Wrong Name Page2

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Therefore, a trustee may avoid a statutory lien pursuant to Section 545(2) on property only to the extent that such lien is not perfected or enforceable at the time of the commencement of the case. The issue to be determined by this Court is whether the Federal Tax Lien of May 13, 1988 was valid as against a hypothetical bona fide purchaser as of August 12, 1988 when the debtor filed for bankruptcy relief.

The validity and priority of federal tax liens are governed by the provisions of 26 U.S.C. §6321 , et seq., and are a matter of federal law. United States v. Brosnan [60-2 USTC ¶9516 ], 363 U.S. 237 (1960); United States v. Union Central Life Insurance, Co. [62-1 USTC ¶9103 ], 368 U.S. 291 (1961). When a taxpayer neglects or refuses to pay a tax liability after assessment, notice, and demand, the amount due becomes "a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person". 26 U.S.C. §6321 .

Once a proper notice of federal tax lien is filed, the lien is valid against a subsequent purchaser of the encumbered property, provided that the purchaser is given notice of the encumbrance. 26 U.S.C. §6323(a) . The requirements for proper notice are set forth in Section 6323(f) which provides in pertinent part:

Place for filing notice; form.--

(1) Place for filing.--The notice referred to in subsection (a) shall be filed--

(A) Under state laws.--

(i) Real property.--In the case of real property, in one office within the State (or the county, or other governmental subdivision), as designed by the laws of such State, in which the property subject to the lien is situated; and

. . .

 

(3) Form.--The form and content of the notice referred to in subsection (a) shall be prescribed by the Secretary. Such notice shall be valid notwithstanding any other provision of law regarding the form or content of a notice of lien.

(4) Indexing required with respect to certain real property.--In the case of real property, if--

(A) under the laws of the State in which the real property is located, a deed is not valid as against a purchaser of the property who (at the time of purchase) does not have actual notice or knowledge of the existence of such deed unless the fact of filing of such deed has been entered and recorded in a public index at the place of filing in such a manner that a reasonable inspection of the index will reveal the existence of the deed, and

(B) there is maintained (at the applicable office under paragraph (1)) an adequate system for the public indexing of Federal tax liens, and

then the notice of lien referred to in subsection (a) shall not be treated as meeting the filing requirements under paragraph (1) unless the fact of filing is entered and recorded in the index referred to in subparagraph (B) in such a manner that a reasonable inspection of the index will reveal the existence of the lien.

26 U.S.C. §6323(f) .

Under the public records doctrine in Louisiana , third parties are only required to look at the public records to determine what interests and claims affect immovable property. La.R.S. 9:2721; Cardinal Federal Savings Bank v. Corporate Tower Partners, Ltd., 564 So.2d 1282, 1288 (La.App.3rd Cir. 1990). All persons are held to have constructive notice of the existence and contents of recorded instruments affecting immovable property. Id. The Orleans Parish Recorder of Mortgages provides an indexing system for the public indexing of federal tax liens. Therefore, in accordance with the provisions of Section 6323(f)(4) , the validity of the Federal Tax Lien of May 13, 1988 depends upon whether "a reasonable inspection of the index will reveal the existence of the lien".

Few courts have treated in detail the legal standards of what constitutes a reasonable inspection. In Kivel v. United States [89-2 USTC ¶9415 ], 878 F.2d 301, 304 (9th Cir. 1989), the Ninth Circuit stated:

The parties have agreed that what title companies in fact do is not itself decisive of the question of reasonableness. The district court heard conflicting expert testimony and then reached its own conclusion as to what was reasonable. Clearly, "reasonable" is a mixed question of fact and law.

In determining the extent of a "reasonable search", the Kivel Court stated:

At the outset we must decide whether a "reasonable inspection of the index" means that a searcher need only look at the index and has no obligation to go from the index to the actual conveyances that are indexed. Such a literal construction of language would not make sense.

[89-2 USTC ¶9415 ], 878 F.2d at 304. The Court concluded that a reasonable inspection would have required the title searcher to look at the actual conveyances, and would have revealed an additional name used by a taxpayer, and a federal tax lien listed under that additional name. Although the Kivel holding is not directly applicable to the case at bar in which the taxpayer's name on the federal tax lien was misspelled, it does indicate that a reasonable inspection requires something more than merely examining the index under the taxpayer's name.

A recent Louisiana case summarized the type of search required by the Clerk of Court and ex officio Recorder of Mortgages for Lafayette Parish:

The Clerk of Court is only required to search his records under the names furnished him by a party seeking a mortgage certificate. [citations omitted]. The Clerk is not required to check encumbrances against property under the names of previous owners when not provided with those names. [citations omitted].

Cardinal Federal Savings Bank v. Corporate Tower Partners, Ltd., 564 So.2d 1282, 1289 (La.App.3rd Cir. 1990). Cardinal Federal Savings recognizes that a mortgage certificate obtained in a particular name only shows privileges and mortgages recorded under that name, and does not necessarily show all encumbrances against an immovable. Id. at 1288. The Court further stated:

Merely obtaining a mortgage certificate in the incorrect name of Corporate Towers Partners, Ltd. is not an adequate search of the records to show all encumbrances existing on the immovable property and, if Cardinal Federal or any third party chooses to rely on such a search, it does so at its own peril. The Clerk of Court is only required to list in a mortgage certificate those encumbrances shown under the names given and variations of the name by middle name or initial.

564 So.2d at 1290. Therefore, a search performed by the Recorder of Mortgages Office is not necessarily a reasonable search under Section 6323 .

A misspelling in the taxpayer's name does not automatically render a tax lien invalid. A federal tax lien is not invalid due to lack of adequate notice when only a slight error in misspelling of the taxpayer's name exists which would not have mislead someone searching the record. See Richter's Loan Company v. United States [56-2 USTC ¶9706 ], 235 F.2d 753 (5th Cir. 1956), (Holding federal tax lien is valid under Florida law even though it incorrectly spelled the taxpayer's name as "Freidlander" instead of "Friedlander"); United States v. Feinstein, et al. [89-2 USTC ¶9547 ], 717 F.Supp. 1552 (D. Fla. 1989 (Slight misspelling of "Tarragon" as "Taragon" did not invalidate federal tax lien). The test frequently cited in the jurisprudence for the notice required by a federal tax lien was made in United States v. Sirico [66-1 USTC ¶9209 ], 247 F.Supp. 421, 422 (S.D. N.Y. 1965): "[t]he essential purpose of the filing of the lien iS to give constructive notice of its existence. The test is not absolute perfection in compliance with the statutory requirement for filing the tax lien, but whether there is substantial compliance sufficient to give constructive notice and to alert one of the government's claims". See also In re Hudgins [92-2 USTC ¶50,341 ], 967 F.2d 973 (4th Cir. 1992).

