United States of America v. Gustafson et al

Filing 50

MEMORANDUM OPINION AND ORDER granting in part and deyning in part 45 MOTION for Summary Judgment. Denying 44 MOTION for Summary Judgment. Joint Pretrial Order due by 9/3/2010, Docket Call set for 9/10/2010 at 04:00 PM in Courtroom 9B before Judge Sim Lake.(Signed by Judge Sim Lake) Parties notified.(hcarr, )

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION UNITED STATES OF AMERICA, Plaintiff, V. RALPH E. GUSTAFSON, DEBORAH W. GUSTAFSON, MARTIN J. SCHOTT, CINDY SCHOTT, and INDYMAC BANK F.S.B., and HSBC MORTGAGE SERVICES, Defendants.
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CIVIL ACTION NO. H-08-3388

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MEMORANDUM OPINION AND ORDER

Plaintiff, United States of American, brings this action against the defendants, Ralph E. Gustafson, Deborah W. Gustafson, Martin J. Schott, Cindy Schott, Indymac Bank F.S.B., and HSBC Mortgage Services for liability judgment and tax lien foreclosure pursuant to 26 U.S.C.
§§

6321, 6322, and 7403.l Pending before the

court are OneWest Bank, FSB's Motion for Summary Judgment (Docket Entry No. 44), and United Statesf Motion for Summary Judgment (Docket Entry No. 45). For the reasons explained below OneWest's

motion will be denied and the United States' motion will be granted in part and denied in part.

'united States of America's Amended Complaint (Amended Complaint), Docket Entry No. 25. By Order entered on August 4, 2009, (Docket Entry No. 29), OneWest has been substituted as the real party in interest instead of IndyMac Bank F.S .B., and by Order entered on January 19, 2010, (Docket Entry No. 41), Martin J. Schott and Cindy Schott have been dismissed as defendants.

Standard of Review

Summary judgment is authorized if the movant establishes that
th ere is en title s

g enu ine dispute about any material fact and the law

judgment. Fed.
'g en u in e' ' '

Civ.

56 ( ). Disputes about c
such that

m ateria l fa ct s are re asonab le

the evidence verdict

could return

the nonmoving party .

Anderson v. Libertv Lobby, Incw 106 S. Ct. 2505, 2511 ( 986). The 1

Supreme Court has interpreted the plain language of Rule 56( ) to c

mandate the entry

summary judgment uafter adequate time

discov ery and upon motion, against a party who fails to make sh owing sufficient estab lish the existence of an element

e ssent ial

that party's case , and on wh ich that party will bear

th e burden

of proof

trial .' '

Celotex

Corp . v . Catrett,

106 S. Ct. 2548, 2552 ( 986). A party moving for summary judgment 1
'mu st 'demonstrate the absence ' genuine issue of m ateria l

fa ct ,' but need not neqate the elements of the nonmovant's case .' '

Little v . Liquid Air Coro w

F.3d 1069, 1075 ( th Cir. 1994) ( û 5 q

banc), ( uoting Celotex, 106 S. Ct. at 2553-2554). If the moving q party meets this burden, Rule 56( ) requires the nonmovant to go c
b eyond the pleadings and sh ow by affidavits, depositions, answers in te rro gato rie s , adm iss ion s file, other admissible
genuine

eviden ce that specific facts exist over which there

issue

trial.

Id. ( iting Celotex, c

at 2553-2554).

rev iewin g the evidence nthe court must draw al1 reasonable

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inferences in favor of the nonmoving party, and

may not make

c red ib i lity determinations or weigh the evidence .' '

Reeves v .

Sanderson Plumbinq Products Incw

S.

2097,

( 000). 2

Fa ctu al controversies are to be resolved in favor of the nonmovant,

'b ut only when '

b0th parties have submitted evidence F .3d at 1075.

contrad icto ry facts .' Little , '

II . Undisputed Facts
On or about April 1976, Ralph E . Gustafson and Deborah W .

Gustafson ( he Gustafsons) purchased real property in Simonton, t
Texas . The Simonton property ( he Property) is more particularly t
de scribe d as

Tract Five ( ) in Block Eleven ( 1) of Brazos Valley, 5 1
Sec tion Two, a subd ivi sion in Fort Bend County, Texas, acc ordin g to the p la t thereof recorded in Vol . 385, page 52 1, et seq . of the Deed Records of Fort Bend County,
Tex as .z

In 1998 the United States began assessing and noticing the Gu sta fson s for unpaid federal income taxes and State s began assessing Ralph Gustafson for 2001 the United unpaid federal

emp loym ent taxes .3

zDeed of Trust, Exhibit 4 attached to United States' Brief in

Support of Its Motion for Summary Judgment ( laintiff's Brief), P
Do cket Entry No . 45 .

