This quiet title action is before the Court on the parties’ dueling motions for summary judgment, to-wit: defendant United States of America’s Motion for Summary Judgment (doc. 77) and plaintiff Lisa Clewis May’s Motion for Partial Summary Judgment (doc. 88). The motions, which concern substantially similar factual and legal issues, have been briefed and are ripe for disposition at this time.
I. Procedural History.
Plaintiff Lisa Clewis May filed this action in Baldwin County Circuit Court in September 2004 against several in person-am defendants, including the United States of America, seeking to quiet title in two related parcels of real property, one of which is merely a 10-foot strip.
Together, these parcels comprise Lisa May’s current homestead and residence in Magnolia Springs, Alabama. The Complaint alleges that plaintiff holds title to the residence, but that the Internal Revenue Service (“IRS”) wrongfully issued a federal tax lien on that property in June 2004 based on a federal income tax indebtedness that she does not have. On that basis, the Complaint seeks a declaration that the federal tax lien is' not valid, and that Lisa May holds the entire and undivided fee simple interest in the residence, subject only to a mortgage held by Irene Trotter, public rights of way, the Houses’ one-half interest in the 10-foot strip, and any other rights that others may have to the bed, shores, and waters of the Magnolia River.
On November 1, 2004, the Government removed this action to this District Court pursuant to 28 U.S.C. § 1444. Following a discovery period, the Government and Lisa May filed cross-motions for summary judgment. The critical legal issue raised by those motions is whether the federal tax lien pertaining to the tax indebtedness of Lisa May’s husband, James May, can properly attach to residential property to which Lisa May holds sole and exclusive title. The Government maintains that the tax lien reaches the property because Lisa May is her husband’s nominee, or alternatively because James May fraudulently transferred the property in an attempt to shield it from the IRS’s collection efforts. By contrast, Lisa May’s position is that James May holds no legal interest in the property that is cognizable under Alabama law, and that the tax lien is therefore improper and invalid, irrespective of federal nominee principles. Lisa May further contends that the Government’s fraudulent transfer argument is time-barred and also fails on the merits.
A. History and Chain of Title for the Property.
In April 1985, James May and his then-spouse, Kathryn May (who is not a party here), purchased certain real property (the “Property”) in Magnolia Springs, Alabama, as joint tenants with rights of survivorship. (U.S.Exh.l.)
In 1991, James and Kathryn May divorced. The Judgment of Divorce entered by the Baldwin County Circuit Court in June 1991 provided, in pertinent part, that Kathryn May “shall convey to all of her right, title and interest in and to the marital home which is currently in the name of [Kathryn May] only.” (U.S. Exh. 4, at ¶7.) A careful reading shows that the quoted language suffered from a typographical error, inasmuch as it failed to
James May continued to live at the Property after Kathryn May transferred it to Lisa May, apparently with no interruption in his residence.
In 1999, significant renovations were done to the Property. Lisa May asserts, “I paid around $180,000 for renovations in 1999.” (U.S. Exh. 3, at # 2e.) James May similarly states, “Mrs. May paid for those renovations.” (U.S. Exh. 2, at #3e.) A closer look, however, exposes the fallacy of this characterization. Lisa May may have nominally paid for the renovations, but the funds did not originate with her. On the contrary, it is undisputed that she paid for the renovations using (a) borrowed money from mortgage refinancings, on which mortgage payments were made 100% by James May; and (b) “about $100,000” in monetary gifts from James May. (U.S. Exh. 2, at # 3e; U.S. Exh. 3, at # 2e.)
With respect to both the 1989 and 1991 transfers of the Property, James May insists that he had no intention of evading his debt liabilities to the IRS or to anyone else; rather, he attributes those decisions to unspecified personal issues relating to his marriage, and not to considerations about debts and creditors. (James May Aff., ¶¶ 13-14.) In this respect, he main
B. James May’s Tax Troubles.
Against the backdrop of the history of the Property, we must project a separate chronology of James May’s dealings with the Internal Revenue Service. There has been no suggestion that Lisa May personally has accrued any back tax liability that might give rise to a tax lien. That said, it is undisputed that at various times dating back to the 1980s, James May has owed back taxes to the United States Treasury. A federal tax lien issued by the IRS in March 1992 reflected that “James W and Kay M May” (presumably referring to Kathryn May) jointly owed back taxes totaling $47,911.99 plus accrued interest. (U.S.Exh.5.)
In the wake of the 1992 lien, James May continued to experience chronic difficulties with his income taxes. In October 2003, the IRS issued a tax lien against him individually in the amount of $89,457.87, consisting of 1040 liability for the 1999 tax year in the amount of $34,271.19 and civil penalties from the tax years 1999, 2000 and 2001 totaling $55,186.68.
