Court Opinion

ID: 2964018
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:19:05.691209+00
Date Added: 2024-06-11T15:01:17.547099
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                 ____________________

          No. 95-1712

                     PROGRESSIVE CONSUMERS FEDERAL CREDIT UNION,

                                Plaintiff, Appellant,

                                          v.

                              UNITED STATES OF AMERICA,

                                 Defendant, Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Reginald C. Lindsay, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                                Boudin, Circuit Judge,
                                        _____________
                            Bownes, Senior Circuit Judge,
                                    ____________________
                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

               Stephen  M.  Sheehy, with  whom  Kaye,  Fialkow, Richmond  &
               ___________________              ___________________________
          Rothstein were on brief for appellant.
          _________
               Kevin M. Brown, Attorney, with  whom Donald K. Stern, United
               ______________                       _______________
          States Attorney, Loretta C. Argrett,  Assistant Attorney General,
                           __________________
          Gary R. Allen, and William S. Estabrook, Attorneys, Tax Division,
          _____________      ____________________
          Department of Justice, were on brief for appellee.

                                 ____________________

                                    March 19, 1996
                                 ____________________

                      BOWNES, Senior Circuit Judge.    On    October   8,
                      BOWNES, Senior Circuit Judge.
                              ____________________

            1993,    Progressive    Consumer    Federal   Credit    Union

            ("Progressive"),   plaintiff-appellant,  filed   a  complaint

            against  the Internal  Revenue  Service  ("the  government"),

            defendant-appellee, in the Land Court Department of the Trial

            Court  of  Plymouth  County, Commonwealth  of  Massachusetts.

            Progressive  sought  a  declaration  that  its  mortgage  had

            priority  over  properly recorded  federal  tax  liens.   The

            government  filed a notice of removal pursuant to 28 U.S.C.  

            1444, removing the action to the United States District Court

            for  the  District  of  Massachusetts.   The  district  court

            entered a  memorandum and order granting  the cross-motion of

            the  United  States for  summary  judgment on  May  26, 1995,

            holding  that  Progressive's  mortgage was  not  entitled  to

            priority over  the federal tax liens  under the Massachusetts

            common  law  doctrines  of  equitable  subrogation or  unjust

            enrichment.  

                      The mortgage  at issue is secured  by real property

            located in Marshfield, Massachusetts.  In  1987, as owners of

            the property,  Jeremiah and Deborah Folkard  ("the Folkards")

            executed  a  $150,000.00  mortgage note  which  was  properly

            recorded in favor of the Miles Standish Federal Credit  Union

            ("MSFCU").    Between 1988 and 1990,  the government recorded

            six notices of tax liens on the Folkards' property for unpaid

            federal taxes.  The  total amount of the liens,  exclusive of

                                         -2-
                                          2

            interest accrued  since recording, was $94,560.93.   In 1990,

            the   Folkards   refinanced   their   mortgage   debt,   then

            $130,905.55, with MSFCU, executing a new note and mortgage to

            secure   a  debt  of  $142,000.00.    At  the  time  of  this

            transaction, MSFCU was presumably unaware of the existing tax

            liens.   The 1987 mortgage  was discharged at  the moment the

            new  mortgage  was recorded  on  November  26,  1990.    This

            resulted  in priority of  the federal  tax liens,  because of

            their recording dates, over the new mortgage.  On October 19,

            1992,  MSFCU  assigned  its interest  in  the  1990 note  and

            mortgage  to Progressive.  The record  does not  reflect when

            Progressive  became  aware  of  the record  priority  of  the

            federal tax liens over its mortgage.   
                                   I.  JURISDICTION
                                   I.  JURISDICTION
                                       ____________

                      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

                                
            ____________________

            1.  The district  court had prima facie  jurisdiction to hear
                                        _____ _____
            Progressive's claim because it involves issues of federal tax
            liens and taxation.   See 28  U.S.C.    1331, 1340;  see also
                                  ___                            ___ ____
            United  States v. Brosnan,  363 U.S. 237,  240 (1960); United
            _________________________                              ______
            States v. Coson, 286 F.2d 453, 455-56 (9th Cir. 1961).    
            _______________

                                         -3-
                                          3

            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 (1986);
            ________________________________

            Wells Real Estate v. Greater Lowell Bd. of Realtors, 850 F.2d
            ___________________________________________________

            803, 813 (1st Cir. 1988). 

