Fox v. Moultrie

• Decision Date: 15 September 2008
• Docket Number: No. 26546.,26546.
• Citation: 666 S.E.2d 915,379 S.C. 609
• Court: South Carolina Supreme Court
• Parties: Steven K. FOX, Appellant, v. George C. MOULTRIE d/b/a George Moultrie & Associates, Charleston County Business License & User Fee Dept., Commerce Clearing House, Inc., United States Government acting by and through The Internal Revenue Service, State of South Carolina Dept. of Revenue, Charleston County, Charleston County Treasurer, Charleston County Tax Collector, John Doe and Mary Doe, also all other persons Unknown claiming any right, title, estate, interest in or lien upon the real estate described in the Complaint herein, Defendants, of whom State of South Carolina Department of Revenue and Charleston County Business License User Fee Dept., Charleston County, Charleston County Treasurer, Charleston County Tax Collector are Appellants, and George C. Moultrie d/b/a George Moultrie & Associates, Commerce Clearing House, Inc., United States Government acting by and through The Internal Revenue Service, John Doe and Mary Doe, also all other persons unknown claiming any right, title, estate, interest in or lien upon the real estate described in the Complaint herein are Respondents.

666 S.E.2d 915

379 S.C. 609

Steven K. FOX, Appellant, v. George C. MOULTRIE d/b/a George Moultrie & Associates, Charleston County Business License & User Fee Dept., Commerce Clearing House, Inc., United States Government acting by and through The Internal Revenue Service, State of South Carolina Dept. of Revenue, Charleston County, Charleston County Treasurer, Charleston County Tax Collector, John Doe and Mary Doe, also all other persons Unknown claiming any right, title, estate, interest in or lien upon the real estate described in the Complaint herein, Defendants of whom State of South Carolina Department of Revenue and Charleston County Business License User Fee Dept., Charleston County, Charleston County Treasurer, Charleston County Tax Collector are Appellants, and George C. Moultrie d/b/a George Moultrie & Associates, Commerce Clearing House, Inc., United States Government acting by and through The Internal Revenue Service, John Doe and Mary Doe, also all other persons unknown claiming any right, title, estate, interest in or lien upon the real estate described in the Complaint herein are Respondents.

No. 26546.

Supreme Court of South Carolina.

Heard May 8, 2008.

Decided September 15, 2008.

Patricia M. Ferguson, of Myrtle Beach, for Appellant Fox.

Joe S. Dusenbury, Jr., of Columbia, for Appellant South Carolina Department of Revenue.

Joseph Dawson, III; Bernard E. Ferrara, Jr.; and Bernice M. Jenkins, all of North Charleston, for Appellants.

Kevin F. McDonald, of Columbia; Lee Ellis Berlinsky, of Charleston; and Randolph L. Hutter, of Washington, for Respondent Internal Revenue Service.

Justice BEATTY:

Steven K. Fox, various Charleston County offices, and the Department of Revenue appeal the master-in-equity's finding that a person buying a property in a county delinquent property tax sale purchased the property subject to outstanding Internal Revenue Service (IRS) liens. We affirm.

FACTS

George C. Moultrie, d/b/a George Moultrie & Associates, owned property on Rivers Avenue in Charleston County. Moultrie failed to pay federal income taxes, and the IRS filed a notice of a tax lien on his property in the amount of $89,789.10 on September 2, 1997, in the R.M.C. office for Charleston County. Moultrie died in 2001, and the IRS filed its claim with the probate court for Charleston County on July 2, 2002. Moultrie's state ad valorem taxes on the property for the tax year 2001 were not paid. Charleston County issued a tax execution for the 2001 taxes and directed the Charleston County Sheriff to levy by distress and sell the property at a non-judicial tax sale to satisfy the delinquent property taxes. Charleston County followed the statutory notice provisions and properly conducted a tax sale of the property on December 2, 2002. Steven Fox was the successful bidder and paid $14,000 for the property. It is undisputed that the IRS was not given notice of the tax sale. Neither Moultrie's estate nor the IRS attempted to redeem the property before the end of the statutory redemption period on December 2, 2003.

Fox was given a deed to the property on March 31, 2004. He initiated a declaratory judgment action on June 8, 2005, seeking to quiet title pursuant to the two-year statute of limitations. The named parties included Moultrie's estate, various Charleston County offices (collectively, the "County"), including the treasurer and tax collector, the United States Government acting through the IRS, the South Carolina Department of Revenue, and any other unknown heirs. The parties consented to having the case referred to a master-in-equity.

Although the County, the Department of Revenue, and the estate did not contest the tax sale, the IRS appeared at the February 15, 2006 hearing to contest the sale. The IRS argued that because they were not given notice of the tax sale pursuant to federal law and there was no application to discharge the tax lien, Fox purchased the property subject to the federal tax lien. At the time of the hearing on the declaratory judgment action, the parties estimated the outstanding federal lien, plus interest, had grown to $145,000.

