Payne Family Homes, LLC v. Survant Air Sys., Inc.
| Decision Date | 14 December 2018 |
| Docket Number | No. 4:17-CV-02912 JAR,4:17-CV-02912 JAR |
| Parties | PAYNE FAMILY HOMES, LLC, Plaintiff, v. SURVANT AIR SYSTEMS, INC., et al., Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
This matter is before the Court on the United States' Motion for Summary Judgment (Doc. No. 57) and Plaintiff's Motion for Conditional Award of Attorneys' Fees and Costs (Doc. No. 34).
In 2015, Plaintiff Payne Family Homes, LLC ("Payne") contracted with Defendant Survant Air Systems, Inc. ("Survant") to install HVAC systems in homes being built by Payne. Survant ceased operating as a business in July 2016 (the "Agreement"). Pursuant to the Agreement, Payne still owes Survant $155,413.49 ("the Disputed Funds"). Defendants Capitol Group, Inc. ("Capitol Group"), the Funds1, and Trane U.S. ("Trane") have unsatisfied judgments against Survant and have, at various times, filed garnishment actions against Payne seeking the Disputed Funds. There are also federal tax liens filed against Survant on March 10, 2015.
As a result of the numerous conflicting claims against the Disputed Funds, Payne filed a Complaint for Interpleader in the Circuit Court of Saint Louis County, Missouri seeking a determination as to which portion, if any, of the funds it owes to Survant should be allocated and distributed to each of the named Defendants. (Doc. No. 2). The United States removed the action to this Court. (Doc. No. 1).
On February 27, 2018, Trane filed a cross-claim against Survant for breach of contract (Count I) and Suit on Account (Count II) and a third-party petition against Richard and Marlene Survant on a Personal Guarantee (Count III). (Doc. No. 22). Survant is in default on Trane's cross-claim. (Doc. Nos. 49, 53).
On March 15, 2018, this Court granted Payne's petition to interplead disputed funds in the amount of $155,413.49 into the Registry of the Court and discharged Payne from any further liability in this case. (Doc. No. 29).
The United States, Capitol Group, and the Funds subsequently filed a joint motion to determine priority, stipulating that the United States' federal tax liens have priority over the claims of Capitol Group and the Funds to the Disputed Funds. (Doc. No. 55). The United States also moved for summary judgment that it is entitled to the entirety of the Disputed Funds plus any accrued interest. Because Trane has also claimed an interest in the Disputed Funds, the Court directed Trane to show cause in writing why the joint motion to determine priority should not be granted. (Doc. No. 56). Trane responded that it did not oppose the entry of an order determining that the United States' federal tax liens have priority over the claims of Capital Group and the Funds; however, Trane did not admit or agree that the United States' federal tax lien has priority over its claims. (Doc. No. 58).
Because there was no objection to the joint motion to determine priority, the Court entered an order determining that the United States' federal tax liens have priority over the claims of Capitol Group and the Funds. (Doc. No. 59). The Court then granted the United States' motion for summary judgment as to Capitol Group and the Funds in light of the parties' stipulation and the Court's order but deferred entering judgment pending its ruling on the remaining defendant, Trane. Trane filed its memorandum in opposition to the United States' motion for summary judgment on October 5, 2018 (Doc. Nos. 60, 61); the United States filed its reply on October 12, 2018 (Doc. No. 62).
Summary judgment is appropriate when no genuine issue of material fact exists in the case and the movant is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The initial burden is placed on the moving party. City of Mt. Pleasant, Iowa v. Associated Elec. Co-op., Inc., 838 F.2d 268, 273 (8th Cir. 1988). If the record demonstrates that no genuine issue of fact is in dispute, the burden then shifts to the non-moving party, who must set forth affirmative evidence and specific facts showing a genuine dispute on that issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In determining whether summary judgment is appropriate in a particular case, the Court must review the facts in a light most favorable to the party opposing the motion and give that party the benefit of any inferences that logically can be drawn from those facts. The Court is required to resolve all conflicts of evidence in favor of the nonmoving party. Osborn v. E.F. Hutton & Co., Inc., 853 F.2d 616, 619 (8th Cir. 1988).