                           A.  Waiver of Sovereign Immunity
                           A.  Waiver of Sovereign Immunity
                               ____________________________

                      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

                                
            ____________________

            2.  In relevant part, 28 U.S.C.   2410 provides:

                        2410.   Actions affecting property on 
                                which United States has lien

                        (a)  Under the conditions prescribed in
                      this section  and  section 1444  of  this
                      title  for the  protection of  the United
                      States, the United States  may be named a
                      party in any civil  action or suit in any
                      district court, or in any State court   

                                         -4-
                                          4

                      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  fore-closure 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). 

                       The Scope of Quiet Title Actions Under 
                       The Scope of Quiet Title Actions Under 
                       _______________________________________
                                28 U.S.C.   2410(a)(1)
                                28 U.S.C.   2410(a)(1)
                                ______________________

                      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. 

                                
            ____________________

                      having jurisdiction of  the subject  mat-
                      ter-- 
                           (1) to quiet title to,

                           . . .

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

                                         -5-
                                          5

                      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:

                      [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.  

            H.R. Rep. No. 1191,  77th Cong., 1st Sess. 2 (1941);  S. Rep.

            No. 1646, 77th Cong., 2d Sess. 2 (1942).  

                      The government points out that, under Massachusetts

            law, a plaintiff  must have both actual  possession and legal

                                         -6-
                                          6

            title to maintain a quiet title action, see MacNeil Bros. Co.
                                                    ___ _________________

            v. Realty Co.  of Boston,  Inc., 131 N.E.2d  178 (Mass.  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).

                      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

                                
            ____________________

            3.  As  mortgagee,  Progressive  holds  legal  title  to  the
            property, see J&W  Wall Sys.,  Inc. v. Shawmut  First Bank  &
                      ___ _______________________________________________
            Trust Co., 594 N.E.2d 859, 860 (Mass. 1992), but it is not in
            _________
            possession.

                                         -7-
                                          7

            interpretation of the federal statute.  See Harrell v. United
                                                    ___ _________________

            States, 13 F.3d 232, 235 (7th Cir. 1993).
            ______

                      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.

                      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  Kadson  v. G.W.  Zierden Landscaping,
                                    _____________________________________

            Inc., 541 F.  Supp. 991 (D. Md. 1982),  aff'd sub nom. Kadson
            ____                                    ______________ ______

            v.  United States, 707 F.2d 820 (4th  Cir. 1983).  In Kadson,
            _________________                                     ______

            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

                                         -8-
                                          8

            in  order for sovereign immunity to be  waived.   Id. at 995-
                                                              __

            96.

                      Unlike the plaintiffs  in Kadson, 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  Kadson 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."  Kadson, 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: 

                                         -9-
                                          9

                      [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). 
            836 F.2d at 945.  
             
                      Other  courts   have  adopted   this  logic.     In

            Brightwell v.  United States,  805 F.  Supp. 1464 (S.D.  Ind.
            ____________________________

            1992), the  court reasoned:

                      [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].  

            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

                                         -10-
                                          10

            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). 
            ______

                      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.
                                                         ___

                                         -11-
                                          11

            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.  

                    The Declaratory Judgment Act and Section 2410
                    The Declaratory Judgment Act and Section 2410
                    _____________________________________________

                      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).  
            ____________________

                      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

                                         -12-
                                          12

            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 (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
                                         ___ __________________

                                
            ____________________

            4.  Congress did intend section 2410(a)(1) to be  a basis for
            taxpayer challenges to the  procedural validity of tax liens.
            See Robinson v. United  States, 920 F.2d 1157, 1161  (3d Cir.
            ___ __________________________
            1990)(where  IRS  failed  to  send notice  of  deficiency  to
            taxpayer when lien filed); Rodriguez v. United States, 629 F.
                                       __________________________
            Supp. 333, 336  (N.D. Ill.  1986) (where IRS  failed to  send
            notice  of deficiency  when  levied on  property); Ringer  v.
                                                               __________
            Basile, 645 F. Supp. 1517, 1525-26  (D. Colo. 1986)(where IRS
            ______
            violated  own procedures  when seized  property).   Likewise,
            with regard  to  third party  nontaxpayer plaintiffs,  courts
            have  adopted  the view  that  "[t]he  validity  of  a  lien,
            depending  upon compliance  or  noncompliance with  statutory
            requirements, or  the  priority of  a lien  validly filed  is
            quite a far cry from  permitting a third party to  attack the
            tax assessment  upon which a  properly filed lien  is based."
            Pipola  v. Chicco,  169  F. Supp  229,  232 (S.D.N.Y.  1959),
            _________________
            modified,  274 F.2d 909 (2d Cir. 1960).  Progressive does not
            ________
            challenge the procedural validity of the tax liens.  It  is a
            matter  of record that the liens were properly filed with the
            Plymouth County (Massachusetts) Registry of Deeds. 

