ert Stokey and
ert Stokey II, Plaintiffs v. China Sea Restaurant, Inc., et al.,
District Court, So.
November 14, 2002
Secs. 6321 and 6323]
Tax liens: Perfection of liens: Validity and priority against third
parties: Liquor license: Wrongful levy. --
liens against the assets of a restaurant corporation that failed to pay
employment taxes, which were properly filed with the office of the
secretary of state (
), had priority over third parties' interest in the entity's alcohol
beverage license. The third parties, who held an interest in the license
as collateral for various loans, reacquired ownership of the collateral
in lieu of foreclosure after the tax liens were filed and perfected.
Thus, the liens remained on the property in the hands of the third
parties, and the government held a superior interest in the license.
GRANTING THE UNITED STATES' MOTION FOR SUMMARY JUDGMENT
KING, District Judge: THIS CAUSE comes before the Court upon the
' Motion for Summary Judgment filed on
September 12, 2002
. Plaintiffs have not filed a Response, and the time to do so has
August 28, 1997
, Steven R. Moshy ("Moshy") and Debra S. Burrows
("Burrows") executed a Balloon Promissory Note, Lease
Agreement, Memorandum of Lease, Security Agreement or Chattel Mortgage,
a Pledge Agreement, and an Indemnity Agreement in favor of the
Plaintiffs related to the sale of China Sea Restaurant, Inc. ("
"). These documents pledged collateral, including Alcoholic
Beverage License 54-00098 5COP ("the license"), issued by the
Florida Department of Business and Professional Regulation, Division of
Alcoholic Beverages and Tobacco ("DABT"). On
September 26, 1997
, the Stokeys recorded their interest in the license with the DABT.
Beginning in 1999,
failed to pay its Federal employment taxes. On
October 26, 2000
, a Notice of Federal Tax Lien ("NFTL") was filed with the
Florida Secretary of State for the 1999 liabilities in the amount of
$47,742.22. NFTLs covering the 2000 liabilities were filed on
March 9, 2001
March 30, 2001
, in the amounts of $30,106.36 and $26,386.97 respectively.
February 16, 2001
, the Stokeys reacquired ownership of the collateral, in lieu of
foreclosure, from Moshy, Burrows, and China Sea, which granted the
Stokeys title to the personal property of
, including the interest in the license. On
March 22, 2001
, the IRS issued a levy for
's 1999 liabilities. A Notice of Levy was served upon the Stokeys on
that date. On
March 26, 2001
, the IRS seized the license. On
September 18, 2001
, the IRS released the levy, and issued another levy on that same date
for approximately $122,000.00, which included
's 1999 and 2000 liabilities. On
September 19, 2001
, the IRS re-seized the license.
STANDARD OF REVIEW
Summary judgment is appropriate only where it is shown that there is no
genuine dispute as to any material fact and that the moving party is
entitled to judgment as a matter of law. FED. R. CIV. P. 56; Celotex
Corp. v. Catrett, 477
317, 322 (1986). If the record as a whole could not lead a rational
fact-finder to find for the non-moving party, there is no genuine issue
for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
574, 587 (1986). On a motion for summary judgment, the court must view
the evidence and resolve all inferences in the light most favorable to
the non-moving party. Anderson v. Liberty Lobby, Inc., 477
242, 255 (1986). There is no requirement that the trial judge make
findings of fact.
, at 251.
The moving party bears the burden of pointing to that part of the record
which shows the absence of a genuine issue of material fact. If the
movant meets its burden, the burden then shifts to the non-moving party
to establish that a genuine dispute of material fact exists. See Hairston
, 9 F.3d 913, 918 (11th Cir. 1993). To meet this burden, the
non-moving party must go beyond the pleadings and "come forward
with significant, probative evidence demonstrating the existence of a
triable issue of fact." Chanel, Inc. v. Italian Activewear of
Florida, Inc., 931 F.2d 1472, 1477 (11th Cir. 1991). If the evidence
relied on is such that a reasonable jury could return a verdict in favor
of the non-moving party, then the court should refuse to grant summary
judgment. Hairston, 9 F.3d at 919. However, a mere scintilla of
evidence in support of the non-moving party's position is insufficient
to defeat a motion for summary judgment. Anderson, 477
at 252. If the evidence is merely colorable or is not significantly
probative, summary judgment is proper. See id. at 249-50.
In a wrongful levy suit, the initial burden is upon the plaintiff to
show that he holds title or some other ownership interest in the
property at issue. Morris v. United States [ 87-1
USTC ¶9241], 813 F.2d 343, 345 (11th Cir. 1987). The burden then
shifts to the
to establish a nexus between the taxpayer and the property by
However, the plaintiff retains the final obligation of persuading the
Court that the levy should be overturned.
Pursuant to 26 U.S.C. §6321, if a person fails to pay their tax
liabilities after demand, a lien arises in favor of the United States on
all property and rights to property of that person. The lien imposed by
§6321 arises on the date of assessment. 26 U.S.C. §6322. This
statutory lien is not valid against certain parties, as provided in §6323(a),
until notice of the tax lien has been filed pursuant to §6323(f). 1
Plaintiffs argue that the United States was required to file its notice
of federal tax lien with the DABT pursuant to Fla. Stat. §561.65.
However, §561.65 is not applicable. Instead, §703.901 governs the
filing of the notice of federal tax lien, and it stipulates, in
pertinent part, that:
(c) Notices of
federal liens upon personal property, whether tangible or intangible,
for obligations payable to the
, and certificates and notices affecting the liens, shall be filed as
1. If the
person against whose interest the lien applies is a corporation or a
partnership whose principle executive offices is in this state ... in
the office of the Secretary of State.
Therefore, because the
filed three Notices of Federal Tax Lien on
October 26, 2000
March 9, 2001
March 30, 2001
, with the Secretary of State, the federal tax liens were perfected on
those dates. The filing with the Secretary of State on
October 26, 2000
, preceded any transfer of ownership of the liquor license to the
Stokeys, and the liquor license was clearly encumbered by the first NFTL
at the time of the transfer. The transfer of property subsequent to the
attachment of a federal tax lien does not affect the lien, which remains
on property in the hands of the transferee. United States v. Bess
USTC ¶9595], 357 U.S. 51, 57 (1958). Therefore, the
' interest in the liquor license is superior to the interest of the
Accordingly, after a careful review of the record, and the Court being
otherwise fully advised, it is
ORDERED and ADJUDGED that the
' Motion for Summary Judgment be, and the same is hereby, GRANTED.
DONE and ORDERED.
OF FINAL JUDGMENT
Pursuant to Fed.R.Civ.P. 58 and the Court's Order Granting the United
States' Motion for Summary Judgment, it is
ORDERED and ADJUDGED that judgment is entered in favor of the United
States and against Plaintiffs
ert Stokey and
ert Stokey II. The case, namely the entire Complaint, is dismissed with
prejudice. This case is CLOSED. The Court retains jurisdiction of the
above-styled action to determine fees, costs, and expenses incurred by
in defending this action. It is further
ORDERED and ADJUDGED that any pending motions are DENIED as moot.
DONE and ORDERED.
Section 6323(f) provides that the notice shall be filed "[i]n the
case of personal property, whether tangible or intangible, in one office
within the State ... as designated by the laws of such State, in which
the property subject to the lien is situated...." 26 U.S.C. §6323(f)(1)(A)(ii).
¶50,827] Waste Management of Missouri, Inc., Interpleader Plaintiff v.
Donna S. Evert,
United States of America
, Defendant-Appellee, William D. Nichols, Intervenor-Appellant
U.S. Court of Appeals, 8th Circuit, 98-3395, 8/27/99, 188 F3d 1002,
Affirming two District Court decisions, 97-2
USTC ¶50,985 and 98-2
Tax liens: State law: Priority of liens: Perfection of liens:
Judgment creditors.--A notice of federal tax lien was properly filed
with the "official records" of the applicable county's
Commissioners, despite the fact that state (Florida) law specified that
the notice was to be filed with the circuit court clerk. Thus, the lien
had priority over subsequently perfected liens of judgment creditors
with respect to interpleaded funds owed to the taxpayer by a third
party. The judgment creditor's contentions that the government filed its
lien notice in the wrong office and that the lien was not valid against
's Federal Lien Registration Act were rejected. The county in which the
notice was filed had exercised its right under the state constitution to
designate different offices for the filing of public documents, such as
and ARNOLD, Circuit Judges, and WATERS, *
Management of Missouri, Inc. ("Waste Management"), was
contractually indebted to taxpayer E. Scott Evert
("Taxpayer"), a resident of
April 20, 1995
filed a notice of federal tax lien against all of Taxpayer's property in
the "official records book" of the Broward County
Commissioners. Taxpayer's judgment creditors Donna S. Evert and William
D. Nichols perfected their judgment liens against monies owed by Waste
May 13, 1997
. Generally, when a federal tax lien is in the competition, the first
lien in time has priority, and state law governs what constitutes a
perfected lien. See
v. Dishman Indep. Oil, Inc., 46 F.3d 523, 526 (6th Cir. 1995). In
these two lawsuits, the judgment creditors seek to capture Waste
Management contract payments on the ground that the government's lien is
unperfected because it was filed in the wrong
office. The district courts 1
granted summary judgment in favor of the United States, and the judgment
creditors filed these consolidated appeals. We affirm.
of unpaid federal income taxes creates a lien in favor of the
on all property "belonging to" the taxpayer. See 26
U.S.C. §6321; Thomson v. United States [95-2 USTC ¶50,549], 66
F.3d 160 (8th Cir. 1995). To be valid against a taxpayer's subsequent
secured creditors, such as judgment creditors, the government must give
formal notice of its tax lien in accordance with 26 U.S.C. §§6323(a)
& (f). For personal property, like the right to Waste Management's
contract payments, notice of the tax lien must be filed--
in one office
within the State (or the county, or other governmental subdivision), as
designated by the laws of such State, in which the property subject to
the lien is situated. . . .
