Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_14-cv-01771/USCOURTS-azd-2_14-cv-01771-1/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1441 Petition for Removal- Action for Interpleader

---

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Nancy K. Duckett, 

Plaintiff, 

v. 

Dennis M. Enomoto, et al., 

Defendants.

No. CV-14-01771-PHX-NVW

ORDER 

Plaintiff, the personal representative of an estate, brings this interpleader action to 

require Defendants to settle among themselves their rights to certain funds currently held 

by Plaintiff and designated to a testamentary trust. 

Before the Court are Defendants’ competing summary judgment motions. The 

United States’ Motion for Summary Judgment (Doc. 48) contends the interpleaded funds 

are subject to federal tax liens. The Trustee and Trust Beneficiary’s Cross-Motion for 

Summary Judgment (Doc. 58) contends the liens do not attach. 

Also before the Court is Plaintiff’s Motion for Discharge (Doc. 65), which seeks 

to recover costs and attorney’s fees incurred in bringing this action, to deposit the 

interpleaded funds with the Court, and to discharge Plaintiff from this action free of 

liability to Defendants. 

Also before the Court is the Trustee’s Motion to Allow Payment of Trust Legal 

Fees from Interpleader Funds (Doc. 51). 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 1 of 14
- 2 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

For the reasons that follow, Defendants’ competing summary judgment motions 

(Docs. 48, 58) and the Trustee’s motion for fees (Doc. 51) will be denied without 

prejudice to renewal. Plaintiff’s Motion for Discharge (Doc. 65) will be granted in part 

and denied in part. 

I. BACKGROUND 

The parties have stipulated to the following facts only for purposes of the pending 

motions for summary judgment. (Doc. 49 at 2.) 

On August 9, 2004, Miyoko Enomoto (“Ms. Enomoto”) executed a Last Will and 

Testament (“Will”) naming Nancy Duckett as the personal representative of her estate. 

(Doc. 49-1 at 8-11.) The Will divided certain of Ms. Enomoto’s personal property and 

the residue of her estate into three shares, to be devised to her three children: Duckett, Dr. 

Dennis Enomoto (“Dr. Enomoto”), and Joanne Bradley. (Id. at 8-9.) The Will called for 

Dr. Enomoto, but not Duckett or Bradley, to receive his share via trust: 

The One-Third share of my Estate, other than tangible personal property, 

that is to be distributed to my son DENNIS MASAKI ENOMOTO, if such 

amount should exceed $50,000, shall be distributed in trust. The Trustee 

shall pay to DENNIS MASAKI ENOMOTO so much or all of the net 

income and principal of the trust as in the sole discretion of the Trustee may 

be required for support in the beneficiary’s accustomed manner of living, 

for medical, dental, hospital, and nursing expenses, or for reasonable 

expenses of education, including study at college and graduate levels. Any 

income not so paid shall be accumulated and added to the principal of such 

trust at the end of the trust’s tax year. In the Trustee’s sole discretion and 

to the extent the Trustee deems advisable, the Trustee may consider or 

disregard the funds available to the beneficiary from other sources or the 

duty of anyone to support the beneficiary. Should the principal of the trust 

drop below $10,000, the Trustee shall distribute the balance of the 

principal, together with the undistributed income therefrom to DENNIS 

MASAKI ENOMOTO. 

(Id. at 9.) Under the terms of the Will, Carol Severyn Trust Management Services was 

named as trustee, but Dr. Enomoto enjoyed “the limited authority to request the removal 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 2 of 14
- 3 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

of the Trustee and appoint a successor Trustee,” who would have to be “an individual 

licensed by the Supreme Court of the State of Arizona as a Private Fiduciary, or an entity 

whose employee(s) responsible for managing the trust are licensed by the Supreme Court 

of the State of Arizona as Private Fiduciaries.” (Id. at 10.) The Will prohibited Dr. 

Enomoto from naming a family member as successor trustee. (Id.) 

Ms. Enomoto passed away on February 16, 2013, and Duckett filed a probate 

petition in Maricopa County Superior Court on March 15, 2013. (Doc. 49 at 5.) On 

April 3, 2014, Duckett prepared a final accounting of the estate, to which both Dr. 

Enomoto and Bradley agreed. (Id.) That accounting provided that the estate would 

deliver $173,545.12 to the trustee of the trust (“Trust”) established for Dr. Enomoto’s 

benefit and would pay out $282,138.10 each to Duckett and Bradley. (Id.) In addition, 

Duckett withheld $15,000 as a temporary reserve to cover future costs and fees of 

administration prior to closing the estate. (Id.) 