                                         -13-
                                          13

            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).

                      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., 539 F.2d at 940; 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).   

                                         -14-
                                          14

                      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.

                                   II.  THE MERITS 
                                   II.  THE MERITS 
                                        __________

                      We  now turn  to the  substantive issue  on appeal:

            whether  Massachusetts  law  entitles Progressive's  mortgage

            priority  over  the  federal  tax  liens.  

                      Because  the  decision  to  grant  summary judgment

            calls  a legal  standard  into play  we  review the  district

            court's order granting summary judgment for the United States

            de novo.  In re  Varrasso, 37 F.3d 760, 763 (1st  Cir. 1994);
            __ ____   _______________

            Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d  576, 581 (1st
            _____________________________________

            Cir. 1994); Quaker  State Oil Refining  Corp. v. Garrity  Oil
                        _________________________________________________

            Co., 884 F.2d 1510,  1513 (1st Cir. 1989).   Summary judgment
            ___

            is appropriate only when "there is no genuine issue as to any

            material fact  and   . . . the  moving party is entitled to a

            judgment  as a matter of  law."  Fed. R.  Civ. P. 56(c).  The

            district  court held and we  agree that because  there are no

            disputed  material  issues   of  fact  summary  judgment   is

            appropriate. 

                      As our  discussion of jurisdiction  relates, it  is

            well-settled  that  federal law  determines  the priority  of

                                         -15-
                                          15

            competing  federal  and state  created  liens.   See   United
                                                             ___   ______

            States v.  Rodgers, 461  U.S. 677, 683  (1983); Brosnan,  363
            __________________                              _______

            U.S.  at 240-41.  Section  6321 of the  Internal Revenue Code

            ("the Code")  authorizes the government to  assert liens upon

            "all  property  and  rights  to property"  belonging  to  the

            taxpayer  for delinquent taxes.   26 U.S.C.    6321.  Section

            6322 of the Code  further provides that "the lien  imposed by

            section 6321 shall arise  at the time the assessment  is made

            and shall  continue until  the liability  for  the amount  so

            assessed  .  . .  is  satisfied or  becomes  unenforceable by

            reason of lapse of time."  26 U.S.C.   6322.  

                      These provisions do not, however, grant federal tax

            liens  automatic priority  over all other  liens.   I.R.S. v.
                                                                _________

            McDermott, --  U.S. --, 113  S. Ct.  1526, 1528 (1993).   The
            _________

            determination  of priority is governed by  the rule of "first

            in time, first in right."  Id. at 1527.  A federal lien which
                                       ___

            attaches  first is thus senior, so long as notice is properly

            filed.5  In  order for a state created  lien to take priority

            over a later  assessed federal  lien it must  be "choate"  or

            "perfected" so that "the identity of the lienor, the property

            subject  to  the  lien,  and  the  amount  of  the  lien  are

            established" prior  to the  filing of the  subsequent federal

                                
            ____________________

            5.  The  Code provides  that "[t]he lien  imposed by  section
            6321 shall not be valid as against any purchaser, holder of a
            security  interest,  mechanic's  lienor,  or   judgment  lien
            creditor until notice thereof . . .."  26 U.S.C.   6323(a).  