With these principles in mind, the Court shall examine the facts of the present case.

The parties agree that the Federal Tax Lien of May 13, 1988 was prepared on the correct Form 668, and filed in the correct location with the Recorder of Mortgages for the Parish of Orleans. The parties further agree that the Federal Tax Lien contained the following errors: (1) incorrect spelling of the first name as "Hughes", instead of "Hugues"; (2) incorrect spelling of the last name as "Verone", instead of "Vergne"; and (3) addition of the term "Payroll Account" after the taxpayer's name.

John Jagot IV, senior deputy clerk in the office of the Recorder of Mortgages for the Parish of Orleans, testified as to the proper method of indexing used by the Recorder of Mortgage's Office. Mr. Jagot testified that because the term "Payroll Account" followed the taxpayer's name, the Federal Tax Lien was indexed under the first name on the lien, i.e. "Hughes". Mr. Jagot stated that indexing under "H" is required because the guidelines of the Recorder of Mortgages Office require that an entry against a business or corporate entity be indexed under the first name listed. The term "Payroll Account" indicated a business entity separate from the individual that was subject to the lien. As an example, Mr. Jabot stated that " Rob ert Dozier, A Professional Law Corporation" would be indexed under the first name, " Rob ert". Mr. Jagot further testified that when the Recorder of Mortgages Office issues a mortgage certificate, the certificate only includes liens listed under the exact names furnished by the person requesting the certificate.

On July 21, 1988 , during the course of the Trustee's admin istration, the Trustee filed an application for private sale of the Emlah Court Apartments, owned in indivision by the debtor and his wife. The Trustee requested a mortgage certificate from the Orleans Parish Recorder of Mortgages on the property under the names: "Beatrice Badger wife of and Hughes J. Delavergne II". The mortgage certificate did not disclose the Federal Tax Lien of May 13, 1988 . (Tr. Ex. 5). The Trustee also requested other mortgage certificates on various properties owned by the debtor on later occasions. See Tr. Ex. 11, 12, 13, 14, 15, & 16. The mortgage certificates were requested under the names: (1) "Hugues J. de la Vergne, II"; (2) "Hughes J. de la Vergne, II"; or (3) "Hughes J. de la Vergne, II and Hugues J. de la Vergne, II". None of the mortgage certificates requested by the Trustee listed the Federal Tax Lien of May 13, 1988 . See Tr. Ex. 11, 12, 13, 14, 15, & 16.

Jerald L. Curtner, an employee of the Internal Revenue Service, testified that he has routinely conducted searches of the records of the Recorder of Mortgages for the last fifteen years. Mr. Curtner was asked to conduct a search of the records of the Orleans Parish Recorder of Mortgages as he would normally and regularly do, and determine whether there were any tax liens against the debtor. Mr. Curtner was aware of the Federal Tax Lien at the time of his search. He stated that his standard procedure in searching the records of Orleans Parish led him to employ alternative syllabications of "delaVer" coupled with the omission of the final three characters and "II", and the inclusion or exclusion of the initial "H". He indicated that the computer index in Orleans Parish includes an automatic feature that searches the index alphabetically for all characters beyond those furnished as part of a name, thus revealing a range of names including and following the characters a searcher actually inputs. The inclusion of this feature in the computer program of the Recorder of Mortgages was designed to compensate for errors, including misspellings, of names. This feature allows an abstractor to find errors that would have been disclosed to the human eye by glancing at pages of an index that could not otherwise be done in a computerized index system. Mr. Curtner stated that one using the computerized index must suppress this feature in order to search for encumbrances by precise, literal names. By using variations of "delaVer" and omitting the final three characters and "II", Mr. Curtner was able to ascertain all encumbrances that began with "delaVer" and were followed by any additional characters, including "gne" or "one". (D. Ex. 44).

Mr. Curtner concluded that had the records of Orleans Parish included any other encumbrances against individuals with last names spelled beginning in "de la Ver", such encumbrances would have appeared in his search. Therefore, if the Federal Tax Lien had been indexed under "de la Verone II", it would have appeared on the same or an adjacent computer screen as the seventeen encumbrances Mr. Curtner discovered when he searched under "de la ver H.". Mr. Curtner also testified his search would have found the Federal Tax Lien if it had been indexed under "Verone" when he searched for variations of "Ver". Mr. Curtner concluded that the Recorder of Mortgages made an error in indexing the Federal Tax Lien under "H", rather than under "D", because nothing on the lien indicated that it applied to any entity other than the individual debtor, "Hughes J. de la Verone II".

Based upon the testimony of Mr. Curtner, the United States argues that the Federal Tax Lien would have been found by a reasonable search of the records of the Recorder of Mortgages, despite the misspellings, if the lien had been properly indexed. The United States asserts that a mortgage which has been properly filed and recorded is effective against third persons even if it has not been indexed properly. See Progressive Bank & Trust Co. v. Dieco Specialty Company, Inc., 421 So. 2d 345 (La. App. 1st Cir. 1982). The United States further contends that the credibility of Mr. Jagot is questionable because the Recorder of Mortgages is liable for injuries resulting from omissions in mortgage certificates attributable to errors made by the office, including errors in indexing. See La.C.C. art. 3394; Housing Authority of Lafayette v. Fidelity & Deposit Company of Maryland, Inc., 309 So. 2d 920, 927 (La. App. 3rd Cir. 1975). In support, the United States refers to two other federal tax liens filed against "Hugues J. de la Vergne, II--Payroll Accountant", and indexed under "de la Vergne" rather than "Hugues". (D. Ex. 43-A, 43-B). ³

This Court is not persuaded by the arguments made by the United States . Mr. Jagot's testimony that inclusion of the term "Payroll Account" on the Federal Tax Lien resulted in indexing of the lien under "H" rather than "D" or "V" is credible. The term "Payroll Account" could reasonably be interpreted as a business individual or entity, resulting in indexing under the first name, while "Payroll Accountant" clearly indicates an individual, resulting in indexing under the last name. Any mistake in the indexing of the Federal Tax Lien results from an error made by the Internal Revenue Service in identifying the taxpayer's name. The Court is convinced that in this case it is not improper indexing by the Recorder of Mortgages but instead the erroneous preparation and filing of the Federal Tax Lien by the United States that lead to the problem.