On June 17, 2014, the Internal Revenue Service served on Duckett, in her capacity 

as personal representative, a Notice of Levy demanding that she “turn over to us [Dr. 

Enomoto’s] property and rights to property (such as money, credits, and bank deposits) 

that you have or which you are already obligated to pay this person.” (Doc. 49-2 at 27 

(italics in original).) The notice, which Duckett received before distributing any money 

from the estate, related to a total of $701,079.11 in assessments the IRS had made against 

Dr. Enomoto for income tax years 2007 through 2011. (Doc. 49 at 4.) Despite receiving 

statutory notices and demands for payment, Dr. Enomoto had not timely paid the full 

amount allegedly due. (Id. at 4-5.) He subsequently made a number of partial payments, 

bringing his balance owing, as of May 18, 2015, to $499,761. (Id. at 5, 7.) 

When Duckett informed Dr. Enomoto of the levy, he objected to paying the IRS 

the funds slated for delivery into the Trust. (Id. at 6.) Duckett subsequently filed a 

Petition for Interpleader in the Maricopa County Superior Court against Dr. Enomoto, the 

IRS, Carol A. Severyn, and Carol Severyn Trust Management Services. (Doc. 1-1 at 6; 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 3 of 14
- 4 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Doc. 49 at 6.) On August 7, 2014, the IRS removed the action to this court pursuant to 

28 U.S.C. § 1444. (Doc. 1 at 1-2.) 

On September 18, 2014, Dr. Enomoto named Kurt A. Tittelbach as the Trust’s 

successor trustee, and Tittelbach accepted the appointment four days later. (Doc. 49 at 6-

7; Doc. 49-2 at 35.) The Court thereafter dismissed Severyn and Carol Severyn Trust 

Management Services. (Doc. 22 at 2.) 

The IRS now moves for summary judgment, arguing that as a matter of law, “the 

Interpleaded Funds should go [to] the United States, not to Dr. Enomoto or the trustee.” 

(Doc. 48 at 2.) In their jointly filed response and cross-motion, Dr. Enomoto and 

Tittelbach contend the “IRS is not entitled to the Interpleaded Funds as a matter of law” 

and they seek summary judgment “precluding IRS attachment of this discretionary trust.” 

(Doc. 58 at 2, 9.) 

Duckett wants out of the fight. She moves for recovery of “costs and reasonable 

attorney’s fees” incurred in bringing this action, as well as discharge from this action 

“with a finding of no liability to the Defendants upon deposit of funds with the Clerk of 

the Court.” (Doc. 65 at 1-2.) 

Finally, Tittelbach moves to recover from the interpleaded funds “the legal fees 

incurred in defending the Trust assets against the IRS claims.” (Doc. 51 at 1.) 

II. ANALYSIS 

A. Defendants’ Cross-Motions for Summary Judgment 

A motion for summary judgment tests whether the opposing party has sufficient 

evidence to merit a trial. At its core is whether sufficient evidence exists from which a 

reasonable jury could find in favor of the party opposing the motion. Summary judgment 

should be granted if the evidence reveals no genuine dispute about any material fact and the 

moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). For purposes 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 4 of 14
- 5 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

of the pending motions, there are no disputed facts. This case therefore presents a pure 

question of law. 

1. Property of the Taxpayer to Which a Lien Attaches 

Defendants’ dispute involves the reach of 26 U.S.C. § 6321, which provides, “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 

such person.” Defendants disagree over whether Dr. Enomoto’s interest in the 

interpleaded funds can be considered “property” or “rights to property.” If it can, the 

parties agree, the IRS has a lien on that interest by operation of law; if not, no lien yet 

exists. 

“The question whether a state-law right constitutes ‘property’ or ‘rights to 

property’ is a matter of federal law.” Drye v. United States, 528 U.S. 49, 58 (1999). 

Courts “look initially to state law to determine what rights the taxpayer has in the 

property the Government seeks to reach, then to federal law to determine whether the 

taxpayer’s state-delineated rights qualify as ‘property’ or ‘rights to property’ within the 

compass of the federal tax lien legislation.” Id.