                                         -16-
                                          16

            lien.  United States v. New Britain, 347 U.S.  81, 84 (1954);
                   ____________________________

            United  States v.  Pioneer  Am. Ins.  Co.,  374 U.S.  84,  88
            _________________________________________

            (1963); see also Baybank Middlesex v. Elec. Fabricators Inc.,
                    ___ ____ ___________________________________________

            751  F.  Supp. 304,  310 (D.  Mass.  1990); United  States v.
                                                        _________________

            Rahar's Inn, Inc.,  243 F.  Supp. 459, 460  (D. Mass.  1965).
            _________________

            Choateness of a state created lien is a matter of federal law

            and mirrors the  standard applicable to liens asserted by the

            government  under sections 6321 and 6322 of the Code.  United
                                                                   ______

            States v. First Nat'l Bank and Trust Co.,  386 F.2d 646, 647-
            ________________________________________

            48 (8th Cir. 1967)(citing United States  v. Vermont, 377 U.S.
                                      _________________________

            351,  354 (1964)).    State recording  statutes are  relevant

            "only insofar  as controlling  federal authority dictates  or

            sound  federal policy  counsels" their  application.   United
                                                                   ______

            States v. Lebanon Woolen  Mills Corp., 241 F. Supp.  393, 398
            _____________________________________

            (D.N.H.  1964).   Section 6323(i)(2)  of the  Code authorizes

            application   of  the  common   law  doctrine   of  equitable

            subrogation where provided by state law.6

                      Just as federal law  governs the issue of priority,

            it  is  equally well-settled  that "in  the application  of a

            federal revenue  act, state  law controls in  determining the

            nature of the legal  interest . . . in the property  . . . to

            be reached by the  statute."  Aquilino v. United  States, 363
                                          __________________________

                                
            ____________________

            6.  "Where, under local law,  one person is subrogated to the
            rights  of another with respect  to a lien  or interest, such
            person shall be subrogated to such rights for purposes of any
            lien  imposed by  section 6321  or 6324."   26 U.S.C.    6323
            (i)(2). 

                                         -17-
                                          17

            U.S. 509, 513 (1960)(quoting Morgan v. Commissioner, 309 U.S.
                                         ______________________

            78, 82 (1940)); see also Maryland v. Louis, 451 U.S. 725, 746
                            ___ ____ _________________

            (1981)(courts must  proceed from "the  basic assumption  that

            Congress  did not intend to displace state law").  "The point

            at  which a  state created  security interest  attaches is  a

            matter of state  law."  ICM Mortg.  Corp. v. Herring, 758  F.
                                    ____________________________

            Supp. 1425, 1426 (D. Colo 1991)(citing Sec. Pac. Mortg. Corp.
                                                   ______________________

            v. Choate, 897 F.2d 1057, 1058-59 (10th Cir. 1990)).  Federal
            _________

            revenue statutes  "creat[e]  no property  rights  but  merely

            atta[ch] consequences, federally  defined, to rights  created

            under state  law."  United  States v.  Bess, 357 U.S.  51, 55
                                _______________________

            (1958).  For this  reason, "it is critical to  determine when

            competing state  created liens come into  existence or become

            valid."   Matter  of  Fisher,  7  B.R.  490,  494  (W.D.  Pa.
                      __________________

            1980)(citing  Pioneer Am. Ins. Co., 374  U.S. 84, 87 (1963));
                          ____________________

            see also; Aquilino,  363 U.S. at 514 (Reconciliation of state
            ___ ____  ________

            law defining when a state created lien  becomes effective and

            federal  law  governing   priority  between  competing  liens

            "strikes  a  proper  balance   between  the  legitimate   and

            traditional  interest which  the  State has  in creating  and

            defining  the  property interest  of  its  citizens, and  the

            necessity for a uniform administration of the federal revenue

            statutes"). 

                      The   government   argues   that  because   section

            6323(i)(2)  explicitly  authorizes the  application  of local

                                         -18-
                                          18

            laws  of subrogation and is  silent as to  the application of

            the  doctrine of  unjust enrichment,  the district  court was

            correct  in  deeming  the  latter  doctrine  inapplicable  to

            Progressive's  claim.   We  disagree.   While  the  court was

            correct in stating that  Congress gave an "explicit directive

            with  respect  to determining  the  priority  of federal  tax

            liens," it was incorrect  in holding that "there is  no basis

            upon which  to  presume the  applicability  of a  common  law

            doctrine" not  expressly provided  for by  the  statute.   To

            essentially  translate a  directive for  a federal  scheme of

            priority  into a preemption of state law governing the nature

            and  extent of state created  liens was unwarranted.   To the

            contrary,  federal courts  should  presume  applicability  of

            state common law doctrines in determining the status of state

            created liens.  Such determinations do not contravene federal

            law simply because  they ultimately bear on the federal issue

            of who was first in time in determining priority.  