If State law does not designate one such office, the lien notice must be
filed "[i]n the office of the clerk of the United States district
court for the judicial district in which the property subject to the
lien is situated." §6323(f)(1)(B). If the government files notice
of its tax lien in the wrong office--which is primarily an issue of
state law--then the judgment creditor has a superior claim to the
personal property in question. See Gordon White Constr. Co., Inc. v.
Southland Inv. Co. [75-2 USTC ¶9771], 521 F.2d 856, 857 (5th Cir.
Constitution states, "When not otherwise provided by county charter
or special law approved by vote of the electors, the clerk of the
circuit court shall be ex officio clerk of the board of county
commissioners, auditor, recorder and custodian of all county
funds." FLA. CONST. art. VIII, §1(d).
counties may enact a county charter providing for "local
self-government not inconsistent with general law." FLA. CONST.
art. VIII, §1(g) and (c). The voters of
approved the Broward County Charter in November 1974. That Charter
transferred responsibility for recording public documents to an agency
of the Broward County Commissioners. Broward
, art. IV, §4.02(C). Consistent with the Broward County Charter, the
filed its lien notice with the "official records" of the
Broward County Commissioners, rather than with the Broward County
Circuit Court or the United States District Court for the Southern
District of Florida.
creditors rely on the Florida Legislature's 1992 enactment of the
Florida Uniform Federal Lien Registration Act ("the Act").
FLA. STAT. §713.901. The Act specifies that liens against an
individual's personal property are to be filed "in the office of
the clerk of the circuit court of the county where the person against
whose interest the lien applies resides at the time of filing of the
notice of lien." FLA. STAT. §713.901(3)(c)(4). The judgment
creditors argue that either §713.901(3)(c) implicitly repealed the
Broward County Charter provision and therefore lien notices must be
filed with the clerk of the circuit court, or §713.901(3)(c) created two
state offices in which tax lien notices may be filed, triggering the
requirement in 26 U.S.C. §6323(f)(1)(B) that federal tax lien notices
be filed with the clerk of the local federal court. Under either theory,
filed its lien notice in the wrong office and the lien is not valid
against the judgment creditors. We disagree.
creditors' argument rests on the mistaken assumption that, in passing
the Act, the Florida Legislature failed to consider the possibility that
some counties--like Broward--had exercised their authority under the
Florida Constitution to designate different offices for the filing of
public documents such as lien notices. However, subsection (3)(b) of the
Act explicitly states:
If by law the
county recorder and custodian of the official records of a county is
other than the clerk of the circuit court, a reference in this section
to the clerk of the circuit court shall be deemed to be the county
recorder so designated by law.
this provision is in a different subsection than §713.901(3)(c), on
which the judgment creditors rely, its plain language states that it
applies to all references "in this section." (Emphasis
added.) Thus, the Act is consistent with the Broward County Charter, and
the two read together provide for only one state office in
for the filing of lien notices. By filing its lien notice in that
complied with 26 U.S.C. §6323(f), and its lien is valid against the
judgment creditors under §6323(a).
of the district courts are affirmed.
The HONORABLE H. FRANKLIN WATERS, United States District Judge for the
District of Arkansas, sitting by designation.
The HONORABLE CATHERINE D. PERRY and the HONORABLE DONALD J. STOHR,
United States District Judges for the Eastern District of Missouri.
United States of America
, Plaintiff v. Wilford A. Simpson, Janet L. Simpson, Cynda B. Simpson,
William A. Simpson, Warren A. Simpson, Whitney A. Simpson and Wesley A.
District Court, No. Dist. Fla.,
Secs. 6321 and 7402 ]
Liens and levies: Property subject to: Real property: Transfer of
ownership: Tenancy by the entireties: Fraudulent transfer: Jurisdiction:
District court: Mootness.--The IRS was not entitled to enforce a
lien against an individual taxpayer with respect to real property that
he held with his wife as a tenant by the entireties since, under state
(Florida) law, a judgment lien could not attach to property held by the
entireties. Moreover, the question of whether the husband made a
fraudulent subsequent transfer of the property to his wife in fee simple
was moot since the property would still have been a tenancy by the
entireties if the transfer were fraudulent.
Jurisdiction: District court: Sanctions: Federal Rule of Civil
Procedure 11: Frivolous litigation.--Married taxpayers were not
entitled to Rule 11 sanctions against the government for its allegedly
frivolous litigation position involving a lien on real property that the
taxpayers held as tenants by the entireties. The government was required
to file a responsive memorandum to the motion for summary judgment filed
by the taxpayers.
Ide, Department of Justice,
, for plaintiff. Wilford Alex Simpson, Janet L.Simpson, General
, pro se.
comes before the Court on the parties' motions for summary judgment
(docs. 26, 31). Also pending is Defendants' motion for Rule 11
sanctions, (doc. 34), which Plaintiff opposes (doc. 40). The Court has
taken both motions for summary judgment under advisement, (docs. 30,
37), and is now prepared to rule on all motions. For the reasons stated
below, Defendants' motion for summary judgment is GRANTED. Plaintiff's
motion for summary judgment and Defendants' motion for sanctions are
STATEMENT OF THE CASE
and Defendants agree that the facts in the instant action are
undisputed, and indeed both recite almost identical factual
circumstances in the memoranda in support of their respective motions
for summary judgment.
December 29, 1983
Defendants Wilford and Janet Simpson, as husband and wife, acquired as
tenants by the entireties a parcel of property located in
. That property, totaling approximately 27.77 acres, also includes
buildings and an airplane runway.
October 12, 1984
, Defendant Wilford Simpson transferred his interest in the property to
Janet Simpson by quitclaim deed.
June 10, 1985
Plaintiff assessed it first tax liability against Defendant Wilford
Simpson for the tax year 1981.
October 30, 1987
Plaintiff filed a notice of federal tax lien as to Defendant Wilford
Simpson's 1981 tax liability.
December 17, 1987
Defendant Janet Simpson transferred her interest in the property by
warranty deed to her children, Defendants Cynda, William, Warren,
Whitney, and Wesley Simpson, but retained a life estate in the property.
April 22, 1988
the children transferred their interest in the property by warranty deed
to only children Cynda and William Simpson, but still reserved a life
estate for Janet Simpson.
June 24, 1988
the Defendants Cynda and William Simpson transferred their interest into
the Earnest Mill Family Preservation Trust. Janet Simpson still retained
a life estate in the property.
additional tax liabilities were assessed by Plaintiff against Defendant
Wilford Simpson in the years 1991, 1994, and 1995 for the tax years
1984-1992. The respective tax liens were subsequently filed in 1992,
1994, and 1995. The total unpaid balance of tax liability alleged by
Plaintiff is $1,284,537.10.
penalties were also assessed against Defendant Wilford Simpson in 1992
and 1994 for tax years 1978-1981, totaling $2,696.66. Notice of liens
were filed as to these assessments in 1994.
April 29, 1992
May 27, 1994
notices of federal tax lien were filed with the Clerk of the
against the Defendants Janet, Cynda, William, Warren, Whitney, and
Wesley Simpson as nominees of Wilford A. Simpson.
Wilford Simpson has not paid either the balance of tax liability or the
civil penalties assessed in 1985 and thereafter.
May 19, 1997
Plaintiff filed this civil action seeking a monetary judgment against
Defendant Wilford A. Simpson for the unpaid balances and foreclosure of
its liens against the 27.77 acres of property and structures located in
(doc. 1). Default judgment was entered against Defendant Wilford Simpson
in the amount of $1,284,537.10 for unpaid federal income taxes and
$2,696.66 for unpaid civil penalties as of
February 28, 1996
plus further interest and statutory additions as allowed by law (doc.
however, timely filed a responsive pleading and moved for summary
judgment against Plaintiff (docs. 26, 27). After the Court took that
motion under advisement, (doc. 30), Plaintiff filed a cross-motion for
summary judgment, which also served as its response in opposition to
Defendants' motion (doc. 31). The Court has taken that motion under
advisement as well, (doc. 37), and is prepared to rule on both motions. 2
MOTIONS FOR SUMMARY JUDGMENT
judgment is appropriate where the pleadings, depositions, answers to
interrogatories, admissions on file, and affidavits, if any, show that
no genuine issue of material fact exists and that the party moving is
entitled to judgment as a matter of law. Celotex Corp. v. Catrett,
317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed. 2d 265 (1986). The substantive
law will identify which facts are material and which are irrelevant.
v. Liberty Lobby, Inc., 477
242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed. 2d 202 (1986). An issue of fact
is material if it is a legal element of the claim under the applicable
substantive law which might affect the outcome of the case.
At the summary
judgment stage, a court's function is not to weigh the evidence to
determine the truth of the matter, but to determine whether a genuine
issue of fact exists for trial. Anderson, 477
at 249, 106 S.Ct. at 2510. A genuine issue exists only if sufficient
evidence is presented favoring the nonmoving party for a jury to return
a verdict for that party.
