Opinion
Case No. 02-CV-70833
October 21, 2002
OPINION AND ORDER
AT A SESSION of said Court, held in the United States Courthouse, in the City of Detroit, State of Michigan, on
PRESENT: THE HONORABLE LAWRENCE P. ZATKOFF CHEF UNITED STATES DISTRICT JUDGE I. INTRODUCTION
This matter is before the Court on Third Party Defendant/Counter-Plaintiff United States' Motion for Summary Judgment on its counter-claim. Third Party Plaintiff and Court-Appointed Receiver David Findling has filed a response, and Plaintiff Lorenzo Wilson, Third Party Defendants Coranzo and Rosie Wilson, and Ann Marie Wilson have filed a separate response. The United States has replied. The Court finds that the parties have adequately set forth the relevant law and facts, and that oral argument would not aid in the disposition of this motion. See E.D. MICH. LR 7.1(e)(2). Accordingly, the Court ORDERS that this motion be decided on the briefs submitted. For the reasons set forth below, Third-Party Defendant United States's Motion for Summary Judgment is GRANTED IN PART and DENTED IN PART.
II. BACKGROUND
On October 13, 1992, Lorenzo Wilson (hereinafter "Lorenzo") filed his 1989, 1990, and 1991 federal income tax returns as married filing separately, reporting balances due in the amounts of $2,231.00, $1, 789.00, and $2,573.00, respectively. On November 4, 1994, Lorenzo filed his 1992 federal income tax return as married separately, reporting a balance due in the amount of $4,395.00. Also on November 4, 1994, Lorenzo and Ann Marie Wilson (hereinafter "Ann Marie") filed a joint 1993 federal income tax return, reporting a balance due in the amount of $4,992.00. These amounts were not paid.
On November 23, 1992, Lorenzo was assessed for his 1989, 1990, and 1991 taxes, on November 28, 1994 Lorenzo and Ann Marie were assessed for their 1992 taxes, and on December 5, 1994, Lorenzo was assessed for his 1993 taxes. According to the Internal Revenue Service (hereinafter "IRS"), despite appropriate notice and demand, these amounts were not paid. See Declaration of Richard Hannum, ¶¶ 6 8. On December 15, 1994, the IRS filed a Notice of Federal Tax Lien with the Register of Deeds for Wayne County against Lorenzo and Ann Marie for 1989, 1990, 1991, and 1993, and on January 30, 1995, the IRS filed a Notice of Federal Tax Lien for 1992.
"In his response to the United States' motion for summary judgment, Third Party Plaintiff David Findling asserts that as of November 6, 1996, the IRS and the State of Michigan had recorded two additional liens: (1) a United States Tax Lien filed on October 15, 1992, in the amount of $7,565.82; and (2) a Michigan State Tax Lien filed on August 27, 1993, in the amount of $1,863.90. See Receiver Findling' s Response to Motion for Summary Judgment ¶ 6. These assertions, however, are not supported by documentation. Nor has the State of Michigan sought to enforce its lien in the present proceedings.
On October 17, 1996, Lorenzo signed a Gift Letter, providing $8,000.00 to his parents, Coranza and Rosie Wilson (hereinafter "Lorenzo's parents" or "Coranza and Rosie"), purportedly to assist his parents in the purchase of a home. On November 6, 1996, Lorenzo' s parents purchased a home, commonly known as 16140-42 Princeton, Detroit, Wayne County, Michigan. The seller conveyed a warranty deed to Coranza and Rosie L. Wilson, husband and wife, which was recorded on December 2, 1996. GMAC Mortgage Corporation largely financed the purchase, and retains a purchase money mortgage on the Princeton property. See Payoff Statement of March 19, 2002.
As of March 19, 2002, the principal of the GMAC mortgage was $55,339.77. See Payoff Statement of March 19, 2002.
On January 13, 1997, Coranza and Rosie, husband and wife, conveyed by quit claim deed the recently purchased Princeton property to "Coranza Wilson, Rosie L. Wilson, Lorenzo Wilson, and Ann Marie Wilson as Joint Tenants With Rights of Survivorship." See Quit Claim Deed of January 13, 1997. The parties recorded the quit claim deed the same day. On June 23, 1997, Ann Marie then conveyed by quit claim deed any interest she had in the Princeton Property to "Coranza Wilson, Rosie L. Wilson, and Lorenzo Wilson, as joint tenants with rights of survivorship." See Quit Claim Deed of June 23, 1997. This quit claim deed was recorded on July 22, 1997.
