hannon v. united states, 1st cir. (2014)

7/26/2019 Hannon v. United States, 1st Cir. (2014)

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United States Court of AppealsFor the First Circuit

No. 13- 1022

PATRI CK J . HANNON,

Pl ai nt i f f ,

v.

CI TY OF NEWTON,

Def endant .

UNI TED STATES OF AMERI CA,

I nt er est ed Par t y, Appel l ant ,

v.

COMMONWEALTH OF MASSACHUSETTS;RI TA S. MANNI NG,

I nt er est ed Par t i es, Appel l ees.

APPEAL FROM THE UNI TED STATES DI STRI CT COURTFOR THE DI STRI CT OF MASSACHUSETTS

[ Hon. Dougl as P. Woodl ock, U. S. Di st r i ct J udge]

Bef or e

Lynch, Chi ef J udge,

Thompson and Kayat t a, Ci r cui t J udges.

Ant hony T. Sheehan, At t orney, Tax Di vi si on, Depart ment ofJ ust i ce, wi t h whom Teresa E. McLaughl i n, At t or ney, Tax Di vi si on,Depar t ment of J ust i ce, Kat hr yn Keneal l y, Assi st ant At t or neyGener al , and Carmen M. Or t i z, Uni t ed St ates At t orney, wer e onbr i ef , f or appel l ant .

Thomas J . Fl annagan, wi t h whom MacLean Hol l oway Doher t y


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Ar di f f & Mor se, P. C. was on br i ef , f or appel l ee.

Febr uar y 28, 2014

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LYNCH, Chief Judge. Thi s case pr esent s an i ssue of f i r st

i mpr essi on concer ni ng t he aut hor i t y under f eder al l aw of t he

I nt er nal Revenue Ser vi ce t o di schar ge a por t i on of i t s t ax l i ens on

a pi ece of r eal pr opert y t aken by emi nent domai n i n exchange f or

payment f r omt hat t aki ng whi l e asser t i ng t he r emai ni ng val ue of i t s

l i ens on any pr oceeds t hat t he t axpayer obt ai ns i n a st ate post -

t aki ng sui t f or undercompensat i on damages. The I nt ernal Revenue

Code, 26 U. S. C. 6325( b) ( 2) ( A) , gi ves t he I RS di scret i on t o

di schar ge pr oper t y f r om a t ax l i en i f t he I RS i s pai d an amount ,

"whi ch shal l not be l ess t han t he val ue" of i t s i nt er est i n t hat

pr oper t y. We concl ude t hat t he I RS di schar ge under t hi s pr ovi si on

di d not sur r ender t he gover nment ' s t ax l i en on the pr oceeds of t he

t axpayer ' s post - t aki ng sui t . We r ever se t he di st r i ct cour t ' s

det er mi nat i on t o t he cont r ary. Hannon v. Ci t y of Newt on, 820 F.

Supp. 2d 254, 258, 261 ( D. Mass. 2011) .

We qui ckl y summar i ze bot h t he i ssue and our concl usi ons.

I n t he spr i ng of 2007, Pat r i ck J . Hannon owed t he Uni t ed St ates

over $4 mi l l i on f or unpai d t axes, and t he I RS hel d t ax l i ens f or

t hat sum agai nst hi s pr oper t y, i ncl udi ng a par cel of l and he owned

at 20 Roger s St r eet i n Newt on, Massachuset t s. I n March 2007, t he

Ci t y of Newt on, seeki ng t o t ake t he 20 Roger s St r eet pr oper t y by

emi nent domai n, asked t he I RS t o assi st i t by di schar gi ng t hat

par cel f r om t ax l i ens, t hus avoi di ng any quest i on as t o Newt on' s

power t o t ake t he pr oper t y f r ee of t hose l i ens. On May 4, 2007,

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t he I RS di schar ged t hat speci f i c par cel of l and ( 20 Roger s St r eet )

f r om i t s t ax l i en under 26 U. S. C. 6325( b) ( 2) ( A) i n a Cer t i f i cat e

of Di schar ge. That Cer t i f i cat e expr essl y st at ed t hat i t " sav[ ed]

and r eser v[ ed] . . . t he f or ce and ef f ect of sai d t ax l i en agai nst

and upon al l ot her pr oper t y or r i ght s t o pr oper t y t o whi ch sai d

l i en i s at t ached, wher esoever si t uat ed. "

Three days l at er , on May 7, 2007, Newt on pai d $2. 3

mi l l i on t o t ake Hannon' s pr oper t y at 20 Roger s St r eet by emi nent

domai n. The I RS had aut hor i zed t he t ax l i en di scharge on 20 Rogers

St r eet upon i t s r ecei pt of $57, 214. 55, whi ch was i t s est i mat e of

what woul d remai n of t he $2. 3 mi l l i on pai d by Newt on af t er t he

mor t gagee, a seni or credi t or , was pai d i n f ul l .

Fol l owi ng t he t aki ng, on November 10, 2008, Hannon

exer ci sed hi s st atut ory r i ght under Massachuset t s emi nent domai n

l aw t o sue Newt on i n st ate cour t , cl ai mi ng that Newt on had not

suf f i ci ent l y compensated hi m f or t aki ng hi s pr oper t y. See Mass.

Gen. Laws ch. 79, 8A. He was awar ded $420, 000 as damages f or

under compensat i on on J ul y 6, 2010. Bot h t he gover nment 1 and Ri t a

S. Manni ng, a l ower - pr i or i t y credi t or who had obt ai ned a j udgment

agai nst Hannon, i nt er vened i n t hi s l and damages sui t and assert ed

pr i or i t y t o r ecei ve t he damages award. The gover nment r emoved t he

1 Al t hough t he I RS i ssued t he Di schar ge Cer t i f i cat e at i ssuei n t hi s case, t he f eder al gover nment , not t he I RS, i nt er vened i nHannon' s l and damages sui t because t he I RS hol ds t ax l i ens " i nf avor of t he Uni t ed St at es. " 26 U. S. C. 6321.

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case t o f ederal cour t , and bot h t he gover nment and Manni ng moved

f or summary j udgment on t he quest i on of whose l i en had pr i or i t y.

The di st r i ct cour t enter ed summar y j udgment i n f avor of Manni ng,

hol di ng t hat t he I RS' s deci si on t o di schar ge 20 Roger s St r eet f r om

f eder al t ax l i ens i n exchange f or payment f r om t he t aki ng al so

meant t he government had r el i nqui shed any t ax l i en on t he l at er

damages awar d.

Ther e i s no di sput e t hat bef or e t he t aki ng and t he f i l i ng

of t he I RS Cer t i f i cat e, Manni ng' s j udgment l i en was j uni or t o the

gover nment ' s t ax l i en. The quest i on of l aw bef or e us i s whet her

t he I RS Cer t i f i cat e i ssued under 6325( b) ( 2) ( A) , r ead i n l i ght of

6325( b) ( 3) , r el eased or abandoned any cl ai ms t he I RS had on t he

post - t aki ng pr oceeds awarded t o t he t axpayer under Mass. Gen. Laws

ch. 79, 8A. We hol d t he I RS l i en on t hose post - t aki ng pr oceeds

i s val i d and so seni or . As a r esul t , we r ever se and di r ect t he

di st r i ct cour t t o ent er summary j udgment i n t he gover nment ' s f avor .

I .

