Interpleader Page1

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Wells Fargo Home Mortgage, Plaintiff v. John S. Ovalles, Ruth M. Ovalles, Household Mortgage Services, United States of America, and State of Rhode Island Department of Administration --Division of Taxation, Defendants.

U.S. District Court, Dist. R.I. ; CA 04-280S, September 30, 2004 .

[ Code Sec. 6323]

Tax Liens: Validity and priority of liens: Validity and priority against third parties: Interpleader: Attorneys' fees. --

Attorney's fees and costs could not reduce the surplus funds from a foreclosure auction sale that an interpleader was to deposit with the court when doing so would reduce the funds allocable to the government under a federal tax lien. An award of attorney's fees and costs is prohibited where the effect of that award would be to reduce the amount recovered by the United States under a prior federal tax lien.

ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR LEAVE TO MAKE DEPOSIT IN COURT AND FOR AWARD OF ATTORNEY'S FEES

MARTIN, Magistrate Judge: This is an action for interpleader to determine whether Defendants have rights or priorities to surplus funds in the amount of $112,753.82 resulting from a foreclosure auction sale. See Motion for Leave to Make Deposit in Court and for Award of Attorney's Fees and Costs (the "Motion") at 1-2. Plaintiff Wells Fargo Home Mortgage ("Plaintiff") filed the instant Motion on August 18, 2004 , seeking leave to deposit with the court the sum of $109,591.64. See id. at 1. Plaintiff also requests an award of attorney's fees and costs in this action in the amount of $3,162.18. See id. Plaintiff states that it has no interest in the surplus, except to pay it to the party rightfully entitled to it. See id. at 2.

Defendant United States of America (the "Government" or the " United States ") has filed a response to the Motion and memorandum in support thereof. See United States' Response to Plaintiff's Motion for Leave to Make Deposit in Court and for Award of Attorney's Fees and Costs (the "Response"); Memorandum in Support of United States' Response to Plaintiff's Motion for Leave to Make Deposit in Court and for Award of Attorney's Fees and Costs ("Government's Mem."). The Government does not oppose the deposit of the surplus funds with the court, but asserts that Plaintiff's attorney's fees and costs cannot reduce the share of the surplus funds allocable to the United States . See Response at 1. The United States claims an interest in the amount of $187,140.81, plus interest, in the surplus funds by virtue of a federal tax lien. See Government's Mem. at 1. Plaintiff was given an opportunity to file a reply to the government's response, but declined to do so.

It is well established that an award of attorney's fees and costs is prohibited where the effect of such an award would be to reduce the amount recovered by the United States under a prior federal tax lien. See Millers Mut. Ins. Ass'n of Ill. v. Wassall [ 84-2 USTC ¶9621], 738 F.2d 302, 303 (8 ^th Cir. 1984) (citing United States v. B.F. Ball Constr. Co. [ 58-1 USTC ¶9327], 355 U.S. 587, 587-88, 78 S.Ct. 442, 443, 2 L.Ed.2d 510 (1958) (summarily reversing award of attorney's fees to interpleader where federal tax lien had previously attached to fund); United States v. Liverpool & London & Globe Ins. Co. [ 55-1 USTC ¶9136], 348 U.S. 215, 217, 75 S.Ct. 247, 248, 99 L.Ed. 268 (1955) (holding authorization of payment of attorney's fees prior to government liens was error)); accord Cable Atlanta, Inc. v. Project, Inc. [ 85-1 USTC ¶9268], 749 F.2d 626, 627 (11 ^th Cir. 1984) ("[T]he provisions of the Internal Revenue Code which establish the lien ... prohibit an award of attorney's fees when the effect of such award would diminish the amount recovered by the United States under its prior tax lien."); Abex Corp. v. Ski's Enters., Inc. [ 85-1 USTC ¶9144], 748 F.2d 513, 516 (9 ^th Cir. 1984) ("Courts have clearly held ... that the existence of prior federal tax liens gives the government a statutory priority over the interpleader plaintiff's ability to diminish the fund by an award of fees."); Campagna-Turano Bakery, Inc. v. United States [ 80-1 USTC ¶9292], 632 F.2d 39, 40 (7 ^th Cir. 1980) ("[T]he interpleading debtor may not recover its costs and attorneys' fees at the expense of the tax liens."); United States v. State Nat'l Bank of Conn. [ 70-1 USTC ¶9209], 421 F.2d 519, 521 (2 ^nd Cir. 1970) (holding that "a disinterested bank-stakeholder is not entitled to attorney's fees from a fund when the total amount in the fund is insufficient to satisfy prior federal tax liens"); United States v. Chapman [ 60-2 USTC ¶9667], 281 F.2d 862, 870 (10 ^th Cir. 1960) ("Under the Ball and the London & Liverpool cases, and under the decisions of the lower federal courts announced since those decisions, the innocent stakeholder, even though he asserts no rights to the fund in dispute, may not recover his costs and attorney's fees when to do so would invade the paramount federal tax lien."); Hinkley & Donovan v. Paine [ 77-1 USTC ¶9373], 424 F.Supp. 1013, 1021 (D. N.H. 1977) (quoting United States v. State Nat'l Bank of Conn.).

Accordingly, the Motion is denied to the extent that it seeks attorney's fees and costs in the amount of $3,162.18. The Motion is granted to the extent that Plaintiff may deposit the surplus funds in the amount of $112,753.82 with the court.

So ordered.

 

[99-1 USTC ¶50,387] Mortgage Consultants, Inc., Plaintiff v. Ronnie Gene Andrews, et al., Defendants

U.S. District Court, No. Dist. Ga. , Newnan Div., Civ. 3:98-CV-010-JTC, 3/4/99

[Code Sec. 6321 ]

Tax liens: Interpleaded funds: Priority of lien.--The government was entitled to the proceeds of a mortgage company's forced sale of a delinquent taxpayer's property to the extent that the interpleaded funds exceeded the amount of the taxpayer's debt to the company. The taxpayer had an outstanding tax liability and the tax lien was filed prior to other creditors' liens.

[Code Sec. 6323 ]

Attorney's fees: Interpleaded funds: Tax liens.--A mortgage company that instituted an interpleader action to determine the ownership of the proceeds from its sale of a delinquent taxpayer's property was not entitled to recover its attorneys' fees and costs. As a stakeholder in the interpleader action, it could not recover costs from funds subject to a federal tax lien, which had attached to the funds before the mortgage company initiated its action.

ORDER

CAMP, District Judge:

This case is before the Court on the Motion for Summary Judgment [#6-1] of Defendant, The United States of America, Internal Revenue Service.

I. BACKGROUND

Plaintiff Mortgage Consultants, Inc. was the holder of a Deed to Secure Debt dated December 7, 1990 on certain property owned by Defendant Ronnie Gene Andrews. On July 6, 1993 , Plaintiff foreclosed on its Deed to Secure Debt and the property was conveyed to a third party purchaser under a Power of Sale. The proceeds of this foreclosure sale exceeded Andrews' debt to Plaintiff by $5,198.81.

Recognizing that there were several possible claimants to the excess funds, Plaintiff filed an interpleader action against all of the potential claimants to the funds in the Superior Court of Coweta County seeking a ruling as to the entitlement to the funds and for attorney's fees and costs associated with the action. One of the Defendants named in the interpleader action was The United States of America, Internal Revenue Service due to a Notice of Federal Tax Lien filed against Andrews on or about October 2, 1992 . The United States removed the action to this Court pursuant to 28 U.S.C. §§1444 and 2410.

Following removal of the action, the United States answered the Complaint and filed a claim to the funds at issue. None of the other Defendants have answered the Complaint nor have they filed claims to the funds. The United States now moves for summary judgment on its claim, contending that Andrews continues to have an outstanding tax debt to the United States and that the Notice of Federal Tax Lien filed against Andrews has priority over the potential claims of the other Defendants to this interpleader action.

II. SUMMARY JUDGMENT

A. Summary Judgment Standard

Rule 56(c) of the Federal Rules of Civil Procedure defines the standard for summary judgment: Courts should grant summary judgment when "there is no genuine issue as to any material fact . . . and the moving party is entitled to judgment as a matter of law." The substantive law applicable to the case determines which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "The district court should 'resolve all reasonable doubts about the facts in favor of the non-movant,' . . . and draw 'all justifiable inferences . . . in his favor. . . .' " United States v. Four Parcels of Real Property, 941 F.2d 1428, 1437 (11th Cir. 1991). The court may not weigh conflicting evidence nor make credibility determinations. Hairston v. Gainesville Sun Publ'g Co., 9 F.3d 913, 919 (11th Cir. 1993), rh'g denied, 16 F.3d 1233 (1994) (en banc).

B. The Claim of The United States

The United States has filed a motion for summary judgment contending that it is entitled to the funds held by Plaintiff and that Plaintiff is not entitled to attorney's fees for the prosecution of this action. Plaintiff and the other Defendants have not opposed the motion.

After assessment, demand, and failure to pay, a tax lien attaches automatically to all property and rights to property belonging to a taxpayer. 26 U.S.C. §6321. The lien arises at the time of assessment and continues until the assessed liabilities are satisfied or become unenforceable. 26 U.S.C. §6322. While the Federal Tax Lien Act identifies several distinct situations in which a security interest may have priority over a federal tax lien, in general, other claims against the taxpayer will compete with the federal tax lien on a "first in time, first in right" basis. Haas v. Internal Revenue Serv. [94-2 USTC ¶50,496], 31 F.3d 1081, 1085 (11th Cir. 1994), cert. denied, 515 U.S. 1142 (1995); see also United States v. Equitable Life Assurance Soc. [66-1 USTC ¶9444], 384 U.S. 323, 327 (1966). Such other claims will only prevail against the federal tax lien "when the identity of the lienor, the property subject to the lien, and the amount of the lien are established" before the recording of the federal tax lien. Equitable [66-1 USTC ¶9444], 384 U.S. at 328-29.

Andrews is indebted to the United States for outstanding income taxes for the years 1985, 1986, 1987 and 1990. ¹ The Internal Revenue Service filed a Notice of Federal Tax Lien against Andrews for this outstanding liability on or about October 2, 1992 in Coweta County , Georgia in the amount of $37,069.58. Andrews continues to have an outstanding tax debt to the United States in excess of the funds at issue in this action. All other Defendants to this action and potential claimants to the funds at issue filed their security interests after the filing of the Notice of Federal Tax Lien. According to the "first in time, first in right" principle, therefore, the United States is entitled to these funds held by Plaintiff as a matter of law. The United States ' Motion for Summary Judgment [#6-1] is GRANTED.

Furthermore, Plaintiffs' request for attorney's fees and costs must be denied. While an award of costs and attorney's fees to a disinterested stakeholder in an interpleader action is typically within the discretion of the trial court, the law is well-settled that a stakeholder is not entitled to recover attorney's fees or costs if those fees would be payable out of a fund subject to a federal tax lien. Cable Atlanta, Inc. v. Project, Inc., TPICS, Inc. [85-1 USTC ¶9268], 749 F.2d 626, 627 (11th Cir. 1984) ("[t]he stakeholder of an interpleaded fund is not entitled to attorney's fees to the extent that they are payable out of part of the fund impressed with a federal tax lien.") (quoting Spinks v. Jones [74-2 USTC ¶9657], 499 F.2d 339, 340 (5th Cir. 1974)); see also Central Bank of Tampa v. United States, 838 F. Supp. 564, 566 (M.D. Fla. 1993) (noting that the federal tax lien has priority over the stakeholder's claim to attorney's fees payable from the interpleaded funds since the tax lien attached to the disputed funds prior to the initiation of the interpleader action). Therefore, Plaintiff's request for attorney's fees and costs is denied.

III. CONCLUSION

Based on the foregoing, the Motion for Summary Judgment [#6-1] of The United States of America, Internal Revenue Service is GRANTED. The Clerk is DIRECTED to enter judgment accordingly.

SO ORDERED.

JUDGMENT

This action having come before the court, Honorable Jack T. Camp, United States District Judge, for consideration of The United States of America, Internal Revenue Service's motion for summary judgment, and the court having granted said motion, it is

Ordered and Adjudged that the United States of America, Internal Revenue Service recover the interplead funds in the sum of $5,198.81 being held by plaintiff, all other potential claimants are found in default and shall recover nothing, and the action be, and the same hereby is dismissed.

¹ Because Plaintiff and the other Defendants to this action have not responded to the Statement of Material Undisputed Facts filed by The United States in support of its Motion for Summary Judgment, that statement of undisputed facts is deemed admitted pursuant to Local Rule 56.1(B)(2). Furthermore, the attachments to the original Complaint filed in the Superior Court of Coweta County reflect the tax liability of Defendant Andrews and the Federal Tax Lien on his property.

 

 

[98-2 USTC ¶50,582] Lynn M. Ewing III, Plaintiff v. Donald Erickson, State of Missouri, Resac, Inc. and United States of America , Defendants

U.S. District Court, East. Dist. Mo. , East. Div., 4:97CV00359 DJS, 6/15/98

[Code Sec. 6323 ]

Liens and levies: Federal tax liens: State tax liens: Mortgagor's liens: Request for litigation costs: Priority: Foreclosure sale: Proceeds from: Deeds of trust: Property subject to.--Under state (Missouri) law, liens filed by the holder of trust deeds against proceeds from the foreclosure sale of the deeded property had priority over a subsequent federal tax lien against the owner of the property. However, the federal tax lien was not extinguished by the sale and, thus, attached to the remainder of the sale proceeds. The federal lien had priority over a state tax lien because the state lien attached only to the property itself, not to the proceeds from its sale. Finally, the federal lien was superior to a claim for reimbursement of court costs and attorneys' fees that the holder of the disputed funds incurred in an interpleader action that determined the proper distribution of the funds.

Richard C. Wuestling IV, Wuestling & James, 1015 Locust St., St. Louis, Mo. 63101-1322, Lynn M. Ewing III, Ewing & Hoberock, 123 N. Main, Nevada, Mo. 64772-0287, for plaintiff. Donald Erickson, 7219 Southwest, St. Louis, Mo. 63143, pro se. Douglas E. Nelson, 221 W. High St., Jefferson City, Mo. 65102-0899, Phillip K. Gebhardt, 2486 Westford Dr., Maryland Heights, Mo. 63043, Rachel I. Wollitzer, Department of Justice, Washington, D.C. 20530, for defendants. Andrew J. Lay, Kansas City, Mo. 64106-2149, John J. Lynch, Assistant Attorney General, St. Louis, Mo. 63101, for cross-defendants.

MEMORANDUM AND ORDER

STOHR, District Judge:

This matter is before the Court on various motions for summary judgment filed by the parties.

Plaintiff Lynn Ewing, III, commenced this interpleader action in state court alleging that he has custody of $56, 557.65, ¹ proceeds from a foreclosure of a deed of trust, and that defendants are adverse claimants to the funds. Ewing is counsel for Roosevelt Bank, which held a promissory note secured by the deed of trust, and Merlyn Petersmeyer, trustee under the terms of the deed of trust. The defendants are Donald Erickson, who holds the equity of redemption in the property; Resac, Inc., which holds junior liens on the property; the State of Missouri , which holds judgment liens against Erickson; and the United States of America , which holds a tax lien against the property. The United States removed the action to this Court. (Doc. 1.) This Court added Petersmeyer as a party plaintiff. (Doc. 35.)