(U.S.Exh.16.) In March 2004, the IRS issued another lien against James May in the amount of $73,946.93, based on unpaid tax liabilities arising from his 1995 income taxes ($1,000) and 1998 income taxes ($72,-946.93). (Id.)
Simply stated, the narrow question presented in this action is whether the tax liens of October 2003 and March 2004 attach to the Property, even though title is held exclusively by Lisa May and not by James May. On June 10, 2004, the IRS forced the issue by issuing a Notice of Federal Tax Lien (the “Nominee Lien”) against “Lisa Clewis May, Nominee of James W May” for the entire $163,404.80 sum of both outstanding tax liens previously issued against James May for the tax years 1995, 1998, 1999, 2000, and 2001. (Plaintiff Exh. 5.) The Nominee Lien provides, “This lien attaches to that certain real property as record [sic] with the Baldwin County Judge of Probate in Real Property Bk. 452 Page 1557,” referring to the Property. (Id.) Thus, the Nominee Lien seeks to attach the Property to satisfy the unpaid tax liabilities of James May, notwithstanding that the Property is titled solely to Lisa May.
III. Summary Judgment Standard.
Summary judgment should be granted only if “there is no issue as to any material fact and the moving party is entitled to a judgment as a matter of law.” Fed. R.Civ.P. 56(c). The party seeking summary judgment bears “the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial.” Clark v. Coats & Clark, Inc.,
The applicable Rule 56 standard is not affected by the filing of cross-motions for summary judgment. See Gerling Global Reinsurance Corp. of America v. Gallagher,
IV. Analysis.
The Government proffers two theories under which it contends the Nominee Lien attaches to the Property, despite the fact that the Property is titled to Lisa May and not James May. First, the Government would rely on the nominee doctrine, a common-law theory pursuant to which federal tax liens attach to a taxpayer’s property that is titled to the taxpayer’s nominee. Second, the Government maintains that James May fraudulently transferred the Property, initially to Kathryn May and then to Lisa May, with the actual intent of hindering, delaying or defrauding the IRS’s efforts to collect the back income taxes and penalties that he owed.
A. The Government’s Nominee Theory.
The Tax Code provides as follows: “If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount ... shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.” 26 U.S.C. § 6321; see also United States v. Towne,
At issue in this case, of course, is the Government’s utilization of this tax lien procedure against the Property, title to which is held by Lisa May. The rub that precipitated this litigation is that § 6321 plainly applies only to property and rights to property belonging to the delinquent taxpayer. Simply put, then, the key question is whether James May has a property right or ownership interest in the Property. If so, then the Nominee Lien is valid and proper. If not, then it is not (unless the underlying transfer was fraudulent under Alabama law, which is a separate and analytically distinct question).
B. Whether Alabama Law Recognizes a Property Interest.
Plaintiff responds that the Government’s analysis is fatally flawed because it glosses over the threshold requirement that James May must have a cognizable interest in the Property under Alabama law before his federal tax lien can attach to it. This requirement is a correct statement of law. Indeed, “[t]he federal tax lien statute itself creates no property rights but merely attaches consequences, federally defined, to rights created under state law.” United States v. Craft,
To buttress her point, plaintiff claims that James May cannot own an interest in the Property because she “is the title holder and Alabama bases ownership on title.” (Plaintiffs Proposed Findings and Conclusions, at ¶ 32.)
These cases demonstrate that Alabama law does, in fact, recognize that an individual may retain a property interest in land that has been deeded to his spouse or other close family member, where the parties’ real intent is for the individual to
C. Application of Nominee Theory to the Property.
In light of the foregoing, then, the critical inquiry becomes whether the presumption of a gift can be rebutted here by evidence of the parties’ “real intent.” There is no direct evidence of “real intent,” in terms of whether it was intended that James May would remain a beneficial owner of the Property notwithstanding his putative “gift” to Lisa May.
Fortunately, the questions of whether a taxpayer had the “real intent” to gift property to his spouse and, alternatively, whether the parties intended that the taxpayer would remain a beneficial owner of such property under Alabama law are substantively indistinguishable from the question of whether the taxpayer’s spouse is his nominee under federal law. Compare Cody v. United States,
Federal courts confronting nominee issues have routinely used the law of other jurisdictions to flesh out amorphous or ill-defined state standards for determining nominee status. See Cody,
The relevant factors for the nominee query are accurately delineated in Cody v. United States,
Considering the summary judgment record in the light most favorable to plaintiff, the pertinent factors militate heavily in favor of a finding that Lisa May is the nominee of James May as to the Property.
