United States District Court, D. Colorado
ORDER GRANTING THE GOVERNMENT'S MOTION FOR ENTRY
OF DECREE OF SALE AND TO APPOINT A RECEIVER TO ENFORCE
CHRISTINE M. ARGUELLO UNITED STATES DISTRICT JUDGE
matter is before the Court on the Government's Motion for
Entry of Decree of Sale and to Appoint a Receiver to Enforce
Lien, wherein the Government argues that Advanced Floor
Concepts (AFC) should be sold pursuant to 28 U.S.C. §
7403(c) to satisfy Defendant Michael Wilhite's
long-outstanding restitution obligations. (Doc. # 168.) Mr.
Wilhite and his wife Darla Wilhite (the Wilhites,
collectively) challenge the motion (Doc. # 177), and for the
following reasons, the Court grants it.
Wilhite owes the Government at least $1, 714, 708.79 in
restitution. In 2015, the Government filed an Application for
Writ of Execution upon “the personal property of [Mr.
Wilhite], which his wife, Darla Wilhite . . ., holds as a
nominee.” (Doc. # 30.) The Clerk issued the Writ of
Execution to the United States Marshal, commanding, as
pertinent here, the sale of Mr. Wilhite's interest in
AFC. (Doc. # 31.) Mrs. Wilhite filed a motion to quash the
Writ, reasoning that Mr. Wilhite has no ownership interest in
AFC because it is solely owned and operated by Mrs. Wilhite.
(Doc. # 36 at ¶ 5.) In 2016, the Court denied the motion
to quash and determined that Mr. Wilhite does, indeed, have
an equitable interest in AFC. (Doc. ## 121, 159.) On October
13, 2017, this Court specifically concluded that Mr. Wilhite
has a 73.9% interest in AFC and Mrs. Wilhite has a 26.1%
interest. (Ownership Order) (Doc. # 159.) The Court also
concluded that Mr. Wilhite's 73.9% interest constitutes
property under the federal tax lien statute and the Federal
Debt Collection Procedures Act (FDCPA) and that such 73.9%
interest may be subject to levy or collection by the
Government to satisfy Mr. Wilhite's substantial and
long-outstanding restitution obligations. (Id.)
instant motion, the Government, seeking to levy on that 73.9%
interest, argues that a forced sale of AFC is the most
appropriate mechanism for doing so. (Doc. # 168 at 1.) The
Government also requests that a receiver be appointed to
manage the sale. (Doc. # 168 at 1.)
Wilhites object to the sale of AFC, arguing primarily that
the Government only has the right to seize Mr. Wilhite's
individual interest in AFC, not to sell the entire company.
For the same reasons, the Wilhites also contend that there is
no justification or authority for appointing a receiver in
this case. (Id. at 11-15.)
SALE OF AFC
Wilhite's restitution obligation was imposed under the
Mandatory Victim's Restitution Act (MVRA) and created a
lien in favor of the Government. 18 U.S.C. 3613(a). The
Government's action to enforce its lien in this case is
therefore “in every real sense a proceeding in court to
collect a tax.” United States v. Holmes, 727
F.3d 1230, 1235 (10th Cir. 2013).
reach of a federal tax lien is broad. It provides:
If any person liable to pay any tax neglects or refuses to
pay the same after demand, the amount (including any
interest, additional amount, addition to tax, or assessable
penalty, together with any costs that may accrue in addition
thereto) shall be a lien in favor of the United States upon
all property and rights to property, whether real or
personal, belonging to such person.
26 U.S.C. § 6321 (emphasis added.) Congress intended the
lien “to reach every interest in property that a
taxpayer may have.” United States v. National Bank
of Commerce, 472 U.S. 713, 719-20 (1985).
“Stronger language could hardly have been selected to
reveal a purpose to assure the collection of taxes.”
U.S. v. Craft, 535 U.S. 274 (2002).
broad, a federal tax lien may only reach a debtor's
“property or rights to property” to the extent
that state law recognizes the subject interest as property.
Id. at 722. In other words, the government
“steps into the shoes of the [debtor] and acquires
whatever rights to the property the [debtor] possessed”
under state law. Kane v. Captical Guardian Trust Co,
145 F.3d 1218, 1221 (10th Cir. 1998.) In looking to state
law, courts consider “the substance of the rights state
law provides, not merely the labels the State gives these
rights or the conclusions it draws from them.”
Craft, 535 U.S. at 279.
Court has already concluded that Mr. Wilhite has a 73.9%
ownership interest in AFC under Colorado state law,
and that this 73.9% interest constitutes property or rights
to property under the federal tax lien statute. (Doc. # 159
at 16.) See Craft, 535 U.S. at 286 (The federal tax
lien attaches to “an individual partner's interest
in the partnership, that is, to the fair market value of his
or her share in the partnership assets.”); LaFond
v. Sweeney, 345 P.3d 932, 939 (Colo.App. 2012);
aff'd, 343 P.3d 939 (Colo. 2015) (partnership law
principles provide guidance when examining LLCs because they
share many important characteristics and the language of the
acts are similar).
holder of this lien, the Government, stepping into Mr.
Wilhite's shoes, is entitled to, at a minimum, a
“share of the profits and losses, ” the
“right to receive distributions” of AFC's
assets, including any proceeds from dissolution, and many
other rights set forth in AFC's Operating Agreement.
Colo. Rev. Stat. §§ 7-80-102 (9-10);
7-80-108(1)(a); see United States v. Triangle Oil,
277 F.3d 1251, 1255 (10th Cir. 2002) (a partner's
interest generally consists of the ...