Florida

---

 

Rob ert Stokey and Rob ert Stokey II, Plaintiffs v. China Sea Restaurant, Inc., et al., Defendants.

U.S. District Court, So. Dist. Fla. , Miami Div.; 01-10089-CIV-KING, November 14, 2002 .

[ Code Secs. 6321 and 6323]

Tax liens: Perfection of liens: Validity and priority against third parties: Liquor license: Wrongful levy. --

Federal tax liens against the assets of a restaurant corporation that failed to pay employment taxes, which were properly filed with the office of the secretary of state ( Florida ), had priority over third parties' interest in the entity's alcohol beverage license. The third parties, who held an interest in the license as collateral for various loans, reacquired ownership of the collateral in lieu of foreclosure after the tax liens were filed and perfected. Thus, the liens remained on the property in the hands of the third parties, and the government held a superior interest in the license.

ORDER GRANTING THE UNITED STATES' MOTION FOR SUMMARY JUDGMENT

KING, District Judge: THIS CAUSE comes before the Court upon the United States ' Motion for Summary Judgment filed on September 12, 2002 . Plaintiffs have not filed a Response, and the time to do so has passed.

I. BACKGROUND

On August 28, 1997 , Steven R. Moshy ("Moshy") and Debra S. Burrows ("Burrows") executed a Balloon Promissory Note, Lease Agreement, Memorandum of Lease, Security Agreement or Chattel Mortgage, a Pledge Agreement, and an Indemnity Agreement in favor of the Plaintiffs related to the sale of China Sea Restaurant, Inc. (" China Sea "). These documents pledged collateral, including Alcoholic Beverage License 54-00098 5COP ("the license"), issued by the Florida Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco ("DABT"). On September 26, 1997 , the Stokeys recorded their interest in the license with the DABT.

Beginning in 1999, China Sea failed to pay its Federal employment taxes. On October 26, 2000 , a Notice of Federal Tax Lien ("NFTL") was filed with the Florida Secretary of State for the 1999 liabilities in the amount of $47,742.22. NFTLs covering the 2000 liabilities were filed on March 9, 2001 , and March 30, 2001 , in the amounts of $30,106.36 and $26,386.97 respectively.

On February 16, 2001 , the Stokeys reacquired ownership of the collateral, in lieu of foreclosure, from Moshy, Burrows, and China Sea, which granted the Stokeys title to the personal property of China Sea , including the interest in the license. On March 22, 2001 , the IRS issued a levy for China Sea 's 1999 liabilities. A Notice of Levy was served upon the Stokeys on that date. On March 26, 2001 , the IRS seized the license. On September 18, 2001 , the IRS released the levy, and issued another levy on that same date for approximately $122,000.00, which included China Sea 's 1999 and 2000 liabilities. On September 19, 2001 , the IRS re-seized the license.

II. STANDARD OF REVIEW

Summary judgment is appropriate only where it is shown that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the record as a whole could not lead a rational fact-finder to find for the non-moving party, there is no genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). On a motion for summary judgment, the court must view the evidence and resolve all inferences in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). There is no requirement that the trial judge make findings of fact. Id. , at 251.

The moving party bears the burden of pointing to that part of the record which shows the absence of a genuine issue of material fact. If the movant meets its burden, the burden then shifts to the non-moving party to establish that a genuine dispute of material fact exists. See Hairston v. Gainesville Sun Pub. Co. , 9 F.3d 913, 918 (11th Cir. 1993). To meet this burden, the non-moving party must go beyond the pleadings and "come forward with significant, probative evidence demonstrating the existence of a triable issue of fact." Chanel, Inc. v. Italian Activewear of Florida, Inc., 931 F.2d 1472, 1477 (11th Cir. 1991). If the evidence relied on is such that a reasonable jury could return a verdict in favor of the non-moving party, then the court should refuse to grant summary judgment. Hairston, 9 F.3d at 919. However, a mere scintilla of evidence in support of the non-moving party's position is insufficient to defeat a motion for summary judgment. Anderson, 477 U.S. at 252. If the evidence is merely colorable or is not significantly probative, summary judgment is proper. See id. at 249-50.

III. ANALYSIS

In a wrongful levy suit, the initial burden is upon the plaintiff to show that he holds title or some other ownership interest in the property at issue. Morris v. United States [ 87-1 USTC ¶9241], 813 F.2d 343, 345 (11th Cir. 1987). The burden then shifts to the United States to establish a nexus between the taxpayer and the property by substantial evidence. Id. However, the plaintiff retains the final obligation of persuading the Court that the levy should be overturned. Id.

