May v. A Parcel of Land

• Decision Date: 06 September 2006
• Docket Number: Civil Action No. 04-0695-WS-B.
• Parties: Lisa Clewis MAY, Plaintiff, v. A PARCEL OF LAND, et al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

458 F.Supp.2d 1324

Lisa Clewis MAY, Plaintiff, v. A PARCEL OF LAND, et al., Defendants.

Civil Action No. 04-0695-WS-B.

United States District Court, S.D. Alabama, Southern Division.

September 6, 2006.

COPYRIGHT MATERIAL OMITTED

M. Mort Swaim, Foley, AL, for Plaintiff.

James W. May, Foley, AL, Pro se.

John L. House, Magnolia Springs, AL, Pro se.

Shirley House, Magnolia Springs, AL, Pro se.

Brian Richard Harris, Department of Justice, Washington, DC, Charles Baer, U.S. Attorney's Office, Mobile, AL, for Defendant.

ORDER

STEELE, District Judge.

This quiet title action is before the Court on the parties' dueling motions for summary judgment, to-wit: defendant United States of America's Motion for Summary Judgment (doc. 77) and plaintiff Lisa Clewis May's Motion for Partial Summary Judgment (doc. 88). The motions, which concern substantially similar factual and legal issues, have been briefed and are ripe for disposition at this time.¹

I. Procedural History.

Plaintiff Lisa Clewis May filed this action in Baldwin County Circuit Court in September 2004 against several in personam defendants, including the United States of America, seeking to quiet title in two related parcels of real property, one of which is merely a 10-foot strip.²

Together, these parcels comprise Lisa May's current homestead and residence in Magnolia Springs, Alabama. The Complaint alleges that plaintiff holds title to the residence, but that the Internal Revenue Service ("IRS") wrongfully issued a federal tax lien on that property in June 2004 based on a federal income tax indebtedness that she does not have. On that basis, the Complaint seeks a declaration that the federal tax lien is not valid, and that Lisa May holds the entire and undivided fee simple interest in the residence, subject only to a mortgage held by Irene Trotter, public rights of way, the Houses' one-half interest in the 10-foot strip, and any other rights that others may have to the bed, shores, and waters of the Magnolia River.

On November 1, 2004, the Government removed this action to this District Court pursuant to 28 U.S.C. § 1444. Following a discovery period, the Government and Lisa May filed cross-motions for summary judgment. The critical legal issue raised by those motions is whether the federal tax lien pertaining to the tax indebtedness of Lisa May's husband, James May, can properly attach to residential property to which Lisa May holds sole and exclusive title. The Government maintains that the tax lien reaches the property because Lisa May is her husband's nominee, or alternatively because James May fraudulently transferred the property in an attempt to shield it from the IRS's collection efforts. By contrast, Lisa May's position is that James May holds no legal interest in the property that is cognizable under Alabama law, and that the tax lien is therefore improper and invalid, irrespective of federal nominee principles. Lisa May further contends that the Government's fraudulent transfer argument is time-barred and also fails on the merits.

II. Relevant Facts.³

A. History and Chain of Title for the Property.

In April 1985, James May and his thenspouse, Kathryn May (who is not a party here), purchased certain real property (the "Property") in Magnolia Springs, Alabama, as joint tenants with rights of survivorship. (U.S.Exh.1.)⁴ James May and Kathryn May used the Property as their residence. (U.S. Exh. 2, at # 3.) In February 1989, James May transferred his interest in the Property to Kathryn May via Assumption Warranty Deed, in exchange for $10.00 and other good and valuable consideration. (U.S. Exhs. 12 and 2, at # 1.)⁵ James and Kathryn May continued to live on the Property after that transfer took place. (U.S. Exh. 2, at # 3.)

