Opinion
No 02-CV-70833
January 8, 2003
ORDER
This matter is before the Court on Third-Party Plaintiff Receiver Findling's Motion for Reconsideration. Receiver Findling requests that this Court reconsider its Opinion and Order of October 21, 2002, granting in part Third-Party Defendant/Counter-Plaintiff United States' Motion for Summary Judgment and providing the United States priority over Receiver Findling's interest in the proceeds of the foreclosure sale of the Princeton property.
II. BACKGROUND
On October 21, 2002, this Court granted in part. Third-Party Defendant/Counter-plaintiff United States' Motion for Summary Judgment. The Court granted the United States' Motion to the extent the United States requested foreclosure on 16140-42 Princeton, Detroit, Wayne County, Michigan, (hereinafter "the Princeton property"), but denied the United States' Motion to the extent the United States requested immediate distribution of the proceeds of the foreclosure sale prior to a final determination of the merits of the Third-Party Complaint. In addition, this Court granted the United States' Motion to the extent it requested that the United States be given priority over Receiver Findling's interest in the property to be sold. Receiver Findling subsequently filed a Motion for Reconsideration, requesting that this Court reconsider its position with respect to the priority of the competing interests to the Princeton property.
In response to the United States' original Motion for Summary Judgment, Receiver Findling had relied upon and cited numerous cases for the proposition that the Receiver's costs of administration, including Receiver's fees, are entitled to priority over the competing interest of the United States' tax liens. Receiver Findling relied upon numerous federal cases to support his position.
See United States v. Waddill, Holland, Flinn, Inc., et al., 323 U.S. 353, 354 (1945); Gardner v. Grand Beach Co., 48 F.2d 491 (6th Cir. 1931); New York Trust Co., et al. v. Detroit Toledo Ironton Ry. Co., 251 F. 514 (C.C.A. 6th Cir. 1918); Jordan v. Hamlett, 312 F.2d 121, 124 (5th Cir. 1963); Abrams v. United States, 274 E.2d 8, 13 (8th Cir. 1960); Hammond, 34 F.2d at 156; Meyerson v. Council Bluffs Savings Bank, et al., 824 F. Supp. 173, 175 (S.D. Iowa 1991) (citing Hammond, 34 F.2d at 156; In re Estate of Smith, 146 N.W. 86 (Iowa 1914)); United States v. Lord, 155 F. Supp, 105, 111 (D.N.H. 1957); Champlin, et al. v. Commissioner, 6 T.C. 280, 285 (1946) (citing I.R.C. § 827(a); United States v. Security-First Nat'l Bank of Los Angeles, et al., 30 F. Supp. 113 (S.D. Cal. 1939); United States v. Eggleston, at al., 25 F. Cas. 979 (C.C.D. Or. 1877) (No. 15, 027); Hammond v. Carthage Sulphite Pulp Paper Co., 34 F.2d 155 (N.D.N.Y. 1928); Bowes v. United States, 11 A.2d 720 (N.J. Ch. 1940)).
The United States took the position that the statutory heirarchy imposed by 26 U.S.C. § 6323 overrode any equitable considerations that might otherwise apply. Accordingly, since Receiver Findling's claim did not meet the requirements of an attorney's lien under § 6323(b)(8), Receiver Findling's interest was not entitled to "superpriority" and was subject to the United States' tax lien.
The Court held that priority fell in the following order: (I) the GMAC Mortgage Corporation; (2) the IRS liens filed against Lorenzo and Ann Marie prior to the Judgment of Divorce; and (3) Receiver Findling's administrative costs. As between GMAC and the IRS, GMAC was entitled to priority because the United States had conceded as much, GMAC had not been named as defendant to the United States' counterclaim, and because the GMAC lien was a purchase money mortgage. As between the IRS and Receiver Findling, the IRS was entitled to priority because Receiver Findling's position found no support in the Federal Tax Lien Act. The Court found that § 6323(b)(8), allowing certain attorney's liens to be afforded "superpriority," did not apply because under local law, Receiver Findling's costs of administration were subject to the IRS tax liens. Sec MICH. COMP. LAWS § 600.5251(1)(a) (b). In addition, since Receiver Findling had only cited one case decided after the enactment of the Federal Tax Lien Act of 1966, which codified the order of priority of claims competing with an IRS tax lien, and since that case provided Receiver Findling with no support, Receiver Findling's interest was subject to the IRS tax liens,
In his Motion for Reconsideration, Receiver Findling contests the Court's findings, and the Court's decision to afford the IRS priority over his interest in the Princeton property. Specifically, Receiver Findling argues that he was not appointed as a receiver pursuant to MICH. COMP. LAWS § 600.5201. which governs common law assignments for the benefit of creditors; that he was appointed as receiver pursuant to MICH. COMP. LAWS § 552.27 but that citation to § 600.5201 was necessary to fully describe the receiver's powers; that it was error for the Court to find that Receiver Findling possessed a lien on the Princeton property; and that the Court's determination was contrary to long standing concepts of federal law. Findling also argues that the Court improperly failed to consider FED. R. Civ. P. 66.
