Opinion
4: 02CV3259.
June 12, 2003.
MEMORANDUM AND ORDER
Two interrelated motions are pending: 1) plaintiff's motion to dismiss defendant's counterclaim, filing 14; and, 2) a motion to intervene filed by Charlene Woolley and E. Jane Woolley, as Trustees, ("Trustees"), of the Donald Woolley Family Trust, Woolley Enterprises Trust, J D Leasing Trust, and Ida May Fleck Trust, (the "trusts"). Filing 18. For the reasons discussed hereafter, I shall grant the government's motion to dismiss and deny the Trustees' motion to intervene.
The government has filed suit to obtain a judgment on the Internal Revenue Service's tax assessments against Woolley. Woolley's response includes a counterclaim brought pursuant to 28 U.S.C. § 2410 to quiet title in properties that are subject to an IRS tax lien for defendant's failure to pay taxes. Filing 10. The defendant claims the trusts own the properties which are subject to IRS liens, and that he has no control over or right of equity in these properties. Filing 10, ¶¶ 14, 19.
The government claims defendant cannot allege a § 2410 quiet title action, and therefore sovereign immunity bars this court from exercising jurisdiction over defendant's counterclaim. The United States, as a sovereign, may not be sued without its consent. The terms of its consent to be sued define the federal court's jurisdiction over a case. United States v. Sherwood, 312 U.S. 584, 586 (1941). Any waiver of sovereign immunity must be explicit and strictly construed. Soriano v. United States, 352 U.S. 270, 276 (1957); Sherwood, 312 U.S. at 590; Spirit Lake Tribe v. North Dakota, 262 F.3d 732, 745 (8th Cir. 2001) (sovereign immunity waiver of Quiet Title Act strictly construed).
The purpose of section 2410 is to waive the government's sovereign immunity and permit a court of proper jurisdiction to remove an IRS lien from property where the party bringing the quiet title action owns the property or holds a lien on the property. Progressive Consumers Federal Credit Union v. U.S., 79 F.3d 1228, 1233 (1st Cir. 1996). A taxpayer can bring an action under § 2410 to challenge the procedural regularity of a tax lien imposed on property, (Pollack v. United States, 819 F.2d 144, 145 (6th Cir. 1987)), but the § 2410 plaintiff must be able to claim some presently held property interest of its own to bring a § 2410 quiet title action. Shaw v. United States, 331 F.2d 493, 496-98 (9th Cir. 1964) (dismissing quiet title action brought by the wife of a taxpayer against whom the IRS had filed a notice of tax lien because wife's complaint asserted no invasion of any property interest of her own and therefore failed to state a claim under § 2410). See also, Bor-Son Bldg. Corp. v. Heller, 572 F.2d 174, 178 (8th Cir. 1978) (plaintiff could not seek reinstatement of lien under § 2410 because plaintiff no longer held a valid and subsisting lien upon to foreclose); E.J. Friedman Co., Inc. v. U.S., 6 F.3d 1355, 1358 (9th Cir. 1993) (absent holding an interest in the property, § 2410 does not permit plaintiff to bring an action to quiet title to the property); Raulerson v. United States, 786 F.2d 1090, 1091 (11th Cir. 1986) (an action to quiet title under § 2410 cannot be brought by a party that has forfeited its rights in the property); Commonwealth Land Title Ins. Co. v. United States, 759 F. Supp. 87, 92-94 (Conn. 1991) (indicating that a title company did not have a sufficient interest in property it insured to bring a § 2410 action). "Standing under [§ 2410] is based on the presumption that the petitioner himself is making a claim of ownership to the property for which title is to be quieted . . ." Matter of Coppola, 810 F. Supp. 429, 432 (E.D.N.Y. 1992).
The defendant alleges he has no property interest in the properties subject to the IRS liens. The United States has sovereign immunity, and thus the court has no jurisdiction, over proceedings brought by one who claims no interest in the property but nonetheless asserts that an IRS lien should be removed from the property's title. Raulerson, 786 F.2d at 1091. Defendant's counterclaim must be dismissed for lack of subject matter jurisdiction.
The Trustees claim an ownership interest in properties subject to IRS liens imposed for defendant's alleged tax obligation to the IRS. In moving to intervene, they claim "disposition of the action to reduce tax assessments against the Defendant may as a practical matter impair or impede the Trustees ability to protect their interest in the property held in trust." Filing 18, motion to intervene, ¶ 3. The government's complaint does not, however, seek to foreclose on any liens for the payment of Woolley's IRS assessments.
