2012, Leonard owed a balance of $65,637.17 for the
employment and unemployment taxes.
Leonard and Joyce jointly own a residential piece of
property, Parcel A, which is their residence. Leonard and
Derek jointly own a commercial piece of property, Parcel B,
which is mixed‐use condominium and commercial. Joyce has
office space for her business at Parcel B. By virtue of the IRS
assessments for Leonard’s and Joyce’s personal income taxes
and Leonard’s employment and unemployment taxes, tax liens
attached to Parcels A and B. See 26 U.S.C. §§ 6321, 6322.
The government filed suit on December 18, 2012, to reduce
the assessments to judgment, foreclose the liens, and obtain a
sale of Parcels A and B to satisfy the tax debts. The Adents filed
three separate answers to the complaint but did not raise the
statute of limitations as an affirmative defense. On July 11,
2014, Leonard and Joyce stipulated to entry of judgment based
upon the tax assessments; specifically, Leonard and Joyce
stipulated that they jointly and severally owe and are liable for
the unpaid personal income taxes to the IRS in the amount of
$90,681.26 as of October 15, 2012, with penalties and interest
until paid. Likewise, Leonard stipulated that he owes and is
liable for the unpaid employment and unemployment taxes to
the IRS in the amount of $65,637.17 as of October 15, 2012, plus
penalties and interest until paid. The district court entered
judgment in favor of the government based on the stipulations.
Thereafter, the government moved for summary judgment
to foreclose on the liens and to obtain an order for the sale of
4 No. 15‐3554
Parcels A and B. The district court granted the government’s
motion. The district court found that because there were no
innocent party interests in Parcel A, it was required to order
the sale. With regard to Parcel B, the district court found Derek
had an innocent party interest.
In considering the factors prescribed by United States v.
Rodgers, 461 U.S. 677 (1983), the district court weighed the
resultant prejudice to the government of a partial sale and the
resultant prejudice to Derek of a total sale. It found in favor of
the government: that a total sale of Parcel B was proper.
Leonard, Joyce, and Derek appeal the district court’s decision
ordering the sale of Parcels A and B.
II. DISCUSSION
We have jurisdiction to hear the Adents’ appeal: the district
court’s order is a final decision. United States v. Davenport, 106
F.3d 1333, 1334–35 (7th Cir. 1997), citing Forgay v. Conrad, 47
U.S. 201, 204 (1848). See also United States v. Williams, 796 F.3d
815, 817 (7th Cir. 2015) (citations omitted). We review the
district court’s order granting the government’s motion for
summary judgment de novo and construe all facts and reason‐
able inferences in the Adents’ favor. Venters v. City of Delphi,
123 F.3d 956, 962 (7th Cir. 1997) (citations omitted); Davenport,
106 F.3d at 1334 (citation omitted). Summary judgment is
proper when “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). The Adents
raise two main issues on appeal, a statute of limitations
argument and an innocent third‐party interest argument,
which we address individually.
No. 15‐3554 5
We first consider the Adents’ argument that the govern‐
ment failed to file its foreclosure suit within the applicable ten‐
year statute of limitations period as prescribed by 26 U.S.C.
§ 6502(a)(1). The running of the statute of limitations as a bar
to suit is an affirmative defense and must be pleaded in a
defendant’s answer to the complaint. Fed. R. Civ. P. 8(c);
Venters, 123 F.3d at 967. It has long been recognized that a
defendant’s failure to plead the statute of limitations as an
affirmative defense in his or her answer to the complaint
constitutes a waiver of that defense. Venters, 123 F.3d at 967–68
(citations omitted) (statute of limitations defense waived where
not pleaded in answer and raised for first time in response to
motion for summary judgment without motion to amend
answer). All three Adents failed to plead the statute of limita‐
tions as an affirmative defense in their individual answers to
the complaint. They also failed to argue the statute of limita‐
tions as a bar to suit in opposition to the government’s sum‐
mary judgment motion. And, none of the Adents ever moved
to amend their answers to include the statute of limitations as
an affirmative defense. Therefore, all three Adents have
waived any statute of limitations argument on appeal.
Next, we consider the Adents’ argument that the district
court should have exercised its discretion and not ordered the
sale of Parcels A and B. There is no dispute that the tax liens
properly attached to both properties. Section 7403 of the
Internal Revenue Code allows the government to file a civil
suit to enforce its lien(s) and recover payment in any case
where taxes have not been paid. 26 U.S.C. § 7403(a). Further,
“[t]he court … in all cases where a claim or interest of the
United States therein is established may decree a sale of such
6 No. 15‐3554
property … and a distribution of the proceeds of such sale
according to the findings of the court in respect to the interests
of the parties and of the United States.” 26 U.S.C. § 7403(c).
There is no provision for innocent, non‐liable third‐party
interests in the statutory framework.