3se e Exhibit 2 attached to United States of America 's Amended Comp lain t , Docket Entry No . 25 ( opies of notices of federal tax c

liens).
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On or about February

2005, following notice

de fault

the Gustafsonsr' Washington Mutual Bank, FA ( ashington Mutual), W
pu rch a sed P rop e rty

non-judicial foreclosure sale for

$81,037 .23 . Washington Mutual's purchase of the Property at the 4

non-judicial foreclosure sale extinguished the federal tax liens
that the United States had previously asserted against the

p rope rty .5 O n April 20 05, Washington Mutual issued
Ralph

Deed Without
Gustafson and

W arran ty transferring the Property

Deborah W . Gustafson in exchange for consideration of $82,477.89.6
The Deed Without Warranty was filed and recorded on July 13, 2005.7 The consideration for the deed was paid by the Schotts directly to

Washington Mutualx

4 ru st ee 's Deed, Exhib it 5 attached to Plaintiff's Brief, T Docket Entry No . 45.

s laintiff's Brief, Docket Entry No. 45, p . 8 (' alph and p 'R
Deb orah Gustafson had income tax liabilities for the 1997, 1998, 1999 2000, and 2002 income tax years and Ralph Gustafson owed emp loymen t tax liabilities for the quarterly periods ending M arch 31, 2001 through March 31, 2002 when Washington Mutual foreclo sed on the Simonton Property . The liens were extinguished

by the Washington Mutual foreclosure sa1e.') . '
E e ed Without Warranty, Exhibit D B rie f , Docket Entry No . 45.
7Id . 8 ra1 Deposition of Ralph E . Gustafson, Exhibit A attached to o De fen dant OneWest Bank, FSB'S Response to Plaintiff's Motion for Summ ary Judgment, Docket Entry No . 47, pp . 28-29.
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attached to Plaintiff's

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2005, Martin

S ch ott and Cindy Schott executed a

Deed of Trust pursuant to which they granted IndyM ac Bank, F . S .B .

secu rit y interest

Prop erty

exch ange for

loan of

$136,000 .00 . 9

The security interest included a power

sale,

requ ired the Schotts

use the Property as their principal place

o f residence, identified the loan as npurchase moneyr' and required ' the Schotts to agree the loan , and that they would not receive any cash from

that any advance not needed to purchase , complete

con st ru ct ion , or renew a p rio r lien on the Property would be used

to reduce the balance evidenced by the notex o
On July 20 05 , Ralph E . Gustafson and Deborah W . Gustafson

exe cu ted a Warranty Deed with Vendor's Lien conv ey ing the Property to Martin Schott and Cindy Schott,

for and in consideration of the sum of TEN AND NO/100 DOLLARS ( 10.00), and other valuable consideration paid $
to Grantor by MARTIN J . SCHOTT and wife CINDY SCHOTT

( Grantee'), the receipt of which is hereby acknowledged, n '
and the further consideration of the execution and de l ive ry by Grantee of one prom issor y note of even date

herewith in the principal sum of $34,000.00 2nd Lien Note
p ay ab le to the order of IndyM ac Bank, F .S .B ., A FEDERALLY

CHARTERED SAVINGS BANK

t' ayee'l and secured by the 'p '

ven dor 's first lien herein retained and a Deed of Trust

g ee d of Trust, Exhibit A-3 attached to Defendant Onewest D

Bank, FSB'S Motion for Summary Judgment

( efendant's Motion), D

Docket Entry No . 44. See also Exhibit 7-1 attached to Plaintiff's B rie f, Docket Entry No . 45 .

