Hensley v. Harbin, 98-6369
| Decision Date | 17 September 1999 |
| Docket Number | No. 98-6369,98-6369 |
| Citation | 196 F.3d 613 |
| Parties | (6th Cir. 1999) Doris W. Hensley, Administratrix of the Estate of Dion Hensley, Charles Hensley, and Mona Hensley, Plaintiffs-Appellants, v. Terry Harbin, Barclay's American Mortgage Corporation, Midland Mortgage Company, Jim L. Harbin and Faye Harbin, and the United States of America, Defendants-Appellees. Submitted: |
| Court | U.S. Court of Appeals — Sixth Circuit |
Appeal from the United States District Court for the Eastern District of Tennessee at Knoxville, No. 97-00096--R. Leon Jordan, District Judge.
J. Mikel Dixon, Knoxville, Tennessee, for Appellants.
Wade M.Boswell, Knoxville, TN, for Terry Harbin, Barclay's American Mortgage Corp., Jim L. Harbin and Fay Harbin.
W. Tyler Chastain, Bernstein, Stair & McAdams, Knoxville, TN, for Midland Mortgage Co.
David English Carmack, Robert L. Baker, U.S. DEPARTMENT OF JUSTICE, APPELLATE SECTION TAX DIVISION, Washington, D.C., for United States.
Before: BATCHELDER and GILMAN, Circuit Judges; HOOD, District Judge*.
This appeal involves the sole issue of when a judgment lien is perfected under federal law. Two of Dion Hensley's relatives and the administrator of his estate (collectively "the Hensleys") won a $780,000 judgment in state court against Terry Harbin in 1988, and attached his property to satisfy the award. On appeal, the judgment was reversed and remanded as to the issue of damages only. The parties eventually reached a settlement in 1992, and a new judgment was entered for $400,000. In 1990, however, after the monetary award in the first judgment was set aside but before the settlement and entry of the final judgment, the United States filed a $19,805.38 tax lien against Harbin's property. In the present action, the Hensleys bring suit against Harbin and the United States, as well as several of Harbin's other creditors, to establish the priority of the Hensleys' judgment lien and to force the foreclosure of Harbin's property.
The question presented on appeal is whether the Hensleys' judgment lien became perfected when the lien was first entered in 1988 or only when its amount was ultimately fixed in 1992. For the reasons set forth below, we AFFIRM the judgment of the district court that the Hensleys' lien was not perfected until 1992.
The facts in this appeal are undisputed. Harbin owns a piece of real property located at 7325 Oxmore Road, in Knox County, Tennessee. The property is subject to several liens. The first such lien is a deed of trust, issued on June 11, 1985, which was secured by a first mortgage in favor of Barclay's American Mortgage Corporation ("Barclay's"). Barclay's has since transferred this lien to Midland Mortgage Company ("Midland").
On April 8, 1988, the Hensleys won a $780,000 civil judgment against Harbin for the wrongful death of Dion Hensley. The Hensleys filed the judgment as a lien in the Register's Office of Knox County, Tennessee on April 19, 1988. Harbin appealed. On July 26, 1989, the Tennessee Court of Appeals reversed and remanded solely for the purpose of redetermining the amount of damages. Approximately three years later, the parties agreed to settle the case for $400,000, and the trial court entered judgment in that amount on June 3, 1992. The Hensleys filed this new judgment as a lien on June 10, 1992.
In the time between the entry of the first and second judgment liens, two additional liens were filed against the property. The first was filed on July 14, 1988, evidencing a second mortgage in the amount of $12,500 that Harbin had executed in favor of his parents. The second was filed on December 31, 1990, based on an assessment by the Internal Revenue Service of $19,805.38 in unpaid taxes owed by Harbin.
The Hensleys brought this action against Harbin and his other creditors in the Chancery Court of Tennessee at Knoxville on January 9, 1997 to enforce the Hensleys' judgment lien. They sought a declaration of the priority of their lien over all liens other than the 1985 mortgage, and requested that the court authorize the foreclosure of Harbin's property. Midland was subsequently joined as a defendant when the Hensleys discovered that it was the current holder of the mortgage once held by Barclay's. The United States removed the action to federal court pursuant to 28 U.S.C. §§1444, 1446, and 2410.
The Hensleys then moved for judgment on the pleadings. As part of its response, the United States filed a motion for partial summary judgment, requesting that its lien be declared superior to that of the Hensleys. Midland filed an unopposed motion for partial judgment on the pleadings, seeking a declaration that its 1985 mortgage lien was superior to all of the liens involved. On September 9, 1998, the district court granted the motions of Midland and the United States and denied the Hensleys' motion, holding that the Hensleys' judgment lien was not perfected until after the federal tax lien was recorded. Having resolved the priority of the federal lien, the court remanded the issue of the remaining lien priorities to the state chancery court, pursuant to 28 U.S.C. §1441(c). The Hensleys filed a timely appeal on October 9, 1998, challenging the award of partial summary judgment in favor of the United States.
We review de novo the district court's grant of summary judgment. See, e.g., Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir. 1997). Summary judgment is appropriate when there are no issues of material fact in dispute and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). In deciding a motion for summary judgment, the court must view the evidence and draw all reasonable inferences in favor of the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The judge is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). A genuine issue for trial exists when there is sufficient "evidence on which the jury could reasonably find for the plaintiff." Id. at 252.
Where a federal tax lien is involved, the relative priority of competing liens is governed by federal law. See United States v. Pioneer Am. Ins. Co., 374 U.S. 84, 88 (1963) (). In adjudicating the priority of such competing liens, federal common law prescribes that "the first in time is the first in right." United States v. City of New Britain, 347 U.S. 81, 85 (1954). "First" is defined as "perfected in the sense that there is nothing more to be done to have a choate lien -- when the identity of the lienor, the property subject to the lien, and the amount of the lien are established." Id. at 84; see also Treas. Reg. §301.6323(h)-1(g) (1976).
The facts of United States v. Dishman Independent Oil, Inc., 46 F.3d 523 (6th Cir. 1995), are comparable to those of the instant case. Dishman brought suit in state court against several debtors who allegedly owed Dishman money from a sale of petroleum products. While pursuing the suit, Dishman secured a prejudgment attachment lien against the debtors' property. Before the case was resolved, however, the IRS assessed the debtors for unpaid taxes and filed a tax lien against the same property. Dishman subsequently prevailed in its case, and was awarded a judgment. The IRS intervened in the case to establish the priority of its lien. On appeal, this court held for the IRS, reasoning that "at the time the federal tax lien was filed, both the property subject to Dishman's attachment lien and its amount remained uncertain." Id. at 527. The court based its opinion on the parallel case of United States v. Acri, 348 U.S. 211 (1955), in which the Supreme Court gave priority to a federal tax lien recorded...
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