Opinion ID: 196637
Heading Depth: 1
Heading Rank: 1

Heading: jurisdiction

Text: 3 The threshold issue to be decided in this case, whether the district court properly exercised subject-matter jurisdiction over Progressive's claim, was raised for the first time on appeal. The government argues that the district court lacked jurisdiction on two grounds: (1) the government has not waived its sovereign immunity and therefore cannot be sued; and (2) the Declaratory Judgment Act, 28 U.S.C. § 2201(a), specifically bars the relief requested. 1 Lack of subject-matter jurisdiction can be raised at any point during litigation. There can be no doubt of our power and duty to decide the issue. See Bender v. Williamsport Area School Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 1331, 89 L.Ed.2d 501 (1986); Wells Real Estate v. Greater Lowell Bd. of Realtors, 850 F.2d 803, 813 (1st Cir.1988).
4 It has long been established that the United States is not subject to suit without a waiver of sovereign immunity, and that any such waiver is to be strictly construed. Nickerson v. United States, 513 F.2d 31, 32-33 (1st Cir.1975). The government correctly argues that Progressive wrongly relies on the Declaratory Judgment Act (the Act), 28 U.S.C. § 2201(a), to constitute a waiver of sovereign immunity because the Act neither provides nor denies a jurisdictional basis for actions under federal law, but merely defines the scope of available declaratory relief. McCarthy v. Marshall, 723 F.2d 1034, 1037 (1st Cir.1983). Title 28 U.S.C. § 2410(a)(1) provides the only basis for finding a waiver of sovereign immunity in this case. 2 5 Under section 2410, the government waives its sovereign immunity in both quiet title and foreclosure actions. See 28 U.S.C. §§ 2410(a)(1), (2). A party bringing a foreclosure under this section, however, must seek a judicial sale of the underlying property. 28 U.S.C. § 2410(c). We begin by discussing whether Progressive's claim of priority constitutes a quiet title action within the meaning of 28 U.S.C. § 2410(a)(1). 6 The Scope of Quiet Title Actions Under 28 U.S.C. § 2410(a)(1) 7 The government contends that Progressive's claim does not fall within the coverage of section 2410(a)(1) because its claim of priority is not a quiet title action within the meaning of the statute. It follows, argues the government, that because no judicial sale has taken place, there can be no waiver of sovereign immunity and hence Progressive cannot maintain its cause of action. We disagree for the reasons that follow. 8 Section 2410(a)(1) has never been read to incorporate the formalistic distinctions state law pleading rules. United States v. Coson, 286 F.2d 453, 457 (9th Cir.1961). In Coson, the Ninth Circuit held that [i]t is plain that the words 'quiet title' ... are not intended to refer to a suit to quiet title in the limited sense in which that term is sometimes used ... but that as used in the section here referred to it comprehends a suit to remove a cloud upon the title of a plaintiff. Id. Both the text and the history of section 2410 support this view. The quiet title provision was inserted by amendment to the predecessor statute, following a recommendation by the Attorney General of the United States (future Justice Jackson). The heart of the recommendation stated: 9 [U]nder existing law there is no provision whereby the owner of real estate may clear his title to such real estate of the cloud of a Government mortgage or lien.... In many instances persons acting in good faith have purchased real estate without knowledge of the Government lien or in the belief that the lien had been extinguished.... It appears that justice and fair dealing would require that a method be provided to clear real estate titles of questionable or valueless Government liens. 10 H.R.Rep. No. 1191, 77th Cong., 1st Sess. 2 (1941); S.Rep. No. 1646, 77th Cong., 2d Sess. 2 (1942). 11 The government points out that, under Massachusetts law, a plaintiff must have both actual possession and legal title to maintain a quiet title action, see MacNeil Bros. Co. v. State Realty Co. of Boston, Inc., 333 Mass. 770, 131 N.E.2d 178 (1956 (citing cases)), and suggests that the contours of the state law cause of action should guide our interpretation of section 2410(a)(1), particularly where the state law is consistent with federal common law (as the government argues it is here). That is, the government argues that Congress intended to waive sovereign immunity only in those cases that would traditionally have been termed quiet title actions; because Progressive did not bring and could not have brought such an action, 3 we should deem this case to be outside the scope of section 2410(a)(1). 