Erickson filed an amended counterclaim against Ewing, Petersmeyer, the law firm of Ewing and Hoberock, and Roosevelt Bank, alleging that they did not provide proper notice of the foreclosure sale. (Doc. 36.) Ewing filed a motion for summary judgment on the counterclaim. (Doc. 55.) Erickson filed motions for summary judgment against all of the parties. (Docs. 57, 59, 60, 62, 65.) Defendants Resac and the United States also filed motions for summary judgment. (Docs. 43, 56.) This Court previously dismissed a cross-claim filed by Erickson against the Missouri Attorney General and two Assistant Attorneys General, which alleged violations of 42 U.S.C. §1983.

The Court will first address Erickson's counterclaim. Erickson moved for summary judgment on the counterclaim, alleging that the counterclaim defendants conducted the foreclosure of his property without prior written notice to his last known address. He argues that notice of the foreclosure sale was sent to an old address, and that Ewing was on notice that Erickson's address had changed because a new address was given on his bankruptcy filings. Erickson noted that Ewing knew for purposes of serving this lawsuit that Erickson's address had changed. Erickson also filed a motion for summary judgment against Petersmeyer, arguing that he had a statutory and fiduciary duty as trustee to give Erickson notice.

Ewing also moved for summary judgment on the counterclaim, arguing that Erickson received proper notice of the foreclosure sale because notice was sent by registered mail to Erickson's last known address twenty-eight days prior to the sale, and notice was sent to his attorney as well. He argued that he reviewed Erickson's audit file, which did not contain any notice of bankruptcy, and that the notice sent to Erickson's address was not returned. Ewing further argued that Erickson never requested the bank to send correspondence regarding his loan to any other address, and that he was later informed of Erickson's current address for purposes of serving this lawsuit by the attorney for Resac.

This Court finds that Ewing satisfied his duty to provide Erickson with notice of the action. The Missouri statute requires notice of a foreclosure sale to be mailed by registered or certified mail to the grantor not less than twenty days prior to the date set for the sale. See Mo. Rev. Stat. §443.325.3(3). Ewing sent proper notice to the last address known to the Bank twenty-eight days prior to the sale. See Woolsey v. Bank of Versailles, 951 S.W.2d 662, 666-67 (Mo. Ct. App. 1997) (notice proper where borrower did not inform bank of new address for loan-related correspondence, despite bank's knowledge of different address for checking and savings account information); Kurtz v. Ripley County State Bank, 785 F. Supp. 116, 118 (E.D. Mo.) (actual receipt not necessary to comply with statute), aff'd, 972 F.2d 354 (8th Cir. 1992). Even if Erickson included a new address on bankruptcy filings submitted to the bank, he did not inform the bank that the address he had provided for the bank to mail loan-related correspondence had changed. Because Ewing provided proper notice of the foreclosure, Erickson does not have a claim for inadequate notice against Petersmeyer.

Ewing argues alternatively that Erickson had actual notice of the sale, because he called Ewing 's office the morning of the sale to request that it be halted. Ewing submitted the affidavit of his legal assistant, who attested that Erickson had called the law firm on the morning of September 18 and stated that he was aware of the pending foreclosure sale, that he had filed for bankruptcy, and that he wanted the foreclosure sale stopped.

Erickson responded with an affidavit attesting that he did not call the law office in an attempt to halt the foreclosure sale. Ewing moves to strike Erickson's response for certain "malicious, scandalous, and hostile" statements made by Erickson. The Court agrees that Erickson's response is inappropriate and again instructs him to refrain from including unwarranted and inflammatory allegations in future pleadings. See Fed. R. Civ. P. 12(f). The Court declines to strike Erickson's affidavit. The Court need not resolve the factual dispute regarding whether Erickson received actual notice, however, given its finding that cross-claim defendants complied with the Missouri statute.

Erickson also argues in his counterclaim that the counterclaim defendants violated Missouri law and a fiduciary duty by failing to deliver the surplus proceeds of the sale to him and instead filing this interpleader action, knowing there was no possibility of multiple liability. Erickson alleges that the actions constituted civil conspiracy. Ewing argues in support of summary judgment that the interpleader action was proper because of the possible multiple liability. Ewing argues that no wrongful act was committed in support of Erickson's allegation of civil conspiracy.

An interpleader action is an appropriate solution when a party "is or may be exposed to double or multiple liability." Fed. R. Civ. P. 22(1). Ewing joined several parties as defendants who had possible claims to the foreclosure surplus. The Court finds that counterclaim defendants did not breach any duty to Erickson by filing this interpleader action. Moreover, the Court notes that Erickson cannot file a counterclaim against non-parties to the action. See Fed. R. Civ. P. 13(a) (counterclaim is claim pleader has against any opposing party). Although the Court may join additional parties in a proper situation, see Fed. R. Civ. P. 13(h), the Court finds that joinder is not feasible, as complete relief can be accorded among those already parties, see Fed. R. Civ. P. 19. Accordingly, Erickson's claims against Ewing 's law firm and Roosevelt Bank must fail for this reason. Ewing 's motion for summary judgment on the counterclaim will be granted, and Erickson's counterclaim will be dismissed.

Because the Court finds that notice of the foreclosure sale was proper, the Court can address which defendant is entitled to the surplus foreclosure proceeds. Defendant Resac has filed a motion for partial summary judgment, arguing that it holds two deeds of trust on the property that was foreclosed, and that it is entitled to principal, interest, and late charges on the deeds of trust. (Doc. 43.) Resac argues that the outstanding principal, accrued interest, and late charges amounted to $3,924.05 as of March 1, 1998 . Erickson opposes the motion, arguing that under Missouri law, junior deeds of trust and notes alleged by Resac were extinguished as a matter of law by the foreclosure sale under Roosevelt Bank's senior deed of trust. Erickson argues that Resac's junior deeds of trust created a lien only against the foreclosed property, not against the foreclosure sale proceeds. (Docs. 57, 58.)

The United States has also moved for summary judgment, arguing that it has valid perfected liens against the foreclosure proceeds which have priority over all liens except for the amount of the prior liens by defendant Resac. The United States argues that tax, penalty, and interest amounted to $90,580.49 as of the filing of the notice of federal tax liens, and that interest and penalties have continued to accrue. The United States further argues that the State of Missouri 's judgment lien does not extend to the proceeds, and that the United States has priority over any claim by plaintiffs for attorney's fees and costs of the action. (Doc. 56.) Erickson moved for summary judgment against the United States , arguing that the United States ' tax lien against Erickson was a lien only against the foreclosed property, not against the foreclosure sale proceeds. (Doc. 59.)

The State of Missouri has not moved for summary judgment. Erickson has filed a motion for summary judgment against the State of Missouri , also arguing that Missouri 's judgment lien was only against real property. (Doc. 60.)

Under Missouri law, disposition of the proceeds of a foreclosure sale is ordinarily ascertained from directions in the deed of trust, unless those directions conflict with the law. See Hilfiker v. Preyer, 690 S.W.2d 451, 452 (Mo. Ct. App. 1985). Missouri law also provides that after the first obligation is satisfied, the holder of a second deed of trust is entitled to the excess proceeds. See In re Rob erts, 91 B.R. 57, 59-60 (E.D. Mo. 1988).

This Court finds that defendant Resac is first entitled to its share of the surplus proceeds. Resac held two junior deeds of trust on the property. The first was recorded July 1, 1985 , and the second was recorded August 26, 1993 . The deed of trust held by Roosevelt Bank provided that any excess proceeds from a foreclosure sale would be applied "to the person or persons legally entitled thereto." (Doc. 43, Ex. C ¶18.) Resac's first deed of trust provided that any surplus proceeds after payment of prior notes would be first applied to the amount unpaid on this note and interest accrued thereon. (Doc. 43, Ex. F. at 3.) Resac's second deed of trust provided that any surplus should be paid "to the person or persons legally entitled thereto." ( Id. Ex. K. at 2.)

Erickson relies on Brask v. Bank of St. Louis, 533 S.W.2d 223, 227 (Mo. Ct. App. 1975) to argue that Resac's deeds of trust were extinguished when the property was sold. Another Court in this district previously rejected the same argument, noting that Brask "does, in fact, hold that a foreclosure sale extinguishes junior lien encumbrances, but this is as between the purchaser at the foreclosure sale and the lienholders. The foreclosure sale cannot extinguish the security agreement between [the lender] and debtors. . . . [After a foreclosure sale occurs], if proceeds remain above satisfaction of the obligation to the holder of the first deed of trust, [the lender] has a right to those proceeds." Rob erts, 91 B.R. at 60.

The Court finds that the United States is entitled to the remaining surplus proceeds of the foreclosure sale. See 26 U.S.C. §§6321, 6323. Notice of the federal tax lien was filed on June 12, 1995 . The United States acknowledges that Resac has a superior entitlement to part of the foreclosure sale proceeds. See 26 U.S.C. §6323(a) (tax lien not valid against holder of security interest until notice is filed by the Secretary). Erickson does not dispute the validity of the tax lien. He argues only that the lien does not extend to the surplus sale proceeds. Erickson's argument is meritless. See, e.g., Frappier v. Texas Commerce Bank, N.A., 879 F. Supp. 715, 717-18 (S.D. Tex.) (federal tax lien attached to excess proceeds of foreclosure sale), aff'd, 71 F.3d 878 (5th Cir. 1995).

The State of Missouri has not moved for summary judgment requesting any part of the surplus proceeds. The Court notes that Missouri 's judgment lien does not extend to the surplus sale proceeds. See Hawkins v. Alcorn, 698 S.W.2d 37, 39 (Mo. Ct. App. 1985) (judgment against person results in lien only against real estate and does not follow surplus from sale under preexisting deed of trust). In addition, although plaintiff Ewing has withdrawn his claim for attorney's fees (Doc. 76), the Court notes that the federal tax liens are prior to any claim by plaintiff for attorney's fees and costs of this action. See Millers Mut. Ins. Ass'n v. Wassall [84-2 USTC ¶9621], 738 F.2d 302, 303 (8th Cir. 1984).

Accordingly,

IT IS HEREBY ORDERED that plaintiff's motion for summary judgment on defendant Erickson's counterclaim (Doc. 55) is GRANTED. Defendant Erickson's motion for summary judgment on the counterclaim (Doc. 65) is DENIED. Defendant Erickson's counterclaim is DISMISSED.

IT IS FURTHER ORDERED that defendant Resac's motion for partial summary judgment (Doc. 43) is GRANTED. Resac shall recover the excess proceeds from the foreclosure sale up to the amount of the unpaid principal, interest, and late charges due on its deeds of trust as of the date of this order.

IT IS FURTHER ORDERED that defendant United States ' motion for summary judgment (Doc. 56) is GRANTED. The United States shall recover all funds remaining after defendant Resac receives the funds to which it is entitled.

IT IS FURTHER ORDERED that defendants Resac and the United States shall consult with plaintiff Ewing regarding the final judgment. Within fifteen days of their receipt of this Memorandum and Order, the parties shall submit a proposed final judgment, addressing how the transfer of funds should be effectuated.

IT IS FURTHER ORDERED that defendant Erickson's motion for summary judgment against the State of Missouri (Doc. 60) is GRANTED.

IT IS FURTHER ORDERED that defendant Erickson's motions for summary judgment against Resac (Docs. 57, 58); the United States (Doc. 59); and Petersmeyer (Doc. 62) are DENIED.

IT IS FURTHER ORDERED that plaintiff Ewing's motion to strike and for sanctions, or alternatively for leave to file a supplemental response (Doc. 82) is GRANTED in part and DENIED in part. Defendant Erickson's improper allegations are stricken from the response.

IT IS FURTHER ORDERED that all other pending motions are DENIED as moot.

¹ The Court has not ordered plaintiff Ewing to deposit the interpleaded funds into the registry of the Court. It appears that Ewing retains custody of the funds, although the possibility exists that the funds have been deposited into the registry of the state court.

 

 

[98-2 USTC ¶50,520] General American Life Insurance v. Richard W. Reed, Carolyn B. Reed, and Internal Revenue Service, Defendants

U.S. District Court, West. Dist. Pa., Civ. 97-1399, 5/12/98

[Code Secs. 6321 , 6332 and 7402 ]

Liens and levies: Insurance companies: Failure to surrender property: Interpleader action: Jurisdiction: Attorneys' fees: Notice.--An insurance company that held an individual's life insurance policy upon which the IRS had filed a tax lien was entitled to recover attorneys' fees incurred in the preparation, filing, and prosecution of its interpleader action. As a disinterested stakeholder, the company was limited under Reg. §§301.6321-1 and 301.6332-1(c) from relinquishing the policy to the IRS since the individual had transferred the policy to his wife several months before the insurance company received notice of the lien. The liability issue constituted a reasonable basis for the awarding of reasonable and necessary attorneys' fees.

William Weiler, Jones, Gregg, Creehan & Gerace, 3000 Grant Bldg., Pittsburgh , Pa. 15219 , for plaintiff. Michael C. Colville, Assistant United States Attorney, Pittsburgh, Pa. 15219, Gerald A. Role, Department of Justice, Washington, D.C. 20530, for defendants.

ORDER

CAIAZZA, Magistrate Judge:

The Plaintiff, General American Life Insurance Co., Inc. (General American), filed a Petition for Counsel Fees and Costs for the instant interpleader action. (Doc. No. 15.) The Plaintiff's Motion is granted for reasonable fees in compliance with the following rationale.

Facts

1. The Internal Revenue Service (IRS) filed a tax lien in the Court of Common Pleas of Allegheny County, Pennsylvania on July 23, 1993 against the Defendant Richard W. Reed (R.W. Reed).

2. At that time, R.W. Reed owned a $100,000 benefit whole life insurance policy (the policy) with General American; Defendant Carolyn B. Reed (C.B. Reed) was the designated beneficiary.

3. On June 16, 1996 , R.W. Reed transferred his entire ownership interest of his policy to his wife, C.B. Reed.

4. On October 16, 1996 , the IRS served the first of three notices upon General American for the cash surrender value of the policy.

5. General American filed this interpleader action in July 1997.

Issue

Whether a disinterested insurance company stakeholder, such as General American, is entitled to recover reasonable counsel fees and costs related to an interpleader action where it is unclear as to what General American's liability will be to the parties who have a property interest in the policy if General American surrenders the cash value of a whole life insurance policy to the IRS.

Treasury Regulations

The United States Treasury Regulations place several requirements on the possessors of properties which are encumbered by a tax lien. However, there are also exceptions and limitations on the possessor's liability when competing interests exist.

Title 26 of the Code of Federal Regulations Section 301.6321-1 states that if anyone

liable to pay any tax [does not do so] after demand, the amount . . . shall be a lien in favor of the United States upon all property . . . belonging to such person. . . . The lien attaches to all property and rights to property belonging to such person at any time during the period of the lien. . . .

26 C.F.R. §301.6321-1 (emphasis added).

It is clear that, without more, General American would be required to relinquish the properly encumbered property to the IRS because the policy was property or a right to property which belonged to R.W. Reed during a portion of the lien's existence. This payment requirement would obviate the need for an interpleader action and therefore would preclude related counsel fees. However, additional federal regulations limit General American's ability to relinquish this property to the IRS. Title 26 of the Code of Federal Regulations Section 301.6321-1 states that:

even though a notice of a lien . . . is filed . . ., the lien is not valid [for] a life insurance . . . contract, against an . . . insurer . . . [b]efore the insuring organization has actual notice or knowledge. . . .