1 Id . at Definitions % R and %% 6, 27 , 28. 0
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of even date herewith

L OR I GRAY , Trustee,

benefit of Payeexl
Th e warranty deed for the sale was filed and recorded in Fort Bend

Coun ty , Texas, on August On October

2005 .1 2 Gu sta fs ons filed a Chapter

11, 2005, the

Voluntary Petition in Bankruptcyx 3
On Ap ril 24, 2006, the Gustafsons were granted a bankruptcy

discharge of joint income tax liabilities for the 1997, 1998, 1999,
and 2000 tax years, and on February 22, 2006, an Agreed Judgment

entered

an adversary proceeding provided that nE qhe tax liens t

re lating to debtors' income taxes p ass through the bankruptcy and rem ain attached to the p rop erty or interests in property owned by
deb tors

the

time

th e

filing

of

debtors' petition

b an krup t cy z / 4 l
On March

200 9, the Federal Deposit Insurance Corporation

( DIC ) announced that IndyMac Bank FSB had been sold F

OneWest

Ban k, FSB, which agreed to purchase sub stant ial ly a1l of the assets of IndyMac, including the loan asset at issue this case .15

ll a rranty Deed With Vendor's Lien, Exhibits A-1 and A-2 W attached to Defendant's Motion, Docket Entry No . 44 . See also E xhib it 7 attached to Plaintiff's Brief, Docket Entry No . 45.
l Id 2
l see Docket Entry No . 3

Bankruptcy Case No . 05-48361.

l see Discharge of Joint Debtors and Agreed Judgment , included 4 in Exhibit 1 attached to Plaintiff's Brief, Docket Entry No . 25, and Exhibit 8 attached to Plaintiff's Brief, Docket Entry No . 45 . l see Affidavit of Chris Moore attached to Unopposed Motion for 5

( ontinued .- ) c
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111 . Analysis
The United States asserts two claim s in this action .
Th e

first claim seeks judgment

ou tstand ing tax assessments holding

Ralph and Deborah Gustafson liable for joint federal income taxes,
p ena lties , and interest the 2002, 2003, 2006, and 2007 tax

years in the amount of $14,387. 3, as well as for additional 8
in tere st and statutory additions that continue to accrue until the

tax es are paid , and holding Ralph Gustafson liable for federal
em p lo ym ent taxesr penalties, and interest for the tax periods
end ing December

200 0 , March
2002 ,

200 1 ,

June

30,

2001,

Decembe r as well

200 1 , and March

for additional interest and st atuto ry additions that accrue until the taxes are paid . The second claim

con tinue

seeks a judgment allowing the United States
l ien s against the Gustafsons

enforce

tax

foreclosing upon and selling the

Prope rty . In support of this claim , the United States alleges that

g lursuant to 26 U.S. . $$ 6321 and 6322, liens arose on p C
th e dates o f assessment outlined in paragraphs 10, 11, and 12 in favor of the United States against a11 property and rights to p rop er ty belonging to Ralph E . Gustafson and Deborah W . Gustafson on the assessment date as ac qu ired thereafter . The United States has perfected the se lien interests by filing notice of its tax liens in

the Fort Bend ( ounty), Texas records. These liens, with C
the exception of the personal liabilities discharged by

O t.- continued)
Sub stitut ion of Real Party in Interest, Docket Entry No . 28, % 5

( tating that OneWest Bank, FSB, agreed to pprchase substantially s a11 of the assets of IndyMac Federal, including the Loan A sse t at issue in this case).

the bankruptcy, secure the liabilities to be reduced to

judgment in this case.
Th e United States of America's tax liens, including the ân rem liens for liabilities personally discharged by the b ankrup tcy , attach to the property listed in paragraph 15 o f the complaint and have priority over a11 other

defendants x 6

Defendant, OneWest, seeks summary judgment and 'an order '
de claring OneWest's purchase money lien superior to
liens the Government asserts against the Property ./l '7

federal tax

The United States seeks summary judgment

the bases that
th e amount

'Ralph E . Gustafson is indebted to the United States '

of $79,456.54 and Deborah Gustafson States

indebted

the United

the amount of $15,560.44, plus statutory additions
2010,'18 and that nthe United States '

ac cru ing from June en titled , as

matter of law, to foreclose its federal tax lien

aga in st the real property at issue to satisfy the outstanding tax deb ts .'l OneWest has filed a response to the United States' motion 'g

for summary judgment reasserting

contention that

holds a

p urcha se money lien against the Property that is superior to any

M u nited States of America's A men ded Complaint, Docket Entry

N o . 25,

5 %% 22-23 .

H De fen dan t , OneWest Bank, FSB'S Motion for Summary Judgment , Doc ket Entry No . 44, p . 3 .
l un ited States' Motion for Summary Judgment , Docket Entry 8 45 , first unnumbered page . 1 (d . 9j g
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prior tax liens . The Gustafsons have not responded to the United

States' motion for summary judgment.