As for the final nominee factor, there is a genuine issue of material fact as to whether the Property was placed in Lisa May’s name in anticipation of a lawsuit or other liability. The Government’s evidence is that the IRS had assessed tens of thousands of dollars of back tax liability against James May before he orchestrated the transfer of the Property to Lisa May in 1991. This evidence raises a reasonable inference that James May placed the Property in Lisa May’s name in anticipation of his own tax liabilities. However, James May avers that he did not transfer the Property to Lisa May “with the intention of to [sic ] avoid paying taxes or to avoid any other debt,” but that “the deed to Lisa was about her and [his] marriage.” (James May Aff., ¶ 13.) If believed, that evidence would support a conclusion that James May did not transfer the Property in anticipation of lawsuits or other liability. For purposes of the Government’s Rule 56 Motion, plaintiffs evidence is credited and all reasonable inferences are drawn in her favor. Therefore, the Court assumes, without finding, that James May did not transfer the Property to Lisa May with the intention of avoiding his IRS liabilities or other debts.
Stepping back from the trees to scrutinize the forest, the Court is reminded that, far from a mechanical checklist of factors, the “ultimate inquiry” in any nominee analysis is whether the taxpayer or the purported nominee is “the true beneficial owner of the property.” Spotts,
Considering all of the foregoing, the Court finds no genuine issues of fact as to James May’s ownership interest in the Property under Alabama law. On the evidence submitted, the Government has conclusively rebutted the Alabama presumption that James May gave the Property to Lisa May as a gift. In particular, the Government has presented uncontroverted evidence that the parties’ real intent (borne out by 15 years of experience following the purported “gift”) was for James May to retain the incidences of ownership and control, and to retain a beneficial ownership interest in the Property. Plaintiff has offered no evidence that might raise a reasonable inference to the contrary. Viewing the record in the light most favorable to plaintiff, the undersigned determines that James May has held and presently holds an interest in the Property which is cognizable under Alabama law, in accordance with the Taylor, McLain, Cox, Cone and Snow lines of precedent. Having ascertained that James May possesses the requisite property interest under Alabama law, the question then becomes “whether the taxpayer’s state-delineated rights qualify as ‘property’ or ‘rights to property’ within the compass of the federal tax lien legislation.” Craft,
For all of the foregoing reasons, it is hereby ordered as follows:
1. The Government’s Motion for Summary Judgment (doc. 77) is granted on the ground that there are no genuine issues of material fact that (a) James May holds an interest in the Property under Alabama law; (b) that state-recognized interest qualifies as a right to property under federal tax lien legislation; and (c) plaintiff holds title to the Property as the nominee of James May, such that the tax liens against James May properly attach to the Property.
2. Plaintiffs Motion for Partial Summary Judgment (doc. 88) is denied for the same reasons.
3. Plaintiffs claims against the United States are dismissed with prejudice, and plaintiff shall take nothing from the United States by her Complaint.
4. Because of this ruling, plaintiffs only remaining causes of action are in rem claims against defendant A Parcel of Land, and in personam claims against defendants John L. House, Shirley House and James W. May. Plaintiff is to notify the Court in writing, on or before September 19, 2006, whether she intends to proceed to trial against those remaining defendants and, if so, what the triable issues might be and what the federal subject-matter jurisdictional basis of those triable issues might be.
Notes
. Under the E-Government Act of 2002, this is a written opinion and therefore is available electronically. However, it has been entered only to decide the motion or matter addressed herein and is not intended for official publication or to serve as precedent.
. The Complaint named several other defendants, including James W. May, Irene N. Trotter, John L. House and Shirley House, and also listed the two parcels as in rem defendants. None of these defendants have submitted Rule 56 motions or briefs. Trotter was dismissed from this litigation via Order (doc. 83) dated May 5, 2006, with the consent of all parties. The Houses, who are proceeding pro se, remain defendants of record, and it is apparently undisputed that they own an undivided one-half interest in the 10-foot strip. The Houses have elected not to be heard on summary judgment, despite being afforded an ample opportunity to do so. Defendant James May, also proceeding pro se, has submitted filings through Lisa May in which he disclaims any legal interest in the real property at issue herein. It appears that plaintiff
.The Court is mindful of its obligation under Rule 56 to construe the record, including all evidence and factual inferences, in the light most favorable to the nonmoving party. See Lofton v. Secretary of Dept. of Children and Family Services,
. The parties' summary judgment filings are rendered somewhat confusing by the lack of any markings identifying their exhibits by number, even as the parties use numbers in their briefs to reference such exhibits. This omission can create ambiguities in the record as to which number corresponds to which exhibit, and renders it difficult to discern which exhibit a litigant (or this Court) is citing. To alleviate such confusion in the future, counsel should take care to label each exhibit with an appropriate sticker or other marking before filing it.