26 C.F.R. §301.6323(b)-1(i).

This code section is a limitation on General American's ability to relinquish the policy to the IRS. Here, the ownership interest of the policy was transferred from R.W. Reed to C.B. Reed on June 16, 1996 , but General American did not receive notice until October 16, 1996 . Under this provision, the lien may be invalid as to the policy because General American received no tice of the lien after R.W. Reed's entire ownership interest was transferred to C.B. Reed.

A further limitation on General American's ability to surrender the policy to the IRS is found in Title 26 of the Code of Federal Regulations Section 301.6332-1(c), which states that:

(2) . . . Any person who surrenders to the Internal Revenue Service property or rights to property not properly subject to levy in which the delinquent taxpayer has no apparent interest is not relieved of liability to a third party who has an interest in the property. However, if the delinquent taxpayer has an apparent interest in property or rights to property, a person who makes a good faith determination that such property or rights to property in his or her possession has been levied upon by the Internal Revenue Service and who surrenders the property to the United States in response to the levy is relieved of liability to a third party who has an interest in the property or rights to property, even if it is subsequently determined that the property was not properly subject to levy.

26 C.F.R. §301.6332-1(c) (emphasis added).

Analysis

In summary, the relevant Treasury Regulations state as follows:

1. Section 301.6321-1 requires that a federal tax lien in favor of the United States shall be a lien upon all property or property rights belonging to R.W. Reed; however,

2. Section 301.6332-1(c)(2) does not require General American to surrender R.W. Reed's property to the IRS if C.B. Reed has an interest in the property; and,

3. Nothing requires General American to seek admin istrative relief; and,

4. Section 301.6323(b)(1) states that a lien is invalid as to a specific insurance contract until General American has notice or knowledge of the lien--here, General American did not receive notice until after R.W. Reed transferred ownership to C.B. Reed; and,

5. Section 301.6332-1(c)(2) does not definitely exonerate General American from liability once it surrenders the policy to the IRS if C.B. Reed has a property interest in the policy.

Accordingly, because there is a question as to whom General American is liable, there is a reasonable basis upon which to support General American's interpleader action. As a result General American is entitled to attorney fees because

federal courts may award reasonable costs and attorneys' fees . . . in an interpleader action. . . . [based on] . . . the sound discretion of the trial court. . . . because [the stakeholder's] involvement . . . usually results not from any transgression or chicanery on their behalf but because they are the innocent target in a dispute. . . .

In re OEM Industrial Corp., AEG Westinghouse Transp. Sys., Inc., v. OEM Industrial Corp., et al., 135 B.R. 247, 249 (W.D. Pa. 1991) (internal citations and quotations omitted) (emphasis added) ; see Massachusetts Mutual Life Ins. Co. v. Central Penn National Bank, et al., 372 F.Supp. 1027 (W.D. Pa. 1974) (citing 3A Moore 's Federal Practice at 22.16(2) (it is within the discretion of the court to award reasonable attorney fees to a stockholder)).

Conclusion

Therefore, this court finds that General American's Motion for Counsel Fees and Costs is granted; however, the fees and costs will be limited to those which are reasonable and necessary to the preparation, filing and prosecution of this interpleader action. OEM Industrial, 135 B.R. at 251. ¹

¹ Because the Plaintiff has not specified the amount of its fees and costs, the court cannot determine whether they are reasonable.

 

 

[96-2 USTC ¶50,437] Diversified Metal Products, Inc., Plaintiff v. T-Bow Company Trust, Internal Revenue Service and Steve Morgan, Defendants

U.S. District Court, Dist. Ida., CV 93-0405-E-BLW, 7/18/96

[Code Secs. 6321 and 6331 ]

Tax liens: Priority: Debtor's property interest: Creditor as alter-ego of taxpayer.--A federal tax lien against a delinquent taxpayer's property that was properly assessed, noticed, and recorded had priority over a trust's claim to wages owed by a corporation for services performed by the taxpayer. Pursuant to an "Independent Contractor Agreement" entered into between the trust and the corporation, the taxpayer worked as a welder for the corporation, but his wages were paid to the trust. The taxpayer formed the trust after his tax liabilities were assessed, he exercised control over the funds in the trust, and the evidence indicated that the wages were channeled through the trust in anticipation of the tax lien. Thus, under state ( Idaho ) law, the trust qualified as the taxpayer's alter ego or nominee, and amounts payable to the trust constituted property of the taxpayer that was subject to the tax lien.

[Code Sec. 6323 and 28 U.S.C. 2412 ]

Tax liens: Interpleader: Attorneys' fees.--In an interpleader action in which a federal tax lien against a delinquent taxpayer's property was accorded priority over a trust's claim to wages owed by a corporation for services performed by the taxpayer, the corporation was not entitled to recover the attorneys' fees and costs that it expended. Such an award would deplete the interpleaded funds prior to full satisfaction of the government's tax lien.

John M. Ohman, Cox, Ohman & Brandstetter, 510 "D" St., Idaho Falls , Ida. 83405-1600, for plaintiff. Betty H. Richardson, Boise , Ida. 83707, Paul W. Sharratt, Richard R. Ward, Department of Justice, Washington, D.C. 20530, for defendant.

MEMORANDUM DECISION AND ORDER

I. INTRODUCTION

WINMILL, District Judge:

This matter comes before the Court on Defendant United States' Motion for Summary Judgment. The motion was filed on April 30, 1996 , and no opposition to the motion has been filed. Therefore, the Court has considered the brief submitted by the United States , as well as the applicable case law and facts of this case, and issues the following decision and order.

II. FACTS

Diversified Metal Products, Inc. ("Diversified") is a steel and metal fabricator, doing business in Idaho Falls , Idaho . Steven Morgan was employed by Diversified during 1993, where he performed welding and other services. T-Bow Company Trust ("T-Bow") was an unincorporated trust organization, created July 2, 1992 , and terminated in 1994, with Steven Morgan as its manager. The address listed for T-Bow was the same as Morgan's home address. T-Bow entered into an "Independent Contractor Agreement" with Diversified on May 3, 1993 , however the effective date of the agreement was March 5, 1993 . Pursuant to the agreement, Morgan performed the same welding and other services at Diversified as he had prior to that time; however, T-Bow billed Diversified for the work Morgan performed, and Diversified paid Morgan's wages directly to T-Bow. Morgan performed all labor or services provided by T-Bow.

T-Bow had a checking account at the Bank of Commerce from March 10, 1993 to August 30, 1994 . The signature card for T-Bow indicated that Marlin Hill, as trustee, and Steven and Koreen Morgan had signature authority on the account. Deposits to T-Bow's account at the Bank of Commerce totaled $11,056.40. The checks written on the T-Bow account indicate a pattern in that checks were made out to "Cash" and then designated to an individual or entity in the "memo" portion of the check. The individuals or entity listed in the "Memo" designations were SK & Bunch Holding, Ralph Brian, Koreen Morgan and Steven Morgan. ¹ The total of the checks made payable to, or listed in the "Memo" designation as for SK & Bunch Holding, Koreen Morgan and Steven Morgan for the period between March 1993 through July 1993 was $9,786.00.

The Internal Revenue Service has made assessments of unpaid federal income taxes against Steven and Koreen Morgan, jointly, and Steven Morgan, individually. Three separate assessments were made, with Notice of Federal Tax Liens being filed with the Madison County Recorder in Rexburg , Idaho on August 30, 1993 . On August 3, 1993, the Internal Revenue Service served a Notice of Levy on Steven Morgan's employer, Diversified, requesting payment of all wages, salary or other income owed to Steven Morgan. The Morgans have failed to voluntarily pay these federal tax liabilities. The only payments have come as a result of the seizure and sale of the Morgans' property by the Internal Revenue Service. As of April 22, 1996 , the outstanding liability, including statutory interest, from the 1989 and 1990 tax years is $5,673.74, which liabilities continue to accrue interest at the statutory rate.

This interpleader action was filed by Diversified in order for the Court to determine competing claims to two checks totaling $849.60. The action was originally filed in Bonneville County , Idaho , and removed to this Court by the United States . The checks are from Diversified and made payable to T-Bow, and represent monies paid for welding and other labor performed by Steven Morgan at Diversified. The United States , T-Bow and Steven Morgan all claim an interest in the funds. Although Diversified has been previously dismissed on its own motion, it requests attorney's fees and costs should the United States be unsuccessful in its claim.

The United States submits this Motion for Summary Judgment, and claims that it has priority to the interpleaded funds over the other claimants because the of the liens that arose in its favor as of the date of the assessments. The United States contends that these liens have priority over the claims of Steven Morgan, as they attach to all of his property and rights to property. The United States further argues that its liens have priority over T-Bow, as T-Bow is merely an alter ego and/or nominee of Steven Morgan. Finally, the United States argues that because it is entitled to the entire funds interpleaded to the Court, Diversified may not recover attorney's fees, as such would diminish the United States' recovery on its tax liens.

III. SUMMARY JUDGMENT STANDARD

Motions for summary judgment are governed by Rule 56 of the Federal Rules of Civil Procedure. Rule 56 provides, in pertinent part, that judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." U.S.C.S. Court Rules, Rule 56(c), Federal Rules of Civil Procedure.

The Supreme Court has made it clear that under Rule 56 summary judgment is mandated if the non-moving party fails to make a showing sufficient to establish the existence of an element which is essential to the non-moving party's case and upon which the non-moving party will bear the burden of proof at trial, See, Celotex Corp v. Catrett, 477 U.S. 317, 322 (1986). If the non-moving party fails to make such a showing on any essential element, "there can be no genuine issue of material fact, since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 323. ²

Moreover, under Rule 56, it is clear that an issue, in order to preclude entry of summary judgment, must be both "material" and "genuine." An issue is "material" if it affects the outcome of the litigation. An issue, before it may be considered "genuine," must be established by "sufficient evidence supporting the claimed factual dispute ... to require a jury or judge to resolve the parties' differing versions of the truth at trial." Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir. 1975) (quoting First Nat'l Bank v. Cities Serv. Co. Inc., 391 U.S. 253, 289 (1968)). The Ninth Circuit cases are in accord. See, e.g., British Motor Car Distrib. v. San Francisco Automotive Indus. Welfare Fund, 882 F.2d 371 (9th Cir. 1989).

According to the Ninth Circuit, in order to withstand a motion for summary judgment, a party

(1) must make a showing sufficient to establish a genuine issue of fact with respect to any element for which it bears the burden of proof; (2) must show that there is an issue that may reasonably be resolved in favor of either party; and (3) must come forward with more persuasive evidence than would otherwise be necessary when the factual context makes the non-moving party's claim implausible.

Id. at 374 (citation omitted).

Of course, when applying the above standard, the court must view all of the evidence in a light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Hughes v. United States [92-1 USTC ¶50,086 ], 953 F.2d 531, 541 (9th Cir. 1992).

IV. DISCUSSION

The United States bases its Motion for Summary Judgment on its contention that its claims have priority over those of both Morgan and T-Bow. ³ Pursuant to the Internal Revenue Code, if a person who is liable to pay any federal tax fails to pay such tax after notice and demand, a federal tax lien arises against all property and rights to property belonging to that person. I.R.C. §6321 . The date the lien arises is the date of the assessment of the tax and continues in full force and effect until the liability is extinguished or becomes unenforceable. I.R.C. §6322 . The lien attaches to all after-acquired property of the taxpayer, including rights to payment. Bank of America Nat'l Trust & Savings Ass'n v. Mamakos [75-1 USTC ¶9211 ], 509 F.2d 1217, 1219 (9th Cir. 1975). Furthermore, in order to be enforceable as against third parties, the Notice of Federal Tax Lien must be filed. A federal tax lien arises automatically upon the failure of a taxpayer to pay an assessed tax after notice and demand. I.R.C. §6321 ; See also, United States v. Speers [66-1 USTC ¶9101 ], 382 U.S. 266, 267 (1965).

Exhibits 1, 3 and 5 to the Declaration of Cindy Mason indicate that notice of the tax liabilities were served on the Morgans. The Certificates of Assessments and Payments submitted as attachments to Exhibits 1 and 3, in the absence of evidence to the contrary, are presumptive evidence that assessments were properly made and that the required notices were properly mailed. Hughes v. United States [92-1 USTC ¶50,086 ], 953 F.2d 531, 535 (9th Cir. 1992). Additionally, Exhibits 2, 4 and 7 to the Declaration of Cindy Mason indicate that the three Notice of Federal Tax Liens were properly recorded, ⁴ The Court, in the absence of any evidence to the contrary, finds that the liabilities were properly calculated, the Morgans and T-Bow were given proper notice and demand for payment, and the liens were properly recorded. The liens arose on the dates of assessment, May 31, 1993 . ⁵ The two checks at issue from Diversified were issued on August 4, 1993 and August 11, 1993 , after the liens had arisen.

The priority of federal tax liens is governed by a "first in time, first in right" theory. A competing claim prevails against a federal tax lien only if it becomes choate and perfected before the federal tax lien attaches and becomes effective. United States v. City of New Britain [54-1 USTC ¶9191 ], 347 U.S. 81, 86-88 (1954). To be choate, a competing claim must be definite as to the identify of the lienor, definite as to the identity of the property to which the lien attaches, and definite as to the amount of the lien. Id. No such claim has been alleged, and thus the United States argues that to the extent the interpleaded funds are determined to be property or rights to property of Steven Morgan, the federal tax liens have attached and must be paid prior to any claim by Steven Morgan to such funds.

Priority Over T-Bow

The United States argues that the federal tax lien takes priority over and attaches to any funds due T-Bow for work performed by Steven Morgan at Diversified because T-Bow is the alter ego and/or nominee of Morgan, and that it is a sham trust devoid of economic reality. As stated above, the liens properly arose on May 31, 1993 , and thus the tax liens against Steven Morgan attach to all property and rights to property owned by him on May 31, 1993 , and thereafter acquired. I.R.C. §6321 ; Runkel v. United States [76-1 USTC ¶9152 ], 527 F.2d 914, 916 (9th Cir. 1975).

The Internal Revenue Service is authorized to levy upon property that belongs to the taxpayer but is possessed by or nominally held by the taxpayer's "nominee, alter-ego, or transferee." Al-Kim, Inc. v. United States [81-2 USTC ¶9573 ], 650 F.2d 944, 946 (9th Cir. 1979); see also, Wolfe v. United States [86-2 USTC ¶9655 ], 798 F.2d 1241, 1243 (9th Cir. 1986); I.R.C. §6331 . That being said, the next question is whether T-Bow is the alter-ego of Steven Morgan.

As the United States ' brief points out, the issue of whether Steven Morgan has a property interest is an issue decided by state law. See, Aquilino v. United States [60-2 USTC ¶9538 ], 363 U.S. 509, 512-513 (1960); Towe Antique Ford Foundation v. Internal Revenue Service [93-2 USTC ¶50,430 ], 999 F.2d 1387, 1391 (9th Cir. 1993). The Idaho Supreme Court has stated that if: (1) there is such a unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, and (2) if the acts are treated as those of the corporation an inequitable result will follow, then the corporate entity may be disregarded. See Chick v. Tomlinson, 531 P.2d 573, 575, 96 Idaho 483 ( Idaho 1975). The Tomlinson court examined several factors when it considered whether to disregard an entity's separate identity. These factors have been utilized, as a non-exclusive list, by other courts as well. They are:

(1) whether the individual is a majority shareholder, officer, director, trustee, managing partner, or otherwise in a position of authority over the affairs of the entity;

(2) whether the individual controls and dominates the business entity's actions and affairs without consulting others;

(3) whether the individual controls and sometimes withholds information from other investors;

(4) whether the individual uses the business entity to shield himself from personal liability;

(5) whether the individual uses the business entity for his own personal and financial gain;

(6) whether the individual mingles his own and his family's affairs in the affairs of the business entity; and

(7) whether the individual uses the business entity to assume his own debts, or the debts of another, or whether the individual uses his own funds to pay the business entity's debts.