Pursuant to 26 U.S.C. §6321, if a person fails to pay their tax liabilities after demand, a lien arises in favor of the United States on all property and rights to property of that person. The lien imposed by §6321 arises on the date of assessment. 26 U.S.C. §6322. This statutory lien is not valid against certain parties, as provided in §6323(a), until notice of the tax lien has been filed pursuant to §6323(f). ¹

Plaintiffs argue that the United States was required to file its notice of federal tax lien with the DABT pursuant to Fla. Stat. §561.65. However, §561.65 is not applicable. Instead, §703.901 governs the filing of the notice of federal tax lien, and it stipulates, in pertinent part, that:

(c) Notices of federal liens upon personal property, whether tangible or intangible, for obligations payable to the United States , and certificates and notices affecting the liens, shall be filed as follows:

 

1. If the person against whose interest the lien applies is a corporation or a partnership whose principle executive offices is in this state ... in the office of the Secretary of State.

Therefore, because the United States filed three Notices of Federal Tax Lien on October 26, 2000 , March 9, 2001 , and March 30, 2001 , with the Secretary of State, the federal tax liens were perfected on those dates. The filing with the Secretary of State on October 26, 2000 , preceded any transfer of ownership of the liquor license to the Stokeys, and the liquor license was clearly encumbered by the first NFTL at the time of the transfer. The transfer of property subsequent to the attachment of a federal tax lien does not affect the lien, which remains on property in the hands of the transferee. United States v. Bess [ 58-2 USTC ¶9595], 357 U.S. 51, 57 (1958). Therefore, the United States ' interest in the liquor license is superior to the interest of the Stokeys.

IV. CONCLUSION

Accordingly, after a careful review of the record, and the Court being otherwise fully advised, it is

ORDERED and ADJUDGED that the United States ' Motion for Summary Judgment be, and the same is hereby, GRANTED.

DONE and ORDERED.

ORDER OF FINAL JUDGMENT

Pursuant to Fed.R.Civ.P. 58 and the Court's Order Granting the United States' Motion for Summary Judgment, it is

ORDERED and ADJUDGED that judgment is entered in favor of the United States and against Plaintiffs Rob ert Stokey and Rob ert Stokey II. The case, namely the entire Complaint, is dismissed with prejudice. This case is CLOSED. The Court retains jurisdiction of the above-styled action to determine fees, costs, and expenses incurred by the United States in defending this action. It is further

ORDERED and ADJUDGED that any pending motions are DENIED as moot.

DONE and ORDERED.

¹ Section 6323(f) provides that the notice shall be filed "[i]n the case of personal property, whether tangible or intangible, in one office within the State ... as designated by the laws of such State, in which the property subject to the lien is situated...." 26 U.S.C. §6323(f)(1)(A)(ii).

 

[99-2 USTC ¶50,827] Waste Management of Missouri, Inc., Interpleader Plaintiff v. Donna S. Evert, Defendant-Appellant , United States of America , Defendant-Appellee, William D. Nichols, Intervenor-Appellant

(CA-8), U.S. Court of Appeals, 8th Circuit, 98-3395, 8/27/99, 188 F3d 1002, Affirming two District Court decisions, 97-2 USTC ¶50,985 and 98-2 USTC ¶50,569

[Code Sec. 6323 ]

Tax liens: State law: Priority of liens: Perfection of liens: Judgment creditors.--A notice of federal tax lien was properly filed with the "official records" of the applicable county's Commissioners, despite the fact that state (Florida) law specified that the notice was to be filed with the circuit court clerk. Thus, the lien had priority over subsequently perfected liens of judgment creditors with respect to interpleaded funds owed to the taxpayer by a third party. The judgment creditor's contentions that the government filed its lien notice in the wrong office and that the lien was not valid against them under Florida 's Federal Lien Registration Act were rejected. The county in which the notice was filed had exercised its right under the state constitution to designate different offices for the filing of public documents, such as lien notices.

Before: LOKEN and ARNOLD, Circuit Judges, and WATERS, ^* District Judge.

LOKEN, Circuit Judge:

Waste Management of Missouri, Inc. ("Waste Management"), was contractually indebted to taxpayer E. Scott Evert ("Taxpayer"), a resident of Broward County , Florida . On April 20, 1995 , the United States filed a notice of federal tax lien against all of Taxpayer's property in the "official records book" of the Broward County Commissioners. Taxpayer's judgment creditors Donna S. Evert and William D. Nichols perfected their judgment liens against monies owed by Waste Management on May 13, 1997 . Generally, when a federal tax lien is in the competition, the first lien in time has priority, and state law governs what constitutes a perfected lien. See United States v. Dishman Indep. Oil, Inc., 46 F.3d 523, 526 (6th Cir. 1995). In these two lawsuits, the judgment creditors seek to capture Waste Management contract payments on the ground that the government's lien is unperfected because it was filed in the wrong Broward County office. The district courts ¹ granted summary judgment in favor of the United States, and the judgment creditors filed these consolidated appeals. We affirm.