12 If, in substance, the relief the plaintiff sought here--a declaration of the priority of Progressive's mortgage over the government's tax lien--is congruent with the relief available in a quiet title suit, it would frustrate congressional intent to block plaintiff's access to relief. Congress, after all, was concerned not with the niceties of common law pleading, but with practical problems facing owners whose property was encumbered by government liens. What label the state has attached to the cause of action is a helpful but not determinative guide to the proper interpretation of the federal statute. See Harrell v. United States, 13 F.3d 232, 235 (7th Cir.1993). 13 The government, however, contends that the relief that Progressive seeks would not have been available in a quiet title action. Progressive does not seek to remove the government's lien as invalid, but rather to establish the priority of its own mortgage over the concededly valid federal tax lien. Such relief would not have been available in a traditional quiet title action, only in a foreclosure action, where valid but junior liens are extinguished in favor of a senior lien. It follows, argues the government, that because no judicial sale has taken place, see § 2410(c), there can be no waiver of sovereign immunity. 14 A careful reading of the authorities, however, does not support the government's narrow portrayal of the relief available to quiet title plaintiffs. The government principally relies on Kasdon v. G.W. Zierden Landscaping, Inc., 541 F.Supp. 991 (D.Md.1982), aff'd sub nom. Kasdon v. United States, 707 F.2d 820 (4th Cir.1983). In Kasdon, suits were brought by tax sale purchasers to foreclose all equities of redemption in properties on which the United States held tax liens. The district court held that the suits were more properly characterized as foreclosure actions than quiet title actions and that judicial sale was required in order for sovereign immunity to be waived. Id. at 995-96. 15 Unlike the plaintiffs in Kasdon, Progressive seeks only a determination of priority between competing liens; it never initiated a foreclosure action and did not seek to extinguish the federal lien. The Kasdon court cited United States v. Morrison, 247 F.2d 285, 289 (5th Cir.1957), for the proposition that priorities among valid interests are the subject of foreclosure suits, whereas the alleged invalidity of adverse interests are the subjects of quiet title actions. Kasdon, 541 F.Supp. at 995. This, however, does not tell the whole story of the Morrison opinion, in which the Fifth Circuit explained that the relief sought [in section 2410(a)(1) claims], as traditional to equity as the woolsack, is the judicial determination of the validity and rank of the competing liens. Id. (emphasis added). The court pointed out that it was an unsound premise to hold that a quiet title action is one to extinguish the lien of the United States, rather than what it really is--a determination that a tax lien does not exist, has been extinguished, or is inferior in rank. Id. (emphasis added). Similarly, in Estate of Johnson, 836 F.2d 940 (5th Cir.1988), the court rejected the government's contention that foreclosure is the only relief available where lien priorities are in dispute. It explained: 16 [W]e think that section 2410, an integral part of the Judicial Code rather than an administrative mechanism of the tax structure, establishes a specific jurisdiction for these suits as bills to quiet title or for foreclosure of the private lien. The jurisdiction does not depend on the specific relief sought, [e.g.] foreclosure. Rather it rests on the existence of the traditional controversy in which a private party asserts an ownership [interest] which is superior to the claimed lien of the United States government. (Quoting United States v. Morrison, 247 F.2d 285 (5th Cir.1957). 17 836 F.2d at 945. 18 Other courts have adopted this logic. In Brightwell v. United States, 805 F.Supp. 1464 (S.D.Ind.1992), the court reasoned: 19 [While] [t]raditionally, actions to quiet title have sought determinations of who owns particular property, ... [u]nder 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 the property, 28 U.S.C. § 2410(a), and thus lien priority disputes have been considered quiet title actions [for the purposes of section 2410]. 20 805 F.Supp. at 1469 (citing McEndree v. Wilson, 774 F.Supp. 1292, 1295-96 (D.Colo.1991)). Moreover, while a priority claim of the sort raised by Progressive has not yet been decided by this Circuit, we have held and reaffirm today that section 2410(a)(1) controversies encompass disputes concerning both the validity and priority of liens, as distinguished from actions seeking their extinguishment in a manner not permitted by the statutes. Remis v. United States, 273 F.2d 293, 294 (1st Cir.1960). 