McEndree v. Wilson

• Decision Date: 27 September 1991
• Docket Number: Civ. A. No. 91-F-1050.
• Citation: 774 F. Supp. 1292
• Parties: Isabelle McENDREE, Plaintiff, v. Raymond G. WILSON, the United States of America, Acting Through the Department of the Treasury, Internal Revenue Service, Frank Leskinen, and Linda Leskinen, Defendants.
• Court: U.S. District Court — District of Colorado

774 F. Supp. 1292

Isabelle McENDREE, Plaintiff, v. Raymond G. WILSON, the United States of America, Acting Through the Department of the Treasury, Internal Revenue Service, Frank Leskinen, and Linda Leskinen, Defendants.

Civ. A. No. 91-F-1050.

United States District Court, D. Colorado.

September 27, 1991.

Bruce Johnson, Fredrickson & Johnson, P.C., Canon City, Colo., for plaintiff.

Michael J. Norton, U.S. Atty., Jessie A. Messenger, Sp. Asst. U.S. Atty., William G. Pharo, Asst. U.S. Atty., Denver, Colo., Stephen G. Fuerth, Chief, Civ. Trial Section, Joel J. Roessner, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendant U.S., acting through the Dept. of the Treasury, I.R.S.

Raymond G. Wilson, pro se.

Frank Leskinen and Linda Leskinen, pro se.

ORDER DENYING MOTION TO DISMISS

SHERMAN G. FINESILVER, Chief Judge.

This matter comes before the court on Defendant United States of America's Motion to Dismiss, filed June 24, 1991. For the reasons set forth below, the motion to dismiss is hereby DENIED.

I. BACKGROUND

On April 6, 1989, Defendant Raymond G. Wilson ("Wilson") executed and delivered to plaintiff a contract for the purchase of real estate described as "Lot 4, Block 20," and known as 219 Macon Avenue, Canon City, Colorado 81212.¹ The contract was recorded in the Fremont County land records on April 7, 1989. The contract provided that Wilson would execute a promissory note in favor of Plaintiff Isabelle McEndree ("McEndree") as security for the balance of the purchase price. Contemporaneous with the execution of the contract, Wilson executed and delivered to McEndree such a promissory note, and McEndree executed and delivered to Wilson a warranty deed conveying title to the property.

Beginning on July 31, 1989, Defendant United States, acting through the Internal Revenue Service, filed three federal tax liens with the Fremont County Clerk and Recorder, against Defendant Wilson as taxpayer, and against the property at 219 Macon Avenue, Canon City.

Plaintiff filed the present action against Wilson, the United States, and other defendants in the District Court for the County of Fremont, Colorado. McEndree v. Wilson, No. 91-CV-133 (Colo.Dist.Ct., Fremont County, Div. II, May 16, 1991). Plaintiff's complaint alleges that the contract, promissory note, and warranty deed together created an equitable mortgage. Plaintiff further asserts that this mortgage takes priority over the federal tax liens by operation of the Colorado recording statute.

On June 18, 1991, the United States filed a notice of removal to the United States District Court for the District of Colorado pursuant to 28 U.S.C.A. §§ 1441(a) and 1446 (West Supp.1991). On June 24, 1991, Defendant United States filed a motion to dismiss for lack of subject matter jurisdiction.

II. STANDARD OF REVIEW

Courts apply a rigorous standard of review when presented with a motion to dismiss for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). In a "facial attack" on subject matter jurisdiction, the party challenging jurisdiction asserts that the complaint fails to allege facts upon which to base subject matter jurisdiction. Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.), cert. denied, 449 U.S. 953, 101 S.Ct. 358, 66 L.Ed.2d 217 (1980); Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977); 1610 Corp. v. Kemp, 753 F.Supp. 1026, 1028 (D.Mass.1991). When defending against a "facial attack," the nonmoving party enjoys the same protections it would receive in defending a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6). Osborn v. United States, 918 F.2d 724 (8th Cir.1990); Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). However, where the issue of subject matter jurisdiction is intertwined with the merits, dismissal on grounds of lack of subject matter jurisdiction is proper only if the claim is frivolous or clearly excluded by prior law. Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946); Clark v. Tarrant County, 798 F.2d 736, 741-42 (5th Cir.1986). Courts typically consider jurisdiction and the merits intertwined when the statute at issue provides both the basis for subject matter jurisdiction and the cause of action. Clark, 798 F.2d at 741-42.

Applying the Rule 12(b)(6) protections, the court must accept all factual allegations as true and must draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Grider v. Texas Oil & Gas Corp., 868 F.2d 1147, 1148 (10th Cir.), cert. denied, 493 U.S. 820, 110 S.Ct. 76, 107 L.Ed.2d 43 (1989). All plaintiff's pleadings must be liberally construed. Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir.1984); FDIC v. Wise, 758 F.Supp. 1414, 1416 (D.Colo.1991). In this action, we believe that the Plaintiff has pleaded sufficiently to overcome Defendant United States' Motion to Dismiss the Action Against the United States.

III.