The assessment of unpaid federal income taxes creates a lien in favor of the United States on all property "belonging to" the taxpayer. See 26 U.S.C. §6321; Thomson v. United States [95-2 USTC ¶50,549], 66 F.3d 160 (8th Cir. 1995). To be valid against a taxpayer's subsequent secured creditors, such as judgment creditors, the government must give formal notice of its tax lien in accordance with 26 U.S.C. §§6323(a) & (f). For personal property, like the right to Waste Management's contract payments, notice of the tax lien must be filed--

in one office within the State (or the county, or other governmental subdivision), as designated by the laws of such State, in which the property subject to the lien is situated. . . .

§6323(f)(1)(A)(ii). If State law does not designate one such office, the lien notice must be filed "[i]n the office of the clerk of the United States district court for the judicial district in which the property subject to the lien is situated." §6323(f)(1)(B). If the government files notice of its tax lien in the wrong office--which is primarily an issue of state law--then the judgment creditor has a superior claim to the personal property in question. See Gordon White Constr. Co., Inc. v. Southland Inv. Co. [75-2 USTC ¶9771], 521 F.2d 856, 857 (5th Cir. 1975).

The Florida Constitution states, "When not otherwise provided by county charter or special law approved by vote of the electors, the clerk of the circuit court shall be ex officio clerk of the board of county commissioners, auditor, recorder and custodian of all county funds." FLA. CONST. art. VIII, §1(d). Florida counties may enact a county charter providing for "local self-government not inconsistent with general law." FLA. CONST. art. VIII, §1(g) and (c). The voters of Broward County approved the Broward County Charter in November 1974. That Charter transferred responsibility for recording public documents to an agency of the Broward County Commissioners. Broward County Charter , art. IV, §4.02(C). Consistent with the Broward County Charter, the United States filed its lien notice with the "official records" of the Broward County Commissioners, rather than with the Broward County Circuit Court or the United States District Court for the Southern District of Florida.

The judgment creditors rely on the Florida Legislature's 1992 enactment of the Florida Uniform Federal Lien Registration Act ("the Act"). FLA. STAT. §713.901. The Act specifies that liens against an individual's personal property are to be filed "in the office of the clerk of the circuit court of the county where the person against whose interest the lien applies resides at the time of filing of the notice of lien." FLA. STAT. §713.901(3)(c)(4). The judgment creditors argue that either §713.901(3)(c) implicitly repealed the Broward County Charter provision and therefore lien notices must be filed with the clerk of the circuit court, or §713.901(3)(c) created two state offices in which tax lien notices may be filed, triggering the requirement in 26 U.S.C. §6323(f)(1)(B) that federal tax lien notices be filed with the clerk of the local federal court. Under either theory, the United States filed its lien notice in the wrong office and the lien is not valid against the judgment creditors. We disagree.

The judgment creditors' argument rests on the mistaken assumption that, in passing the Act, the Florida Legislature failed to consider the possibility that some counties--like Broward--had exercised their authority under the Florida Constitution to designate different offices for the filing of public documents such as lien notices. However, subsection (3)(b) of the Act explicitly states:

If by law the county recorder and custodian of the official records of a county is other than the clerk of the circuit court, a reference in this section to the clerk of the circuit court shall be deemed to be the county recorder so designated by law.

Although this provision is in a different subsection than §713.901(3)(c), on which the judgment creditors rely, its plain language states that it applies to all references "in this section." (Emphasis added.) Thus, the Act is consistent with the Broward County Charter, and the two read together provide for only one state office in Broward County for the filing of lien notices. By filing its lien notice in that office, the United States complied with 26 U.S.C. §6323(f), and its lien is valid against the judgment creditors under §6323(a).

The judgments of the district courts are affirmed.

^* The HONORABLE H. FRANKLIN WATERS, United States District Judge for the District of Arkansas, sitting by designation.

¹ The HONORABLE CATHERINE D. PERRY and the HONORABLE DONALD J. STOHR, United States District Judges for the Eastern District of Missouri.

 

 

[98-2 USTC ¶50,590] United States of America , Plaintiff v. Wilford A. Simpson, Janet L. Simpson, Cynda B. Simpson, William A. Simpson, Warren A. Simpson, Whitney A. Simpson and Wesley A. Simpson, Defendants

U.S. District Court, No. Dist. Fla., 3:97-cv-242/LAC, 6/24/98

[Code Secs. 6321 and 7402 ]

Liens and levies: Property subject to: Real property: Transfer of ownership: Tenancy by the entireties: Fraudulent transfer: Jurisdiction: District court: Mootness.--The IRS was not entitled to enforce a lien against an individual taxpayer with respect to real property that he held with his wife as a tenant by the entireties since, under state (Florida) law, a judgment lien could not attach to property held by the entireties. Moreover, the question of whether the husband made a fraudulent subsequent transfer of the property to his wife in fee simple was moot since the property would still have been a tenancy by the entireties if the transfer were fraudulent.

[Code Sec. 7402 ]

Jurisdiction: District court: Sanctions: Federal Rule of Civil Procedure 11: Frivolous litigation.--Married taxpayers were not entitled to Rule 11 sanctions against the government for its allegedly frivolous litigation position involving a lien on real property that the taxpayers held as tenants by the entireties. The government was required to file a responsive memorandum to the motion for summary judgment filed by the taxpayers.