Receiver Findling again cites New York Trust Co., 251 F. at 514, and numerous Michigan state cases, Fisk v. Fisk, 53 N.W.2d 356 (Mich. 1952); Westgate v. Westgate, 9 N.W.2d 661 (Mich. 1943); Bailey v. Bailey, 247 N.W. 160 (Mich. 1933); Cohen v. Cohen, 335 N.W.2d 661 (Mich.Ct.App. 1983); and In re Dissolution of Co-Med Drug Co., 212 N.W.2d 28 (Mich.Ct.App. 1973).
F20. R. Civ. P. 66, however, governs receivers appointed by federal courts, and since Findling was appointed by a state court, it is inapplicable in the present action.
III. LEGAL STANDARD
A motion for reconsideration seeks to have the Court reconsider matters encompassed in a previous decision on the merits. The Court will not grant a motion for reconsideration that merely presents the same issues, expressly or by reasonable implication, ruled upon by the Court in its decision on the merits. A movant must "not only demonstrate a palpable defect by which the court and the parties have been misled but also show that correcting the defect will result in a different disposition of the case." E.D. MICH. L.R 7.1(g)(3).IV. ANALYSIS
A. Receiver Findling's Appointment
Receiver Findling claims that the Court improperly found that he had been appointed bythe circuit court pursuant to MICH. COMP. LAWS § 600.5201 et seq., which deals with assignments for the benefit of creditors, when he had actually been appointed pursuant to MICH. COMP. LAWS § 552.27. For the reasons set forth below, the Court agrees that Findling was not appointed pursuant to MICH. COMP. LAWS § 600.5201, but finds that this does not warrant a different outcome.
On December 14, 2001, Judge Lucas of the Wayne County Circuit Court issued a judgment of divorce in the matter of Wilson v. Wilson, Wayne County Circuit Court Case No. 01-113099-DO. On January 25, 2002, Judge Lucas issued an Amended Order Appointing Receiver, appointing Findling as Receiver to enforce the judgment of December 14, 2001. The Order provided:
IT IS FURTHER ORDERED, that the Receiver is hereby granted all powers and authority conferred by statutes and case law, including but not limited to MCL 600.5201 et seq., to control, sell, encumber, take possession of, lease or liquidate said assets for the purpose of satisfaction of the provisions of the Judgment entered between the parties. . . .
Amended Order Appointing Receiver, Wilson v. Wilson, Wayne County Circuit Court Case No. 01-113099-DO, p. 2. Pursuant to MICH. COMP. LAWS § 600.2926, circuit courtjudgcs in Michigan may appoint a receiver "in all cases pending where appointment is allowed by law." Such appointment does not require statutory authority. A receiver may be appointed in "(1) those cases where appointment of a receiver is provided for by statute and (2) those cases where the facts and circumstances render the appointment of a receiver an appropriate exercise of the circuit court's equitable discretion." Cohen v. Cohen, 335 N.W.2d 661, 664 (Mich.Ct.App. 1983). In the present case, the Order Appointing Receiver does not specify whether Receiver Findling was being appointed pursuant to statute, or pursuant to a non-statutory appropriate exercise of the circuit court's equitable discretion.
In his Motion for Reconsideration, Receiver Findling claims that he was appointed pursuant to MICH. COMP. LAWS § 552.27. Section 552.27 of the Michigan Compiled Laws provides:
If alimony or an allowance for the support and education of the children is awarded to either party, the amount of the alimony or allowance constitutes a lien upon the real and personal estate of the adverse party as provided in section 25a of the support and parenting time enforcement act, 1982 PA 295, MCL 552.65a. The court may do 1 or more of the following if the party defaults on the payment of the amount awarded: . . . (c) Order the sequestration of the real and personal estate of either party and may appoint a receiver of the real estate or personal estate, or both, and cause the personal estate and the rents and profits of the real estate to be applied to the payment of the judgment.
Although the statute cites MICH. COMP. LAWS § 552.65a, there is no section 552.65a, but since the reference is to section 25a of the Support and Parenting Time Enforcement Act, the statute actually refers to MICH. COMP. LAWS § 552.625a. Therefore, the Court will cite to MICH. COMP. LAWS § 552.625a, not section 552.65a.
MICH. COMP. LAWS § 552.27 (emphasis added).