. James May testified that his financial position was "fine” in 1989 and that there were no creditors at that time "who were not paid or who were hounding” him, with the possible exception of the IRS. (James May Dep., at 35.) Other record evidence confirms that the IRS was in fact an exception to this statement, as the IRS had assessed tax liabilities against him of $15,166.23 on May 30, 1988. (U.S.Exh.5.)
. James May was in dire financial straits at the time of his 1991 divorce. As he wrote several years later, “At the time of the divorce what little liquid assets I had had been spent paying Katie’s medical bills, rent, support, and buying her furniture and other things to set her up in her new apartment. By the time of the divorce I didn't have any money left and had considerable outstanding liabilities.” (U.S. Exh. 14, at 1-2.) He further wrote, “My income at the time of the divorce was not sufficient for me to pay all of Katie's bills and all of my bills.” (Id. at 2-3.) Similarly, as of May 1994, James May represented that his current financial demands "far outstrip my present income.” (Id. at 3.)
. The payment obligation was James May’s, not Lisa May’s. (U.S. Exh. 2, at # 6.) Lisa May paid nothing for the Property. The evidence before the Court is that James May paid the $9,000 in full to Kathryn May for the Property. (Id. at #6, # 10.)
. James May represents that, as of the date of the transfer to Lisa May, he “was solvent and able to pay [his] debts as they accrued.” (U.S. Exh. 2, at # 8.) Given that the transfer occurred in August 1991, just two months after entry of the Judgment of Divorce, it is difficult to reconcile James May's statement in his affidavit that he was able to pay his debts as they accrued at the time of the transfer with his earlier statement that he “didn’t have any money left and had considerable outstanding liabilities” at the time of the divorce. Likewise, it is problematic that James May offered representations of solvency in his affidavit/after responding, “I do not remember,” when asked in interrogatories about his assets and liabilities as of 1991. (Id. at # 4.) These discrepancies cannot be resolved on summary judgment.
.The Government points to the U.S. Bankruptcy Court's findings during James May’s 1994 bankruptcy proceedings that there was no evidence of consideration for the transfer to Lisa May, and "there was a pattern of James May's putting assets in his spouse's name or of he and his spouse at the time of putting assets in his spouse's name.” (U.S. Exh. 11, at 12.) But the parties offer no indication as to the factual basis of that "pattern,” so there is no evidence in the record
. In that regard, it bears noting that James May is listed (along with Lisa May) as a mortgagor for the Property in conjunction with a mortgage executed in September 1999. (U.S.Exh.8.) If, in fact, James May has no interest in the Property, then it is difficult to comprehend how he could be classified as a mortgagor with respect to that Property, given that he would have no interest to mortgage. Additionally, correspondence in the record establishes that James May was involved, in a hands-on manner, in discussions with the mortgagee concerning a proposed refinance of the Property in 2003 and 2004. (U.S. Exh. 9 & 10.)
. Such gifts are considerable, in light of James May’s representation in discovery that his annual adjusted gross income from 1991 through 2004 ranged from roughly $80,000 to roughly $134,000. (U.S. Exh. 2, at # 7.)
. The gross amount of this liability may be broken down by year as follows: (a) $3,232.44 for the 1984 tax year; (b) $15,166.23 for the 1987 tax year; (c) $11,017.75 for the 1988 tax year; (d) $4,624.10 for the 1989 tax year; and (e) $13,871.47 for the 1990 tax year. (Id.) These amounts were assessed by the IRS at different times, dating back as far as May 1988.
. A 1994 letter from James May's then-counsel relating to his bankruptcy proceedings stipulated that at the time of the divorce James and Kathryn May’s joint debts included income tax liability of $47,911.99 plus interest. (U.S.Exh.13.) The joint nature of this indebtedness is underscored by the Judgment of Divorce, which assigns responsibility to James May for paying "all federal and state income taxes which have accrued during the marriage including, but not necessarily limited to, federal income taxes due for the years 1983, 1987, 1988 and 1990.” (U.S. Exh. 4, at ¶ 2.)
.Notices of Federal Tax Liens were duly recorded in the Baldwin County Probate Court for these liens in October 2003 and April 2004, respectively.