A. The Di scharge of the Real Proper t y at 20 Rogers St r eetf r om Feder al Tax Li ens

On August 23, 2002, Hannon purchased a 1. 5 acr e

beachf r ont r esi dence l ocat ed at 20 Roger s St r eet i n Newt on,

Massachuset t s f or $3, 000, 000. That same day, Mer r i l l Lynch Cr edi t

Corp. r ecorded i t s pur chase money mor t gage i n t he amount of

$1, 950, 000 agai nst t he pr oper t y.

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Meanwhi l e, Hannon never pai d hi s f ederal i ncome t ax and

ot her f eder al t axes assessed agai nst hi mf or t he year s 1999, 2000,

and 2001, even af t er t he I RS had i ssued a not i ce and demand f or

payment of t hose t axes. Due t o t hi s out st andi ng t ax l i abi l i t y, t he

I RS r ecor ded not i ces i n Febr uar y 2003 of f eder al t ax l i ens agai nst

Hannon' s r eal pr oper t y i n t he Mi ddl esex Count y Regi st r y of Deeds

f or t axes owed f r om year s 1999 t o 2001, t ot al i ng $5, 447, 154. See

Mass. Gen. Laws ch. 36, 24 ( "Not i ce of a f eder al t ax

l i en . . . on any r eal pr oper t y or f i xt ur es shal l be f i l ed wi t h t he

r egi st er of deeds of t he count y i n whi ch such r eal pr oper t y or

f i xt ur es ar e si t uat ed. " ) . Hannon' s Newt on, Massachuset t s pr oper t y

i s l ocat ed i n Mi ddl esex Count y.

The I RS al so r ecor ded not i ces, i n l at e J anuar y and ear l y

Febr uar y 2003, of f eder al t ax l i ens agai nst Hannon' s per sonal

pr oper t y f or t he same amount i n t he Di st r i ct Cour t f or t he Di st r i ct

of Massachuset t s. 2

About t wo year s l at er , on March 17, 2005, Manni ng

obt ai ned a j udgment agai nst Hannon i n t he amount of $103, 333. 33.

On J une 9, 2005, she obt ai ned an execut i on f or t hat amount agai nst

Hannon' s " goods, chat t el s or l and, " whi ch she r ecor ded at t he

2 The I nt er nal Revenue Code di r ect s t he I RS t o f i l e not i cesof f eder al t ax l i ens agai nst per sonal pr oper t y i n t he Di st r i ctCour t f or t he j udi ci al di st r i ct i n whi ch t he per sonal pr oper t y i sl ocat ed whenever st at e l aw has not desi gnat ed a di f f er ent f i l i ngf orum, as i s t he case i n Massachuset t s. See 26 U. S. C. 6323( f ) ( 1) ( B) .

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Mi ddl esex Regi st r y of Deeds on J une 28, 2005. The I RS l i ens wer e

obvi ousl y recor ded f i r st .

I n 2007, Newt on sought t o t ake Hannon' s beachf r ont

proper t y on 20 Rogers St r eet by emi nent domai n. Newt on i ntended t o

f i x an unst abl e r et ai ni ng wal l on t he pr oper t y t hat abut t ed

Newt on' s publ i c beach ar ea and t hat posed a publ i c saf et y r i sk t o

swi mmers. As a r esul t , on March 26, 2007, Newt on submi t t ed an

appl i cat i on t o t he I RS t o di schar ge 20 Roger s St r eet f r om t he

f eder al t ax l i ens. Newt on i nf or med t he I RS t hat i t was wai t i ng f or

t he I RS t o appr ove the di scharge bef ore Newt on' s Boar d of Al dermen

convened f or a f i nal vot e on t he dr af t or der of t aki ng.

Newt on' s appl i cat i on f or a di schar ge cer t i f i cat e compl i ed

wi t h t he I RS r equi r ement s t hat i t : a) descr i be t he pr oper t y f r om

whi ch i t sought t o r emove t he f eder al t ax l i en; b) pr ovi de t he

addr ess of t he r eal pr oper t y; c) i dent i f y t he basi s f or t he

di schar ge under 26 U. S. C. 6325; and d) submi t a pr of essi onal

appr ai sal of t he pr oper t y compl et ed by a di si nt er est ed t hi r d

par t y. 3 See I RS Form14135 ( J une 2010) . The appr ai sal t hat Newt on

submi t t ed val ued t he pr oper t y at $2. 3 mi l l i on.

The I RS knew t hat Hannon bel i eved t hat hi s proper t y was

wor t h more t han Newt on' s $2. 3 mi l l i on est i mat e and t hat Newt on had

a budget l i mi t of $2. 3 mi l l i on t o acqui r e t hat proper t y. Under

3 The appl i cat i on f or m sol i ci t s di f f er ent i nf or mat i on f r omt he appl i cant dependi ng on t he subsect i on of 6325 t hat f orms t hebasi s of t he appl i cat i on.

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Massachuset t s l aw, a ci t y i s aut hor i zed t o t ake pr i vat el y owned

"r eal est at e or any i nt er est t her ei n" by emi nent domai n. Mass.

Gen. Laws ch. 79, 1, 2; Li choul as v. Ci t y of Lowel l , 937 N. E. 2d

65, 69- 70 ( Mass. App. Ct . 2010) . Upon r ecordi ng an order of

t aki ng, t he ci t y acqui r es t i t l e t o t he pr oper t y desi gnat ed i n t hat

order , and a r i ght t o damages vest s i n t he f ormer owner of t he

pr oper t y t aken. See Mass. Gen. Laws ch. 79, 3. As a r esul t , t he

ci t y i s r equi r ed t o pay a "r easonabl e amount " f or t he condemned

pr opert y. See i d. 8A. Thi s amount can be accept ed by t he owner

as ei t her a set t l ement f or al l damages owed f or t he t aki ng or

mer el y as a "payment pr o t ant o, " whi ch pr eserves t he r i ght " t o

cl ai m a l ar ger sum by pr oceedi ng bef or e an appr opr i at e t r i bunal "

f or an assessment of damages wi t hi n t hr ee year s of t he t aki ng. I d.

8A, 16. Hannon t ook t he $2. 3 mi l l i on sum as a payment pr o

t ant o.

To f aci l i t at e t he t aki ng as Newt on r equest ed, t he I RS

appr oved t he di schar ge of 20 Roger s St r eet f r om f eder al t ax l i ens

on May 4, 2007, wel l aware t hat t he proper t y mi ght be wor t h more

t han t he $2. 3 mi l l i on t hat Newt on was abl e t o pay f or i t , and t hat

t her e coul d be a post - t aki ng cl ai m by Hannon f or a l ar ger sum.

Accor di ng t o t he I RS' s not es f r om Apr i l 2007, t he I RS i ssued t he

Di schar ge Cer t i f i cat e because i t bel i eved i t s t ax l i ens woul d

f ol l ow any pr oceeds t hat Hannon woul d obt ai n i f he successf ul l y

sued Newt on f or addi t i onal damages.