"If reasonable minds could differ on the inferences arising from
undisputed facts, then a court should deny summary judgment." Miranda
v. B & B Cash Grocery Store, Inc., 975 F.2d 1518, 1534 (11th
Cir. 1992) (citing Mercantile Bank & Trust Co. v. Fidelity and
Deposit Co., 750 F.2d 838, 841 (11th Cir. 1985)).
the sufficiency of the evidence in favor of the nonmoving party, the
court must view all the evidence, and all factual inferences reasonably
drawn from the evidence, in the light most favorable to the nonmoving
party. Hairston v. Gainesville Sun Publ'g Co., 9 F.3d 913, 918
(11th Cir. 1993). The court is not obliged, however, to deny summary
judgment for the moving party when the evidence favoring the nonmoving
party is merely colorable or is not significantly probative. Anderson,
at 249, 106 S.Ct. at 2510. A mere scintilla of evidence in support of
the nonmoving party's position will not suffice to demonstrate a
material issue of genuine fact that precludes summary judgment.
v. Darby, 911 F.2d 1573, 1577 (11h Cir. 1990).
law, property held as a tenancy by the entireties cannot be charged with
the individual debts of either spouse, in the absence of fraud. United
States v. Gurley [69-2 USTC ¶9562], 415 F.2d 144, 149 (5th Cir.
1969) (citing Meyer v. Faust, 83 So. 2d 847 (
"Because of the unique nature of a tenancy by the entireties under
law, a judgment lien cannot attach to real property held in such an
estate . . ., and since property held by the entireties is not subject
to levy and sale under execution, an 'Execution Lien' cannot attach
undisputed that Defendants Wilford and Janet Simpson took title to the
property at issue as tenants by the entireties, 4
and Plaintiff readily concedes that "[t]here is no evidence before
this Court that the Simpsons acquired the real property as tenants by
the entireties in order to defeat Mr. Simpson's creditors" (doc.
31, memorandum at 9). Therefore, Defendant Wilford Simpson's interest in
the property was unreachable by Plaintiff or any other creditor while
held as a tenancy by the entireties.
circumstance was at issue before the Fifth Circuit in Gurley:
property here involved was then held by the Gurleys in a tenancy by the
entirety, the filing of this federal tax assessment with the Clerk of
the Circuit Court of Duval County would not have created a United States
tax lien against said property because in matters involving the creation
and enforcement of federal tax liens the Federal Courts respect those
laws of a state which establish and regulate property rights within a
USTC ¶9562], 415 F.2d at 150 (citing Folsom v. United States
[62-2 USTC ¶9648], 306 F.2d 361 (5th Cir. 1962); United States v.
American Nat'l Bank [58-2 USTC ¶9564], 255 F.2d 504 (5th Cir.
ultimately concluded that if the property was in fact held as an estate
by the entireties, it could only be reached by creditors once the
spouses' interests converted to a tenancy in common, where each spouse's
separate interests in such property become liable for his or her
If on remand the district court determined that the Gurleys were tenants
by the entireties, then the tenancy would be destroyed only upon the
divorce of the husband and wife, thus creating a tenancy in common and
simultaneously allowing the United States tax lien to attach to each
In the instant
case, there simply was no opportunity for Plaintiff to reach the
individual interest of Defendant Wilford Simpson. As a tenant by the
entireties under the laws of
, his interest was unreachable by any creditor.
15621 S.W. 209th Avenue
, 894 F.2d 1511, 1514-15 (11th Cir. 1990). Moreover, because the
property was then conveyed to only Janet Simpson in fee simple, Wilford
Simpson had absolutely no interest at the time the tenancy by the
entireties was destroyed:
except husband and wife have a present interest in an estate by the
entireties when such estate is unencumbered by any lien existing prior
to the creation of such estate and is unencumbered by any lien created
jointly by the husband and wife after the estate by entireties came into
being. It is not subject to execution for the debt of the husband. It is
not subject to partition; it is not subject to devise by will; neither
it is subject to the laws of descent and distribution. It is, therefore,
an estate over which the husband and wife have absolute disposition and
as to which each, in the fiction of the law, holds the entire estate as
one person. Therefore, there appears to be no plausible reason why the
law should not recognize as valid any formal agreement executed
according to law whereby one spouse would be divested of his or her
interest in such estate and the other be invested with the unqualified
, 200 So. 76 (
argues that the subsequent transfers to Janet Simpson, then to her
children, and ultimately to the Mills Family Preservation Trust were
fraudulent, as those grantees were effectively nominees of Wilford
Simpson, and that it is entitled to foreclose its liens against the
property (doc. 31, memorandum at 8-14). However, a large component of
this argument becomes moot when considered in light of the safeguards
afforded property held by tenants by the entireties. If, arguendo,
the transfer to Janet Simpson was not fraudulent, then clearly she hold
the property in fee simple and is free to dispose of it as she wishes.
On the other hand, if that conveyance was fraudulent, Janet Simpson
would not have fee simple title to the property, but rather the property
would still be held by Wilford and Janet Simpson as tenants by the
entireties. In either case, the subsequent transfers to the children and
trust become irrelevant, as they too are either entirely valid or
entirely void depending on the validity of the initial transfer to
it is also unnecessary to address whether the conveyance from Wilford
and Janet Simpson to only Janet was fraudulent. As discussed immediately
above, if the conveyance to Janet was fraudulent, the property remained
a tenancy by the entireties and was unreachable by creditors of only
Wilford Simpson. If the conveyance was valid, then Janet Simpson held
the property in fee simple and Wilford had no interest at all. While
there is a possibility that by divorce or some other reason the tenancy
by the entireties could be destroyed, thus creating a tenancy in common
and making the validity of subsequent conveyances of utmost importance,
that day has not yet arrived. As such, the Court declines to make those
determinations today. 6
The facts of
this case mandate an unusual result. Frequently, a debtor will attempt
to covey his own property to a third party or into a tenancy by the
entireties as an attempt to hinder or obstruct his creditors. Without
discerning the motives behind their decision, the Court notes that
Defendants did exactly the opposite, destroying the tenancy by the
entireties in favor of a fee simple held by Janet Simpson alone. While
this conveyance, if valid, would have placed the property beyond the
reach of Wilford's individual creditors, the tenancy by the entireties
already afforded that protection. Nonetheless, because it is undisputed
that Wilford and Janet Simpson acquired the 27.77 acre parcel as tenants
by the entireties without intention to defraud or avoid creditors, the
Plaintiff is simply unable to enforce a lien against Mr. Simpson's
interests in the property as it is held today, regardless of subsequent
conveyances. Therefore, summary judgment in favor of Defendants is
MOTION FOR SANCTIONS
also move for Rule 11 sanctions against Plaintiff and allege that the
Government's motion for summary judgment is "frivolous, not
'substantially justified,' and is not 'warranted by existing law or by a
nonfrivolous argument for the extension, modification, or reversal or
existing law' " (doc. 34:1). However, the Court finds Defendants'
argument unpersuasive. By filing their own motion for summary judgment,
Defendants invited a response in opposition from the Plaintiff. Indeed,
the non-movant is required in this district to file a responsive
memorandum to a motion for summary judgment and failure to do so
"may be sufficient cause to grant the motion." N.D. FLA. Loc.
of Rule 11 "stresses the need for some prefiling inquiry into both
the facts and the law to satisfy the affirmative duty imposed by the
rule." FED. R. CIV. P. 11 advisory committee's note. The rule, as
amended in 1983, is intended to "reduce frivolous claims, defenses
or motions" and to deter "costly meritless maneuvers,"
thus avoiding unnecessary delay and expense in litigation. Donaldson
v. Clark, 819 F.2d 1551, 1556 (11th Cir. 1987) (citations omitted).
The standard for testing conduct under Rule 11 is "reasonableness
under the circumstances," a standard more stringent than the
original good faith requirement required under the rule.
Where there is some legal and factual basis for the argument, sanctions
are inappropriate. See, e.g., Davis v. Carl, 906 F.2d 533, 536-37
(11th Cir. 1990).
In the instant
case, Plaintiff's arguments are well-grounded in Eleventh Circuit
jurisprudence. Although they now fail because of their inapplicability
to the unusual factual posture of this case, the significance of those
arguments may come to bear in the future. Simply because the Court finds
those arguments unavailing today does not mean they are without merit,
nor does it compel this Court to resort to Rule 11 sanctions. Moreover,
as Plaintiff was required to respond to Defendants' motion, it's
cross-motion for summary judgment did not impose any additional expenses
upon the Court or the parties than if it had been titled only as a
responsive memorandum. 7
For these reasons, the Court finds that sanctions are not proper.
ruling in this matter may be summarized as follows, and IT IS HEREBY
JANET, CYNDA, WILLIAM, WARREN, WHITNEY, AND WESLEY SIMPSON's motion for
summary judgment (doc. 26) is GRANTED and summary judgment is
hereby entered in favor of those Defendants. Plaintiff takes nothing by
this action from said Defendants who shall go without day.
cross-motion for summary judgment (doc. 31) is DENIED.
motion for Rule 11 sanctions is DENIED.
Only Wilford A. Simpson defaulted. Defendants Janet, Cynda, William,
Warren, Whitney, and Wesley Simpson remain and are the only defendants
moving for summary judgment and sanctions.
Additionally, Defendants filed a motion for Rule 11 sanctions. (doc.
34), which is opposed by Plaintiff (doc. 40). That motion will also be
disposed of in this order.
