TPF Deeds, LLC v. United States, 2:13–cv–01116–DN.
| Decision Date | 09 October 2015 |
| Docket Number | No. 2:13–cv–01116–DN.,2:13–cv–01116–DN. |
| Citation | 138 F.Supp.3d 1268 |
| Parties | TPF DEEDS, LLC; and PRM Investment Company, Plaintiffs, v. The UNITED STATES of America, Defendant. The United States of America, Counterclaim Plaintiff, v. TPF Deeds, LLC; and PRM Investment Company, Counterclaim Defendants. |
| Court | U.S. District Court — District of Utah |
Sara E. Bouley, Felicia B. Canfield, Action Law LLC, Salt Lake City, UT, Tyler S. Stoehr, Cottonwood Heights, UT, for Plaintiffs/Counterclaim Defendants.
Landon M. Yost, U.S. Department of Justice, Washington, DC, John K. Mangum, Us Attorney's Office, Salt Lake City, UT, for Defendant/Counterclaim Plaintiff.
, District Judge.
In this federal tax lien dispute, TPF Deeds, LLC ("TPF") and PRM Investment Company ("PRM") seek declaratory judgment that certain federal tax liens have been extinguished or do not attach to their respective interests in a piece of real property. For the reasons stated below, the United States' Motion for Summary Judgment1 is GRANTED, and TPF and PRM's Motion for Summary Judgment2 is GRANTED IN PART AND DENIED IN PART.
1. On December 27, 2004, the Internal Revenue Service ("IRS") made a timely and proper assessment pursuant to
26 U.S.C. § 6203
against Ernest Hewlett, with notice and demand for payment sent to Mr. Hewlett, for unpaid federal income taxes for the 1997 tax year, creating a lien upon Ernest Hewlett's property, including after-acquired property.3
2. On August 23, 2005, a Notice of Federal Tax Lien ("NFTL") against Ernest Hewlett in the amount of $1,068,560.44 dated August 17, 2005 was recorded as Entry No. 287694, in the Official Records of Wasatch County, Utah ("Lien No. 1").4 By the express terms of Lien No. 1, it self-released and operated as a "Certificate of Release" the day after the last day for re-filing of that lien, which was September 19, 2011. Lien No. 1 was not re-filed by the September 19, 2011 deadline.5
3. On August 26, 2005, a NFTL against Ernest Hewlett and Colleen Hewlett in the amount of $3,618.99 dated August 17, 2005 was recorded as Entry No. 287695, in the Official Records of Wasatch County, Utah ("Lien No. 2"). A Certificate of Release of Federal Tax Lien dated January 24, 2013, and recorded February 1, 2013, as Entry No. 386472, in the Official Records of Wasatch County, Utah, released Colleen Hewlett from Lien No. 2 but not Ernest Hewlett.6 Lien No. 2 correctly spelled the name of each taxpayer.7
4. On August 31, 2006, Ernest Hewlett acquired a one-third interest in real property located at 98 N. River Road, Midway, Wasatch County, Utah, and more particularly described as Township 3 South, Range 4 East, Salt Lake Base and Meridian:
5. The Property was conveyed by Claud Josiah McLendon III and Patricia S. McLendon, as grantors, to Ernest Hewlett, Colleen Hewlett, and Michael Hewlett, as grantees, via a warranty deed ("McLendon Deed"). The McLendon Deed was recorded on August 31, 2006 at 3:24 p.m. as Entry No. 306938 in the Official Records of Wasatch County.9
6. The purchasers of the Property are listed on the real estate agreement as Michael, Colleen, and Ernest Hewlett.10
7. The final HUD settlement statements also show that the purchasers of the Property are Michael, Colleen, and Ernest Hewlett.11
8. At the moment Ernest Hewlett acquired his interest in the Property, Lien No. 2 attached to that interest.12
9. That same day, Ernest Hewlett, Colleen Hewlett, and Michael Hewlett, as grantors, conveyed the Property to Celeste Hewlett, as grantee, via a warranty deed ("Celeste Hewlett Deed"). The Celeste Hewlett Deed was recorded on August 31, 2006 at 3:25 p.m. as Entry No. 306939 in the Official Records of Wasatch County.13
10. On December 1, 2008, a NFTL against Ernest Hewlett in the amount of $117,065.04 dated November 17, 2008 was recorded as Entry No. 342502 in the Official Records of Wasatch County, Utah ("Lien No. 3"). Lien No. 3 indicates that the delinquent taxes on which it is based were assessed in 2008.14
11. On December 1, 2008, a NFTL against Ernest Hewlett in the amount of $809,307.22 dated November 18, 2008 was recorded as Entry No. 342503 in the Official Records of Wasatch County, Utah ("Lien No. 4"). Lien No. 4 indicates that the delinquent taxes on which it is based were assessed in 2007 and 2008.15
12. On December 1, 2008, a NFTL against Ernest Hewlett in the amount of $260,585.31 dated November 18, 2008 was recorded as Entry No. 342504 in the Official Records of Wasatch County, Utah ("Lien No. 5"). Lien No. 5 indicates that the delinquent taxes on which it is based were assessed in 2007 and 2008.16