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The Cer t i f i cat e of Di schar ge, cont ai ned i n r el evant par t

i n t he Appendi x, di schar ged 20 Roger s St r eet , " [ a] cer t ai n par cel

of l and mor e f ul l y descr i bed at t he Regi st r y of Deeds, " f r om

f eder al t ax l i ens whi l e "savi ng and r eser vi ng, however , t he f or ce

and ef f ect of sai d t ax l i en[ s] agai nst and upon al l ot her pr oper t y

or r i ght s t o pr oper t y t o whi ch sai d l i en[ s] [ ar e] at t ached,

wher esoever s i t uated. " The di schar ge was i ssued pur suant t o 26

U. S. C. 6325( b) ( 2) ( A) , whi ch per mi t s t he Secr et ar y of Tr easur y to

i ssue a cer t i f i cat e of di schar ge wi t h r espect t o a cer t ai n pr oper t y

i f :

t her e i s pai d over t o t he Secret ar y i n par t i alsat i sf acti on of t he l i abi l i t y secur ed by t hel i en an amount det ermi ned by t he Secretary,whi ch shal l not be l ess t han t he val ue, asdet er mi ned by t he Secr et ar y, of t he i nt er estof t he Uni t ed St at es i n t he [ pr oper t y] t o beso di schar ged[ . ]

26 U. S. C. 6325( b) ( 2) ( A) . The sum t he I RS obt ai ned f r om t he

emi nent domai n pr oceedi ng was onl y i n par t i al sat i sf act i on of t he

t ot al t ax l i en.

The I RS cal cul at ed t hat i t woul d get onl y $57, 214. 55 f r om

t he i ni t i al $2. 3 mi l l i on pr o t ant o payment af t er Mer r i l l Lynch, a

seni or secur ed credi t or , was pai d i n f ul l , and so t he Cer t i f i cat e

di scharged 20 Rogers St r eet i n exchange f or a payment of t hat sum.

As i t t ur ned out , on May 11, 2007, Newt on pai d t he I RS $60, 692. 83

- - mor e t han t he $57, 214. 55 l i st ed i n t he Di schar ge Cer t i f i cat e - -

because Mer r i l l Lynch' s out st andi ng mor t gage bal ance was l ess t han

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expect ed. Thi s al l ocat i on accor ded wi t h t he I RS' s bel i ef t hat i t

was ent i t l ed t o al l "r emai ni ng f unds by vi r t ue of i t s [ f eder al t ax

l i ens] " af t er payment of t he seni or mor t gage, r egar dl ess of t he

speci f i c amount l i st ed i n t he Di schar ge Cer t i f i cat e.

Newt on i ssued i t s or der of t aki ng on May 7, 2007, by

whi ch i t acqui r ed 20 Rogers St r eet by emi nent domai n i n exchange

f or a $2. 3 mi l l i on damages award. The I RS l ater r ecorded t he

Di schar ge Cer t i f i cat e i n t he Mi ddl esex Count y Regi st r y of Deeds on

J ul y 17, 2007. The Cer t i f i cat e was expl i ci t t hat i t appl i ed onl y

t o real pr oper t y l ocat ed at 20 Roger s St r eet , so t he I RS di d not

r ecor d t he Cer t i f i cat e of Di schar ge i n t he Di st r i ct of

Massachuset t s Di st r i ct Cour t , wher e i t must f i l e t ax l i en not i ces

f or per sonal pr oper t y.

B. Pr ocedur al Hi st or y

On November 10, 2008, a l i t t l e over a year af t er t he

t aki ng, Hannon sued Newt on i n Mi ddl esex Count y Super i or Cour t ,

asser t i ng t hat t he damages award was i nadequat e compensat i on f or

t he t aki ng of 20 Roger s St r eet . See Mass. Gen. Laws. ch. 79,

8A, 16. Manni ng i nt ervened i n t hi s l and damages sui t on May 14,

2010, and t he I RS ser ved a not i ce of l evy t o at t ach t o any j udgment

agai nst Newt on on May 19, 2010.

On J ul y 6, 2010, t he Super i or Cour t ent er ed j udgment i n

f avor of Hannon, awar di ng hi m $420, 000 i n damages f or

undercompensat i on and $31, 245. 72 i n i nt erest . On Oct ober 4, 2010,

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Newt on pai d $451, 649. 82 i nt o the regi st r y of t he cour t , and

$151, 761. 73 of t he i nt erpl eaded f unds were pai d t o Hannon' s counsel

wi t h t he consent of al l par t i es, l eavi ng $299, 888. 09 t o be

di str i but ed.

The gover nment moved t o i nt er vene i n t hi s post - t aki ng

under compensat i on sui t on December 3, 2010. The Super i or Cour t

grant ed t he government ' s mot i on on December 7, 2010, based on t he

f eder al t ax l i ens, and t he gover nment l ater r emoved t he case t o

f eder al cour t . As of November 1, 2010, Hannon' s out st andi ng t ax

l i abi l i t y t ot al ed $7, 307, 687. Onl y t he gover nment and Manni ng

t i mel y assert ed an i nt erest i n t hese undercompensat i on damages, and

t he government moved f or summary j udgment , asser t i ng t hat i t s t ax

l i ens had pr i or i t y over Manni ng' s j udgment l i en and t hat t he

Di schar ge Cer t i f i cat e onl y appl i ed t o r eal pr oper t y l ocat ed at 20

Rogers St r eet and not t o any addi t i onal damages r ecover ed by

Hannon. Manni ng opposed t he mot i on and cr oss- moved f or summar y

j udgment .

I n an Oct ober 24, 2011 memorandumand order , t he di st r i ct

cour t gr ant ed summary j udgment i n f avor of Manni ng. The di st r i ct

cour t , i n a t heor y i t advanced sua spont e, hel d t hat by pr oceedi ng

under 26 U. S. C. 6325( b) ( 2) ( A) , t he I RS had di schar ged t he

gover nment ' s l i en on any pr oceeds f r om t he t aki ng ot her t han

$57, 214. 55, t he amount l i st ed i n t he Di schar ge Cer t i f i cat e as t he

val ue of i t s i nt er est i n 20 Roger s St r eet . Hannon, 820 F. Supp. 2d

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at 258, 261. I t r easoned t he government had t o el ect bet ween

6325( b) ( 2) ( A) and 6325( b) ( 3) , and by opt i ng f or t he f or mer had

r el i nqui shed i t s r i ght t o any under compensat i on damages. The

gover nment ' s f ai l ur e to compl y wi t h t he 6325( b) ( 3) pr ocedur e, t he

di st r i ct cour t r easoned, sur r ender ed t he pr i or i t y of i t s t ax l i ens

t o the addi t i onal damages pai d t o the t axpayer i n hi s post - t aki ng

sui t . I d. at 257- 58.

The di st r i ct cour t al so not ed t hat Massachuset t s' s

emi nent domai n l aw t r eat s t he r i ght t o sue f or damages, and any

awar d r esul t i ng f r om t hat sui t , as a subst i t ut e f or and

r epr esent at i on of t he l and t hat was t aken. Manni ng had pr i or i t y

because t he I RS had di schar ged i t s l i en on t he l and, wher eas

Manni ng had not . I d. at 259- 61. As a r esul t , t he di st r i ct cour t

i ssued a j udgment awar di ng Manni ng $103, 333. 33, t he amount of her

j udgment l i en, out of t he undercompensat i on damages wi t h t he

r emai nder di st r i but ed t o t he gover nment "as an unsecur ed cr edi t or . "

I d. at 261.