In Bonner v. City of Prichard the Eleventh Circuit adopted as
binding precedent all of the decisions of the former Fifth Circuit
handed down prior to the close of business on
September 30, 1981
. 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
A tenancy by the entireties cannot exist unless the five
"unities" of marriage (the joint owners must be married to
each other), title (they must both have title to the property), time
(they must have both received title from the same conveyance), interest
(they must have an equal interest in the whole of the property), and
control (they must both have the right to use the whole property) are
present. United States v. 15621 S.W. 209th Avenue, 894 F.2d 1511,
1514 (11th Cir. 1990); United States v. Gurley [69-2 USTC ¶9562],
415 F.2d 144, 149 (5th Cir. 1969). However, as stated previously,
Plaintiff does not contest that Wilford and Janet Simpson held the
property as tenants by the entireties.
Unless, of course, the children took the property as bona fide
purchasers for value. Even if this were the case, it would have no
bearing on the outcome of this action as the children's purchases would
then be protected from prior creditors under the
statutes even if the transfer to Janet was fraudulent. See United
States v. Ressler [77-1 USTC ¶9459], 433 F.Supp. 459, 464 (S.D.
Fla. 1977), aff'd [78-2 USTC ¶9571], 576 F.2d 650 (5th Cir.
If that day arrives, at least a portion of the property would presumably
be reachable as a tenancy in common between Wilford Simpson and his
wife; that is if Plaintiff could demonstrate that the conveyances made
to Janet Simpson and then to the children and trust were fraudulent.
The Court reminds Defendants that the local rules required them to file
their own responsive memorandum and statement of facts in opposition to
Plaintiff's cross-motion. The Court did not hold them to that strict
standard here, as each motion for summary judgment also effectively
serves as opposition to the other, making additional argument
¶50,294] In re Darrell Joe Carrens and Linda Dell Carrens, Debtors.
Darrell Joe Carrens, Linda Dell Carrens, and Terry Smith, Chapter 13
Trustee, Plaintiffs v. United States of America, Defendant
Bankruptcy Court, Mid. Dist. Fla.,
, 198 BR 999.
[Code Sec. 6323 ]
Validity of lien: Bankruptcy: Purchaser: Bona fide purchaser:
A federal tax lien on a married couple's vehicles was perfected and
enforceable against a bona fide purchaser at the commencement of the
couple's bankruptcy case because the IRS properly filed a notice of lien
with the clerk of the circuit court in the county of the debtors'
residence. State (
) law specifically provided that the department of motor vehicles was
not a recording office for liens on motor vehicles, and the tax lien did
not have to be recorded on the vehicle's certificate of title. The tax
liens on the couple's vehicles and other personal property could not be
avoided under section
545(2) of the Bankruptcy Code because the bankruptcy trustee was not
entitled to assert the superpriority status of a purchaser. The
bankruptcy trustee merely acquired the characteristics of a traditional
bona fide purchaser under the Bankruptcy Code and did not possess the
additional characteristics of a purchaser under Code Sec.
6323(b) . The Bankruptcy Code did not the grant the trustee
hypothetical possession of the vehicles or other characteristics
necessary to satisfy the purchaser requirement of Code Sec.
6323 ; thus, the couple could not avoid the liens.
Carrens, Linda Dell Carrens, Terry E. Smith, pro se. Michael
Barnett, 115 N. MacDill Ave., Tampa, Fla. 33609, for plaintiffs. Philip
Doyle, United States Attorney General, Department of Justice,
Washington, D.C. 20530, for defendant.
ON MOTION FOR SUMMARY JUDGMENT AND CROSS-MOTION FOR PARTIAL SUMMARY
came before the Court to consider the Motion for Summary Judgment filed
by Darrell Joe Carrens and Linda Dell Carrens (the "Debtors"),
together with the Cross-Motion for Partial Summary Judgment filed by the
United States of America (the United States). The Motions relate to a
Complaint to Determine Secured Status and to Avoid Statutory Lien filed
by the Debtors and Terry E. Smith (the "Trustee"), the Trustee
in the Debtors' Chapter 13 case (the Debtors and the Trustee are the
has asserted a federal tax lien on the Debtors' personal property, which
includes their motor vehicles, and real estate. In Count I of the
Complaint, the Plaintiffs request the Court to avoid the lien asserted
on the Debtors' vehicles and personal property pursuant to Section
545(2) of the Bankruptcy Code. In Count II of the Complaint, the
Plaintiffs request the Court to determine that the secured portion of
' claim is $3,000, based on the amount of the Debtors' equity in their
homestead real property. In its Answer to the Complaint, the United
States asserts that its lien is not avoidable under §545
because the lien was perfected against a bona fide purchaser at the
commencement of the case, and because the Chapter 13 Trustee is not
entitled to the "superpriority" rights of a purchaser as
provided by the Internal Revenue Code.
have filed the Motion for Summary Judgment, and the
has filed a Cross Motion for Summary Judgment. Both parties contend that
there is no genuine issue as to any material fact, and that they are
entitled to a judgment as a matter of law with respect to the avoidance
of the lien on the Debtors' vehicles and personal property. Both parties
also appear to concede, however, that a factual issue exists regarding
the amount of the Debtors' equity in their homestead real property.
Consequently, the entry of a summary judgment is not appropriate with
respect to a determination of the secured portion of the
' claim on such real property.
filed their Petition under Chapter 13 of the Bankruptcy Code on
July 6, 1994
. In connection with their filing, the Debtors listed various
automobiles and personal property on their schedules of assets. The
parties agree that the description and value of these assets are as
Furniture ........................................................... $ 2,000
Vehicles ............................................................ 7,900
Clothing ............................................................ 100
Jewelry ............................................................. 270
Hobby equipment ..................................................... 180
Other personal property ............................................. 100
Total ............................................................ $10,550
also listed their homestead on their schedule of real property. The
Debtors claim that the amount of their equity in the homestead real
property is $3,000. The
claims that the amount of the Debtors' equity in the homestead real
property is $16,000.
scheduled their interest in all of their personal property except the
motor vehicles as exempt, and scheduled their interest in their
homestead real property as exempt.
timely filed a Proof of Claim in the Debtors' bankruptcy case in the
total amount of $13,662.84. Of this total amount, the sum of $12,920.64
was filed as a secured claim. The
bases its security on a Notice of Federal Tax Lien filed with the Clerk
of the Circuit Court of Hillsborough County, Florida, on
July 20, 1993
September 20, 1993
, prior to the commencement of the Debtors' bankruptcy case. The
contends that its lien extends to all property and rights to property
owned by the Debtors.
11 U.S.C. §545
. Statutory liens
may avoid the fixing of a statutory lien on property of the debtor to
the extent that such lien--
(2) is not
perfected or enforceable at the time of the commencement of the case
against a bona fide purchaser that purchases such property at the time
of the commencement of the case, whether or not such a purchaser exists.
(h) The debtor
may avoid a transfer of property of the debtor or recover a set-off to
the extent that the debtor could have exempted such property under
subsection (g)(1) of this section if the trustee had avoided such
transfer is avoidable by the trustee under section
544 , 545 , 547
, 548, 549, or 724(a)
of this title or recoverable by the trustee under section
553 of this title; and
trustee does not attempt to avoid such transfer.
Statutes. Notice of lien on motor vehicles or mobile homes; notation on
certificate; recording of lien.--
(1) Each lien,
mortgage, or encumbrance on a motor vehicle or mobile home titled in
this state shall be noted upon the face of the Florida certificate of
title or on a duplicate or corrected copy thereof, as provided by
law;.... Except for the recording of liens upon motor vehicles or mobile
homes for which no
certificates of title have been issued as provided in subsection (3),
the department shall not be a recording office for liens on motor
vehicles or mobile homes.
(2) ... No
interest of a statutory nonpossessory lienor; the interest of a
nonpossessory execution, attachment, or equitable lienor; or the
interest of a lien creditor as defined in s. 679.301(3), if
nonpossessory, shall be enforceable against creditors or subsequent
purchasers for a valuable consideration unless such interest becomes a
possessory lien or is noted upon the certificate of title for the
subject motor vehicle or mobile home prior to the occurrence of the
Uniform Federal Lien Registration Act.
Title. This section may be cited as the "Florida Uniform Federal
Lien Registration Act."
This section applies only to federal tax liens and to other federal
liens, notices of which, under any act of Congress or any regulation
adopted pursuant thereto, are required or permitted to be filed in the
same manner as notices of federal tax liens.
(3) Place of
(a) Notices of
liens, certificates, and other notices affecting federal tax liens or
other federal liens, notices of which, under any act of Congress or any
regulation adopted pursuant thereto, are required or permitted to be
filed in the same manner as notices of federal tax liens, must be filed
in accordance with this section.
(c) Notices of
federal liens upon personal property, whether tangible or intangible,
for obligations payable to the
, and certificates and notices affecting the liens, shall be filed as
4. In all
other cases, in the office of the clerk of the circuit court of the
county where the person against whose interest the lien applies resides
at the time of filing of the notice of lien.
of application and construction. This section shall be applied and
construed to effectuate its general purpose to make uniform the law with
respect to the subject of this section among the states enacting it.
26 U.S.C. §6321
. Lien for taxes.
If any person
liable to pay any tax neglects or refuses to pay the same after demand,
the amount (including any interest, additional amount, addition to tax,
or assessable penalty, together with any costs that may accrue in
addition thereto) shall be a lien in favor of the United States upon all
property and rights to property, whether real or personal, belonging to
26 U.S.C. §6323
. Validity and Priority Against Certain Persons.
