Medina v. Internal Revenue Service

Filing 22

MEMORANDUM & ORDER. Accordingly, the IRSs Motion for Summary Judgment (Dkt. 15) is DENIED. Medinas Amended Motion for Summary Judgment (Dkt. 20) is DENIED. Medinas original Motion for Summary Judgment (Dkt. 18) is DENIED as moot.This case is referred to Magistrate Judge J. Scott Hacker to determine what remains to be done before trial.(Signed by Judge George P Kazen) Parties notified.(mxperez, 5)

United States District Court
Southern District of Texas
O

ENTERED
September 21, 2017

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
LAREDO DIVISION

NORMA LINDA LEAL MEDINA,
Plaintiff,
v.
INTERNAL REVENUE SERVICE,
Defendant.

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§
§
§
§
§
§

David J. Bradley, Clerk

NO. 5:16-cv-90

MEMORANDUM AND ORDER
Before the Court are cross motions for summary judgment, one
filed by Plaintiff Norma Linda Leal Medina (“Plaintiff”) (Dkt. 20)
and one filed by Defendant Internal Revenue Service (“Defendant”)
(Dkt. 15.)

Each party has responded to its opponent’s motion.

(Dkt. 17; Dkt. 21.)

Plaintiff brings this action to quiet title to

three pieces of real property on which Defendant has placed liens
to secure payment of Plaintiff’s parents’ tax debt.

The Court will

deny both motions.
BACKGROUND
The following facts are taken from the motions and evidence
the parties provided.
I.

Tax Debt
For 2005, 2006, and 2007, Plaintiff’s father, Florentino Leal,

Jr. (“Leal”), failed to pay $215,036.18 in employment taxes arising
out of his business.

(Dkt. 15-2 at 1.)

For those same three

years, Leal and his wife failed to pay $118,332.24 in income taxes.

(Dkt. 15-3 at 1.)

For 2008 and 2009, Leal and his wife failed to

pay an additional $9,577.45 in income taxes.

(Dkt. 15-3 at 1.)

In

total, they accrued $342,945.87 in tax debt.
II.

Property Conveyances
Four pieces of real property in Laredo, Texas, along with

their recent conveyance histories, are relevant to this case.

The

Court will refer to these properties as Colorado 10, Colorado 21,
Colorado 22, and 503 Garfield. 1

This case primarily concerns a

conveyance that occurred on March 26, 2008, when Leal conveyed
these properties to his daughter, Plaintiff, via a recorded “Gift
Deed.”

(See Dkt. 15-6 at 1.)

The Gift Deed reads, in operative

part, as follows:
That I, FLORENTINO LEAL JR. Of The County of Webb and
State of Texas, for and in consideration of the love and
affection I have for and received From Daughter, NORMA
LINDA LEAL MEDINA, hereby acknowledge, subject My Life
estate which I hereby reserve, have GRANTED AND CONVEY,
and by These Present do GRANT AND CONVEY unto my Daughter
NORMALINDA LEAL MEDINA of the County of Webb and State of
Texas, to be hers as her The following real properties,
to –wit:
[Colorado 10, Colorado 21, Colorado 22, 503 Garfield.]
To have and to hold the above described premises,
together
with
all
and
singular
The
right
and
appurtenances thereto in anywise belongings unto the said
Grantee, his heir and assigns forever, and I do hereby
1

The actual property descriptions are (1) Lot 10 BLK 7 Colorado
ACS SUB 18 4.01 ACS Laredo, Texas 78040 [Colorado 10], (2) Lot 21
BLK 7 Colorado ACS SUB 18 4.01 ACS Laredo, Texas 78040 [Colorado
21], (3) Lot 22 BLK 7 Colorado ACS SUB 18 4.01 ACS Laredo, Texas
78040 [Colorado 22], and (4) 503 Garfield, Laredo, Texas 78040, E ½
of 11 & W ½ of Lot 10, BLK 81 of ED [Garfield].
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bind myself, my heir, executer and Administrator to
WARRANT AND FOREVER DEFEND all and singular the said
Premises unto the GRANTEE, his heir, and assigns against
every person Whomsoever lawfully claiming or to claim the
same or any part thereof.
(Id. at 1–2 (errors in the original).)
exact

result

of

this

property

The parties dispute the

transfer.

Each

of

the

four

properties has a unique, if overlapping, recent conveyance history.
Colorado 10 was purchased by Leal on December 19, 2003, along
with Colorado 21.

(Dkt. 21-3.)

In 2008, Leal deeded the property

to Plaintiff in the Gift Deed.
Colorado 10 to a third party.

On March 28, 2011, Leal sold

(Dkt. 21-2.)

Colorado 21 was purchased by Leal on December 19, 2003, along
with Colorado 10.