Even if a hypothetical third party purchaser had searched the records themselves and discovered the existence of the Federal Tax Lien of May 13, 1988 against "Hughes J. de la Verone II Payroll Account", this would not have put the party on notice of the existence of a tax lien against "Hugues J. de la Vergne II". The error resulting from inserting an "O" for a "G" in "de la Vergne" is material enough to result in the conclusion that "de la Verone" was not the same individual as "de la Vergne".

The errors in the Federal Tax Lien of May 13, 1988 , unlike the errors in Richter's Loan Company, Feinstein, supra at p. 9, are significant. This case is similar to Haye v. United States [79-1 USTC ¶9192 ], 461 F. Supp. 1168 (C.D. Cal. 1978), in which the court held that a federal tax lien erroneously listed under "Manual de J. Castello" instead of "Manuel de J. Castillo" did not provide a third party purchaser with constructive notice of the lien.

The Court concludes that a reasonable search of the records of the Orleans Parish Recorder of Mortgages would not have disclosed the existence of the Federal Tax Lien of May 13, 1988 . Because the existence of the Federal Tax Lien would not have been disclosed, the lien was not perfected or enforceable at the time of the commencement of the case, and is avoidable by the Trustee under the provisions of Section 545(2) of the Bankruptcy Code.

B. ALTERNATIVE ARGUMENTS OF THE TRUSTEE

The Trustee makes three alternative arguments to his position under Section 544 and Section 545 , as follows:

(1) the Federal Tax Lien is avoidable under Section 547 and 548 of the Bankruptcy Code as a preferential transfer;

(2) the United States is an undersecured creditor, and the interest on the Federal Tax Lien stopped accumulating after commencement of the bankruptcy case; and

(3) the Trustee has effectively avoided the inscription of a judgment held by Louis V. de la Vergne against the debtor's estate by virtue of a compromise agreement entered into between the Hibernia National Bank, Louis V. de la Vergne, and the estate. As such the Trustee steps into the shoes of this avoided judgment holder in priority to any junior encumbrances, i.e. the Federal Tax Lien. Consequently, Louis de la Vergne's lien ranking is preserved for the benefit of the debtor's estate under Section 551 of the Bankruptcy Code, and prevents the United States from benefitting in rank or priority from the compromise agreement.

Having found in favor of the Trustee on his claim under Section 545(2) , the Court need not consider and address the Trustee's alternative arguments.

A judgment in accordance with this opinion will be entered.

¹ This Memorandum Opinion constitutes this Court's findings of fact and conclusions of law in accordance with Bankruptcy Rule 7052. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §1334. The matter is a core proceeding under 28 U.S.C. §157(b)(2).

² To be valid against third parties, the Federal Tax Lien had to be filed with the Recorder of Mortgages for the Parish of Orleans. See La.R.S. 52:52:B. However, the three day delay between the filing with the Custodian of Notarial Records of Orleans Parish and the Recorder of Mortgages for the Parish of Orleans is of no significance to the issues presented.

³ The two additional federal tax liens were subsequently withdrawn by the United States as having been erroneously filed while the stay was in place. supra, at p. 3.

 

 

[93-1 USTC ¶50,223] James A. and Catherine L. Brightwell, Plaintiffs v. United States of America , Defendant

U.S. District Court, So. Dist. Ind., Indianapolis Div., IP 89-59-C, 11/10/92, 805 FSupp 1464

[Code Sec. 6323 ]

Tax liens: Jurisdiction: Action to quiet title: Strict foreclosure.--A federal district court had jurisdiction over a lien priority dispute that had been removed from state (Indiana) court because the amended complaint stated a valid action to quiet title against the United States. The court also had jurisdiction over the strict foreclosure component of the complaint because a judicial sale of the property was sought. Although Indiana had never ordered a judicial sale in a strict foreclosure action, case law supported the idea that judicial sale is a proper remedy in actions that begin or are labelled as strict foreclosures.
[Code Sec. 6323 ]

Tax liens: Validity of notice.--A notice of federal tax lien filed with the appropriate county recorder's office was statutorily adequate despite the fact that it listed the property owner's middle initial incorrectly and inserted an extra space in his last name. The notice substantially complied with statutory requirements because the taxpayer's first name was correctly listed, the error concerning his middle initial arguably involved the least important aspect of his name, and the index card for the notice was filed exactly where it would have been if the extra space had not been inserted in his last name.

[Code Sec. 6323 ]

Tax liens: Mortgage liens: Merger: Priority.--A properly filed federal tax lien had priority over the rights of subsequent purchasers who bought property without actual notice of the tax lien. Under state ( Indiana ) anti-merger law, an original mortgagee's mortgage did not merge with property's legal title when the original mortgagee purchased the property at foreclosure. However, subsequent purchasers of the property were not the equitable assignees of the original mortgagee's right to assert its mortgage against junior lienholders who were inadvertently omitted from a foreclosure action.

A. Donald Wiles II, Jeffrey W. Scripture, Harrison & Moberly, 320 N. Meridian St., Indianapolis, Ind. 46204, for plaintiffs. Sue Hendricks Bailey, Assistant United States Attorney, Indianapolis, Ind. 46204, Charles M. Greene, Peter Sklarew, Department of Justice, Washington, D.C. 20530, for defendant.

ORDER ON MOTIONS FOR SUMMARY JUDGMENT

MCKINNEY , District Judge:

This case addresses two issues: (1) whether a federal tax lien is valid, when the notice of lien lists an incorrect middle initial for the taxpayer, and inserts an extra space in his last name; and (2) whether the senior lien of a mortgagee, who forecloses and buys the property at a foreclosure sale, can be asserted by the mortgagee's transferee against a junior lienholder who was not a party to the foreclosure action.

I. FACTS AND PROCEDURAL BACKGROUND

The key facts are undisputed. William B. VanHorn purchased three parcels of real property from the Indianapolis Spring Corporation ("ISC") on November 10, 1982, executing a purchase money mortgage in ISC's favor. ¹ On May 24, 1984, VanHorn was assessed for $10,247.53 in unpaid federal tax liabilities. On July 13, 1984 the Internal Revenue Service ("IRS") executed a lien against VanHorn for this amount (the "first lien"), and filed a Notice of Federal Tax Lien (the "first notice") in the Marion County, Indiana Recorder's Office.