Carol Koehler Ide, Department of Justice, Washington , D.C. 20530 , for plaintiff. Wilford Alex Simpson, Janet L.Simpson, General Delivery, Paxton , Fla. 32538 , pro se.

SUMMARY JUDGMENT

COLLIER, District Judge:

THIS CAUSE comes before the Court on the parties' motions for summary judgment (docs. 26, 31). Also pending is Defendants' motion for Rule 11 sanctions, (doc. 34), which Plaintiff opposes (doc. 40). The Court has taken both motions for summary judgment under advisement, (docs. 30, 37), and is now prepared to rule on all motions. For the reasons stated below, Defendants' motion for summary judgment is GRANTED. Plaintiff's motion for summary judgment and Defendants' motion for sanctions are both DENIED.

I. STATEMENT OF THE CASE

A. Background

Both Plaintiff and Defendants agree that the facts in the instant action are undisputed, and indeed both recite almost identical factual circumstances in the memoranda in support of their respective motions for summary judgment.

1. On December 29, 1983 Defendants Wilford and Janet Simpson, as husband and wife, acquired as tenants by the entireties a parcel of property located in Walton County , Florida . That property, totaling approximately 27.77 acres, also includes buildings and an airplane runway.

2. On October 12, 1984 , Defendant Wilford Simpson transferred his interest in the property to Janet Simpson by quitclaim deed.

3. On June 10, 1985 Plaintiff assessed it first tax liability against Defendant Wilford Simpson for the tax year 1981.

4. On October 30, 1987 Plaintiff filed a notice of federal tax lien as to Defendant Wilford Simpson's 1981 tax liability.

5. On December 17, 1987 Defendant Janet Simpson transferred her interest in the property by warranty deed to her children, Defendants Cynda, William, Warren, Whitney, and Wesley Simpson, but retained a life estate in the property.

6. On April 22, 1988 the children transferred their interest in the property by warranty deed to only children Cynda and William Simpson, but still reserved a life estate for Janet Simpson.

7. On June 24, 1988 the Defendants Cynda and William Simpson transferred their interest into the Earnest Mill Family Preservation Trust. Janet Simpson still retained a life estate in the property.

8. Twelve additional tax liabilities were assessed by Plaintiff against Defendant Wilford Simpson in the years 1991, 1994, and 1995 for the tax years 1984-1992. The respective tax liens were subsequently filed in 1992, 1994, and 1995. The total unpaid balance of tax liability alleged by Plaintiff is $1,284,537.10.

9. Civil penalties were also assessed against Defendant Wilford Simpson in 1992 and 1994 for tax years 1978-1981, totaling $2,696.66. Notice of liens were filed as to these assessments in 1994.

10. On April 29, 1992 and May 27, 1994 notices of federal tax lien were filed with the Clerk of the Circuit Court of Walton County against the Defendants Janet, Cynda, William, Warren, Whitney, and Wesley Simpson as nominees of Wilford A. Simpson.

11. Defendant Wilford Simpson has not paid either the balance of tax liability or the civil penalties assessed in 1985 and thereafter.

B. Procedural History

On May 19, 1997 Plaintiff filed this civil action seeking a monetary judgment against Defendant Wilford A. Simpson for the unpaid balances and foreclosure of its liens against the 27.77 acres of property and structures located in Walton County (doc. 1). Default judgment was entered against Defendant Wilford Simpson in the amount of $1,284,537.10 for unpaid federal income taxes and $2,696.66 for unpaid civil penalties as of February 28, 1996 plus further interest and statutory additions as allowed by law (doc. 36).

The remaining Defendants, ¹ however, timely filed a responsive pleading and moved for summary judgment against Plaintiff (docs. 26, 27). After the Court took that motion under advisement, (doc. 30), Plaintiff filed a cross-motion for summary judgment, which also served as its response in opposition to Defendants' motion (doc. 31). The Court has taken that motion under advisement as well, (doc. 37), and is prepared to rule on both motions. ²

II. MOTIONS FOR SUMMARY JUDGMENT

A. Standard

Summary judgment is appropriate where the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, show that no genuine issue of material fact exists and that the party moving is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed. 2d 265 (1986). The substantive law will identify which facts are material and which are irrelevant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed. 2d 202 (1986). An issue of fact is material if it is a legal element of the claim under the applicable substantive law which might affect the outcome of the case. Id.

At the summary judgment stage, a court's function is not to weigh the evidence to determine the truth of the matter, but to determine whether a genuine issue of fact exists for trial. Anderson, 477 U.S. at 249, 106 S.Ct. at 2510. A genuine issue exists only if sufficient evidence is presented favoring the nonmoving party for a jury to return a verdict for that party. Id. "If reasonable minds could differ on the inferences arising from undisputed facts, then a court should deny summary judgment." Miranda v. B & B Cash Grocery Store, Inc., 975 F.2d 1518, 1534 (11th Cir. 1992) (citing Mercantile Bank & Trust Co. v. Fidelity and Deposit Co., 750 F.2d 838, 841 (11th Cir. 1985)).