                      Before  addressing  the  status   of  Progressive's

            current mortgage, we  briefly review its  history.  In  1987,

            MSFCU  financed the Folkards' first mortgage in the amount of

            $150,000.00.   Between 1988 and  1990, the IRS  filed six tax

            liens on the property, totalling $94,560.93.  In 1990,  MSFCU

            refinanced   the   Folkards'   first   mortgage   debt,  then

            $130,905.55,  by executing  a new  note to  secure a  debt of

            $142,000.00.   The recording of the  1990 mortgage discharged

                                         -19-
                                          19

            the 1987 mortgage, rendering the tax  liens senior to MSFCU's

            second  mortgage on  the record  title to  the property.   In

            1992,   MSFCU   assigned   its   mortgage   to   Progressive.

            Progressive  argues  that   under  the  doctrine   of  unjust

            enrichment, MSFCU  should be  reinstated to its  initial 1987

            mortgage  position  and  that   Progressive  is  entitled  to

            effectively occupy MSFCU's reinstated position.  We agree. 

                        A.  Massachusetts Common Law Doctrine
                        A.  Massachusetts Common Law Doctrine
                            _________________________________
                                of Unjust Enrichment  
                                of Unjust Enrichment  
                                ____________________

                      Under Massachusetts  law,  the doctrine  of  unjust

            enrichment  provides   that  "where   a  mortgage   has  been

            discharged by  mistake, equity  will set the  discharge aside

            and reinstate the mortgage to the position  which the parties

            intended  it to  occupy,  if the  rights  of the  intervening

            lienholders have not been affected."  North Easton Co-op Bank
                                                  _______________________

            v. MacLean, 15 N.E.2d  241, 245 (Mass. 1938)(second mortgagee
            __________

            not prejudiced by reinstatement of first mortgage where first

            mortgage   had  been   discharged  by   mistake  upon   first

            mortgagee's  acceptance  of  new  note without  knowledge  of

            intervening lien)(citations omitted);  see also Provident Co-
                                                   ________ _____________

            Operative  Bank v. Talcott, Inc.,  260 N.E.2d 903, 909 (Mass.
            ________________________________

            1970)(assignee  of first  mortgagee declared holder  of first

            mortgage  to prevent  unjust enrichment  of  second mortgagee

            where   first   mortgagee    discharged   mortgage    through

            inadvertence  and second  mortgagee's position  not adversely

            affected  by  acts  of   first  mortgagee);  Piea  Realty  v.
                                                         ________________

                                         -20-
                                          20

            Papuzynski, 172 N.E.2d 841,  846 (Mass. 1961)(exchange of new
            __________

            mortgage notes for  old ones did not constitute  discharge of

            old mortgage where  parties had no intent  to alter substance

            or  priority of  old notes and  mortgagor's grantees  did not

            show   adverse  change   of   position   in   reliance   upon

            transaction).  

                      The government maintains that no "mistake" was made

            because  MSFCU  intended  to  refinance the  Folkards'  first

            mortgage, and so by  law must have intended the  consequences

            of its actions  -- i.e.  the extinguishment  of its  original

            security  interests.  Massachusetts  law,   however,  clearly

            contemplates situations  where the intention to  renew is not

            tantamount to  the intention to extinguish  existing security

            interests upon refinancing a mortgage.   See North Easton Co-
                                                     ___ ________________

            op Bank, 15 N.E.2d at 245; Provident, 260 N.E.2d at 909; Piea
            _______                    _________                     ____

            Realty,  172 N.E.2d.  at 846;  see also  Financial Acceptance
            ______                         ___ ____  ____________________

            Corp. v.  Garvey, 380  N.E.2d 1332, 1335  (Mass. 1978)("Under
            ________________

            Massachusetts law the renewal  of a note in a  different form

            does  not  operate to  discharge  a mortgage  where  the debt

            itself has  not been paid  . . .  . even  where the new  note

            includes a  new debt"); Worcester  N. Sav. Inst.  v. Farwell,
                                    ____________________________________

