Opinion
Case No: 8:03-cv-02616-SCB-MAP.
April 8, 2005
ORDER
This cause comes before the Court for consideration of Defendant United States of America's ("IRS") Motion for Summary Judgment (Doc. No. 33) and Defendants Jean Dickinson's, as Personal Representative of the Estate of Evelyn Fisher, and William H. McVay's, as Successor Trustee of the Evelyn J. Fisher Revocable Trust dated August 10, 2000, ("Trust") Motion for Summary Judgment (Doc. No. 35). Plaintiff Homestead Title ("Homestead') opposes both motions. (Doc. No. 36). The IRS opposes the Trust's motion. (Doc. No. 37). The Trust opposes the IRS' motion. (Doc. No. 38). I. Background
This is an interpleader action removed from state court. Homestead filed an interpleader action in order to determine which of the two defendants is entitled to the proceeds from the sale of the property located at 3754 Central Avenue, St. Petersburg, Florida 33712 ("3754 Central Avenue"). The IRS claims it is entitled to the proceeds by virtue of a Federal Tax Lien that was recorded in Pinellas County, Florida prior to the closing. The Trust claims it is entitled to the proceeds by virtue of an assignment of the proceeds from the sale made by International Advisory Services, Inc., a Florida Corporation ("IAS") the day before the closing.
According to the Corporate Warranty Deed dated August 29, 2003, IAS was a "Dissolved Florida Corporation" as of that date. There is no evidence before this Court as to when IAS dissolved.
On November 15, 2000, Robert J. Ambrose conveyed 3754 Central Avenue to IAS by Warranty Deed. (Doc. No. 33 at 1). On August 11, 2003, the IRS made jeopardy assessments pursuant to 26 U.S.C. § 6861 against IAS for unpaid taxes in the amount of $114,740.00, plus $28,685.00 in penalties, and $11,593.57 in interest. (Doc. No. 33 at 2). The IRS recorded a Notice of Federal Tax Lien against IAS on August 14, 2003, and has provided a Certificate of Official Record indicating that the total balance due as of April 9, 2004 was $170,889.53. (Doc. No. 33, exhibits B C).
On August 28, 2003, the day before the closing, IAS assigned the proceeds of the sale associated with 3754 Central Avenue, which was under contract with Falichia L. Fisher, to the Trust. On August 29, 2003, more than two weeks after the IRS had recorded the Notice of Federal Tax Lien, IAS conveyed 3754 Central Avenue to Falicia L. Fisher for $202,000.00. (Doc. No. 33 at 2). Homestead handled the closing in its offices and acted as both escrow agent and title insurer. Homestead received an affidavit by Ronald C. Keeling, Vice President of IAS, stating that 3754 Central Avenue was not subject to an IRS lien. (Doc. No. 36, exhibit A).
At settlement, Homestead issued a check for the proceeds of the sale, in the amount of $107,728.28, payable to the Estate of Evelyn Fisher. (Doc. No. 35 at 2). Upon discovering the federal tax lien, Homestead issued a stop payment order on the proceeds of the check on or about September 5, 2003. (Doc. No. 35 at 3).
Homestead filed this interpleader action in state court to determine whether the IRS or the Trust is entitled to the proceeds. (Doc. No. 2) The IRS removed this action to this Court (Doc. No. 1), and this Court substituted the United States for the IRS as a defendant in this action. (Doc. No. 4). This Court then authorized Homestead to deposit the proceeds into the registry of this Court. (Doc. No. 11).
II. Standard of Review
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of showing the Court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial. See Celotex Corp. v. Catrett, 477 U.S. 317 (1986). A moving party discharges its burden on a motion for summary judgment by "showing" or "pointing out" to the Court that there is an absence of evidence to support the nonmoving party's case. Id. at 325. Rule 56 permits the moving party to discharge its burden with or without supporting affidavits and to move for summary judgment on the case as a whole or on any claim. See id. When a moving party has discharged its burden, the non-moving party must then "go beyond the pleadings," and by its own affidavits, or by "depositions, answers to interrogatories, and admissions on file," designate specific facts showing there is a genuine issue for trial. Id. at 324.
In determining whether the moving party has met its burden of establishing that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law, the Court must draw inferences from the evidence in the light most favorable to the non-movant and resolve all reasonable doubts in that party's favor. See Spence v. Zimmerman, 873 F.2d 256 (11th Cir. 1989); Samples on behalf of Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir. 1988). The Eleventh Circuit has explained the reasonableness standard:
In deciding whether an inference is reasonable, the Court must "cull the universe of possible inferences from the facts established by weighing each against the abstract standard of reasonableness." [citation omitted]. The opposing party's inferences need not be more probable than those inferences in favor of the movant to create a factual dispute, so long as they reasonably may be drawn from the facts. When more than one inference reasonably can be drawn, it is for the trier of fact to determine the proper one.WSB-TV v. Lee, 842 F.2d 1266, 1270 (11th Cir. 1988).
