Paul Revere Life Ins. Co. v. Brock
| Decision Date | 24 June 1994 |
| Docket Number | Nos. 92-4227 and 92-4228,s. 92-4227 and 92-4228 |
| Citation | 28 F.3d 551 |
| Parties | -5469, 63 USLW 2026, 94-2 USTC P 50,519, 25 Bankr.Ct.Dec. 1338 PAUL REVERE LIFE INSURANCE COMPANY, Plaintiff, v. Thomas E. BROCK, Jr.; and Marino V. Moleres, Padre (92-4227); United States of America (92-4228), Defendants-Appellants, Newark Orthopedics, Inc.; Henry D. Rocco; E. Padro, M.D., Inc.; Efrain Padro; Emergency Professional Group, Inc.; Necdet K. Orhon; Metin Ercan; Tri-State Orthopedics, Inc.; James W. Valuska; Fort Steuben Ophthalmologist, Inc.; Ronald C. Agresta; Jose L. Pinelli, M.D., Inc.; Jose L. Pinelli; Paul N. Mastros, M.D., Inc.; Paul N. Mastros; Constantine V. Katsaros; Agresta Clinic, Inc.; Sara Agresta Risovich, on behalf of decedent Joseph Agresta, Intervenors-Appellees, Lola V. BROCK, Defendant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
David W. Alexander, Squire, Sanders & Dempsey, Columbus, OH, for plaintiff.
Ronald B. Noga (argued and briefed), Ball, Noga & Tanoury, Columbus, OH, for defendants-appellants.
Jonathan S. Cohen (argued), U.S. Dept. of Justice, Appellate Section Tax Div., Washington, DC, for U.S. in No. 92-4227.
Alan Berliner (argued and briefed), Carlile, Patchen & Murphy, Columbus, OH, for E. Padro, M.D., Inc., et al.
David W. Alexander, Squire, Sanders & Dempsey, Columbus, OH, for the Paul Revere Life Ins. Co.
Stephen A. Sherman, U.S. Dept. of Justice, Tax Div., Gary R. Allen, Acting Chief (briefed), Jonathan S. Cohen (argued), Robert L. Baker, U.S. Dept. of Justice, Appellate Section Tax Div., Washington, DC, Brenda L. Dodrill, Columbus, OH, for the U.S. in No. 92-4228.
Before: MARTIN and JONES, Circuit Judges; and DEMASCIO, Senior District Judge. *
This is an interpleader action brought by Plaintiff Paul Revere Life Insurance Company to resolve competing claims to proceeds due under the terms of Defendant Thomas E. Brock's disability insurance policy. Plaintiff deposited the proceeds of this policy with the district court. As of October 14, 1992, the amount in the fund was $120,500.
In 1990, the district court determined the order of priority of the claims of the various defendants. In 1991, a panel of this court affirmed the order of priority, but reversed on other grounds. On remand in 1992, the district court held, inter alia, that although the United States was entitled to first priority in the amount of tax liens it had perfected against Brock, it was not entitled to any priority in the interest due on these tax liens; it would have to pursue Brock directly in order to collect this interest. We reverse the district court with regard to the interest due to the United States, and we remand for further proceedings.
Defendant United States of America filed tax liens relating to Brock's "tax return preparer's penalty liability" on April 15, 1983. The pre-interest balance due to the United States is $11,001.22. In the present appeal, all parties agree that the United States has first priority to the interpleaded funds, at least to the extent of this pre-interest balance.
Most of the other defendants are former clients of Brock who, in 1982, sued Brock for fraud in an Ohio court of common pleas. On March 23, 1983, the state court certified these former clients as a class under Rule 23 of the Ohio Rules of Civil Procedure. On May 20, 1983, individual class members won a default judgment against Brock for $350,538.55, pursuant to Ohio Civil Rule 37, as a sanction for Brock's failure to comply with discovery orders. Newark Orthopedics, Inc., v. Brock, No. 82CV-07-4282 (Franklin County, Ohio, Court of Common Pleas, May 20, 1983).
On March 5, 1986, Brock assigned his entire interest in the insurance proceeds presently at issue to Defendant Padre Marino V. Moleres. A few months later, the plaintiff insurance company filed its Complaint for Interpleader.
In 1988, the United States and Newark jointly moved for summary judgment, arguing that the United States had first priority to the fund, and that the state court class members shared second priority. Brock and Moleres filed a cross-motion for summary judgment, arguing that Moleres had first priority. In 1990, the district court granted summary judgment in favor of the United States and Newark, and against Brock and Moleres, holding that the United States had first priority to $11,001.22 of the funds, and that Newark, representing the class of former clients who became judgment creditors of Brock in the state court suit, had second priority to the rest of the funds. Brock and Moleres appealed.
In 1991, a panel of this court affirmed as to most of the issues, but held that the court below erred by failing to determine whether Newark met the requirements for class certification under Rule 23 of the Federal Rules of Civil Procedure. Paul Revere Life Ins. Co. v. Brock, 1991 WL 59941 at * 1 (6th Cir. April 19, 1991). An implication of this holding was that the other state court class members were not yet parties to the federal suit. The panel suggested that joinder may be an option, rather than class certification, because there were so few members of the class. Id.