The United States Supreme Court addressed the issue of an
innocent third‐party interest in the context of a forced sale in
United States v. Rodgers, 461 U.S. 677 (1983). There, the Supreme
Court found that the plain language of § 7403 contemplates the
sale of the entire property, including innocent third‐party
interests in that property, and that the Supremacy Clause
precludes protection of innocent third‐party interests via state
law. Id. at 693–94, 703–04. Further, § 7403 protects an innocent
third party’s interest by providing for distribution of the
proceeds from the court‐ordered sale to the innocent third
party to compensate them for their interest. Id.
The Supreme Court did not stop there. It recognized the
district court’s discretion to not order a forced sale, but
emphasized that this discretion is not “unbridled.” Id. at 706,
709; see also Davenport, 106 F.3d at 1338. The district court’s
“limited discretion” under § 7403 is to be “exercised rigorously
and sparingly, keeping in mind the Government’s paramount
interest in prompt and certain collection of delinquent taxes.”
Rodgers, 461 U.S. at 711. The Supreme Court indicated that a
district court has no discretion to deny a forced sale when no
innocent third‐party interests are at issue: “We can think of
virtually no circumstances, for example, in which it would be
permissible to refuse to authorize a sale simply to protect the
interests of the delinquent taxpayer himself or herself.” Id. at
709.
No. 15‐3554 7
Additionally, the Supreme Court provided a non‐exhaus‐
tive list of four factors to consider when an innocent third
party has an interest in the property to be sold, recognizing
that “financial compensation may not always be a completely
adequate substitute for a roof over one’s head.” Id. at 704.
These factors include: (1) the prejudice to the government’s
interest as the result of a partial, rather than a total, sale;
(2) “whether the third party with a non‐liable separate interest
in the property would, in the normal course of events … have
a legally recognized expectation that that separate property
would not be subject to forced sale by the delinquent taxpayer
or his or her creditors”; (3) the prejudice to the third party as
the result of a total sale; and (4) “the relative character and
value of the non‐liable and liable interests held in the prop‐
erty.” Id. at 710–11.
With regard to Parcel A, the district court had no discretion
to deny a sale because no innocent third‐party interests were
implicated. It is undisputed that Leonard and Joyce are the
only owners of Parcel A. It is undisputed that Leonard and
Joyce are jointly and severally liable for the delinquent per‐
sonal income taxes, as Leonard and Joyce stipulated to such.
Because there are no innocent third‐party interests in Parcel A,
the district court was correct when it determined it had no
discretion to deny the sale.
With regard to Parcel B, Derek has an innocent half‐
ownership interest in the property, as he is not liable for any of
Leonard’s tax debts. However, there are no circumstances of
undue hardship to Derek that overcome “the Government’s
paramount interest in prompt and certain collection” of the
unpaid taxes. Id. at 711. First, the government’s interest would
8 No. 15‐3554
be severely prejudiced by denying the sale of Parcel B. As we
have noted, § 7403 contemplates only a total sale of the entire
property; § 7403 does not provide for a partial sale, and a
partial sale is not a viable, practical option. See e.g., Williams,
796 F.3d at 818; Davenport, 106 F.3d at 1337; United States v.
Trilling, 328 F.2d 699, 703 (7th Cir. 1964). If the sale were to be
denied, the government would be precluded from any pro‐
ceeds from Parcel B.
The other Rodgers factors also weigh in favor of the govern‐
ment. Derek, the non‐delinquent co‐owner of Parcel B, has no
“legally recognized expectation” that his interest would not be
subject to a forced sale due to Leonard’s delinquency. Also, the
prejudice to Derek as the result of a sale is minimal; Derek does
not reside in Parcel B, so dislocation is not a consideration.
After the sale, Derek will be compensated for his half interest.
Further, Derek may bid on Parcel B at the foreclosure auction,
either to gain the property outright or to attempt to increase
the final sale price. Finally, the “relative character and value of
the non‐liable and liable interests” does not weigh in any
party’s favor. The non‐liable interest of Derek is equal to the
liable interest of Leonard.
In weighing the Rodgers factors, we find that the Adents
have presented no exceptional circumstances that overcome
the severe prejudice to the government’s “paramount” interest.
The district court was justified in declining to exercise its
extremely limited discretion to deny the sale of Parcel B. In
other words, the Adents have not presented any evidence that
would justify anything less than the sale of Parcel B. We have
repeatedly affirmed the district courts’ sound discretion in
ordering sales where innocent third‐party interests are impli‐
No. 15‐3554 9
cated. See, e.g., Williams, 796 F.3d at 818; Davenport, 106 F.3d at
1338; Trilling, 328 F.2d at 703. The facts of this case are germane
to tax lien foreclosure actions and do not justify a change in
course in our precedent. Because there is no dispute of material
fact, summary judgment in favor of the government was
proper.
All other arguments made by the Adents are meritless and
need not be addressed. United States v. Cunningham, 429 F.3d
673, 678 (7th Cir. 2005) (citations omitted).
III. CONCLUSION
For the foregoing reasons, we AFFIRM the order of the
district court.