On November 21, 2011, t he government moved f or

r econsi der at i on, ar gui ng: ( 1) t hat i t s f eder al t ax l i ens at t ached

t o Hannon' s undercompensat i on damages regardl ess of i t s di scharge

of 20 Roger s St r eet under 26 U. S. C. 6325( b) ( 2) ( A) ; and ( 2) t hat

t he di st r i ct cour t had mi si nt er pr et ed 26 U. S. C. 6325( b) ( 3) . The

di st r i ct cour t deni ed t hi s mot i on on Sept ember 24, 2012. I t agr eed

wi t h t he gover nment t hat t he f easi bi l i t y of a di schar ge pur suant t o

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6325( b) ( 3) was doubt f ul i n t hi s case. Hannon v. Ci t y of Newt on,

No. 11- 10021- DPW, 2012 WL 4390527, at *6 ( D. Mass. Sept . 24, 2012) .

However , t he cour t expl ai ned t hat t hi s di d not al t er i t s concl usi on

t hat 6325( b) ( 3) means t hat use of 6325( b) ( 2) ( A) i mpl i ci t l y

di schar ges any l i en on post - t aki ng pr oceeds. I d. at *5- *6. I t

al so reasoned t he I RS coul d have chosen t o do not hi ng at al l i n t he

emi nent domai n pr oceedi ngs t o pr eser ve i t s r i ght s. I d. at *6.

The gover nment t i mel y appeal ed.

I I .

Thi s cour t r evi ews a grant of summar y j udgment de novo.

Col on v. Tr acey, 717 F. 3d 43, 49 ( 1st Ci r . 2013) . Nei t her par t y

poi nt s t o any di sput ed f act s. Fur t her , t he i ssues her e i nvol ve

st at ut or y i nt er pr et at i on quest i ons, subj ect t o de novo r evi ew. See

Uni t ed St at es v. St r ong, 724 F. 3d 51, 55 ( 1st Ci r . 2013) .

A. Scope of t he Di schar ge of Pr oper t y f r omFeder al Tax Li ensUnder 6325( b) ( 2) ( A)

Under f eder al l aw, i f a per son, such as Hannon, f ai l s t o

pay f eder al t axes despi t e a demand f or payment , t ax l i ens " i n f avor

of t he Uni t ed St at es" aut omat i cal l y at t ach t o al l of t hat per son' s

"pr oper t y and r i ght s t o pr oper t y, whet her r eal or per sonal . " 26

U. S. C. 6321. We emphasi ze t he l i en i s not onl y at t ached t o

pr oper t y, but al so t o "r i ght s t o pr oper t y, whet her r eal or

per sonal . " I d. "St r onger l anguage coul d har dl y have been sel ect ed

t o r eveal a pur pose t o assur e t he col l ect i on of t axes. " Gl ass Ci t y

Bank of J eanet t e, Pa. v. Uni t ed St at es, 326 U. S. 265, 267 ( 1945) .

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As a r esul t , f eder al t ax l i ens at t ach t o pr oper t y acqui r ed by t he

del i nquent t axpayer at " any t i me dur i ng t he l i f e of t he l i en. " I d.

at 268; see al so 26 U. S. C. 6322 ( " [ T] he l i en i mposed by [ ] 6321

shal l ar i se at t he t i me t he assessment [ f or t axes] i s made and

shal l cont i nue unt i l t he l i abi l i t y f or t he amount so assessed

. . . i s sat i sf i ed or becomes unenf or ceabl e by r eason of l apse of

t i me. ") .

Ami dst t hi s backdr op, 6325( b) gr ant s t he I RS di scr et i on

t o di schar ge speci f i c pr oper t y f r omf eder al t ax l i ens under cer t ai n

ci r cumst ances. See 26 U. S. C. 6325( b) ; 26 C. F. R. 301. 6325- 1( b) .

Most di schar ges occur t o f aci l i t at e t he t r ansf er of encumber ed

pr oper t y. The I RS' s appl i cat i on pr ocess f or di schar ges r ef l ect s

t hi s r eal i t y.

For exampl e, t he appl i cat i on f or m al l ows ei t her t he

del i nquent t axpayer or t he pur chaser / t r ansf er ee of t he taxpayer ' s

pr oper t y t o appl y f or a di schar ge cer t i f i cat e. Appl i cant s must

descr i be "how and when t he t axpayer wi l l be di vest ed of hi s/ her

i nt er est i n t he pr oper t y" and at t ach t he sal es cont r act and

pr oposed cl osi ng st at ement , i f possi bl e. I RS For m 14135 ( J une

2010) . As a r esul t , and consi st ent wi t h t he br oad l anguage of

6321, t he pur pose of al most ever y di schar ge i s t o car ve out of

t he t ax l i en onl y t he speci f i c pr oper t y or par t of pr oper t y whi ch

a del i nquent t axpayer wi l l no l onger own i n exchange f or payment of

t hat i nt er est whi ch i s di schar ged.

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To t hat end, 6325( b) ( 2) provi des i n r el evant par t :

Subj ect t o such r egul at i ons as t he Secr et ar y[ of Treasur y] may pr escr i be, t he Secr et ary mayi ssue a cer t i f i cat e of di schar ge of any par tof t he pr oper t y subj ect t o t he l i en i f - -

( A) t her e i s pai d over t o t heSecr et ar y i n p a r t i a lsat i s fact i on of t he l i abi l i t ysecur ed by t he l i en an amountdet ermi ned by t he Secretary,whi ch shal l not be l ess t han t heval ue, as det er mi ned by t heSecret ar y, of t he i nt er est oft he Uni t ed St at es i n t he par t t obe so di schar ged . . . .

I n det er mi ni ng t he val ue of t hei nt er est of t he Uni t ed St at es i nt he part t o be so di schar ged,t he Secret ar y shal l gi veconsi der at i on t o the val ue ofsuch par t and t o such l i enst her eon as have pr i or i t y overt he l i en of t he Uni t ed St at es.

26 U. S. C. 6325( b) ( 2) ( A) ( emphases added) .

A f undament al pur pose of 6325( b) ( 2) ( A) i s t o gi ve cl ear

t i t l e t o t he pur chaser . Not hi ng i n 6325( b) ( 2) ( A) pur por t s t o

di schar ge any pr oper t y ot her t han t he speci f i c pr oper t y or por t i on

of a pr oper t y t hat i s di schar ged f r om t ax l i ens i n a di schar ge

cer t i f i cat e. A pr oper l y r ecor ded cer t i f i cat e of di schar ge i ssued

pur suant t o any subsect i on of 6325( b) i s " concl usi ve t hat t he

pr oper t y cover ed by such cer t i f i cat e i s di schar ged f r om t he [ t ax]

l i en. " I d. 6325( f ) ( 1) ( B) . Thi s makes cl ear that t he par t i cul ar

subsect i on of 6325( b) t hat aut hor i zes t he di schar ge does not

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oper at e t o def i ne t hat di schar ge. Rat her , t he l anguage of t he

cert i f i cat e cont rol s .