Every tax lien notice filed in the recorder's office before 1987 was indexed according to a standardized procedure: office staffers would transcribe information from the notice onto a card, which then was placed in the county's federal tax lien index. ² These cards contained only basic information--the taxpayer's name, a reference number, and the filing date--and were filed alphabetically according to the last name of the taxpayer. The first notice was indexed no differently, but unbeknownst to the IRS, it contained a mistake: it listed the taxpayer's name as "William S. Van Horn," rather than "William B. VanHorn." ³ When it was transcribed onto the index card, this error found its way into the lien index.

The IRS executed a second tax lien against VanHorn and his wife for $875.82 in late 1984 (the "second lien"), and filed a corresponding notice on December 11, 1984 (the "second notice"). The second notice correctly identified the taxpayer(s) as "William B. VanHorn & Carlotta VanHorn." As a result, it was correctly indexed, and its index card was filed immediately in front of the card for the first lien. Both cards are still in the index, right next to one another.

By June 1986, VanHorn defaulted on his mortgage payments, so ISC brought an action to foreclose. ISC hired the Lawyer's Title Insurance Company to research the status of VanHorn's title, but the company failed to discover either of the two tax liens against the property, even though the second notice was correct and properly indexed. Therefore, the IRS never learned of, and did not become a party to, ISC's foreclosure action. ISC eventually achieved a consent judgment foreclosing the interests of VanHorn, a second mortgagee, and a judgment creditor in the property. ISC then purchased the property at a sheriff's sale on September 18, 1986 .

Sometime afterward ISC, in preparing the property for sale to a third party, hired the Chicago Title Insurance Company to research title and provide insurance. This time a search revealed the second notice, but the first notice remained undiscovered. ISC's attorney checked with the IRS about satisfying the second lien, and was told that it would be released upon payment of the total deficiency ($875.82) and interest. ISC paid this amount, and the IRS released the lien--never mentioning that a prior, larger tax lien still encumbered the property.

On July 1, 1987 , ISC sold the property by warranty deed to plaintiffs James and Catherine Brightwell, representing that no tax liens encumbered its title. As a result, the plaintiffs believed that the property was theirs free and clear. Before long, however, they learned about the first lien, the first notice, and the mistake the IRS had made in naming VanHorn as the taxpayer.

So, the plaintiffs decided to sue. On December 27, 1988 , they filed a strict foreclosure petition in Marion County Superior Court, seeking to cut off the government's lien on the property. The government removed the case to federal court on January 20, 1989 , where it was assigned to Judge John Daniel Tinder. On April 24, 1989 , the plaintiffs amended their complaint to add a claim to quiet title. The government thereafter filed a motion for summary judgment, ⁴ which became ripe for ruling on August 22, 1989. The plaintiffs moved for summary judgment on August 7, 1989 , and this motion became ripe on September 18, 1989 . In November 1991, the case was transferred from Judge Tinder to the docket of this Court, which ordered the parties to file superseding briefs on their motions. This briefing was finished on March 20, 1992 .

The plaintiffs assert that the first lien is invalid, because they never received constructive notice of its existence. ⁵ Their claim hinges on one contention: that the difference between the name "William S. Van Horn," which was on the first lien's index card, and "William B. VanHorn," which is the correct taxpayer name, is so great that no reasonable search of the index for liens against "Williams B. VanHorn" would have led to the first lien's discovery. The IRS disagrees, claiming that the two names are substantially identical, and that a reasonable searcher, noticing this similarity, would have looked at the actual lien notices and discovered the existence of the first lien. Alternatively, the plaintiffs contend that even if the first lien is valid, their interest nevertheless has priority, because they are equitable assignees of ISC's mortgage lien against the property.

II. LEGAL STANDARD

Rule 56(c) of the Federal Rules of Civil Procedure provides that a motion for summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." A party moving for summary judgment initially has the burden of showing the absence of any genuine issue of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Covalt v. Carey Canada, Inc., 950 F.2d 481, 482 (7th Cir. 1991). If the moving party carries this burden, the opposing party then must "go beyond the pleadings" and present specific facts which show that a genuine issue exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Co., 475 U.S. 574, 586-87 (1986); Becker v. Tenenbaum-Hill Assocs., 914 F.2d 107, 110 (7th Cir. 1990). The opposing party, however, must do more than create a mere "colorable" factual dispute to defeat summary judgment; disputed facts must be outcome determinative. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986); International Bhd. of Boilermakers v. Local D354, 897 F.2d 1400, 1406 (7th Cir. 1990); Clampitt v. Ft. Wayne , 682 F.Supp. 401 (N.D. Ind.), aff'd, 864 F.2d 486 (7th Cir. 1988).

In considering a summary judgment motion, a court must draw all reasonable inferences "in the light most favorable" to the opposing party, Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991), and must resolve any doubt against the moving party. Becker, 914 F.2d at 110. Still, if the opposing party fails to meet the standards of Rule 56(c), summary judgment becomes mandatory. Celotex, 477 U.S. at 322-23; Anderson, 477 U.S. at 248-50. Summary judgment is not a disfavored procedural shortcut; rather, it is an integral part of the federal rules, which are designed to secure the just and expeditious determination of every action. Celotex, 477 U.S. at 327; see Patrick v. Jasper County, 901 F.2d 561, 565 (7th Cir. 1990); Spellman v. Commissioner [88-1 USTC ¶9302 ], 845 F.2d 148, 151-52 (7th Cir. 1988).

III. DISCUSSION

A. Jurisdiction

Initially, the Court must now determine if it has jurisdiction over the plaintiffs' suit. The United States cannot be sued, and no court can have jurisdiction over a suit against it, unless its sovereign immunity has been waived in the area at issue. Raulerson v. United States [86-1 USTC ¶9458 ], 786 F.2d 1090, 1091 (11th Cir. 1986). In cases that involve tax liens against property, sovereign immunity has been waived, at least in part:

[T]he United States may be named a party in any civil action or suit in any district court, or in any State court having jurisdiction of the subject matter--

(1) to quiet title to,

(2) to foreclose a mortgage or other lien upon,

(3) to partition,

(4) to condemn, or

(5) of interpleader or in the nature of interpleader with respect to,

real or personal property on which the United States has or claims a mortgage or other lien.

