Hannon v. City of Newton
744 F.3d 759
1st Cir.2014Background
- IRS liens totaling over $4 million attached to Hannon’s real and personal property, including 20 Rogers Street in Newton, MA.
- Newton sought to condemn 20 Rogers Street by eminent domain and requested discharge of the parcel from federal tax liens.
- IRS discharged 20 Rogers Street from the liens on May 4, 2007 under 26 U.S.C. § 6325(b)(2)(A) with a certificate saving the lien on other property/rights.
- Newton paid $2.3 million for the taking; the discharge specified $57,214.55 as the value of the United States’ interest, with later adjustments confirming proceeds could exceed that amount.
- Hannon subsequently received a $420,000 undercompensation award for the taking; Manning intervened with a priority lien claim; the district court held the discharge relinquished the government’s lien on post-taking proceeds but the government appealed.
- United States v. Manning priority dispute proceeded in federal court after removal by the government and Manning’s challenge to the district court’s ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of §6325(b)(2)(A) discharge | Manning argues discharge extends to post-taking proceeds | US argues discharge limited to 20 Rogers Street and does not affect post-taking rights | Discharge limited to the specific property; liens on post-taking proceeds remain intact. |
| Relation between §6325(b)(2)(A) and §6325(b)(3) | Manning contends §6325(b)(3) implicitly limits §6325(b)(2)(A) | US argues §6325(b)(3) addresses priority disputes, not this case | §6325(b)(3) does not alter §6325(b)(2)(A) in this context; not applicable to post-taking proceeds. |
| Effect of equitable conversion on federal liens | Massachusetts equitable conversion transfers rights to post-taking damages | Federal liens follow the taxpayer’s rights under 6321, irrespective of state doctrine | Federal liens attach to post-taking damages; equitable conversion cannot defeat or extend the discharge. |
Key Cases Cited
- United States v. McDermott, 507 U.S. 447 (1993) (preexisting federal liens retain priority against later assets)
- Glass City Bank of Jeanette, Pa. v. United States, 326 U.S. 265 (1945) (liens attach to property and rights to property; broad reach of §6321)
- Craft v. United States, 535 U.S. 274 (2002) (discussion of property rights and lien scope under §6321)
- United States v. Rodgers, 461 U.S. 677 (1983) (federal liens attach to property acquired by delinquent taxpayer with priority status)
- Drye v. United States, 528 U.S. 49 (1999) (disclaimer/diversion of inheritance does not defeat federal liens; 6321 scope)