Lorenzo and Jo-Renee Hunter Wilson (hereinafter "Jo-Renee") were divorced in Wayne County Circuit Court on December 14, 2001. On January 25, 2002, Wayne County Circuit Court Judge Lucas issued an order appointing David Findling (hereinafter "Receiver Findling") as receiver of the real and personal property of Lorenzo in order to ensure satisfaction of the Divorce Judgment. Pursuant to his duties, Receiver Findling filed a Third Party Complaint against Coranza and Rosie, Ann Marie, the United States, the IRS, and the Department of Treasury of the State of Michigan seeking to establish his rights to the Princeton property.
It has not been made clear to the Court the relationship, if any, between Ann Marie Wilson and Jo-Renee Hunter Wilson. The Third-Party Complaint seems to assert that they are the same person. It appears that either Ann Marie is Jo-Renee Hunter, or sometime between 1997 and 2001 Lorenzo Wilson divorced Ann Marie Wilson and married Jo-Renee Hunter Wilson.
The Third Party Complaint contained two counts: Fraudulent Conveyance (Count D and Declaratory Relief (Count II). Count I alleged that Lorenzo fraudulently conveyed the Princeton property to his parents Coranza and Rosie by having his parents "purchase" the Princeton property on November 6, 1996, in violation of Michigan's Uniform Fraudulent Transfer Act in an effort to avoid his creditors and tax liabilities. See Third-Party Complaint ¶¶ 27-30. See also MICH. COMP. LAWS §§ 566.31-43. Count II sought declaratory relief and a determination of Receiver Findling's rights regarding the Princeton property with respect to Lorenzo's unpaid tax liabilities. See Third Party Complaint ¶ 33. See also MICH. CT. R. 2.605.
The United States removed to this Court on March 6, 2002. With its Answer to the Third Party Complaint, the United States filed a counterclaim, seeking to foreclose on its liens on the Princeton Property pursuant to § 7401 of the United States Code. See 26 U.S.C. § 7401. See also 26 U.S.C. § 6321 6322. On July 11, 2002, the United States filed the instant Motion for Summary Judgment.
On July 16, 2002, this Court issued an Order denying Third-Party Plaintiff Findling's Motion for Order Setting Aside Removal. See Wilson v. Wilson, Case No. 02-70833, 2002 U.S. Dist. LEXIS 14460 (E.D. Mich. July 16, 2002).
The United States argues that, pursuant to § 6321 of the United States Code, the tax liens against Lorenzo and Ann Marie that resulted from the unpaid 1989, 1990, 1991, 1992 and 1993 taxes attached by operation of law to all of Lorenzo's and Ann Marie's real and personal property. When Coranza and Rosie conveyed an interest in the Princeton property to Lorenzo and Ann Marie, Lorenzo and Ann Marie acquired a fifty percent ownership interest in the property and the IRS obtained a valid federal tax lien on that fifty percent. Since the IRS liens were filed and recorded, the United States claims priority over all other interests in the Princeton property except the GMAC mortgage. The United States seeks to foreclose on the Princeton property and apply fifty percent of the proceeds, (the fifty percent representing Lorenzo's and Ann Marie's interest), after GMAC has been paid, to Lorenzo's and Ann Marie's outstanding tax liabilities, with the balance placed in escrow with the Court pending a determination of the interests of all parties in the Princeton property.
The United States did not make GMAC a party to its Counterclaim because the United States concedes that GMAC has priority over any subsequently arising IRS lien.
Receiver Findling concurs in large part with the United States's position. Findling agrees that the IRS has valid tax liens as to at least fifty percent of the Princeton property, and that these liens should be foreclosed upon, the property sold, and fifty percent of the net proceeds used to pay Lorenzo's and Ann Marie's outstanding tax liabilities. Findling also agrees that the remaining fifty percent should be placed in escrow, pending a determination of the fraudulent conveyance claim. If the fraudulent conveyance claim is successful, then the IRS lien would attach to the entire Princeton property. It is Findling's position, however, that as Receiver, his fees and costs are entitled to priority over all liens under equitable principles, including IRS liens, as administrative expenses.
