Court Opinion

ID: 1017622
Source: CourtListenerOpinion
Date Created: 2013-07-04 22:07:55.287814+00
Date Added: 2024-06-11T09:17:09.290486
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 05-1387

RUSSELL G. RUGGERIO,

                                              Plaintiff - Appellee,

           versus

UNITED STATES OF AMERICA,

                                             Defendant - Appellant.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. William D. Quarles, Jr., District Judge.
(CA-04-639-WDQ)

Argued:   October 25, 2005              Decided:     November 17, 2005

Before MOTZ, TRAXLER, and SHEDD, Circuit Judges.

Reversed and remanded by unpublished opinion. Judge Shedd wrote
the opinion, in which Judge Motz and Judge Traxler joined.

ARGUED: Bethany Buck Hauser, UNITED STATES DEPARTMENT OF JUSTICE,
Tax Division, Washington, D.C., for Appellant.        Griffin Vann
Canada, Jr., MILES & STOCKBRIDGE, Rockville, Maryland, for
Appellee.    ON BRIEF: Eileen J. O’Connor, Assistant Attorney
General, Frank P. Cihlar, Tax Division, Allen Loucks, United States
Attorney, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.,
for Appellant.      Rachel T. McGuckian, MILES & STOCKBRIDGE,
Rockville, Maryland, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
SHEDD, Circuit Judge:

     Russell G. Ruggerio brought this action against the United

States    to   quiet     title    to   a    condominium       (“the   Property”)       in

Worcester      County,    Maryland.         Specifically,       Ruggerio      sought    a

declaration that the Property was not encumbered by federal tax

liens assessed against Rocky A. Kimbrew, the prior owner of the

Property.        After both parties moved for summary judgment, the

district court granted Ruggerio’s motion based on the doctrine of

equitable conversion.            The United States now appeals.                For the

reasons    set    forth    below,      we   reverse     and    remand   for    further

proceedings consistent with this opinion.

                                            I.

     We    review    de   novo     a   district     court's     award    of    summary

judgment, viewing the facts and inferences drawn therefrom in the

light most favorable to the non-moving party.                     Scott v. United

States, 328 F.3d 132, 137 (4th Cir. 2003).                     An award of summary

judgment    is    appropriate      only     "if   the   pleadings,      depositions,

answers to interrogatories, and admissions on file, together with

the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to a

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

     Between 1998 and 2002, the Commissioner of Internal Revenue

(“the Commissioner”) assessed payroll taxes of $143,000 against

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Kimbrew, a delinquent taxpayer.       On January 14, 2003, Kimbrew

entered into a contract to sell the Property to Ruggerio.       At the

time of contracting, Ruggerio had no knowledge of Kimbrew’s tax

delinquency.

     On April 7, 2003, the Commissioner filed notices of federal

tax liens against Kimbrew in Worcester County.         The next day,

Kimbrew executed and delivered the deed to the Property to Ruggerio

in exchange for approximately $210,000.      Ruggerio filed the deed

with Worcester County land records several days later.

     The   Commissioner   then   demanded   that   Ruggerio   pay   the

government for release of the federal tax liens.     Ruggerio brought

this suit to quiet title, arguing that because he signed the

contract of purchase before the Commissioner filed the notices of

federal tax liens, the Property was not encumbered by those liens.

On cross-motions for summary judgment, the district court granted

summary judgment in favor of Ruggerio on the basis of equitable

conversion and denied the United States’ motion.        The district

court concluded that, because Kimbrew’s interest in the Property

after contracting was limited to his anticipated proceeds from the

sale, the tax liens did not attach to the Property but rather to

Kimbrew’s interest in the sales proceeds. Thus, the district court

held that the Commissioner could not enforce the federal tax liens

against Ruggerio.

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                                         II.