In 1991, James and Kathryn May divorced. The Judgment of Divorce entered by the Baldwin County Circuit Court in June 1991 provided, in pertinent part, that Kathryn May "shall convey to all of her right, title and interest in and to the marital home which is currently in the name of [Kathryn May] only." (U.S. Exh. 4, at ¶ 7.) A careful reading shows that the quoted language suffered from a typographical error, inasmuch as it failed to identify the person to whom Kathryn May was to convey her right, title and interest to the Property. Nonetheless, James May avers that Kathryn May had agreed that he should receive the Property as part of the divorce property settlement, but that this document "omitted [his] name when it came to the provision about who was to get the Property." (James May Aff., ¶ 6.) He also admits that "[i]t is true that technically [he] got the house" in the divorce. (U.S. Exh. 14, at 2.)⁶ Thus, despite the ambiguity in the divorce decree, it is undisputed that Kathryn May and James May agreed that he would receive the Property pursuant to their divorce in 1991. In the meantime, James May proposed marriage to Lisa May, and they married soon after. (James May Aff., ¶ 7.) James May asserts that he gave Lisa May the Property as a "wedding gift," with no further elaboration as to his reasons or intent. (Id., ¶ 9; U.S. Exh. 3, at # 1, # 7; Lisa May Aff., ¶ 4.) Rather than having Kathryn May deed the Property to him and then deeding the Property to Lisa May, James May felt that it was more efficient to have Kathryn May deed the Property directly to Lisa May. (James May Aff., ¶ 10.) This is exactly what happened. On August 12, 1991, as part of the property settlement on divorce, Kathryn May transferred the Property to Lisa May, in exchange for a $9,000 payment by James May to Kathryn May. (Id.; U.S. Exh. 2, at # 2.)⁷ This figure represents approximately half of the equity that Kathryn and James May had accumulated in the Property prior to the divorce. (U.S. Exh. 11, at 7, 12.) At any rate, title passed directly from Kathryn May to Lisa May, without ever formally including James May, as Kathryn May executed an Assumption Warranty Deed for the Property in favor of Lisa May in August 1991. (James May Aff., ¶ 12; Plaintiffs Exh. 2.)⁸

James May continued to live at the Property after Kathryn May transferred it to Lisa May, apparently with no interruption in his residence.⁹ It is undisputed that James May has continuously resided at the Property from 1985 through the present, and that he currently lives there with Lisa May and their two children. (U.S. Exh. 2, at #3a; U.S. Exh. 3, at # 2a.) There is no allegation or suggestion that James May has not enjoyed or does not continue to enjoy unfettered access to the rights and benefits of home ownership through his residence at the Property, or that any limitation has been placed on him in that respect. Furthermore, although the Property is titled in Lisa May's name, the record reflects that James May pays all or substantially all of the day-to-day expenses incident to home ownership. James May has personally paid the property taxes on the Property every year, purportedly at the request of and "on behalf of Lisa Clewis May." (U.S. Exh. 2, at #3b; U.S. Exh. 3, at #2b.) James May has personally made all mortgage payments on the Property since 1985, first on behalf of Kathryn May and later on behalf of Lisa May. (Id. at # 3c.)¹⁰ He has taken deductions on his personal income tax returns for those mortgage payments, as he and Lisa May file their tax returns separately. (James May Dep., at 70-77.) The utility and telephone bills for the Property are in James May's name, and he personally pays all such bills, purportedly on behalf of and at the request of Lisa May. (U.S. Exh. 2, at # 3d; U.S. Exhs. 6 & 7; U.S. Exh. 3, at # 2d.) Thus, despite the fact that she holds title to the Property, Lisa May does not now make, and has never made, payments for mortgage, property tax or utilities for the Property at which she, James May and their children reside.

In 1999, significant renovations were done to the Property. Lisa May asserts, "I paid around $180,000 for renovations in 1999." (U.S. Exh. 3, at # 2e.) James May similarly states, "Mrs. May paid for those renovations." (U.S. Exh. 2, at # 3e.) A closer look, however, exposes the fallacy of this characterization. Lisa May may have nominally paid for the renovations, but the funds did not originate with her. On the contrary, it is undisputed that she paid for the renovations using (a) borrowed money from mortgage refinancings, on which mortgage payments were made 100% by James May; and (b) "about $100,000" in monetary gifts from James May. (U.S. Exh. 2, at # 3e; U.S. Exh. 3, at # 2e.)¹¹ In the face of uncontroverted evidence that James May was the source of and responsible for every penny used to renovate the Property, the Court will not indulge the fiction that Lisa May personally paid for that work.

With respect to both the 1989 and 1991 transfers of the Property, James May insists that he had no intention of evading his debt liabilities to the IRS or to anyone else; rather, he attributes those decisions to unspecified personal issues relating to his marriage, and not to considerations about debts and creditors. (James May Aff., ¶¶ 13-14.) In this respect, he main tains that the proof is in the pudding, inasmuch as he has fully repaid all of his tax debts from 1989 and 1991. (Id.) He specifically asserts that "[t]here was no intent to defraud any creditor, including the revenue service[,] by titling the property to her." (U.S. Exh. 2, at # 8.)

B. James May's Tax Troubles.

Against the backdrop of the history of the Property, we must project a separate chronology of James May's dealings with the Internal Revenue Service. There has been no suggestion that Lisa May personally has accrued any back tax liability that might give rise to a tax lien. That said, it is undisputed that at various times dating back to the 1980s, James May has owed back taxes to the United States Treasury. A federal tax lien issued by the IRS in March 1992 reflected that "James W and Kay M May" (presumably referring to Kathryn May) jointly owed back taxes...