A.

Liab ili ty for Outstanding Tax A sses sm en ts
A sse rting that the Gustafsons are liable for ou tst and in g tax

assessments, the United States seeks summary judgment that Ralph
Gu sta fson ind eb ted th e United States the amount of

$63,896.10 and that Ralph

Gustafson and Deborah Gustafson are

indebted to the United States

amount of $15,560.44, plus
Gustafsons
summary

statu to ry additions accru ing from June 28, 2010.2 0
h ave responded to the United States' motion

judgment . For the reasons explained below the court concludes that the United States is entitled judgment as a matter of law that

the Gustafsons are liable for the outstanding tax assessments

identified in the United States' motion for summary judgment.

1.

Gustafasons' Failure to Respond

Six weeks have passed since the United States filed its motion

for summary judgment on June 28, 2010, ( ocket Entry No. 45), three D
w eeks have passed since the Gustafsons' response the pending

m ot ion was due on July 19, 2010, and more than four months have

z u nite d States' Brief, Docket Entry No . 45, pp . 2-3 %% 2-3. o
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passed since the period

di sco ve ry exp ired on March

2 010 ,2 l

yet the Gustafsons have not re sp ond ed to the United States' m ot ion .
L oca l Rule

p rov ide s that : nOpposed

motions will be

subm itte d to the

judge twenty days from filing without notice from
S .D . Tex . R .

the clerk and w ithou t appearance b y counsel .' '

( 000). Local Rule 2

provides:

Fa ilu re to respond will be taken as a rep res enta tion n o opposition . Responses to motions
A. B. C. D.

Mu st be filed by the submission day; Mu st be written ; M u st include or be accompanied by authority; and M u st be accompanied by separate form order den ying the relief sought .

Tex .

( 000). 2

In accordance w ith Local Ru le
re sp on d

th e

cou rt takes the Gustafsons' failure

the United

States' motion for summary judgment as
op po sition A lthou gh

rep re sen tat ion of no

the United States' summary judgment evidence.
dist rict court m ay not grant summary judgment by the motion ,

d efau lt simply because there is no opposition

cou rt may accept as undisputed the movant's version of the facts

and grant a motion for summary judgment when the movant has made a prima facie showing of entitlement to summary judgment. See John
v . State of Louisiana ( oa rd of Trustees for the State Colleqes and B

Universities),

F. d 698, 2

( th Cir. 1985) ( hen the movant's 5 w

summary judgment evidence establishes its right to judgment as a

2l ee Docket Control Order , Docket Entry No . s
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matter

law ,

district court

entitled

gran t summary

judgment absent unusual circumstances); and Ev er slev v . Mbank
Dallas, 843 F. d 2 ( th Cir. 1988)( hen the nonmovant fails 5 w

to respond to a motion for summary judgment, the court does not err
b y granting the motion when the movant's submittals make prima

facie showing of entitlement

judgment as a matter of law).

2.

Applicable Law

An assessment of tax by the Internal Revenue Service ( RS) I

presumptively correct therefore, the E axpayerl must shoulder the t
b urden proving that the assessment was improper .' '

Affiliated Foods, Inc. v. Commissioner, 154 F.3d 527, 530 ( th Cir. 5 1998) ( iting Welch v. Helveringr c

S. Ct. 8,

( 933)). 1

lien

for non-payment of federal taxes arises upon assessment of the tax . order to be valid as against some classes of lienholdersz notice
of the lien must be filed as de sign ated by the laws of the state

wh ich the property is located .

U. . . SC

6323 ( ) f

Fede ra l tax

liens extend to after-acquired property .
Je anette , Pennsvlvania v . United States,

See G la ss Citv Bank of

108,

( 945) 1

( congress also provided that the lien should A ontinue until the n c
liab ilit y for such amount is sat is fied or becomes unenforceable by

reason
p rop erty

lap se r igh t s

t.' e .' l. m

.