When assessing the sufficiency of the evidence in favor of the nonmoving party, the court must view all the evidence, and all factual inferences reasonably drawn from the evidence, in the light most favorable to the nonmoving party. Hairston v. Gainesville Sun Publ'g Co., 9 F.3d 913, 918 (11th Cir. 1993). The court is not obliged, however, to deny summary judgment for the moving party when the evidence favoring the nonmoving party is merely colorable or is not significantly probative. Anderson, 477 U.S. at 249, 106 S.Ct. at 2510. A mere scintilla of evidence in support of the nonmoving party's position will not suffice to demonstrate a material issue of genuine fact that precludes summary judgment. Walker v. Darby, 911 F.2d 1573, 1577 (11h Cir. 1990).

B. Discussion

Under Florida law, property held as a tenancy by the entireties cannot be charged with the individual debts of either spouse, in the absence of fraud. United States v. Gurley [69-2 USTC ¶9562], 415 F.2d 144, 149 (5th Cir. 1969) (citing Meyer v. Faust, 83 So. 2d 847 ( Fla. 1955)). ³ "Because of the unique nature of a tenancy by the entireties under Florida law, a judgment lien cannot attach to real property held in such an estate . . ., and since property held by the entireties is not subject to levy and sale under execution, an 'Execution Lien' cannot attach thereto." Id.

It is undisputed that Defendants Wilford and Janet Simpson took title to the property at issue as tenants by the entireties, ⁴ and Plaintiff readily concedes that "[t]here is no evidence before this Court that the Simpsons acquired the real property as tenants by the entireties in order to defeat Mr. Simpson's creditors" (doc. 31, memorandum at 9). Therefore, Defendant Wilford Simpson's interest in the property was unreachable by Plaintiff or any other creditor while held as a tenancy by the entireties.

A similar circumstance was at issue before the Fifth Circuit in Gurley:

[I]f the property here involved was then held by the Gurleys in a tenancy by the entirety, the filing of this federal tax assessment with the Clerk of the Circuit Court of Duval County would not have created a United States tax lien against said property because in matters involving the creation and enforcement of federal tax liens the Federal Courts respect those laws of a state which establish and regulate property rights within a state.

[69-2 USTC ¶9562], 415 F.2d at 150 (citing Folsom v. United States [62-2 USTC ¶9648], 306 F.2d 361 (5th Cir. 1962); United States v. American Nat'l Bank [58-2 USTC ¶9564], 255 F.2d 504 (5th Cir. 1958)).

That court ultimately concluded that if the property was in fact held as an estate by the entireties, it could only be reached by creditors once the spouses' interests converted to a tenancy in common, where each spouse's separate interests in such property become liable for his or her individual debts. Id. If on remand the district court determined that the Gurleys were tenants by the entireties, then the tenancy would be destroyed only upon the divorce of the husband and wife, thus creating a tenancy in common and simultaneously allowing the United States tax lien to attach to each spouses' interests. Id. at 149-50.

In the instant case, there simply was no opportunity for Plaintiff to reach the individual interest of Defendant Wilford Simpson. As a tenant by the entireties under the laws of Florida , his interest was unreachable by any creditor. United States v. 15621 S.W. 209th Avenue , 894 F.2d 1511, 1514-15 (11th Cir. 1990). Moreover, because the property was then conveyed to only Janet Simpson in fee simple, Wilford Simpson had absolutely no interest at the time the tenancy by the entireties was destroyed:

No persons except husband and wife have a present interest in an estate by the entireties when such estate is unencumbered by any lien existing prior to the creation of such estate and is unencumbered by any lien created jointly by the husband and wife after the estate by entireties came into being. It is not subject to execution for the debt of the husband. It is not subject to partition; it is not subject to devise by will; neither it is subject to the laws of descent and distribution. It is, therefore, an estate over which the husband and wife have absolute disposition and as to which each, in the fiction of the law, holds the entire estate as one person. Therefore, there appears to be no plausible reason why the law should not recognize as valid any formal agreement executed according to law whereby one spouse would be divested of his or her interest in such estate and the other be invested with the unqualified fee-simple title.

Hunt v. Covington , 200 So. 76 ( Fla. 1941).

