The opinion of the court was delivered by: B. Lynn Winmill Chief Judge United States District Court
MEMORANDUM DECISION AND ORDER
Before the Court is Plaintiff the United States of America's Motion for Summary Judgment Against Kathleen Fitch and Default Judgment Against Michael J. Fitch, Portfolio Recovery Associates, LLC, and NCO Financial Systems, Inc. (Dkt. 43). The Court heard oral argument on July 19, 2011. Having considered the pleadings and counsels' arguments at hearing, and having thoroughly reviewed the record, the Court will grant the United States' motion, as indicated at hearing, and as more fully expressed below.
The United States filed this action on January 25, 2010, to reduce to judgment federal income tax assessments against Defendant Michael J. Fitch, and to foreclose federal tax liens against Mr. Fitch and the real property located at 705 Leona Circle, Idaho Falls, ID, 83401. Am. Compl., Dkt. 26-1, ¶ 9. On May 12, 2010, Mr. Fitch was personally served with the Summons and Complaint (Dkt. 12). Mr. Fitch having failed to answer or otherwise respond, a Clerk's Entry of Default was entered against him on July 13, 2010 (Dkt. 25). Since then, Mr. Fitch still has yet to answer or otherwise appear.
A duly authorized delegate of the Secretary of the Treasury made timely assessments against Michael J. Fitch for unpaid federal taxes, penalties, interest, and other statutory additions for tax periods 1998-2008. Am. Compl., ¶ 13. On January 25, 2010, the United States also filed an action to reduce these same federal tax assessments to judgment in the District of Alaska. On January 26, 2011, the court in the Alaskan suit entered default judgment against Mr. Fitch in the amount of $208,454.40 for the unpaid balance of these liabilities as of November 10, 2010. See United States v. Michael J. Fitch, 3-10-cv-00012-TMB (D. Alaska), Ex. 1 to Yost Dec., Dkt. 43-4. The first claim for relief having been satisfied in the District of Alaska, the United States now seeks default judgment against Mr. Fitch as to the second claim for relief only -- foreclosing the federal tax liens against Mr. Fitch that arise from these assessments against the subject property.
A foreclosure report obtained by the United States revealed that Portfolio Recovery Associates, LLC and NCO Financial Systems, Inc. might claim some right, title, or interest in the subject property. The United States therefore named these non-taxpayer defendants in this action. Although both Recovery Associates and NCO Financial Systems were properly served with the Summons and Complaint, see Dkts. 13, 34, neither have appeared in this matter to assert any interest in the subject property. The Clerk of Court entered default against Portfolio Recovery Associates on June 25, 2010, and against NCO Financial Systems on February 24, 2011. See Dkts. 24, 40. Neither of the non-taxpayer Defendants has filed an answer or other response since default was entered.
The United States has entered into a stipulation of priority with Bank of America Corporation, providing that Bank of America Corporation's Deed of Trust described in the Complaint (¶ 11) is senior and prior to the United States' tax liens on the subject property. Therefore, in the event of the foreclosure sale, Bank of America Corporation's Deed of Trust shall be satisfied before the United States' tax liens. See Dkt 41.
The United States named Kathleen Fitch, Michael Fitch's ex-wife, as a defendant under 26 U.S.C. § 7403(b), because she may claim some right, title, or interest in the subject property. The subject property was acquired before the Fitches were married, but was not the separate property of either; instead it was jointly owned and titled in both Michael and Kathleen Fitch's names. Ex. 2 to Yost Dec. Upon their divorce, Michael and Kathleen Fitch's Decree of Divorce characterized the subject property as community property, to be distributed to Kathleen Fitch. Ex. 5 to Yost Dec. Ms. Fitch does not dispute this. Response Mem., Dkt. 44 at 2. In its motion, the United States asserts that the federal tax liens arising from its assessments attached to Mr. Fitch's community property interest, and were not extinguished by the subsequent transfer of the subject property to Ms. Fitch as her separate property in the Fitches' divorce.
1. The Record Supports Foreclosure Of Michael Fitch's Federal Tax Liens Against His Property Interests In this case, the United States assessed, and gave notice and demand to Michael
Fitch, for unpaid federal taxes, penalties, interest, and other statutory additions for tax periods 1998-2008. Am. Compl., ¶¶ 13, 15. Mr. Fitch failed to pay, thus a lien arose in favor of the United States at the times, and in the amounts, of the assessments; the lien attached to all property, and rights to property of Michael Fitch. 26 U.S.C. §§ 6321, 6322; Drye v. United States, 528 U.S. 49, 55 (1999). On January 26, 2011, in an action filed by the United States based on these assessments, the United States District Court for the District of Alaska entered judgment against Mr. Fitch. Ex. 1 to Yost Dec. Also, Notices of Federal Tax Lien were filed with the Bonneville County Recorder, to perfect the liens. Am. Compl. ¶¶ 19-21.
A tax lien attaches to any property interest of the taxpayer, including those later acquired, while the lien is in force. Glass City Bank v. United States, 326 U.S. 265, 267-68 (1945). The lien continues in full force until the liability is paid in full or becomes unenforceable due to the lapse of time. 26 U.S.C. § 6322; United States v. Cache Valley Bank, 866 F.2d 1242, 1244 (10th Cir. 1989). Once a tax lien under 26 U.S.C. § 6321 arises, the United States may file an action to enforce the lien against any property in which the taxpayer has an interest. 26 U.S.C. § 7403. Where a claim or interest of the United States is established, the court "may decree a sale of such property . . . and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States." Id.
The record supports the United States' request to enforce Mr. Fitch's federal tax lien against his property interests. Mr. Fitch has not appeared or otherwise challenged ...