The United States replies to Findling's assertions by arguing that Findling's claim to the proceeds do not meet the superpriority requirements of § 6323(b)(8) of the Code. See 26 U.S.C. § 6323 (b)(8). Under the statute, Findling's claim is not entitled to priority over the IRS lien.
Plaintiff Lorenzo Wilson, and Third-Party Defendants Coranza and Rosie Wilson and Ann Marie Wilson (collectively hereinafter "Wilsons") have filed a response to the United States' motion for summary judgment. The Wilsons deny that the purchase and subsequent conveyances of the Princeton property were fraudulent conveyances. Accordingly, the Wilsons argue that summary judgment would be inappropriate because there is a genuine issue of material fact as to the ownership of the Princeton property and as to whether there was any fraudulent intent to defraud creditors. In addition, summary judgment would be inappropriate because Lorenzo has made a compromise offer to the IRS.
The United States replies to the Wilsons' s arguments by pointing out that the Wilsons contest issues of fact that are not material to the instant motion. Once the IRS lien attached to Lorenzo's and Ann Marie's interest in the Princeton property, no subsequent conveyance could discharge those liens, and even if the purchase of the Princeton property was not a fraudulent conveyance, then Lorenzo still had an interest to be foreclosed upon. Finally, the United States points out that the IRS no longer has jurisdiction to consider Lorenzo's offer of compromise.
Since this case has been referred to the Department of Justice (hereinafter "DOJ") for "prosecution or defense, " the IRS lacks authority to bind the Government. The DOJ has exclusive authority to settle Lorenzo's claim. See 26 U.S.C. § 7122 (a). See also Faust v. United States, 101 F.3d 675, 676 (Fed. Cir. 1996).
III. LEGAL STANDARD
Summary judgment is appropriate only if the answers to the interrogatories, depositions, admissions, and pleadings combined with the affidavits in support show that no genuine issue as to any material fact remains and the moving party is entitled to judgment as a matter of law. See FED. R. Civ. P. 56(c). A genuine issue of material fact exists when there is "sufficient evidence favoring the non-moving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986) (citations omitted). In application of this summary judgment standard, the Court must view all materials supplied, including all pleadings, in the light most favorable to the non-moving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). "If the evidence is merely colorable or is not significantly probative, summary judgment may not be granted." Anderson, 477 U.S. at 249-50 (citations omitted).The moving party bears the initial responsibility of informing the Court of the basis for its motion and identifying those portions of the record that establish the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has met its burden, the nonmoving party must go beyond the pleadings and come forward with specific facts to demonstrate that there is a genuine issue for trial. See FED. R. Civ. P. 56(e); Celotex, 477 U.S. at 324. The non-moving party must do more than show that there is some metaphysical doubt as to the material facts. It must present significant probative evidence in support of its opposition to the motion for summary judgment in order to defeat the motion for summary judgment. See Moore v. Phillip Morris Co., 8 F.3d 335, 339-40 (6th Cir. 1993).
IV. ANALYSIS
The United States seeks to force a sale of the Princeton property by enforcing its lien on the property created pursuant to § 6321 ofthe Internal Revenue Code (hereinafter "IRC"). See 26 U.S.C. § 6321. See also 26 U.S.C. § 7403. Section 6321 provides:
If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount. . . 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. § 6321. This lien shall arise "at the time the assessment is made and shall continue until the liability for the amount so assessed. . . is satisfied or becomes unenforceable by reason of lapse of time." 26 U.S.C. § 6322. Section 7403 of the IRC allows the United States to enforce its § 6321 lien and foreclose on property owned by the taxpayer. See 26 U.S.C. § 7403 (a). Section 7403 provides:
§ 7403. Action to enforce lien or to subject property to payment of tax.
(a) Filing. In any case where there has been a refusal or neglect to pay any tax, or to discharge any liability in respect thereof, whether or not levy has been made, the Attorney General or his delegate, at the request of the Secretary, may direct a civil action to be filed in a district court of the United States to enforce the lien of the United States under this title with respect to such tax or liability or to subject any property, of whatever nature, of the delinquent, or in which he has any right, title or interest, to the payment of such tax or liability. . . .
(b) Parties. All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto.
(c) Adjudication and decree. The court shall, after the parties have been duly notified of the action, proceed to adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property, and, in all cases where a claim or interest of the United States therein is established, may decree a sale of such property. . . and a distribution of the proceeds of such sales according to the findings of the court in respect to the interests of the parties and of the United States. . . .26 U.S.C. § 7403.
