Thompson v. Adams

• Decision Date: 12 April 1988
• Docket Number: Bankruptcy No. 86-601-CIV-ORL-18.
• Parties: William F. THOMPSON, Trustee, Plaintiff, v. N. Lois ADAMS, a/k/a Naomi Lois Adams, f/k/a Lois A. Evans; Boyd D. Evans; United States of America; Oscar E. Kramer, Jr.; Akerman, Senterfitt & Eidson; the Springs Community Association, Inc.; Robert L. Poore, Esquire; Rinker Materials Corporation; and Michael Sigman, Defendants.
• Court: U.S. District Court — Middle District of Florida

685 F. Supp. 842

William F. THOMPSON, Trustee, Plaintiff, v. N. Lois ADAMS, a/k/a Naomi Lois Adams, f/k/a Lois A. Evans; Boyd D. Evans; United States of America; Oscar E. Kramer, Jr.; Akerman, Senterfitt & Eidson; the Springs Community Association, Inc.; Robert L. Poore, Esquire; Rinker Materials Corporation; and Michael Sigman, Defendants.

Bankruptcy No. 86-601-CIV-ORL-18.

United States District Court, M.D. Florida, Orlando Division.

April 12, 1988.

Shawn G. Rader, Lowndes, Drosdick, Doster, Kantor & Reed, P.A., Orlando, Fla., for William F. Thompson.

A. Clifton Black, Orlando, Fla., for N. Lois Adams.

Kendell W. Wherry, Asst. U.S. Atty., Orlando, Fla., and George T. Rita, Trial Atty., Dept. of Justice—Tax Div., Washington, D.C., for U.S.

Robert L. Taylor, Orlando, Fla., for Springs Community Ass'n, Inc.

ORDER

GEORGE KENDALL SHARP, District Judge.

In its October 15, 1987 order, the court delineated its reasons for concluding that plaintiff Thompson would take nothing in this foreclosure action, and advised that judgment would be entered following receipt of additional information from defendants the United States and The Springs Community Association, Inc. (Springs). (Doc. 61). These defendants were requested to submit legal memoranda, discussing the priority of their respectively held liens against defendants Adams and Evans as well as specific issues particular to the parties. The United States and Springs have filed their memoranda, and the court details herein its bases for deciding upon the judgment to be entered. The United States and Springs also have filed a joint motion to sell the subject property and to deposit the proceeds in the registry of the court pursuant to 28 U.S.C. §§ 2041-42. (Doc. 64).

Springs has six home association assessment liens, recorded from December 18, 1979 through May 17, 1985, against defendant Evans in the amount of $10,533.82. Because plaintiff could not locate defendant Evans, service by publication was accomplished in compliance with 28 U.S.C. § 1655. Default was entered against defendant Evans on October 3, 1986. Section 1655 provides in pertinent part:

If an absent defendant does not appear or plead within the time allowed, the court may proceed as if the absent defendant had been served with process within the State, but any adjudication shall, as regards the absent defendant without appearance, affect only the property which is the subject of the action.

28 U.S.C. § 1655. By its terms, § 1655 aids service upon absent defendants only in proceedings in rem and does not suffice for claims in personam. Union Camp Corp. v. Dyal, 460 F.2d 678, 685 (5th Cir.), cert. denied, 409 U.S. 849, 93 S.Ct. 56, 34 L.Ed.2d 90 (1972); Harrison v. Prather, 404 F.2d 267, 269 (5th Cir.1968) (per curiam); Stewart v. United States, 242 F.2d 49, 52 (5th Cir.1957); see Ward v. Humble Oil & Refining Co., 321 F.2d 775, 780 (5th Cir.1963); Royal Lace Paper Works, Inc. v. Pest-Guard Products, Inc., 240 F.2d 814, 816 (5th Cir.1957). Therefore, a personal, monetary judgment against defendant Evans would not be valid given his service by publication pursuant to § 1655.

Furthermore, in Florida, a married couple owns real estate as tenants by the entirety, unless a contrary interest is shown. Knapp v. Fredricksen, 148 Fla. 311, 4 So.2d 251, 252 (1941). Upon the dissolution of defendants Evans and Adams' marriage, they became tenants in common, each with an undivided one-half interest. Fla.Stat. § 689.15 (1977). Therefore, the liens held by Springs in defendant Evans' name are against him and cannot be pursued against defendant Adams.

Moreover, the Springs liens have not been reduced to judgment. Under 26 U.S. C. § 6323(a), formerly, § 3672, government liens for tax liability "imposed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until notice thereof...." 26 U.S.C. § 6323(a). The Supreme Court has interpreted judgment creditor "in the usual, conventional sense of a judgment of a court of record, since all states have such courts." United States v. Gilbert Associates, Inc., 345 U.S. 361, 364, 73 S.Ct. 701, 703, 97 L.Ed. 1071 (1953); United States v. Weissman, 135 So.2d 235, 238 (Fla.2d DCA 1961). A Florida federal court has held that "§ 6323 protects a creditor against a tax lien only when the creditor's judgment becomes a specific lien against the property to which the tax lien has attached." United States v. Cohen, 271 F.Supp. 709, 715 (S.D.Fla.1967); see Bryan Toyota of Fort Lauderdale, Inc. v. Fort Lauderdale Toyota, Inc., 1979 Stand.Fed.Tax Rep. (CCH) ¶ 9517 (S.D.Fla.1979) available on WESTLAW, 1979 WL 1423.