See Towe Antique Ford Foundation v. I.R.S., supra [93-2 USTC ¶50,430 ], 999 F.2d at 1391 (applying Montana law). The first factor is met, as Morgan was a manager of T-Bow. The second factor is satisfied since Morgan was able to act independently of the trustees. The trust creation documents indicate that Marlin Hill needed to co-sign all checks and approve all major purchases; however, the documents also allowed him to delegate the management of the trust to others. Steven and Koreen Morgan were managers of the trust. It is also clear that Morgan has mingled his own and his family's affairs in those of T-Bow.

The United States further cites to the fact that Morgan had been assessed for his 1988 federal tax liability prior to the time when T-Bow was formed. Additionally, Morgan's 1989 and 1990 tax liabilities had accrued prior to December 14, 1992 , which is the date T-Bow's creation documents were filed with the Madison County Recorder. He was also under a labor contract with T-Bow, and Morgan's employer and duties were unchanged after the "Independent Contractor Agreement" was executed between T-Bow and Diversified. Finally, the funds paid to T-Bow by Diversified were placed in T-Bow's checking account, and then checks were made out on that account and designated to Steven Morgan, Koreen Morgan or SK & Bunch Holding Trust, which the Internal Revenue Service has determined to be another nominee of Steven Morgan.

The Towe court considered additional factors in determining whether an alter ego situation existed. Those factors are whether:

(1) no consideration or inadequate consideration was paid by the nominee;

(2) the property was placed in the name of the nominee in anticipation of a suit or occurrence of liabilities while the transferor continued to exercise control over the property;

(3) a close relationship between transferor and the nominee existed;

(4) the conveyance failed to be recorded;

(5) possession was retained by the transferor; and

(6) the transferor continued to enjoy the benefits of the transferred property.

See, Towe Antique Ford Foundation v. I.R.S., supra [93-2 USTC ¶50,430 ], 999 F.2d at 1393. In the instant case, the tax liabilities had already arisen when the trust was formed, and the Morgans had notice of those liabilities prior to the execution of the "Independent Contractor Agreement." These facts indicate that the channeling of wages through T-Bow was done in anticipation of the tax lien, all the while Morgan continued to exercise control over the money.

It is also clear that a close relationship existed between the Morgans and T-Bow. Steven and Koreen Morgan were managers of the trust, and their home address was an address listed for the trust. The trust was, in effect, Steven Morgan's employer, as it contracted to send Steven out to work at Diversified and billed Diversified for Steven's wages. Steven was paid directly by T-Bow, and only indirectly by Diversified. It is also clear that Morgan retained possession and continued to enjoy the benefits of T-Bow's assets. The Morgans continued to retain possession of the funds in the T-Bow account, by virtue of their managerial status, and because T-Bow paid Steven his wages from the trust checking account.

Based on the foregoing, the Court finds that T-Bow was in fact the alter ego of Steven Morgan. Because of the alter ego status of T-Bow, the funds payable to T-Bow and deposited within the registry of the Court are properly considered to be the property of Steven Morgan, and thus subject to the federal tax lien. ⁶

Diversified's Claim for Attorney's Fees

The Ninth Circuit has held that a party's claim for attorney's fees and costs may not deplete any portion of any interpleaded fund prior to full satisfaction of the federal tax lien thereon. Abex Corp. v. Ski's Enterprises, Inc. [85-1 USTC ¶9144 ], 748 F.2d 513, 516-517 (9th Cir. 1984). Diversified apparently concedes this fact, as it only sought attorney's fees in the event that the United States did not prevail on its claim to the funds. Here, the lien far exceeds the $849.60 interpleaded, and thus the Court will not grant Diversified its attorney's fees in this matter.

V. CONCLUSION

The Court finds that the federal tax lien was properly assessed, noticed and recorded, and that it takes priority over any competing claims. The Court further finds that T-Bow was the alter ego or nominee of Steven Morgan, and the funds payable to it are in fact, Morgan's property, and subject to the lien. Finally, because an award of attorney's fees to Diversified would deplete the interpleaded funds prior to full satisfaction of the lien, the Court declines to award such fees and costs.

VI. ORDER

Based on the foregoing and the Court being fully advised in the premises,

IT IS THEREFORE ORDERED that the United States ' Motion for Summary Judgment (Docket No. 34), filed April 30, 1996 , should be, and is hereby, GRANTED.

IT IS FURTHER ORDERED that the funds currently held in the Court's registry shall be paid to the United States , pursuant to a proposed judgment consistent with this decision. The Court directs the United States to prepare and submit for the Court's approval such proposed judgment.

IT IS FURTHER ORDERED that the trial, currently set for July 23, 1996 , is hereby VACATED.

¹ The United States also contends that SK & Bunch Holding Trust, a trust created with identical documents as T-Bow, is a nominee of Steven Morgan. The Internal Revenue Service has so determined. However, that is not at issue before the Court, and will not be decided here.

² See also, Rule 56(e) which provides, in part:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

U.S.C.S. Court Rules, Rules of Civil Procedure, Rule 56(e).

³ The Internal Revenue Service, and not the United States , was originally named as defendant in this action. However, the United States is correct that the Internal Revenue Service has no capacity to sue or be sued. Blackmar v. Guerre, 342 U.S. 512, 514 (1952). Therefore, the United States is properly substituted for the Internal Revenue Service in this action.

⁴ The Court notes that Exhibit 2 is a lien notice against both Steven and Koreen Morgan, and was recorded on August 30, 1993 . Exhibit 4 is a lien notice against Steven Morgan only, and was recorded on August 30, 1993 . Exhibit 7 is a lien notice against T-Bow as agent, nominee, transferee and/or alter ego of Steven and Koreen Morgan. It was not recorded until November 15, 1993 .

⁵ The Court notes that the 1988 tax liability, which totals $516.50 and is referenced in Exhibits 1 and 2 to the Declaration of Cindy Mason, has been satisfied and is no longer at issue in the instant case.

⁶ An additional ground for granting summary judgment is that the Morgans have failed "to make a showing sufficient to establish the existence of an element which is essential to [their] case and upon which [they] will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). By not responding to the motion for summary judgment, the Morgans have made no showing that Steven Morgan or T-Bow has any claim to the funds which has priority over the United States ' lien. For this reason alone, the Court could grant summary judgment to the United States . However, the Court finds it preferable to resolve motions for summary judgment on the merits whenever possible.

 

 

[94-2 USTC ¶50,410] The Safemasters Co., Inc., Plaintiff v. D'Annunzio and Circosta, et al., Defendants

U.S. District Court, Dist. Md. , Civ. K-93-3883, 7/18/94

[Code Sec. 6323 ]

Lien for taxes: Creditor's priority: Interpleader.--Attorney fees and costs were awarded to a disinterested stakeholder in an interpleader action. The award of costs was within the discretion of the court. Further, the award did not reduce the amount to be received by the IRS. Although the amount in the fund exceeded the IRS's tax lien, the award was prorated based on the portion of the fund that the IRS and other parties agreed to pay to a third-party claimant.

[Code Sec. 6323 ]

Lien for taxes: Creditor's priority: Judgment creditor.--The relevant date for determining the priority of a federal tax lien over a competing state judgment lien was the date of notice of the tax lien and not the date of notice of the levy. Accordingly, the judgment creditor's lien, which was perfected when a writ of garnishment was served upon a garnishee that was making installment payments to the delinquent taxpayer, did not occur until after the IRS recorded its tax lien and the federal tax lien had priority. BACK REFERENCES: 94FED ¶39,060.78

Jeffrey Michael Rob bins, Manatt, Phelps and Phillips, 1200 New Hampshire Ave., Washington, D.C. 20036, for plaintiff. Jonathan R. Bromberg, Bromberg, Rosenthal & Siegel, 110 N. Washington St., Rockville, Md. 20850, for defendant (Schloss, F.). Lynne A. Battaglia, 101 W. Lombard St., Baltimore City, Md. 21201, Gerard J. Mene, Department of Justice, Washington, D.C. 20530, for defendant.

MEMORANDUM AND ORDER

KAUFMAN, District Judge:

(1) Reference is hereby made to motions for summary judgment filed with this Court by defendant United States of America (" United States ") on April 4, 1994 , and by defendant Leonard Kraisel ("Kraisel") on May 2, 1994 . Reference is also hereby made to the Motion for Attorneys' Fees and Costs filed with this Court by plaintiff The Safemasters Company, Inc. ("Safemasters"), on May 9, 1994 .

(2) The relevant facts in this interpleader action are undisputed. Safemasters, a District of Columbia corporation with its principal place of business in Maryland , entered into a non-competition agreement with Dennis D'Annunzio in 1983. Under the terms of that agreement, Safemasters admittedly was obligated to pay D'Annunzio, a resident of Charleston , South Carolina , periodic annual installments during a span of twelve years. At some point after signing that agreement, D'Annunzio, a partner in the Virginia general partnership of D'Annunzio & Circosta, seems to have fallen upon hard times.

(3) On August 6, 1992, Leonard Kraisel, a defendant in the within case, obtained a default judgment against D'Annunzio & Circosta in the amount of $481,246.20 in the Circuit Court of the Fifteenth Judicial Circuit of Palm Beach County, Florida. In that court, on October 29, 1992 , Kraisel further obtained a default judgment in the same amount against D'Annunzio individually. In response to Kraisel's request, the Circuit Court of Montgomery County, Maryland, recorded both Florida judgments on June 28, 1993 . On that date, Kraisel also filed with that court a request for a writ of garnishment against Safemasters. The Circuit Court of Montgomery County issued that writ on July 27, 1993 , naming Safemasters as garnishee and Kraisel as judgment creditor, and the writ was served upon Safemasters on August 3, 1993 . The Maryland court issued an Order on October 13, 1993, and an amended Order on October 22, 1993, in which it ordered Safemasters to pay claimant Fred Schloss $3,120 and Kraisel $31,705.90, of which Kraisel was to pay Schloss an additional $3,928. ¹

(4) In addition to Schloss and Kraisel, the United States sought payment from D'Annunzio. According to a Certificate of Assessments and Payments filed with this Court by the United States , the Internal Revenue Service ("IRS") made assessments of federal income tax against D'Annunzio on November 2, 1992 , and November 30, 1992 , in the amounts of $27,217.60 and $20,827.95 respectively. On June 29, 1993 , the IRS recorded a Notice of Federal Tax Lien against Dennis and Nancy D'Annunzio in the Register of Mesne Conveyance Office in Charleston County , South Carolina , in the amount of 45,045.55. On October 19, 1993 , after the Circuit Court of Montgomery County 's first Order and before its Amended Order, the IRS served a Notice of Levy upon Safemasters directing it to turn over all property or rights to property belonging to D'Annunzio which Safemasters held or controlled, up to the amount of $54,730.27. ²

(5) Faced with those conflicting claims, Safemasters instituted this action for interpleader before this Court on November 24, 1993 . This Court, in its Order for Interpleader of that date, directed Safemasters to deposit the sum of $34,825.90 ³ (the "Fund") into the Registry of this Court and dismissed Safemasters from this action "but with leave to file a Bill of Costs and a Motion for Attorney's Fees, pursuant to Local Rule 109, D. Md." Following those events, the three adverse claimants to the Fund--the United States , Kraisel and Schloss--filed with this Court on April 25, 1994 , a proposed Consent Order. In that Consent Order, the parties agreed that Schloss would reduce his claim to the Fund to a total of $5,000.00, and the other two claimants agreed to release that amount to Schloss from the Fund and to dismiss him from this case, leaving the United States and Kraisel as the only remaining claimants. Upon receiving a copy of the proposed Consent Order, Safemasters requested this Court, in an April 22, 1994 , communication, not to disburse any payments from the Fund until it was able to request reimbursement of attorney fees and costs incurred in bringing this case. In response to this Court's April 28, 1994 , Memorandum to Counsel and a marginal order of April 29, 1994 , Safemasters filed a motion for those fees and costs on May 9, 1994 .

(6) In this case, both movants for summary judgment have submitted proposed statements of material fact which demonstrate that no relevant or material fact in this case is in dispute. Accordingly, this case seems appropriate for disposition upon summary judgment. See Federal Civil Rule 56. In order to decide the cross-motions for summary judgment in this case, this Court must determine which claim against D'Annunzio--the federal tax lien or the state-court judgment lien of Kraisel--deserves priority to the monies in the Fund.

(7) 26 U.S.C. §6321 provides as follows:

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.

Thus, a federal lien is created upon the date of assessment against the taxpayer for unpaid federal taxes. See also United States v. McDermott [93-1 USTC ¶50,164 ], 61 U.S.L.W. 4282, 123 L. Ed. 2d 128 (U.S. Mar. 24, 1993). In this case, the assessments against D'Annunzio were made on November 2, 1992 , and on November 30, 1992 . ⁴ However, it is the date of filing of notice of the federal tax lien which is controlling in the face of a competing state lien.

Federal tax liens do not automatically have priority over all other liens. Absent provision to the contrary, priority for purposes of federal law is governed by the common-law principle that " 'the first in time is the first in right.' " United States v. New Britain [54-1 USTC ¶9191 ], 347 U.S. 81, 85 (1954). . . . For purposes of applying that doctrine in the present case--in which the competing state lien (that of a judgment creditor) benefits from the provision of [26 U.S.C.] §6323(a) that the federal lien shall "not be valid . . . until notice thereof . . . has been filed"--we must deem the United States' lien to have commenced no sooner than the filing of notice. As for the (state) lien: our cases deem a competing state lien to be in existence for "first in time" purposes only when it has been "perfected."

Id. ; see also Air Power, Inc. v. United States [84-2 USTC ¶9732 ], 741 F.2d 53, 55 and n.2 (4th Cir. 1984). ⁵ The United States recorded its notice of lien on June 29, 1993, seemingly in accordance with the requirements of 26 U.S.C. §6323(a) and (f) , ⁶ in the South Carolina jurisdiction in which D'Annunzio apparently resides. No party in this case has contested the procedural propriety of that filing.

If Kraisel's judgment "lien was perfected . . . before the United States filed its tax lien . . . that is the end of the matter; [Kraisel's] lien prevails." McDermott [93-1 USTC ¶50,164 ], 61 U.S.L.W. at 4282. In order to be perfected or "choate," Kraisel's judgment lien must meet "certain threshold federal requirements of choateness." Air Power [84-2 USTC ¶9732 ], 741 F.2d at 55 n.2; see also McDermott [93-1 USTC ¶50,164 ], 61 U.S.L.W. at 4282. ⁷ Kraisel's lien also must satisfy any additional requirements of applicable state law. See Air Power [84-2 USTC ¶9732 ], 741 F.2d at 55 n.2. 26 C.F.R. §301.6323(h)-1(g) provides that, in addition to the three federal requirements, "if under local law levy or seizure is necessary before a judgment lien becomes effective against third parties acquiring liens on personal property, then a judgment lien under such local law is not perfected until levy or seizure of the personal property involved."