In order to foreclose on the Government's lien, sell the Princeton property, and distribute the proceeds, this Court must make several determinations. First, this Court must find that the Government has a lien on the property to be sold. This requires that the delinquent taxpayer have had at one time an ownership interest in the property. This Court must then decide whether the property should in fact be sold. This requires the Court to apply the factors described in United States v. Rodgers, 461 U.S. 677 (1982). And finally, if this Court decides the property should be sold, the Court must determine both the relative interests in the property of the parties involved and the priority of the parties' interests to any proceeds.
A. IRS Lien on Princeton Property
A Government lien under § 6321 cannot extend further than the interests of the delinquent taxpayer. See United States v. Rodgers, 461 U.S. 677, 690 (1982). See also 26 U.S.C. § 6321. A § 6321 lien, however, "is broad and reveals that Congress meant to reach every interest in property that a taxpayer might have." Drye v. United States, 528 U.S. 49, 56 (1999) (citing United States v. Nat'l Bank of Commerce, 472 U.S. 713, 719-20 (1985)). The Government's lien will encumber property acquired by the taxpayer after the imposition of the lien, see United States v. McDermott, 507 U.S. 447, 553-55 (1993), and remain attached to property subsequently transferred by the taxpayer to third parties. See Rodgers, 461 U.S. at 691 n. 16.
In the present case, the United States seeks to foreclose on the Princeton property and use the proceeds to pay Lorenzo's and Ann Marie's outstanding tax liabilities. Lorenzo was assessed for his 1989, 1990, and 1991 taxes on November 23, 1992. On November 28, 1994, Lorenzo and Ann Marie were assessed for their 1993 taxes, and on December 5, 1994, Lorenzo was assessed for his 1992 taxes. Pursuant to § 6323 of the Code, appropriate Notices of Federal Tax Liens were filed against Lorenzo and Ann Marie with the Wayne County Register of Deeds on December 15, 1994, and on January 30, 1995. In addition, Receiver Findling's Third Party Complaint has two potential outcomes: it will either be unsuccessful, and Lorenzo and Ann Maire will be considered to have acquired an ownership interest in the Princeton property on January 13, 1997, holding title as joint tenants with right of survivorship along with Coranza and Rosie; or it will be successful and Lorenzo will have purchased the property on November 6, 1996. Therefore, IRS liens attached, at the latest, to Lorenzo's and Ann Marie's interest in the Princeton property on January 13, 1997.
The Court notes that the amount of the IRS liens does not depend on Ann Marie having possessed an interest in the Princeton property. Her liability arises from the joint 1993 federal income tax return, for which Lorenzo is also liable.
The success or failure of Receiver Findling's Third-Party Complaint will not affect this Court's determination that the IRS holds a lien on the Princeton property as of January 13, 1997. Even if the original purchase of the home on November 6, 1996, by Coranza and Rosie is considered a fraudulent conveyance by Lorenzo to Coranza and Rosie, and fee simple title is vested in Lorenzo, then Lorenzo's ownership interest would still remain and the IRS lien on his interest would still be valid. Whether the IRS lien would have attached on January 13, 1997, or November 6, 1996, does not have to be presently decided. Accordingly, regardless of the outcome of the Third Party Complaint, the United States may proceed under § 7403.
The Court finds that the IRS has a lien on the Princeton property arising from its assessments and Notices of Federal Tax Liens filed against Lorenzo. The Court must now determine whether foreclosure is appropriate.