WAIVER OF SOVEREIGN IMMUNITY FOR QUIET TITLE ACTIONS UNDER 28 U.S.C. § 2410(a)

The issue before this Court is whether this Court may entertain jurisdiction based upon a waiver of sovereign immunity under 28 U.S.C.A. § 2410(a)(1) (West 1978). Section 2410(a)(1) waives the United States' sovereign immunity in actions to quiet title to "real or personal property in which the United States has or claims a mortgage or other lien." 28 U.S.C.A. § 2410(a). As a general rule, the United States, as sovereign, "is immune from suit save as it consents to be sued ... and the terms of its consent to be sued in any court define the court's jurisdiction to entertain the suit." United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953, 47 L.Ed.2d 114 (1976) (quoting United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941)). We are persuaded that the present case is a quiet title action within the meaning of 28 U.S.C.A. § 2410(a)(1), and that this Court retains jurisdiction.

IV. POSSESSION AND QUIET TITLE ACTIONS

Defendant United States asserts that actual or constructive possession by the Plaintiff is necessary to maintain a quiet title action. In this case, the Plaintiff holds only a promissory note, and not actual or constructive possession of the property.

Some courts have concluded that actual or constructive possession is required to maintain a 28 U.S.C.A. § 2410(a)(1) quiet title action. See Aqua Bar & Lounge, Inc. v. United States Dep't of Treasury, 539 F.2d 935, 937 (3d Cir.1976); Kasdon v. G.W. Zierden Landscaping, Inc., 541 F.Supp. 991, 994 (D.Md.1982). Actual or constructive possession is not necessary to maintain a 28 U.S.C.A. § 2410(a)(1) action.

A. BROAD READING GIVEN TO 28 U.S.C.A. § 2410(A)

Most courts recognize that the words "quiet title" in 28 U.S.C.A. § 2410(a)(1) were intended to be more expansive than the common law meaning of "quiet title" actions. United States v. Coson, 286 F.2d 453, 457 (9th Cir.1961); United States v. Morrison, 247 F.2d 285, 290-91 (5th Cir. 1957); Kasdon, 541 F.Supp. at 994. Rather, the phrase "quiet title" is "used in a broad sense to cover a suit to remove a cloud on title." Coson, 286 F.2d at 457. Recognized equity principles illustrate that where the plaintiff's title is not one which gives him a right to recover possession, such as the claim of a mortgagee, the plaintiff "may sue to remove a cloud on her title even though she is out of possession." HENRY L. MCCLINTOCK, HANDBOOK OF THE PRINCIPLES OF EQUITY, § 193, at 522 (2d ed. 1948).

B. FEDERAL COMMON LAW

Federal common law principles govern whether federal or state law defines the scope of a 28 U.S.C.A. § 2410(a)(1) quiet title action. The United States Supreme Court has held that the federal courts should create common law when the federal interests at stake justify the creation of a uniform federal law. Clearfield Trust Co. v. United States, 318 U.S. 363, 366, 63 S.Ct. 573, 574-75, 87 L.Ed. 838 (1943). The Supreme Court adopted a three-pronged balancing test to determine when to create federal common law. United States v. Kimbell Foods, Inc., 440 U.S. 715, 728-29, 99 S.Ct. 1448, 1458-59, 59 L.Ed.2d 711 (1979).

First, the Kimbell Court concluded that "when there is little need for a nationally uniform body of law, state law may be incorporated as the federal rule of decision." Id. at 728, 99 S.Ct. at 1458. The Supreme Court has recognized that state law could divest junior government liens in a 28 U.S.C.A. § 2410(a) action, because nothing in the legislative history precludes the application of state procedures. United States v. Brosnan, 363 U.S. 237, 250, 252, and n. 11, 80 S.Ct. 1108, 1116, 1117, and n. 11, 4 L.Ed.2d 1192 (1960). The Brosnan Court observed that "Congress must have recognized the possibility that state procedures might affect federal liens." Id. at 247, 80 S.Ct. at 1114.

Second, the Kimbell Court noted that when application of state law would frustrate a federal program, a uniform federal law should be created. Kimbell Foods, Inc., 440 U.S. at 728, 99 S.Ct. at 1458. The Brosnan Court determined that the enforcement of federal liens would not be frustrated by application of state law absent a clear congressional finding to the contrary. Brosnan, 363 U.S. at 250, 252, 80 S.Ct. at 1116, 1117.

Third, the Kimbell Court stated that federal courts should consider any disruptions of commercial relationships predicated on state law before implementing a uniform federal rule. Kimbell Foods, Inc., 440 U.S. at 728-29, 99 S.Ct. at 1458-59. Under Colorado law, possession of property is not necessary in order to maintain a quiet title action under Colo.R.Civ.P. 105. Lamberson v. Thomas, 146 Colo. 539, 362 P.2d 180, 183 (1961); Siler v. Investment Sec. Co., 125 Colo. 438, 244 P.2d 877, 879-80 (1952). Therefore, creation of a uniform federal rule that required actual or constructive possession to maintain a quiet title action under 28 U.S.C.A. § 2410(a)(1)...