This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).


God's Helping Hands,
Appellant (C7-99-624),
Respondent (C4-99-631),


Taylor Investment Corporation, et al.,
Respondents (C7-99-624),
Defendants (C4-99-631),

Faye J. Sitzmann,
Respondent (C4-99-631),

James L. Noske, individually and as alter ego of BBCA, Inc.,
Respondent (C7-99-624),
Appellant (C4-99-631),

Joan M. Noske, individually and as alter ego of BBCA, Inc.,
Appellant (C4-99-631).

Filed September 28, 1999
Peterson, Judge

Hubbard County District Court
File No. C597268

John R. Koch, Reichert Wenner Kock & Provinzino, P.A., 501 St. Germain, P.O. Box 1556, St. Cloud, MN 56302 (for appellant/respondent God's Helping Hand)

William R. Busch, 325 Cedar Street, Suite 803, St. Paul, MN 55101 (for respondent Faye J. Sitzmann)

James L. Noske, PMB 4000, Rochester, MN 55903 (appellant/respondent pro se)

Joan M. Noske, P.O. Box 6000, Pekin, IL 61555 (appellant/respondent pro se)

Considered and decided by Peterson, Presiding Judge, Lansing, Judge, and Amundson, Judge.

U N P U B L I S H E D   O P I N I O N


God's Helping Hands (GHH) appeals from the district court judgment dismissing its quiet title action on the ground of res judicata. James and Joan Noske challenge the dismissal of their cross-claims for lack of standing. We affirm.


In 1980, GHH, formerly known as BBCA, Inc., was incorporated under Minnesota law as a nonprofit corporation with general religious, educational, and charitable purposes. Neither Joan nor James Noske was an incorporator or a member of GHH's first board of trustees, but Joan Noske was GHH's first president and has been a board member since 1981. By the end of 1982, GHH had acquired title to 19 parcels of real property in Minnesota, including four parcels in Hubbard County that are the subject of this action.

In 1986, the Internal Revenue Service (IRS) assessed penalties against James and Joan Noske under IRC § 6700 for assisting in the sale of trust entities that the IRS determined were abusive tax shelters. GHH alleges that it was not involved in these activities and that the trusts were unrelated to GHH. In 1988, the IRS filed notices of tax liens in six Minnesota counties, including Hubbard County, naming James and Joan Noske and GHH, as the alter ego of James and Joan Noske, as the delinquent taxpayers.

In 1989, GHH began an action in federal district court under 28 U.S.C. § 2410(a) seeking to quiet title to certain parcels of real estate, including the Hubbard County properties that are the subject of this lawsuit. GHH challenged the validity of the federal tax liens. The federal district court eventually dismissed the quiet title action with prejudice, due to GHH's failure to cooperate in discovery.

In November 1996, the IRS conducted a tax foreclosure sale and sold the 19 parcels of real property owned by GHH. Faye Sitzmann was the highest bidder on three of the four parcels of property at issue in this case. The IRS gave Sitzmann two district director's deeds, one conveying and quitclaiming all right, title, and estate of Joan Noske and GHH, as Joan Noske's alter ego, and one conveying and quitclaiming all right, title, and estate of James Noske and GHH, as James Noske's alter ego.

GHH brought this quiet title action seeking a judgment that it was the sole owner in fee of four specified land parcels in Hubbard County and that neither Faye Sitzmann nor James or Joan Noske had any interest in or lien against the specified real property. James and Joan Noske filed separate answers, both of which contained a section labeled affirmative defenses and cross-claims. Based on its conclusions that res judicata barred the quiet title action and that the Noskes lacked standing to assert cross-claims, the district court granted summary judgment in favor of Sitzmann.


On appeal from a summary judgment, this court must review the record to determine whether any genuine issues of material fact exist and whether the district court erred in applying the law. In re Estate of Palmen, 588 N.W.2d 493, 495 (Minn. 1999). This court must view the evidence in the light most favorable to the nonmoving party. Id.

1. Res judicata

The availability of res judicata is subject to de novo review. Erickson v. Commissioner of Dep't of Human Servs., 494 N.W.2d 58, 61 (Minn. App. 1992). If the reviewing court determines res judicata is available, the decision whether to actually apply the doctrine is left to the discretion of the trial court. Id.

Res judicata is designed to prevent the relitigation of issues determined in a prior action and applies to matters actually litigated as well as to all matters that could have been litigated. Beutz v. A.O. Smith Harvestore Prods., Inc., 431 N.W.2d 528, 531 (Minn. 1988); Hauser v. Mealey, 263 N.W.2d 803, 806 (Minn. 1978). Res judicata requires (1) a final adjudication on the merits, (2) a subsequent suit involving the same cause of action, and (3) identical parties or persons in privity with the original parties. Demers v. City of Minneapolis, 486 N.W.2d 828, 830 (Minn. App. 1992). A dismissal of an action with prejudice for failure to cooperate with discovery operates as a judgment on the merits for purposes of res judicata. Johnson v. Hunter, 447 N.W.2d 871, 873 (Minn. 1989).

