Rodriguez v. Escambron Development Corp., 83-1439

• Citation: 740 F.2d 92
• Decision Date: 01 August 1984
• Docket Number: No. 83-1439,83-1439
• Parties: 84-2 USTC P 9698 Maria Elisa RODRIGUEZ, et al., Petitioners, v. ESCAMBRON DEVELOPMENT CORP., et al., Respondents.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 92

740 F.2d 92

84-2 USTC P 9698

Maria Elisa RODRIGUEZ, et al., Petitioners, v. ESCAMBRON DEVELOPMENT CORP., et al., Respondents.

No. 83-1439.

United States Court of Appeals, First Circuit.

Argued Feb. 6, 1984.

Decided Aug. 1, 1984.

David Rive Rivera, Hato Rey, P.R., with whom Calderon, Rosa-Silva & Vargas, Hato Rey, P.R., was on brief, for petitioners.

Carlton D. Powell, Atty., Tax Division, Dept. of Justice, Washington, D.C., with whom Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, Atty., Tax Div., Dept. of Justice, John J. McCarthy, Atty., Tax Division, Dept. of Justice, Washington, D.C., and Daniel F. Lopez-Romo, U.S. Atty., Hato Rey, P.R., were on brief, for the United States of America.

Before CAMPBELL, Chief Judge, WISDOM, ^* Senior Circuit Judge, and BREYER, Circuit Judge.

WISDOM, Senior Circuit Judge.

The question this appeal presents is whether a title, acquired by acquisitive prescription (adverse possession), is subject to a federal tax lien against the prior owners of the land. The district court held that under the law of Puerto Rico acquisitive prescription will not extinguish an existing nonpossessory interest in land; alternatively, the court held that such an extinguishment would conflict with federal law. The court concluded that the possessors' rights are subject to the tax lien. Rodriguez v. Escambron Development Corp., 556 F.Supp. 703 (D.P.R.1983). We affirm. The effect and extinguishment of a federal tax lien are matters of federal law. Under federal law, a federal tax lien continues to encumber land, even after the legal transfer of the land.

I.

In the words of the district court, this case began as "a relatively simple and brief" action to quiet title. The plaintiffs are the family of the late Jose Rivera Mulet. Rivera Mulet was the "Mayordomo", or manager, of a 42-cuerda ¹ farm in Bayamon owned by Felix Benitez Rexach and his wife Lucienne d'Hotelle de Benitez Rexach. The plaintiffs allege that in 1945 Benitez Rexach "gave" Rivera Mulet 9.897 cuerdas of the farm to live on, and they have lived on that land in "uninterrupted adverse possession" ever since. Benitez Rexach was a well-known engineer and builder. He and his wife became embroiled in prolonged federal income tax litigation that eventually led to findings of deficiencies against them amounting to several million dollars. ² The United States assessed the deficiency at issue here in 1963. This assessment created a lien against the property of the taxpayers. ³ In 1964 the United States filed two civil actions for the purpose of foreclosing on the tax liens against various properties, including the Bayamon farm, belonging to Benitez Rexach, his wife, and various companies owned by them. The government also filed a notice of lis pendens. The court entered judgment for the United States in 1975 and 1977, and ordered foreclosure on the liens in March 1978.

In July 1978, the plaintiffs filed a complaint in the Superior Court of Puerto Rico against Escambron Development, one of Benitez Rexach's companies, to quiet title to the 9.897 cuerdas on the ground of usucapion (acquisitive prescription) by possession for more than thirty years. ⁴ The United States intervened, asserting the tax liens, and removed the case to federal court. The plaintiffs and the United States both moved for summary judgment. The court denied the motions. The court held that the plaintiffs had not proved the elements of their claim of usucapion and that any rights the plaintiffs did establish would be subject to the federal tax liens. The plaintiffs then asked the district court to certify an interlocutory appeal under 28 U.S.C. Sec. 1292(b) (1982). The court certified the question as one of controlling importance, and this Court granted permission to appeal. We assume, for the purposes of deciding the present appeal, that the plaintiffs have met the Civil Code's requirements for acquisitive prescription.

II.