28 U.S.C. §2410(a).

To the extent that the plaintiffs seek to quiet title, this Court clearly has jurisdiction. Traditionally, actions to quiet title have sought determinations of who owns particular property, by forcing adverse claimants--i.e., those whose claims are "clouds" on the plaintiff's title--to establish them or be estopped from asserting them ever again. Black's Law Dictionary 255, 1249 (6th ed. 1990); see Raulerson v. United States [86-1 USTC ¶9458 ], 786 F.2d 1090, 1092 (11th Cir. 1986). Under federal law, the definition is somewhat broader; a party may maintain a quiet title action against the United States when the government asserts that a federal tax lien exists against property, 28 U.S.C. §2410(a), and thus lien priority disputes have been considered "quiet title" actions. McEndree v. Wilson , 774 F.Supp. 1292, 1295-96 (D. Colo. 1991). Under this standard, the plaintiffs' amended complaint states a valid action to quiet title against the United States .

The strict foreclosure component of the plaintiffs' complaint poses a thornier problem. If a suit involves foreclosure of a mortgage, a waiver of sovereign immunity will be effective only to the extent that the plaintiff seeks a "judicial sale" of the property--i.e., a sale directed by judicial order, decree, or judgment. Id. §2410(c); Kasdon v. G.W. Zierden Landscaping, Inc., 541 F.Supp. 991, 996 (D. Md. 1982), aff'd, 707 F.2d 820 (4th Cir. 1983). The plaintiffs seek a judicial sale of the property, ⁶ but the government claims that such sales are not recognized remedies for strict foreclosure actions in Indiana.

The government's assertion is correct, at least on one level. Strict foreclosure permits a party who acquired title through or after a foreclosure sale to cut off the interests of any junior lienholders who, for some reason, were not parties to the foreclosure action. Strict foreclosure, therefore, is quite different from judicial foreclosure, where a mortgagee sells the property to satisfy an underlying secured debt. See Jackson v. Weaver, 138 Ind. 539, 38 N.E. 166 (1894) (strict foreclosure case); Jefferson v. Coleman, 110 Ind. 515, 11 N.E. 465 (1887) (same).

However, the fact that Indiana has never ordered a judicial sale in a strict foreclosure action does not mean that such a remedy is barred. The United States Supreme Court, in fact, has upheld an order for judicial sale in a strict foreclosure action, finding it appropriate under the plaintiff's prayer for general relief. Sage v. Central R.R. Co., 99 U.S. 334, 338-44 (1878). Courts in other states also have been friendly to the idea. See, e.g., Williams v. Williams, 32 Ariz. 164, 256 P. 356, 357-58 (Ariz. 1927) (vacating foreclosure and ordering new sale); Johns v. Wilson, 6 Ariz. 125, 53 P. 583, 585 (Ariz. 1898) (allowing second foreclosure sale to cut off interest of lienholder not joined originally), aff'd, 180 U.S. 440 (1901); Deming Nat'l Bank v. Walraven, 133 Ariz. 378, 651 P.2d 1203, 1205-06 (Ariz. App. 1982) (allowing foreclosure sale to follow initial execution action where lienholder was not joined); McGraw v. Premium Fin. Co. of Missouri, 7 Kan. App. 32, 637 P.2d 472, 477 (Kan. App. 1981) (recognizing that second foreclosure might be necessary where junior lienholder was not joined initially); Western Bank v. Fluid Assets Dev. Corp., 111 N.M. 458, 806 P.2d 1048 (N.M. 1991) (recognizing that in "proper case," new sale might follow first where junior lienholders were not joined); Moulton v. Cornish, 138 N.Y. 133, 33 N.E. 842 (1893) (finding that redemption cannot be compelled in strict foreclosure, but that new sale can be ordered).

The exact facts of these cases vary, but they still support the idea that judicial sale is a proper remedy in actions that begin or are labelled as strict foreclosures. Accordingly, the Court holds that it has jurisdiction over both the plaintiffs' claims under 28 U.S.C. §2410.

B. Validity of the First Lien

Federal tax liens are "wholly . . . creature[s] of federal law," Atlantic States Const., Inc. v. Hand, Arendall, Bedsole, Greaves & Johnston [90-1 USTC ¶50,065 ], 892 F.2d 1530, 1534 (11th Cir. 1990), ⁷ and federal law governs all their aspects, including scope, attachment, and priority. 26 U.S.C. §6323(f) ; Kivel v. United States [89-2 USTC ¶9415 ], 878 F.2d 301, 303 (9th Cir. 1989); United States v. Polk [87-2 USTC ¶9432 ], 822 F.2d 871, 873 (9th Cir. 1987); Eskanos v. Alpha 76, Inc. [90-2 USTC ¶50,344 ], 712 F.Supp. 819 (D. Colo. 1989).

According to 26 U.S.C. §6323(a) , a tax lien is not valid against any purchaser, secured party, statutory lienor, or judgment creditor that lacks actual notice of the lien until "constructive" notice--i.e., notice which meets the requirements of 26 U.S.C. §6323(f) --has been filed by the IRS. Section 6323(f) requires constructive notice to meet certain form and content requirements, ⁸ and in the case of real property, mandates filing in one office within the county in which the property is situated, as designated by the laws of the state. If state law provides that deeds must be recorded and indexed to be valid, and "there is maintained . . . an adequate system for public indexing of Federal tax liens," then

the notice of the lien . . . shall not be treated as meeting the filing requirements . . . unless the fact of filing is entered and recorded in the index . . . in such a manner that a reasonable inspection of the index will reveal the existence of the lien.

26 U.S.C. §6323(f) . In other words, if a state indexes federal tax lien notices, and determines priorities based on its indexing system, the IRS must use the system to give constructive notice of its lien. Indiana uses such an indexing system.

The parties agree that the first notice was filed in the correct place and on the correct form. They disagree, however, about whether it was filed in such a manner that a "reasonable inspection of the index" would have "reveal[ed] the existence of the [first] lien," so as to charge the plaintiffs with constructive notice of the lien. This issue embraces two distinct questions. First, what constitutes a "reasonable inspection of the index"? Second, if a reasonable inspection had been made in this case, would it have failed to reveal the first lien due to errors in VanHorn's name as transcribed in the first notice and its index card?

As to the first question, the available case law makes clear that a searcher, upon seeing information in the index that would cause a reasonable person to go outside the index and examine the lien notices themselves, must look at those notices. As the Ninth Circuit has stated:

[W]e must decide whether a "reasonable inspection of the index" means that a searcher need only look at the index and has no obligation to go from the index to the actual conveyances that are indexed. Such a literal construction [of §6323 ] would not make sense. It is evident that as to documents that are in the actual chain of title the searcher must at least look at such documents as may have a current effect and must then act on the notice imparted.

Kivel [89-2 USTC ¶9415 ], 878 F.2d at 304; see also Richter's Loan Co. v. United States [56-2 USTC ¶9706 ], 235 F.2d 753, 755 (5th Cir. 1956).

