Charles Hunter v. Sterling Mtg & Investment Co.

CourtCourt of Appeals for the Sixth Circuit
DecidedMarch 4, 2022
Docket21-1496
StatusUnpublished

This text of Charles Hunter v. Sterling Mtg & Investment Co. (Charles Hunter v. Sterling Mtg & Investment Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Charles Hunter v. Sterling Mtg & Investment Co., (6th Cir. 2022).

Opinion

NOT RECOMMENDED FOR PUBLICATION File Name: 22a0101n.06

No. 21-1496

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

) FILED CHARLES R. HUNTER, Mar 04, 2022 ) Plaintiff-Appellant, ) DEBORAH S. HUNT, Clerk ) v. ) ) ON APPEAL FROM THE STERLING MORTGAGE AND ) UNITED STATES DISTRICT INVESTMENT COMPANY and ) COURT FOR THE EASTERN INTERNAL REVENUE SERVICE, ) DISTRICT OF MICHIGAN Defendants-Appellees. ) ) OPINION )

Before: MOORE, WHITE, and BUSH, Circuit Judges.

KAREN NELSON MOORE, Circuit Judge. The Internal Revenue Service (“IRS”) sued

Sterling Mortgage and Investment Company (“Sterling”) and Charles Hunter to enforce its tax

liens on a property that was purchased by Sterling at a foreclosure sale, but still subject to Hunter’s

right of redemption. The IRS and Sterling entered into a settlement agreement, and all three parties

stipulated to a voluntary dismissal of the case without prejudice. Hunter moved to vacate the

stipulated order of dismissal, enforce the federal tax lien, and equitably toll his redemption period.

The district court dismissed Hunter’s complaint for failure to state a claim. We AFFIRM the

district court’s judgment.

I. BACKGROUND

In 1999, Hunter received a warranty deed for a residential property (“Lakeside property”).

R. 1 (Compl. ¶ 14) (Page ID #4–5). In 2004, he and his wife executed a mortgage, secured by the No. 21-1496, Hunter v. Sterling Mortg. and Inv. Co. et al.

Lakeside property, with Wells Fargo Financial America, Inc. Id. ¶ 15 (Page ID #5). In 2013 and

2015, the IRS recorded liens on the property, totaling more than $800,000, based on Hunter’s

failure to pay his taxes. Id. ¶¶ 8–13 (Page ID #3–4).

In 2017, after Hunter defaulted on his mortgage, Wells Fargo sold the property to Sterling

at a foreclosure sale.1 Id. ¶¶ 16–17 (Page ID #5). Wells Fargo attempted to notify the IRS of the

foreclosure sale, but the IRS never received the letter. Id. ¶¶ 21–26 (Page ID #6–7); see R. 10-3

(USPS Tracking) (Page ID #123–24).

On July 12, 2017, during Hunter’s redemption period, the IRS filed a suit against Hunter

and Sterling,2 seeking to enforce its liens on the property. Compl., United States v. Sterling Mortg.

& Inv. Co., No. 2:17-cv-12281 (E.D. Mich. 2017), ECF No. 1. On September 15, 2017, all parties

stipulated to a voluntary dismissal of the case. Stipulation of Dismissal Without Prejudice,

Sterling, ECF No. 15. The case was dismissed without prejudice on September 18, 2017. R. 10-

4 (2017 Order) (Page ID #126).

Separately, and before the stipulation of dismissal, the IRS and Sterling entered into a

settlement agreement, in which Sterling agreed to sell the property and divide the net profits

equally with the IRS.3 R. 1 (Compl. ¶ 33) (Page ID #9). They did not inform Hunter of this

settlement agreement or its terms prior to the stipulation of dismissal, and Hunter’s counsel did

not participate in the settlement negotiations or ask the other parties whether any negotiations had

1 Hunter’s right of redemption ran from the date of the sale, April 11, 2017, until October 11, 2017. 2 The IRS named the State of Michigan and the Oakland County Treasurer as defendants as well, but they are not parties to the instant appeal, so we mention them only in passing. 3 No copy of the agreement is in the record, but the parties do not dispute its terms. The IRS contends that it ultimately sought to resolve its claims against the property by settlement rather than litigation because there is no controlling precedent on the effectiveness of a foreclosure-sale notice that is timely mailed but possibly lost in transit, as was the case here. Appellees Br. at 6.