(Dkt. 21-3.)

In 2008, Leal deeded the property

to Plaintiff in the Gift Deed.
Colorado 22 was sold to Leal and his wife on May 19, 2004.
(Dkt. 15-8.)

In 2008, Leal deeded the property to Plaintiff in the

Gift Deed.
503 Garfield was bought by Leal and his wife for $69,930 via a
Warranty Deed with Vendor’s Lien on July 21, 2005.

(Dkt. 15-7.)

In 2008, Leal deeded the property to Plaintiff in the Gift Deed.
From 2010 to 2015, Plaintiff claims to have paid about $60,000
toward this property’s mortgage.

(Dkt. 20-2 at 6–32.)

III. IRS Liens and Procedural History
In 2009, Defendant attached liens to Leal’s and his wife’s
properties to secure payment of their tax debts.
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(Dkt. 15-2; Dkt.

15-3.)

While investigating their assets, Defendant determined that

Plaintiff held bare legal title to the properties listed in the
2008 Gift Deed as a nominee of Leal and his wife.

(Dkt. 20-3.)

On

December 16, 2015, Defendant executed “nominee liens” on those
properties.

(Dkt. 15-4; Dkt. 15-5.)

The liens attached only to

Colorado 21, Colorado 22, and 503 Garfield, but not to Colorado 10,
the property Leal later sold to a third party.

(Id.)

On March 2, 2016, Plaintiff filed the instant suit in state
court to remove Defendant’s liens against Colorado 21, Colorado 22,
and 503 Garfield.

(Dkt. 1-1 at 1.)

On April 29, 2016, Defendant

timely removed this case to federal court, invoking federal-agency
jurisdiction under 28 U.S.C. §1442(a)(1).

(Dkt. 1 at 1–2.)

LEGAL STANDARD
A party moving for summary judgment must demonstrate that
there is no genuine issue of material fact and it is entitled to
judgment as a matter of law.

Fed. R. Civ. P. 56(c).

The movant

bears the initial burden of informing the court of the legal basis
for the motion and identifying the evidence in support.
Corp. v. Catrett, 106 S.Ct. 2548, 2553 (1986).

Celotex

Once the movant

meets that burden, the non-movant must present sufficient evidence
to allow a reasonable fact finder to find for the non-movant.
Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006).
A court views the evidence in the light most favorable to the nonmovant.
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Id.

Mere conclusory allegations are not sufficient to

defeat a motion for summary judgment, Eason v. Thaler, 73 F.3d
1322, 1325 (5th Cir. 1994), nor are unsubstantiated assertions,
improbable inferences, or unsupported speculation.
Barr, 19 F.3d 1527, 1533 (5th Cir. 1994).

Forsyth v.

When deciding cross

motions for summary judgment, a court must consider each motion
independently, viewing the evidence in the light most favorable to
each non-movant.

White Buffalo Ventures, LLC v. Univ. of Tex. at

Austin, 420 F.3d 366, 370 (5th Cir. 2005).
ANALYSIS
Both parties move for summary judgment.
Plaintiff is a nominee as a matter of law.

Defendant claims
(Dkt. 15 at 11.)

Plaintiff claims Leal and his wife had no interest in the relevant
properties sufficient for Defendant to place a lien on them.
20 at 9.)

(Dkt.

Because these motions rely upon the same law and facts,

the Court considers them together.

However, as it must when

considering cross summary-judgment motions, the Court independently
considers the evidence in the light most favorable to each party to
determine whether it is appropriate to grant either motion.
I.

Legal Framework
Plaintiff brings this quiet-title action under 28 U.S.C.

§2410, which allows a person to challenge a lien placed on her
property by the United States.

The United States has the power to

place a lien on the property of a tax debtor to satisfy delinquent
tax debt.
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26 U.S.C. §6321.

Congress intended this enforcement

power to reach “every interest in property that a taxpayer might
have.”

United States v. Nat’l Bank of Commerce, 105 S.Ct. 2919,

2924 (1985).

The United States bears the burden to show that a

delinquent taxpayer has an interest in a property by “substantial
evidence.”

See Century Hotels v. United States, 952 F.2d 107, 109

(5th Cir. 1992).

Taxpayers have an interest in not only property

to which they have title, but also “property held by a third party
if it is determined that the third party is holding the property as
a nominee . . . of the delinquent taxpayer.”
States, 429 F.3d 248, 251 (6th Cir. 2005).

Spotts v. United

“A nominee is one who

holds bare legal title to property for the benefit of another.”
Scoville v. United States, 250 F.3d 1198, 1202 (8th Cir. 2001)
(citing Black’s Law Dictionary (7th ed. 1999)).
Although the definition of “property” as used in 26 U.S.C.
§6321 is a federal question, a taxpayer’s property interest is
determined by looking to the law of the state in which the property
is located.