Plaintiff now argues that the subsequent transfers to Janet Simpson, then to her children, and ultimately to the Mills Family Preservation Trust were fraudulent, as those grantees were effectively nominees of Wilford Simpson, and that it is entitled to foreclose its liens against the property (doc. 31, memorandum at 8-14). However, a large component of this argument becomes moot when considered in light of the safeguards afforded property held by tenants by the entireties. If, arguendo, the transfer to Janet Simpson was not fraudulent, then clearly she hold the property in fee simple and is free to dispose of it as she wishes. On the other hand, if that conveyance was fraudulent, Janet Simpson would not have fee simple title to the property, but rather the property would still be held by Wilford and Janet Simpson as tenants by the entireties. In either case, the subsequent transfers to the children and trust become irrelevant, as they too are either entirely valid or entirely void depending on the validity of the initial transfer to Janet. ⁵

Furthermore, it is also unnecessary to address whether the conveyance from Wilford and Janet Simpson to only Janet was fraudulent. As discussed immediately above, if the conveyance to Janet was fraudulent, the property remained a tenancy by the entireties and was unreachable by creditors of only Wilford Simpson. If the conveyance was valid, then Janet Simpson held the property in fee simple and Wilford had no interest at all. While there is a possibility that by divorce or some other reason the tenancy by the entireties could be destroyed, thus creating a tenancy in common and making the validity of subsequent conveyances of utmost importance, that day has not yet arrived. As such, the Court declines to make those determinations today. ⁶

The facts of this case mandate an unusual result. Frequently, a debtor will attempt to covey his own property to a third party or into a tenancy by the entireties as an attempt to hinder or obstruct his creditors. Without discerning the motives behind their decision, the Court notes that Defendants did exactly the opposite, destroying the tenancy by the entireties in favor of a fee simple held by Janet Simpson alone. While this conveyance, if valid, would have placed the property beyond the reach of Wilford's individual creditors, the tenancy by the entireties already afforded that protection. Nonetheless, because it is undisputed that Wilford and Janet Simpson acquired the 27.77 acre parcel as tenants by the entireties without intention to defraud or avoid creditors, the Plaintiff is simply unable to enforce a lien against Mr. Simpson's interests in the property as it is held today, regardless of subsequent conveyances. Therefore, summary judgment in favor of Defendants is warranted.

III. MOTION FOR SANCTIONS

Defendants also move for Rule 11 sanctions against Plaintiff and allege that the Government's motion for summary judgment is "frivolous, not 'substantially justified,' and is not 'warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal or existing law' " (doc. 34:1). However, the Court finds Defendants' argument unpersuasive. By filing their own motion for summary judgment, Defendants invited a response in opposition from the Plaintiff. Indeed, the non-movant is required in this district to file a responsive memorandum to a motion for summary judgment and failure to do so "may be sufficient cause to grant the motion." N.D. FLA. Loc. R. 7.1(C)(1).

The language of Rule 11 "stresses the need for some prefiling inquiry into both the facts and the law to satisfy the affirmative duty imposed by the rule." FED. R. CIV. P. 11 advisory committee's note. The rule, as amended in 1983, is intended to "reduce frivolous claims, defenses or motions" and to deter "costly meritless maneuvers," thus avoiding unnecessary delay and expense in litigation. Donaldson v. Clark, 819 F.2d 1551, 1556 (11th Cir. 1987) (citations omitted). The standard for testing conduct under Rule 11 is "reasonableness under the circumstances," a standard more stringent than the original good faith requirement required under the rule. Id. Where there is some legal and factual basis for the argument, sanctions are inappropriate. See, e.g., Davis v. Carl, 906 F.2d 533, 536-37 (11th Cir. 1990).

In the instant case, Plaintiff's arguments are well-grounded in Eleventh Circuit jurisprudence. Although they now fail because of their inapplicability to the unusual factual posture of this case, the significance of those arguments may come to bear in the future. Simply because the Court finds those arguments unavailing today does not mean they are without merit, nor does it compel this Court to resort to Rule 11 sanctions. Moreover, as Plaintiff was required to respond to Defendants' motion, it's cross-motion for summary judgment did not impose any additional expenses upon the Court or the parties than if it had been titled only as a responsive memorandum. ⁷ For these reasons, the Court finds that sanctions are not proper.

IV. SUMMARY

The Court's ruling in this matter may be summarized as follows, and IT IS HEREBY ORDERED:

1. Defendants JANET, CYNDA, WILLIAM, WARREN, WHITNEY, AND WESLEY SIMPSON's motion for summary judgment (doc. 26) is GRANTED and summary judgment is hereby entered in favor of those Defendants. Plaintiff takes nothing by this action from said Defendants who shall go without day.

2. Plaintiff's cross-motion for summary judgment (doc. 31) is DENIED.

3. Defendants' motion for Rule 11 sanctions is DENIED.

ORDERED.

¹ Only Wilford A. Simpson defaulted. Defendants Janet, Cynda, William, Warren, Whitney, and Wesley Simpson remain and are the only defendants moving for summary judgment and sanctions.

² Additionally, Defendants filed a motion for Rule 11 sanctions. (doc. 34), which is opposed by Plaintiff (doc. 40). That motion will also be disposed of in this order.

³ In Bonner v. City of Prichard the Eleventh Circuit adopted as binding precedent all of the decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981 . 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).

