2010 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 1-26-2010 

# M o co In v Inc v . U SA P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 08-1972

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w . vi ll anova . e du/thir dc ir c uit_2010/2015NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT N o. 08- 1972 M O C O IN V E S T M E N T S , IN C ., A ppel l ant v. UNI T E D S T AT E S OF AM E RI CA ; I NTER NA L REV ENU E SERVI CE; CH AD BA CEK ; NA DI NE B AC EK

A p p ea l from the U n it ed S tat es D istri ct C o u rt forthe D i s tr i ctof N ew J er s ey ( D . C . C i vi l A ct i on N o. 2- 06- cv- 04040) D i s tr i ctJ udge: H onor abl e D enni s M . C avana ugh Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

J anuary14, 2010 B efor e: A M B R O , C H A G A R E S, and ST A PL E T O N , C i r cui tJ udges

( O pi ni on fi l ed: J anuary26, 2010)

OP I NI ON A M B R O , C i r cui tJ udge In th is acti o n to q u ietti tl e, M o co Inv estm en ts, Inc . ap p ea ls th e D istri ct C o u rt ’sM oco’ s C om pl ai nti s ent i t l ed: “C om pl ai ntt o C om pel R el eas e of I R S L i en and f or 1 D a m a g e s.” A lth o u g h th e C o m p lain t lac k s a ju risd ictio n a l sta tem e n t, i t w a s p ro p e rly tre a ted a s a n a c tio n u n d e r 2 8 U .S .C . § 2 4 1 0 , w h ich g ra n ts ju risd ictio n to d istric t co u rts over“anyci vi l act i on ors ui t ” aga i ns tthe U ni t ed St at es “t o qui ett i t l e t o . . . r eal or per s onal pr opertyon w hi ch the U ni t ed St at es has orcl ai m s a mort gage orotherl i en. ” I d. § 2410( a) . W e have appel l at e j ur i s di ct i on under28 U . S. C . § 1291. A l though M oco named t he I R S as a def endant , the U ni t ed St at es al one i s the pr oper 2 defe ndanti n a s ui tunder28 U . S. C . § 2410. T h o u g h n a m e d a s d e f

e n d a n ts, th e B a c e k s w e re n e v e r se rv e d a n d d id n o t en ter th e ir 3 ap p ea ran ce in the D istri ct C o u rt . W h il e w e g en era ll ylack juri sd ict ion to rev iew o rde rs 2 e n tryo f j u d g me n ti n f

a v o ro f th e Un i t e d S t a t e s . W e a f f i r m. 1 I. T he r el evantfac t s ar e undi s put ed. I n M ar ch 2003, the I nt ernal R evenue Ser vi ce (“ IR S ” ) a s s e s s e d ta x e s a g a in s t C h a d a n d N a d in e B a c e k f o r t h e 2 0 0 1 ta x y e a r. A ddi t i onal l y , the I R S as s es s ed t axes agai ns tC had B ace k i n M ay2004 and M ay2005 for the 2003 and 2004 t ax y ear s , r es pect i vel y . O n M ay31, 2005, M oco I nves t m ent s , I nc. ( “M oco”) , a N ew J er s eyl i m i t ed l i abi l i tycompany , acqui r ed fr om the B ace ks a par cel of rea l pro p ertyloca ted in M idd lesex C o u n ty . H o w ev er, M o co d id n o t i m m ed iat elyrec o rd i t s deed. I n D ece m ber2005, the I R S r ecor ded the not i ce of a fe der al t ax l i en ( i n the a m o u n t o f