B. Foreclosure
Once a court determines that a delinquent taxpayer has an interest in property, and that a lien has attached, § 7403 requires the court to sell the property and distribute the proceeds, even if non delinquent third parties retain an ownership interest or state law otherwise prohibits partition of the property. See United States v. Craft, 122 S.Ct. 1414 (2002), rev'g, 233 F.3d 358 (6th Cir. 2000); Drye v. United States, 528 U.S. 49, 61 (1999); Rodgers, 461 U.S. at 712. A court is afforded, however, a limited amount of equitable discretion in determining whether to force a sale of property where innocent third parties retain an ownership interest. This discretion takes into account the "Government's interest in prompt and certain collection of delinquent taxes and the possibility that innocent third parties will be unduly harmed by that effort." Rodgers, 461 U.S. at 709. The Supreme Court in Rodgers indicated that there are four factors which a court may take into consideration, though warned against the factors being used as a "mechanical checklist." See id. at 711. These factors are:
(1) the extent to which the Government's financial interests would be prejudiced if it were relegated to a forced sale of the partial interest actually liable for the delinquent taxes; (2) whether the third party with a nonliable separate interest in the property would, in the normal course of events, have a legally recognized expectation that the separate property would not be subject to forced sale by the delinquent taxpayer or his or her creditors; (3) the likely prejudice to the third party' both in personal dislocation costs and in the sort of practical undercompensation resulting from a forced sale; (4) the relative character and value of the nonliable and liable interests held by the property.See Rodgers, 461 U.S. at 710-11. Although the interest of the delinquent taxpayer is to be given little, if any, weight, a forced sale could "be temporarily postponed or made subject to an upset price, in order to do justice." See Rodgers, 461 U.S. at 709, 710 n. 39.
Application of the preceding factors to the present estate is complicated by the nature of the parties' interest in the Princeton property. Coranza and Rosie originally purchased the property on November 6, 1996, as husband and wife. On January 13, 1997, Coranza and Rosie conveyed by quit claim deed their interest to Coranza and Rosie, Lorenzo, and Ann Marie as joint tenants with rights of survivorship. Less than six months later, on June 23, 1997, Ann Marie conveyed by quit claim deed her interest in the Princeton property to Coranza and Rosie, and Lorenzo as joint tenants with rights of survivorship. But while the January 13, 1997, conveyance transferred the entire estate, the June 23, 1997, conveyance only transferred Ann Marie's interest, to be held by the remaining three as joint tenants with full rights of survivorship.
Furthermore, in Michigan, a conveyance that transfers an estate to be held by the transferees as "joint tenants with right of survivorship" creates a joint tenancy with an indestructible right of survivorship held by each joint tenant. See Albro v. Allen, 454 N.W.2d 85 (Mich. 1990). In effect, the estate held by each tenant is a joint life estate with a contingent remainder dependent upon the tenant outliving the other joint tenants. See Albro, 454 N.W.2d at 93. Under Michigan law, such an estate prevents one joint tenant from affecting the survivorship interest of the otherjoint tenants. See id. at 90 ("[T]he Legislature has decreed that the contingent remainder following the joint life estate may not be destroyed by alienation of the precedent estate, nor by any act of the owner of the precedent estate.").
While these complications do not affect this Court's power under § 7403 to foreclose on the instant property, they make application of the Rodgers factors a precarious endeavor. See Craft, 122 S.Ct. at 1425-26 (holding that federal tax lien statute applied to property held by husband and wife as tenants by the entirety, which, under Michigan law, was not subject to levy under execution on judgment rendered against the husband or wife alone). It is difficult to take into consideration an innocent third parties' interest until the full extent of that interest is known to the Court. This Court notes, however, that even if the Third Party Complaint is eventually successful, and fee simple in the Princeton property is vested in Lorenzo, then there would be no reason not to foreclose on the property. See Rodgers, 461 U.S. at 709. If the Third Party Complaint is unsuccessful, then this Court would have to take into consideration how Coranza's and Rosie's interests would be affected by a forced sale. If these interests do not outweigh the Government's interest in "prompt and certain collection of delinquent taxes, " then the property should be sold. Therefore, for the purposes of considering the Rodgers factors, the Court will assume that the Third Party Complaint will be unsuccessful and that Coranza and Rosie are innocent third parties. After consideration of the Rodgers factors, and a balancing of the relative interests, this Court determines that foreclosure is appropriate.
First, the Government would be prejudiced if the Princeton property were not sold as a whole. The sale of a partial estate, sold separately and still subject to the survivorship interest of the innocent third parties, would be worth considerably less than Lorenzo' s and Ann Marie's percentage share of a sale of the whole estate.
Second, there is some indication that the Wilsons may have thought that under Michigan law, a joint tenancy with right of survivorship is inseverable, and that Lorenzo' s and Ann Marie's interests in the property could not be reached by their creditors. The IRS, however, filed Notices of Federal Tax Liens against Lorenzo and Ann Marie well before Coranza and Rosie made the conveyance on January 13, 1997. Coranza and Rosie, therefore, at least, had record notice of the possibility that the IRS would seek to enforce its liens.