In “determining whether a federal taxpayer’s state-law rights constitute ‘property’ 

or ‘rights to property,’ ‘the important consideration is the breadth of the control the 

[taxpayer] could exercise over the property.’” Id. at 61 (brackets in original). That is, 

courts examine the degree of control a taxpayer possesses under state law and then ask 

whether, as a matter of federal law, that degree of control rises to the level of “property” 

or a “right to property.” There are few guideposts in this area. In general, however, “the 

taxpayer must have a beneficial interest in any property subject to the lien.” Id. at 59 n.6. 

A “state-created incident of ownership,” such as “bare legal title” to disputed property, is 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 5 of 14
- 6 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

“not a sufficient ‘right to property’ . . . to allow [a] tax lien to attach.” Id. (citations 

omitted). 

Applying this test, the Supreme Court has held that “a taxpayer’s right under state 

law to withdraw the whole of the proceeds from a joint bank account constitutes 

‘property’ or the ‘right to property’ subject to levy for unpaid federal taxes, although state 

law would not allow ordinary creditors similarly to deplete the account.” Id. at 58 (citing 

United States v. Nat’l Bank of Commerce, 472 U.S. 713, 723-27 (1985)). Similarly, “a 

taxpayer’s right under a life insurance policy to compel his insurer to pay him the cash 

surrender value qualifies as ‘property’ or a ‘right to property’ subject to attachment for 

unpaid federal taxes, although state law shielded the cash surrender value from creditors’ 

liens.” Id. (citing United States v. Bess, 357 U.S. 51, 56-57 (1958)). But where the 

taxpayer lacks authority to dispose of the disputed funds, there is no “property” or “right 

to property” within the meaning of § 6321. Accordingly, “as a matter of federal law, . . . 

no federal tax lien could attach” to the proceeds of a life insurance policy, since those 

proceeds were “unavailable to the insured in his lifetime.” Id. at 58-59 (citing Bess, 357 

U.S. at 55-56). 

2. Dr. Enomoto’s Interest in the Interpleaded Funds 

When interpreting a trust governed by Arizona law, “the overriding goal is to 

ascertain the intent of the trustor.” Weinstein v. Weinstein, 235 Ariz. 40, 44, 326 P.3d 

307, 311 (Ct. App. 2014). “That intent is to be ascertained from the contents within the 

four corners of the instrument, including the general plan or scheme thereof, and when 

necessary or appropriate, the circumstances under which the [instrument] was made.” Id.

at 44-45, 326 P.3d at 311-12 (brackets in original) (internal quotation marks omitted).

The IRS’ Notice of Levy instructs Duckett to hand over any of Dr. Enomoto’s 

“property and rights to property . . . that [she] ha[s] or which [she is] already obligated to 

pay” to him. (Doc. 49-2 at 27.) But Arizona trust law recognizes no property interests of 

any kind that Duckett is obligated to pay to Dr. Enomoto. Nor does she have any 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 6 of 14
- 7 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

property interests belonging to Dr. Enomoto. Ms. Enomoto’s clear intent in establishing 

the Trust was to confer on her son the limited right to receive only those amounts that the 

Trustee, in his discretion, believed necessary for Dr. Enomoto’s “accustomed manner of 

living,” including medical and educational expenses. It is the Trustee, not Duckett, who 

is obligated to make distributions to Dr. Enomoto. Duckett’s only obligation is to pay the 

Trustee the amount agreed to in the final accounting of the estate so that the trustee can 

subsequently disburse it at his discretion. Were Duckett to pay the money directly to Dr. 

Enomoto—or to the IRS, standing in Dr. Enomoto’s shoes—she would violate both the 

letter and spirit of the Will. Under Arizona trust law, Dr. Enomoto’s interests run only to 

the Trustee. 

Because Dr. Enomoto’s interests run only to the Trustee, the IRS has not shown 

that Dr. Enomoto has any state-law right or interest in payment from Duckett. It follows 

that Dr. Enomoto does not currently have any state-law right or interest in the 

interpleaded funds because they are still in Duckett’s hands. Therefore those funds—

though designated to the Trust—are not yet Dr. Enomoto’s “property” for federal tax 

purposes. 

The IRS’ summary judgment motion does not fully appreciate the fact that the 

funds are not yet held in trust. Instead, the IRS claims this case is “on point with United 

States v. Delano, 182 F. Supp. 2d 1020, 1023 (D. Colo. 2001).” (Doc. 48 at 11.) But the 

issue in Delano was whether a testamentary trust beneficiary’s interest in the trust

constituted “property” for federal tax purposes. 182 F. Supp. 2d at 1021. Here, the issue 

is whether a testamentary trust beneficiary’s interest in funds designated to the trust but 

held by the personal representative constitutes “property” for federal tax purposes. 

