Opinion
No. 8:00-CV-682-T-30-TGW
July 20, 2001
ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
This is an action brought by St. Joe Title Services, Inc. d/b/a Sarasota Title Services ("Sarasota Title") to recover $29,301.95 erroneously paid to the Internal Revenue Service ("IRS"). The matter is now before the Court on the parties' cross motions for summary judgment (Dkt. #20 and #32). Both parties agree that this case should be resolved by the Court on summary judgment because the material facts are undisputed. The Court has reviewed the record, memoranda of law submitted by the parties, applicable case law, and has considered the oral arguments of counsel on March 6, 2001, and finds that Sarasota Title is entitled to the entry of summary judgment in its favor and a tax refund from the IRS in the amount of $29,316.93.
I. FACTUAL BACKGROUND
This action arises from a real estate closing that occurred on July 26, 1999, when Sarasota Title, acting as Title Agent, performed a closing on the refinancing of the home of Stephen and Bonnie Wild ("the Wilds"). The purpose of the refinancing was to pay off the Wilds' mortgage to SunTrust Mortgage, Inc. ("SunTrust"), and pay the IRS the remaining proceeds from the equity in their home to satisfy outstanding tax liability.
The settlement statement Sarasota Title prepared for the closing contained a typographical error. As a result of the mistake, the IRS received an additional $30,000.00 from Sarasota Title, which the IRS now refuses to return. More specifically, the settlement statement indicated the amount due and owing SunTrust to be only $45,384.00, instead of the actual mortgage payoff amount of $75,384.00. This mistake resulted in the remaining $30,000.00 to be forwarded to the IRS instead of SunTrust. In short, SunTrust received $30,000.00 less than the payoff amount of its mortgage, and the IRS received $30,000.00 more than it otherwise would have received.
The Monday following the closing, Sarasota Title was contacted by SunTrust and informed that the proceeds check was short $30,000.00. Sarasota Title immediately prepared a check to SunTrust for $29,316.93, to satisfy the mortgage on the property. The same day, Sarasota Title notified the IRS of the overpayment and requested a refund check in the amount of $29,316.93. On January 25, 2000, the IRS denied Sarasota Title's claim for the refund, which prompted the filing of this lawsuit.
In the interim, the Wilds made a payment directly to SunTrust, which accounts for the difference between the amount of the typographical error and the amount Sarasota Title paid SunTrust.
Both parties claim they are entitled to summary judgment in their favor.
II. SUMMARY JUDGMENT STANDARD
Motions for summary judgment should only be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322(1986). The existence of some factual disputes between the litigants will not defeat an otherwise properly supported summary judgment motion. "The requirement is that there be no genuine issue of material fact."Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (emphasis in original). The substantive law applicable to the claimed causes of action identifies which facts are material. Id. Throughout this analysis, the judge must examine the evidence in the light most favorable to the non-moving party and draw all justifiable inferences in his favor. Id. at 255.
III. LEGAL DISCUSSION
Sarasota Title's lawsuit has been brought pursuant to 28 U.S.C. § 1346 and 26 U.S.C. § 744. Section 1346 waives the Government's sovereign immunity in certain situations, and provides:
(a) The district courts shall have original jurisdiction, concurrent with the United States Claims Court, of:
(1) Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws. . . .28 U.S.C. § 1346.
During the Motion to Dismiss phase of this lawsuit, and again on Summary Judgment, the Government has argued that Sarasota Title lacks standing to sue under Section 1346 because Sarasota Title was the closing agent, not the taxpayer. This Court recognizes that until recently, Courts were split as to whether a party that had not been originally assessed a tax had standing to sue under Section 1346. Compare Martin v. United States, 895 F.2d 992(4th Cir. 1990) with Snodgrass v. United States, 834 F.2d 537(5th Cir. 1987). This split in authority was resolved by the United States Supreme Court in United States v. Williams, 514 U.S. 527(1995).