It is undisputed that Survant filed federal employment tax returns with the IRS for tax periods ending June 30, 2013, September 30, 2013, December 31, 2013, March 31, 2014, and June 30, 2014 (the "delinquent tax periods"). (United States' Statement of Uncontroverted Material Facts ("SOF"), Doc. No. 57-2 at ¶ 1). Survant self-reported federal employment tax liabilities due on each of its federal employment tax returns. (SOF at ¶ 2). A delegate of the Secretary of Treasury made income tax assessments against Survant based on its filed returns. (SOF at ¶ 3). The IRS gave Survant notice of assessments and made demands for payment for the delinquent tax periods on or about the date of the assessments. (SOF at ¶ 3). Survant has not paid its outstanding federal employment tax liabilities for the delinquent tax periods, which liabilities exceed the amount of the Disputed Funds. (SOF at ¶ 4). On or about March 10, 2015, a delegate of the Secretary of the Treasury filed a Notice of Federal Tax Lien pursuant to 26 U.S.C. § 6323(f)(1)(A)(ii) in St. Charles County, Missouri against Survant in the amount of $525,365.41 regarding federal employment tax assessments made against Survant for the delinquent tax periods. (SOF at ¶ 5).
Trane's claim against Survant arises from a June 2014 contract with Survant to establish a "residential" credit account pursuant to Trane's Program Inventory and Credit Agreement, effective May 30, 2014. (Doc. No. 60-2).2 The Credit Agreement provided Trane with, among other things, a security interest "[t]o secure the due and punctual payment of all Advances made by Trane . . . now or hereafter existing or due or to become due . . ." (Id. at ¶ 3). Between April 4, 2016 and July 13, 2016, Survant issued purchase orders to Trane for HVAC equipment totaling $66,478.10. (Doc. No. 60-1). In addition, between November 5, 2015 and April 8, 2016, Survantissued purchase orders pursuant to its "commercial" account with Trane totaling $17,407.01. (Id.) Trane has not filed a UCC financing statement with either the Secretary of State of Missouri or St. Charles County, Missouri regarding the money Survant owes Trane. (SOF at ¶ 7).
The United States asserts that it has valid tax liens, notice of which was properly filed on March 10, 2015, that have priority over Trane's security interest because Trane's security interest is not perfected. (Doc. No. 57-1 at 1, 6-8). In response, Trane argues the United States' priority lien argument only applies to funds that came into existence before notice of the tax liens was filed. Here, Trane's claim includes amounts owed on HVAC equipment Trane sold to Survant after the federal tax lien notice was filed. (Doc. No. 60 at 2). Trane further argues it is entitled to an equitable lien on the Disputed Funds. (Id.). Relying on United States v. McDermott, 507 U.S. 447, 453 (1993), the United States replies that its tax liens attach to all property and rights to property of the taxpayer against whom the lien is filed, including after-acquired property. (Doc. No. 62 at 2-3). The United States takes no position on whether Trane has an equitable lien against the Disputed Funds because regardless, "equitable liens" do not have priority over first-in-time and properly filed notices of federal tax liens. See 26 U.S.C. §§ 6323(a)-(d). (Doc. No. 62 at 4-6).
Federal tax liens do not automatically have priority over all other liens. Absent provision to the contrary, "priority [of liens] for purposes of federal law is governed by the common-law principle that 'the first in time is the first in right.' " Minn. Dep't of Revenue v. United States, 184 F.3d 725, 728 (8th Cir. 1999) (quoting McDermott, 507 U.S. at 449). The "time" for assessing priority "depends on the time the lien attached to the property in question and becamechoate." Id. (quoting Cannon Valley Woodwork, Inc. v. Malton Const. Co., 866 F. Supp. 1248, 1250 (D. Minn. 1994)).
Federal tax liens attach to "all property and rights to property" "belonging to" the taxpayer as of the assessment date and continues until the liability is satisfied or becomes unenforceable by lapse of time. See 26 U.S.C. § 6322; Waste Mgmt. of Missouri, Inc. v. Evert, 188 F.3d 1002, 1003-04 (8th Cir. 1999). As a result, the tax lien attaches not only to property belonging to the taxpayer on the assessment date, but also to "after-acquired property" (property acquired after the date the lien attaches) until the tax is paid or collection becomes barred by the statute of limitations. IRS Prac. & Proc. ¶ 14.07[1][b] Scope of the General Tax Lien, 1999 WL 1051006, at *1 (2016); see also McDermott, 113 S. Ct. at 1530-31.
A competing state lien is "choate" for "first in time" purposes only when it has been "perfected" in the sense that there is nothing more to be done, i.e., when "the identity of the lienor, the property subject to the lien, and the amount of the lien are established." United States v. Tolin, 827 F.3d 809, 812 (8th Cir. 2016) (quoting United States v. City of New Britain, 347 U.S. 81, 84 (1954)).
As noted above, Trane contends it has a security interest against the Disputed Funds. A security interest is defined as ...
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