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United States v. McFarland

United States District Court, S.D. Mississippi, Northern Division

December 15, 2014

BURNS H. McFARLAND, et al., Defendants


DANIEL P. JORDAN, III, District Judge.

This tax-lien-enforcement action is before the Court on Plaintiff's Motion to Dismiss Counterclaim of Robert B. McFarland [24] and Defendant Robert B. McFarland's Motion to Dismiss Count III of the Complaint [38]. Because the United States has waived its sovereign immunity for quiet-title claims such as the Counterclaim, its motion is denied. And because the United States has sufficiently pleaded a claim for foreclosure under a nominee theory of ownership, Defendant's motion is also denied.

I. Facts and Procedural History

The United States filed this lawsuit to reduce to judgment various federal tax liens and penalties assessed against Defendant Burns H. McFarland ("B. McFarland"). At issue in the motions before the Court is the United States' claimed interest in real property B. McFarland purchased in 1997 and transferred to his son, Defendant Robert B. McFarland ("R. McFarland"), on March 27, 2003. The United States alleges that R. McFarland "holds title only as the nominee of B. McFarland, " such that its tax liens arising after the transfer attached to the Subject Property. Compl. [1] ¶ 32.

Count III of the United States' Complaint seeks "to have [the] tax liens foreclosed, to have the property sold free and clear of the claims of any of the defendants to this litigation, and to have the proceeds of sale attributable to B. McFarland's ownership of the Subject Property applied to his unpaid federal tax liabilities." Id. ¶ 37. R. McFarland filed a counterclaim against the United States asserting a quiet-title claim in which he asks the Court to "confirm and quiet title to the Subject Property as vested in R. McFarland, as well as hold all federal tax liens filed against B. McFarland or R. McFarland, as nominee of B. McFarland, invalid...." Answer & Countercl. [16] at 17.

The United States moved to dismiss R. McFarland's Counterclaim [24], and R. McFarland moved to dismiss Count III of the United States' Complaint [38]. The issues raised have been fully briefed, and the Court is prepared to rule.

II. Standards

The United States seeks dismissal of R. McFarland's counterclaim under Rules 12(b)(1) for lack of subject-matter jurisdiction and 12(b)(6) for failure to state a claim. R. McFarland asserts his motion under Rule 12(b)(6), but because he filed it after answering the complaint, the motion is technically one for judgment on the pleadings under Rule 12(c). Regardless, the standards governing motions under Rules 12(b)(6) and 12(c) are identical. Doe v. MySpace, Inc., 528 F.3d 413, 418 (5th Cir. 2008).

In considering a motion under Rule 12(b)(6) or 12(c), the "court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.'" Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (quoting Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999)). But "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

To overcome a Rule 12(b)(6) or 12(c) motion, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555 (citations and footnote omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678.

"[W]here subject[-]matter jurisdiction is being challenged, the trial court is free to weigh the evidence and resolve factual disputes in order to satisfy itself that it has the power to hear the case." Montez v. Dep't of Navy, 392 F.3d 147, 149 (5th Cir. 2004). "The party asserting jurisdiction bears the burden of proof for a 12(b)(1) motion to dismiss." Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 762 (5th Cir. 2011).

III. Analysis

A. Motion to Dismiss Counterclaim

The United States asserts that the Court lacks subject-matter jurisdiction over R. McFarland's counterclaim because the United States has not waived sovereign immunity. Alternatively, the United States argues that the counterclaim is barred by the Anti-Injunction Act and the Declaratory Judgment Act. Finally, the United States asserts that the counterclaim fails to state a claim.

1. Subject-Matter Jurisdiction

"[T]he federal government is immune from suit unless it consents to be sued." First Nat'l Bank v. Genina Marine Servs., Inc., 136 F.3d 391, 394 (5th Cir. 1998). Here, R. McFarland contends that consent exists in Title 28 of the United States Code, Section 2410(a), which provides that "the United States may be named a party in any civil action or suit in any district court... to quiet title to... real or personal property on which the United States has or claims a mortgage or other lien."

"Section 2410(a) waives the sovereign immunity of the federal government, enabling private parties to hale the government into court to determine the priority of outstanding liens on real or personal property." Hussain v. Boston Old Colony Ins. Co., 311 F.3d 623, 629 (5th Cir. 2002). The waiver applies to quiet-title actions seeking "a determination that a tax lien does not exist, has been extinguished, or is inferior in rank." In re Estate of Johnson, 836 F.2d 940, 946 (5th Cir. 1988) (quoting United States v. Morrison, 247 F.2d 285, 291 (5th Cir. 1957)).

The United States asserts that R. McFarland may not resort to § 2410 because he "may only challenge the... lien[s]" on the Subject Property under 26 U.S.C. §§ 6325(b)(4) and 7426(a)(4). Pl.'s Reply [30] at 2. Section 6325 concerns the discharge of property subject to a tax lien and provides, in pertinent part, as follows:

At the request of the owner of any property subject to any lien imposed by this chapter, the Secretary shall issue a certificate of ...

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