a p p ro x im a tely$ 1 0 ,0 0 0 ) a g a in st th e p ro p e rtyth e B a c e k s h a d c o n v e y e d to M oco. M oco r ecor ded i t s deed t o the pr opertys hor t l yther eaf t er , i n J anuary2006. M oco s oughtt o have the t ax l i en r el eas ed, and i n A ugus t2006 fi l ed s ui ti n the D i s tr i ctC our tforthe D i s tr i ctof N ew J er s eyagai ns tthe U ni t ed St at es , the I R S, and the 2 B a c e k s . In D e c e m b e r 2 0 0 6 , th e G o v e rn m e n t m o v e d f o r j u d g m e n t o n th e p le a d in g s . 3th a ta r e n o tf i n a l a s t o a l l p a r t i e s a b s e n ta c e r t i f i c a t i o n b yth e Di s tr i c tCo u r tu n d e rF e d . R. C i v. P. 54( b) , “a na m ed def endantw ho has notbeen s erved i s nota ‘ party ’ w i thi n the m eani ng of R ul e 54( b) . ” G om ezv. G ov’ tof V i r gi n I s lands , 8 8 2 F . 2 d 7 3 3 , 7 3 6 (3d C ir . 1989) . A ccor di ngl y , the D i s tr i ctC our t ’ s or dergr ant i ng the G overnm ent ’ s m ot i on for ju d g m e n t o n th e p le a d in g s w a s f in a l f o r p u rp o s e s o f

2 8 U .S .C . § 1 2 9 1 . A s the G overnm entpoi nt s out , i t s m ot i on forj udgm enton the pl eadi ngs s houl d have 4 been tr eat ed as a mot i on fors um m aryj udgm ent , as i t( 1) w as fi l ed bef or e the G overnm ent a ns w e r e d the Com pl a i nt , a nd thu s be fo r e the “ pl e a di ng s [wer e ] c l os e d, ” Fe d. R. Ci v. P. 12( c) ; and ( 2) i ncl uded mat er i al s out s i de the pl eadi ngs — C ert i fi cat es of A s s es s m ent s and Paym ent s forthe B ace ks ’ 2001, 2003, and 2004 t ax y ear s , w hi ch es t abl i s hed thatt axes w ere as sess ed ag ai nstthe B aceks b efore t heycon vey ed the propertyt o M oco . B ecause th e D istric t C o u rt d id n o t ex c lu d e th e se m a ter ials in ru lin g o n th e G o v e rn m e n t’s m o tio n , it e f f e c tiv e ly co n v e rt e d th e m o tio n to o n e f o r s u m m a ry ju d g m e n t. See F ed . R . C iv. P. 12 (d); se e a lso R o se v . B a rtle , 8 7 1 F . 2 d 3 3 1 , 3 4 0 (3d C ir . 1 9 8 9 ) (“[T ]he labe l a distr ictco u rt p lac e s o n its d isp o sitio n is n o t b in d in g o n a n a p p e llate c o u rt.”); s ee al s o For d Mot orC o. v. Sum m i tMot orP r ods . , I nc. , 930 F. 2d 277, 284 ( 3d C i r . 1991) ( cons trui ng di s tr i ct c o u rt’s d isp o sitio n a s th e e n tryo f su m m a ryju d g m e n t, rath e r th a n a d ism iss a l u n d e r R u le 1 2 (b)(6 ), w h ere the c o u rtd id n o t exc lud e a d d it ion al m aterial att ac h ed to p lai n ti ff ’s m ot i on t o di s m i s s count er cl ai m ) . H avi ng done s o, the C our tneede d t o gi ve the part i es n o tic e o f th e c o n v e rs io n to a m o tio n f o r s u m m a ry ju d g m e n t. See R ose , 8 7 1 F .2 d a t 3 4 2 . M oco does notdi s cus s i n i t s br i ef the D i s tr i ctC our t ’ s tr eatm entof the G o v ern m en t’ s m o ti o n ; acc o rdin g ly , ith as w aive d an ych all en g e to th e C o u rt ’s c o n v e rs io n . See Labor ers ’I nt ’ lU ni on of N . A m . , A F