Whatever Dr. Enomoto’s interest in the Trust, it does not extend to funds outside the 

Trust. 

In supplemental briefing the IRS suggests it does not matter whether the funds are 

currently held in trust, since it is not “relevant to query whether the IRS could have or 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 7 of 14
- 8 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

should have waited to levy until the Personal Representative distributed the subject funds 

to the Trustee.” (Doc. 77 at 3.) The IRS relies on American Trust v. American 

Community Mut. Ins. Co., 142 F.3d 920 (6th Cir. 1998), where the court enforced an IRS 

lien on interpleaded funds that had been designated to a trust but were not yet held in 

trust. That case sheds no light on whether the funds held by Duckett are Dr. Enomoto’s 

property. 

For starters, American Trust addressed a different question: whether an exemption 

from levy prevented the IRS from enforcing an otherwise valid lien on certain funds. 142 

F.3d at 922. That the lien attached to the funds was not in dispute. But that is precisely 

the question here: whether the interpleaded funds are currently subject to the IRS’ lien at 

all. 

Moreover, in American Trust there was reason to think the interpleaded funds 

were the taxpayer’s property when in the hands of the person who petitioned for 

interpleader. There, the interpleaded funds were sales commissions earned by the 

taxpayer, and the person who petitioned for interpleader was the taxpayer’s employer. 

See id. at 921-22. Thus the taxpayer had a right to the funds at the time of interpleader 

just as any employee has a right to earnings held by an employer. Here, however, the 

interpleaded funds are a prospective inheritance, and the person who petitioned for 

interpleader was Duckett, the personal representative of the estate. Dr. Enomoto has no 

right to the funds as against Duckett because the Will gives him no such right. 

One might think the Trustee’s right to compel Duckett to distribute the funds 

effectively confers a similar right to Dr. Enomoto. American Trust does not support that 

conclusion either. There, the taxpayer assigned his own rights in the funds to a trust 

created for his benefit and to evade taxes, id. at 921 & n.1, so the trustee’s right to 

distribution seemed indistinguishable from the taxpayer’s right. Here, by contrast, Ms. 

Enomoto designated her own money to a testamentary trust that expressly prohibited Dr. 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 8 of 14
- 9 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Enomoto from appointing a family member as trustee. Thus, whatever right the Trustee 

has against Duckett does not confer such a right to Dr. Enomoto. 

In sum, because Dr. Enomoto has no state-law right or interest in payment from 

Duckett, the interpleaded funds are not yet Dr. Enomoto’s property and the IRS’ lien does 

not attach. The IRS’ summary judgment motion must be denied. 

This conclusion is based on the unusual facts and procedural posture of this case, 

where the personal representative of an estate has petitioned for interpleader in response 

to an IRS levy seeking funds that are in her possession but have been designated to a trust 

whose beneficiary is the taxpayer. Multifaceted cases like this one require a careful 

accommodation of divergent legal principles and offer little predictive value for future 

cases with different facts. Accordingly, the Court does not address whether the funds 

would be Dr. Enomoto’s property once distributed to the Trust. As a result, Dr. Enomoto 

and Tittelbach’s cross-motion for summary judgment will also be denied as premature. 

It is worth noting that the Court would be well equipped to decide whether the 

funds are Dr. Enomoto’s property once in the Trust, because Defendants have thoroughly 

briefed this question in their summary judgment motions. (See Doc. 48 at 11-15; Doc. 58 

at 4-9.) Therefore Defendants will be permitted to renew their summary judgment 

motions without a need for further briefing, once the funds are in the Trustee’s hands. 

B. Plaintiff’s Motion for Discharge 

Duckett’s motion seeks (1) reimbursement for costs and attorney’s fees reasonably 

incurred in bringing this interpleader action, (2) deposit of the interpleaded funds with the 

Clerk of Court, and (3) discharge from this action free of liability to Defendants. 

1. Costs and Attorney’s Fees 

Duckett properly brought this interpleader action. Pursuant to Federal Rule of 

Civil Procedure 22(a)(1), “[p]ersons with claims that may expose a plaintiff to double or 

multiple liability may be joined as defendants and required to interplead.” The Court has 

subject-matter jurisdiction because the IRS removed Duckett’s state court action under 28 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 9 of 14
- 10 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

U.S.C. § 1444. See Hood v. United States, 256 F.2d 522, 525 (9th Cir. 1958) 

(interpreting 28 U.S.C. § 1444 as providing an independent basis for jurisdiction). 