Purchasers, holders of security interests, mechanic's lienors, and
judgment lien creditors.--The lien 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 which meets the requirements of subsection (f) has been
filed by the Secretary.
Protection for certain interests even though notice filed.--Even
though notice of a lien imposed by section
6321 has been filed, such lien shall not be valid--
Vehicles.--With respect to a motor vehicle, ... as against a
purchaser of such motor vehicle, if--
the time of the purchase such purchaser did not have actual notice or
knowledge of the existence of such lien, and
before the purchaser obtains such notice or knowledge, he has acquired
possession of such motor vehicle and has not thereafter relinquished
possession of such motor vehicle to the seller or his agent.
Personal property purchased in casual sale.--With respect to
household goods, personal effects, or other tangible personal property
... purchased (not for resale) in a 'casual sale for less than $250, as
against the purchaser, but only if such purchaser does not have actual
notice or knowledge (A) of the existence of such lien, or (B) that the
sale is one of a series of sales.
for filing notice; form.--
for filing.--The notice referred to in subsection (a) shall be
property.--In the case of real property, in one office within the
State (or the county, or other governmental subdivision), as designated
by the laws of such State, is which the property subject to the lien is
Personal property.--In the case of personal property, whether
tangible or intangible, in one office within the State (or the county,
or other governmental subdivision), as designated by the laws of such
State, in which the property subject to the lien is situated, except
that State law merely conforming to or reenacting Federal law
establishing a national filing system does not constitute a second
office for filing as designated by the laws of such State; or
clerk of the district court.--In the office of the clerk of the
United States district court for the judicial district in which the
property subject to the lien is situated, whenever the State has not by
law designated one office which meets the requirements of subparagraph
Definitions.--For purposes of this section and section
Purchaser.--The term "purchaser" means a person who, for
adequate and full consideration in money or money's worth, acquires an
interest (other than a lien or security interest) in property which is
valid under local law against subsequent purchasers without actual
claim that the lien on their vehicles and personal property is avoidable
under §545(2) of
the Bankruptcy Code.
Filing of Notice of Lien
to their vehicles, the Debtors assert that the lien of the United States
was not perfected or enforceable at the commencement of the case within
the meaning of 11 U.S.C. §545(2)
because the United States had not complied with §319.27(2), Florida
Statutes, which provides that a statutory nonpossessory lien on motor
vehicles titled in Florida must be noted upon the certificates of title.
undisputed that the lien was not noted on the certificates of title to
the Debtors' motor vehicles. It is also undisputed that the
filed its Notice of Lien only with the Clerk of the
, and not with the Department of Motor Vehicles.
The lien of
was perfected and enforceable at the time of the commencement of the
case against a bona fide purchaser, because the notice of lien was filed
with the Clerk of the
In this case,
the statutory lien is a federal tax lien asserted under 26 U.S.C. §6321
, which provides that the amount of any unpaid tax "shall be a
lien in favor of the
upon all property and rights to property, whether real or personal,
belonging to" the taxpayer. The validity and priority of the lien
as against third parties is determined in accordance with federal law, see
United States v. City of New Britain, Conn. [54-1
USTC ¶9191 ], 74 S.Ct. 367 (1954), specifically 26 U.S.C. §6323
. Subsection (a) of that section provides that the lien imposed by
26 U.S.C. §6321 shall
not be valid against certain third parties unless a notice has been
filed pursuant to subsection (f). Subsection (f) states that, in the
case of personal property, the required notice shall be filed "in
one office within the state ... as designated by the laws of such State,
in which the property subject to the lien is situated." In
, the filing of a federal tax lien is governed by §713.901, Florida
Statutes, the "Florida Uniform Federal Lien Registration Act."
The general purpose of this Act, as stated in subsection (7), is to make
the law with respect to the filing of federal liens uniform among the
states enacting it. If the obligor is an individual, subsection
713.901(3)(c)(4) provides that a notice of a federal lien upon personal
property "shall be filed" in the office of the clerk of the
circuit court of the county where the person resides.
If the laws of
a state provide more than one office to file a notice of federal tax
lien with respect to a taxpayer's personal property, then the notice
must be filed with the clerk of the
district court for the judicial district in which the property subject
to the lien is situated. 26 U.S.C. §6323(f)(1)(B)
. However, §319.27(1), Florida Statutes, specifically provides that
the department of motor vehicles is not a recording office for liens on
motor vehicles. Further, the Attorney General of Florida has issued an
opinion that §319.27, Florida Statutes, does not provide an additional
office for filing a notice of federal tax lien and does not require that
the notice of federal tax lien be recorded on the certificate of title
for a motor vehicle in order to be valid. See Op. Atty. Gen.
76-119 (May 28, 1976).
United States filed its notice of federal tax lien with the Clerk of the
Circuit Court in Hillsborough County, the county of the Debtors'
residence, the United States properly perfected its lien in accordance
with 26 U.S.C. §6323(f)
and §713.901, Florida Statutes, and its lien is perfected and
enforceable against a bona fide purchaser.
Bona Fide Purchaser.
respect to the vehicles and also with respect to the other personal
property, the Debtors also contend that the lien is not valid pursuant
to 26 U.S.C. §6323(b) ,
which provides that even though a notice of lien has been properly
filed, the lien is not valid against certain purchasers. Pursuant to 11
U.S.C. §545(2) ,
the Trustee may avoid a statutory lien which is not valid against a bona
fide purchaser. Therefore, the issue is whether the statutory lien may
be avoided pursuant to the Trustee's powers under 11 U.S.C. §545(2)
if the lien is valid against bona fide purchasers in general but
invalid against a special group of bona fide purchasers designated in 26
U.S.C. §6323 .
The Parties' Contentions.
the Debtors, 11 U.S.C. §545(2)
allows the Trustee to stand in the shoes of the purchasers described
in 26 U.S.C. §6323(b)(2)
quoted above. Since the lien of the
on their vehicles and personal property would not be enforceable as
against such purchasers as of the date the case was filed, the Debtors
contend, the lien is ineffective as against the Trustee and may be
States contends that the Debtors are not entitled to avoid the lien by
virtue of 26 U.S.C. §6323(b)
because §545(2) of
the Bankruptcy Code endows the Trustee 1
with only the rights of a bona fide purchaser as of the commencement of
the case. It contends that a bona fide purchaser is simply a purchaser
for value without notice of an adverse claim. The United States claims
that its lien is valid as against a bona fide purchaser since it had
properly filed its Notice of Federal Tax Lien, and that 26 U.S.C. §6323(b)(2)
require that a purchaser have characteristics in addition to those
associated with a bona fide purchaser to be entitled to the
"superpriority" status granted under those sections. A
purchaser of a vehicle, for example, must have actual possession of the
vehicle, and the purchaser of household goods or other personal effects
must purchase at a "casual sale" for a price not to exceed
$250, and must not intend to purchase the goods for resale. The
concludes, therefore, that the qualifications for a purchaser under 26
U.S.C. §6323 are
higher than those of a traditional bona fide purchaser. Since a
bankruptcy trustee acquires only the rights and characteristics of a
"mere" bona fide purchaser under 11 U.S.C. §545
, and not the additional qualities set forth in 26 U.S.C. §6323
, it is not entitled to assert the superpriority status of a
purchaser under 26 U.S.C. §6323
and may not avoid the lien.
interpreting the application of 11 U.S.C. §545(2)
with respect to tax liens have not reached consistent results. In In
re Branch [94-2
USTC ¶50,406 ], 170 B.R. 577 (E.D.N.C. 1994), the District Court in
ruled that a Chapter 13 debtor and trustee could avoid a federal tax
lien on household goods. The Court reasoned that the trustee was a bona
fide purchaser by virtue of 11 U.S.C. §545
, and that he necessarily was a purchaser at a casual sale within
the meaning of 26 U.S.C. §6323(b)(4)
because a "casual sale" is defined as a sale "not
occurring in the ordinary course of business." Therefore, the
debtor and the trustee could avoid the lien based on the combined effect
of 11 U.S.C. §545(2) and
26 U.S.C. §6323(b)(4)
have reached mixed results on the same issue. The complexity of the
issue is evidenced not only by inconsistencies in results between
different cases, but also by confusion and convoluted histories within
the same case. See
v. Sierer, 121 B.R. 884 (Bankr. N.D. Fla. 1990), 139 B.R. 752,
on remand In re Sierer, 137 B.R. 523; and In re Znider [93-1
USTC ¶50,165 ], 150 B.R. 239, opinion vacated 167 B.R. 603 (Bankr.
C.D. Cal. 1993). Further, the legislative history of 11 U.S.C. §545(2)
provides little guidance in explaining the applicability of the
section to federal tax liens. In re Walter [95-1
USTC ¶50,072 ], 45 F.3d 1023, 1027 n.2. (6th Cir. 1995).
("[T]he legislative history itself is contradictory and offers
little help in interpreting the statute.")