Her e, t he Di schar ge Cer t i f i cat e was pr eci se and

di schar ged onl y 20 Roger s St r eet , Newt on, Massachuset t s, def i ned as

"[ a] cer t ai n par cel of l and mor e f ul l y descr i bed at t he Regi st r y of

Deeds, Sout hern Mi ddl esex, St at e of Massachuset t s i n Book 36209,

Page 167. " Of t he "bundl e of st i cks" or col l ect i on of r i ght s t hat

compr i sed Hannon' s ownershi p of 20 Rogers St r eet , see Uni t ed Stat es

v. Cr af t , 535 U. S. 274, 278- 79 ( 2002) , t he Cer t i f i cat e di schar ged

onl y a speci f i c pi ece of r eal pr oper t y t hat Hannon was par t i ng wi t h

and Newt on was t aki ng. I t di d not di schar ge t he ot her st i cks t hat

made up Hannon' s ownershi p i nt erest i n 20 Rogers St r eet , such as

hi s cont i ngent r i ght s t o pr oper t y i f t hat par cel of l and was t aken

by emi nent domai n; t hese i ncl uded t he ri ght t o recei ve an i ni t i al

damages award, whi ch accr ued af t er t he parcel of l and was t aken by

emi nent domai n, and t he r i ght t o sue f or more damages i f Hannon

deemed t he i ni t i al award i nadequat e. Were t here any doubt as t o

t he l i mi t ed scope of t he di schar ge, t he Cer t i f i cat e saved and

r eser ved t he "f or ce and ef f ect of [ sai d] t ax l i en[ s] agai nst and

upon al l ot her pr oper t y or r i ght s t o pr oper t y t o whi ch sai d l i en i s

at t ached, wher esoever si t uated. " ( emphasi s added) .

Nor was t he scope of t he di schar ge l i mi t ed her e by

6325( b) ( 2) ( A) ' s i nst r uct i on t hat t he I RS r ecei ve a payment wor t h

"not . . . l ess t han t he val ue . . . of [ i t s] i nt erest" i n t he

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pr oper t y di schar ged. That i nst r uct i on const i t ut es a pr econdi t i on

t o t he I RS' s exer ci se of di scret i on t o i ssue a di schar ge

cer t i f i cat e. I t di r ects t he I RS not t o di schar ge pr oper t y f or l ess

t han what i t cal cul at es as t he val ue of i t s i nt er est i n t hat

pr oper t y. I t does not modi f y t he scope of t he di schar ge beyond

what i s expr essl y i ncl uded i n t he Cer t i f i cat e. 4 Nor does i t

pr event t he gover nment ' s l i ens f r omat t achi ng t o any sur pl us i n t he

i ni t i al pr o t ant o payment , and t he gover nment enf or ced i t s l i ens on

t hat payment when i t r ecei ved $60, 692. 83, an amount t hat exceeded

t he speci f i ed 6325( b) ( 2) ( A) payment of $57, 214. 55. I n shor t ,

6325( b) ( 2) ( A) i s ent i r el y consi st ent wi t h t he gover nment ' s

act i ons her e and f ul l y aut hor i zed t hem.

Manni ng' s ar gument i s t hat a di f f er ent subsect i on,

6325( b) ( 3) , must be read wi t h 6325( b) ( 2) ( A) and that i t i mposes

l i mi t s on what may be di schar ged under 6325( b) ( 2) ( A) . Sect i on

6325( b) ( 3) st at es:

Subj ect t o such r egul at i ons as t he Secr et ar ymay pr escr i be, t he Secret ary may i ssue acer t i f i cat e of di schar ge of any par t of t hepr oper t y subj ect t o t he l i en i f such par t oft he pr oper t y i s sol d and, pur suant t o anagr eement wi t h t he Secretary, t he pr oceeds ofsuch sal e ar e t o be hel d, as a f und subj ect t ot he l i ens and cl ai ms of t he Uni t ed St at es, i nt he same manner and wi t h t he same pr i or i t y as

such l i ens and cl ai ms had wi t h r espect t o thedi schar ged pr oper t y.

4 Sect i on 6325( b) ( 2) ( A) does not addr ess what happens i ncases wher e t he I RS has accept ed l ess t han i t s i nt er est i n t hepr oper t y at t he t i me of di schar ge due t o f r aud.

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26 U. S. C. 6325( b) ( 3) . Manni ng argues t hat because 6325( b) ( 3)

expr essl y ar t i cul at es a way t o di schar ge pr oper t y whi l e mai nt ai ni ng

an i nt er est i n t he pr oceeds f r omt he sal e of t hat pr oper t y, wher eas

6325( b) ( 2) ( A) r equi r es t he gover nment t o r ecei ve a speci f i ed

payment i n exchange f or t he di schar ge, 6325( b) ( 2) ( A) i mpl i ci t l y

ext i ngui shes t he gover nment ' s l i en on any pr oceeds t hat exceed that

payment . Thi s argument mi sconst r ues t he r el at i onshi p between

subsect i ons ( b) ( 3) and ( b) ( 2) ( A) . Bot h t he pl ai n l anguage of t he

st at ut e and t he l egi sl at i ve hi st or y of t hese sect i ons make cl ear

t he ar gument i s wr ong. I n f act , 6325( b) ( 3) addr esses a di f f er ent

pr obl em, not pr esent her e, and does not af f ect t he oper at i on of

6325( b) ( 2) ( A) on t hese f act s. Rat her , subsect i on ( b) ( 3) appl i es

t o al l ow t he r esol ut i on of di sput es wher e t he pr i or i t y of t he I RS

l i ens i s di sput ed bef or e t r ansf er of t he pr oper t y f r om t he

t axpayer . That i s not t hi s si t uat i on.

To begi n, i nt er pret i ng 6325( b) ( 2) ( A) i n l i ght of

6325( b) ( 3) i s a dubi ous under t aki ng because Congr ess enacted

6325( b) ( 3) i n 1966, l ong af t er 6325( b) ( 2) ( A) was adopt ed, 5 i n

or der t o addr ess a speci f i c si t uat i on. At t hat t i me, Congr ess

not ed t hat a pr edecessor ver si on of 6325( b) ( 2) ( A) exi st ed under

whi ch t he I RS coul d di schar ge pr oper t y i f i t i s pai d t he val ue of

t he gover nment ' s i nt er est i n t hat pr oper t y. Feder al Tax Li en Act

5 The si mi l ar l y worded pr edecessor t o 6325( b) ( 2) ( A) wasenact ed as Sect i on 509 of t he Revenue Act of 1934, ch. 277, 48St at . 680, 757- 58.

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of 1966, H. R. Rep. No. 89- 1884 ( 1966) . However , no pr ocedur e t hen

exi st ed t o f aci l i t at e t he t r ansf er of encumber ed pr oper t y wher e

l i enor s of t hat pr oper t y di sput ed t he pr i or i t y of t hei r l i ens. So,

Congr ess enact ed subsect i on ( b) ( 3) as a "new pr ocedur e [ t o] ai d i n

t he di sposi t i on of pr oper t y wher e a di sput e exi st s among compet i ng

l i enor s, i ncl udi ng t he Uni t ed St at es, concer ni ng t hei r r i ght s t o

speci f i c pr oper t y. " I d. I n t hi s way, 6325( b) ( 3) enabl es a sal e

of encumber ed pr oper t y wi t hout t he i mmedi ate di st r i but i on of t he

pr oceeds f r om t hat sal e t o l i enhol der s. I t al so ensur es t hat

f eder al t ax l i ens r emai n at t ached t o sal e pr oceeds whi l e a pr i or i t y

di sput e ensues even i f t he t axpayer l oses hi s i nt er est i n t hose

pr oceeds. Sect i on 7426( a) ( 3) , i n t ur n, coor di nat es wi t h

6325( b) ( 3) by al l owi ng compet i ng l i enor s t o sue t he Uni t ed St at es

t o resol ve pr i or i t y di sput es concer ni ng "proper t y [ t hat ] has been

sol d pur suant t o an agr eement descr i bed i n [ ] 6325( b) ( 3) . " 26

U. S. C. 7426( a) ( 3) .

On appeal , Manni ng adopt s t he di st r i ct cour t ' s

i nt er pr et at i on of 6325( b) ( 2) ( A) i n l i ght of 6325( b) ( 3) . The

di st r i ct cour t r easoned t hat because 6325( b) ( 3) set s f or t h a

speci f i c mechani sm f or mai nt ai ni ng l i ens on pr oceeds f r omt he sal e

of di schar ged pr oper t y, t he gover nment ' s f ai l ur e t o use t hat

mechani sm sur r ender ed i t s l i ens on pr oceeds r esul t i ng f r om t he

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post - t aki ng sui t f or under compensat i on i n t hi s case. 6 Hannon, 820

F. Supp. 2d. at 257- 58. I n ot her wor ds, t he di st r i ct cour t r ead

subsect i on ( b) ( 3) as i mpl i ci t l y l i mi t i ng t he gover nment ' s power

under subsect i on ( b) ( 2) . Thi s mi sappr ehends t he congr essi onal

pur pose behi nd 6325( b) ( 3) .

