USA v. Baker et al

Filing 44

ORDER granting in part and denying in part 40 Motion for Attorneys' Fees. So Ordered by Judge Paul J. Barbadoro.(jna)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE

United States of America
v.

Case No. 13-cv-213-PB
Opinion No. 2015 DNH 003

Scott G. Baker and Robyn Baker

O R D E R
Robyn Baker filed a motion to recover attorneys’ fees as a
prevailing defendant in this tax case.

See 26 U.S.C. § 7430.

The United States has responded by arguing that the motion
should be denied because its decision to sue Baker was
“substantially justified.”

I.

BACKGROUND

The United States brought this action in an effort to force
the sale of property that Robyn Baker acquired from her exhusband pursuant to a divorce decree.

The government’s claim

was based on tax liens it obtained against her ex-husband.
Although it is undisputed that the tax liens accrued after the
effective date of Baker’s divorce decree, the government
nevertheless argued that the liens covered Baker’s property
because they accrued before a deed transferring the property was

recorded at the registry of deeds.

I rejected the government’s

legal theory in ruling on the parties’ cross motions for summary
judgment.

See United States v. Baker, 13-cv-213-PB, 2014 DNH

176.

II.

ANALYSIS

The government’s lien against a taxpayer for unpaid taxes
extends to “all property and rights to property, whether real or
personal, belonging to such person.”

26 U.S.C. § 6321.

Construing this provision, the First Circuit held that property
is not subject to a tax lien if the taxpayer relinquishes all
interest in the property before the tax lien accrues.

United

States v. V & E Eng’g & Constr. Co., 819 F.2d 331, 333 (1st Cir.
1987); see also United States v. Gibbons, 71 F.3d 1496, 1501
(10th Cir. 1995); Thomson v. United States, 66 F.3d 160, 162-63
(8th Cir. 1995); but see United States v. Creamer Indus., Inc.,
349 F.2d 625 (5th Cir. 1965).

In reaching this conclusion, the

First Circuit rejected the government’s argument that a taxpayer
retains an interest in transferred property that can be subject
to a tax lien until the deed is recorded and the property is
protected from claims of subsequent purchasers.
noted:

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As the court

The government’s argument amounts to asking that we
construe the term “right to property” in Section
6321 as referring to the possibility that the seller
might fraudulently convey the sold property to an
innocent third party. We cannot accept that
Congress intended the term “right” to include the
possibility that a party might engage in fraud.
V & E Eng’g & Constr. Co., 819 F.2d at 333.

The Tenth Circuit

reached a similar conclusion when, in following the First
Circuit’s reasoning, it noted that the government stands in the
shoes of the taxpayer rather than his creditors when it attempts
to enforce a tax lien against transferred property.

Gibbons, 71

F.3d at 1501.
As I explained in my prior ruling granting Baker’s motion
for summary judgment, a divorce decree apportioning real estate
among divorcing parties ordinarily occurs under New Hampshire
law as soon as the decree becomes effective rather than when a
deed reflecting the transfer is recorded.

See Mamalis v.

Bornovas, 112 N.H. 423, 424, 428 (1972) (citing Swett v. Swett,
49 N.H. 264, 264 (1870)).

The failure to record a deed

reflecting the transfer thus does not affect the validity of the
transfer between the grantor and the grantee.

See N.H. Rev.

Stat. Ann. § 477:7 (specifying that no conveyance of real estate
“shall be valid to hold the same against any person but the
grantor and his heirs only, unless such deed or lease be

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acknowledged and recorded, according to the provisions of this
chapter”)(emphasis added).
Because the First Circuit has determined that the federal
government cannot enforce a tax lien against property that the
taxpayer has transferred before the lien accrued even if a deed
reflecting the transfer has not been properly recorded, and New
Hampshire law provides that a transfer of property pursuant to a
divorce decree occurs as soon as the divorce decree becomes
effective, it should have been obvious to the government that
its tax liens against Baker’s ex-husband cannot apply to her
property because the decree transferring the property became
effective before the tax liens accrued.

In short, because

Baker’s ex-husband had no interest in the property when the tax
liens accrued, the liens simply do not cover the property.
The government’s contention that its litigation position
was substantially justified is based on an untenable reading of
First Circuit precedent and New Hampshire law.

Accordingly, I

agree that Baker is entitled to recover her reasonable
attorneys’ fees.1

1

I decline to address the government’s argument that the fee
request is excessive and insufficiently supported. Instead, I
direct the parties to meet and confer in an effort to resolve
this issue by agreement. If an agreement cannot be reached
within 30 days, the defendant may renew her motion and the
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III. CONCLUSION
Baker’s motion for fees (Doc. No. 40) is granted to the
extent that it seeks an award of reasonable fees.

In all other

respects, the motion is denied without prejudice.
SO ORDERED.
/s/Paul Barbadoro
Paul Barbadoro
United States District Judge
January 8, 2015
cc:

Michael R. Pahl, Esq.
Jeffrey J. Cymrot, Esq.
Anthony M. Ambriano, Esq.
D. Sean McMahon, Esq.
Terri L. Pastori, Esq.

matter will be referred to the magistrate judge for resolution.
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