⁴ A tenancy by the entireties cannot exist unless the five "unities" of marriage (the joint owners must be married to each other), title (they must both have title to the property), time (they must have both received title from the same conveyance), interest (they must have an equal interest in the whole of the property), and control (they must both have the right to use the whole property) are present. United States v. 15621 S.W. 209th Avenue, 894 F.2d 1511, 1514 (11th Cir. 1990); United States v. Gurley [69-2 USTC ¶9562], 415 F.2d 144, 149 (5th Cir. 1969). However, as stated previously, Plaintiff does not contest that Wilford and Janet Simpson held the property as tenants by the entireties.

⁵ Unless, of course, the children took the property as bona fide purchasers for value. Even if this were the case, it would have no bearing on the outcome of this action as the children's purchases would then be protected from prior creditors under the Florida statutes even if the transfer to Janet was fraudulent. See United States v. Ressler [77-1 USTC ¶9459], 433 F.Supp. 459, 464 (S.D. Fla. 1977), aff'd [78-2 USTC ¶9571], 576 F.2d 650 (5th Cir. 1978).

⁶ If that day arrives, at least a portion of the property would presumably be reachable as a tenancy in common between Wilford Simpson and his wife; that is if Plaintiff could demonstrate that the conveyances made to Janet Simpson and then to the children and trust were fraudulent.

⁷ The Court reminds Defendants that the local rules required them to file their own responsive memorandum and statement of facts in opposition to Plaintiff's cross-motion. The Court did not hold them to that strict standard here, as each motion for summary judgment also effectively serves as opposition to the other, making additional argument unnecessary.

 

 

[96-1 USTC ¶50,294] In re Darrell Joe Carrens and Linda Dell Carrens, Debtors. Darrell Joe Carrens, Linda Dell Carrens, and Terry Smith, Chapter 13 Trustee, Plaintiffs v. United States of America, Defendant

U.S. Bankruptcy Court, Mid. Dist. Fla., Tampa Div., 94-6541-8G3, 5/8/96 , 198 BR 999.

[Code Sec. 6323 ]

Validity of lien: Bankruptcy: Purchaser: Bona fide purchaser: Superpriority.--

A federal tax lien on a married couple's vehicles was perfected and enforceable against a bona fide purchaser at the commencement of the couple's bankruptcy case because the IRS properly filed a notice of lien with the clerk of the circuit court in the county of the debtors' residence. State ( Florida ) law specifically provided that the department of motor vehicles was not a recording office for liens on motor vehicles, and the tax lien did not have to be recorded on the vehicle's certificate of title. The tax liens on the couple's vehicles and other personal property could not be avoided under section 545(2) of the Bankruptcy Code because the bankruptcy trustee was not entitled to assert the superpriority status of a purchaser. The bankruptcy trustee merely acquired the characteristics of a traditional bona fide purchaser under the Bankruptcy Code and did not possess the additional characteristics of a purchaser under Code Sec. 6323(b) . The Bankruptcy Code did not the grant the trustee hypothetical possession of the vehicles or other characteristics necessary to satisfy the purchaser requirement of Code Sec. 6323 ; thus, the couple could not avoid the liens.

Darrell Joe Carrens, Linda Dell Carrens, Terry E. Smith, pro se. Michael Barnett, 115 N. MacDill Ave., Tampa, Fla. 33609, for plaintiffs. Philip Doyle, United States Attorney General, Department of Justice, Washington, D.C. 20530, for defendant.

ORDER ON MOTION FOR SUMMARY JUDGMENT AND CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT

GLENN, Bankruptcy Judge:

THIS CASE came before the Court to consider the Motion for Summary Judgment filed by Darrell Joe Carrens and Linda Dell Carrens (the "Debtors"), together with the Cross-Motion for Partial Summary Judgment filed by the United States of America (the United States). The Motions relate to a Complaint to Determine Secured Status and to Avoid Statutory Lien filed by the Debtors and Terry E. Smith (the "Trustee"), the Trustee in the Debtors' Chapter 13 case (the Debtors and the Trustee are the "Plaintiffs"). The United States has asserted a federal tax lien on the Debtors' personal property, which includes their motor vehicles, and real estate. In Count I of the Complaint, the Plaintiffs request the Court to avoid the lien asserted by the United States on the Debtors' vehicles and personal property pursuant to Section 545(2) of the Bankruptcy Code. In Count II of the Complaint, the Plaintiffs request the Court to determine that the secured portion of the United States ' claim is $3,000, based on the amount of the Debtors' equity in their homestead real property. In its Answer to the Complaint, the United States asserts that its lien is not avoidable under §545 because the lien was perfected against a bona fide purchaser at the commencement of the case, and because the Chapter 13 Trustee is not entitled to the "superpriority" rights of a purchaser as provided by the Internal Revenue Code.

The Debtors have filed the Motion for Summary Judgment, and the United States has filed a Cross Motion for Summary Judgment. Both parties contend that there is no genuine issue as to any material fact, and that they are entitled to a judgment as a matter of law with respect to the avoidance of the lien on the Debtors' vehicles and personal property. Both parties also appear to concede, however, that a factual issue exists regarding the amount of the Debtors' equity in their homestead real property. Consequently, the entry of a summary judgment is not appropriate with respect to a determination of the secured portion of the United States ' claim on such real property.