This leads to the second question. Would a reasonable inspection of the index (or in this case, the first lien's index card) have failed to give a reasonable searcher any cause to look at the lien notices themselves? Stated differently, would a searcher have been so misled by the errors in VanHorn's name as to think the liens involved completely different taxpayers? The answer, according to the weight of well-reasoned authority, appears to be "no."

Initially, it is clear that lien notices and index cards need to comply only substantially, rather than perfectly, to convey adequate notice of a lien:

The mere fact that a full name is not given or that there is an addition, omission or substitution of letters in a name, or even errors, does not, in and of itself, invalidate the notice. The essential purpose of the filing of the lien is to give constructive notice of its existence. The test is not absolute perfection in compliance with the statutory requirement for filing the tax lien, but whether there is substantial compliance sufficient to give constructive notice and to alert one of the government's claim.

United States v. Sirico [66-1 USTC ¶9209 ], 247 F.Supp. 421, 422 (S.D.N.Y. 1965). Numerous courts have applied this standard, and each decision indicates that the first notice here was statutorily adequate. In Sirico, for example, the court gave effect to a lien when the notice listed "Sirico, George" and "Sirico, A." as taxpayers, but title documents listed "Assunta Sirico" as the property's owner. Id. at 422. In Richter's Loan, the notice and index entry transposed two letters in the taxpayers' name, listing it as "Freidlander" rather than "Friedlander." The court enforced the lien, however, holding that "the slight difference in spelling the name 'Freidlander' instead of 'Friedlander' could not mislead searchers of record, who were contemplating doing business with [the taxpayers]." Richter's Loan [56-2 USTC ¶9706 ], 235 F.2d at 755. In Hannus v. United States , 60-2 USTC (CCH) ¶9574 (W.D. Wash. 1958), a tax lien against "Andy Johnston" was held valid against property titled in the name of "Andrew Johnston." See also Kivel [89-2 USTC ¶9415 ], 878 F.2d at 304 (giving lien notices naming "Bobbie Morgan" effect against property owned by " Bobbie Morgan Lane "); Polk [87-2 USTC ¶9432 ], 822 F.2d at 873-74 (enforcing lien notices naming "Roy Bruce Polk" against property held by "Bruce Polk").

The errors in these cases did not greatly affect the location of index entries, but courts have forgiven mistakes of a much greater magnitude under the substantial compliance standard. For example, in Weeks v. United States, 87-1 USTC (CCH) ¶9246 (D. Md. 1987), a lien notice against "Kenneth Gardner Contracting, Inc." was held effective against property deeded to "K.P. Gardner Contracting, Inc.," even though the mistake caused the notice to be indexed over 100 pages from where it should have been. The court held that a reasonable inspection of the index required examination of older, differently arranged index volumes that would have put a searcher on notice of a link between the named entities. Id. at 87,469.

The plaintiffs respond to this by arguing that the substantial compliance standard, at least as it was applied in Sirico, Richter Loan, Weeks, and Hannus, does not govern this case because the facts are drastically different. According to the plaintiffs, those cases dealt with index entries that listed not only taxpayer names, but correct taxpayer and/or property addresses; as a result, an index searcher could have found other entries and liens against the taxpayers at issue by cross-referencing the additional information. ⁹ Marion County , in contrast, uses a "name-only" index--i.e., its cards provide taxpayer names only, without addresses or any other information. Under such circumstances, the plaintiffs contend, searchers are forced to rely strictly on the taxpayer names as listed, and the law "demands a strict standard for correct spelling of the name[s]."

This argument, though not unappealing, has two major problems. First, the cases relied upon by the plaintiffs--Continental Investments v. United States [53-2 USTC ¶9625 ], 142 F.Supp. 542 (W.D. Tenn. 1953); United States v. Ruby Luggage Corp. [54-2 USTC ¶9512 ], 142 F.Supp. 701 (S.D.N.Y. 1954); Haye v. United States [79-1 USTC ¶9192 ], 461 F.Supp. 1168 (C.D. Cal. 1978); and Fritschler, Pellino, Schrank & Rosen , S.C. v. United States [89-1 USTC ¶9111 ], 716 F. Supp. 1157 (E.D. Wis. 1988)--are distinguishable from this case, and do not support their argument. In Continental, the IRS filed a lien notice against one "W.B. Clark, Sr." when the taxpayer's correct name was "W.R. Clark, Sr.," and thereafter seized and sold the taxpayer's car. The plaintiff, a mortgagee of the car, sued for conversion and won. The court, without citation to any authority, held that the mortgagee was "not charged with notice of anything beyond" what the lien records "purport[ed] to be on their face." Continental [53-2 USTC ¶9625 ], 142 F.Supp. at 544. In Continental, however, the taxpayer's initials were used in place of both his first and middle "Christian name[s]," which prompted the court to require perfectly correct initials. Id. Here, VanHorn's first name was correctly listed on both index cards, so any potential for confusion was much smaller than in Continental. In addition, Continental was decided in 1953, well before Congress enacted §6323 with its "reasonable inspection" standard, and the court appears to have applied a higher standard of exactness than the current law requires.

In Ruby Luggage, the government filed notice against "Ruby Luggage Corporation" instead of "S. Ruby Luggage Corporation." The court examined whether the missing "S." materially affected priority under New York 's indexing system, and held that it did. The circumstances of that case, however, made the error much more critical than the one here. New York law required judgment dockets to have separate volumes for each letter of the alphabet, and provided that liens against corporations be filed in the volume corresponding to the first letter of the corporate name. The notice against "Ruby Luggage Corporation" was indexed in the "R" volume; consequently, no search of the "S" volume --where the notice should have been indexed--would have revealed the lien's existence. Ruby Luggage [54-2 USTC ¶9512 ], 142 F.Supp. at 702. The error here, like the one in Ruby Luggage, did concern an initial; however, it affected arguably the least important part of the taxpayer's name, and resulted in no serious indexing error. In fact, the index cards were (and are) right next to one another.

Haye, too, involved more significant errors than the one at issue here. There, the notice referred to the taxpayer as "Manual de J. Castello," when his correct name was "Manuel J. de Castillo." The court held that a reasonable search of the index would not have disclosed the lien, because these two errors, coupled with the relative commonness of the taxpayer's last name, caused the notice to be indexed "approximately nine pages and one thousand names prior to its proper location" --a scope well beyond the "reasonable inspection" required by statute. Haye [79-1 USTC ¶9192 ], 461 F.Supp. at 1173-74. By contrast, the mistake in VanHorn's name left the index card for the first notice exactly where it would have been, even if perfect: right next to the card for the second notice.