L- C IO v. Fos t erW

heelerC or

p. , 26 F. 3d 375, 398 ( 3d C i r . 1994) . I n anyevent , M oco does notdi s put e the authent i ci tyof the C ert i fi cat es of A s s es s m ent s and Paym ent s att ache d t o the G overnm ent ’ s m ot i on, nordoes it co n ten d th a t itw a s d e n ied a “ ‘re a so n a b le o p p o rtu n ity ’ to p re se n t all m a ter ial re lev a n t to a s um m aryj udgm entm ot i on. ” I n r e Rockef

el l erC tr . P r ops . , I

nc. Sec. Li t ig. , 184 F. 3d 2 8 0 , 2 8 8 (3d C ir . 1 9 9 9 ) ( quot i ng Fed. R . C i v. P. 12( d) ) . I ndeed, i n i t s m ot i on for s um m aryj udgm ent( fi l ed bef or e M oco r es ponded t o the G overnm ent ’ s m ot i on for j udgm enton t he pl eadi ngs ) , M oco as s ert ed thatthe “f act s [w er e] undi s put ed, ” and a t t a c h e d n o a d d i t i o n a l ma t e r i a l s o ra f f i d a v i t s i n s u p p o r to f

i t s mo t i o n . Ac c o r d i n g l y , we concl ude thatthe fa i l ur e t o pr ovi de not i ce of the s um m aryj udgm entconver s i on w as h a rm le s s . See R ose , 8 7 1 F . 2 d at 34 2 (th e f ail u re to p rov ide p rop er n o ti ce d o es n o t r eq u ir e 3 M o c o o p p o s e d th e G o v e rn m e n t’ s m o tio n , a n d s e p a ra te ly m o v e d f o r s u m m a ry ju d g m e n t. I n J anuary2008, the D i s tr i ctC our tgr ant ed the G overnm ent ’ s m ot i on and deni ed thatof M oco, w hi ch has t i m el yappea l ed. 4re v e rsa l w h e re th e e rro r is h a rm les s); accord I n r e Rockef

el l er , 1 8 4 F .3 d a t 2 8 8 . H avi ng det erm i ned thatthe D i s tr i ctC our tconvert ed the G overnm ent ’ s m ot i on t o a m o ti o n fo r sum m aryjud g m en t, w e e x erc ise p lena ryrev iew o v er it s g ran t of su m m ary ju d g m e n t, a p p lyin g th e s a m e s ta n d a rd th a t a d is tr ic t c o u rt m u s t a p p ly. See J aki m as v. H of f m ann- La R oche, I

nc. , 485 F. 3d 770, 777 ( 3d C i r . 2007) . W e vi ew the fa ct s i n the lig h t m o s t f

a v o ra b le to th e n o n m o v in g p a rt y . I d. ; E rie T

e lec o m m s. In c . v. C ity o f E rie , 853 F. 2d 1084, 1093 ( 3d C i r . 1988) . A partyi s ent i t l ed t o s um m aryj udgm entonl y“i f the pl eadi ngs , the di s coveryand di s cl os ur e mat er i al s on fi l e, and anyaff i davi t s [, ] s how that th e re is n o g e n u in e iss u e a s to a n ym a ter ial f a c t an d th a t th e m o v a n t is e n tit led to ju d g m e n t a s a m a tte r o f la w .” F e d . R . C iv . P . 5 6 (c )( 2 ).

4 II. “I f anyper s on l i abl e t o payanyt ax negl ect s orr efus es t o paythe s ame aft er demand, the amount. . . s hal l be a l i en i n favorof the U ni t ed St at es upon al l pr opertyand ri g h ts to p ro p e rt y , w h e th e r r e a l o r p e rs o n a l, b e lo n g in g to s u c h p e rs o n .” 2 6 U .S .C . § 6 3 2 1 . S u c h a ta x lie n a ri s e s a t th e tim e th e ta x is a s s e s s e d . See 2 6 U .S .C . § 6 3 2 2 ; In re D eA n g e lis , 373 F. 2d 755, 757 ( 3d C i r . 1967) ( “[N ] on- paym entof t axes aft erdemand c re a te s a lie n c o m m e n c in g a t th e a s s e s s m e n t d a te .” ). H e re , a ta x lie n “ u p o n a ll [ o f th e B a c e k s ’] p ro p e rt y. . , w h e th e r r e a l o r p e rs o n a l,” ar os e w hen the I R S as s es s ed t axes agai ns tthe B ace ks i n M ar ch 2003, M ay2004, and M a y2 0 0 5

