The opinion of the court was delivered by: ORRICK
The United States of America (the "government") brought this action seeking to recover certain funds belonging to taxpayer Raymond Castor ("Castor") but now in the possession of defendant Redevelopment Agency of the City of Oakland (the Agency"). The funds at issue are rents collected by a receiver on real property owned by Castor before it was purchased by the Agency on June 10, 1993. The Internal Revenue Service ("IRS") served levies on both the receiver and the Agency for the funds that were not honored.
The Agency brought a motion to dismiss and motion for summary judgment on the grounds that the government cannot demonstrate any entitlement to the rents that are the subject of this action. The government brought a cross-motion for partial summary judgment on its claim that the Internal Revenue Service ("IRS") perfected its lien before the Agency. For the reasons hereinafter stated, the Agency's motions are denied, and the government's motion is granted.
Castor owned real property located on Alice Street in the City of Oakland, County of Alameda. On August 5, 1986, Castor entered into a twenty-year written lease of this property with the City of Oakland (the "City"). Under the terms of this lease, the City was to pay Castor $ 15,847 monthly rent through June 1, 2006, at which time, upon delivery of one more payment of $ 15,847 on July 1, 2006, and the satisfaction of certain other conditions, the City would acquire title to the property.
Castor failed to pay taxes due to the government, and on October 21, 1991, the government recorded its notice of federal tax lien.
On November 22, 1991, the RTC filed a complaint for judicial foreclosure of trust deed and for appointment of a receiver against Castor in the Superior Court for the County of Alameda ("Superior Court") for Castor's refusal to make mortgage payments. In paragraph 11 of the complaint, the RTC claimed it was entitled to the appointment of a receiver to take possession of the real property and to collect the rents. It made no attempt to collect the rents before the receiver was appointed.
On December 9, 1991, the Superior Court appointed Susan Uecker, Receiver for the property and authorized her to take possession of the leases and collect the rents. The Receiver managed the property and collected the rents under the City of Oakland lease between December 9, 1991, and October 1993. On June 10, 1993, the Trustee, California General Mortgage Service, Inc., conducted a sale of the property pursuant to the power of sale in the deed of trust. The Agency was the successful bidder at the sale and acquired the property by trustee's deed upon sale on that date. Its successful bid was $ 1,265,315.40; at the time of the foreclosure sale, the outstanding debt was $ 1,590,315.40. Thus, following foreclosure, the Agency was still owed $ 315,000.
On January 4, 1994, the Superior Court discharged the Receiver and ordered that the unexpended rent monies collected by the Receiver be paid over to the Agency. On January 11, 1994, pursuant to the Superior Court's order, $ 397,637.86 remaining from rents collected by the Receiver was paid over to the Agency. On January 28, 1994, the government served a notice of levy on the Agency for funds that the Agency had received on January 11, 1994, from the Receiver that represented the rents paid prior to June 10, 1993. The government claims that this notice of levy was not honored by the Receiver.
The government claims that its lien right in the rent was perfected on October 21, 1991, when a notice of federal tax lien was filed against Castor in Alameda County. It also claims that the beneficiary of the deed of trust did not perfect its rights in the rents until the Receiver was appointed on December 9, 1991, and, thus, after the IRS had perfected its lien.
The Agency moves to dismiss the complaint on the grounds that the government cannot demonstrate any entitlement to the rents that are the subject of this action under the applicable provisions of the Internal Revenue Code ("IRC."). In the alternative, the Agency moves for summary judgment on the above-stated grounds. It claims that it had a perfected security interest under California law to all the rents from the property before the Agency purchased the property on June 10, 1993. The government opposes this motion and moves for partial summary judgment on its claim that the notice of federal tax lien filed October 21, 1991, primes the Agency's interest in the rents, which was not perfected until December 9, 1991.
The Supreme Court's 1986 "trilogy" of Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986), and Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986), requires that a party seeking summary judgment identify evidence that shows the absence of a genuine issue of material fact. Once the moving party has made this showing, the non-moving party must "designate 'specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324 (quoting Fed. R. Civ. P. 56(c)). "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Liberty Lobby, 477 U.S. at 249-50 (citations omitted).
The government claims that on September 17, 1991, the IRS assessed Castor for $ 526,397.66 of unpaid employment taxes. When Castor failed to pay these taxes, the assessment became a lien against all property and rights to the property of Castor in existence on September 17, 1991, as well as to any property or rights to property that Castor acquired thereafter. I.R.C. §§ 6321, 6322 (West 1989); Glass City Bank v. United States, 326 U.S. 265, 90 L. Ed. 56, 66 S. Ct. 108 (1945).
The government's claim to the presale proceeds delivered by the Receiver to the Agency is based upon its lien against Castor for unpaid taxes. The authorization for this lien is found at § 6321 of the IRC, which provides:
If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) 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 (West 1989). A tax lien is analogous to a judgment lien and attaches to the taxpayer's property in the same way. Citizens Nat'l Trust & Say. Bank v. United States, 135 F.2d 527, 528 (9th Cir. 1943). Courts look to state law to determine if and to what extent the taxpayer has an interest in the property subject to a tax lien. United States v. Creamer Indust., Inc., 349 F.2d 625, 628 (5th Cir.), cert. denied, 382 U.S. 957, 15 L. Ed. 2d 361, 86 S. Ct. 434 (1965). When there are competing liens against the taxpayer's property, priority is ...