In the current action, GHH argues that the liens against its properties were invalid because GHH is not the alter ego of James or Joan Noske. This issue was raised in the federal quiet title action. GHH, however, argues that the federal district court lacked jurisdiction to decide the alter ego issue and, therefore, the current action is a different cause of action from the federal quiet title action.

In a quiet title action under 28 U.S.C. § 2410(a), only the procedural regularity of the lien may be challenged, not the underlying tax assessment or liability. BBCA, Inc. v. United States, 733 F. Supp. 73, 74 (D. Minn. 1989). Resolution of the alter ego issue requires a determination of whether the Noskes enjoyed the use and benefit of the properties and merely listed GHH as the owner in an effort to conceal their assets. Id. at 75. The issue is essentially one of ownership that relates to the propriety of the attachment of the lien and is entirely separate from the underlying tax assessment or liability. We, therefore, conclude that the alter ego issue could have been addressed in the federal quiet title action. See Kulawy v. United States, 917 F.2d 729, 733 (2d Cir. 1990) (rejecting argument that action challenged tax liability and, therefore, was not proper under 28 U.S.C. § 2410(a) when complaint sought only orders and declarations regarding property subject to lien). Our conclusion is supported by the fact that the federal district court addressed the merits of the alter ego issue in an order denying GHH summary judgment. BBCA, Inc., 733 F. Supp. at 74-75.

GHH also contends that only the taxpayer, not a third party, may bring a quiet title action under 28 U.S.C. § 2410(a). The argument is not persuasive. None of the cases cited by GHH to support its position involved a challenge to the validity of a lien on the ground that a third party, not the taxpayer, owned the property.

In Winebrenner v. United States, 924 F.2d 851, 856 (9th Cir. 1991), the court held that because the government had already seized or levied upon and sold the property, the third party's exclusive remedy was a wrongful levy action under 26 U.S.C. § 7426. Whether a third party can bring an action under 28 U.S.C. § 2410(a) before the property is levied upon and sold was not at issue in the case. See also Greening v. United States, No. 94-578-FR, 1994 WL 519038 (D. Oregon Sept. 9, 1994) (property had already been levied upon and sold), affirmed 85 F.3d 635 (9th Cir. 1996); Texas Commerce Bank v. United States, 896 F.2d 152, 156 (5th Cir. 1990) (property already confiscated by IRS). The record contains no evidence that the properties at issue in this case had been seized when GHH brought the federal quiet title action in 1989, and the properties were not sold until 1996.

In First of America Bank v. Alt, 848 F. Supp. 1343, 1348-49 (W.D. Mich. 1993), a bank holding a mortgage to property sought to assert a claim under 28 U.S.C. § 2410(a) that a lien was invalid because it had not been preceded by a deficiency notice. The court concluded that the bank lacked standing to assert the claim because the specific provision of the Internal Revenue Code at issue, the notice requirement, was designed to protect the taxpayer, not third parties. Id. at 1349. In E.J. Friedman Co., Inc. v. United States, 6 F.3d 1355, 1358 (9th Cir. 1993), the court indicated that a third-party nontaxpayer holding a trust deed to the property subject to the lien had a sufficient interest in the property to support a claim under 28 U.S.C. § 2410. Similarly, we conclude that the ownership interest claimed by GHH was sufficient to support a quiet title action under 28 U.S.C. § 2410(a).

The district court neither erred in determining that res judicata could be applied nor abused its discretion by applying that doctrine.

2. Cross-claims

Minn. Stat. § 559.01 (1998) provides:

Any person in possession of real property personally or through the person's tenant, or any other person having or claiming title to vacant or unoccupied real property, may bring an action against another who claims an estate or interest therein, or a lien thereon, adverse to the person bringing the action, for the purpose of determining such adverse claim and the rights of the parties, respectively.

The Noskes claim no interest in the property at issue in this case.

Minn. R. Civ. P. 13.07 permits cross-claims by one party against a co-party. But the rules of civil procedure do not govern actions to determine adverse claims under chapter 559 to the extent that the rules are inconsistent or in conflict with the governing statutes. Minn. R. Civ. P. 81.01. Chapter 559 does not authorize cross-claims or counterclaims except for an occupying claimant's right under Minn. Stat. § 559.10 (1998) to claim compensation for improvements made by the claimant on the subject real estate. Even if additional cross-claims are permitted under chapter 559, Minn. R. Civ. P. 13.07 authorizes only cross-claims by parties. Because the Noskes are not claiming any interest in the properties at issue in this case, they are not proper parties to this action. The district court did not err in determining that the Noskes lacked standing to assert any cross-claims in this action.