Unpublished Disposition, 905 F.2d 1541 (9th Cir. 1986)

MEMORANDUM^** 

The United States seeks to remedy a judgment in a tax collection and foreclosure case which does not address all its requested claims for relief. The government appeals the district court's denial of its "Motion for Entry of a Final Judgment." We reverse and remand to the district court with instructions to enter a complete final judgment.

Stanley and Anna Mae Trohimovich, and Merita Trohimovich,¹  are involved in extensive tax litigation with the government. In 1975 the Trohimoviches transferred all their interests in a business known as Grays Harbor Motors into a trust, leaving them insolvent.

In 1978 and 1981, the Tax Court issued decisions upholding deficiency determinations against the taxpayers, Stanley and Anna Mae Trohimovich and Richard and Merita Trohimovich, for the tax years 1971 through 1975. Thereafter, the I.R.S. made tax assessments and filed notices of tax liens. The United States filed the present action to collect and foreclose on the tax liens in December 1981, pursuant to Secs. 7402 & 7403 of the Internal Revenue Code (26 U.S.C.). This section directs the court to "proceed to adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property...." It "may decree a sale of such property ... and a distribution of the proceeds of such sale according to the findings of the court ..."² 

The government's complaint requested the following relief: (1) that tax judgments be entered against the taxpayers in the amounts determined by the Tax Court; (2) that the trust be determined invalid, or the transfers fraudulent, such that the tax liens would attach to the property; (3) that the court determine the validity and priority of the liens; (4) that the liens be foreclosed as to the "trust" property as well as a private residence owned by Merita and Richard Trohimovich; (5) that these properties be ordered sold and that the proceeds be distributed according to the determined priorities of the parties; (6) that a receiver be appointed to take charge of and sell Grays Harbor Motors; and (7) that a deficiency judgment be entered to the extent that the proceeds of the sale were insufficient.

Prior to the judgment, the parties, along with Grays Harbor County and the State of Washington Employment Security Department, who were joined as parties in the present case, entered into a "Stipulation of Judgment," providing that in the event of a foreclosure sale the county's property tax liens would be superior, and that the remaining proceeds would be distributed among the parties according to their priorities as determined by the court.

A two-day non-jury trial was held. On November 21, 1985 the court issued its "Findings of Fact and Conclusions of Law," in which it determined that the taxpayers were liable for the taxes assessed against them, that the transfers to the trust were invalid, and that the federal tax liens could be foreclosed against the trust property. The conclusions of law ended with the direction that " [t]he clerk of the court shall enter judgment for plaintiff."

A document, designated as a "Judgment in a Civil Case," was issued on November 25, 1985 and a notation entered on the docket sheet by the clerk. It reads as follows:

Decision by Court. This action came to trial before the Court. The issues have been tried and a decision has been rendered.

IT IS ORDERED AND ADJUDGED

Grays Harbor Motors Family Estate (A Trust) is not a valid trust.

Court finds for the plaintiff.

Stanley Trohimovich filed a motion for a new trial and a motion to vacate on December 9, 1985, to which the government filed an opposition. This motion was denied. No further actions were taken by the government until approximately eight months later, when it filed the "Motion for Entry of Final Judgment," on August 13, 1986. It was denied on September 16, 1986. The court ruled merely that "the judgment entered on November 25, 1986 (sic) is a final judgment."

The government contends that the court's failure to provide all requested relief constitutes an abuse of discretion. It filed this appeal of the denial of the motion within the 60-day time limit prescribed by Fed. R. App. P. 4(a) (1) for appeals in cases to which the United States is a party.

The district court was clearly in error when it ruled that "the judgment entered on November 25, 1986 (sic) is a final judgment." The district court's findings of fact and conclusions of law do not address the government's requests: for determination of priority of the liens; that the liens be foreclosed on the present residence of Merita and Richard Trohimovich; that a judicial sale of the property be made free and clear of the various liens; that the sale proceeds be distributed in accordance with the interests and priorities of the lien holders; that a receiver be appointed to take charge of the assets of Grays Harbor Motors and sell the business as a going concern; and for a deficiency judgment. The so-called judgment issued by the clerk made two declarations but adjudicated very little; it certainly was not final.

A final judgment must dispose of all the claims of all the parties. Wolf v. Banco Nacional de Mexico, S.A., 721 F.2d 660, 662 (9th Cir. 1983). Rule 54(b) of the Federal Rules of Civil Procedure provides that "any order or other form of decision ... which adjudicates fewer than all the claims or rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties...." See United States v. F. & M. Schaefer Brewing Co., 356 U.S. 227 (1958) (a decree that decides only liability and leaves open the amount to be awarded is not final).

In the context of a tax lien foreclosure action, such as the litigation here, 26 U.S.C. § 7403(c) expressly states that a district court "shall ... proceed to adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property...." There is no question that as a matter of law the so-called "judgment" entered by the court on November 25, 1985 is only a partial judgment. The government is entitled to a modified or further judgment providing for all the relief requested.

The motion of the government for entry of a final judgment is for all purposes a motion for relief from judgment under Fed. R. Civ. P. 60. See Straw v. Bowen, 866 F.2d 1167, 1771-72 (9th Cir. 1989) (untimely motion for reconsideration could be construed as motion under Rule 60(b)); McConnell v. MEBA Medical and Benefits Plan, 778 F.2d 521, 524, 526 (9th Cir. 1987) (motion for entry of final judgment construed as 60(b) motion). We review the denial of a motion under Rule 60(b) for abuse of discretion.³  Plotkin v. Pacific Tel. & Tel. Co., 688 F.2d 1291, 1292 (9th Cir. 1982).

It is clear from the record that the government is entitled to the relief it seeks by virtue of Rule 60(b) (6). This provision may be employed whenever such action is appropriate to accomplish justice and extraordinary circumstances exist. United States v. Sparks, 685 F.2d 1128, 1130 (9th Cir. 1982). Extraordinary circumstances exist here: It would be a travesty of the law and the judicial system for a party to prevail in litigation and then find that the judgment is meaningless because of the inability of the clerk of a district court to correctly draft a judgment which ends the litigation.

When the district court decided not to enter a proper judgment and denied the government's motion, it refused to carry out the role it was statutorily mandated to perform, 26 U.S.C. § 7403(c) ("adjudicate all matters"), and failed to make orders regarding which it had very little discretion. United States v. Gibson, 817 F.2d 1406, 1407 (9th Cir. 1987) (court abused limited discretion not to order judicial sale). The refusal of the district court to enter a proper judgment is an abuse of discretion as a matter of law. That decision is reversed.

The case is remanded to the district court with direction to enter proper judgment on the remaining claims of the United States and the other creditors.

REVERSED AND REMANDED.