( hus,) T

cont inu ing lien covers any

p rop e rty

the delinquent's hands

time prior to expiration.'). '
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United States' Prima Facie Showin? The exhibits attached to the United States' motion for summary

judgment make a prima facie showing that
R alp h E . Gustafson and Deborah Gustafson owe the United Sta tes following amounts unpaid federal income

taxe s , penalties, and interest :
Type of Tax Assessment Recording Amount Due

Tax
1040
1040

Period
2002
2003

Date
09/15/2003
Exh ib it 2

Date
04/27/2005
Exhibit 1

06/28/2010
101269.12
Exhzbit 2-1

11/15/2004
Exh ib it 2

Not Evidenced

375.63
Exhibit 2-1

1040 1040

2006 2007

11/19/2007
Exhibit 2

Not Evidenced Not Evidenced

3,092.05
Exhibit 2-1

06/22/2008
E xhib it 2

1,823.64
Exhibit 2-1

TOTAT ,

$15 ,560 . 4 4
R alph E . Gu sta fson owes the United States the following

am ount s of unpaid, non-discharged
ta xes and interest :
Type of Tax Period Assessment Recording

federal employment

Amount Due

Tax
94l 941 94l
941

Date
03/31/2001 06/30/2001 12/31/2001
03/30/2002

Date
04/22/2002
Exhibit 1

06/28/2010
221362. 8 2
Exhibit 3-2

06/11/2001
Exh ib it 3

09/17/2001
Exhibit 3

04/22/2002
Exhibit 1

161995.77
Exhibit 3-2

04/08/2002
Exhib it 3

04/22/2002
Exhibit 1

16,331. 8 5
Exhibit 3-2

06/17/2002

12/02/2002
Exh ib it 1

8,206.48
Exhibit 3-2

TOTAT .

$63, 96. 0 81

( ) Notice and demand for the unpaid taxes listed above have 3
b een provided to Ralph E . Gustafson and Deborah Gustafson

an d filed
Cou nty ,

the real property records
Ralph and Deborah

Fort Bend
Gustafson's

Texas ,

liab il ity for the 2002 income tax assessment, and for
R a lph Gustafson's liability th e above-listed

em p io yme nt taX assessments .

Th e United States has not p re sent ed any evidence showing that the

Un ited States recorded liens securing the Gustafson s' liability for
th e 2003, 2006, or 2007 income tax assessments .zz
Be cause the Gustafsons have not submitted any evidence that

di spu tes the United States' evidence

the tax assessments that

the United States seeks to have reduced to judgment against them, the court concludes that the United States is entitled to judgment
a s a matter of 1aw that Ralph E . Gustafson and Deborah Gustafson are indebted to the United States for unpaid 2002, 2003, 2006, and

2007 income taxes

the amount

$15,560.44, plus statutory
Gustafson

add ition s accruing from June

2010, and that Ralph

is indebted to the United States for unpaid employment taxes for th e last three quarters of 2001 and the first quarter of 2002

2 see Plaintiff's Brief, Do cke t Entry No . 45, p . 3 % 4 stating 2 on ly that the United States h as recorded tax liens for the 2002 inc om e tax liabilities.

the amount
June 28, 2010.

$63,896.10, plus statutory additions accruing from

B.

A b ili ty to Foreclose and Sell th e Simonton Property

The United States seeks summary judgment that

nentitled,

as a matter of law, to foreclose its federal tax lien against the
real property at issue to sat is fy the outstanding YeY tS /2 /3

OneWest contends that it its entitled to judgment as a matter of
1aw because Ralph Gustafson 's testimony establishes that the

Gu stafson s held no interest in the Property to which a federal tax l ien could attach ,24 and the Schotts held a purchase-money lien aga in st the Property that is superior to any prior tax 1ien .25

1.

Apo lic ab le Law
a

An individual's failure to p ay federal taxes results federa l tax lien against
p rop erty and rights such person .' '

property, U .S .C .

wh ethe r real or personal, belonging

5 6321.

The Supreme Court has held that

6321 1s ustatutory
is

languag e 'all property rights and rights to propertyz'

2 Id 3 M De fend ant , OneWest Bank, FSB 'S Response to Plaintiff's Motion fo r Summary Judgment, Docket Entry No . 47, p . 3 % 6 .

z Defend ant , OneWest Bank, FSB'S Motion for Summary Judgment , s Do cket Entry No . 44; and Defendant OneWest Bank, FSB'S Response to Pla in tif f's Motion for Summary Judgment, Docket Entry No . 47.
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broad and reveals on

face that Congress meant to reach every

inte rest in property that a taxpayer might have,' United States v . ' N at ion al Bank of Commerce , a fte r-acqu ired p rop erty . Glass,

2919, 2924 ( 985), including 1
at federal tax

lien , however, does not attach h as interest under state law .

property in which the taxpayer See Slodov v . United States ,

98

1778, 1790 (1978) ( the IRS n

not given the power to

levy on property in the hands of the taxpayer beyond the extent of

the taxpayer's interest in the property/). '
Th e nature and extent of the taxpayer's p rop e rty interest have tradit iona lly been recognized as matters to be determined by state

law .