In Williams, the Plaintiff, Lori Williams, separated from her husband and received full ownership of their home as part of the property settlement. After entering into a contract to sell the home, Williams learned that the IRS had placed several tax liens on the property. All of the tax liens were against Williams' husband. In order to sell the property free of encumbrances and convey clear title, Williams paid the tax under protest. Williams thereafter sued to obtain a refund and the IRS argued that she lacked standing under the refund provision of 28 U.S.C. § 1346(a)(1) because she was not the "taxpayer" since she was not the person against whom the tax was assessed.
When considering the Williams case, the Supreme Court addressed the issue of "whether respondent Lori Williams, who paid a tax under protest to remove a lien on her property, had standing to bring a refund claim under 28 U.S.C. § 1346(a)(1), even though the tax she paid was assessed against a third party." Id. The Court held that Williams did have standing to sue for a refund under the broad language of 28 U.S.C. § 1346(a)(1) which gives federal courts jurisdiction to hear "any civil action against the United States for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected." Id. at 1614; Beauchamp v. United States, 4 F. Supp.2d 213, 215(W.D.N.Y. 1998).
The Government argues that the holding in Williams does not apply in this case because Sarasota Title did not actually pay the tax owed by the Wilds. Instead, the Government argues that the money came from the equity in the Wilds' home that Sarasota Title mistakenly diverted from SunTrust to the IRS. The Government overlooks the fact that Sarasota Title is the party with the out-of-pocket loss of $30,000.00. The Government also overlooks that fact that Sarasota Title, like Lori Williams, is without a realistic remedy in the event it cannot obtain a refund from the IRS.
In this regard, the Court finds guidance from the dicta in the Supreme Court's Williams opinion discussing the fact that Williams would be left without a remedy in the event she could not obtain a refund. Id. at 536.
Most importantly, this Court believes it is bound by the broad holding in Williams that " 28 U.S.C. § 1346(a)(1) clearly allows one from whom taxes are erroneously or illegally collected to sue for a refund of those taxes." Id. at 536; See Beauchamp, 4 F. Supp.2d at 216. Accordingly, the Court has again considered the Government's arguments concerning standing and finds that Sarasota Title does have standing to sue under theWilliams holding.
The Court finds that under a plain-meaning interpretation of Section 1346, as applied by the Supreme Court in Williams, Sarasota Title falls within the broad language of Section 1346(a)(1). Although Sarasota Title was not originally assessed the tax, the IRS, by accepting payment after being notified that the payment was sent in error and then refusing to issue a refund, certainly imposed a tax on Sarasota Title. See Williams; see also Martin v. United States, 895 F.2d 992(4th Cir. 1990).
The Court notes that taking the Government's narrow reading of Section 1346 to its logical conclusion could result in absurd and unfair results. For example, using the Government's logic, if a taxpayer were to mail a check to the IRS to satisfy her tax liability and through an inadvertent error mis-typed one letter of her social security number on the check so that her payment went to satisfy someone else's outstanding tax liability, she would be unable to obtain a refund from the IRS. In fact, she would most likely be left without a remedy against the other taxpayer who benefitted from her mistake. The Court finds this result to be unfair and, in this case, finds that it resulted in the IRS obtaining a windfall from Sarasota Title.
The Government has also argued that Sarasota Title lacks standing to sue under the Anti-Assignment Act. The Court is not persuaded by this argument. SunTrust never had a claim against the IRS for not being paid; its only claim for the full mortgage amount could have been against Sarasota Title or possibly the Wilds. In fact, after making the typographical error, Sarasota Title could have been sued by either the Wilds, SunTrust, or the new mortgage holder on the property had SunTrust's mortgage not been satisfied. Sarasota Title's only opportunity for relief from its mistake is to receive a refund from the IRS in the amount of the overpayment. Accordingly, it is hereby
ORDERED and ADJUDGED that:
1. Plaintiff's Motion for Summary Judgment (Dkt #32) is GRANTED. Plaintiff is entitled to a tax refund from the IRS in the amount of $29,316.93.
2. Defendant's Motion for Summary Judgment (Dkt. #20) is DENIED.
3. Defendant's Motion to Strike (Dkt. #41) is DENIED.
4. The Clerk is directed to terminate all pending motions as moot and close this case.DONE and ORDERED