United States v. Craft, 122 S.Ct. 1414, 1420 (2002).

In this case, the state is Texas.

Because Texas courts have not

delineated a nominee test, federal courts determining whether a
person holds title to Texas property as a taxpayer’s nominee look
to the generally applied common-law factors.

Battle v. United

States, No. 9:06-cv-109, 2007 WL 1424553 at *5 (E.D. Tex. Feb. 7,
2007) (citing State Bank & Trust Co. v. Ins. Co. of the West, 132
F.3d 203, 205, n.3 (5th Cir 1997)).
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The non-exclusive factors are:

1.

No consideration or inadequate consideration paid
by the nominee;

2.

Property placed in the name of the nominee in
anticipation of a suit or occurrence of liabilities
while the transferor continues to exercise control
over the property;

3.

Close relationship between the transferor and the
nominee;

4.

Failure to record conveyance;

5.

Retention of possession by the transferor; and

6.

Continued enjoyment by the transferor of benefits
of the transferred property.

Oxford Capital Corp. v. United States, 211 F.3d 280, 284 n.1 (5th
Cir. 2000).
The Court will analyze the evidence in light of the Oxford
factors to determine whether Plaintiff is a nominee.
II.

Oxford Factors
The evidence before the court includes certified copies of the

IRS tax liens (Dkt. 15-2; Dkt. 15-3; Dkt. 15-4; Dkt. 15-5; Dkt. 171; Dkt. 20-1), certified copies of the Gift Deed (Dkt. 15-6; Dkt.
20-2 at 34–35; Dkt. 20-4), certified copies of various Warranty
Deeds involving the properties at issue (Dkt. 15-7; Dkt. 15-8; Dkt.
21-2; Dkt. 21-3; Dkt. 21-4), a letter from Defendant to Plaintiff
and her counsel (Dkt. 20-3), copies of checks and transaction
receipts (Dkt. 20-2 at 7–30), a Deed of Release indicating that a
deed of trust executed by Leal and his wife had been satisfied and
released (Dkt. 20-2 at 31–33), and a letter sent by Plaintiff’s
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lawyer to Defendant (Dkt. 20-2 at 2–5).

The parties have provided

no testimonial evidence, such as affidavits or depositions.
The

Court

will

consider

each

factor

in

turn,

adding

Plaintiff’s mortgage payments as an additional factor, which does
not fit well into any listed factor but nonetheless weighs on this
inquiry.

The Court considers only the evidence before it.

1. Consideration
The

first

factor

asks

whether

consideration for the properties.

Plaintiff

gave

adequate

In Texas, property conveyed by

gift deed is not given for valuable consideration.

Tex. Eastern

Transmission Corp. v. Garza, 894 F.Supp. 1055, 1060 (S.D. Tex.
1995) (Jack, J.).
convey

property

consideration.

“Love and affection,” although sufficient to
by

gift,

is

also

not

considered

valuable

Glenney v. Crane, 352 S.W.2d 773, 776 (Tex. Civ.

App.—Houston 1961); see also Small v. Brooks, 163 S.W.2d 236, 237
(Tex.

Civ.

App.—Austin

1942).

In

this

case,

the

Gift

Deed

unambiguously conveyed the properties to Plaintiff in exchange “for
and in consideration of the love and affection I have for and
received From Daughter.”

(Dkt. 15-6 at 1.)

Therefore, the deed

reflects that Plaintiff gave no consideration.
Plaintiff claims she purchased the properties in exchange for
$60,000 she paid toward the mortgage of 503 Garfield.

Basic

contract law teaches that consideration must be “bargained for and
received by a promisor from a promisee,” and it must be intended to
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“motivate[] a person to do something, esp[ecially] to engage in a
legal act.”

Black’s Law Dictionary (10th ed. 2014); see also

Restatement (Second) of Contracts §71.

While Plaintiff may have

begun paying the mortgage on 503 Garfield two years after the
properties were transferred to her, she provides no evidence that
she made those payments in exchange for receiving the properties.
Her conclusory assertion that the payments were consideration is
not evidence.
Therefore,

the

Court

finds

that

Plaintiff

properties for no valuable consideration.

received

the

This factor favors

finding her to be a nominee.
2. Anticipation of Liability
The next factor asks whether the property was transferred in
anticipation of liability while the transferor maintained control
of the properties.
2005 to 2009.

Leal and his wife incurred their tax debt from

The Gift Deed was executed in 2008.

Defendant

notified Leal of his tax debt in 2009, about one year after the
properties were transferred.
The evidence is insufficient to support a summary-judgment
finding on whether Leal anticipated his tax liability when he
transferred the properties to Plaintiff.

