Bigheart Pipeline Corp. v. United States
| Decision Date | 18 October 1984 |
| Docket Number | No. 83-C-891-B.,83-C-891-B. |
| Citation | 600 F. Supp. 50 |
| Parties | BIGHEART PIPELINE CORPORATION, an Oklahoma corporation, Plaintiff, v. The UNITED STATES of America (Internal Revenue Service); Homestead Oil Company, Inc., His Industries, Inc.; Duncan Petroleum, Core Energy, Inc.; Delores Brightwell; Herman Wilson; and Charles Duggar, Defendants. |
| Court | U.S. District Court — Northern District of Oklahoma |
R. Louis Reynolds, Lynwood A. Wells, Prichard, Norman & Wohlgemuth, Tulsa, Okl., for plaintiff.
Larry B. Bach, Forney, Tex., for Homestead Oil Co., Inc.
Robert T. Mowrey, Benny D. Campbell, Lisa B. Graivier, Locke, Purnell, Boren, Laney & Neely, Dallas, Tex., Stephen H. Brammell, Tony M. Davis, Conner & Winters, Tulsa, Okl., for Core Energy.
Layn Phillips, U.S. Atty., Tulsa, Okl., Cary L. Jennings, Atty., Tax Div., Dept. of Justice, Dallas, Tex., for U.S.A.
Jeffrey N. Sheehan, Forney, Tex., for Duncan Petroleum, Core Energy, Brightwell, Wilson and Duggar.
This matter comes before the Court on cross motions for summary judgment filed by defendant United States of America and defendant Core Energy, Inc. A hearing on the motions has been held. For the reasons set forth below, the motion for summary judgment of Core Energy, Inc., is overruled and the motion for summary judgment of the United States of America is sustained.
This is an interpleader action filed by Bigheart Pipe Line Corporation, the purchaser of oil runs from the "Hammer K" lease in Mayes County, Oklahoma, to determine entitlement to proceeds from the oil purchases. Defendants all claim some right to proceeds from the sale of oil to Bigheart.
The lawsuit has its origin in the failure of Homestead Oil Co. to pay certain federal employment taxes owed for its taxable quarters in 1981, 1982, and 1983. These unpaid taxes were assessed against Homestead by the Internal Revenue Service on the following dates and in the following amounts:
Date of Principal
Assessment Tax Period Type of Tax Amount
11/1/82 4th Qtr/1981 FICA/Withholding $62,368.69
11/1/82 1st Qtr/1982 FICA/Withholding 39,119.34
11/1/82 2nd Qtr/1982 FICA/Withholding 43,845.81
11/22/82 3rd Qtr/1982 FICA/Withholding 20,648.49
2/21/83 4th Qtr/1982 FICA/Withholding 31,416.74
2/21/83 4th Qtr/1982 FUTA 6,169.13
7/4/83 1st Qtr/1983 FICA/Withholding 10,138.71
Homestead is currently indebted to the United States for the total sum of $247,532.37, plus statutory additions as allowed by law.
On November 17, 1982, Homestead assigned to Core Energy a 78.125 percent interest in an undeveloped oil and gas lease in Mayes County, named the "Hammer K" lease. On November 29, 1982 and December 27, 1982, the United States filed of record Notices of Federal Tax Lien against all property or rights to property of Homestead with the County Clerk, Mayes County, Oklahoma, in connection with the federal tax liabilities of Homestead. On January 20, 1983 — after the filing of the Notice of Federal Tax Lien — the assignment from Homestead to Core Energy was filed of record with the County Clerk, Mayes County, Oklahoma.
Core Energy commenced drilling on the property on May 1, 1983. Production of oil from the lease began in June 1983. All crude oil produced on the lease was sold to Bigheart Pipe Line Corporation from June through November 1983.
On August 31, 1983, the Internal Revenue Service served a Notice of Levy upon Bigheart with respect to funds in its possession covering the purchase price of the crude oil sold to it by Core Energy. On October 21, 1983, Bigheart filed this interpleader action, depositing $27,271.59 with the Clerk of the Court, and requesting a Court determination of proper distribution of the funds. Defendants Core Energy and the United States of America have filed cross motions for summary judgment on the issue of whether the general federal tax lien filed by the Internal Revenue Service attached to the funds paid into the Court.
The Internal Revenue Code, 26 U.S.C. § 6321, provides:
"If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) 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." (Emphasis added)
The lien arises at the time the tax is assessed, and continues until the liability is satisfied or becomes unenforceable. 26 U.S.C. § 6322.
Under 26 U.S.C. § 6323, the United States, through filing of its tax lien, may obtain priority over other claimants to the same property except for certain protected parties such as purchasers. To qualify as a protected "purchaser" under § 6323, a third party who acquires an interest in property of the taxpayer must be protected against subsequent purchasers without actual notice under local law. § 6323(h)(6). The parties agree that Core Energy, having failed to file its assignment of record until after the United States filed its Notice of Federal Tax Lien, did not qualify as a "purchaser" under § 6323 until after January 20, 1983, the date it filed the assignment of record. Thus, the only question for resolution is whether the tax liens can attach to monies in the Registry of the Court as "property or rights to property" of Homestead under § 6321.
The Government may not take one person's property to satisfy another person's tax obligations, and unless it is established that the taxpayer, at the time the tax lien was filed, was the owner of or had some interest in the property on which the levy is sought to be made, the government cannot enforce the lien against such property. United States v. Kaufman, 267 U.S. 408, 45 S.Ct. 322, 69 L.Ed. 685 (1925); In re Carlson, 580 F.2d 1365, 1369 (10th Cir.1978). The question then becomes whether and to what extent a taxpayer had "property" or "rights to property" to which the lien could attach under § 6321. Aquilino v. United States, 363 U.S. 509, 80 S.Ct. 1277, 4 L.Ed.2d 1365 (1960). In answering this question, courts must look to state law. In re Carlson, supra, 580 F.2d at 1368-69. The tax lien statute creates no property rights, but it does attach consequences, which are federally defined, to rights created under state law. United States v. Durham Lumber Co., 363 U.S. 522, 80 S.Ct. 1282, 4 L.Ed.2d 1371 (1960).
The parties have agreed that under Oklahoma law, an oil and gas lessee has an incorporeal interest known as a profit a prendre. A lease does not vest in the lessee the title to the oil and gas in the land, but is simply a grant of a right to prospect for oil and gas, no title vesting until the oil or gas is reduced to possession by extracting the same from the earth. Kolochny v. Galbreath, 26 Okl. 772, 110 P. 902 (1910); Frank Oil Co. v. Belleview Gas & Oil Co., 29 Okl. 719, 119 P. 260 (1911). Therefore, the parties agree, the right to prospect for oil and gas, as defined by Oklahoma law, is a "contingent interest." The dispute between the parties centers on whether the federal tax lien could attach to a contingent interest.
The Court believes under § 6321 and applicable case law, a federal tax lien clearly may...
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