Although the parties in this case do not seem to have indicated agreement as to which state's law is applicable, ⁸ both the United States and Kraisel point to the same date as the date upon which Kraisel's judgment lien was perfected--August 3, 1994, the date upon which the writ of garnishment obtained by Kraisel from the Circuit Court of Montgomery County, Maryland, was served upon Safemasters. See Lahay Flooring & Fixtures, Inc. v. Weinstein, 590 So.2d 1055, 1056 (Fla. Dist. Ct. App. 3d Dist. 1991); Md. Cts. & Jud. Proc. Code Ann. §11 -403 (1989). That date falls after June 29, 1993 , which was the date of the recording of notice of the federal tax lien in this case. In fact, Kraisel's Florida court judgments were not recorded in the Circuit Court of Montgomery County until June 28, 1993 , and a writ of garnishment was not issued until July 27, 1993 . No relevant action was taken with respect to Kraisel's judgments before the date upon which the United States filed its notice of lien; accordingly, no possible date which could be offered by Kraisel would defeat the United States ' lien. ⁹

(8) The sequence of events set forth hereinabove does not seem to be disputed by Kraisel. Rather, Kraisel contends that the date of the United States ' notice of levy (October 19, 1993), not the date of the notice of lien, should be the operative date for determining priority. If that legal contention were correct, Kraisel, indeed, would seem to succeed in this case. However, the case law does not support Kraisel's argument. The Supreme Court, in discussing liens and levies, seems clearly to have distinguished between the two terms:

A federal tax lien, however, is not self-executing. Affirmative action by the IRS is required to enforce collection of the unpaid taxes. The Internal Revenue Code provides two principal tools for that purpose. The first is the lien-foreclosure suit. . . . The second tool is the collection of the unpaid tax by admin istrative levy. The levy is a provisional remedy and typically "does not require any judicial intervention." [United States v. Rodgers [83-1 USTC ¶9374 ], 461 U.S. 677, 682 (1983)]. . . .

In the situation where a taxpayer's property is held by another, a notice of levy upon the custodian is customarily served pursuant to [26 U.S.C.] §6332(a) .

United States v. Nat'l Bank of Commerce [85-2 USTC ¶9482 ], 472 U.S. 713, 720 (1985); see also United States v. Rodgers [83-1 USTC ¶9374 ], 461 U.S. 677, 681-83 (1983); Bank of America Nat'l Trust & Sav. Ass'n v. Mamakos [75-1 USTC ¶9211 ], 509 F.2d 1217, 1219 (9th Cir. 1975); compare 26 U.S.C. §§6321 , 6323 (dealing with liens) with 26 U.S.C. §§6331 , 6332 (dealing with levies).

A levy is merely one instrument with which the United States can enforce a lien. The Supreme Court has determined that the relevant date for determining priority of a federal lien is the date of notice of the lien, not the levy. McDermott [93-1 USTC ¶50,164 ], 61 U.S.L.W. at 4282. Because Kraisel's judgment lien was not perfected until after the United States recorded its notice of lien, the federal lien has priority. Cf. Park City Leasing, Inc. v. V.I.P. Mobile Phone Centers, Inc., 763 F. Supp. 140, 141-42 (E.D. Pa. 1991) (involving Pennsylvania law but analyzing issues which are similar to those present in this case).

(8) The United States has requested--and is entitled to obtain--reimbursement of the Registry fee assessed by the Clerk of this Court for the handling of that portion of the Fund to which the United States is entitled. See 54 Fed. Reg. 2040 7 ( May 11, 1989 ).

(9) The only remaining issue for determination in this case is Safemasters' Motion for Attorneys' Fees and Costs. This Court, in its November 24, 1993 , Order for Interpleader, permitted Safemasters to pray for fees and costs in accordance with the provisions of Local Rule 109 of this Court. That Rule permits several types of motions, including such requests, to be made within twenty days of judgment. Defendant Schloss maintains that this Court's November 24, 1993 , Order constitutes a final judgment as to Safemasters, and, consequently, Safemasters' May 9, 1994 , motion was untimely filed.

Federal Civil Rule 54(b) provides in pertinent part:

[W]hen multiple parties are involved [in an action], the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such a determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.

See also County Bank v. First Nat'l Bank, 184 F.2d 152 (4th Cir. 1950). This Court's November 24, 1993 , Order for Interpleader did not adjudicate "all the claims or the rights and liabilities" of all of the parties. Fed. R. Civ. P. 54(b). Accordingly, that Order was not a final judgment, and Safemasters' motion was timely filed.

Schloss also opposes Safemasters' motion upon the grounds that Safemasters should be estopped from pursuing its quest for fees or costs ¹⁰ and that the amount of Safemasters' request is "clearly outrageous." ¹¹ Generally,

[a] federal court has discretion to award costs and counsel fees to the stakeholder in an interpleader action whenever it is fair and equitable to do so. . . . Because of the discretionary character of the court's power, and because its exercise depletes the fund, costs and fees will not be allowed as a matter of course. Typically they are available only when the party initiating the interpleader is acting as a mere stakeholder, which means that he has admitted liability, has deposited the fund in court, and has asked to be relieved of any further liability.

7 Wright, Miller & Kane, Federal Practice & Procedure §1719, at 629-33 (2d ed. 1986) (footnotes omitted); see also Prudential Ins. Co. v. Boyd, 781 F.2d 1494, 1497 (11th Cir. 1986); Aetna Life Ins. Co. v. Outlaw, 411 F. Supp. 824, 825-26 (D. Md. 1976) (Blair, J.).

In this case, Safemasters is in the position of a "mere disinterested stakeholder," Boyd, 781 F.2d at 1497; it has not contested liability and simply has filed this action in order to avoid potential litigation brought by one or more of the adverse claimants. It is well-settled law, however, that a federal tax lien "preclude[s] an award of costs and attorneys' fees to an interpleading plaintiff unless there [i]s some amount remaining after satisfaction of the tax lien." Campagna-Turano Bakery, Inc. v. United States [80-1 USTC ¶9292 ], 632 F.2d 39, 41 (7th Cir. 1980); see also, e.g., Spinks v. Jones [74-2 USTC ¶9657 ], 499 F.2d 339, 340 (5th Cir. 1974); Cavalier Service Corp. v. Wise [86-2 USTC ¶9590 ], 645 F. Supp. 31, 37 (E.D. Va. 1986). "None of the attorneys fees and costs of the plaintiff are [sic] to be paid from the portion of the interpleaded fund to which the United States is entitled." C.I.T. Corp. v. United States [72-2 USTC ¶9544], 344 F. Supp. 1272, 1277 (N.D. Cal. 1972). An interpleading plaintiff may not recover costs or fees if that recovery would "impair the value of the tax lien." United States v. Wilson [64-1 USTC ¶9396 ], 333 F.2d 147, 149 (3d Cir. 1964); see also Mamakos [75-1 USTC ¶9211 ], 509 F.2d at 1219 (claims for fees or costs "may not diminish the portion of an interpleaded fund to which the government is entitled by virtue of a federal tax lien"). Indeed, Safemasters concedes that it cannot recover from that portion of the Fund claimed by the government.

The United States' lien, in the amount of $45,045.55, exceeds the total sum of the monies in the Fund ¹²; therefore, initially it would seem that Safemasters' quest for fees and costs is futile. However, the United States specifically disclaims any interest to the $5,000 of the Fund which it, along with Kraisel, agreed should be paid to Schloss. In other words, the United States has relinquished any potential entitlement to that $5,000. To permit recovery of fees and costs by Safemasters from the monies allocated to Schloss in no way would "impair the value of the tax lien" against D'Annunzio, Wilson [64-1 USTC ¶9396 ], 333 F.2d at 149, and would not reduce the size of the United States ' portion of the Fund. See Spinks [74-2 USTC ¶9657 ], 499 F.2d at 340. Consequently, there would appear to be no legal bar to Safemasters' quest in that regard.

(10) Nevertheless, that does not end the matter. The appropriate disposition of Safemasters' motion lies within the equitable discretion of this Court. To order recovery of the entire amount which Safemasters seeks would vitiate any benefit obtained by Schloss in his settlement agreement with the other defendants, leaving Schloss empty-handed. In Dal-Mac Constr. Co., Inc. v. Don Wall Co., Inc., 423 F. Supp. 122 (N.D. Tex. 1976), in which a portion of the fund at issue was accorded priority by the court over a federal tax lien, the district court stated:

As to the question of amount [of fees to be awarded], the Court finds that the portion of the fund not subject to Federal tax liens should not be subject to any special burdens owing to the coincidence of tax liens. Therefore, Plaintiff's request of 10% attorneys' fees should be figured solely on the basis of funds not subject to the Federal tax lien and not on the basis of the total fund deposited in the court's registry. If attorneys' fees were assessed on the basis of the whole amount, then the carefully preserved priority of certain claims over Federal tax liens would be meaningless in situations where the bulk of the fund is subject to Federal tax liens and the smaller claims could be wiped out.

Id. at 123.

In this case it seems appropriate to prorate the amount of fees and costs sought by Safemasters in such a way as to give Safemasters a percentage of its requested recovery that is equivalent to the percentage of the Fund which Schloss, by agreement with the other defendants, is entitled to recover. That prorated amount ($760.31) will be deducted from Schloss' share of the Fund. ¹³

(11) Accordingly, this Court, by separate Order of even date herewith, hereby grants defendant United States' Motion for Summary Judgment and denies defendant Kraisel's Motion for Summary Judgment. This Court also hereby grants in part plaintiff Safemasters' Motion for Attorneys' Fees and Costs, as delineated in the aforementioned separate Order.

(11) Copies of this Memorandum and Order are today being mailed to all counsel of record.

(12) It is so ORDERED this 18th day of July, 1994.

¹ Schloss, a resident of Arlington , Virginia and also a defendant in this case, had filed a motion in the Circuit Court of Montgomery County as a third-party claimant for release of funds held by Safemasters which Schloss claimed were owed him by D'Annunzio. Schloss asserted that D'Annunzio had executed an assignment of the first sum, $3,120, to him on July 14, 1993 , and thus that money belonged to him and should not be the subject of garnishment. The remaining sum, which was to be paid to Schloss by Kraisel, allegedly represented the amount still owed Schloss by D'Annunzio.

² The reasons for the apparent discrepancies among the various amounts sought by the IRS are left unexplained in the present record before this Court. It may be that the growth in the various amounts owed stems from accumulating interest or penalties. See 26 U.S.C. §6321 . However, regardless of the explanation, those seeming discrepancies are unimportant for purposes of the disposition of this case as even the lowest figures exceed the amount requested by the United States in this case.

³ That sum represents the three remaining payments owed to D'Annunzio by Safemasters under the noncompetition agreement. The payments for 1994 and 1995 were discounted by Safemasters prior to the institution of this action to reflect their present value. None of the parties in this case has contested the accuracy or propriety of that discounting.

⁴ The dates provided on a certificate of assessment are presumptively correct and can be relied upon by this Court in the absence of any attack upon their reliability. See Turney v. Shafer, U.S. Tax Cases (CCH) ¶9951, at 85,906 (D. Md. July 13, 1984) (Ramsey, J.); United States v. Posner [76-1 USTC ¶9224 ], 405 F. Supp. 934, 937 (D. Md. 1975) (Miller, J.). In this case, no party has raised any questions with regard to the authenticity or reliability of the certificate presented by the United States .

⁵ Notwithstanding the general rule enunciated in McDermott, under certain circumstances a federal tax lien for which notice has been filed first may be subordinated to other interests. 26 U.S.C. §6323(b) lists ten types of interests which supersede a previously filed federal tax lien. The parties agree, as does this Court, that Kraisel's lien does not fall within the compass of that subsection.

⁶ §6323(a) directs that notice be filed in compliance with the "requirements of subsection (f)." Section 6323(f) provides in pertinent part:

(1) Place for filing.--The notice referred to in subsection

(a) shall be filed--

(A) Under State laws.--

. . .

(ii) Personal property.--In the case of personal property, whether tangible or intangible, 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.

. . .

(2) Situs of property subject to lien.--For purposes of paragraphs (1) and (4), property shall be deemed to be situated--

. . .

(B) Personal property.--In the case of personal property, whether tangible or intangible, at the residence of the taxpayer at the time the notice of lien is filed.

⁷ In delineating that federal threshold, the Supreme Court in McDermott required that " 'the identity of the lienor, the property subject to the lien, and the amount of the lien [be] established.' " McDermott [93-1 USTC ¶50,164 ], 61 U.S.L.W. at 4282 (quoting New Britain [54-1 USTC ¶9191 ], 347 U.S. at 84).

⁸ The United States appears to suggest that whether or not Kraisel's judgment has been perfected may depend upon either the relevant provisions of Maryland law or those of Florida law, while Kraisel solely invokes the law of Florida . In any event, the United States notes, and Kraisel does not dispute, that the applicable rule is the same in both states.

⁹ Of course, the mere recording of a judgment does not suffice in that regard. See id.

¹⁰ Schloss asserts, and the United States concurs, that defendants assumed in their settlement discussions that Safemasters would not seek fees or costs.

¹¹ Safemasters seeks attorney fees in the amount of $4,938.75 and costs of $356.96, for a total of $5,295.71. It has attached to its motion an affidavit outlining those expenditures.

¹² See note 2, supra.

¹³ The result is achieved by dividing the total amount of the Fund ($34,825.90) by the total sum allocated to Schloss ($5,000). That resulting percentage (.1435713) is then multiplied by the reimbursement sought by Safemasters ($5,295.71) and rounded to the nearest cent.

 

 

[93-1 USTC ¶50,043] Michael L. Nichols, Richard Matthews, Rudy Rios and Rob ert S. Wiley, Plaintiffs v. Vonna J. Glass, Individually and as Trustee of the Randolph Manufacturing Company Employee Stock Ownership Plan, and as Trustee of Randolph Manufacturing Company Employee Recreation Plan, Defendant and Tommy J. Swann, Trustee Garnishee Interpleader v. Michael L. Nichols, Richard Matthews, Rudy Rios and Rob ert S. Wiley and United States of America, Defendants

U.S. District Court, No. Dist. Tex., Lubbock Div., Civ. 5:92-CV-0023-W, 10/23/92

[Code Sec. 6323 ]

Validity of lien: Attorneys' fees: Interpleader.--The Government's lien for taxes held by a trustee was superior to the lien of individuals that had filed an application for writ of garnishment. Since the individuals did not file their turnover action, or take any other action, prior to the Government's perfecting its tax lien, the Government was entitled to priority and the funds impleaded were paid to the IRS. Also, attorneys' fees and costs were denied to the stakeholder of the interpleaded fund because the portion of the interpleaded fund that was subject to a Government tax lien could not be reduced by an award of attorneys' fees to the stakeholder for bringing the interpleader action.

Don Cummings, 2435 20th St. , Lubbock , Tex. 79408 , for plaintiffs. Gregg D. Stevens, Department of Justice, Dallas , Tex. 75201 , for defendant.

MEMORANDUM OPINION AND ORDER

WOODWARD, District Judge:

On this date the Court considered the Motion for Summary Judgment filed by the United States of America , together with its brief and supporting materials. A response was filed by Michael L. Nichols, Richard Matthews, Rudy Rios, and Rob ert S. Wiley (Plaintiffs herein). No response was filed by Tommy J. Swann (Swann).