Because Defendant had not

yet notified Leal of his debt at the time of transfer, a reasonable
fact finder could find that Leal did not know about his debt when
he gave the properties to Plaintiff.
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A reasonable fact finder

could also find the timing of the transfer suspicious enough to
decide Leal must have transferred the properties in anticipation of
his tax debt.

This determination is best reserved for the fact

finder’s consideration upon hearing and evaluating the credibility
of the testimony at trial.
This factor also asks whether Leal maintained control over the
properties after effectuating legal transfer.

Via the Gift Deed,

Leal reserved a life estate for himself in the properties, giving
him the legal right to control the properties for the rest of his
life.

See Collins v. New, 558 S.W.2d 108, 112 (Tex.Civ.App.—Corpus

Christi 1977).

He clearly exercised continued control over one of

the properties when he sold Colorado 10 to a third party despite
having purportedly given it to Plaintiff.

While this evidence

supports finding that Leal maintained control of the properties, it
is insufficient to support such a finding on summary judgment.
There is no evidence that Leal actually exercised control of
Colorado 21, Colorado 22, or 503 Garfield.

Similarly, there is

insufficient evidence that Plaintiff controlled those properties.
Plaintiff’s conclusory statements to that effect are not evidence.
A reasonable fact finder could find for either party.
The Court cannot decide this factor on summary judgment.
3. Relationship

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The next factor is whether the transferor and transferee have
a close relationship.

Plaintiff is Leal’s daughter.

This factor

clearly favors the IRS.
4. Recorded Deed
The next factor asks whether the deed was recorded.
appearances, the Gift Deed was properly recorded.

By all

This factor

clearly favors Plaintiff.
5. Transferor’s Possession
The

next

factor

asks

whether

the

transferor

possession of the properties after transfer.

maintained

Plaintiff claims

“that she had total control and dominion over the property to the
complete exclusion of taxpayer [Leal].”

(Dkt. 20 at 8.)

As

evidence, she provides her contributions toward the 503 Garfield
mortgage

payments.

While

those

payments

connect

her

to

503

Garfield in some way, they do not show her actual possession of the
property.

Plaintiff’s conclusive claim of possession is not

evidence.

There is no evidence before the Court showing who has

maintained actual possession of the properties in the nine years
since the Gift Deed was executed.

This factor will best be

determined by the fact finder after hearing and evaluating the
testimony at trial.
on summary judgment.

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Therefore, the Court cannot decide this factor

6. Enjoyment of the Properties
The final Oxford factor asks whether the transferor continued
to enjoy the benefits of the properties after the transfer.

As has

become a common refrain, the parties provide little if any evidence
concerning who has enjoyed the properties since the Gift Deed was
executed.

Leal clearly continued to enjoy the benefits of Colorado

10 after the transfer, but that property is not subject to an IRS
lien.

Who has enjoyed the benefits of Colorado 21, Colorado 22,

and 503 Garfield is entirely unclear.

Once again, Plaintiff’s

conclusory statement that she has enjoyed the properties is not
evidence.

This factor will be best decided by the fact finder

after hearing and evaluating testimony at trial.

Therefore, the

Court cannot decide this factor on summary judgment.
7. Payment of the Mortgage
Although not an Oxford factor, the Court considers Plaintiff’s
mortgage payments.

Plaintiff claims to have paid $60,000 toward

503 Garfield’s mortgage.

(Dkt. 20 at 8.)

As evidence, she

provides a number of checks and bank receipts, as well as a letter
stating that the mortgage has been satisfied.

(Dkt. 20-2 at 7–33.)

If Plaintiff made payments toward the mortgage on 503 Garfield, it
would seem to support Plaintiff’s claim that she is not a nominee
as to at least that property.

The fact finder will decide the

appropriate weight to give this compared to the other factors when
it makes its findings after trial.
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III. Findings
The Court finds that neither summary judgment motion should be
granted.

Although

two

Oxford

factors,

consideration

and

relationship, favor Defendant and one factor, recorded deed, favors
Plaintiff, viewing the evidence in the light most favorable to each
party, separately, it is apparent that neither is entitled to
summary judgment.

The fact questions posed by the gaping holes in

the evidence provided by the parties necessitate a trial on the
merits.
CONCLUSION
Accordingly, the IRS’s Motion for Summary Judgment (Dkt. 15)
is DENIED.

Medina’s Amended Motion for Summary Judgment (Dkt. 20)

is DENIED.

Medina’s original Motion for Summary Judgment (Dkt. 18)

is DENIED as moot.
This case is referred to Magistrate Judge J. Scott Hacker to
determine what remains to be done before trial.
DONE at Laredo, Texas, this 21th day of September, 2017.

___________________________________
George P. Kazen
Senior United States District Judge

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