Aquilino v. United States, 80 S. Ct. 1277, 1280 ( 960); 1 1054, 1057 (1958), surerseded on
6332 ( ). 5 Thus courts look to state

United States v. Bess,
other crounds bv U. . . SC

law to determine what rights - if any - the taxpayer has p rope rty the United States seeks to reach , then to federal 1aw to

dete rm ine whether the taxpayer's state-delineated rights qualify as np rope rty ' ' nrights to property' to which ' federal lien can

attach . Slodov, 98 S.

1790

(' e have held that the 'W

extent of the tax debtor's interest in the p rop ert y is determined
b y state law , and w hen the debtor has

no interest.'). '

See also Moraan v . Commissioner, 60

424,

( 940) ( state 1aw creates legal interests and rights. 1 u
fed eral revenue acts designate what interests

The

rights, so

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created,

shall

taxed .' . ')

Aquilino

Sup rem e Court

reaf firm ed the ho lding in Moraan , 60

Ct . at 424, that federal

1aw determ in es whether the taxpayer's interests are sufficient to
con st itu te nproperty' '

'right s to property' sufficient to be ' '

subjected to the Government's lien, and remanded for determination
o f whether the taxpayer held beneficial interest in the
at

p rope rty at issue as opposed to Mbare legal title .' '

1280- 81 .

In Drve v . United States, 120 S .

474 ( 999), the 1

Suprem e Court noted that

A qu il in o supports the view that the Court has chosen to app ly a federal test of classification, for the

E axpayer) concededly had legal title to the ( roperty) t p
and yet in remanding the Court indicated that this sta te -c reat ed incident of ownership was not a sufficient 'r igh t to property' in the contract p roceed s to allow the tax lien to attach . In this sense Acuilino follows Bess in requiring that the taxpayer must have a beneficial

interest in any property subject to the lien.
Id . at 482 & Lien,
exp la ined

( uoting Note, Propertv Subnect to the Federal Tax q ' The Supreme Court
federal taxpayer's

Harv. L. eV . 1485, 1491 ( 964)). R 1
that determining whether a

state- law rights constitute ' rope rty ' or 'rights to property ,' p

Al lhe important consideration t

the breadth

the control the Id. ( uoting q

E axpayer) could exercise over the property.f' t '
Morcan, S. 427)

Only after the court has determined

th at the taxpayers have property or the right to property to which
a federal tax lien may attach, does the question of the priority of

a federal tax lien over competing claims become an issue . United

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States v. Durham Lumber Co., 80 S. Acuilino , 80

1282, 1284-85 ( 960) ( iting 1 c

Ct. at 1285, and Bess, 78 S. Ct. at 1057).

App l icat ion of the Law to the Facts Gu staf son s ' Right to the Property Under Texas Law
Citing
U .S .C .

632 1 ,

U nite d States contends that on

Ap ril

2005 , when the Property w as repurchased from Washington

Mu tual , the Gustafsons acquired the Property or rights to the Prop ert y which the federal tax liens reattached . See Glass,

66 S. Ct. at 110) ( ecognizing that federal tax liens attach r

after-acquired property)

As evidence that the Gustafsons the Property to which a

acquired the Property and/or rights

fed eral tax lien attached in April of 2005, the United States cites

the Deed Without Warranty executed by Washington Mutual on April 20 05 , that identifies Washington Mutual as grantor, the

Gustafsons as grantees, the amount of consideration as $82,477.89,
the property conveyed as the Simonton Property at issue this

act ion , and the date of filing in the official public records of Fort Bend County, Texas, as July 2005.2 6 Asserting that the

asses sm ent for delinquent taxes automatically results in a lien on
th e taxpayers' property , the United States contends that a federal

26 eed Without Warrantyr Exhib it 6 attached to Plaintiff's D B rief , Docket Entry No . 45 .

tax

lien

attached

Prop e rty

when

was

deeded

from

Wa sh ingt on Mutual to the Gustafsons . See

U . S . . 55 6231, 6322 . C

C it ing the deposition testimony fu nds used

Ralph Gustafson that the

purchase the Property from Washington Mutual were Gustafsons, OneWest argues that

p rov ided by the Schotts,

the Schotts held equitable title to the Property and the Gustafsons
had no interest in the Property to which a federal tax lien could atta ch , or that the Schotts held an equitable purchase money lien

again st the Prop erty that was superior to any federal tax liens . 2z
On eW est explains that a fter the Washington Mutual foreclosure , Schott funded the purchase of the Property from the Bank and the deed to the hom e was to be held by Gustafson in trust .