2 No. 21-1496, Hunter v. Sterling Mortg. and Inv. Co. et al.

taken place. Id. ¶ 40 (Page ID #11). The settlement between the IRS and Sterling impacts Hunter

because it affects his tax liability: if the IRS receives less money from the property, more of

Hunter’s tax liability remains for Hunter to satisfy with other assets.

On October 16, 2017, Sterling sued to evict Hunter. Id. ¶ 36 (Page ID #10). On October

26, 2017, Hunter sued Sterling and the IRS pursuant to 28 U.S.C. § 2410, seeking a declaratory

judgment that the tax liens have priority over Sterling’s interest in the property and an order

directing the IRS to enforce the tax liens. See Hunter v. United States (“Hunter I”), No. 17-13494,

2018 WL 2009559 (E.D. Mich. Apr. 30, 2018). The district court construed the suit as an action

to quiet title and dismissed it, finding that (1) Hunter lacked standing to sue because his right to

redemption had expired on October 11, 2017, meaning that he no longer had any interest in the

property; and (2) Hunter failed to show that the government had waived its sovereign immunity

under § 2410. Id. The Sixth Circuit affirmed on the grounds that the United States has sovereign

immunity from a putative quiet-title action such as Hunter’s, “where a non-titleholding, non-lien-

holding third party sues to gain a derivative benefit” pursuant to § 2410. Hunter v. United States

(“Hunter II”), 769 F. App’x 329, 332–33 (6th Cir. 2019).4

Hunter then filed this suit against the IRS and Sterling, asking the court to vacate the

stipulation of dismissal in Sterling, order an evidentiary hearing about Sterling’s and the IRS’s

allegedly fraudulent concealment of their settlement agreement, and/or equitably toll his right to

redeem the property. R. 1 (Compl. at 17) (Page ID #17). The district court granted the defendants’

motion to dismiss, finding that Hunter failed to state a claim under either Federal Rule of Civil

4 The court declined to consider Hunter’s claim that the settlement agreement amounted to a fraud on the court because Hunter never made this argument before the district court in Hunter I. Hunter II, 769 F.App’x at 333.

3 No. 21-1496, Hunter v. Sterling Mortg. and Inv. Co. et al.

Procedure 60(d)(1), which leaves open the court’s power to hear an independent action brought in

equity to relieve a party from a prior judgment, or Federal Rule of Civil Procedure 60(d)(3), which

permits a party to set aside a judgment for fraud on the court. Hunter v. Sterling Mortg. & Inv.

Co. (“Hunter III”), No. 19-13814, 2021 WL 1087654 (E.D. Mich. Mar. 22, 2021). Hunter timely

appealed. R. 16 (Notice of Appeal) (Page ID #156).

II. ANALYSIS

A. Standard of Review

“We review de novo a district court’s dismissal of a complaint under Rule 12(b)(6).”

EPLET, LLC v. DTE Pontiac N., LLC, 984 F.3d 493, 499 (6th Cir. 2021). We accept as true well-

pleaded factual allegations in the complaint and will affirm a district court’s grant of a motion to

dismiss only if defendants are entitled to judgment as a matter of law. Id.

B. Rule 60

Rule 60 provides several ways by which a litigant can seek relief from a judgment. First,

Rule 60(b) permits litigants to file a motion to seek relief from a final judgment, order, or

proceeding. It lists several reasons that can support such a motion including “fraud (whether

previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party.”

Fed. R. Civ. P.

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