United States v. Henry E. Perry

473 F.2d 643, 31 A.F.T.R.2d (RIA) 567, 1973 U.S. App. LEXIS 12271
CourtCourt of Appeals for the Fifth Circuit
DecidedJanuary 8, 1973
Docket72-2143
StatusPublished
Cited by9 cases

This text of 473 F.2d 643 (United States v. Henry E. Perry) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Henry E. Perry, 473 F.2d 643, 31 A.F.T.R.2d (RIA) 567, 1973 U.S. App. LEXIS 12271 (5th Cir. 1973).

Opinions

LEWIS R. MORGAN, Circuit Judge.

The Internal Revenue Service brought this action against the appellees to set aside the transfer of certain real property as fraudulent against the government and to impress and foreclose an equitable lien on the property. The District Court for the Northern District of Alabama dismissed the government’s claim as barred by an earlier state court quiet title action under principles of res judi-cata. From that adverse decision, the Internal Revenue Service appeals.

I.

Appellees-taxpayers, Henry and Annie Mae Perry, were charged by the government with failure to pay a total of approximately $84,000 in federal income tax for various years from 1959 to 1965. At the times that these liabilities accrued, Henry and Annie Mae Perry owned the piece of real property which was subject of the conveyance that the IRS now asserts to be fraudulent. In January, 1967, taxpayers Henry and Annie Mae entered a contract to transfer this real estate to Perrylanes, Inc., a corporation whose sole stockholders were the children of Henry and Annie Mae, in exchange for assumption of outstanding mortgages. When the actual deed delivery came on March 11, 1967, however, the property was transferréd by warranty deed to the Perry children jointly, rather than to the corporation.

Between November, 1967, and March, 1968, the IRS assessed deficiencies against the Perrys totaling $84,617,83. [645]*645Notice of liens were filed by the government in the appropriate county offices on March 15 and June 11, 1968, pursuant to 26 U.S.C. § 6322.

In September, 1969, the corporation, Perrylanes, Inc., commenced a suit in the circuit court of Morgan County, Alabama, to reform the deed to show Perry-lanes, not the children, as grantee, and to quiet title. Named defendants were the Perry children, the parties holding mortgages on the property, and the United States government. The United States was properly served with process, both in Alabama and in Washington, as required by federal law. The filed tax liens claimed by the United States were specifically set out in the complaint. The United States failed to make any appearance in this state court action1 and never requested, as was its right, that the action be removed to federal district court. On September 15, 1970, a decree pro confesso was entered against the government, ostensibly freeing the property of all government claims.

On April 7, 1971, the IRS commenced this action to declare the transfer to Perrylanes to be fraudulent against the government and, void. The district court held that action was barred by res judicata.

II.

In this appeal, the government alleges two grounds for reversal which are very closely connected. Both arguments rest on the acceptance of the government’s view of the nature and origin of the lien it now seeks to enforce. The first argument is substantive. The second is procedural and highly technical.

The government argues that the notice of liens filed March and June, 1968, were against the taxpayers and not the property, and so at the time of the judgment of the Morgan County court the government had no claim on the property. The government maintains that these recorded liens are not the subject of the instant fraudulent conveyance action. Rather, the government asserts that the lien involved herein is a totally new equitable lien which did not, and indeed could not, come into existence until the instant suit was brought in 1971.

At the outset, it is necessary to understand the basis for the original suit to quiet title. Congress has expressly granted to appropriate state and federal courts the power to entertain suits of this type in 28 U.S.C. § 24102 One of the purposes of this statute was “to provide a method to clear real estate titles of questionable or valueless liens.” 3 It was in response to the recognized need for a way to force disputes over government tax liens to resolution, rather than leaving the United States in complete control of the timing. It is against this background that the effect of the quiet title proceeding attacked herein must be resolved.

Both the Alabama courts and this court construing Alabama law have rec[646]*646ognized that quiet title actions in Alabama are designed to end all doubts about title to land as far as all persons given notice of the suit are concerned. The Alabama Supreme Court has stated:

The primary purpose of [the quiet title action] is to enable a party who is in the peaceable possession of land, and who, for this reason, cannot maintain an action at law, to compel a party who claims a right, title, or interest in the land, or who is ever reputed to so claim, to come into a court of equity and propound and show the nature, character, and kind of his title, claim, and demand, and to have it determined, and to have the court to decree and adjudge whether it is good or bad. Wylie v. Lewis, 263 Ala. 522, 83 So.2d 346, 347 (1955).

This court has recently recognized this as Alabama law:

By the Alabama statutes which control quieting title and determination of claims to land, the Circuit Court decrees “. . . clear up all doubts or disputes concerning [the land].” Anderson v. Moorer, 372 F.2d 747, 751 (5th Cir. 1967).

Thus it is clear that quiet title actions are intended to be as final and reliable as possible.

The government now takes the position that while quiet title suits may be designed to settle all claims, the government’s instant claim was not in existence at the time of the quiet title suit and that the government was not bound to litigate it. We reject this position in order to preserve the integrity of the quiet title action and to give full effect to what Congress must have intended in 28 U.S.C. § 2410.

There can be no doubt that the government was fully aware of these transactions in 1969 when the quiet title suit was brought. The Service had been feuding with the Perrys, both in court and out, for several years. The question is whether the government, a creditor of those who transferred land, is required to come in and assert any claim of fraudulent conveyance in any action brought by a third-party transferee to quiet title to the land. In the instant case, where all the necessary facts are known to the government at the time of the quiet title action, we find that it was obligated to assert its claim of a fraudulent conveyance at that time and failure to do so subjects the government to res judicata.

Under Alabama law, as this court has recognized, all matters are to be settled in quiet title actions, including matters available for presentation but not presented:

. the Alabama state courts would not allow relitigation either of issues raised in the prior suits or of issues which could have been raised in those suits. By the Alabama statutes which control quieting title and determination of claims to land, the Circuit Court decrees “ . . . clear up all

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473 F.2d 643, 31 A.F.T.R.2d (RIA) 567, 1973 U.S. App. LEXIS 12271, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-henry-e-perry-ca5-1973.