Plaintiffs are the owners of an unsatisfied judgment against Vonna J. Glass, and they filed an Application for Turnover in Cause No. 87-516,848 [in] the 72nd District Court of Lubbock County, Texas, seeking an order from the Court directing Tommy J. Swann, as Trustee, to turnover certain funds in his possession to Plaintiffs. Swann is the Trustee in bankruptcy for Randolph Manufacturing Company, Inc. who is required to pay to Vonna J. Glass, as an unsecured creditor, a stream of payments annually over several years. Swann had in his possession, on the date of the filing of the turnover action, the sum of $5,285.50.

Upon receiving service of the Application for Turnover, Swann filed his Answer, Crossclaim, and Third-Party Claim for Interpleader, and interplead the $5,285.50 into the registry of the Court. Thereafter, the United States of America properly removed the case to this Court.

Both Plaintiffs and the United States of America , on behalf of the Internal Revenue Service, claim an interest in and to the funds held by Swann. The Internal Revenue Service claims that its Federal tax lien is entitled to priority over the judgment lien held by Plaintiffs.

The following dates and facts are pertinent to the determination of the priority of the competing liens:

(1) On August 6, 1990 , Vonna Glass was assessed $86,506.41 for unpaid income taxes for the period ending December 31, 1985 .

(2) On December 7, 1990 , Plaintiffs obtained a judgment against Vonna Glass for the sum of $141,599.19.

(3) Plaintiffs filed an Application for Writ of Garnishment in the State Court on December 12, 1990 , seeking to garnish funds being held by Swann, as Trustee in the Randolph Manufacturing Company bankruptcy proceedings, for the benefit of Glass.

(4) On December 14, 1990 , Swann filed his answer in the garnishment proceedings, indicating that he was indebted to Glass in the sum of $5,285.50, at the time of service.

(5) The 72nd District Court of Lubbock County , Texas , entered its Judgment in Garnishment on March 26, 1991 , in favor of Plaintiffs and against Swann, as garnishee, for the sum of $5,285.50. Swann was ordered to tender the sum of $5,285.50 into the registry of the Court for payment to Plaintiffs. Subsequent thereto, the funds were paid to Plaintiffs.

(6) On December 3, 1991 , the Internal Revenue Service recorded its tax liens against Glass in the personal and real property record of Lubbock County , Texas .

(7) Plaintiffs filed this turnover action on December 20, 1991 , to which Swann filed his answer, crossclaim and third-party claim for interpleader, interpleading the sum of $5,285.50 into the registry of the 72nd District Court of Lubbock County , Texas .

After considering the pleadings, briefs, and evidence before the Court, the Court finds that the Internal Revenue Service's federal tax lien filed on December 3, 1991 , is entitled to priority over the judgment lien held by Plaintiffs herein.

26 U.S.C. §6323(a) provides that a lien imposed for taxes pursuant to §6321 will not be valid against a judgment lien creditor until the Internal Revenue Service files its notice as required by §6323(f) . This section requires the Internal Revenue Service to file notice of its lien in the office designated by State law. In Texas this is the County Clerk 's records--real property and personal property.

The Internal Revenue Service complied with §6323 on December 3, 1991 , and this is not in dispute.

In discussing the priority of an Internal Revenue Service lien, the Second Circuit in U.S. v. 110-118 Riverside Tenants Corp., 886 F.2d 514, 518 (2nd Cir. 1989) cert. denied 495 U.S. 956 noted as follows:

Title 26 United States Code Section 6321 authorized the imposition by the Government of a tax lien upon the property of the taxpayer when he is in default. [citation omitted]

The priority of a federal tax lien is a matter of federal law. [citation omitted]

The Sixth Circuit made a more detailed discussion regarding priority and noted that:

Federal law determines the priority between a federal tax lien and a judgment creditor's lien. [citation omitted]. Generally, a federal tax lien arises against property belonging to a delinquent taxpayer from the time he refuses or neglects to heed a lawful demand to pay. [citation omitted]. Congress, however, has chosen to extend special protection to holders of judgment liens whose interests are perfected before they have constructive notice of an outstanding federal tax lien. [citation omitted]. Accordingly, a judgment lien will have priority over a federal tax lien if the judgment lien is perfected before the government gives constructive notice of its lien to the public by filing written notice with the appropriate state or county agency. [citation omitted] Courts must look to state law to determine whether a competing judgment lien is perfected. Yardas v. U.S. [90-2 USTC ¶50,390 ], 899 F.2d 550 (6th Cir. 1990), reh. denied 1992 WL 176538.

See also Don King Productions, Inc. v. Thomas [91-2 USTC ¶50,474 ], 945 F.2d 529 (2nd Cir. 1991).

In Texas , a judgment creditor can perfect its judgment lien against real property by recording an abstract of judgment in the deed records in the county where the real property is located. Texas Property Code §52.001 et seq.

However, we are not dealing with real property in the case before the Court.

Execution of a judgment is the only way to perfect a judgment lien on personal property--no lien is created by filing an abstract of judgment. See United States v. Bollinger Mobile Home Sales, Inc. [80-2 USTC ¶9644 ], 492 F.Supp. 496, 497 (N.D. Tex. 1980). Since Plaintiffs sought to recover personal property in the possession of a third party, they first followed the procedures for obtaining a writ of garnishment regarding the money held by the trustee at that time, i.e., the December, 1990, $5,285.50 payment owing to Glass.

Plaintiffs ask this Court to find that the filing of their application for writ of garnishment established their right to all payments received by the trustee--the one the trustee had in his possession and all future payments. If this were true, then Plaintiffs' lien would have priority over the Internal Revenue Service lien. However, as discussed below, the law is not in Plaintiffs' favor.

The Texas courts have held that the judgment against the garnishee, or writ of garnishment, should be in the amount which is absolutely owed at the time the application for writ of garnishment is served and the garnishee files his answer. See Burkitt v. Glenney, 371 S.W.2d 412 (Tex. Civ. App.--Houston 1963, writ dism'd w.o.j., writ ref'd n.r.e.) ("judgment against the garnishee shall be in the amount of the indebtedness that is shown on trial to have been absolutely owed in an amount certain when the garnishee is served or files his answer, if there is an accrual between the date of service and filing of the answer."); United States v. Wakefield, 572 S.W.2d 569 (Tex. Civ. App.--Fort Worth 1978, writ dism'd w.o.j.) ("It is well settled that garnishment should be in the amount of the debt absolutely owed at the time the garnishee files his answer.")

In Wakefield , supra, the Court found that the debt being garnished was "contingently" but not absolutely owed. Wakefield was seeking a garnishment of her ex-husband's military retirement benefits. See also Etzel v. U.S. Dept. of Air Force, 620 S.W.2d 853 (Tex. App.--Houston [14th Dist.] 1981, writ ref'd n.r.e.) ("the Air Force is liable only for the amount absolutely owed at the time its answer was filed, and to award future retirement benefits that might accrue would be error.")

In DeMello v. NBC Bank-Perrin Beitel, 762 S.W.2d 379, 381 (Tex. App.--San Antonio 1988) the Court made the following discussion regarding garnishment:

Garnishment is a statutory proceeding through which a debtor's property, money, or credit, in the possession of or owing by another, are applied to pay the debtor's debt to a third party. [citation omitted] The burden is on the person claiming the benefit of the statute to establish his right to recover. [citation omitted] The judgment against the garnishee should be in the amount of the indebtedness shown at trial to have been absolutely owed in an amount certain at the time the garnishee is served. [citation omitted]. The only real issue in a garnishment action is whether the garnishee was indebted to the defendant in the main suit or had in its possession effects belonging to him at the time of the service of the writ and the filing of the answer. [citation omitted]

The Fifth Circuit in Matter of T.B. Westex Foods, Inc., 950 F.2d 1187 (5th Cir. 1992), quoting United States v. Standard Brass & Mfg. [54-1 USTC ¶9303 ], 266 S.W.2d 407 (Tex. Civ. App. 1954) noted that:

"the service of a writ of garnishment creates a lien on property subject to such writ of garnishment from the date of the service of the writ." [emphasis in original]

The Fifth Circuit in Westex Foods, supra at 1191, also noted that:

Texas courts have stated that the garnishor is to be treated as if he stood in the shoes of the garnishment debtor. [citations omitted] "That is, the garnishor . . . may enforce whatever rights the debtor could have enforced had such debtor been suing the garnishee directly." quoting RepublicBank Dallas v. National Bank of Daingerfield, 705 S.W.2d 310, 311 (Tex. Ct. App. 1986).

Applying the case law to the facts of the instant case, it is apparent that the garnishment action and the writ which issued applied only to the $5,285.50 Swann had in his possession when he was served with the writ of garnishment and filed his answer. That payment has already been paid to Plaintiffs.

Since the Plaintiffs did not file their turnover action, or take any other action, prior to the Internal Revenue Service perfecting its tax lien on December 3, 1991 , the Internal Revenue Service is entitled to priority and the funds implead should be paid to the Internal Revenue Service.

The Internal Revenue Service also seeks summary judgment that it is not liable for the attorneys' fees sought by Swann. Swann seeks attorneys' fees for filing the interpleader action, to be paid out of the funds deposited into the registry of the court prior to payment to the prevailing party. Swann did not file a response to the motion for summary judgment.

The Fifth Circuit, citing United States v. R.F. Ball Construction Co. [58-1 USTC ¶9327 ], 355 U.S. 587 (1958) has found that:

The stakeholder of an interpleaded fund is not entitled to attorney's fees to the extent that they are payable out of a part of the fund impressed with a federal tax lien. [citations omitted] The judicial prerogative to award stakeholders their attorney's fees must give way to the supremacy of the federal tax lien law whenever an award would invade the amount subject to tax lien . . . The portion of an interpleaded fund that is subject to a Government tax lien cannot be reduced by an award of attorney's fees to the stakeholder for bringing the interpleader action. Spinks v. Jones [74-2 USTC ¶9657 ], 499 F.2d 339 (5th Cir. 1974).

The Court therefore finds that the United States of America 's federal tax liens take priority over the judgment lien of Plaintiffs, and judgment awarding the interpleaded funds should be rendered in favor of the United States and against all other claims herein.

All claims for attorneys' fees and costs are hereby denied. JUDGMENT SHALL BE ENTERED ACCORDINGLY.

 

 

[91-1 USTC ¶50,049] Century Bank, Plaintiff v. Cheyenne Foods, Inc., Defendant v. Cheyenne Center Associates and Nash Finch Company, Intervenor-Defendants and Nash Finch Company, Third Party Plaintiff v. United States of America, Colorado Department of Revenue and City of Colorado Springs, Third Party Defendants

U.S. District Court, Dist. Colo., Civ. 89-B-92, 12/7/90

[Code Secs. 6323 and 7426 ]

Interpleader actions: Jurisdiction: IRS consent: Priority of claims: Attorney's fees.--The court did not have jurisdiction to determine whether a creditor had any potential tax liability to the IRS arising from its use of a portion of an award against a defaulting debtor to satisfy a secured debt. With respect to the remainder of the award, however, the IRS tax lien claim had priority over the creditor's attorney fees claim. The creditor used the majority of an award granted against a defaulting debtor to satisfy its security interest and attorney's fees. It then instituted an interpleader action to determine who had priority to the excess. The IRS attached a levy on the interpleaded funds and the creditor asserted a claim based on attorney's fees incurred in bringing the interpleader action. The creditor also asked the court to determine whether it had any potential liability to the IRS arising from its satisfaction of the secured debt owed by the defaulting debtor. The court did not have jurisdiction to determine the creditor's potential liability with respect to the portion of the award that it kept since the IRS did not attach a levy on such funds. A potential or threatened levy is insufficient to grant jurisdiction. With respect to the excess funds, the IRS levy had priority over the creditor's claim for attorney's fees. Although an interpleader is generally given attorney's fees for bringing the action, he may not recover his fees when to do so would invade the federal tax lien. Also, Code Sec. 6323 did not apply in cases such as this where the secured obligation has already been fully enforced and reimbursement is sought for attorney's fees incurred in a separate interpleader action.

Ann S. Irwin, Hecox, Tolley, Keene & Beltz, P.C., 316 N. Tejon St., Colorado Springs, Colo. 80903, for third party plaintiff. Michael J. Norton, United States Attorney, William G. Pharo, Assistant United States Attorney, Denver, Colo. 80202, Philip E. Blondin, Department of Justice, Washington, D.C. 20530, for U.S.

ORDER

BABCOCK, District Judge:

The only dispute left in this case is the third party complaint of Nash Finch Company (Nash Finch) against third party defendant United States of America . This complaint contains two distinct parts. One part is an interpleader action concerning a fund of $8,888.93, which is deposited with this Court. The second part concerns Nash Finch's request for an adjudication of its rights and liabilities concerning potential tax liability arising out of a successful state court replevin action. Cross motions for summary judgment have been filed. I conclude that I am without jurisdiction to adjudicate the Nash Finch's potential tax liability and that the United States has priority over the $8,888.93 interpleaded fund. Consequently, the United States ' motion for summary judgment is granted, Nash Finch's is denied.

I. FACTS

Cheyenne Foods, Inc. (Cheyenne Foods) was in default to Nash Finch on a secured obligation (the security obligation). Nash Finch brought a replevin action in Colorado state court (the replevin action) and was awarded $30,000. Nash Finch used the majority of the award to satisfy its security obligation (the money Nash Finch kept). However, even after satisfying that obligation, Nash Finch was left with $8,888.93 (the excess money). On March 3, 1989 , commenced an interpleader action in Colorado state court to determine who has priority over the excess money. The United States then attached a levy upon the excess money and was named a party to the interpleader action. The United States removed the action to this Court.

Nash Finch claims to be entitled to the majority of the excess money based on the amount it has incurred in attorney fees in pursuing this interpleader action. The United States , which is the only competing creditor, maintains that it is entitled to all of the excess money based on delinquent taxes owed by Cheyenne Food.

Nash Finch seeks to adjudicate not only its rights to the excess money, but also to adjudicate its potential liability as a result of the replevin action. Specifically Nash Finch seeks that: (a) the United States be required to interplead and assert its rights over the full $30,000 that Nash Finch obtained in the replevin action; (b) the rights of the United States to the $30,000 be adjudicated; (c) the United States be restrained from instituting any action against Nash Finch for the recovery of any taxes which relate to the operation of Cheyenne Foods; and (d) Nash Finch be discharged for any tax liability owed by Cheyenne Foods, provided the $30,000 is sufficient.

II. JURISDICTION

Based on the doctrine of sovereign immunity, the federal government cannot be sued without its consent. United States v. Mitchell, 463 U.S. 206, 212 (1983). Consent must be specific and statutory, United States v. Shaw, 309 U.S. 495, 500-01 (1940), and must be strictly interpreted. United States v. Sherwood, 312 U.S. 584, 590 (1941). By previous Order, I concluded that for the interpleader action over the excess funds, the United States had consented to jurisdiction based on 28 U.S.C. §2410(a)(5). This section grants subject matter jurisdiction over interpleader actions where the United States has or claims a lien. I concluded that by attaching a levy on the excess money, the United States had consented to be sued based on this section.

That Order did not determine whether jurisdiction is proper over the second part of the action, which seeks a determination of Nash Finch's potential liability for any taxes owed by Cheyenne Foods. I now conclude that I have no jurisdiction over this part of the action.