I t was an er r or of l aw t o i nt er pr et subsect i on ( b) ( 3) as

pr ovi di ng the excl usi ve means f or mai nt ai ni ng l i ens on t he pr oceeds

of post - t aki ng compensat i on pr oceedi ngs. Sect i on 6325( b) ( 3) ( i n

concer t wi t h 7426( a) ( 3) ) does no more t han cr eate a usef ul

pr ocedur e t o f aci l i t at e t he sal e of encumber ed pr oper t y when ther e

i s a di sput e as t o t he pr i or i t y of f eder al t ax l i ens. Rat her t han

del ay t he sal e ( and r i sk l osi ng i t ) dur i ng t he t i me i t t akes t o

r esol ve pr i or i t y di sput es, 6325( b) ( 3) and 7426( a) ( 3) gi ve

l i enor s t he opt i on t o move t hei r di sput e t o the pr oceeds of t he

sal e and r esol ve i t t hr ough l i t i gat i on i f need be. Wher e, as i n

t hi s case, t her e was no pr i or i t y di sput e when t he I RS di schar ged 20

6 The di str i ct cour t r el i ed on t hr ee out - of - ci r cui t di str i ctcour t deci si ons i t f ound per suasi ve i n i nt er pr et i ng 6325( b) ( 2) ( a) . See Hannon, 2012 WL 4390527, at *6- *7; Hannon,820 F. Supp. 2d. at 257- 58. None of t hese cases i nvol ved t het aki ng of pr oper t y by emi nent domai n. See Est at e of Frazi er v.

Di st . Di r . , I RS, No. 1: 91- CV- 1877- J TC, 1992 WL 472026 ( N. D. Ga.Oct . 14, 1992) ; I n r e Mi l l er , 98 B. R. 110 ( Bankr . N. D. Ga. 1989) ;Uni t ed St at es v. Hol t zcl aw, Ci vi l No. S- 84- 403 MLS, 1988 U. S. Di st .LEXI S 16355 ( E. D. Cal . Dec. 12, 1988) . To t he ext ent t hey supportt he di st r i ct cour t ' s i nt er pr et at i on of 6325( b) ( 2) ( A) , we di sagr eewi t h t hei r r easoni ng on t hi s i ssue of l aw f or t he same r easons wer ej ect t he di str i ct cour t ' s st at ut or y i nt er pr et at i on.

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Roger s St r eet , use of 6325( b) ( 3) was not compul sor y t o accompl i sh

t he di schar ge. Nor was i t pr act i cabl e. 7

Manni ng does not and cannot di sput e t hat bef ore t he I RS

had di schar ged 20 Roger s St r eet f r om a por t i on of t he f eder al t ax

l i ens, t he I RS' s f eder al t ax l i ens of over $4 mi l l i on had pr i or i t y

over Manni ng' s j udgment l i en. I n t hi s case, t he I RS had pr oper l y

f i l ed i t s not i ces of f eder al t ax l i ens agai nst Hannon' s r eal and

per sonal pr oper t y, i n compl i ance wi t h bot h f eder al and

Massachuset t s l aw, by Febr uar y 2003. 8 Manni ng di d not f i l e her

j udgment l i en i n t he Mi ddl esex Count y Regi st r y of Deeds unt i l J une

28, 2005, cl ear l y maki ng her i nt er est j uni or t o t he f eder al t ax

l i ens .

7 The I RS can uni l ater al l y i mpl ement a 6325( b) ( 2)di schar ge. By cont r ast , 6325( b) ( 3) r equi r es t he I RS and

compet i ng l i enor s t o agr ee i n wr i t i ng t o hol d t he pr oceeds f r om asal e of encumbered pr oper t y i n escr ow. See 26 U. S. C. 6325( b) ( 3) ;26 C. F. R. 301. 6325- 1( b) ( 3) ; Di schar ge I nst r uct i ons, I RS Pub. 783( J une 2010) . Absent a pr i or i t y di sput e, Mer r i l l Lynch, whi ch waspai d i n f ul l out of t he i ni t i al payment pr o t ant o, had no i ncent i vet o agr ee t o t i e up t he pr oceeds f r om t he emi nent domai n t aki ng i nescr ow. Nor di d t he I RS.

8 Feder al l aw det er mi nes the pr i or i t y t hat f eder al t ax l i enshave agai nst compet i ng l i ens on a t axpayer ' s pr oper t y. SeeAqui l i no v. Uni t ed St at es, 363 U. S. 509, 513- 14 ( 1960) . A f eder alt ax l i en i s not val i d agai nst ot her l i enhol der s, i ncl udi ng j udgment

l i en credi t or s such as Manni ng, unt i l a not i ce of f eder al t ax l i enhas been f i l ed i n t he appr opr i at e f or um. 26 U. S. C. 6323( a) , ( f ) .St at e l aw desi gnat es t he appr opr i at e f or um. See i d. 6323( f ) ( 1) ( A) . I f st at e l aw i s si l ent as t o t he appr opr i at ef or um, f eder al l aw desi gnat es a def aul t f or um wher e t he I RS canf i l e not i ce t o asser t t he pr i or i t y of i t s t ax l i en. See i d. 6323( f ) ( B) .

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Supr eme Cour t case l aw est abl i shes t hat i n thi s case,

where t he government ' s f ederal t ax l i ens were i mposed and recor ded

bef ore Manni ng had r ecor ded her j udgment l i en agai nst Hannon, t he

gover nment ' s l i ens r et ai n t hei r pr eexi st i ng pr i or i t y to any

pr oper t y t hat Hannon l at er acqui r es, i ncl udi ng t he $420, 000 i n

under compensat i on damages he r ecei ved i n J ul y 2010. See Uni t ed

St ates v. McDer mot t , 507 U. S. 447, 455 (1993) ; Gl ass Ci t y Bank of

J eanet t e, Pa. , 326 U. S. at 268.

The unambi guous l anguage of t he Cer t i f i cat e and t he

st at ut e r esol ve t hi s case. The I RS coul d not have wai ved,

r el i nqui shed, or sur r ender ed i t s r emai ni ng t ax l i ens on May 4,

2007, when t he I RS i ssued t he Di schar ge Cer t i f i cat e i n t hi s case.

Newt on di d not t ake 20 Rogers St r eet by emi nent domai n unt i l t hr ee

days l at er on May 7, when i t i ssued an or der of t aki ng f or t hat

par cel of l and, and t he t axpayer ' s cause of act i on f or addi t i onal

compensat i on arose af t er May 7. See Mass. Gen. Laws ch. 79, 8A;

Tr uck Termi nal Real t y Co. v. Bos. Redev. Aut h. , 339 N. E. 2d 891, 891

( Mass. 1976) .