The Supreme Court also has held that the relative priority of federal tax liens is "always a federal question to be determined finally by the federal courts." United States v. Acri, 348 U.S. 211, 213, 75 S.Ct. 239, 241, 99 L.Ed. 264 (1955); United States v. Security Trust & Savings Bank, 340 U.S. 47, 49, 71 S.Ct. 111, 112, 95 L.Ed. 53 (1950); see United States v. Morrison, 247 F.2d 285, 287-88 (5th Cir.1957); United States v. First Federal Savings & Loan Association, 155 So.2d 192, 193 (Fla.2d DCA 1963); Weissman, 135 So.2d at 237. "Although a state court's classification of a lien as specific and perfected is entitled to weight, it is subject to reexamination by this Court." Security Trust & Savings Bank, 340 U.S. at 49-50, 71 S.Ct. at 113; see Acri, 348 U.S. at 213, 75 S.Ct. at 241 ("The state's characterization of its liens, while good for all state purposes, does not necessarily bind this Court."). In Security Trust & Savings Bank, the Supreme Court found that a federal tax lien recorded subsequent to an attachment lien, but prior to judgment by the attaching creditor, was superior to the inchoate attachment lien. 340 U.S. at 48-51, 71 S.Ct. at 112-113. Making the distinction that the attachment creditor did not have a judgment lien when the United States tax liens were recorded, the Court characterized the attachment lien as "contingent or inchoate—merely a lis pendens notice that a right to perfect a lien exists." Id. at 50, 71 S.Ct. at 113; see Cohen, 271 F.Supp. at 716-17.

Using the Security Trust & Savings Bank reasoning, a Florida appellate court held that federal tax liens, which had assessment dates prior to and subsequent to a landlord's statutory rent lien, were superior to the rent lien. Weissman, 135 So.2d at 237-38. Based upon the "first in time is first in right" principle, the trial court had adjudged only the federal lien recorded before the landlord's lien to be superior. Id. at 236; see United States v. Equitable Life Assurance Society, 384 U.S. 323, 327-28, 86 S.Ct. 1561, 1563-64, 16 L.Ed.2d 593 (1966); United States v. New Britain, 347 U.S. 81, 85, 74 S.Ct. 367, 370, 98 L.Ed. 520 (1954). Federal tax liability pursuant to 26 U.S.C. § 6321 arises at the time of assessment and continues until satisfaction. 26 U.S.C. § 6322; Weissman, 135 So.2d at 237; see Bryan Toyota, 79 Stand.Fed.Tax Rep. ¶ 9517 at 87,856; United States v. Ressler, 433 F.Supp. 459, 463 (S.D.Fla.1977), aff'd, 576 F.2d 650 (5th Cir. 1978) (per curiam), cert. denied, 440 U.S. 929, 99 S.Ct. 1265, 59 L.Ed.2d 485 (1979).

In Weissman, the court held that "all of the federal liens actually arose and became perfected liens on the respective assessment dates even though not recorded in the county records." 135 So.2d at 237. Because the landlord was not a judgment creditor, and, therefore, held an inchoate and unperfected lien at the time that the federal tax liens arose, the court reversed the trial court and held that "the landlord's lien was not entitled to priority under the doctrine of first in time is first in right or under any doctrine of relation back." Id. at 238; see Morrison, 247 F.2d at 287-88; Bryan Toyota, 79 Stand.Fed.Tax Rep. ¶ 9517 at 87,857. Likewise, the priority determination in this case is governed by federal, not state law. Since the Springs liens have yet to be reduced to judgment, they must yield to the superior, federal tax liens.

Because Springs cannot procure a personal, monetary judgment against defendant Evans, their assessment liens in his name alone are not recoverable against defendant Adams. In addition, the Springs is not a judgment creditor, and, therefore, the federal tax liens are superior. Accordingly, the Springs liens must defer to the federal tax liens.

In its memorandum, the United States designates the income tax liability that it is seeking against defendants/taxpayers: Boyd D. Evans, $57,875.49 for 1978 and $13,611.44 for 1979; Naomi Lois Adams, $65,197.74 for 1978, $40,604.65 for 1979 and $641.11 for 1981. "Regardless of when federal taxes are actually assessed, taxes are considered as due and owing, and constitute a liability, as of date the tax return for the particular period is required to be filed." Ressler, 433 F.Supp. at 463; Federal Deposit Insurance Corp. v. United States, 654 F.Supp. 794, 806 (N.D.Ga. 1986); see 26 U.S.C. § 6151; United States v. Hickox, 356 F.2d 969 (5th Cir.1966). The government duly assessed and recorded defendants/taxpayers' tax liability. 26 U.S. C. §§ 6322, 6502. Internal Revenue Service assessments are presumptively correct. Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 9, 78 L.Ed. 212 (1933); United States v. Hoffman, 643 F.Supp. 346, 348 (E.D.Wis.1986).

The United States is entitled to a lien "upon all property and rights to property, whether real or personal" belonging to a taxpayer, who neglects or refuses to pay any tax after demand plus interest, penalties and costs. 26 U.S.C. § 6321. Defendant Evans' service by publication, pursuant to 28 U.S.C. § 1655, does not preclude the government from adjudication "affecting only the property which is the subject of the action." Dyal, 460 F.2d at 685. Furthermore, the Supreme Court has held that a 26 U.S.C. § 7403 sale of property to satisfy tax liabilities of delinquent...