Jackson v. Wellington & Assocs., LLC
| Decision Date | 25 March 2019 |
| Docket Number | 1:16-CV-04101-ELR |
| Citation | 389 F.Supp.3d 1199 |
| Parties | Theodore JACKSON, Fulton County Sheriff, Plaintiff, v. WELLINGTON & ASSOCIATES, LLC, et al., Respondents. |
| Court | U.S. District Court — Northern District of Georgia |
Natalie R. Rowland, The Law Office of Natalie R. Rowland, Charles W. Brown, Beloin & Brown, LLC, Mitchell Philip Watkins, Office of Attorney General, Atlanta, GA, Michael N. Wilcove, Pro Hac Vice, U.S. Department of Justice, Bruce Todd Russell, Michael W. May, Office of the United States Attorney-Tax Division Ben Franklin Station, Washington, DC, for Respondents.
Eleanor L. Ross, United States District Judge Presently before the Court are several matters. The Court's rulings and conclusions are set out below.
This case arises from an interpleader action involving $418,145.57 in excess funds generated from a tax sale of real property located at 270 17th Street, N.W., Unit 4406 in Atlanta, Georgia ("the Subject Property"). As an overview, in 2011, Iphigenia McGrue purchased the Subject Property by Limited Warranty Deed. However, in 2012, the ad valorem taxes were not fully paid. As a result, two (2) Tax Fieri Facias ("Fi. Fas."), or liens, were issued and recorded on the Subject Property, one (1) for the City of Atlanta and one (1) for Fulton County/Georgia. On September 1, 2015, the Fulton County Sheriff conducted a tax sale pursuant to the City of Atlanta Fi. Fa. only ("the Tax Sale"). At the Tax Sale, the Subject Property was purchased for $420,000. The difference between the ad valorem taxes evidenced by the City of Atlanta Fi. Fa. and the amount paid for the Subject Property was $418,145.57. This amount represents the excess funds at issue in this case.
On October 3, 2016, the Fulton County Sheriff filed a Petition for Interpleader to determine how the excess funds of $418,145.57 should be paid. Petition [Doc. 1-1]. Five (5) Parties responded to the Petition: Iphigenia McGrue, Wellington & Associates, LLC, PHH Mortgage Company, the United States Internal Revenue Service; and the Georgia Department of Revenue. This order addresses the priority of the claims to the $418,145.57 in excess funds asserted by these Parties.
The detailed facts are as follows. On November 18, 2011, Iphigenia McGrue acquired the Subject Property by Limited Warranty Deed recorded in Fulton County, Georgia. [Docs. 75-1 at ¶ 6; 78-1 at ¶¶ 1–2; 81-1 at ¶¶ 1–2; 82-1 at ¶¶ 1–2]. The Settlement Statement for the closing reflects that McGrue purchased the Subject Property for $518,700. [Docs. 78-1 at ¶ 4; 81-1 at ¶ 4; 82-1 at ¶ 4]. To finance the purchase, McGrue executed and recorded a first priority security deed in favor of Mortgage Electronic Registration Systems, Inc. ("MERS") as nominee for Equity Loans, LLC, in the principal amount of $324,058 ("the Security Deed"). [Docs. 75-1 at ¶ 7; 78-1 at ¶ 5–6; 81-1 at ¶ 5–6; 82-1 at ¶ 5–6].