B. Massachuset t s Law of Equi t abl e Convers i on Does NotRemove t he Gover nment ' s Tax Li ens f r omAny Pr oper t y thatWas Not Expr essl y Di schar ged i n a Di schar ge Cer t i f i cat e

Manni ng argues t hat t he I RS di schar ge encompassed

di schar ge of t he pr oceeds of a post - t aki ng under compensat i on sui t

under t he st at e l aw doct r i ne of equi t abl e conver si on. She st ar t s

wi t h t he pr oposi t i on t hat Massachuset t s l aw t r eats any damages

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awarded f or a taki ng by emi nent domai n as a subst i t ut e f or t he l and

t aken. See Cor nel l - Andr ews Smel t i ng Co. v. Bos. & P. R. Cor p. , 95

N. E. 887, 890 ( Mass. 1911) ( " [ C] ompensat i on pai d f or l and t aken by

t he exer ci se of t he power of emi nent domai n i n equi t y r epr esent s

t he l and and i s subj ect t o al l t he r i ght s of per sons who had r i ght s

i n t he l and . . . . ") . She cont ends thi s equi t abl e conver si on

doct r i ne means t he gover nment ' s di schar ge of 20 Roger s St r eet f r om

t ax l i ens al so gave up i t s i nt er est i n t he l at er awar d of post -

t aki ng damages. I n cont r ast , she ar gues her l i ens at t ached t o al l

of Hannon' s emi nent domai n damages pr eci sel y because she never

di schar ged her l i en on 20 Roger s St r eet , whi l e t he I RS di d. Thi s

argument i s wr ong on several grounds.

Fi r st , f eder al l aw, not Massachuset t s l aw, cont r ol s bot h

t he scope t he I RS di schar ge i n t hi s case and t he at t achment of

f eder al t ax l i ens t o Hannon' s pr oper t y and r i ght s t o pr oper t y.

Under cont r ol l i ng f eder al st at ut or y l aw, a l i en i n f avor of t he

gover nment at t aches t o "al l pr oper t y and r i ght s t o pr oper t y" hel d

by a del i nquent t axpayer . 26 U. S. C. 6321 ( emphasi s added) ; see

Uni t ed St ates v. Rodger s, 461 U. S. 677, 701 ( 1983) . Moreover , once

a f eder al t ax l i en i s i mposed ( and r ecor ded) , i t aut omat i cal l y

at t aches t o any pr oper t y t hat t he t axpayer l at er acqui r es, such as

Hannon' s post - t aki ng under compensat i on damages, wi t h t he same

pr i or i t y i t had over pr eexi st i ng j uni or cr edi t or s l i ke Manni ng.

See McDer mot t , 507 U. S. at 455.

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Second, a st at e l aw doct r i ne of equi t abl e conver si on,

whi ch mi ght def i ne t he r i ght s of st at e l aw cr edi t or s, does not

extend t he I RS' s di schar ge of r eal pr oper t y l ocat ed at 20 Roger s

St r eet t o Hannon' s post - t aki ng r i ght t o sue f or under compensat i on

damages. Sect i on 6321 gover ns whether Hannon' s r i ght t o sue f or

under compensat i on damages i s a "pr opert y or r i ght t o pr oper t y"

subj ect t o t he gover nment ' s f eder al t ax l i ens. For exampl e, i n

Dr ye v. Uni t ed St at es, 528 U. S. 49 ( 1999) , t he I RS had made

assessment s agai nst a t axpayer and so had val i d t ax l i ens agai nst

al l of hi s pr oper t y and pr oper t y r i ght s under 6321. I d. at 53.

Si x mont hs l at er , t he t axpayer ' s mot her di ed i nt est at e, and he

exer ci sed hi s r i ght under Ar kansas l aw t o di scl ai mhi s i nher i t ance.

Thi s di scl ai mer t r eat ed t he t axpayer as i f he had predeceased hi s

mot her , di r ect i ng hi s shar e of t he est at e t o hi s daught er , t he next

per son i n l i ne. As such, under Ar kansas l aw, t he t axpayer ' s

cr edi t or s coul d not r each t he di scl ai med pr oper t y. I d. The

Supr eme Cour t hel d that " t he di scl ai mer di d not def eat t he f eder al

t ax l i ens" because Ar kansas l aw had gi ven t he t axpayer a val uabl e

pr ot ect ed r i ght t o ei t her i nher i t hi s mot her ' s est at e or channel

t he i nher i t ance t o a cl ose r el at i ve. I d. at 52, 60. As a mat t er

of f eder al l aw, t hi s subst ant i ve st at e- del i neat ed r i ght was

suf f i ci ent t o count as a " r i ght t o pr oper t y" under 6321 t o whi ch

f eder al t ax l i ens at t ached. Cf . Uni t ed St at es v. Bess, 357 U. S.

51, 56- 60 ( 1958) ( hol di ng t hat del i nquent t axpayer ' s r i ght t o

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compel hi s i nsur er t o pay hi m cash sur r ender val ue of pol i cy

const i t ut ed " r i ght t o pr oper t y" under 6321 subj ect t o f eder al t ax

l i ens al t hough st at e l aw i nsul at ed t hat cash sur r ender val ue f r om

ot her credi t or s' l i ens) .

We l ook t o Massachuset t s l aw onl y f or t he pur pose of

det er mi ni ng t he nat ur e of t he subst ant i ve r i ght s i t gr ant s Hannon

as t o 20 Roger s St r eet . See Cr af t , 535 U. S. at 278- 79.

Massachuset t s st at ut or y l aw gi ves Hannon t he ri ght t o an i ni t i al

payment of a "r easonabl e amount " i f hi s l and i s t aken by emi nent

domai n, as wel l as a r i ght t o sue f or under compensat i on and r ecei ve

addi t i onal damages f or t he t aki ng. Mass. Gen. Laws ch. 79, 8A.

That ends t he st at e l aw i nqui r y under 6321.

As a mat t er of f ederal l aw, once Newt on t ook 20 Rogers

St r eet by emi nent domai n, Hannon' s r i ght t o sue f or and r ecei ve

under compensat i on damages f or t hat t aki ng qual i f i es as "proper t y"

or a "r i ght t o pr oper t y" t o whi ch f eder al t ax l i ens at t ach, and

Manni ng does not argue ot her wi se. Rather , she cl ai ms t hat

Massachuset t s' s equi t abl e conver si on doct r i ne t r ansf er r ed

cr edi t or s' l i ens on 20 Roger s St r eet t o Hannon' s post - t aki ng

undercompensat i on damages, such t hat onl y cr edi t ors t hat had

exi st i ng l i ens on 20 Roger s St r eet at t he t i me of t he t aki ng coul d

l at er cl ai m an i nt er est i n t hose damages. 9 However , 6321 does

9 Manni ng al so ar gues t hat t he gover nment ' s di schar ge of 20Rogers St r eet was unnecessary because under Massachuset t s l aw, "anemi nent domai n t aki ng i n f ee si mpl e ext i ngui shes al l ot her