            198 N.E. 897, 899 (Mass. 1935)(where bank, due to  negligence

            of its counsel, failed to discover later mortgage on property

            and  discharged   first  mortgage  upon   refinancing,  first

            priority restored  to bank  because bank  did not intend  for

                                         -21-
                                          21

            discharge  of interest);  compare  ICM Mortg.  Corp., 758  F.
                                      _______  _________________

            Supp. at  1427  (where  refinancing  of  deed  of  trust  not

            intended  to extinguish  security  interest, second  deed  of

            trust  renewed  prior obligation,  resulting  in priority  of

            state created lien  over federal tax lien);  see generally 33
                                                         ___ _________

            A.L.R. 149 ("It is a general rule  that the cancellation of a

            mortgage  on the record is not conclusive as to its discharge

            .  .  .  . [a]nd  where  the  holder  of  a  senior  mortgage

            discharges  it  of  record, and  contemporaneously  therewith

            takes  a new  mortgage,  he  will  not,  in  the  absence  of

            paramount equities, be held to have subordinated his security

            to  intervening   lien  unless   the  circumstances  of   the

            transaction indicate  this to have been his intention . . . .

            ").   We  are  thus convinced  that an  action  based on  the

            failure to discover a properly recorded lien is precisely the

            type of  inadvertence  the Massachusetts  doctrine of  unjust

            enrichment aims  to rectify.  Furthermore,  we are persuaded,

            in accord with Progressive's  view, that no reasonable lender

            in MSFCU's position would have intended, upon refinancing, to

            replace a first mortgage bearing the attachment of junior tax

            liens with a second mortgage bearing the attachment of senior

            tax liens,  thereby relinquishing its senior  interest on the

            property.  

                      The  district  court  held  that  reliance  on  the

            Massachusetts line of  unjust enrichment cases  was misplaced

                                         -22-
                                          22

            because  such  cases  do   not  concern  federal  tax  liens.

            Although  it is  true that  Massachusetts  case law  does not

            address   reinstatement of a state created lien to a position

            of  priority over  a  federal  government  lien, we  are  not

            persuaded  by the district court's reasoning.   We think that

            cases  involving the  reinstatement of  mortgages which  have

            been inadvertently discharged to  the advantage of unintended

            and  unexpected beneficiaries  are sufficiently  analogous to

            Progressive's claim to warrant applicability.  Whether or not

            federal  tax liens are involved  in such cases,  to us, seems

            immaterial.   This  is mainly  because the  unjust enrichment

            doctrine operates only to restore a state created lien to the

            position  it occupied  prior  to  the inadvertent  discharge.

            Reestablishing  the party's  position,  of  itself, does  not

            disturb the status of  competing liens -- whether those  of a

            private lienor or the federal government -- in terms of their

            effective  dates  of  attachment  for  the  determination  of

            priority.   It equitably determines the effective date of the

            state  created lien  independent  of  other  existing  liens.

            Federal law  remains intact to determine  both the choateness

            of  the state  created  lien and  its  order of  priority  in

            relation to any competing federal liens. 

                      Moreover,  while Massachusetts courts  have not had

            occasion to  apply the doctrine  of unjust enrichment  to the

            federal government under  this set of  circumstances, federal

                                         -23-
                                          23

            courts have held  that the doctrine  is applicable where  the

            federal  government is concerned;  and in  several instances,

            have restored state created liens to their intended positions

            without  regard  for the  United  States'  potential loss  of

            priority under federal law. See  United States v. McCombs, 30
                                        ___  ________________________

            F.3d 310,  333 (2d  Cir. 1994)(holding that  where government

            ran afoul of notice requirements of federal statute governing

            priority  between  federal   tax  liens   and  interests   of

            subsequent purchasers, to deny subsequent holder  of security

            interest  priority over  tax lien  would allow  government to

            "leap  frog" the interests vested in two prior mortgage liens

            and   would  represent   "a   classic   example   of   unjust

            enrichment");  Dietrich Indus.,  Inc. v.  United States,  988
                           ________________________________________

            F.2d 568,  573 (5th  Cir. 1993)(holding that  where purchaser

            who paid  vendor's senior mortgage  debt as part  of purchase

            transaction  with  expectation  that  property  was  free  of

            additional encumbrances, to deny equitable subrogation remedy

            "would give  the government an  unearned windfall in  that it

            would elevate  the government's  liens for no  good reason");

            Han  v.  United  States, 944  F.2d  526,  530  n.3 (9th  Cir.
            _______________________

            1991)(holding that  where purchasers of  residential property

            paid off and discharged priority position lender unaware that

            additional federal tax lien  attached to property, to require

            the purchasers to pay a portion of the  taxpayer's delinquent

                                         -24-
                                          24

            taxes  would "unjustly  enrich" and  "produce a  windfall" in

            favor of the United States).  

