Brown v. United States

• Decision Date: 12 September 1980
• Docket Number: Civ. No. 80-1683,80-2144.
• Citation: 496 F. Supp. 903
• Parties: Julia A. BROWN, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of New Jersey

496 F. Supp. 903

Julia A. BROWN, Plaintiff, v. UNITED STATES of America, Defendant.

Civ. Nos. 80-1683, 80-2144.

United States District Court, D. New Jersey.

September 12, 1980.

Juan J. Ryan, New Providence, N. J., for plaintiff.

William W. Robertson, Acting U.S. Atty. by Judy Sello, Asst. U.S. Atty., Newark, N. J. and M. Carr Ferguson, Asst. Atty. Gen. by D. Patrick Mullarkey and Allen R. Mass, Attys., Tax Division, Washington, D. C., for defendant.

OPINION

BIUNNO, District Judge.

Plaintiff Julia Brown has filed two suits against the United States, and both are before the court on motions by the United States to dismiss under F.R.Civ.P. 12(b).

The first suit was filed in Superior Court of New Jersey under 28 U.S.C. § 2410, a statute which authorizes the United States to be named a party in any civil action or suit in any district court, or in any State court having jurisdiction of the subject matter, where the suit is of specified kinds.¹ That suit evidently was begun as a summary action, N.J. Court Rule R.4:67, as the papers indicate the procedure on complaint and order to show cause with direction to answer (in lieu of summons). The order to show cause included temporary restraints and set a date for hearing why a preliminary injunction should not issue. Before the return date, the case was removed here by the United States under 28 U.S.C. § 1441 or § 1444. That case is Civ. No. 80-1683.

The second case was filed here, Civ. No. 80-2144, and is filed under 28 U.S.C. § 2409a. (1972).

In both cases, the United States has moved to dismiss under Rule 12(b). The theory of the motions is that the suits, if authorized at all, are permitted only under 28 U.S.C. § 2409a, paragraph (f) of which contains a 12-year statute of limitations, which the United States says has expired. There does not appear to be any statute of limitations for a suit under 28 U.S.C. § 2410. If the statute of limitations applies, the argument is that consent to suit by waiver of sovereign immunity does not exist, and so there is no subject-matter jurisdiction.

Both motions involve matters of fact outside the pleadings, and so must be treated as motions for summary judgment, F.R. Civ.P. 12, and see DeTore v. Local 245, etc., 615 F.2d 980 (CA 3, 1980).

The same facts underlie both cases, and the background, to the extent so far indicated by the present record, shows the following history.

1. A quitclaim deed dated February 28, 1957 from the United States (Public Housing Administration) purported to convey Lot 21 on a subdivision map of Victory Gardens, Morris County, N.J., to Alfred L. Buono, Alfred E. Buono and John L. Buono for a consideration of $5,000; Book F-63 of Deeds, p. 286.²

2. From January 23, 1952 to July 7, 1959, five federal tax liens were filed in the Morris County Clerk's Office, three in respect to "Alfred M. Buono," one against "Alfred L. Buono", and one against "Alfred Buono". Index to Federal Liens, p. 103. See 26 U.S.C. § 6321, and NJSA 46:16-13.³

3. A quitclaim deed dated June 10, 1961, from the United States (District Director of Internal Revenue) purported to convey Lot 21, Victory Gardens, to the United States recorded in Deed Book 1806, page 976.

4. On September 23 and October 13, 1965, five releases of federal tax lien were filed in the Morris County Clerk's Office in respect to "Alfred M. Buono" (3), "Alfred L. Buono" (1) and "Alfred Buono" (1). Index to Federal Liens, p. 103.

5. A bargain and sale deed dated February 18, 1966, from Alfred L. Buono (unmarried), Alfred E. Buono and his wife Patricia, and John L. Buono and his wife Rose, purported to convey Lot 21, Victory Gardens, to the plaintiff, Julia A. Brown (single). Deed Book 1976, p. 867. A purchase money mortgage to Wyckoff Savings & Loan Ass'n, for $9,500, was simultaneously recorded, Mortgage Book 1137, p. 207.

6. In 1978, Brown was notified by I.R.S. of its claim under the 1961 deed. Discussions are said to have ensued without result and a notice of proposed public sale by the United States triggered the Superior Court suit removed here as Civ. No. 80-1683, and the later one filed here as Civ. No. 80-2144.

The source of the difficulty is that the quitclaim deed from the United States to the United States, while recorded, was not indexed to reflect the name of the taxpayer, Buono, as grantor of the subject property. Evidently, after constructing the retrospective chain of title, the adverse work disclosed the five federal tax liens and their releases, but did not disclose the tax sale deed. For a brief description of this title search process, see Trend Mills v. Socher, 4 B.R. 465 (D.N.J., 1980).