On the other
hand, the Sixth Circuit as well as the District Court in the Middle
District of Florida have recently addressed the issue in the context of
Chapter 7 cases. In In re Walter [95-1
USTC ¶50,072 ], 45 F.3d 1023 (6th Cir. 1995), the Sixth Circuit
concluded that the trustee could not avoid a federal tax lien on the
debtor's motor vehicle. Significantly, the Sixth Circuit specifically
stated that a "bona fide purchaser" for purposes of §545(2)
of the Bankruptcy Code is not necessarily a "purchaser"
for purposes of §6323(b)(2)
of the Internal Revenue Code, and that a bankruptcy trustee standing
in the shoes of a hypothetical bona fide purchaser does not meet the
possession requirement of 26 U.S.C. §6323(b)(2)
with respect to a motor vehicle. The Court concluded that the
Bankruptcy Code does not grant hypothetical possession to a hypothetical
bona fide purchaser, so that the trustee in Walter could not
avoid the federal tax lien on the debtor's vehicle under 11 U.S.C. §545(2)
. In re Walter [95-1
USTC ¶50,072 ], 45 F.3d at 1034.
In In re
Southern Transfer & Storage Co. (
United States of America
v. Charles L. Weissing, Trustee), -- B.R. -- (M.D. Fla. 1995), the
District Court in this district adopted the reasoning of the Sixth
Circuit. In that case, a chapter 7 trustee sought to avoid a federal tax
lien on several vehicles, and the Bankruptcy Court initially held that
the perfection of liens on vehicles in
is governed by the
law requiring notation of the lien on the certificate of title. Since
the Government in that case had not noted its lien on the certificates
of title to the vehicles, the Bankruptcy Court held that the lien was
not enforceable against a bona fide purchaser and therefore was
On appeal, the
District Court first noted that the tax lien at issue in the case was a
federal lien created by federal law. Accordingly, the District Court
ruled that the enforceability and avoidability of the lien must be
determined by federal law rather than state law. The District Court
found that federal law provides that federal tax liens are generally
perfected by filing a notice of a tax lien, and further found that the
proper place for filing such a lien on the motor vehicles is the Clerk
of the Circuit Court. Because the Government had filed its notice with
the Clerk, the Court concluded that the federal tax lien on the vehicles
was perfected and enforceable, and could not be avoided by the trustee
under 11 U.S.C. §545(2)
that the lien was perfected and enforceable, the District Court then
found it necessary to consider whether the trustee in bankruptcy could
avoid the federal tax lien by virtue of the special protection afforded
to certain purchasers under 26 U.S.C. §6323(b)
. In its analysis, the Court first found that a "bona fide
purchaser" is "one who has purchased property for value
without notice of any defects in the title of the seller." A
"purchaser" for purposes of 26 U.S.C. §6323(b)
is defined by 26 U.S.C. §6323(h)(6)
as a person who acquires an interest in property "for adequate
and full consideration in money or money's worth." The District
Court agreed with the Sixth Circuit that "value" is a
different standard than "adequate and full consideration in money
or money's worth," with the result that a bona fide purchaser
within the meaning of 11 U.S.C. §545(2)
is not necessarily a "purchaser" for purposes of 26 U.S.C.
District Court found that a trustee in bankruptcy does not satisfy the
requirement of 26 U.S.C. §6323(b)
that the purchaser be in possession of the motor vehicles. Again,
the District Court agreed with the Sixth Circuit that the statute
requires actual possession, and rejected the fiction of
"hypothetical possession" by a trustee with the rights of a
bona fide purchaser. Since the trustee did not satisfy the specific
requirements of 26 U.S.C. §6323(b)
, the District Court concluded that the bankruptcy trustee could not
avoid a federal tax lien under 11 U.S.C. §545(2)
or 26 U.S.C. §6323(b)
As set forth
above, the Debtors seek to avoid a statutory lien pursuant to §545(2)
of the Bankruptcy Code. Section
545(2) of the Bankruptcy Code provides that a trustee may avoid the
fixing of a statutory lien on property of the debtor to the extent that
such lien is not perfected or enforceable against a bona fide purchaser
on the date that the case was filed, whether or not such a purchaser
6323(b) of the Internal Revenue Code protects certain purchasers of
personal property even though a notice of a federal tax lien was
properly filed. The question, therefore, is whether these provisions
render a properly filed federal tax lien avoidable as against a bona
fide purchaser as that term is used in §545(2)
of the Bankruptcy Code. This Court concurs with the District Court
in this district and with the Sixth Circuit that only those purchasers
who satisfy the specific qualifications set forth in 26 U.S.C. §6323(b)
are entitled to the protection provided by those provisions.
generally established that a bona fide purchaser for purposes of 11
U.S.C. §545(2) is a
purchaser who takes for value without notice or knowledge of any adverse
claim to the property. In re Walter [95-1
USTC ¶50,072 ], 45 F.3d at 1030. Under 11 U.S.C. §545(2)
, this purchaser may be hypothetical, and need not exist. There are
no further requirements for this hypothetical purchaser other than that
he exchanged some measure of value to purchase the property, and that he
has not been placed on notice of the lien affecting the property. There
are no conditions concerning who has possession of the property
purchased, the type of sale, or a maximum purchase price, and these
conditions cannot be assumed.
6323(b) of the Internal Revenue Code, on the other hand, sets forth
a specific description of the purchasers entitled to defeat a federal
tax lien under that provision, and 26 U.S.C. §6323(h)(6)
defines "purchaser." The description of the purchaser is
necessarily detailed to promote the policy of the statute to encourage
the free flow of the property in commerce. In re Sierer, 121 B.R.
at 885. The trustee in a bankruptcy case, however, does not possess the
characteristics required of a purchaser under 26 U.S.C. §6323(b)
agrees with the Sixth Circuit and the District Court that the Bankruptcy
Code does not grant hypothetical possession or other hypothetical
characteristics to a bona fide purchaser. Since a purchaser must have
these characteristics to satisfy the specific requirements of 26 U.S.C. §6323(b)
, the Trustee may not avoid the lien under 11 U.S.C. §545(2)
the Debtors' motion for summary judgment should be denied, and the
is entitled to the partial summary judgment which it requests.
Cross-Motion for Partial Summary Judgment filed by the
United States of America
is granted, and the federal tax lien asserted by the
United States of America
on the Debtors' vehicles and personal property is determined to be valid
and enforceable. The Court will issue a separate Partial Summary
Judgment consistent with this determination.
2. The Motion
for Summary Judgment filed by the Debtors, Darrell Joe Carrens and Linda
Dell Carrens, is denied, and the Debtors are not entitled to avoid the
federal tax lien of the United States with respect to the Debtors'
vehicles and personal property.
proceedings will be scheduled to consider the Complaint to Determine
Secured Status to the extent that the Complaint seeks a determination of
the secured portion of the
' claim with respect to the Debtors' homestead real property.
The United States notes, correctly, that the Debtors may assume the
Trustee's lien avoidance powers under §545
only to the extent that the Debtors could have exempted the property
subject to the lien, see 11 U.S.C. §522(h), and that only the
Debtors have brought the motion for summary judgment. However, for other
reasons expressed in this order, the Court concludes that neither the
Debtors nor the Trustee may avoid the lien. Consequently, it is not
necessary to determine whether or the extent to which the Debtors are
United States of America
, Appellant v. Griffin-Moore Lumber Co., Inc., a Florida Corporation,
the Supreme Court of Florida., January Term, 1953. En Banc, Supreme
Court #23,366, 62 SO2d 589, Filed
January 13, 1953
An Appeal from the Circuit Court for
Lien for taxes: Priority: Materialmen's lien.--Materialman's lien
on mortgaged property had priority over tax liens where the tax liens
accrued after the materialman's lien and were recorded after the
materialman's lien although before suit was brought to enforce the
materialman's lien. Moreover, the Federal statute, Code Sec. 3672, does
not attempt to give tax liens priority over the materialman's lien
because furnishing materials, without the priority, could result in
unjust enrichment of the lands and puts in jeopardy the very source of
the materialman's livelihood.
Phillips and J. Hardin Peterson, Jr., for appellant. R. B. Huffaker, for
Acting Chief Justice:
October 16, 1950
, A. C. Thompson and his wife Alma Thompson executed a promissory note
to Lake Wales State Bank. The note was secured by a mortgage describing
certain lands in
. It was duly recorded and on
November 8, 1951
, it was assigned to Griffin-Moore Lumber Company, Inc., who will
hereinafter be referred to as the plaintiff. The plaintiff commenced
furnishing the Thompsons material for construction of a building on the
premises described in the mortgage and on August 23, 1951, recorded a
claim of lien in the sum of $2,250.06 to cover amount due on materials
furnished and delivered to the property.
States of America filed and duly recorded three notices of tax liens
against A. C. Thompson as follows: (1) October 23, 1951, notice of lien
for withholding taxes and Federal Insurance Contributions Act taxes for
the period ending March 31, 1951, in the amount of $513.84; (2) October
26, 1951, lien for withholding taxes, Federal Insurance Contributions
Act taxes and Federal Unemployment tax act taxes for the period ending
June 30, 1951, and the year 1950, respectively, in the sum of $1,780.08;
(3) November 16, 1951, lien for withholding taxes and Federal Insurance
Contributions Act taxes in the sum of $267.77, for the period ending
September 23, 1951.
November 17, 1951
, the plaintiff filed its complaint to foreclose the mortgage and the
mechanic's lien described in the forepart of this opinion.
March 1, 1951
United States of America
filed its answer to the complaint challenging the priority of the
mechanics lien over the tax liens of the
heretofore described. On final hearing the chancellor found that
plaintiff's mechanic's lien was a valid and subsisting lien upon the
mortgaged property and that it was prior to and superior to the tax
liens of the United States of America.
of the property to satisfy the mortgage and lien was confirmed and this
appeal was prosecuted from the final decree.
The sole point
for determination is whether or not the tax liens of the
are prior in right to the mechanic's lien of the plaintiff.