21 These cases undercut the government's contention that a quiet title action is appropriate under section 2410(a)(1) only where the plaintiff seeks a decree that the government's lien is defective or invalid and seeks to have the cloud removed from his title. In support of its position, the government primarily relies on Raulerson v. United States, 786 F.2d 1090 (11th Cir.1986), where the court held that section 2410 waives sovereign immunity only in actual quiet title actions, not suits analogous to quiet title actions. 786 F.2d at 1091. The court concluded that plaintiff Raulerson's complaint was not an action to quiet title because he had already forfeited title to his property and had waived his property interest by the terms of a plea agreement. Id. The instant case is not like Raulerson because Progressive has title to the Folkards' property and has not waived its ownership interest. Furthermore, Progressive merely seeks a determination regarding the priority of its ownership interest. The Raulerson plaintiff, in contrast, sought a declaration that the IRS's claim had priority over the valid claims of other branches of government to ensure that the IRS's jeopardy assessment would not be satisfied from his other assets. Id. at 1091-92. Consistent with the broad construction accorded section 2410's quiet title provision by a number of other jurisdictions, we hold that Progressive's claim falls within the meaning and scope of the statute. 22 The Declaratory Judgment Act and Section 2410 23 In the alternative, the government argues that even if we were to hold that the district court has jurisdiction to hear Progressive's claim, the Declaratory Judgment Act (the Act), 28 U.S.C. § 2201(a), nonetheless bars the court from granting the relief requested. The Act provides, inter alia, that a federal district court has the authority to grant declaratory relief [i]n a case of actual controversy within its jurisdiction, except with respect to Federal taxes.... 28 U.S.C. § 2201(a). A claim challenging the power of the IRS to assess and collect taxes is barred by the Act. McCarthy v. Marshall, 723 F.2d 1034, 1037 (1st Cir.1983). 24 Similarly, [w]hen a federal tax lien is involved, ... an action pursuant to section 2410(a) will not lie if its sole purpose is to challenge the validity of the underlying assessment. Johnson v. United States, 990 F.2d 41, 42 (2d Cir.1993). This is because the purpose of section 2410 is to waive the government's immunity from suit so as to permit a court of proper jurisdiction to determine the relative position of government liens on property as against other lienors--not to permit a collateral attack on the tax assessment. Broadwell v. United States, 234 F.Supp. 17, 18 (E.D.N.C.1964), aff'd 343 F.2d 470 (4th Cir.), cert. denied, 382 U.S. 825, 86 S.Ct. 57, 15 L.Ed.2d 70 (1965); accord, McMillen v. United States Dep't of Treasury, 960 F.2d 187, 189 (1st Cir.1991); Falik v. United States, 343 F.2d 38, 41 (2d Cir.1965); Remis v. United States, 172 F.Supp. 732, 733 (D.Mass.1959), aff'd, 273 F.2d 293 (1st Cir.1960). Congress thus did not intend section 2410(a)(1) to extend a new remedy by which a plaintiff, whether taxpayer or third party, could contest the government's assessment of taxes. 4 Where a plaintiff does not challenge the underlying tax assessment, however, section 2410(a) has been recognized as a vehicle for determining lien priority. See Estate of Johnson, 836 F.2d at 945 (executor's claim of priority of estate interest in estate over federal tax lien constitutes quiet title action where it does not contest merits of assessment); Morrison, 247 F.2d at 290-91 (property seller's claim of priority of vendor's lien over federal lien constitutes quiet title action where no hazard posed to revenues); First of America Bank--West Michigan v. United States, 848 F.Supp. 1343, 1349 (W.D.Mich.1993) (nontaxpayer third party has standing under section 2410 to merely ... assert the priority of its lien over the federal tax lien); McEndree, 774 F.Supp. at 1296 (vendor of property eligible to maintain quiet title action alleging priority of equitable mortgage over federal tax liens where no challenge to tax assessment itself). 25 Progressive's claim in no way contests the legitimacy of the government's tax assessment or the taxpayers' liability. It follows that [s]ince the quiet title action specifically mandated by section 2410 is in substance a suit for a declaratory judgment, the Declaratory Judgment Act will not operate as a wrench to deprive the district court of its jurisdiction in this case. Aqua Bar & Lounge Inc. v. U.S., 539 F.2d 935, 940 (3d Cir.1976); see also McEndree, 774 F.Supp. at 1297 (Section 2410(a) provides an exception to the Declaratory Judgment Act, as plaintiff's remedies are limited to declaratory relief). 26 In summary, because we conclude that the government waives its sovereign immunity under 28 U.S.C. § 2410(a)(1), and that the Declaratory Judgment Act poses no bar to the relief sought, we accordingly hold that the district court properly exercised subject-matter jurisdiction over Progressive's claim.