Duckett’s petition for interpleader was based on “a good faith belief that there are or may 

be colorable competing claims” to the funds at issue, Michelman v. Lincoln Nat. Life Ins. 

Co., 685 F.3d 887, 894 (9th Cir. 2012), because the funds had been designated to a 

testamentary trust but were also the apparent subject of an IRS notice of levy. 

The Court has discretion to award attorney’s fees to a disinterested plaintiff for 

properly bringing an interpleader action. Abex Corp. v. Ski’s Enterprises, Inc., 748 F.2d 

513, 516 (9th Cir. 1984); see also 7 Charles Alan Wright, Arthur R. Miller, & Mary Kay 

Kane, Federal Practice & Procedure § 1719 (3d ed. 2001) (“A federal court has 

discretion to award costs and counsel fees to the stakeholder in an interpleader action . . . 

whenever it is fair and equitable to do so.”). Such awards are taken from the interpleaded 

funds. Michelman, 685 F.3d at 898; see also Wright, Miller, & Kane, supra, at § 1719 

(stating an award “depletes the fund”). Reasons to reimburse such plaintiffs are that “the 

plaintiff has benefited the claimants by promoting early litigation on ownership of the 

fund, thus preventing dissipation, and that the plaintiff should not have to pay attorney 

fees in order to guard himself against the harassment of multiple litigation.” Schirmer 

Stevedoring Co. v. Seaboard Stevedoring Corp., 306 F.2d 188, 193 (9th Cir. 1962) 

(citation omitted). 

These reasons for reimbursement apply here. Duckett’s petition for interpleader 

protects against competing claims to the same funds. In light of these equitable 

considerations, Duckett will be awarded the costs and attorney’s fees she reasonably 

incurred in bringing this interpleader. 

This award will come from the interpleaded funds even though the IRS claims a 

lien on the funds. While “prior federal tax liens give[] the government a statutory priority 

over the interpleader plaintiff’s ability to diminish the fund by an award of fees,” Abex, 

748 F.2d at 516, the IRS’ lien does not attach to the funds here because they are in 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 10 of 14
- 11 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Duckett’s hands, as explained above. Thus, the IRS’ lien does not give the government 

“statutory priority” over Duckett’s claim for costs and fees. 

Duckett will be ordered to file a motion pursuant to Local Rule LRCiv 54.2 

establishing the amount and reasonableness of the requested costs and fees, bearing in 

mind that such fees are “normally not high.” Michelman, 685 F.3d at 898; see also

Wright, Miller, & Kane, supra, at § 1719 (“In the usual case the fee will be relatively 

modest, inasmuch as all that is necessary is the preparation of a petition, the deposit in 

court or posting of a bond, service on the claimants, and the preparation of an order 

discharging the stakeholder.”). Any fees incurred in advancing one claimant’s position 

against another will be disallowed. Upon the Court’s approval of the amount, Duckett 

will be ordered to withdraw that amount from the interpleaded funds and to transfer the 

balance of the funds to the Trustee. 

2. Transfer of Funds 

While this action was properly commenced as an interpleader, the interests of all 

parties are fully protected through the normal remedies of restraining the Trustee, a 

professional licensed by the Arizona Supreme Court, from disbursing the funds except in 

accordance with a final judgment as to the rights of the claimants. A trustee is in the 

business of retaining funds and disbursing them as directed by a court of competent 

jurisdiction. A trustee needs no relief from the duties of his ordinary business, and the 

claimants need no protection beyond that. In the circumstances of this case it is 

needlessly complex for the Court to take the funds and take on the burdens of trust 

handling and administration. The usual duty of directing or approving the trustee’s 

distribution is all that is needed of a court. Were it otherwise, trustees could routinely 

shed their duties of administration by washing their hands of the corpus and the 

claimants. 

The funds need not be deposited with the Court as a jurisdictional matter because 

subject-matter jurisdiction does not depend on 28 U.S.C. § 1335. Rather, as stated above, 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 11 of 14
- 12 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

this interpleader is proper pursuant to Federal Rule of Civil Procedure 22 and the Court 

has subject-matter jurisdiction pursuant to 28 U.S.C. § 1444. See Gelfgren v. Republic 

Nat. Life Ins. Co., 680 F.2d 79, 82 (9th Cir. 1982) (distinguishing between interpleader 

under 28 U.S.C. § 1335 and interpleader under Rule 22). 