Third, the Wilsons concede that Coranza and Rosie will not suffer any displacement costs because they have never even lived in the Princeton property. See Wilsons's Answer to CounterClaim Filed by United States of America, Department of Treasury ¶¶ 44.
Finally, after a practical consideration of all factors and circumstance, this Court finds that, regardless of the outcome of Receiver Findling' s Third Party Complaint, the relative character of Coranza and Rosie's interest in the property will not be significant enough to tip the balance against foreclosure. The Princeton property should be foreclosed upon.
Accordingly, the United States's motion is GRANTED to the extent it requests foreclosure on the IRS liens.
C. Relative Interests in the Princeton Property
The Third Party Complaint is an action to quiet title on the Princeton property. It alleges a fraudulent conveyance between Lorenzo and Coranza and Rosie. Under Michigan law, the issue of fraud is a question of fact to be determined by the fact finder. See In re Otis Edwards, P.C., 115 B.R. 900 (Bankr. E.D. Mich. 1990) ("Fraudulent intent is a question of fact, not law, and as such is a question for this court to determine based on the relevant evidence provided by the parties.") (citations omitted). In the present case, Lorenzo denies any fraudulent intent. Accordingly, a determination by the Court of the relative interests of the parties to the Princeton property is inappropriate for this motion.
D. Priority
The Court may, however, determine the relative priority of competing interests to the Princeton property. Once it is determined that a lien has attached to a taxpayer's property, and a court has decided to force a sale of the property pursuant to § 7403 of the IRC, federal law determines the priority of competing interests in that property. See Aquilino v. United States, 363 U.S. 509, 513-14 (1960). The validity and priority of a § 6321 lien as against third parties is governed by § 6323. See 26 U.S.C. § 6323. See also United States v. Rodgers, 461 U.S. 677, 682 n. 2 (1983). Section 6323 requires a lien to be recorded according to the applicable state law where the real property is located. See 26 U.S.C. § 6323 (a) (f).
Once recorded, a Government lien does not automatically have priority over all other liens. See McDermott, 507 U.S. at 449. "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."' Id. (quoting United States v. Britain, 347 U.S. 81, 85 (1827)). "A properly filed federal tax lien has priority over a competing state-created lien unless the competing lien has "attached' to the property in question and is `choate' prior to the perfection of the federal tax lien." Redondo Constr. Corp. v. United States, 157 F.3d 1060, 1062 (6th Cir. 1998). Furthermore, a Government lien on a taxpayer's property cannot attach until the taxpayer has acquired an interest in the property and will not be "perfected" until that time. See McDermott, 507 U.S. at 452.
The United States concedes that GMAC Mortgage Corporation retains a lien against the Princeton property superior in priority to the IRS liens. See Memorandum of Law in Support of United States Motion for Summary Judgment ¶ 16. This is a necessary position for the United States to take because GMAC Mortgage Corporation is not party to the United States' counterclaim. See 26 U.S.C. § 7403(b) (requiring all persons having an interest in the property to be made a party to the proceedings). In addition, it has been recognized that a purchase money mortgage is entitled to priority over a competing IRS Lien. See First Interstate Bank of Utah, N.A. v. Internal Revenue Service, 930 F.2d 1521, 1523 (10th Cir. 1991) ("[A] security interest based on the extension of purchase money defeats a previously filed federal tax lien.").
The United States, however, does claim priority as to any competing interest of Receiver Findling. While Receiver Findling concedes that the IRS lien is first in time, he argues that applying the law and equitable principles, his "fees and costs, as administrative expenses, take priority over all Lien-holders, " including the United States. See Receiver Findling's Response to Motion for Summary Judgment p. 5 ¶ 1 (emphasis added).
Receiver Findling was appointed by the State court and granted powers pursuant to MICH. COMP. LAWS § 600.5201 et seq. Under the statute, such a proceeding is equitable in nature. See MICH. CoMP. LAWS § 600.5265.