A timely motion to intervene as of right under Fed.R.Civ.P. 24(a)(2) should be granted when: 1) the proposed intervenor has an interest in the subject matter of the action; 2) the interest may be impaired; and 3) the interest is not adequately represented by an existing party to the action. South Dakota ex rel Barnett v. U.S. Dept. of Interior, 317 F.3d 783, 785 (8th Cir. 2003); Sierra Club v. Robertson, 960 F.2d 83, 85 (8th Cir. 1992) (citing Little Rock School Dist. v. Pulaski Special School Dist. No. 1, 738 F.2d 82 (8th Cir. 1984). Based on the facts before me, I conclude the Trustees have not met the conditions to intervene as of right.
The subject matter of the government's suit is to reduce its tax assessment against the defendant to a judgment. A suit to obtain judgment on a tax assessment is wholly separate from an action to quiet title under § 2410. "When a federal tax lien is involved, . . . an action pursuant to section 2410(a) will not lie if its sole purpose is to challenge the validity of the underlying assessment." Progressive Consumers, 79 F.3d 1228, 1233 (1st Cir. 1996) (quoting Johnson v. United States, 990 F.2d 41, 42 (2d Cir. 1993).
The government has not filed suit against the Trustees to obtain a judgment for unpaid taxes. That suit lies solely against the defendant. The Trustees can offer no evidence and can raise no defenses relevant to the government's suit to collect taxes from the defendant. If the defendant successfully defends the government's suit, the Trustees property interests will not be subject to foreclosure. If a judgment is entered against the defendant on the government's claim, and the defendant pays the judgment, the government will not have a basis to pursue collection against the Trustees' property interests to pay the defendant's IRS debt. Under such circumstances, the Trustees cannot assert that the governments's suit against the defendant raises any present claim against the Trustees' property interests such that intervention must be allowed as a matter of right. A judgment against the defendant on whether he owes money to the IRS will not impair or impede the Trustees' ability to litigate whether, irrespective of any tax owed by the defendant to the IRS, their property cannot be used to pay the government's judgment against the defendant.
Finally, "[i]nadequacy of representation is a necessary element to be proved by a party seeking to intervene under Rule 24(a)." Edmondson v. State of Neb. ex rel. Meyer, 383 F.2d 123, 127 (8th Cir. 1967). The intervening party must prove that its interests will not be adequately protected by the existing parties in the litigation. South Dakota ex rel Barnett, 317 F.3d at 785; Taylor v. Southwestern Bell Telephone Co., 251 F.3d 735, 741 (8th Cir. 2001).
The Trustees and defendant are represented by the same counsel. The defendant has an interest in avoiding a judgment for unpaid taxes; the Trustees have the same interest since a judgemnt for defendant would require removing the IRS liens on their property. Therefore, the interests of defendant and the Trustees' are fully aligned in the suit brought by the government against the defendant. The Trustees' interests will be adequately represented through their counsel's representation of the defendant in that action. The Trustees have failed to establish a right to intervene under rule 24(a).
Rule 24(b) permits intervention, at the court's discretion if the applicant is asserting a claim or defense based on facts or law already at issue in the primary action. In exercising its discretion to permit intervention, the court must consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties. South Dakota ex rel Barnett., 317 F.3d at 787.
The Trustees' claim asserts that defendant has no interest in their property, and any IRS debt owed by the defendant cannot be collected by foreclosing on the IRS' liens. The suit against the defendant does not seek to foreclose the IRS liens, determine what property he owns, or determine whether he has transferred assets to the Trusts to avoid collection of any IRS obligation. The government's suit seeks only to reduce its tax assessments against the defendant to a judgment. There are no common issues of law or fact between the government's suit and the issues raised by the Trustees' proposed claim in intervention. Further, litigation of the real estate title claims, and any argument that the Trusts hold such properties as the alter ego of the defendant, would add substantial issues to this case and serve to unnecessarily complicate and prolong adjudication of the primary issue — whether the defendant owes taxes assessed against him by the IRS. The Trustees will suffer no prejudice if intervention is denied; their interests are adequately represented in the primary case. South Dakota ex rel Barnett, 317 F.3d at 787 (adequacy of protection for intervenor is a variable, albeit minor, in the Rule 24(b) decision calculus).
I conclude the Trustees have presented no basis for mandatory or permissive intervention under Rule 24. I shall deny their motion to intervene.
IT THEREFORE HEREBY IS ORDERED:
1. Plaintiff's motion to dismiss defendant's counterclaim, filing 14, is granted.
2. The motion to intervene filed by Charlene Woolley and E. Jane Woolley, as Trustees of the Donald Woolley Family Trust, Woolley Enterprises Trust, J D Leasing Trust, and Ida May Fleck Trust, filing 18, is denied.