In 2012, McGrue transferred title to the Subject Property, by quitclaim deed, to Wellington & Associates, LLC ("Wellington") and recorded the transfer. [Docs. 75-1 at ¶ 9; 78-1 at ¶ 8; 81-1 at ¶ 8; 82-1 at ¶ 8]. The quitclaim deed reflects a date of August 1, 2012, but it was not actually signed by McGrue until December 3, 2012. [Docs. 78-1 at ¶¶ 8–9; 81-1 at ¶ 9; 82-1 at ¶ 9]. Wellington is a Georgia limited liability company with its sole members being McGrue and her son, Shawn Jones. [Docs. 78-1 at ¶ 10; 81-1 at ¶ 10; 82-1 at ¶ 10]. Wellington was formed for the benefit of McGrue's son but conducts no business. [Doc. 75-1 at ¶ 10]. Besides forms filed with the Georgia Secretary of State, Wellington has no other governing documents. [Docs. 78-1 at ¶ 10; 81-1 at ¶ 10; 82-1 at ¶ 10]. Wellington has not paid any federal or state income taxes, though it may have had some "minimal income" in the past. [Docs. 78-1 at ¶ 11; 81-1 at ¶ 11; 82-1 at ¶ 11]. Wellington has never borrowed money, and has no bank accounts, credit or credit history, or credit approvals. [Docs. 78-1 at ¶ 11; 81-1 at ¶ 11; 82-1 at ¶ 11]. McGrue is the only source of funds for Wellington, and she pays the mortgage and expenses associated with the Subject Property. [Doc. 75-1 at ¶ 11].
For the year of 2012, the ad valorem taxes on the Subject Property were not fully paid. [Docs. 78-1 at ¶ 14; 81-1 at ¶ 15; 82-1 at ¶ 14]. As a result, on January 11, 2014, two (2) Tax Fi. Fas. were issued and recorded, one (1) for the City of Atlanta and one (1) for Fulton County/Georgia. [Docs. 78-1 at ¶ 14; 81-1 at ¶ 15; 82-1 at ¶ 14]. Immediately upon recording, these Fi. Fas. were transferred to Investa Services of Ga Christiana Trust as Custodian ("Investa"). [Docs. 78-1 at ¶ 15; 81-1 at ¶ 16; 82-1 at ¶15].
On September 1, 2015, the Fulton County Sheriff conducted a Tax Sale pursuant to the City of Atlanta Fi. Fa. only. [Docs. 75-1 at ¶ 14; 78-1 at ¶ 16; 81-1 at ¶ 17; 82-1 at ¶ 16]. The Subject Property was purchased for $420,000 by Deed Co. LLC, which obtained a tax deed for the Subject Property. [Docs. 75-1 at ¶ 14; 78-1 at ¶ 16; 81-1 at ¶ 17; 82-1 at ¶ 16]. The tax deed was recorded on October 7, 2015. [Docs. 75-1 at ¶ 14; 78-1 at ¶ 16; 81-1 at ¶ 17; 82-1 at ¶ 16]. The difference between the ad valorem taxes evidenced by the City of Atlanta Fi. Fa. and the amount paid by Deed Co. LLC for the tax deed was $418,145.57, representing the excess funds at issue in this case. [Docs. 75-1 at ¶ 16; 78-1 at ¶ 19; 81-1 at ¶ 20; 82-1 at ¶ 19]. At the time of the Tax Sale, PHH Mortgage Corporation was servicing the mortgage loan underlying the Security Deed, and CoreLogic Tax Services, LLC was its tax servicer. [Docs. 78-1 at ¶ 17; 81-1 at ¶ 18; 82-1 at ¶ 17].
Meanwhile, Investa retained the 2012 Fulton County/Georgia Fi. Fa. and did not send it to the Sheriff for a levy or sale. [Docs. 78-1 at ¶ 20; 81-1 at ¶ 21]. Instead, on September 17, 2015, about two (2) weeks after the Tax Sale, Investa as Custodian for GSRAN-Z, LLC ("GSRAN-Z")1 paid $504,000 to Deed Co. LLC for the redemption of the Subject Property in favor of Wellington. [Docs. 78-1 at ¶ 20; 81-1 at ¶ 21]. The Quitclaim Deed of Redemption and Notice of Super Priority Lien referencing this transaction were recorded on October 14, 2015 (the " ‘Super-Priority’ redemption lien"). [Doc. 74-2 at ¶ 28].