The IRS opposes transfer to the trustee pending conclusion of the tax lien dispute 

but offers no reason. (See Doc. 68.) This course of action could not unfairly prejudice 

the IRS, as the trustee may not prematurely distribute any of the funds. The Court may 

then adjudicate who has a superior right to the funds in the hands of the Trustee and 

direct the Trustee accordingly. 

Therefore, once Duckett withdraws her fee award from the interpleaded funds, she 

will be ordered to transfer the remaining funds to the Trustee, Tittelbach. The funds 

currently total $177,525. (Doc. 65 at 12; accord Doc. 49 at 2.) Tittelbach and all 

successive trustees will be ordered to hold the entirety of the transferred funds until the 

Court orders a final distribution as between the two claimants. The IRS may decide for 

itself whether to issue a Notice of Levy on Tittelbach after the transfer. 

3. Discharge from Liability 

 “When the court decides that interpleader is available, it may issue an order 

discharging the stakeholder, if the stakeholder is disinterested . . . .” Wright, Miller, & 

Kane, supra, at § 1714 (footnotes omitted). Here, Duckett is a disinterested stakeholder 

who seeks to be rid of the interpleaded funds. No one objects to Duckett’s discharge per 

se. (See Doc. 67 at 4; Doc. 68 at 1.) Therefore, after Duckett withdraws her fee award 

from the interpleaded funds and transfers the remaining funds to the trustee, she will be 

discharged from this action free of liability to Defendants for or in connection with the 

interpleaded funds. 

C. Trustee’s Motion for Legal Fees 

The Trustee also requests an award of legal fees to date from the interpleaded 

funds. A trustee “shall take reasonable steps to . . . defend claims against the trust,” 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 12 of 14
- 13 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

A.R.S. § 14-10811, and “is entitled to reimbursement from the trust” for fees incurred in 

a good faith defense in a proceeding “involving the administration of the trust,” A.R.S. 

§ 14-11004. Tittelbach argues these statutes entitle him to reimbursement for fees spent 

responding to the IRS’ claims in this interpleader action. 

The Trustee’s motion is premature, as the Trustee’s services are not yet concluded 

and the validity and the time of validity of the IRS’s lien must first be adjudicated to 

know whether any funds may be distributed to the Trustee over the IRS. 

This argument, much like the IRS’ summary judgment motion, also overlooks the 

fact that the Trustee does not yet have the interpleaded funds. The parties give scant 

discussion and less authority on what effect entitlement to “reimbursement from the 

trust” has when the trust is empty. Nor have the parties addressed adequately whether the 

Trustee can be reimbursed out of the trust funds for carrying water for the Beneficiary 

when the Beneficiary is a party and can carry his own water. Therefore Tittelbach’s 

motion will be denied, without prejudice to renewal at the conclusion of this case. 

IT IS THEREFORE ORDERED that the United States’ Motion for Summary 

Judgment (Doc. 48) and the Trustee and Trust Beneficiary’s Cross-Motion for Summary 

Judgment (Doc. 58) are denied. Defendants may renew their motions without a need for 

further briefing once the funds have been transferred to the Trustee as described below. 

IT IS FURTHER ORDERED that the Trustee’s Motion to Allow Payment of Trust 

Legal Fees from Interpleader Funds (Doc. 51) is denied without prejudice to renewal at 

the conclusion of this case. 

IT IS FURTHER ORDERED that Plaintiff is awarded the costs and attorney’s fees 

reasonably incurred in bringing this interpleader. Plaintiff shall file no later than 

November 27, 2015, a motion pursuant to Local Rule LRCiv 54.2 for attorney’s fees and 

costs. 

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 13 of 14
- 14 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Upon quantification of Plaintiff’s attorney’s fees and costs, a further order will be 

entered authorizing Plaintiff to retain for herself those amounts from the interpleaded 

funds and directing payment of the balance of the interpleaded funds to the Trustee, to be 

held in their entirety until the Court orders otherwise. Upon transfer of those funds, 

Plaintiff’s Motion for Discharge (Doc. 65) will be granted by separate order to the extent 

that Plaintiff will be discharged from this action free of liability to Defendants for or in 

connection with the interpleaded funds and shall be dismissed from further participation 

in these proceedings. 

Dated this 13th day of November, 2015. 

Neil V. Wake

United States District Judge

Case 2:14-cv-01771-NVW Document 79 Filed 11/13/15 Page 14 of 14