The plaintiffs contend that, under the civil law of Puerto Rico, when they completed the thirty-year prescriptive period they acquired title to the land free of all encumbrances. They base this argument on the retroactive effect of completed prescription. As Planiol, one of the leading French commentators, explains this principle, "When prescription is completed, the possessor is deemed to be owner, not merely from the last day of the delay, but retroactively from the moment when the prescription began to run." M. Planiol & G. Ripert, Treatise on the Civil Law, vol 1, pt. 2, n. 2708, at 599 (La. State Law Inst. trans. 1959). Planiol states that the consequences of the retroactivity doctrine are: to consolidate title in the possessor; to secure the possessor's right to fruits collected during the prescriptive period; to vest ownership in a possessor who marries during the prescriptive period, rather than in the marital community; and to validate interests in the land granted by the possessor during the prescriptive period. Id. at 599-600. In discussing this last effect, Planiol writes,

"Third parties who had acquired from the possessor real rights upon the immovable (servitudes, mortgages, etc.) during the duration of prescription, find them retroactively consolidated. It is just as if they had been granted by the true owner...."

Id. at 600. Planiol does not discuss what happens to real rights created by or against the true owner during the prescriptive period. The plaintiffs interpret the principle of retroactivity to mean that those rights are eliminated. They argue that when the thirty years prescription was completed in 1975, the law made them owners of the farm after 1945, when they first took possession. Accordingly, they argue, the government's tax lien was ineffective because in 1963, when the lien arose, the plaintiffs "already" owned the farm.

Since 1979 the Mortgage Law of Puerto Rico has explicitly provided:

"Real rights limiting ownership which do not imply possession, acquired on someone else's right by a third party ... shall not be affected by the out-of-registry usucapion of the right on which they exist."

30 L.P.R.A. Sec. 2357 (Supp.1982). Plaintiffs admit that this statute would prevent prescription of the lien now, but argue that the adoption of this statute in 1979 is strong evidence that, before 1979, nonpossessory liens were subject to usucapion. The district court rejected this argument after reviewing the opinions of a number of Spanish commentators, including Castan Tobenas, Diez-Picazo, Roca Sastre, Puig Brutau, and Scaevola, all of whom agree that a nonpossessory real right is not susceptible to extinguishment by acquisitive prescription. 556 F.Supp. at 707-09. On appeal the plaintiffs contend that these commentators based their opinions on a 1944 amendment to the Spanish Civil Code that is substantially equivalent to the 1979 amendment to the Puerto Rico Mortgage Law quoted above. The plaintiffs therefore argue that the district court effectively based its decision on the present law of Puerto Rico rather than that in effect in 1975. They submit that the law of Puerto Rico before 1979, and of Spain before 1944, gave an adverse possessor ownership free of any interests granted by or asserted against the prior owner.

There is some authority to support the plaintiffs' position. The plaintiffs cite the opinion of Guaroa Velazquez, a noted professor of law at the University of Puerto Rico, who wrote in 1937:

"Important point. The title created by prescription is retroactive to the day possession began. The possessor who has taken by use [usucapido] can, therefore, invoke his right against the third party beginning that day. If, therefore, during that time, a creditor of the true owner acquired against the latter a mortgage or a privilege and filed them, this right will not be against the possessor who has taken by use. On the other hand, the real rights granted by the simple possessor will be consolidated by virtue of usucapion."

Velazquez, Los Derechos Reales Principales 326 (1937) (our translation). Acquisitive prescription represents in part a civil law policy in favor of simple titles. As the court stated in Union Producing Co. v. Parkes, 40 F.Supp. 163 (W.D.La.1940):

"In order to insure simple and unentailed or uninvolved titles to real estate, it is the policy of [the civil] law, that there should be no encumbrances which shall prevent the running of the two major periods of 10 and 30 years over which a complete and indefeasible title to all of the elements of ownership in land may be acquired....

" 'Our laws are marked by the simplicity of the titles by which property is held, and are utterly opposed to the suspended and uncertain ownership incident to substitutions, or the system of entails of the Common law. * * * ' Succession of McCan, 48 La.Ann. 145, at page 158, 19 So. 220, at page 221 [ (1895) ]."

40 F.Supp. at 166. It would be possible to extract from these comments a civil law policy to give the possessor who has had the benefit of prescription a title free of encumbrances for which he is not responsible.

On the other hand, that the Spanish and Puerto Rican codes were amended explicitly to prevent prescription of non-possessory liens is by no means conclusive evidence that such liens were previously subject to prescription. Even before the 1979 amendments, article 35 of the Puerto Rico Mortgage Law of 1893 provided:

"Prescription which does not require a good title (justo titulo) shall not prejudice a third party if the possession on which it is to be based does not appear of record.

"Nor shall prescription which requires a good title prejudice a third person if such title is not recorded.

"In either case the time of the prescription shall begin to run from the date of the record.

"With regard to the legal owner of the real property or interest which is in the process of prescribing, the title shall be determined and the time computed in accordance with the provisions of the...