It is admitted
that the mortgage is prior to the tax liens. It is shown that the tax
liens accrued subsequent to the mechanic's lien and that they were
recorded prior to time suit was brought to enforce the mechanic's lien
but subsequent to the date the claim for mechanic's lien was recorded.
The applicable Florida Statutes are Sections 84.16, 84.21 and 84.23, F.
S. A. These statutes provide the means by which mechanic's liens may
attach, the procedure for foreclosing them, and the conditions for their
discharge. The applicable Federal Statutes are Sections 3670 and 3672,
Title 26, United States Code. The latter statute in terms makes the
Government lien for taxes inferior to the interests of mortgagees,
pledgees, purchasers, judgment creditors and others. United States v.
Security Trust & Savings Bank et al., 340
47, 71 S. Ct. 111, 95 L. Ed. 53 [50-2 USTC ¶9492].
of Materialman's Lien]
There is no
question about the priority, notice recordation, or other factors
essential to the validity or bona fides of the materialman's lien. The
Federal statute, Section 3672, does not attempt to give the tax liens
priority over the materialman's lien. Chapter 84, F. S. A., gives the
laborer and the materialman the right to a lien from the day the first
material is furnished and makes it prior to other claims. It is enforced
against the property rather than the property owner. Any interest
accruing to the property by reason of furnishing labor or material is
held with notice of the labor or materialman's lien. Hendry Lumber
Co. v. Bryant, 138
485, 189 So. 710;
Assoc. v. Ford, 168
513, 18 S. C. 170, 42 L. Ed. 562.
This court has
repeatedly held that the labor and materialman's lien law should be
liberally construed to protect the laborer and the materialman.
ert L. Weed, Architect, Inc. v. Horning, 159
847, 33 So. (2d) 648. The reason for this holding is that the labor and
material results in the unjust enrichment of the land owner if the
laborer or the materialman is not given priority in the enforcement of
his lien claim. If this were not the case, any other claimant could come
in and get the advantage of the value that the labor or materials adds
to the land. Another reason for this rule is even more imperative.
Furnishing labor and material not only results in unjust enrichment of
the lands but it is the very source of the laborer and materialman's
bread and butter. This of itself was reason enough why the Federal
Statute did not give the Federal tax lien priority over the laborer or
materialman's lien. No Legislative body in this country would deign to
enact a law to separate the laboring man from his bread. Man's necessity
for bread preceded his necessity for law. It is the staff of his life,
the basis of his health, his culture, his religion, and every impulse,
good or bad, that colors his thinking. To contend that a tax claim of
any character can deprive him of it is contrary to nature and all human
experience; it is contrary to equity and would contravene every natural
impulse. The state may trim corners and get along on less taxes but the
working man can't cut corners and get along without bread.
searched diligently and have found no law or decision to the contrary
and appellant has cited none. Any other interpretation of the mechanic's
lien statute would leave the laborer in a most precarious condition and
would deprive him of that which the law has provided to safeguard his
economy. Western culture has always recognized the right to eat, to
worship, to commerce in thought, to criticize the things we hate as well
as the things we love; the law and common sense recognize this and have
consistently refused to mess with these freedoms. For these and other
good and sufficient reasons it is our view that the decree of the lower
court should be and is hereby affirmed.
It is so
SEBRING, ROBERTS and MATHEWS, Justices, and WHITE, Associate Justice,
Concurs in Judgment.
¶9426]In re Estate of George L. Cury, Deceased
the Fla. County Judge's Court, Durval County, No. 21587-D, 2/24/65
[1954 Code Sec. 6321]
Claim for taxes: Decedent's estate: Effect of Florida statute.--A
Florida non-claim statute was inapplicable to claims of the United
States and, therefore, claims of the United States in a probate
proceeding for unpaid taxes were not barred.
, for Cury Est.
George L. Cury
May 15, 1954
. An order appointing
ert L. Cury as
istrator of the estate was filed on
July 9, 1954
. The first publication of the notice to creditors took place on
July 12, 1954
filed its Proof of Claim in this probate proceeding on
January 31, 1956
, wherein the Acting District Director of Internal Revenue stated that
the decedent was indebted to the
United States of America
for internal revenue taxes in the total amount of $83,182.53 plus
interest. In May of 1963 George Cury's widow, Polly Thomas (formerly
Polly Roach Cury), filed an election to take dower. By order dated
February 3, 1964
, this Court denied the dower election. On
April 17, 1964
istrator de bonis non filed a Supplemental Final Return and
Petition for Order of Distribution and Discharge. The Suplemental Final
Return showed that the
istrator held a cash balance of $24,839.63, that more than sixty days
had elapsed since dower was denied and that no appeal had been taken
from the order denying dower. The Petition prayed for an order
authorizing distribution of the $24,839.63 to the
April 28, 1964
, Polly Thomas, as the widow and sole heir-at-law of George L. Cury,
deceased, filed a Reply To Petition For Order of Distribution in which
she opposed distribution of the $24,839.63 to the
on the ground that the Proof of Claim of the
was barred by Section 733.211 of the Florida Statutes. At a hearing on
May 18, 1964
, counsel for the parties agreed that this was the only remaining issue
for this Court to decide prior to closing this proceeding. The parties
have submitted briefs and the Court heard oral argument on
February 22, 1965
The issue to
be decided is whether the provisions of Section 733.211 of the Florida
Statutes apply to claims filed by the
United States of America
in probate proceedings. The argument of Mrs. Thomas is that since the
claim of the
. . . has not
had objection filed thereto or has not been paid, settled or otherwise
disposed of and no proceeding is pending for the enforcement or
compulsory payment thereof . . .
claim is barred because three years have expired since it was filed. The
position of the
is that Section 733.211 of the Florida Statutes is not applicable to
claims of the
In In re
Brown's Estate, 117 So. 2d 478 (Fla. 1960), it was held that Section
733.211 was in essence a statute of non-claim, similar to the statute
(Section 733.16) requiring claims to be filed within a certain number of
months from the time of the first publication of notice to creditors.
States v. Summerlin [40-2 USTC ¶9633], 310
414 (1940), the Court in referring to Section 733.16 (which had been
denominated a statute of non-claim by the Florida Supreme Court) stated:
is well settled that the
is not bound by state statute of limitations or subject to the defense
of laches in enforcing its right. United States v. Thompson, 98
U. S. 486; United States v. Nashville, C. & St. L. Ry. Co.,
118 U. S. 120, 125, 126; Stanley v. Schwslby, 147 U. S. 508, 514,
515; Guaranty Trust Co. v. United States, 304 U. S. 126, 132; Board
of Commissioners v. United States, 308 U. S. 343, 351. The same rule
applies whether the
brings its suit in its own courts or in a state court. Davis v.
Corona Coal Co., 265
219, 222, 223. * * *
* * When the United States becomes entitled to a claim, acting in its
governmental capacity, and asserts its claim to that right, it cannot be
deemed to have abdicated its governmental authority so as to become
subject to a state statute putting a time limit upon enforcement.
& Delaware Canal Co. v.
123, 126, 127.
state court, however, has said that the statute in question is not a
statute of limitations, but rather a statute of 'non-claim' for the
orderly and expeditious settlement of decedents' estates. Presumably the
Court refers to the provision of the statute that if a claim is not
filed within the specified period it 'shall be void even though the
personal representative has recognized such claim or demand by paying a
portion thereof or interest thereon or otherwise.
this were a statute merely determining the limits of the jurisdiction of
a probate court and thus providing that the County Judge should have no
jurisdiction to receive or pass upon claims not filed within the eight
months, while leaving an opportunity to the United States otherwise to
enforce its claim, the authority of the State to impose such a
limitation upon its probate court might be conceded. But if the
statute, as sustained by the State Court, undertakes to invalidate the
claim of the United States, so that it cannot be enforced at all,
because not filed in eight months, we think the statute in that sense
transgressed the limits of state power. Davis v. Corona Coal Co., supra.
States v. Embrey, 145
277, 199 So (1940), it was held that pursuant to the Summerlin
follows that as to all claimants but the United States, if filed after
eight months, it would be the duty of the probate judge to declare them
void but as to the United States, since it is not bound by laches or
State statutes of non-claims, it would be his duty to permit them to be
filed and consider them along with other claims against the estate. (199
So. at 42.)
Section 733.211 is a statute of non-claim similar to Section 733.16, In
re Brown's Estate, supra, it follows that the Summerlin and Embrey
cases,supra, are direct authority against Mrs. Thomas' contention
here. This conclusion is reenforced by a decision rendered by the
Court of Pinellas County
In the case of
In re The Estate of Joseph R. Busek, County Judges' Court,
Pinellas County, Florida, Number 18,574, the
istratrix filed a Petition which recited that the claim of the Medical
Supply Company of Jacksonville had been filed on November 12, 1952; that
the claim of the Director of Internal Revenue had been filed on April 9,
1953; and, "That said claims have not been objected to, have not
been paid, settled or otherwise disposed of, and no preceeding is
pending for the enforcement or compulsory payment thereof." The
istratrix then prayed for an Order:
. . . that
such claims are barred and foreclosed and have no further force and/or
effect, and that no proceedings shall hereafter be brought, for the
enforcement or payment of same, according to the provisions of Chapter
733.211 of the Florida Statutes.
filed an Answer to Petition and on
May 8, 1962
, the Court entered an Order granting the Petition as to the Medical
Supply Company of
and denying the Petition as to the Director of Internal Revenue. The
holding of the Court is directly on point in this case and clearly
supports the position of the
herein. In pertinent part, the Court (after defining the issue to be
whether Section 733.211 applies to claims of the
non-applicability of the Florida Non-Claim Statute, requiring that
claimants file their claim within a certain period of time from the
first notice to creditors (Section 733.16), has been heretofore clearly
determined for the Florida Supreme Court in United States v. Embry,
(sic) 199 So. 41 clearly holds that as the United States is not bound by
laches or state statutes of non-claim, that the time limitation for
filing claims does not apply to the United States. Likewise, it has been
held by the Florida Supreme Court that unless a statute of limitation in
terms is made to apply to the state, it will not be held applicable to
demands enforceable by the state (see Florida Industrial Commission
v. Felds Lumber Company, et al., 18 So. (2d) 362, and Heidt v.