As stated previously, Federal law establishes the priority of liens competing with the IRS. See Rodgers, 461 U.S. at 682 n. 2; Aquilino, 363 U.S. at 5 13-14. Yet Findling's position finds no support in the Federal Tax Lien Act. Section 6323(b) of the Federal Tax Lien Act provides the limited circumstances where a lien will be entitled to priority over a Government lien regardless of when filed. The only subsection applicable in this instance, § 6323(b)(8), allows certain attorney's liens to be entitled to such "superpriority." See 26 U.S.C. § 2363 (b)(8). These liens "should be protected as to their reasonable fees to the extent that the fees are protected under local law." United States v. First Nat'l Bank of Memphis, 458 F.3d 550, 567 (6th Cir. 1972) (detailing history of Federal Tax Lien Act). The state court judge that appointed Receiver Findling ordered "that the Receiver [was] . . . granted all powers and authority conferred by statutes and case law, including but not limited to MCL 600.5201 et seq. . . ." See Amended Order Appointing Receiver, January 25, 2002, p. 2. Section 600.5201 of the Michigan Compiled Laws addresses an assignment for the benefit of creditors. See Revised Judicature Act of 1961, Assignments for the Benefit of Creditors, MICH. COMP. LAWS § 600.5201 et seq. Under the section dealing with priority of claims, an assignee's cost of administration is inferior to an IRS tax lien. See MICH. COMP. LAWS § 600.5251. Funds available for disbursement are to be paid first to cover "[a]ll taxes legally due and owing by the assignor to the United States, state, county or municipality. . ." and second "[t]he cost of administration." MICH. COMP. LAWS § 600.5251(1)(a) (b). So even if Receiver Findling's costs of administration were considered an attorney's lien for the purposes of the Federal Tax Lien Act, that lien would not be entitled to priority over the IRS liens.
This "superpriority" category includes real property tax and special assessment liens. See 26 U.S.C. § 6323 (b)(6). The nature of the alleged State of Michigan tax lien, however, has not been presented to the Court, and the State of Michigan has not submitted any briefs. Whether any Michigan tax liens would qualify for "superpriority" status under § 6323(b)(6) cannot be determined.
In addition, Findling relies upon a series of cases decided prior to the enactment of the Federal Tax Lien Act, except for Meyerson v. Council Bluffs Sav. Bank, 824 F. Supp. 173 (S.D. Iowa 1991). His reliance on Meyerson, however, is misplaced. In Meyerson, the applicable Iowa statute required court costs and administrative costs to be paid prior to other debts and taxes, and the United States had agreed to be bound by that order of priorities. See Meyerson, 824 F. Supp. at 175-76 (citing IOWA CODE § 63 3.425). The applicable Michigan statute, however, as previously discussed, requires taxes to be paid prior to administrative costs. See MICH. COMP. LAWS § 600.5251(1)(a) (b). Meyerson, therefore, provides Findling with no relief.
The state court judge appointed Receiver Findling to enforce a judgment of divorce entered on December 14, 2001. In doing so, this Court agrees that the state court "pledged its faith that all of the authorized obligations of the receivership shall be paid or at least secured by proper liens upon the property in its custody." Gardner v. Grand Beach Co., 48 F.2d 491, 492 (6th Cir. 1931). The statute under which Findling derives his powers, however, provides that this "lien" shall be inferior to the IRS lien. See MICH. COMP. LAWS § 600.5251(1)(a) (b).
Accordingly, since Michigan law requires taxes be paid prior to administrative costs, and since Receiver Findling's position fails to find support in the FTLA, this Court sees no reason to improve the Receiver's position by virtue of being removed to this Court. Accordingly, the Court finds that the relative priorities of the competing interests to any proceeds from a decree of sale fall in the following order: (1) GMAC Mortgage Corporation; (2) IRS liens filed against Lorenzo and Ann Marie prior to the Judgment of Divorce; and (3) Receiver's administrative costs. This Court makes no determination as to the relative priority of interests other than GMAC, the IRS, or Receiver Findling.
V. CONCLUSION
Accordingly, for the reasons set forth above, the Court finds that IRS tax liens properly attached to the property described as 16140-42 Princeton, Detroit, Wayne County, Michigan, and that sale of said property should be allowed, with proceeds of such sale to be held in escrow with the Court pending a determination of the Third Party Complaint.
Therefore, Third Party Defendant United States's Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART. To the extent the United States request foreclosure on the Princeton property, its motion is GRANTED and the United States's liens are entitled to priority over Receiver Findling's interest in the property. To the extent the United States requests distribution of the proceeds prior to a final determination on the merits of the Third Party Complaint its motion is DENTED.
IT IS SO ORDERED.