From the papers before the court at this early stage, it appears that each of the three Buono grantees to the 1957 deed from the United States acquired a one-third undivided interest as a tenant-in-common. If the tax lien recorded by IRS, and the later 1961 deed to the United States affected the interest of one of these grantees (a point not entirely clear at this stage because two of the grantees are named "Alfred", and because none has the middle initial "M"), then the interest of the United States, at most, involves some kind of claim to a one-third undivided share.

Whether the 1961 deed to the United States conveyed ownership, or amounted to a mortgage, is also an open question.⁴ The record of seizure and sale required to be kept by the Secretary for each internal revenue district, 26 U.S.C. § 6340, copy of which has been supplied by the United States, shows that the sale was to satisfy assessments totalling $936.84, plus advertising costs of $7.02 or $943.86 in all. The date of sale was July 17, 1959, a bit more than 2 years after the property had been sold by the United States for $5,000., and the bid by the United States was for $100., leaving $92.98 as the net proceeds after advertising expense for credit to the assessment.⁵

Under these conditions, it is possible that the deed should be treated as being in the nature of a mortgage, and if that be so, then the suit which is now Civ. No. 80-1683 is one within 28 U.S.C. § 2410 and no statute of limitations seems to apply. See, also, Hadfield v. Hadfield, 128 N.J.Eq. 510, 17 A.2d 169 (E & A 1940), holding that a mortgage recorded as a deed does not import constructive notice. See, also, Dodge v. Jordan, supra; Scott v. Stewart, 1 N.J. 60, 61 A.2d 765 (1948).

On the other hand, if the claim of the United States be a claim of ownership to a one-third undivided interest, and if the 12 year limitation of 28 U.S.C. § 2409a(f) applies, it is still an open question of fact when that period began to run.

The District record of seizure and sale is certified by the collection officer and the District Director on July 20, 1959. The deed to the United States is dated July 11, 1961, and nothing on that sheet suggests that the taxpayer was given any kind of notice that the deed had issued, or should have known that the deed had issued.

The filing of releases of federal lien in 1965 implies some kind of satisfaction of the assessments other than by the sale for a nominal $100. These facts will need to be developed.

By New Jersey law, there can be no question that once a deed or other instrument is "lodged for record", there is imputed or constructive notice to all who later acquire interests, even though the deed be improperly indexed, or not indexed at all NJSA 46:21-1. See Schwartz v. Gurnwald, 174 N.J.Super. 164 (Ch.1980), at p. 171, 415 A.2d 1203, where the major precedents are cited.

But the question on statute of limitations may not turn on constructive notice under NJSA 46:21-1. It more likely will turn on the language and meaning of 28 U.S.C. § 2409a(f). That language seems to contemplate not "constructive notice", but "discovery". The time runs from the date on which a plaintiff or his predecessors in interest "knew or should have known of the claim of the United States." So far as plaintiff Brown is concerned, the indication is that she first "knew" of the claim in 1978. On the present record, it cannot be said that there is no genuine issue that she "knew or should have known" of the 1961 deed, recorded but not indexed to one of her grantors when she took record title in 1966. The 1965 releases of the earlier federal tax liens point the other way.

As to the predecessors in title, it may be that the United States will be able to show knowledge of one of them, the taxpayer, that tax assessments had been made, and that personal service was made of the notice of seizure and notice of sale, 26 U.S.C. § 6335(a) and (b), but it may or may not be able to show that he knew or should have known of the 1961 deed to the United States issued two years after the sale.

If the property consisting of Lot 21, Victory Gardens, was not divisible, so as to require the whole to be sold, a question which none of the cases deal with will be whether the other tenants in common ought to have been given notice, see 26 U.S.C. § 6335(c).

In this connection, the "claim" of the United States which must be shown to have been known clearly refers to the claim of title under the 1961 deed, not the underlying claim for taxes supporting the sale. This is clear from the language of 28 USC § 2409a(a), referring to "property in which the United States claims an interest." The claim of interest arises under the 1961 deed.

The legislative history supports this view. As shown by House Report No. 90-1559, 1972 U.S. Code Congressional and Administrative News, p. 4547 et seq., the bill had originally passed the Senate as S-216, and the major objections were to the limitations provisions.

The original draft submitted by the Justice Department would have been prospective only. The language was that the Act would "not apply to any claim or right of action which accrued prior to the date of its enactment." As passed by the Senate, § 2409a(f) would have barred a claim unless action was brought within 6 years after accrual or...