Meanwhile, in February 1991, while the appeal was pending, Newark asked the district court to distribute $11,001.22 plus post-judgment interest to the United States, and the rest of the fund to Newark. The United States opposed this motion, arguing that it was entitled to interest dating all the way back to April 15, 1983.
On remand, the former class members, (except for Newark and Henry Rocco, who were already defendants), opted to proceed individually rather than as a class, and moved to intervene. The district court granted their motion. Shortly thereafter, the intervenors moved for summary judgment. Brock and Moleres opposed the motion on the basis of new defenses not raised in their 1990 cross-motion for summary judgment nor in their 1991 appeal to the Sixth Circuit.
In its Opinion and Order filed on September 8, 1992, the court resolved both Newark's Motion for Distribution of Funds and the Intervenor's Motion for Summary Judgment. As to the former, the court held, on equitable grounds, that the United States was entitled to first priority only with regard to the amount of its tax liens, and not with regard to interest going back to 1983. As to the latter motion, the court rejected Brock's and Moleres's new defenses both for their untimeliness and on their merits. Therefore, it granted summary judgment in favor of the Intervenors. This appeal followed.
Meanwhile, in March 1993, Brock filed, in the Franklin County, Ohio, Court of Common Pleas, a motion for relief from the default judgment of May 20, 1983. The trial court overruled the motion, but, in January 1994, the Ohio Court of Appeals for Franklin County reversed, holding that the default judgment appeared to be void, and, if it is not actually void, it is at least voidable. Newark Orthopedics, Inc. v. Brock, 92 Ohio App.3d 117, 124-25, 634 N.E.2d 278, 283 (1994). The matter was remanded back to the common pleas court for further proceedings.
The facts are not in dispute. All of the questions before this court are either questions of law, mixed questions of law and fact, or questions of statutory interpretation. We review each of these de novo. See, e.g., Waxman v. Luna, 881 F.2d 237, 240 (6th Cir.1989) (); Cordrey v. Euckert, 917 F.2d 1460, 1465 (6th Cir.1990), cert. denied, 499 U.S. 938, 111 S.Ct. 1391, 113 L.Ed.2d 447 (1991) (); United States v. Brown, 915 F.2d 219, 223 (6th Cir.1990) ().
The United States contends that the district court erred in holding that the government's priority tax claims did not include the full amount of interest that accrued after the filing of its tax liens. We agree. The United States correctly argues that, under I.R.C. Sec. 6321, its tax lien against Brock includes all interest due, and under I.R.C. Sec. 6601(a), the interest on underpaid taxes accrues from the date payment was due until the date payment is made. Furthermore, under I.R.C. Sec. 6665(a), additions to taxes such as penalties and interest are to be collected in the same manner as taxes. From these statutes, it follows that whatever priority the government enjoys with regard to tax liens, the government enjoys the same priority with regard to interest on those liens. Because it is uncontested that the United States has first priority with regard to the insurance proceeds at issue, this priority must include interest accruing from the date the tax liens were filed, April 15, 1983.
The district court acknowledged this argument, but it refused, as a matter of equity, to find for the United States on this issue. Rather, the district court expressly adopted the reasoning of Washington Irrigation & Development Co. v. United States, 110 Wash.2d 288, 751 P.2d 1178 (1988).
Like the present case, Washington Irrigation involved an interpleaded fund to which the United States had first priority by virtue of tax liens, and to which a private creditor had second priority. 751 P.2d at 1180. The issue before the court was whether the United States could collect the interest due on the tax liens from the interpleaded fund. Id. The court acknowledged that "seemingly straightforward" Internal Revenue Code sections provided that...
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Carlson, Matter of
...to determine otherwise. Its equitable powers do not allow it to override the plain command of § 6601(a). Cf. Paul Revere Life Ins. Co. v. Brock, 28 F.3d 551, 554 (6th Cir.1994). The Carlsons add that the bankruptcy court should have invoked the "discretionary exception" of 26 U.S.C. § 6404(......
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...questions of law and fact, like pure questions of law or of statutory interpretation, are reviewed de novo. Paul Revere Life Insurance Co. v. Brock, 28 F.3d 551, 553 (6th Cir.1994). Furthermore, the sufficiency of the evidence to support a finding that a constitutional predicate (such as "a......
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Carlson v. IRS, 96 C 1660.
...otherwise. Nor do the bankruptcy court's equitable powers allow it to override the plain mandate of § 6601. Paul Revere Life Ins. Co. v. Brock, 28 F.3d 551, 554 (6th Cir.1994). Accordingly, the bankruptcy court did not err when it declined to abate the interest assessed against the Carlsons......
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...mixed questions of law and fact is de novo. United States v. Spinelle, 41 F.3d 1056, 1057-58 (6th Cir.1994); Paul Revere Life Ins. Co. v. Brock, 28 F.3d 551, 553 (6th Cir.1994). See Waxman v. Luna, 881 F.2d 237, 240 (6th Cir.1989) (per curiam) (holding that de novo review is proper where di......