Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_10-cv-01055/USCOURTS-caed-1_10-cv-01055-16/pdf.json

Parties Involved:
Bedrock Financial, Inc.
Counter Defendant
First American Title Company
ThirdParty Defendant
First American Title Insurance Company
ThirdParty Defendant
Internal Revenue Service
Defendant
United States of America
Counter Claimant

Document Text:

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

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

BEDROCK FINANCIAL CORPORATION, 

a California Corporation,

Plaintiff and Counterclaim 

Defendant,

v.

THE UNITED STATES OF AMERICA; and 

Does 1 through 50, inclusive,

Defendants, Counterclaimant, 

and Third-Party Plaintiff,

v.

FIRST AMERICAN TITLE COMPANY and 

FIRST AMERICAN TITLE INSURANCE 

COMPANY, California Corporations,

Third-Party Defendants.

Case No. 1:10-cv-01055-MJS

ORDER AWARDING DAMAGES AND 

ENTERING JUDGMENT THEREON

(Doc. 135)

This case originated with an action filed May 3, 2010, by Bedrock Financial, Inc., a 

California corporation ("Bedrock"), against the United States Internal Revenue Service ("IRS") in 

Merced County California Superior Court (case no. CV001026). Bedrock, holder of a deed of trust 

to real property in Atwater, Merced County, California (APN 004-110-005) (the "property"), sought 

Case 1:10-cv-01055-MJS Document 140 Filed 06/06/14 Page 1 of 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

2

to be subrogated to an earlier mortgage so as to establish priority over a federal tax lien which 

attached to the property after the earlier mortgage but before Bedrock's deed of trust. The United 

States ("Government") removed the suit to this Court. The IRS was later dismissed, leaving the 

Government as the only Defendant. The Government answered Bedrock's suit, and filed a 

counterclaim against Bedrock and a third-party complaint against First American Title Company and 

First American Title Insurance Company (collectively, "First American"). The parties consented to 

the jurisdiction of a United States Magistrate Judge for all purposes, pursuant to 28 U.S.C. § 636 

(c)(1).

On November 12, 2012, the Court granted Bedrock's motion for summary judgment, 

awarding it equitable subrogation and an equitable lien in the amount of $171,106.85.

For the third time, on December 31, 2012, the Government amended its third-party 

complaint, alleging that First American intentionally and negligently impaired the federal tax lien,

committed bad-faith waste by distributing the proceeds of the taxpayers' refinancing to parties 

holding lower priority claims and to the taxpayers themselves, and converted funds subject to the 

federal tax lien. First American moved to dismiss. On May 21, 2013, the Court held that the third 

amended third-party complaint stated cognizable claims of conversion and waste but dismissed the 

negligent and intentional impairment of security claims.

On December 2, 2013, the Government moved for summary judgment on the remaining 

third-party claims. On April 17, 2014, the Court granted the Government's motion against First 

American on the conversion and waste claims. The Court found that First American wrongfully 

diverted $42,458.12 in loan proceeds that were subject to the tax lien, but that the Government had 

subsequently recovered a portion of the outstanding debt, leaving an approximate unrecovered 

balance of $24,354.75. 

The Court ordered the Government to file a written brief setting forth its request for damages 

and the evidence on which it was based. The Government complied on April 30, 2014, documenting 

Case 1:10-cv-01055-MJS Document 140 Filed 06/06/14 Page 2 of 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

3

a request for unpaid tax liabilities and statutory accruals totaling $24,648.76 through May 28, 2014 

($24,715.70 through June 30, 2014). On May 14, 2014, the third-party defendants, First American 

Title Company and First American Title Insurance Company filed a statement of non-opposition. 

The Court has carefully considered the points, authorities, and evidence submitted by the 

Government and, like First American, finds no basis for questioning the requested amount. The 

Certificates of Assessments, Payments and Other Specified Matters for the tax debtors through 

November 15, 2013, are probative and, absent contradiction, competent evidence for the matters 

shown. Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993), cert. denied, 512 U.S. 1219 

(1994); Koff v. United States, 3 F.3d 1297, 1298 (9th Cir. 1993), cert. denied, 511 U.S. 1030 (1994). 

The Court concludes that the Government has correctly determined tax, penalties, and interest due 

from the taxpayers to be $24,648.76 as of May 28, 2014.

Accordingly, the Court hereby ORDERS that the Clerk of Court enter judgment in favor of 

the third-party plaintiff, the United States of America, and against the third-party defendants, First 

American Title Company and First American Title Insurance Company, in the amount of $24,648.76 

plus interest accruing from May 28, 2014, pursuant to 26 U.S.C. §§ 6601 and 6621 and 28 U.S.C. 

§ 1961(c)(1). The Clerk is directed to close the case. 

IT IS SO ORDERED.

Dated: June 5, 2014 /s/Michael J. Seng 

UNITED STATES MAGISTRATE JUDGE

Case 1:10-cv-01055-MJS Document 140 Filed 06/06/14 Page 3 of 3