— b e f

o re th e B a c e k s c o n v e y e d th e p ro p e rt yto M o c o . 2 6 U .S .C . § 6 3 2 1 . A ccordi ng l y , the tr ansfer of t he p ropertyt o M oco did not affectthe li en b ecause itarose b e f o re th e tr a n s f

e r. See U

nited S tates v. B ess , 357 U . S. 51, 57 ( 1958) ( i nt ernal quot at i on m arks om i t t ed) ( as a gene r al m att er , “[t ] he tr ans ferof pr opertys ubs equentt o the att achmentof [a ] l i en does notaff ectthe l i en, fori ti s of the verynatur e and e s s ence of a5

lien [ ] th a t n o m a tter in to w h o se h a n d s th e p ro p e rtyg o e s, it p a ss e s c u m o n e re [ in e f f e c t, w ith th e b u rd e n o f

th e lien ]” ); se e a lso U

n itedS ta tes v . A v ila , 8 8 F . 3 d 2 2 9 , 2 3 3 (3d C ir . 1 9 9 6 ). A n e x c e p tio n to th is ru le a p p e a rs in 2 6 U .S .C . § 6 3 2 3 , w h ich p ro v id e s th a t a f e d e r a l t a x l i e n i s n o tv a l i d “ a g a i n s ta n y pu rchaser . . . unt i l not i ce [ of the l i en] . . . has been f i l ed bythe Secr et ary . ” I d. § 6323( a) ( emphasi s added) . A “pur chas er ” i s defi ned as a “pe r s on w ho, foradequa t e and f ul l cons i der at i on . . . , acqui r es an i nt er es t( otherthan a l i en ors ecur i tyi nt er es t ) i n pr opertyw hi ch i s val i d underl ocal l aw agai ns ts ubs equent pur chas er s w i thoutactual not i ce. ” I d. § 6323( h) ( 6) . A ccor di ngl y , the I R S l i en i s not v a lid a g a in s t M o c o if

, bef or e the I R S fi l ed not i ce of the l i en, M oco qual i fi ed “unde r[N ew J er s ey ] l aw [as a] s ubs equentpur chas er [] w i thoutactual not i ce. ” I d. W e agr ee w i th the D i s tr i ctC our tthatthe t ax l i en i s val i d agai ns tthe pr opertynow ow ned byM oco bec aus e i tr ecor ded i t s deed t oo l at e. N ew J er s eyi s a “r ace - not i ce” ju risd ictio n , m e a n in g th a t, “a s b e tw e e n tw o c o m p e tin g p a rties [ ,] th e in ter e st o f th e p a rty w ho fi r s tr ecor ds the i ns trum entw i l l pr evai l . ” C ox v. R K A C or p. , 753 A . 2d 1112, 1 1 1 6

– 1 7 (N . J. 2 0 0 0 ) ( ci t i ng N . J . St at . A nn. §§ 46: 21- 1, 46: 22- 1) . U nderthi s fr amew or k, M o c o ’s in ter e st in th e p ro p e rtyb e c a m e v a lid a g a in st s u b se q u e n t p u rc h a se rs w h e n it re c o rd e d its d e e d . H o w e v e r, M o c o d id n o t re c o rd its d e e d u n til Ja n u a ry2 0 0 6 , a m o n th aft er the IR S recor ded the tax l i en. A ccordi ng l y , the li en w as val i d ag ai nstM oco becau se M oco w as nota “pur chas er ” w i thi n the meani ng of § 6323 w hen the I R S r ecor ded i t s l i en.6