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not put t he gover nment on par wi t h other cr edi t ors but i nst ead

r el at es t o t he t axpayer ' s i nt er est s, al l owi ng f eder al t ax l i ens t o

f ol l ow al l of t he t axpayer ' s st at e- def i ned pr oper t y r i ght s

r egar dl ess of st at e l aw r est r i ct i ons on ot her s seeki ng t o r each t he

same i nt erest s. See Uni t ed St ates v. Nat ' l Bank of Commer ce, 472

U. S. 713, 727 ( 1985) .

Fi nal l y, Manni ng' s argument mi sst at es t he rel evant st at e

l aw. She cl ai ms t hat due t o equi t abl e conver si on, Massachuset t s

l aw r ecogni zes onl y "one cont i nui ng i nt er est " i n r eal pr oper t y and

t he st atut ory r i ght t o sue and r ecei ve damages when t hat pr oper t y

i s t aken by emi nent domai n. However , i t i s Massachuset t s st atut ory

l aw t hat di vi ded Hannon' s pr oper t y i nt er est s i n 20 Roger s St r eet ,

r ecogni zi ng hi s r i ght , whi ch ar ose af t er t he t aki ng of t he l and, t o

r ecei ve and sue f or emi nent domai n damages as di st i nct f r om hi s

r i ght t o possess t he l and. See Mass. Gen. Laws ch. 79, 8A, 16. 10

i nt er est s i n t he pr oper t y. " New Eng. Cont ' l Medi a, I nc. v. Town ofMi l t on, 588 N. E. 2d 1382, 1384 ( Mass. App. Ct . 1992) . The cases onwhi ch Manni ng r el i es, however , i nvol ve onl y pr i vat e par t i es and sodo not i mpl i cat e f eder al t ax l aw.

The gover nment says t hi s ar gument i s bot h i r r el evant and r est son a quest i onabl e pr emi se t hat Newt on coul d have r emoved t hef eder al t ax l i ens wi t hout agr eement f r om t he gover nment . I t i sunset t l ed whet her Newt on mi ght have had t o br i ng a condemnat i onsui t agai nst t he Uni t ed St at es under 28 U. S. C. 2410( a) ( 4) t ocl ear t i t l e wi t hout t he act i ons t he I RS t ook. Thi s squar es wi t h

Newt on' s conduct i n thi s case: Newt on r equest ed t he di schar gecer t i f i cat e f r om t he I RS and post poned i t s vot e on t he f i nal dr af tor der of t he t aki ng unt i l t he I RS had appr oved t he di schar ge of 20Rogers St r eet . We need not deci de t he quest i on.

10 I n a f oot not e, Manni ng asser t s t hat t hi s cour t shoul ddi sr egar d ten pages of t he gover nment ' s br i ef because i t di d not

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I I I .

Accor di ngl y, we r ever se wi t h i nst r uct i ons t hat t he

di st r i ct cour t ent er summary j udgment i n t he government ' s f avor .

r ai se t hose ar gument s wi t h t he di st r i ct cour t . Her f ai l ur e t obr i ef t hi s i ssue wai ves i t . See Uni t ed St at es v. Zanni no, 895 F. 2d1, 17 ( 1st Ci r . 1990) .

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Appendi x

Cer t i f i cat e of Di schar ge:

Depart ment of t he Treasury- I nt er nal Revenue Ser vi ceCERTI FI CATE OF DI SCHARGE OF PROPERTY FROM FEDERAL TAX LI EN

( Under Sect i on 6325( b) ( 2) ( A) of t he I nt er nal Revenue Code)

WHEREAS, Pat r i ck J & El i zabet h Hannon . . . i s/ ar e i ndebt ed t ot he Uni t ed St at es f or unpai d i nt er nal r evenue t ax, as evi dencedby:Not i ce of Recor di ng Dat e Taxpayer Amount

Feder al Tax I nf or mat i on Recor ded I dent i f i cat i on Shown onLi en Ser i al Number Li en

Number( A) ( B) ( C) ( D) ( E)

40318073 Book: 37941 02- 08- 2003 $2, 739, 256. 88Page: 130

40318586 Book: 38015 02- 15- 2003 $2, 707, 897. 12Page: 259

156245104 Book: 42081 02- 23- 2004 $17, 408. 00Page: 591

WHEREAS, t o secur e t he col l ect i on of sai d t ax, not i ce of t he l i enof t he Uni t ed St at es, at t achi ng t o al l t he pr oper t y and r i ght s t opr oper t y of t he sai d t axpayer on account of sai d t axi ndebt edness, was f i l ed wi t h t he Regi st r y of Deeds, Sout her nMi ddl esex, St at e of Massachuset t s i n accor dance wi t h theappl i cabl e pr ovi si ons of l aw.

WHEREAS, t he l i en of t he Uni t ed St at es, l i st ed above, f orsai d t ax has at t ached t o cer t ai n pr oper t y descr i bed as:

20 Rogers St r eet , Newt on, MA

A cer t ai n par cel of l and mor e f ul l y descr i bed at t he Regi st r yof Deeds, Sout her n Mi ddl esex, St at e of Massachuset t s i nBook 36209, Page 167.

WHEREAS, t he Ar ea Di r ect or of I nt ernal Revenue hasdet er mi ned t hat t he val ue of t he i nt er est of t he Uni t edSt at es i n t he f or egoi ng pr oper t y, under and by vi r t ue of i t s

af or esai d t ax l i en, amount s t o t he sum of $57, 214. 55. I naddi t i on, under t he pr ovi si ons of sect i on 6325( d) ( 2) , t heUni t ed St at es subor di nat es i t s t ax l i en t o al l r easonabl e andnecessary expenses i ncur r ed i n connect i on wi t h t he sal e oft he pr oper t y or admi ni st r at i on of t he sal e pr oceeds and anyi nt er est I have det er mi ned wi l l i ncr ease the amount r eal i zedand f aci l i t at e col l ect i on of t he t ax l i abi l i t y. I have, t heref ore

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aut hor i zed t he i ssuance, under t he pr ovi si ons of sect i on6325( b) ( 2) ( A) of t he I nt er nal Revenue Code, of a cer t i f i cat edi schar gi ng t he above- descr i bed pr oper t y f r om t he t ax l i en oft he Uni t ed St at es upon t he payment of t he sum of$57, 214. 55 t o be appl i ed i n par t sat i sf acti on of t he l i abi l i t y i nr espect of t he t ax her ei nbef ore st at ed whi ch sum has been

pai d t o be so appl i ed, and t he recei pt of whi ch sum by me i shereby acknowl edged;

NOW, THEREFORE, THI S I NSTRUMENT WI TNESSETH, t hat I , [ Col l ect i onAr ea Di r ect or , Nor t h At l ant i c Ar ea of t he I nt er nal RevenueSer vi ce, ] char ged by l aw wi t h t he dut y of col l ect i ng andenf or ci ng t he col l ect i on of i nt er nal r evenue t axes due t o t heUni t ed St ates, and charged wi t h t he assessment herei nbef orest at ed, do, pur suant t o t he pr ovi si ons of sect i on 6325( b) ( 2) ( A)of t he I nt er nal Revenue Code, di schar ge t hepr oper t y her et of or e descr i bed f r om t he af or esai d t ax l i en,savi ng and r eser vi ng, however , t he f or ce and ef f ect of sai dt ax l i en agai nst and upon al l ot her pr oper t y or r i ght s t opr oper t y t o whi ch sai d l i en i s at t ached, wher esoever si t uat ed.

WI TNESS my hand at Bost on, Massachuset t s, on May 4, 2007.

[ Si gnatur e Omi t t ed]

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hannon v. united states, 1st cir. (2014)

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