I. Background

The Debtors filed their Petition under Chapter 13 of the Bankruptcy Code on July 6, 1994 . In connection with their filing, the Debtors listed various automobiles and personal property on their schedules of assets. The parties agree that the description and value of these assets are as follows:

Furniture ........................................................... $ 2,000

Vehicles ............................................................   7,900

Clothing ............................................................     100

Jewelry .............................................................     270

Hobby equipment .....................................................     180

Other personal property .............................................     100

                                                                      -------

   Total ............................................................ $10,550

 

The Debtors also listed their homestead on their schedule of real property. The Debtors claim that the amount of their equity in the homestead real property is $3,000. The United States claims that the amount of the Debtors' equity in the homestead real property is $16,000.

The Debtors scheduled their interest in all of their personal property except the motor vehicles as exempt, and scheduled their interest in their homestead real property as exempt.

The United States timely filed a Proof of Claim in the Debtors' bankruptcy case in the total amount of $13,662.84. Of this total amount, the sum of $12,920.64 was filed as a secured claim. The United States bases its security on a Notice of Federal Tax Lien filed with the Clerk of the Circuit Court of Hillsborough County, Florida, on July 20, 1993 , and September 20, 1993 , prior to the commencement of the Debtors' bankruptcy case. The United States contends that its lien extends to all property and rights to property owned by the Debtors.

II. Applicable Statutes

Bankruptcy Code:

11 U.S.C. §545 . Statutory liens

The trustee may avoid the fixing of a statutory lien on property of the debtor to the extent that such lien--

...

(2) is not perfected or enforceable at the time of the commencement of the case against a bona fide purchaser that purchases such property at the time of the commencement of the case, whether or not such a purchaser exists.

11 U.S.C. §522. Exemptions.

...

(h) The debtor may avoid a transfer of property of the debtor or recover a set-off to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if

(1) such transfer is avoidable by the trustee under section 544 , 545 , 547 , 548, 549, or 724(a) of this title or recoverable by the trustee under section 553 of this title; and

(2) the trustee does not attempt to avoid such transfer.

Florida Statutes:

§319.27, Florida Statutes. Notice of lien on motor vehicles or mobile homes; notation on certificate; recording of lien.--

(1) Each lien, mortgage, or encumbrance on a motor vehicle or mobile home titled in this state shall be noted upon the face of the Florida certificate of title or on a duplicate or corrected copy thereof, as provided by law;.... Except for the recording of liens upon motor vehicles or mobile homes for which no Florida certificates of title have been issued as provided in subsection (3), the department shall not be a recording office for liens on motor vehicles or mobile homes.

...

(2) ... No interest of a statutory nonpossessory lienor; the interest of a nonpossessory execution, attachment, or equitable lienor; or the interest of a lien creditor as defined in s. 679.301(3), if nonpossessory, shall be enforceable against creditors or subsequent purchasers for a valuable consideration unless such interest becomes a possessory lien or is noted upon the certificate of title for the subject motor vehicle or mobile home prior to the occurrence of the subsequent transaction.

§713.901, Florida Statutes. Florida Uniform Federal Lien Registration Act.

(1) Short Title. This section may be cited as the "Florida Uniform Federal Lien Registration Act."

(2) Scope. This section applies only to federal tax liens and to other federal liens, notices of which, under any act of Congress or any regulation adopted pursuant thereto, are required or permitted to be filed in the same manner as notices of federal tax liens.

(3) Place of Filing.

(a) Notices of liens, certificates, and other notices affecting federal tax liens or other federal liens, notices of which, under any act of Congress or any regulation adopted pursuant thereto, are required or permitted to be filed in the same manner as notices of federal tax liens, must be filed in accordance with this section.

...

(c) Notices of federal liens upon personal property, whether tangible or intangible, for obligations payable to the United States , and certificates and notices affecting the liens, shall be filed as follows:

...

4. In all other cases, in the office of the clerk of the circuit court of the county where the person against whose interest the lien applies resides at the time of filing of the notice of lien.

...

(7) Uniformity of application and construction. This section shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this section among the states enacting it.

Internal Revenue Code:

26 U.S.C. §6321 . Lien for taxes.

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. §6323 . Validity and Priority Against Certain Persons.

(a) Purchasers, holders of security interests, mechanic's lienors, and judgment lien creditors.--The lien imposed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Secretary.

(b) Protection for certain interests even though notice filed.--Even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid--

...

(2) Motor Vehicles.--With respect to a motor vehicle, ... as against a purchaser of such motor vehicle, if--

(A) at the time of the purchase such purchaser did not have actual notice or knowledge of the existence of such lien, and

(B) before the purchaser obtains such notice or knowledge, he has acquired pos