     Section 6321 of the Internal Revenue Code (“IRC”) provides

that “[i]f any person liable to pay any tax neglects or refuses to

pay the same after demand, the amount . . . shall be a lien in

favor   of    the   United    States    upon    all    property   and    rights   to

property, whether real or personal, belonging to such person.”                    26

U.S.C. § 6321.       Further, “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.”                     Id. at

§ 6322.      “For the lien to become valid and effective under these

sections, notice, filing or recording are not required.”                    United

States v. Bond, 279 F.2d 837, 841 (4th Cir. 1960).                       Therefore,

because federal tax liens attach at the time the assessment is

made, the liens attached to the Property by 2002, before Kimbrew

and Ruggerio entered into their contract.

     However, § 6323 of the IRC provides that liens imposed under

§ 6321 will not be valid against certain third parties, such as

“purchasers,” until the filing of notice. 26 U.S.C. § 6323(a); see

also United States v. Gold, 178 F.3d 718, 721 (4th Cir. 1999)

(“Liens created by § 6321 become ‘valid’ as against third parties

upon the IRS’s filing notice of the lien in any recording office

within the state in which the property is located.”).                      The IRC

defines   “purchaser”        as   “a   person   who,    for   adequate    and   full

consideration in money or money’s worth, acquires an interest

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(other than a lien or security interest) in property which is valid

under   local   law   against    subsequent   purchasers   without   actual

notice.” 26 U.S.C. § 6323(h)(6) (emphasis added). Ruggerio argues

that because of his prior contract with Kimbrew, he became a

“purchaser” under § 6323 before April 7, 2003, the date the

Commissioner filed notices of federal tax liens.            Specifically,

Ruggerio contends that upon contracting he possessed equitable

title to the Property and Kimbrew possessed only legal title under

the doctrine of equitable conversion.          See Watson v. Watson, 497

A.2d 794, 800 (Md. 1985).

     Ruggerio’s status as a “purchaser” under the IRC turns on

whether   his   interest   was   valid    against   subsequent   purchasers

without actual notice under Maryland law before April 7, 2003. The

Maryland recording statute provides that:

     Every recorded deed or other instrument takes effect from
     its effective date as against the grantee of any deed
     executed and delivered subsequent to the effective date,
     unless the grantee of the subsequent deed has:

     (1) Accepted delivery of the deed or other instrument:

     (i) In good faith;
     (ii) Without constructive notice under § 3-202; and
     (iii) For a good and valuable consideration; and

     (2) Recorded the deed first.

Md. Code Ann., Real Prop. § 3-203 (2005) (emphasis added).           We have

noted that “the Maryland law is that legal title to land does not

pass until a deed is properly executed and recorded, and . . .

until this is done a vendee’s equity in property is subject to

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destruction by a conveyance of the legal title to a bona fide

purchaser without notice.” Bourke v. Krick, 304 F.2d 501, 504 (4th

Cir. 1962) (emphasis added).   Hence, under Maryland law Ruggerio’s

interest in the Property would be invalid against subsequent

purchasers without actual notice.      See Price v. McDonald, 1 Md.

403, 414-15 (1851) (stating that “an equitable claim . . . will be

enforced in a court of equity, except against a bona fide purchaser

without notice”).   Because Ruggerio’s interest in the Property was

subject to destruction under Maryland law by subsequent purchasers

without actual notice, he did not qualify as a “purchaser” under

§ 6323(h) of the IRC before April 7, 2003.    Thus, the federal tax

liens on the Property remain valid against Ruggerio.*

                                III.

     Accordingly, we reverse the district court's order granting

summary judgment in favor of Ruggerio and remand this case for

further proceedings consistent with this opinion.

                                              REVERSED AND REMANDED

     *
      To the extent that Ruggerio may have achieved “purchaser”
status after April 7, 2003, the federal tax liens on the Property
remain valid against him based on the antecedent filing of tax
notices.   26 U.S.C. § 6323(a); see also Gold, 178 F.3d at 721
(“Liens created by § 6321 become ‘valid’ as against third parties
upon the IRS’s filing notice of the lien in any recording office
within the state in which the property is located.”).

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