                      Finally, we  note that no rights  of the government

            are  impaired  by   MSFCU's  mortgage  reinstatement.     The

            government argues that  the IRS is unlike  a private creditor

            in that it does  not bargain for interest rates and  thus can

            never be  unjustly enriched  where valid liens  have attached

            for unpaid taxes.   But Progressive does not argue, nor do we

            suggest, that  the government  would be unjustly  enriched by

            the ultimate satisfaction of  its legitimate tax liens.   The

            point is that  the government could not have  anticipated its

            current priority status because from the outset its 1988-1990

            liens  were clearly  junior  to MSFCU's  1987 mortgage  lien.

            Absent the inadvertent discharge of MSFCU's mortgage in 1990,

            the government would  not have gained serendipitous  priority

            over  MSFCU's second mortgage lien in 1990.  This resulted in

            the government's unjust enrichment at the expense of MSFCU in

            1990,  and ultimately of Progressive  in 1992.   We hold that

            because MSFCU extinguished its initial 1987 mortgage interest

            by mistake upon refinancing  the Folkards' second mortgage in

            1990, it  should be equitably  restored to its  original 1987

            lien position. 

                      The government argues that the equities in favor of

            MSFCU may  not  apply  to  Progressive because  there  is  no

            evidence  that  Progressive   was  unaware  of   the  earlier

                                         -25-
                                          25

            government lien when it  took the assignment of  the mortgage

            from MSFCU.   But it is  hornbook law that the  assignee of a

            mortgage succeeds to  all of the assignor's  rights power and

            equities;  and  Massachusetts  has  applied this  rule  in  a

            situation very like this  case.  Provident Co-operative Bank,
                                             ___________________________

            260 N.E.2d at 908 ("By virtue of her purchase from Provident,

            Mrs.  Hutchinson succeeded  to all  of Provident's  rights in

            relation to the mortgage assigned,  including the right to  a

            judicial determination whether it  was a first mortgage or  a

            second  mortgage.").     Thus  Progressive   may  assert  any

            equitable rights and defenses  that MSFCU could have asserted

            before it assigned the mortgage.

                                    C.  Conclusion
                                    C.  Conclusion
                                        __________

                      The parties  do not  dispute that  MSFCU's mortgage

            lien was choate  as of its  original recording in  1987.   It

            identified  the  lienor  as  MSFCU,  described the  Folkards'

            property, and  established  the amount  of the  lien so  that

            nothing  more  needed  to   be  done  for  the  lien   to  be

            "perfected."  New Britain, 347 U.S. at 89.  MSFCU  was thus a
                          ___________

            holder  of a security interest in the Folkards' property that

            attached before  the filing of  the federal    tax     liens 

            between     1988-1990.     See   26     U.S.C.    6323(h)(1).
                                       ___

            Because  we  hold  that MSFCU  should  be  restored   to  its

            original mortgage  lien position and  that Progressive should

            be subrogated to  that same position,  it follows that  under

                                         -26-
                                          26

            the federal rule of priority, Progressive's mortgage is first

            in time  and hence first in right over the tax liens asserted

            by the government.  

                      We reverse the district court's decision and vacate
                      We reverse the district court's decision and vacate
                      ___________________________________________________

            its  entry of summary judgment in favor of the United States.
            its  entry of summary judgment in favor of the United States.
            _____________________________________________________________

            Summary judgment shall be entered in favor of Progressive and
            Summary judgment shall be entered in favor of Progressive and
            _____________________________________________________________

            an appropriate  declaratory judgment order shall  be entered.
            an appropriate  declaratory judgment order shall  be entered.
            _____________________________________________________________

            Costs awarded to Progressive.      
            Costs awarded to Progressive.      
            _____________________________

                                         -27-
                                          27