( xhibit A, Deposition of Ralph Gustafson, p . 28, 1 3E 21). Schott sent the money directly to Washington Mutual
to pay for title to the Property out of foreclosure . Jd ., at p . 28-29. Schott purchased the home out of fo rec losure , not Gustafson . Id ., at 38, 1 . 24 - p . 39,

1. 1).

Gustafson didn't have the money or credit to

pu rch ase the home from Washington Mutual . Id., at p . 52,

1. 1-11). Because Schott advanced the purchase money to
Gu staf son , Schott had an equitable purchase money lien wh i ch was superior to the federal tax liens . See IRS v .

Fagin, 252 B . . 118, 120 ( . . Tex. 2000). R WD
The entire deal was predicated upon Schott purchasing the p rop er ty for full consideration in exchange for Gustafson exe cutin g a contract for deed to purchase the property at

a later date. ( xhibit nA' Deposition of Ralph E ' Gustafson, p . 37-38). The fact that Schott was able to
ta ke advantage of the lower purchase price out of for eclo su re by having Gustafson obtain the title does not n ega te the fact Schott was the true owner of the Prope rty . OneWest then provided a purchase money
z? e fend ant , OneWest Bank , FSB'S Response to Plaintiff's Motion D for Summary Judgment, Docket Entry No . 47, pp . 3-4 .
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mortgage to Schott. These two purchase money mortgages shou ld be protected as the primary liens upon the grounds

stated in Slodov because the IRS has not been prejudiced
b y those liens . Simply put, the Property would not have be en in the Gustafson 's estate without the purchase money ad van ced by Schott and OneWest .2 8 Ra lp h Gustafson's testimony is sufficient to raise a genu in e i ssu e of material fact regarding the nature of the right
th at the Gustafsons acquired repu rch a se from Washington Mutual .

if any

th e Property following its ligh t of the evidence that

W ashing ton Mutual deeded the Property to the Gustafsons in April of 20 05, and that the Gustafsons deeded the Property Schotts

th ree months later in July of 2005, Ralph Gustafson's testimony

n ot sufficient, however, to estab lish that OneWest is entitled to

judgment as a matter

law .

( ) Priority of Competing Liens b Citing IRS v. Facin, 252 B . . 118, 120 ( .D . Tex. 2000), R W

OneWest contends that nE lecause Schott advanced the purchase money b
to Gustafson , Schott had an equitable pu rcha se money lien which was sup e rio r to the federal tax liens.'2 In Facin the B ank rup tc y Court '9
h e ld that a deed of trust executed by the debtor in favor of his
p aren ts was a ntransfer,' within ' the

m ean ing

of

Texas

fraudu lent transfer statute, but m ere ly

m em o ria li za tion of an

2 Id . at îî 8 (l 2 Id . a t % 9

( mphasis added) e

equitable mortgage that his parents had acquired some years earlier

when they advanced money to the debtor to purchase property subject
the debtor's p rom ise not only them lien against the property repay them but also secure the loan . grant The

Bank rup tcy Court concluded that the equitable mortgage held by the debto r 's parents was superior to the United States' federal tax
liens because debtor used the proceeds mortgage

retire an earlier mortgage that predated the federal tax liens and th at the parents' equitable mortgage was thus subrogated to the righ ts of the earlier mortgage that was senior to the federal tax liens . A lth ough OneWest contends that the Bankruptcy Court's opinion
Fac in supports contention that 'Sch ott ' an equitable

pu rch ase money lien which was superior to the federal tax liens,'o '

OneWest has not explained how and/or why Facin supports this
conten tion . p rom ised 50th While the evidence in Fagin showed that the debtor
rep a y the loan provided by his parents

p rov id e his parents loan proceeds

lien against

p rop ert y that he used the

purchase, OneWest has not presented any evidence

show ing that sim ilar agreements existed between the Gustafsons and th e Schotts. Absent evidence that the Schotts provided funds

p urcha se the Property from Washington Mutual in exchange for or relian ce on the Gustafsons' promises to repay those funds and to

a zd o

at

grant the Schotts a lien against the Property to secure rep aym ent , On eW est has failed to present any evidence from which a reasonable fact finder could conclude that the funds used P rop erty purchase

from Washington Mutual in April 2005 constituted an

equitab le mortgage or est ab lishe d an equitab le lien against
Prope rty .
N or has OneWest presented any evidence from which a reasonable

fin der

fa ct could conclude that

fund s IndyMac loaned the

Sch ott s in Ju ly of 2005 constituted a purchase money loan . OneWest h as presented excerpts from the deposition testimony
Ra lph