Except for the excess money, the United States has not attached a levy over, nor has it asserted any claim to, the money that Nash Finch kept. Accordingly, for the second part of the suit, jurisdiction does not exist under 28 U.S.C. §2410(a)(5).

Nash Finch argues that sovereign immunity has been waived by 26 U.S.C. §7426(a)(1) . This section states that where:

a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary.

Nash Finch claims that this statute grants jurisdiction not only to adjudicate the claims concerning the excess money, to which the United States has attached a lien, but also to adjudicate claims concerning the money that Nash Finch kept, to which no levy has been attached. I disagree.

"In order for Section 7426 to apply, the IRS must have made an actual 'levy' upon the property in question; a threatened levy is insufficient." Interfirst Bank Dallas, N.A. v. United States [85-2 USTC ¶9635 ], 769 F.2d 299 (5th Cir. 1985) (citations omitted), cert. denied, 475 U.S. 1081 (1986). Since the United States does not have an actual levy on the money that Nash Finch kept, jurisdiction is not proper.

Moreover, as stated by the Tenth Circuit, "the key to jurisdiction lies in the remedies set forth in §7426(b) , all of which clearly contemplate the existence of a levy. For example, the only injunctive remedy granted the district court is to prohibit the enforcement of the levy or to prohibit the sale of the property. 26 U.S.C. §7426(b)(1) ." Three "M" Invest., Inc. v. United States [86-1 USTC ¶9185 ], 781 F.2d 352, 353 (10th Cir. 1986). Nash Finch is seeking to protect property to which no levy has been attached, presumably by prohibiting the United States from filing a lien. However, "[t]here is no provision for the granting of an injunction to prohibit the filing of liens as sought by [third party] plaintiff in this case." Id. Accordingly, I have no jurisdiction to adjudicate Nash Finch's potential liability as a result of the replevin action.

III. THE $8,888.93.

As discussed above, jurisdiction is proper over claims concerning the $8,888.93. Nash Finch asserts priority over this money based on attorney fees incurred in this interpleader litigation. The only competing creditor is the United States , which claims priority over this money based on federal tax liens recorded September 19, 1988 and October 21, 1988 . These liens total more than $11,000. Nash Finch argues that because the security obligation has priority over the tax lien of the United States , it is entitled to its attorney fees expended in this interpleader action. I disagree.

Nash Finch has already been fully compensated for the debt owed under the security obligation, including the attorney fees incurred in litigating the replevin action. See Nash Finch's Brief at 2. It is now seeking attorney fees incurred in litigating this interpleader action.

As a general rule, an interpleader is given its attorney fees in bringing the action. However, "the innocent stakeholder . . . may not recover his costs and attorney's fees when to do so would invade the paramount federal tax lien. The judicial prerogative to award stakeholders their attorney's fees must give way to the supremacy of the federal tax lien . . . ." United States v. Chapman [60-2 USTC ¶9667 ], 281 F.2d 862, 870 (10th Cir. 1960).

"The law is that a court may not diminish the amount available for satisfaction of a federal tax lien by awarding costs and attorneys' fees to an interpleading plaintiff." Campagna-Turano Bakery, Inc. v. United States [80-1 USTC ¶9292 ], 632 F.2d 39, 41 (7th Cir. 1980). See also United States v. R. F. Ball Constr. Co. [58-1 USTC ¶9327 ], 355 U.S. 587 (1958) (per curium reversal of decision awarding costs and attorney fees to an interpleading plaintiff); Chevron U.S.A., Inc. v. May Oilfield Services, Inc. [85-1 USTC ¶9270 ], 739 F.2d 498 (10th Cir. 1984) (same). Because the United States ' tax lien exceeds the amount of the interpleaded funds, it is entitled to all of the excess money. Chevron [85-1 USTC ¶9270 ], 739 F.2d at 499.

Nash Finch attempts to avoid the import of this clear line of authority by arguing that it is entitled to attorney fees under 26 U.S.C. §6323(e) . This argument lacks merit. Section 6323(e) grants attorney fees "actually incurred in collecting or enforcing the obligation secured." It does not apply to cases, such as this, where the obligation secured has already been fully enforced and reimbursement is sought for attorney fees incurred in a separate interpleader action. Campagna-Turano [80-1 USTC ¶9292 ], 632 F.2d at 44; National Bank of Joliet v. Barber Oil Co., 75-2 USTC ¶9627 at p. 87,919 (N.D. Ill. 1975).

Accordingly, it is ORDERED that:

(1) the United States' motion for summary judgment is GRANTED;

(2) Nash Finch's motion for summary judgment is DENIED;

(3) Paragraphs a--d of Nash Finch's Amended Complaint are dismissed without prejudice;

(4) Nash Finch's remaining claims for relief are DISMISSED with prejudice;

(5) Final judgment shall enter in favor of the United States for the full amount of the interpleaded funds including any accrued interest.

 

[85-1 USTC ¶9270]Chevron U. S. A., Inc., Plaintiff-Appellee v. May Oilfield Services, Inc., a Nevada corporation; Michael Vercimak d/b/a Bridger Valley Leasing; Michael Kelly, District Director of the Internal Revenue Service, Department of Treasury, Defendants, United States of America, Defendant-Appellant

(CA-10), U. S. Court of Appeals, 10th Circuit, No. 82-1867, 739 F2d 498, 1/20/84, Reversing unreported District Court decision

[Code Secs. 6321 and 6322]

Lien for taxes: Property subject to: Period of lien.--An oil company requested the court to enter an order discharging it from liability to a second oil company, the IRS district director, and the U. S. on an account payable to the second oil company, for which it was alleged that conflicting claims had been made to that sum. The oil company also requested an award of attorney's fees and costs. The government asserted a claim and a demand for payment, which exceeded the amount interpled, and filed a tax lien. The oil company's suit was brought well after the tax lien had been perfected, and its claim was inchoate and uncertain in amount at the time the tax lien was filed. The trial court erred in awarding attorney's fees and costs to the oil company before the tax lien had been satisfied in full. The fact that interest may have accrued did not change the result. The Equal Access to Justice Act, 28 U. S. C. §2412 provided that attorney's fees could be granted to a prevailing party unless expressly prohibited by statute. Here, Code Secs. 6321 and 6322 served as such a bar.

Richard A. Stacy, United States Attorney, Cheyenne, Wyo. 82001, Glenn L. Archer, Jr., Assistant Attorney General, Farley B. Katz, Michael L. Paup, Richard W. Perkins, Department of Justice, Washington, D. C. 20530, for defendant-appellant.

Before SETH, HOLLOWAY and MCKAY, Circuit Judges.

PER CURIAM:

Chevron U. S. A. instituted this interpleader action under 28 U. S. C. §1335 naming as defendants May Oilfield Services, Inc., Michael Vercimak, the district director of the Internal Revenue Service, and the United States. Chevron had an account payable to May in the amount of $125,079.04, and alleged that conflicting claims had been made to that sum by the defendants. Chevron claimed to be a disinterested stakeholder having no claim to the money, and tendered that sum to the court. Chevron requested the court to enter an order discharging it from liability to the defendants and requested an award of attorney's fees and costs.

Mr. Vercimak had sued May and asserted a claim to a portion of the money on the basis of a writ of garnishment filed September 4, 1980 . On November 13, 1980 , Mr. Vercimak obtained a judgment on the claim.

The United States asserted a claim to the fund on the basis of unpaid withholding tax, FICA tax, FUTA tax, penalties, and interest. The Government's claim was asserted and a demand for payment made against May on September 8, 1980 . A tax lien was filed on September 12, 1980 . The Government's claims exceeded the amount interpled.

The trial court granted the Government's motion for summary judgment finding that the federal tax lien had priority over Mr. Vercimak's claim. Mr. Vercimak's appeal of that ruling has been dismissed for failure to prosecute (No. 82-1905, dismissed, August 11, 1982). The trial court accordingly awarded the Government the interpled funds plus accumulated interest, but subtracted $3,031.93 which it awarded to Chevron as attorney's fees and costs. As mentioned, the Government's lien exceeded the total amount of the funds. The United States appeals the award of attorney's fees and costs made to Chevron.

The Government contends that sections 6321 and 6322 of the Internal Revenue Code proscribe the award of the attorney's fees and costs to Chevron. We agree. Those sections provide that no claim can compete with a federal tax lien on a "first in time/first in right" basis until the claim becomes certain in amount. United States v. Pioneer American Insurance Co. [63-2 USTC ¶9532], 374 U. S. 84; United States v. Chapman [60-2 USTC ¶9667], 281 F. 2d 862 (10th Cir.). Chevron's suit was brought well after the tax lien had been perfected. Chevron's claim was inchoate and uncertain in amount at the time the tax lien was filed. The trial court erred in awarding attorney's fees and costs to Chevron before the tax lien had been satisfied in full. The fact that interest may have accrued does not change the result.

We note the Equal Access to Justice Act, 28 U. S. C. §2412, does not provide an independent basis for an award to Chevron. While the Act provides that attorney's fees may be granted to a prevailing party, such an award can only be made where not expressly prohibited by statute. Here, sections 6321 and 6322 of the Code serve as such a bar.

It is therefore the judgment of this court that the award of attorney's fees and costs made to Chevron is hereby reversed.

IT IS SO ORDERED.

 

 

[85-1 USTC ¶9268]Cable Atlanta, Inc., Plaintiff-Appellee v. Project, Inc., TPICS, Inc., Ernest Dixon d/b/a TPI Construction Supplies, Defendants, United States of America, Defendant-Appellant

(CA-11), U. S. Court of Appeals, 11th Circuit, No. 83-8848, 12/26/84, Reversing the District Court, 85-1 USTC ¶9267

[Code Secs. 6321 and 6322 and the Equal Access to Justice Act, 28 U. S. C. §2412]

Attorney fees: Equal Access to Justice Act: Interpleader: Priority of tax lien.--The stakeholder in an interpleader action was not entitled to an award of attorneys' fees and costs incurred in bringing the interpleader action. Code Secs. 6321 and 6322 prohibit any award of attorneys' fees and costs when, as here, such award would reduce the amount recovered by the government under its tax liens, which arose prior to the interpleader action. The Equal Access to Justice Act does not form an independent base upon which to award fees and costs where the interpled fund is not sufficient to cover the prior tax liens.

Philip A. Bradley, 1900 Rhodes-Haverty Bldg., Atlanta , Ga. , for plaintiff-appellee. Jere W. Morehead, Sharon D. Stokes, Assistant United States Attorneys, Atlanta, Ga., Glen L. Archer, Assistant Attorney General, Michael L. Paup, Farley P. Katz, William S. Estabrook, Elaine Ferris, Department of Justice, Washington, D. C. 20530, for Defendant-appellant.

Before RONEY and ANDERSON, Circuit Judges, and MORGAN, Senior Circuit Judge.

RONEY, Circuit Judge:

Normally a stakeholder who brings an interpleader action to determine which of two claimants is entitled to a fund which it holds, but does not claim, is entitled to have attorneys fees it incurs in bringing the action paid out of the fund. No such fees can be paid from the fund, however, when it goes to satisfy a federal tax lien. The question in this case is whether, in such event, the stakeholder is entitled to an award of fees against the Government under the Equal Access to Justice Act. 28 U. S. C. A. §2412(b). In a case of first impression in this Circuit, we hold that such fees cannot be assessed against the Government, and reverse the attorney fee award made in this case.

Cable Atlanta, Inc. owed money to Project, Inc. when the United States Internal Revenue Service served a Notice of Levy for that exact amount to pay taxes owed by Project. Cable Atlanta filed an interpleader action. Making no claim to the fund, Cable Atlanta moved for summary judgment to relieve it of further liability and for attorney's fees. All claimants to the fund abandoned their claims and consented to the payment of the fund to the United States . The United States made no claim against Cable Atlanta, only claiming the fund, but resisted the award against it of attorney's fees.

The district court awarded attorney's fees against the Government, reasoning that although an award could not be made out of the interpled fund, a direct award could be made under the Equal Access to Justice Act, 28 U. S. C. A. §2412(b). [85-1 USTC ¶9267] 572 F. Supp. 1113.

Under the American Rule a prevailing litigant ordinarily may not recover attorney's fees from the losing party. Alyeska Pipeline Co. v. Wilderness Society, 421 U. S. 240, 247, 95 S. Ct. 1612, 1616, 44 L. Ed. 2d 141 (1975). All parties concede and the law is clear that the so-called common fund exception to this American Rule does not apply when the fund goes to pay a United States tax lien. Decided in 1974, the court in Spinks v. Jones [74-2 USTC ¶9657], 499 F. 2d 339, 340 (5th Cir. 1974), citing a string of authorities, said that:

[t]he stakeholder of an interpleaded fund is not entitled to attorney's fees to the extent that they are payable out of a part of the fund impressed with a federal tax lien.

The rationale of this decision is that the provisions of the Internal Revenue Code which establish the lien, 26 U. S. C. A. §§ 6321, 6322, prohibit an award of attorney's fees when the effect of such award would diminish the amount recovered by the United States under its prior tax lien. The theory is that the federal tax lien attached prior to the commencement of the interpleader action and thus had priority over any inchoate and uncertain claim for attorney's fees accruing in that action. See, e.g., United States v. Equitable Life [66-1 USTC ¶9444], 384 U. S. 323, 86 S. Ct. 1561, 16 L. Ed. 2d 593 (1966); United States v. Ball Construction Co. [58-1 USTC ¶9327], 355 U. S. 587, 78 S. Ct. 442, 2 L. Ed. 2d 510 (1958) (summary reversal of an award of attorney's fees to an interpleader where a federal tax lien had previously attached to the fund); United States v. Liverpool & London Insurance Co. [55-1 USTC ¶9136], 348 U. S. 215, 217, 75 S. Ct. 247, 248, 99 L. Ed. 268 (1955); Katsaris v. United States, 684 F. 2d 758, 763 (11th Cir. 1982); Campagna-Turano Bakery, Inc. v. United States [80-2 USTC ¶9725], 632 F. 2d 39 (7th Cir. 1980).

The only question is whether The Equal Access to Justice Act, passed in 1980, changes this settled law. That statute provides as follows:

Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys . . . to the prevailing party in any civil action brought by or against the United States . . . . The United States shall be liable for such fees and expenses to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award.

28 U. S. C. A. §2412(b).

Two circuits have held that this statute does not form an independent base upon which to award attorney's fees and therefore does not change the settled law on the matter. In Chevron U. S. A., Inc. v. May Oilfield Services, Inc. [85-1 USTC ¶9270], 739 F. 2d 498, 499 (10th Cir. 1984), the Tenth Circuit reversed an attorney fee award on the ground that sections 6321 and 6322 of the Internal Revenue Code proscribed the awarding of attorney's fees and costs where the fund was insufficient to satisfy the Government's tax lien. The Court then said:

We note that the Equal Access to Justice Act, 28 U. S. C. §2412, does not provide an independent basis for an award to Chevron. While the Act provides that attorney's fees may be granted to a prevailing party, such an award can only be made where not expressly prohibited by statute. Here, sections 6321 and 6322 of the Code serve as such a bar.

739 F. 2d at 499.

In Millers Mutual Ins. Assn. of Ill. v. Wassall [84-2 USTC ¶9621], 738 F. 2d 302 at 304 (8th Cir. 1984), the Eighth Circuit likewise held that the new statute did not change the law.