Fritschler is the plaintiffs' strongest case. There, the court held that a lien notice filed in Florida under the name "Allen G. Casey" failed to give constructive notice of a lien against "Allen J. Casey," because it "was not in compliance with the statute." Fritschler [89-1 USTC ¶9111 ], 716 F.Supp. at 1160. The court appeared to recognize the governance of the "reasonable inspection" standard, but held that the government had "failed to support its assertion that a reasonably prudent person conducting a tax lien search . . . would have realized that Alan G. Casey was really Alan J. Casey." Id. at 1161-62 (citing Haye, Continental, and Richter's Loan).

Despite its apparent helpfulness to the plaintiffs, however, Fritschler ultimately falls short. It appears that the decision there did not hinge on the issue of constructive notice, because the property subjected to the tax lien--cash--is treated differently under the lien statute, as the court pointed out:

Even if the filing of a notice of tax lien which misspells the taxpayer's name does not make the notice ineffective, 26 U.S.C. §6323(b)(1) protects a purchaser of "securities" including cash [from assertion of the lien] when the purchaser has no actual knowledge or notice of the existence of the lien.

Id. at 1160. In other words, one who receives money that is subject to a tax lien cannot have the lien enforced against her, unless she actually knows of the lien's existence. This protection is wholly unavailable to a purchaser of realty, who is charged with constructive notice of a lien if it is properly recorded. See 26 U.S.C. §6323(a) , (f) . In light of this difference, Fritschler's constructive notice discussion carries less weight.

The plaintiffs' argument, besides lacking support in the case law, has a second serious problem: it is logically contradictory. The name-only/cross-reference argument implicitly concedes that an index searcher would always have to look beyond those entries bearing the exact name sought, because cross-referencing information such as addresses would be helpful only where examined cards have incorrect taxpayer names. If a searcher were to find a card with a perfectly matching name, cross-referencing information would be irrelevant; the lien would be discovered. On the other hand, if the searcher were to find a technically non-matching name, he or she would have to look at other cards to see if non-name information matches. This logical difficulty seriously undercuts the plaintiffs' contention that one need look no further than exact names on cards to reasonably inspect an index.

In light of all the case law, this Court concludes that the first notice, as filed by the IRS and indexed in the Marion County federal tax lien index, substantially complied with the requirements of §6323 . Accordingly, the plaintiffs had constructive notice of the first lien, and the lien is valid and enforceable against them.

C. Priority

Determining that the tax lien is valid does not end the inquiry, however, because the plaintiffs still claim to have rights in the property superior to those of the government. Their argument runs like this: ISC's mortgage did not merge with the property's legal title when ISC bought it at the foreclosure sale. Instead, the lien was preserved so that ISC could assert it against any junior lienholders who inadvertently were not joined in the foreclosure action, and who consequently might try to "step up" and foreclose against ISC. When the plaintiffs bought the property, they became "equitable assignees" of ISC's preserved mortgage interest. Therefore, they may assert ISC's lien against any omitted junior lienholders, including the government. This argument, because it deals with the nature of the parties' interests, must be examined according to state law. Acquilino v. United States [60-2 USTC ¶9538 ], 363 U.S. 509, 512-14 (1960); United States v. Brosnan [60-2 USTC ¶9516 ], 363 U.S. 237, 240-42 (1960); Tompkins v. United States [91-2 USTC ¶50,540 ], 946 F.2d 817, 819 (11th Cir. 1991); First American Title Ins. Co. v. United States [88-2 USTC ¶9408 ], 848 F.2d 969, 972 (9th Cir. 1988); United States v. Polk [87-2 USTC ¶9432 ], 822 F.2d 871, 874 (9th Cir. 1987); see Southern Bank of Lauderdale County v. Internal Revenue Serv. [85-2 USTC ¶9670 ], 770 F.2d 1001, 1007 (11th Cir. 1985), cert. denied, 476 U.S. 1169 (1986).

1. Merger

In Indiana , a mortgagee's acquisition of fee simple title to mortgaged property generally results in a merger of the mortgage with the title, thus extinguishing the mortgage lien. Ellsworth v. Homemakers Finance Serv., Inc., 424 N.E.2d 166, 168 (Ind. Ct. App. 1981). Merger will not occur, however, and the lien will be preserved, where merger would harm the interests of the mortgagee. Id. (citing Swatts v. Bowen, 141 Ind. 322, 40 N.E. 1057 (1894)); see Zilky v. Carter, 226 Ind. 396, 402-03, 81 N.E.2d 597, 599 (1948); Evansville Gas-Light v. State, 73 Ind. 219, 222 (1881). The key factor in deciding if merger has occurred is determining what the parties to the sale--primarily the mortgagee--intended. Ellsworth, 424 N.E. 2d at 168. If intent is not express, but circumstances indicate that preservation will "benefit" the mortgagee, the court will presume that no merger was intended. Id. (citing Egbert v. Egbert, 226 Ind. 346, 80 N.E.2d 104 (1948)).

The underlying purpose of this "anti-merger" rule--i.e., the benefit it is meant to confer--is protection of the mortgagee's priority. Specifically, the rule allows the mortgagee to prevent junior lienholders from stepping up in priority, foreclosing, and reducing the mortgagee's already-diminished recovery, because it bars all but the mortgagee from re-foreclosing or reselling the property, and guarantees the mortgagee's priority in any proceeds. Ellsworth, 424 N.E. 2d at 168 ("[t]here would be no reason to prevent merger except to foreclose the mortgage, if necessary, to protect the mortgagee's interest"). Put simply, the anti-merger rule gives a mortgagee first crack at any money generated by foreclosures on the property, ahead of any junior lienholders, until it has been paid what it is owed in full.

In this case, there is no clear evidence that ISC intended for there to be no merger, but the circumstances clearly support an inference of such intent. To borrow the language of the Tenth Circuit:

By purchasing the property at the auction, the [mortgagee] intended to protect its lien, and perhaps junior lienholders, by preventing the property from being purchased at below market value. It would be an absurd result to conclude that the [mortgagee] intended to destroy its own lien . . . by taking action that arguably benefitted junior lienholders. Absent evidence to the contrary, we therefore presume that the [mortgagee] intended to preserve its lien.