On February 5, 2016, MERS as nominee for Equity Loans, LLC assigned the Security Deed to the Subject Property to PHH Mortgage Corporation, recording the transfer. [Docs. 75-1 at ¶ 7; 78-1 at ¶ 21; 81-1 at ¶22; 82-1 at ¶ 5]. On February 15, 2016, PHH caused the tax servicer, CoreLogic Tax Services, LLC, to tender the full $520,043.91 that would have been sufficient to satisfy both the "Super-Priority" redemption lien and the 2012 Fulton County/Georgia Tax Fi. Fa, which at that time were held by GSRAN-Z. [Docs. 78-1 at ¶ 24; 81-1 at ¶ 25]. The same day, GSRAN-Z executed and assigned the "Super-Priority" redemption lien to PHH, which was recorded. [Docs. 78-1 at ¶ 26; 81-1 at ¶ 27]. Also on February 15, 2016, GSRAN-Z, executed and assigned to PHH the 2012 Fulton County/Georgia Fi. Fa. [Docs. 78-1 at ¶ 27; 81-1 at ¶ 28]. By virtue of these three (3) transfers–the (1) assignment of the 2012 Fulton County/Georgia Fi. Fa., the (2) assignment of the "Super-Priority" redemption lien, and the (3) assignment of the Security Deed–PHH makes claims to the $418,145.57 in excess funds.
On November 12, 2013, amidst the above-mentioned transfers regarding the Subject Property, a delegate of the United States Secretary of Treasury recorded a Notice of Federal Tax Lien in Fulton County, Georgia against Iphigenia McGrue. [Docs. 75-1 at ¶ 5; 78-1 at ¶ 13; 81-1 at ¶¶ 13–14; 82-1 at ¶ 13]. The lien was for unpaid federal income taxes for tax years 2010, 2011, and 2012. [Docs. 75-1 at ¶ 5; 78-1 at ¶ 13; 81-1 at ¶¶ 13–14; 82-1 at ¶ 13]. The 2010 tax liability bears a September 5, 2011 date of assessment; the 2011 tax liability bears a May 21, 2012 date of assessment; and the 2012 tax liability bears a June 17, 2013 date of assessment. [Doc. 75-1 at ¶ 2–4]. McGrue currently owes the United States at least $89,818.74 in unpaid federal income taxes for the 2000, 2011, and 2012 tax years. [Doc. 75-1 at ¶ 1].
Similarly, McGrue owes the State of Georgia approximately $197,711.93 in state income taxes for tax years 2009 through 2014. [Doc. 74-2 at ¶ 1]. During two (2) of these years, McGrue filed tax returns under two (2) different social security numbers, one ending in -1746 and the other ending in -0040. [Doc. 74-2 at ¶¶ 4, 11–12]. The tax years and dates of assessments for the two social security numbers are as follows:
Tax Date of Assessment for Social Date of Assessment for Social
Year Security Number -1746 Security Number -0040
2009 August 31, 2012 & October 21, N/A
2016
2010 August 31, 2012 & October 21, N/A
2016
2011 October 21, 2016 October 21, 2016
2012 October 21, 2016 October 21, 2016
2013 N/A October 21, 2016
[See generally id. ] As a result of McGrue's unpaid taxes, the Georgia Department of Revenue recorded three (3) state tax executions in Fulton County, Georgia against McGrue. [See generally id. ] The first occurred on November 1, 2012, was under McGrue's social security number ending in -1746, and was for the 2009 and 2010 tax years. [Id. at ¶ 4]. The second occurred on October 24, 2016, was under McGrue's social security number ending in -1746, and was for tax years 2009 thru 2012.2 [Id. at ¶ 9]. The third occurred on October 24, 2016, was under McGrue's social security number ending in -0040, and was for the 2011, 2012, and 2013 tax years. [Id. at ¶ 16]. Due to McGrue's unpaid taxes, the United States IRS and the Georgia Department of Revenue (collectively "the Government Respo...
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