Even if the EAJA, 28 U. S. C. §2412(a) and (b), arguably creates a discretionary claim for costs and attorney fees by [the stakeholder], as against a defense of sovereign immunity, nothing in the Act gives the stakeholder a priority to the fund superior to that of the United States, based on its prior federal tax liens. Here, the claim of the United States to the fund is based upon the statutory authority of 26 U. S. C. §§ 6321, 6322. In the cases cited supra the courts denied an award of attorney fees and costs on the basis of this statutory authority, and not upon a general claim of sovereign immunity. . . . There is nothing in the statute or the legislative history of the EAJA to indicate that Congress intended to override the priority of the United States to interpleaded funds under prior federal tax liens.

738 F. 2d at 304 (footnote omitted).

We follow the holdings in these circuits for the reason set forth in those opinions. A review of the statute and its legislative history clearly show no congressional purpose to provide an independent base for an award of attorney's fees and costs where the interpled fund is not sufficient to cover the government's tax liens which arose prior to the interpleader action.

The argument that Georgia law, O. C. G. A. §23-3-90, ¹ provides support for the attorney's fees award fails, if for no other reason, because no Georgia case has construed that statute to justify an attorney's fee directly against the prevailing claimant to an interpled fund. See Eaton Yale & Towne, Inc. v. Strickland, 228 Ga. 430, 185 S. E. 2d 923 (1971); Helmken v. Meyer, 118 Ga. 657, 45 S. E. 450 (1903); but see Blaylock v. Georgia Mutual Ins. Co., 239 Ga. 462, 238 S. E. 2d 105 (1977) (parties agreed to order allowing interpleader and attorney's fees and costs). In this case the United States was a prevailing party on its claim against the fund, and on the claim that the liened funds should have been paid by Cable Atlanta to it.

REVERSED.

¹ O. C. G. A. § 23-3-90 states:

(a) Whenever a person is possessed of property or funds or owes a debt or duty, to which more than one person lays claim of such a character, as to render it doubtful or dangerous for the holder to act, he may apply to equity to compel the claimants to interplead.

(b) If the person bringing the action has to make or incur any expenses in so doing, including attorney's fees, the amount so incurred shall be taxed in the bill of costs, under the approval of the court, the court in its discretion determining the amount of the attorney's fees, and shall be paid by the parties cast in the action as other costs are paid.

 

 

[85-1 USTC ¶9144]Abex Corporation, Plaintiff-Appellee v. Ski's Enterprises, Inc., et al., Defendants United States of America, Defendant-Appellant v. Walton Shim and Sandra Shim, Defendants-Appellees

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 84-1787, 11/27/84, Reversing an unreported District Court decision

[Code Secs. 6321 and 6322 and the Equal Access to Justice Act, 28 U. S. C. §2412]

Attorney fees: Equal Access to Justice Act: Interpleader: Priority of tax liens.--Attorney fees could not be paid to the disinterested stakeholder in an interpleader action out of the interpleader fund prior to full satisfaction of preexisting federal tax liens against the fund. Code Secs. 6321 and 6322 establish a clear priority to interpleader funds in favor of the government tax liens and the Equal Access to Justice Act, 28 U. S. C. §2412, does not abrogate the priority of outstanding tax liens to allow the awarding of attorney fees to an interpleader stakeholder.

David Waters, Goodsill, Anderson, Quinn & Stifel, P. O. Box 3196, Honolulu, Hawaii 96801, for Abex Corporation. Larry C. Y. Lee, 345 Queen Street , Honolulu , Hawaii 96813 , for Walton Shim. Glenn L. Archer, Jr., Assistant Attorney General, Michael L. Paup, William Eastabrook, Farley Katz, Department of Justice, Washington, D. C. 20530, for defendant-appellant.

Before HUG, TANG and SCHROEDER, Circuit Judges.

Opinion

TANG, Circuit Judge:

The government appeals the award of attorney fees to private parties in an interpleader action. The issue presented is whether the Equal Access to Justice Act, 28 U. S. C. §2412, authorizes an award of attorney fees to an interpleader party out of the interpleader fund before satisfaction of preexisting federal tax liens. We reverse.

I.

Abex Corporation contracted with the State of Hawaii for construction of loading bridges at the Honolulu Airport . Abex hired Ski's Enterprises to do related installation work in August 1978. After partial completion of the work, Abex owed Ski's approximately $14,000.

The government and other creditors of Ski's claimed the amount in various portions. The total of all claims exceeded the amount owed to Ski's which prompted Abex to file an interpleader action seeking discharge of the debt and attorney fees.

The government answered, claiming Ski's owed about $18,000 in taxes from the first quarter of 1978 and that the government's tax lien priority entitled it to the whole fund. The parties stipulated that the government's liens were superior. A stipulation was entered to keep the fund open.

In February, 1980, the parties entered an agreement under which Ski's assigned its contracts to C&S Crane and Rigging Co. for $120,000. $25,000 of that amount went directly to Ski's creditors under a specified distribution plan: $15,000 (60%) to the IRS; $6,000 (24%) to Walton and Sandra Shim; $3000 (12%) to Hydraulic Services Inc.; and $500 (2%) each to Westinghouse Electric Company and Atlas Electric Company. This stipulated distribution scheme, which was applicable to deposits made to compensate for work done after February 1980, was filed with the court on May 2, 1980 .

At the beginning of August, 1981, Abex deposited another $13,000 with the court to extinguish completely its obligation to Ski's. The other parties, thinking the money was for work done after February, 1980, tried to distribute the amount pursuant to the distribution plan of the agreement. Abex would not agree to this stipulated distribution scheme because it claimed that the money was owed to Ski's prior to Ski's assignment to C&S Crane and Rigging. Abex claimed that the amount discharged all obligations owed to Ski's and sought attorney fees.

Although the new deposit paid off the remainder of what Ski's owed on its first quarter 1978 taxes, the government claimed that nearly $40,000 was owing when the rest of 1978 and 1979 tax liabilities were included. The government argued that attorney fees could not be paid to Abex until tax liens were satisfied.

In April, 1982, the district court found that the later deposit was intended to pay Ski's for work done prior to the February, 1980 assignment. But the court rejected the government's claim that it had priority to the complete fund until all liens were satisfied. The court cited the Equal Access to Justice Act, 28 U. S. C. §2412, as authority to award attorney fees to a disinterested stakeholder before all liens were satisfied.

On January 14, 1983 , the district court entered an order awarding $3381 in fees to Abex. The government then moved for summary judgment, claiming the rest of the fund. It claimed that $66,000 was owing in taxes, interest and penalties and that $23,000 of that amount was an assessment from November, 1978, which predated a claim filed by another creditor, Walton and Sandra Shim, which was filed December 1, 1978 . Thus, the government claimed entitlement to the full amount of the new deposit. The Shims also filed for summary judgment, arguing that the government's statutory lien priority was superceded by the August 1981 stipulation to distribute the fund under the 1980 distribution scheme. Hearings on these motions were held March 17, 1983 .

The district court ruled that the August 1981 distribution stipulation was invalid because the fund was intended to pay Ski's for work done before the February 1980 agreement. Thus, the government had statutory priority to the fund. However, the court ordered an award of fees to those parties who had incurred attorney fees under the futile belief that they would be eligible for a larger part of the fund pursuant to the 1980 agreement if Abex's attorney fees claim was defeated. The court found that the government's failure promptly to inform other parties that it intended to claim the whole fund justified the award of fees out of the interpleader fund to those parties.

On December 23, 1983 , Abex moved the court to allow the withdrawal of fees from the fund by amending its order of January 14, 1983 nunc pro tunc. The Shims were awarded $1830 in attorney fees from the fund on January 4, 1984 , and Abex's motion to withdraw fees was granted on January 25, 1984 . Abex withdrew $3381. The government's motion for summary judgment was entered on February 27, 1984 , entitling the government to the rest of the fund pursuant to its tax lien priority.

The government filed its notice of appeal March 23, 1984 .

II.

Abex Corporation and the Shims contend initially that the government's appeal is untimely. Because the district court entered orders granting them attorney fees on January 14, 1983 , and January 4, 1984 respectively, they argue that the government's notice of appeal, which was filed March 23, 1984 , was beyond the 60-day time period provided in Fed. R. App. P. 4.

Under Fed. R. Civ. P. 54(b), orders which resolve the claims of fewer than all of the parties to the action are not appealable absent "an express determination that there is no just reason for delay and . . . an express direction for the entry of judgment." Thus, a particular claim in an interpleader action is not appealable until all claims to the funds are adjudicated. Diamond Shamrock Oil and Gas Corp. v. Commissioner of Revenues, State of Arkansas , 422 F. 2d 532, 534 (8th Cir. 1970). "Also interlocutory, and not appealable in the absence of a certificate, is an order granting interpleader, even though the stakeholder is disinterested; the rival claims of the interpleaded parties call the provisions of Rule 54(b) into play." 3A Moore, Federal Practice, ¶22.14[6] (2d ed. 1981).

The government's appeal is timely. The orders awarding fees did not provide for the withdrawal of money from the interpleader fund. No certificate expressly entering judgment and finding no just reason for delay was issued with respect to the individual attorney fee awards. Thus, the correct date for the commencement of the filing period was February 27, 1984 , the date on which judgment was entered. The March 23, 1984 notice of appeal was timely.

Abex Corporation next contends that the government's argument against an award of fees to an interpleader plaintiff may not be considered by this court on appeal because the government failed to make the argument in the district court. Specifically, Abex claims that the government limited its argument in the district court to an assertion of priority over other defendants in the interpleader action. According to Abex, the government did not argue that sections 6321 and 6322 of the Internal Revenue Code gave the government priority over an interpleader plaintiff's claim for attorney fees.

Generally, this court should not consider arguments that the appellant failed to raise below. Rothman v. Hospital Service of Southern California , 510 F. 2d 956, 960 (9th Cir. 1975). Application of the rule is discretionary. Singleton v. Wulff, 428 U. S. 106, 121 (1976). This court may dispense with the waiver rule when "the question is a purely legal one that is both central to the case and important to the public." In Re Sells [83-2 USTC ¶9662], 719 F. 2d 985, 990 (9th Cir. 1983). "It is well settled in this circuit that where the new issued is purely a legal one, the injection of which would not have caused the parties to develop new or different facts, we may resolve it on appeal." United States v. Dann, 706 F. 2d 919, 925 n. 5 (9th Cir. 1983), cert. granted, 104 S. Ct. 2693 (1984).

Here, the question is strictly a legal procaptionposition--whether the Equal Access to Justice Act abrogates the priority of outstanding tax liens to allow an award of fees to an interpleader plaintiff. Abex Corporation makes no claim that it would have developed its case or its facts differently had the government made its argument below.

III.

The government maintains that the district court incorrectly awarded fees to Abex Corporation prior to full satisfaction of outstanding tax liens against Ski's Enterprises. The government argues, contrary to the district court's finding at the April 6, 1982 hearing, that federal tax lien statutes prohibit the award of fees in this case despite the recent passage of the Equal Access to Justice Act, 28 U. S. C. §2412 (1982) (EAJA) which allows fees against the United States under certain circumstances. ¹

Generally, courts have discretion to award attorney fees to a disinterested stakeholder in an interpleader action. Gelfgren v. Republic National Life Ins. Co., 680 F. 2d 79, 81 (9th Cir. 1982). Courts have clearly held, however, that the existence of prior federal tax liens gives the government a statutory priority over the interpleader plaintiff's ability to diminish the fund by an award of fees. Bank of America National Trust & Savings Assn. v. Mamakos [75-1 USTC ¶9211], 509 F. 2d 1217, 1219-20 (9th Cir. 1975); Campagna-Turano Bakery, Inc. v. United States [80-1 USTC ¶9292], 632 F. 2d 39, 41 (7th Cir. 1980); Spinks v. Jones [74-2 USTC ¶9657], 499 F. 2d 339, 340 (5th Cir. 1974); see also United States v. R. F. Ball Construction Co., [58-1 USTC ¶9327], 355 U. S. 587 (1958). Under sections 6321 and 6322 of the Internal Revenue Code, failure to pay taxes creates a lien on the taxpayer's real and personal property in favor of the government and the lien remains in force until the amount assessed "is satisfied or becomes unenforceable by reason of lapse of time." 26 U. S. C. §6322. ² According to the government, these statutes protect the interpleader fund from attorney fee reductions prior to satisfaction of the lien.

Abex contends that the EAJA abrogates the government's tax lien priority to allow an award of fees to the interpleader plaintiff. Under the EAJA, 28 U. S. C. §2412, the United States is liable to a prevailing party for reasonable attorney fees in civil actions to the same extent any other party would be liable for fees under the common law or under a statute authorizing fees unless such liability is expressly prohibited by statute. Abex argues that the tax lien statutes do not "expressly prohibit" an award of attorney fees. Thus, according to Abex, Section 2412(b) allows the award of fees consistent with the general rule which allows an interpleader plaintiff to collect fees.

The Eighth and Tenth circuits have already faced this issue. Both have held that the governmental priority established under the tax lien statutes precludes an award of fees to the plaintiff stakeholder from an interpleader fund when such an award would deplete the fund prior to total satisfaction of the lien. In Millers Mutual Insurance Assn. of Illinois v. Wassall [84-2 USTC ¶9621], 738 F. 2d 302 (8th Cir. 1984), the plaintiff stakeholder received $1500 in attorney fees over the government's claim that no such award could be made if it reduced the amount recovered under prior tax liens. The Eighth Circuit reversed the award, concluding that the EAJA did not abrogate the statutory tax lien priority. "There is nothing in the statute or the legislative history of the EAJA to indicate that Congress intended to override the priority of the United States to interpleaded funds under prior federal tax liens." 738 F. 2d at 304. In Chevron U. S. A. v. May Oilfield Services, Inc., 739 F. 2d 498 (10th Cir. 1984), the Tenth Circuit reversed an award of attorney fees to an interpleader plaintiff, concluding that sections 6321 and 6322 of the Internal Revenue Code expressly prohibited an award of attorney fees under the EAJA. 739 F. 2d at 499.

We find the reasoning of the Eighth and Tenth Circuits persuasive. The tax lien statutes established a clear priority to interpleader funds in favor of the government. The passage of the EAJA, while abrogating governmental sovereign immunity against claims for attorney fees, does not dispense with the tax lien priority created under the tax lien statutes. Millers Mutual, 738 F. 2d at 304.

Similarly, we reverse the award of fees to the Shims. The district court's award of fees to the Shims was improper as a matter of law because it drained the interpleader fund before tax liens were satisfied. The award of fees from the fund effectively gave the Shims a priority over the government with respect to the interpleader fund. This violated the statutory tax lien priority. Millers Mutual, 738 F. 2d at 304; Chevron U. S. A., 739 F. 2d at 499.

Moreover, the EAJA authorizes an award of fees to a "prevailing party." The Shims, however, cannot fairly be characterized as prevailing parties in this action because the lower court found that the government's tax liens predated the Shim's substantive claim to the fund.

IV.

The government's appeal is timely and presents a strictly legal issue which may be raised on appeal even if it was not raised below. The awards of attorney fees are reversed pursuant to the tax lien statutes which are not abrogated under the Equal Access to Justice Act.

REVERSED.

¹ 28 U. S. C. §2412(b) provides:

Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys, . . . to the prevailing party in any civil action brought by or against the United States or any agency and any official of the United States acting in his or her official capacity in any court having jurisdiction of such action. The United States shall be liable for such fees and expenses to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award.

² 26 U. S. C. §6321 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. §6322 provides:

Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessmant is made and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time.