United States v. Colorado [89-1 USTC ¶9260 ], 872 F.2d 338, 340 (10th Cir. 1989). ¹⁰

2. Transfer of the Mortgage-Assertion Right

This leaves one crucial question to answer. Did ISC's ability to assert its mortgage against junior lienholders pass to the plaintiffs when they bought the property? There is apparently no case on point, but this Court is constrained to answer "no." Initially, Indiana cases seem to hold that the anti-merger rule is designed to benefit only the foreclosing mortgagee who is a party to the original sale; the law says nothing about subsequent transferees. See Ellsworth, 424 N.E. 2d at 168; see also Swatts, 40 N.E. at 1058 (purpose is to "prevent[ ] injury to the interests of the parties to the transaction") (emphasis added); Hanlon v. Doherty, 109 Ind. 37, 9 N.E. 782, 785 (1887) ("[i]t is presumed . . . that the party must have intended to keep on foot his mortgage title when it was essential to his security") (emphasis added). Moreover, the rule, as noted above, is meant to give the mortgagee first crack at a full recovery, and this is exactly what ISC appears to have gotten when it consummated the sale to the plaintiffs. ¹¹ After this sale, ISC no longer had any interest in the property to protect, so there was no reason for its mortgage-assertion right to pass to the plaintiffs.

The plaintiffs rely on Oldham v. Noble, 117 Ind. App. 68, 66 N.E. 2d 614 (Ind. Ct. App. 1946) in arguing that ISC's right did indeed pass to them. In that case, Selig bought property from Iverson, and conveyed a mortgage to him. Selig then conveyed the property to Walker for life, with the remainder to Walker 's daughters. Iverson then foreclosed on the mortgage, joining Selig and Walker as defendants, but he failed to join Walker 's daughters. Iverson bought the property at a sheriff's sale, then sold it to Noble, who believed that he was getting a fee simple. Later, Walker died, and his daughters sued Noble for possession.

The court held that Walker 's daughters were fee simple owners of the property, because the foreclosure action had no effect on their remainder interest. In effect, Iverson had purchased (and conveyed to Noble) Walker 's life estate, and nothing more. However, the court also held that Walker 's daughters were still liable on the debt secured by the mortgage. Therefore, in order to prevent unjust enrichment to the daughters at Noble's expense, the court held that Noble, as the "equitable assignee" of Iverson's mortgage, could foreclose against the daughters and recover part of what he paid Iverson. Oldham , 66 N.E. 2d at 617-18.

Oldham does have similarities to this case, but it differs in one dispositive respect. The parties against whom the mortgage was asserted in Oldham-- Walker 's daughters--actually were liable on the underlying debt. As a result, failing to allow Noble to enforce Iverson's mortgage "would [have] len[t] sanction to an unjust enrichment of the [daughters'] estate at the expense of others [i.e., Noble] . . . by virtue of their own default in an obligation they justly owe." Id. Here, by contrast, the party against whom the plaintiffs want to assert the mortgage--the government--owes nothing to anybody, and is not in a position of being unjustly enriched. Therefore, the equitable concerns addressed in Oldham are not present here, and that case does not control.

In sum, the Court holds that ISC's mortgage was preserved after it bought the property at foreclosure, but holds further that ISC's right to assert the mortgage against junior lienholders did not pass to the plaintiffs when they bought the property. As a result, the government's lien has priority.

IV. CONCLUSION

For the reasons discussed, the government's motion for summary judgment is GRANTED, and the plaintiffs' motion for summary judgment is DENIED. This cause is DISMISSED WITH PREJUDICE.

SO ORDERED this 10th day of November, 1992.

¹ Each document discussed in this order is attached as an exhibit to the Amended Complaint or some other pleading in the record.

² Since 1987, notices have been indexed on computer.

³ An authenticated photocopy of the actual index entry is attached as Exhibit B to Plaintiffs' Memorandum In Opposition to Defendant's Motion to Dismiss and in Support of Motion for Summary Judgment (Aug. 7, 1989). Apparently, there is no taxpayer or property owner named "William S. Van Horn" against whom a federal tax lien has been recorded.

⁴ The government's motion actually sought dismissal. However, because the motion was supported by declarations and other extra-pleading materials, the Court will treat it as one for summary judgment. See Sheldon v. Munford, Inc., 660 F.Supp. 130, 136 (N.D. Ind. 1987); Mac's Eggs, Inc. v. Rite-Way Agri Distribs., Inc., 656 F.Supp. 720, 727-28 (N.D. Ind. 1986).

⁵ No one disputes that the plaintiffs lacked actual notice of the first lien.

⁶ The plaintiffs expressed their desire to seek judicial sale in a conference with the Court earlier in this case, and the government agreed to address the claim without formal amendment of the complaint. The Court since has proceeded since on the assumption that a judicial sale is sought.

⁷ Tax liens are powerful; once created, they reach "all property and rights to property, whether real or personal, belonging to [the taxpayer]," 26 U.S.C. §6321 , and may be enforced from the moment attachment occurs at assessment. 26 U.S.C. §6322 . Moreover, tax liens can attach to particular items of property, encumbering title even after the items are transferred to a third party, provided that statutory notice requirements are met. 26 U.S.C. §6323(a) , (f) .

⁸ IRS regulations promulgated pursuant to 26 U.S.C. §2363[6323](f) require the IRS to use Form 668, "Notice of Federal Tax Lien Under Internal Revenue Laws," to file a lien notice in a state indexing system. Treas. Reg. §301.6323-1(3).

⁹ Presumably, the presence of an address allows a researcher to find a lien notice through recognition of the street address on the incorrect index entry, or through discovery that the incorrect entry's address matches the address on a technically correct card (which assumes more than one outstanding lien against the taxpayer).

¹⁰ The government attempts to draw a distinction between cases involving judicial sales, which it claims "invariably divest or extinguish the liens of all parties to the action," and nonjudicial sales, where merger may not occur. See Defendant's Superseding Brief at 24-25. The Court, however, is aware of no cases (and defendants have cited none) that relied on this distinction. Moreover, it appears that Indiana courts might act to preserve a mortgage in equity even where the foreclosure sale is judicial (i.e., ordered by a court). See, e.g., Watson v. Strohl, 220 Ind. 672, 691 46 N.E.2d 204, 211 (1943).

¹¹ The sheriff's deed issued to ISC shows that it paid $49,000 for the property at the foreclosure sale. See Amended Complaint, Ex. H. The title insurance policy issued by Chicago Title Insurance Company indicates that the plaintiffs paid the same amount to ISC on July 1, 1987 . See Plaintiffs' Superseding Brief, Ex. E.