Thus, if a reasonable fact finder evaluating the evidence could draw more than one inference from the facts, and if that inference introduces a genuine issue of material fact, then the court should not grant the summary judgment motion. See Augusta Iron Steel Works v. Employers Ins. of Wausau, 835 F.2d 855, 856 (11th Cir. 1988). A dispute about a material fact is "genuine" if the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52.
III. Discussion
Both the IRS and the Trust move the Court for summary judgment. The IRS moves on the grounds that the recorded federal tax lien takes priority over all other claims, and it is entitled to judgment as a matter of law. (Doc. No. 33 at 4-5). The Trust moves for summary judgment on the grounds that Homestead's complaint for interpleader is improper. The Trust argues that Homestead does not have a right to interpleader, because Homestead is an interested party which is not free from fault, and because Homestead has an adequate remedy at law against IAS. (Doc. No. 35 at 3). Homestead opposes both motions arguing that questions of fact exist regarding the validity of the tax lien, the validity of the Trust's claim to the proceeds based on an allegedly fraudulent assignment, and Homestead's duties and obligations to the Trust.
A. The Trust's Motion for Summary Judgment
The Trust argues that this Court should grant summary judgment in its favor because Homestead does not have the right to interpleader.
1. Choice of Law
The Court must first determine whether federal or state law applies. The government removed this case pursuant to 28 U.S.C. § 1444. Once a federal tax lien arises, "federal law governs the priority of competing liens asserted against a taxpayer's property." Griswold v. United States, 59 F.3d 1571, 1575 (11th Cir. 1995). Whether Homestead's action is a proper interpleader is governed by Federal Rule of Civil Procedure 22 and federal law.
Section 1444 provides:
Any action brought under section 2410 of this title against the United States in any State court may be removed by the United States to the district of the United States for the district and division in which the action is pending.28 U.S.C. § 1444. Section 2410(a) provides:
Actions affecting property on which United States has a lien (a) Under the conditions prescribed in this section and section 1444 of this title for the protection of the United States, the United States may be named a party in any civil action or suit in any district court, or in any State court having jurisdiction of the subject matter — (5) of interpleader or in the nature of interpleader with respect to, real or personal property on which the United States has or claims a mortgage or other lien.28 U.S.C. § 2410(a) (emphasis added).
2. Interpleader is Proper
i. Interested Stakeholder
First, the Trust argues that Homestead is interested and not free from fault; therefore, it has no right to interpleader. Homestead filed a complaint for interpleader, because it was unable to determine which Defendant had superior title to the proceeds. Homestead has made no claim to the funds. (Doc. No. 2).
Historically, under strict interpleader, an interested plaintiff was denied interpleader relief. See Bradley v. Kochenash, 44 F.3d 166, 168 (2d Cir. 1995). The rules of interpleader were later relaxed and "a bill `in the nature of interpleader' became available in order to `guard against the risks of loss from the prosecution in independent suits of rival claims where the plaintiff himself claim[ed] an interest in the property or fund which [wa]s subject to the risk.'" Id. (quoting Texas v. Florida, 306 U.S. 398, 406-407 (1939)). Homestead has demonstrated that it may be exposed to double liability and may be subjected to an adverse claim to a particular fund, which is required pursuant to Federal Rule of Civil Procedure 22. See General Electric Credit Corporation v. Grubbs, 447 F.2d 286, 288 (5th Cir. 1971) (overruled on other grounds). Therefore, even if Homestead is an interested plaintiff in this action, Homestead's complaint for interpleader is proper.
The Trust argues that Homestead is independently liable to them for breach of contract and breach of fiduciary duty pursuant to state law. However, these issues are pending in a pending state court proceeding and are not before this Court. This Court's determination as to which of the two defendants is entitled to the proceeds of the 3754 Central Avenue property does not affect the issues regarding Homestead's possible independent liability.
ii. Adequate Remedy at Law
The Trust argues that Homestead has an adequate remedy at law; therefore, it should be denied interpleader relief. (Doc. No. 35 at 7). Federal Rule of Civil Procedure 22 affords equitable relief, and as a general rule, equitable relief is precluded where there is an adequate remedy at law. See Morales v. Trans World Airlines, Inc., 504 U.S. 374, 381 (1992).