. In their affidavits, both James May and Lisa May express in virtually identical language their belief that they "are the victims of a vendetta on the part of the Government because [they] refused to move out of the house and live somewhere else.” (Lisa May Aff., ¶ 9; James May Aff., ¶ 17.) Of course, statements of speculation or personal belief are generally not proper and are not considered on summary judgment. See, e.g., Pace v. Capobianco,
. See also G.M. Leasing Corp. v. United States,
. See also National Bank of Commerce,
. In support of this proposition, plaintiff points to Cooper v. Cooper,
. This line of authority undercuts plaintiff's strident assertion that the Government is asking this Court "to judicially create a law which allows a federal agency to confiscate private Alabama residential real property, depriving Alabama citizens of their hearth and home, where no state statute or case law exists on the point." (Plaintiff's Opposition Brief (doc. 81), at 16.) The requisite on-point caselaw plainly exists.
. At most, plaintiff offers a conclusoiy statement that James May "wanted to make a wedding gift of the Property.” (James May Aff., ¶ 9.) Similarly, Lisa May attests in con-clusoiy fashion that the Property “was a wedding gift from Jim.” (Lisa May Aff., ¶ 4.) This testimony sheds no light on the “real intent” of the parties, as required by Alabama law, but simply confirms the unremarkable and unilluminating fact that the parties now label the transaction a "gift.” Likewise, James May’s statement that, following the "gift,” he has "always regarded the Property as Lisa’s” (James May Aff., ¶ 12) is too vague, too ambiguous, and too obscure to be reasonably classified as an expression that he intended to relinquish all of his beneficial rights and interests in the Property. And even if it could be so construed, plaintiff has never articulated that argument to this Court. In any event, that statement leaves unanswered whether James May intended to continue, or whether he has continued, to exercise dominion and control over the Property, to reap its benefits and to chart its course after the transfer occurred. Therefore, the Court must dig deeper on summary judgment. Given the Government's extensive arguments that James May retained an ownership interest in the Property, plaintiff was squarely on notice that the Mays’ intentions as to James May's interest in the Property were at issue on summary judgment. Yet she remained silent on this point, proffering neither direct evidence nor argument that James May’s real intent was that he would have no say in, rights to, responsibility for, or beneficial ownership interest of any kind in the Property after he deeded it to Lisa May, much less that he intended for Lisa May to be free to do whatever she wanted with the Property without input, interference or restrictions from him. In the absence of such evidence, the Court must turn to circumstantial evidence to assess the parties’ intentions.
.The parties concur that "no state or federal court in Alabama has definitively set forth the factors to be considered in determining whether an individual holds property as the nominee of another.” (U.S. Opposition Brief (doc. 91), at 9; Plaintiff Reply Brief (doc. 92), at 2.)
. It would be erroneous to focus on the label applied to the doctrine by Alabama courts, as opposed to its substance. Plaintiff does just that, arguing "that Alabama does not recognize nominee liens at all." (Plaintiff’s Principal Brief, at 3.) There is, indeed, no Alabama decisional authority that explicates a "nominee doctrine” as such. But federal appellate courts have deemed state law to bear on the nominee question even when the state courts have called it something else. See, e.g., Spotts,
. The justification for considering precedents from other jurisdictions in evaluating whether Lisa May is the nominee of James May is rendered even more compelling by Shades Ridge Holding Co. v. United States,
. The Court also bears in mind the Sixth Circuit’s admonition that the nominee factors may be "less probative" in cases of married couples, in terms of "distinguishing tax shams from legitimate titling decisions between spouses.” Spotts,
. Plaintiff's briefs do not address these factors, but simply dismiss them out of hand as inapplicable because of her belief that Alabama law can confer no property right to James May. This argument having been rejected, and plaintiff having offered no fallback position, this Court does not have the benefit of plaintiff’s analysis or application of the nominee factors.
. Plaintiff derides the Government's arguments on this point as "pure speculation made by a party who has never spent any time at the May home.” (Plaintiff's Opposition Brief (doc. 81), at 9.) However, plaintiff neither challenges the veracity of the underlying statement nor submits record evidence tending to show that it is incorrect.
. Perhaps plaintiff possesses evidence that might establish these considerations. But she has placed no such evidence in the record, and has done nothing to rebut the Government’s showing that James May remains the true, beneficial owner of the Property. The Court must decide matters before it based on the facts that the parties have actually placed in the record, without regard to facts that might have been (but were not) presented.
. In light of this determination, it is unnecessary to reach the Government's alternative argument that James May fraudulently transferred the Property to Kathryn May in 1989 and again fraudulently transferred the Property to Lisa May in 1991, in violation of the Alabama Uniform Fraudulent Transfer Act ("AUFTA”), Ala.Code §§ 8-9A-1, et seq.