Accordingly, if, as Receiver Findling asserts, he was appointed pursuant to section 552.27, he could only have been appointed if Plaintiff Lorenzo Wilson had already defaulted on the amount awarded in the judgment of divorce. See MICH. COMP. LAWS § 552.27. The amount in default would have then constituted a lien upon Plaintiff Wilson's real and personal property pursuant to MICH. COMP. LAWS §§ 552.27 552.625a, and Findling would have been appointed in order to enforce the judgment of divorce — to the extent Plaintiff Wilson was in default — pursuant to section 552.27(c). But since the judgment of divorce had only been entered six weeks prior to the Order appointing Findling as Receiver, and since there has been no indication that at the time of Findling's appointment, Plaintiff Wilson had been past due on any alimony payments, it does not appear as if Findling was appointed pursuant to section 552.27(c). See Wells v. Wells, 375 N.W.2d 800, 804 (Mich.Ct.App. 1985). As indicated, however, a circuit court does not need statutory authority to appoint a receiver. An appointment may lawfully be made where, based upon the facts and circumstances, the circuit court, in its equitable discretion, finds that a receiver is necessary. See Cohen, 335 N.W.2d at 664; MICH. COMP. LAWS § 600.2926. Cf. Zielinski v. Zielinski, 54 N.W.2d 665, 666-667 (Mich. 1952) (holding that appointment of a receiver in a divorce action where there was no showing that the defendant was likely to dispose of his property and divorce judgment had not yet been entered was an abuse of discretion). In such a case, even if the Order appointing the receiver indicated that the receiver derived some of his powers from another statutory source, the appointment would still be pursuant to section 600.2926.
Accordingly, the Court finds that Receiver Findling was appointed either pursuant to MICH. COMP. LAWS § 600.2926, or, if the Receiver was appointed because Plaintiff was already in default on the amount awarded in the judgment of divorce, pursuant to MICH. COMP. LAWS § 552.27. The Court, however, does not find that it committed palpable error when it treated the Receiver's interest as an assignment for the benefit of creditors because there is authority for the proposition that under Michigan law, the interest of a receiver in equity, see MICH. COMP. LAWS § 600.2926, and the interest arising from an assignment for the benefit of creditors, see MICH. COMP. LAWS § 600.5201 et seq., are both to be treated similarly, as lien creditors. See MICH. COMP. LAWS § 440.9102(1)(zz) (i) (iv).
B. Receiver Findling's Interest on the Princeton Property
Receiver Findling argues that the Court improperly found that he possessed a lien on the Princeton property. In its Opinion and Order, the Court evaluated Findling's position within the parameters established by the Federal Tax Lien Act of 1966. See 26 U.S.C. § 6323, Section 6323 establishes the priority of interests competing with an IRS lien. The Court analogized Findling's interest to that of an attorney's lien, which is the only exception that would have allowed Findling to have priority over the competing IRS tax lien under the Act, Contrary to Receiver Findling's assertions, the Court's position is consistent with Michigan law. See MICH. COMP. LAWS § 440.9102(1)(zz) ("`Lien Creditor' means 1 or more of the following: . . . (iv) A receiver in equity from the time of appointment."); Gardner v. Grand Beach Co., 48 F.2d 491, 492 (6th Cir. 1931) ("[h]aving appointed the receiver . . . the court has . . . pledged its faith that all of the authorized obligations of the receivership shall be paid or at least secured by proper liens upon the property in custody."). The Court did not commit palpable error when it treated Receiver Findling's interest in the Princeton property as a lien.
C. Case Law
As indicated in this Court's Opinion and Order of October 21, 2002, the Federal Tax Lien Act of 1966 established the priority of claims competing with an IRS tax lien. See 26 U.S.C. § 6323. See also United States v. Rodgers, 461 U.S. 677, 682 n. 2 (1983). While the Receiver cited numerous federal cases decided prior to the enactment of the Federal Tax Lien Act of 1966, see, supra, Part II, n. 1, only one federal case was decided post-enactment. See Meyerson v. Council Bluffs Savings Bank, et al., 824 F. Supp. 173, 175 (S.D. Iowa 1991), For the reasons stated in this Court's Opinion and Order of October 21, 2002, however, Meyerson provided Receiver Findling with no relief. The United States has a prior federal tax lien, and the Receiver's interest is subordinate to that lien. See McGinness v. United States of America, No. 99-4023, 2000 U.S. App. LEXIS 34470, at *7-*8 (6th Cir. Dec. 22, 2000) ("The earliest date on which [the Receiver] could have attained an interest in the relevant funds was upon his appointment as receiver. . . . This date comes after the . . . filings of tax liens against the property of [the debtor]. . . . Thus, the tax liens are first in time and the district court was correct in holding that they have priority over [the receiver's] interest in the funds."). See also Kennebec Box Co. v. O.S. Richards Corp., 5 F.2d 951 (2d Cir. 1925); O'Sullivan v. Commissioner, T.C. Memo 1994-17 ("e]xpenses of administering an estate . . . ordinarily enjoy priority over nonlien Federal tax claims. . . .") (emphasis added) (citing Rev. Rul. 80-112, 1980-1 C.B. 306).
V. CONCLUSION
For the reasons set forth above, Third-Party Plaintiff Receiver Findling's Motion for Reconsideration is DENIED.
IT IS SO ORDERED.