, 41 So. (2d) 303).
it is true that there has been no known specific case holding that
Section 733.211, Florida Statutes, does not apply to the claim of the
Federal Government or of the State Government, yet by reason of the past
decisions with respect to the exemption of the Government with respect
to the existent Non-Claim Statute and by reason of the above-cited cases
holding that unless a statute of limitations in terms is made to apply
to the Government, it will not be held applicable to demands enforceable
by the Government, it is the opinion of this Court that such must also
be the ruling in the present instance.
accordance with the foregoing, it is the opinion of this Court that the
provisions of Section 733.211 do not apply to the claim of the
of the Court]
therefore, the opinion of this Court that Section 733.211 of the Florida
Statutes is inapplicable to claims of the
, and that the claim of the
herein is not barred. It is therefore,
ADJUDGED AND DECREED that the objections raised by Mrs. Thomas in her
Reply to Petition for Order of Distribution be, and the same hereby are,
overruled. It is further,
ADJUDGED, AND DECREED that the Supplemental Final Return filed by the
Administrator de bonis non be, and the same hereby is approved.
It is further,
ADJUDGED, AND DECREED that the Petition for Order of Distribution and
Discharge be and the same hereby is granted and the
istrator de bonis non is hereby authorized to distribute the
remaining assets of the Estate to the United States of America after the
expiration of sixty days from the date of this Order and provided that
the Estate is dismissed as a party-defendant from Civil Action Number
4232-T which is now pending in the United States District Court for the
Middle District of Florida. The
shall furnish the
istrator de bonis non with a certified copy of the dismissal of
the Estate from Civil Action Number 4232-T after the expiration of sixty
days from the date of this Order.
¶9531]The Travelers Insurance Company, Plaintiff v. Mercantile National
Bank of Miami Beach and The United States of America, Defendants The
United States of America, Plaintiff v. Julius I. Friedman, Prudential
Life Insurance Co., Metropolitan Life Insurance Co., Lincoln National
Life Insurance Co., and Mercantile National Bank of Miami Beach,
S. District Court, So. Dist. Fla., Miami Div., Nos. 7323-M-Civil,
[1939 Code Sec. 3672(a)--similar to 1954 Code Sec. 6323(a)]
Priority of liens: Cash surrender value of pledged life insurance
policies.--In 1950, taxpayer borrowed money from a bank and assigned
insurance policies on his life to it as collateral security. On
March 10, 1953
, the Government recorded a lien for delinquent taxes due from the
taxpayer. The bank made further advances to the taxpayer after that
date. A summary judgment in favor of the bank has previously been
rendered for its interest in the proceeds prior to March 10. Held,
the monies advanced by the bank after the date of the Government's lien
were new and separate loans and not future advances under the terms of
the original loan. The Government has priority on the increase in the
cash surrender value of the policies subsequent to
March 10, 1953
Guilmartin, United States Attorney, 234
, for plaintiff. Dixon, DeJarnette, Bradford & Williams, 908 Ainsley
Building, Miami, Fla., for Prudential Life Insurance Co. and Lincoln
National Life Insurance Co. Broad and Cassel, 420 Lincoln Road, Miami
Beach, Fla., for Mercantile National Bank of Miami Beach. Shutts, Bowen,
Simmons, Prevatt & Boureau, 800 First National Bank Building, Miami
32, Fla., Julius I. Friedman, 311 Lincoln Road, Miami Beach, Fla., for
Metropolitan Life Insurance Co.
of Fact, Conclusions of Law and Final Judgment
having come on before the Court, without jury, on the 21st day of
February, 1958, and the Court having heard the evidence, examined the
exhibits, and being fully advised in the premises thereof, hereby enters
the following Findings of Fact and Conclusions of Law.
Insurance Company, Prudential Life Insurance Company, Metropolitan Life
Insurance Company, Lincoln National Life Insurance Company, are duly
organized corporations authorized to do business in the State of
Florida, and maintain offices in and about Dade County, Florida.
Mercantile National Bank of
is a duly organized national banking corporation with offices in
Julius I. Friedman, resides in the Southern District of Florida and
within the jurisdiction of this Court.
United States of America
is body politic and sovereign, acting through the United States
Commissioner of Internal Revenue.
May 24, 1950
, defendant Julius I. Friedman assigned as collateral security to the
Mercantile National Bank of
certain policies of insurance, said policies having been issued upon the
life of defendant, Friedman. These included insurance policies numbered
14,635,407A, and 14,635,408A issued by the Metropolitan Insurance
Company; policy number 13 136 476, issued by the Prudential Insurance
Company; policy number 754 022, issued by the Lincoln National Life
Insurance Companies, and policies numbered 2358537, 2381858, 2381859,
2401030, 2401031, 2401032, 2402242, 2402243, 2402244, 2402245, 2402246,
issued by the Travelers Insurance Company. To evidence the loan
transaction, Friedman executed and delivered to defendant Mercantile
National Bank, a series of collateral notes, each note being paid by
renewal until the note of
March 31, 1955
United States of America
recorded a lien for delinquent taxes due from defendant Friedman to the
United States Government in
March 10, 1953
. It was admitted that the amount of the lien is greatly in excess of
the cash surrender value of the several insurance policies in question.
The amount of defendant Mercantile National Bank's interest prior to
March 10, 1953
is not in dispute, and summary judgment has previously been rendered in
favor of said bank for the sum of $5,551.75.
March 10, 1953
, defendant Mercantile National Bank made four additional loans to
Friedman in the total amount of $4,248.25. The alleged purpose of the
loans was to provide Friedman with money and to help him to meet the
premiums due upon the insurance policies, held as collateral security by
assignments of the policies and the notes executed by defendant Friedman
to the defendant Mercantile National Bank contained the provision that
they would cover any and all liabilities of the defendant Friedman, now
existing, or that might arise in the future.
9. The cash
surrender value of the now lapsed insurance policy number 13 136 476,
issued by the Prudential Insurance Company is $982.98.
10. The cash
surrender value of the Lincoln National Life Insurance Company's policy
number 754 022, as of the 3rd day of October, 1957, was $406.00. A
premium loan had been made against that policy in the amount of $57.92,
by the company upon default in payment of premiums.
11. The cash
surrender values of policy number 14 635 407A, and policy number 14 635
408A, issued by the Metropolitan Life Insurance Company were $733.75
each, as of
September 8, 1957
. However, on or about October 9, 1956, defendant Mercantile National
Bank received a loan from the Metropolitan Insurance Company on behalf
of the two policies in the total sum of $1,589.70, and on which there is
presently due and owing the sum of $1,403.42.
12. As of
December 3, 1957
, the cash surrender value of Travelers Insurance Company policies
numbered 2358537, 2381858, 2381859, 2401030, 2401031, 2401032, 2402242,
2402243, 2402244, 2402245, 2402246, was of a total amount of $7,047.90.
The Travelers Insurance Company, having paid that amount into the
registry of the Court, has been discharged from this action.
1. The Court
has jurisdiction of the parties and the subject matter herein.
question as to who has priority to the additional cash surrender value
of the aforecited insurance policies subsequent to March 10, 1953 is
determined by whether or not monies advanced after that date by the
defendant Mercantile National Bank were future advances under the terms
of the original loan or new and separate loans (United States et al.
v. Peoples Bank, 197 Fed. (2d) 898 (5th Cir. 1952) [52-2 USTC ¶9407]).
the original notes carried the provision that they would cover future
liabilities, the loans in question were new and separate loans rather
than future advances.
4. While it
appears that defendant Mercantile Bank would have the right to secure
their interests in the policies by making payments themselves to the
insurors to prevent lapse or loss of the policies, the making of new
loans to defendant Friedman for other purposes as well as incidental
part payment of the premiums does not supersede the government's right
to the value of the policies accruing after March 10, 1953, although the
policies may have been to some extent enhanced indirectly due to the
defendant Bank's additional loans.
5. There is
due and owing plaintiff
United States of America
taxes by the Defendant Friedman greatly in excess of the additional cash
surrender value of the policies held by defendant, Mercantile Bank, and
issued by defendants Prudential Insurance Company.
interest of the United States of America in the cash surrender value,
accruing subsequent to March 10, 1953, of those aforecited policies
issued by Prudential Life Insurance Company and Lincoln National Life
Insurance Company, Travelers Insurance Company and the Metropolitan Life
Insurance Company is superior to that of the Mercantile National Bank of
Miami Beach, and said United States of America has a valid lien on the
aforesaid policies of insurance for those increases in value subsequent
to March 10, 1953 and is entitled to have said lien foreclosed.
United States of America
is entitled to judgment against Julius I. Friedman for the principal
amount of $47,882.10.