Gu stafso n that the Schotts provided the funds used to p u rcha se the P rop erty from Washington Mutual in April of 2005, and that although

W ash ing ton Mutual deeded

the Property

the Gustafsons,

G u sta fson s held the deed in tru st for the Schotts who were the true
ow ner s Property . as Ralph Gustafson testified,

Schott s owned the Property in Ap ril of 2005, then the loan that
IndyMa c made a

pu rchase -m on ey loan because the loan proceeds would not have been u sed to purchase p rop erty that the Schotts did not already own .

Co nc- u sion s l

N e ither party has prov ided

the court enough

ev id ence or

b r iefin g on Texas law to determ ine what

if any - right to the

Property recognized by Texas 1aw the Gustafsons and/or the Schotts
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2 1-

acquired and/or held in April of 2005 when the Property was
purch ased from Washington Mutual , in July of 2005 when IndyMac p rov ided the Schotts a loan secured by the Property , or in October
o f 2005 when the Gustafsons filed their Chapter

Pe tit ion in

Bank rup tcy . Absent evidence establish ing th e existence of a right

to the Property recognized by Texas 1aw that the Gustafsons and/or the Schotts acquired and/or held on these dates, the court is
un ab le to determ in e whether the Gustafsons a cqu ired a right to the
Prop erty to which a federal tax lien could attach . Absent

ev iden ce that the Gustafsons acquired a right to the Property to wh ich a federal tax lien could attach , the court is unable to de te rm ine

the Property is subject to competing liens or, if so,

wh ich of the competing liens is superior . See Drve , 120 S . Ct . at

482 & n . P% ourts should look first to state law to determine 6 c
'the nature of the legal interest ' a taxpayer has in the property

the Government seeks to reach under its tax 1ien') . Accordingly, '
the court concludes that genuine issues of material fact preclude

the grant of summary judgment to either party.

IV . Conclusions and Order

For the reasons explained above in 5

III. , the court A

concludes that

United States
-

entitled

judgment

a

22 -

matter

1aw that Ralph E . Gustafson and Deborah Gustafson are

indebte d to the United States for unpaid 2002, 2003 , 2006, and 2007

income taxes

the amount of $15,560. 4 plus statutory additions 4

acc ru ing from June 28, 2010, and that Ralph E . Gustafson

indeb ted to the United States for unpaid employment taxes for the

last three quarters of 2001 and the first qu a rte r of 2002
amoun t

$63,896.10 plus statutory additions accruing from
For the reasons explained above
II I .B , the

June 28, 2010 .

cou rt concludes that genuine issues

material fact p re clud e

grant

summary judgment to either the United States or OneWest
existence and/or priority of competing liens.
Summary

regarding

Ac cordin gly , Defendant One West Bank, FSB'S Motion
Judgm en t , Docket Entry Mo tion

DEN IED , and

Un ited States' is GRANTED IN

Summ a ry Judgment, Docket Entry No .

PART and DENIED IN PART .

The

joint

pretrial

order

shall be

filed

Friday,

September 3, 2010. The joint pretrial order shall include proposed
fin ding s of fact and conclusions of law , and shall be accompanied by trial briefs that address, inter alia, what - if any - right to

the Property recognized by Texas law the Gustafsons and/or the Schotts acquired and/or held in April of 2005 when the Property
wa s purchased from Washington Mutual , in July of 2 00 5 when IndyMac p rov ided the Schotts a loan secured by the Property , and in

O ctob er of 2005 when the Gustafsons filed their Chapter 7 Petition

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23-

in Bankruptcy, and what
attachm ent of a federal tax

if any

fed era l law supports the
the Property .

Doc ket

call

will

be

held

Courtroom

9B

Friday ,

Septemb er 1O, 2010 at 4:00 p .m . SIGNED at Houston , Texas, this 10th day of ugust, 2010.

S IM LAKE UN ITE D STATES DISTRICT JUDGE

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