After hearing arguments from the parties and reviewing their submitted briefs, the master-in-equity ruled the property was purchased subject to the IRS tax lien. The master noted that while the County followed all the state statutory notice procedures for performing a tax sale and the state statute did not require notice to be given to the federal government, federal law holds that federal tax liens survive a sale of the property where the federal government is not given notice of the sale. Fox, the County, and the Department of Revenue (collectively, "Appellants"), all appealed, and this Court granted the Court of Appeals' motion to certify the case.

SCOPE OF REVIEW

An action to quiet title is one in equity. Van Every v. Chinquapin Hollow, Inc., 265 S.C. 474, 477, 219 S.E.2d 909, 910 (1975). In an action in equity, tried with reference to a master, this Court reviews the evidence and determines the facts according to its own view of the preponderance of the evidence, though it is not required to disregard the findings of the master. Friarsgate, Inc. v. First Fed. Sav. & Loan Ass'n, 317 S.C. 452, 456, 454 S.E.2d 901, 904 (Ct.App. 1995).

DISCUSSION

Appellants all argue the master erred in interpreting federal law by holding it merely subordinated the federal lien. They argue the master erred by not recognizing the law provides that the federal lien is not valid when there is a local property tax lien on the property which is entitled to priority. Thus, they assert, since the lien was not valid, the failure to follow the federal notice provisions did not make the federal lien survive the sale.

In interpreting these statutes, we must look to the plain meaning. "If the statute is clear and unambiguous `that is the end of the matter, for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.' ... The traditional deference courts pay to agency interpretation is not to be applied to alter the clearly expressed intent of Congress." Bd. of Governors, FRS v. Dimension Fin. Corp., 474 U.S. 361, 368, 106 S.Ct. 681, 88 L.Ed.2d 691 (1986) (quoting Chevron U.S.A., Inc. v. Natural Res. Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)); New York Times Co. v. Spartanburg County Sch. Dist. No. 7, 374 S.C. 307, 310, 649 S.E.2d 28, 29-30 (2007) ("We cannot construe a statute without regard to its plain and ordinary meaning, and this Court may not resort to subtle or forced construction in an attempt to limit or expand a statute's scope."). In determining the plain meaning of a statute, the courts must look at the particular statutory language at issue and the language and design of the statute as a whole. Bethesda Hosp. Ass'n v. Bowen, 485 U.S. 399, 403-05, 108 S.Ct. 1255, 99 L.Ed.2d 460 (1988); Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000)("Where the statute's language is plain and unambiguous, and conveys a clear and definite meaning, the rules of statutory interpretation are not needed and the court has no right to impose another meaning.").

A county property tax becomes a first lien on real property and attaches at the beginning of the fiscal year in which the tax is levied. Taylor v. Mill, 310 S.C. 526, 528, 426 S.E.2d 311, 312 (1992); S.C.Code Ann. § 12-49-10 (2000). While there are strict statutory requirements for a valid tax sale, the parties do not dispute that the County properly followed those requirements and notified the delinquent taxpayer and any mortgagees of the tax sale. See S.C.Code Ann. § 12-51-140 (2000) (adopting notice requirements to mortgagees from section 12-49-220 to apply to non-judicial sales); S.C.Code Ann. § 12-51-40 (2000) (providing procedure for a levy of execution on delinquent taxpayer's property and notice to delinquent taxpayer); S.C.Code Ann. § 12-49-220 (2000) (providing that notice must be given to mortgagees twenty days before a tax sale). Nothing in the state statutes required the County to notify the IRS of the tax sales. Thus, the key question is whether the federal tax laws hold that the federal tax lien survives the state tax sale where no notice of the sale was given.

When a person fails to pay a federal tax liability, the amount due becomes a "lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." 26 U.S.C.A. § 6321 (2002). This lien continues until the lien is satisfied or becomes unenforceable after a lapse of time. 26 U.S.C.A. § 6322 (2002). "The overriding purpose of the tax lien statute obviously is to ensure prompt revenue collection" because the "collection of taxes is vital to the functioning, indeed existence," of the government. United States v. Kimbell Foods, Inc., 440 U.S. 715, 734-35, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979). Thus, the property "shall, except as otherwise provided, be made subject to and without disturbing" the federal lien if the United States recorded notice of its lien thirty days before the sale but the United States was not given notice¹ of the sale. 26 U.S.C.A. § 7425(b)(1) (2002).

However, in section 6323, entitled, "Validity and priority against certain persons," the federal government has provided ten instances where federal liens are subordinated in priority against certain persons, even where the United States has filed its notice of a lien. 26 U.S.C.A. § 6323 (2002); see Hinkley & Donovan v. Paine, 424 F.Supp. 1013, 1019 (D.C.N.H.1977) (interpreting section 6323 and stating "Congress very specifically provided for various kinds of transactions which would have priority even over filed tax liens"); United States v. Amos, 287 F.Supp. 886, 890-91 (D.C.Ill.1968) (interpreting section 6323(b)(6), as modified by the Federal Tax Lien Act, as rendering "federal tax liens junior to liens securing local real...