The Trust argues that Homestead's adequate remedy at law is to pay on the title claim in the amount owed to the IRS, then pay the closing proceeds to the Trust. After paying out twice, Homestead would seek to recover from IAS. (Doc. No. 35 at 7). This remedy would result in Homestead's possible double liability, which is exactly what an interpleader action is designed to protect against. See Matter of Bohart, 743, F.2d 313, 325 (5th Cir. 1984) (citations omitted). The Trust's proposal does not leave Homestead with an adequate remedy at law. Accordingly, the Trust's motion for summary judgment based on the ground that Homestead's interpleader is improper is denied.
B. Defendant United States Motion for Summary Judgment
The United States moves for summary judgment on the ground that the federal tax lien has priority. Whenever the federal government asserts a tax lien, the threshold question "is whether and to what extent the taxpayer had `property' or `rights to property' to which the tax lien could attach." Aquilino v. United States, 363 U.S. 509, 512 (1960).
1. Validity of the Federal Tax Lien
Homestead states that there is a question of fact as to whether or not the lien against IAS is valid. (Doc. No. 36 at 2). The IRS has provided the Court with a Certificate of Official Record showing a jeopardy assessment against IAS (Doc. No. 33, exhibit B), a copy of a Warranty Deed conveying 3754 Central Avenue to IAS on November 15, 2000 (Doc. No. 33, exhibit A), a Notice of Federal Tax Lien against IAS recorded in Pinellas County on August 12, 2003 (Doc. No. 33, exhibit C), and a copy of a Warranty Deed conveying the property in question from IAS to Falichia L. Fisher on August 29, 2003. (Doc. No. 33, exhibit D). The Trust does not contest the validity of the tax lien against IAS or any of these documents. There is no evidence that IAS disputes the jeopardy assessment or the lien.
Homestead, however, argues that there are material questions of fact as to the validity of the assessment and the tax lien because the IRS did not make a levy against Homestead prior to being interplead. Homestead bases its argument on Arguelles v. City of Orlando, 855 So.2d 1202 (5th DCA Fla. 2003).Arguelles, however, is inapposite. First, Arguelles is based on state law. Second, in Arguelles, the court based its decision on the fact that summary judgment was premature because discovery requests were outstanding when the lower court granted summary judgment. Id. at 1203. Homestead does not allege that there are any outstanding discovery requests.
Furthermore, Homestead merely states that a question of fact exists as to the validity of the lien and who owned 3754 Central Avenue, but fails to address the validity of the IRS's documents. Once the movant, here, the IRS, "satisfies its intial burden under Rule 56(c) of demonstrating the absence of a genuine issue of material fact, the burden shifts to the nonmovant to `come forward with `specifics facts showing that there is a genuine issue for trial.'" Allen v. Tyson Foods, Inc., 121 F.3d 642, 647 (11th Cir. 1997) (quoting Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). Homestead has not come forward with specific facts showing a genuine issue for trial. Therefore, this Court concludes that no material questions of fact exists regarding the validity of the federal tax lien or that it attached to the 3754 Central Avenue property prior to the transfer of that property on August 29, 2003.
2. Priority of the Federal Tax Lien
The Court must next determine whether a valid federal tax lien has priority over the claims of the Trust. The priority of a federal tax lien is a question of federal law. Griswold, 59 F.3d at 1575. "The general rule is, `first in time, first in right.'" Id. (quoting United States v. City of New Britain, 347 U.S. 81, 85 (1954)). However, 26 U.S.C. § 6323 creates a limited number of exceptions to the "first in time" rule and requires that the lien be properly filed before notice becomes effective. Id.
Neither the Trust nor Homestead argues that any of the specific exceptions listed in 26 U.S.C. § 6323 apply in this case; therefore, the "first in time" rule applies. As previously stated, the IRS recorded a Notice of Federal Tax Lien in Pinellas County, the county in which 3754 Central Avenue is located, on August 14, 2003. The Assignment of Contract Proceeds, on which the Trust bases its claim, was executed on August 28, 2003. Therefore, the government's tax lien takes priority and attached to the property as well as the proceeds.
IV. Conclusion
Accordingly, it is ORDERED AND ADJUDGED that:
1. Defendant United States of America's Motion for Summary Judgment (Doc. No. 33) is GRANTED;
2. The Trust's Motion for Summary Judgment (Doc. No. 35) is DENIED;
3. The clerk is directed to enter judgment in favor of Defendant United States and pay the $108,809.55 plus any accrued interest upon receipt of the funds in the registry of this Court to the "United States Treasury," to be credited to the account of International Advisory Services, Inc.;
4. The clerk is directed to CLOSE the case and TERMINATE any pending motions; and
5. The pretrial conference scheduled for April 14, 2005 at 8:30 a.m. is hereby cancelled.
DONE AND ORDERED.