13. On April 21, 2009, a NFTL against Ernest Hewlett in the amount of $207,535.85 dated April 8, 2009 was recorded as Entry No. 347061 in the Official Records of Wasatch County, Utah ("Lien No. 6"). Lien No. 6 indicates that the delinquent taxes on which it is based were assessed in 2008.17
14. On October 20, 2009, SourceOne Financial, Inc. made a load ("Loan") to Celeste Hewlett in the original principal amount of $150,000.00 evidenced by a Trust Deed Note.18
15. To secure payment of the Loan, Celeste Hewlett, as trustor, executed and delivered to SourceOne Financial, Inc., a Trust Deed with Assignment of Rents dated October 20, 2009, naming Celeste Hewlett, as trustor, and SourceOne Financial, Inc., as beneficiary, was recorded against the Property on October 22, 2009, as Entry No. 353524, in Book 1002, at Pages 1596–1600, in the Official Records of Wasatch County, Utah (the "SourceOne Trust Deed").19
16. SourceOne Financial, Inc. ordered a title report from Founders Title when it made the $150,000 loan to Celeste Hewlett in order to ascertain whether there were any outstanding liens against the Property. The title commitment dated October 12, 2009, Order No. F–W16665, did not list any liens, such as federal tax liens, as exceptions. SourceOne Financial, Inc. relied upon the title commitment, and, without actual knowledge of any federal tax liens or other liens, closed the loan with Celeste Hewlett.20
17. On November 2, 2009, Source OneFinancial, Inc., executed and delivered to TPF Deeds, LLC, for valuable consideration, an Assignment of Trust Deed dated November 2, 2009, in which SourceOne Financial, Inc. assigned to TPF Deeds, LLC, a 69.333% undivided beneficial interest in the SourceOne Trust Deed and the indebtedness secured by the SourceOne Trust Deed, was recorded November 5, 2009, as Entry No. 353901, in Book 1003, at Page 1390, in the Official Records of Wasatch County, Utah (the "Assignment").21
18. Celeste Hewlett defaulted on the Loan and a nonjudicial foreclosure action was instituted.22
19. On June 28, 2011, a Trustee's Deed was recorded as Entry No. 370298, in Book 1037, at Pages 516 to 518, of the Official Records of Wasatch County, Utah, in favor of TPF Deeds, LLC (as to an undivided 69.333% interest) and SourceOne Financial, Inc. (as to an undivided 30.677% interest) (the "Trustee's Deed").23
20. On November 23, 2011, SourceOne Financial, Inc. conveyed an undivided 30.667% interest in the Property to PRM Investment Company via a Warranty Deed dated November 23, 2011, and recorded on November 30, 2011, as Entry No. 374376, in Book 1045, at Page 1570 (the "PRM Warranty Deed").24
21. PRM Investment Company did not have actual knowledge of any federal tax liens recorded against the Property prior to acquiring its interest in the Property.25
22. SourceOne Financial, Inc. and TPF Deeds, LLC did not have actual knowledge of any federal tax liens until shortly after the Trustee's Sale of the Property, when SourceOne Financial, Inc. obtained a copy of a title report ordered by a potential buyer of the Trust Deed Note evidencing the $150,000 loan to Celeste Hewlett that showed Lien No. 2.26
23. Prior to the recording of Lien No. 1, a Deed of Trust in the principal amount of $184,000 dated December 30, 2004, in which the McLendons were named as borrower, Founders Title was named as trustee, and Delta Employees Credit Union was named as beneficiary, was recorded against the Property on January 4, 2005, as Entry No. 278590, in Book 030, at Pages 0320–0332, of the Official Records of Wasatch County, Utah ("First Delta Credit Union Trust Deed").27
24. Prior to the recording of Lien No. 1, a Deed of Trust in the principal amount of $46,000 dated December 30, 2004, in which the McLendons were named as borrower, Stewart Title Company of Utah was named as trustee, and Delta Employees Credit Union was named as beneficiary, was recorded against the Property on January 4, 2005, as Entry No. 278591, in Book 0730, at Pages 0333–0339, of the Official Records of Wasatch County, Utah ("Second Delta Credit Union Trust Deed").28
25. The First Delta Credit Union Trust Deed and the Second Delta Credit Union Trust Deed were paid off in the amount of $181,446.53 and $71,429.79, respectively, on or about August 31, 2006, the same day the McLendon Deed and the Celeste Hewlett Deed were recorded.29
26. A free Grantor/Grantee online search in the Recorded Document Lookup of Wasatch County's public records for the taxpayer's exact name "Ernest Hewlett" (without quotation marks and with no comma) does not reveal the existence of Lien No. 2 or any of...
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