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Grable & Sons Metal Prods. v. Darue Eng'g & Mfg. - 207 F. Supp. 2d 694 (W.D. Mich. 2002)

Rule:

According to 26 U.S.C.S. § 6339(b)(2), assuming all other pertinent requirements of state and federal law are met, substantial compliance with the notice requirements of 26 U.S.C.S. § 6335(a) is sufficient to support valid transfer of title through a tax deed.

Facts:

Plaintiff Grable & Sons Metal Products, Inc. ("Grable"), commenced an action in the Eaton County Circuit Court, asking the court to remove a cloud on its title to certain real property in Eaton Rapids, Michigan. The cloud was created by a quitclaim deed purporting to convey all of Grable's interest in the subject property from the District Director of Internal Revenue to defendant Darue Engineering & Manufacturing, Inc. ("Darue"), pursuant to a tax sale. Darue later removed the action to federal district court. Grable alleged that the quitclaim deed was void because Grable never received proper notice of the Internal Revenue Service seizure of the property in the first place. Darue contended that adjudication of Grable's claim necessarily turned on a proposition of federal law, i.e., the IRS's compliance with the notice requirements of 26 U.S.C.S. § 6335(a). Subsequently, Darue filed a third-party complaint alleging that the United States was liable for Darue's damages if Darue's quitclaim deed was declared void.

Issue:

Was the notice requirement complied with?

Answer:

Yes

Conclusion:

The court found that there was substantial compliance with 26 U.S.C.S. § 6335(a) because Grable, the landowner, received actual notice of the seizure of its property by certified mail, was afforded ample opportunity to be present at the tax sale and bid on the property, and did not suffer any prejudice as a result of the IRS's failure to personally deliver notice. Therefore, pursuant to 26 U.S.C.S. § 6339(b)(2), the deed conveying right, title, and interest in the property to Darue, the land buyer, was valid and effective. Furthermore, because Grable received actual notice of the seizure and sale, was not prejudiced by the technical notice defect, and delayed in challenging the sale, equity denied relief as well.

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