M oco nonethel es s cont ends thatthe t ax l i en i s notval i d beca us e the B ace ks “no lo n g e r h a d a n in te re s t” in th e p ro p e rt yw h e n th e IR S re c o rd e d th e lie n . M o c o is m is ta k e n . A s noted, a fed eral t ax li en ari ses atthe ti m e t he tax i s as s es s ed , n o t w h e n th e lien is r ecorded . See 2 6 U .S .C . § 6 3 2 2 ; In re D eA n g e lis , 3 7 3 F .2 d a t 7 5 7 ; s ee al s o U ni t ed Stat es v. V & E E ng’

g & Constr . C o. , 81 9 F . 2d 33 1, 33 5 (1stC i r. 19 87 ) ( rej ect i ng bu y ers ’ argum ents that t ax li en o n the purchased property“d[id] notexis tun t i l no t i ce [w as] f iled ,” a n d th a t “a t th e tim e o f th e n o tice th e re w a s n o ‘p ro p e rtyo r rig h t to p ro p e rty ’ to w hi ch the l i en coul d att ach be caus e [i t ] had al r eady[bee n] s ol d”) . A l though M oco’ s deed w as i m m ediat el yvali d as betw een M oco and the B aceks, i tw as not val i d ag ai nst s u b s e q u e n t p u rc h a s e rs u n til it w a s re c o rd e d . See N . J . St at . A nn. § 46: 22- 1 ( “any. . . deed . . . s h a ll b e v a lid a n d o p e ra tiv e , a lth o u g h n o t r e c o rd e d , ex c e p t as agai ns ts uch s ubs equent ju d g m e n t cr e d ito rs, p u rc h a se rs a n d m o rtg a g e e s” ) (e m p h a sis a d d e d ); s ee al s o H. K. v. S ta te , 877 A . 2d 1218, 1228 ( N . J . 2005) ( “[A ] n unr ecor ded dee d i s ‘ per fec t l yeff i cac i ous i n p assi ng t i t l e from grant or t o g rant ee, subjectt o all subsequ ent r ecorded l i ens aga i nst the gr ant orand s ubj ectt o pot ent i al di ves t m entbya s ubs equentbona fi de gr ant ee w i thout n o ti ce . ’”) ( q u o tin gS ili

g a to v . S ta te , 6 3 2 A .2 d 8 3 7 , 8 4 0 (N .J . S u p e r. C t. A p p . D iv . 1 9 9 3 )) . I n s um , M oco’ s i nt er es ti n t he pr opertyw as not“val i d . . . agai ns t[a] s ubs equent p u r c h a s e r [ ] wi th o u ta c tu a l n o t i c e ” u n t i l i tr e c o r d e d i t s d e e d i n J a n u a ry2 0 0 6 . 2 6 U. S . C. § 6323( h) ( 6) . T hus , M oco w as nota “pur chas er ” w i thi n the meani ng of § 6323 w hen the IR S re c o rd e d its lie n in D e c e m b e r 2 0 0 5 . A c c o rd in g ly, th e ta x lie n is v a lid a g a in s t M o c o .T hough noti n pl aybeca us e i tl os t , had M oco w on i ts oughtpuni t i ve damages fr om 5 the U ni t ed St at es . W e poi ntoutthatM oco coul d nothave be en aw ar ded puni t i ve d a m a g e s a g a in s t th e U n ite d S ta te s . See 28 U . S. C . § 2674. 7 M o c o a lso c o n ten d s th a t th e D istric t C o u rt im p e rm iss ib ly“ u se d f e d e ra l law to c re a te in th e [ B a c e k s ] a n in te re s t in th e [ p ro p e rt y ].” W e re je c t th is a rg u m e n t a s w e ll. A l though w hetheran i nt er es ti n pr operty“cons t i tut es ‘ pr opertyand r i ght s t o pr operty ’ for the purpos es of . . . 26 U . S. C . § 6321[] . . . . l ar gel ydepends upon s t at e l aw , ” U ni t ed S ta tes v . C ra

ft , 5 3 5 U .S . 2 7 4 , 2 7 8 (2 0 0 2 ), itis u n d isp u ted th a t th e B a c e k s h a d a v a lid i nt er es ti n t he pr opertyw hen the t ax as s es s m entw as m ade. I n anyevent , the D i s tr i ct C o u rtco rrectl yap p li ed N ew Jerse ylaw to d eterm ine w h en M o co b ec am e a “p u rch ase r” w ith in th e m e a n in g o f

2 6 U .S .C . § 6 3 2 3 . F o r th e se re a so n s, w e a f f irm th e D istric t C o u rt’s ju d g m e n t. 5