Charles Hunter v. United States ( 2019 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 19a0228n.06
Case No. 18-1728
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
CHARLES R. HUNTER, ) Apr 30, 2019
DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellant, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE EASTERN DISTRICT OF
UNITED STATES OF AMERICA; ) MICHIGAN
STERLING MORTGAGE AND )
INVESTMENT COMPANY, )
)
Defendants-Appellees. )
BEFORE: ROGERS, DONALD, and THAPAR, Circuit Judges.
THAPAR, Circuit Judge. Charles Hunter wants the IRS to enforce its tax lien on a home
that he once owned. But because Hunter no longer has a legal interest in that home, the district
court dismissed his claim. We affirm.
I.
Twenty years ago, Charles Hunter purchased a home in Michigan (the “Lakeside
Property”). Five years later, he secured a mortgage with Wells Fargo on the Lakeside Property.
But when Hunter failed to pay his federal taxes for several years, the IRS filed multiple liens
against Hunter’s “property and rights to property”—including the Lakeside Property.
To compound his financial woes, Hunter also defaulted on his mortgage. So Wells Fargo
foreclosed on the Lakeside Property and sold it to Sterling Mortgage & Investment Company.
Case No. 18-1728, Hunter v. United States
Wells Fargo tried to notify the IRS about the sale, but it sent the notice to the wrong address. As
a result, Sterling bought the Lakeside Property with the government’s liens still attached. See
26 U.S.C. § 7425(b).
The United States subsequently filed suit to enforce its liens against the Lakeside Property.
The government sued both Sterling (the current property owner) and Hunter, who at that time still
had a right to redeem the property under Michigan law. See Mich. Comp. Laws § 600.3240(8).
The three parties eventually agreed to a voluntary dismissal without prejudice. Before the
dismissal, the United States and Sterling had worked out a deal between themselves: Sterling
would sell the Lakeside Property and split the “net profits” evenly with the United States. R. 8,
Pg. ID 33. The United States would then apply its proceeds towards Hunter’s tax liability. Shortly
after Hunter’s right to redeem the property lapsed, Sterling moved to evict Hunter from the
Lakeside Property. See Mich. Comp. Laws § 600.3240(8).
In response, Hunter sued to quiet title to the Lakeside Property. In his putative quiet title
action, Hunter sought (1) a declaratory judgment that the government’s tax liens have priority over
Sterling’s interest in the property and (2) an order forcing the government to enforce its tax liens
through a judicial sale. If the United States fully enforced its tax liens, Hunter argued, it would
receive more money—and if the government received more money, he would owe less in tax
liability.
Both Sterling and the United States moved to dismiss the case for lack of subject-matter
jurisdiction. The district court granted their motion to dismiss, and we review that dismissal de
novo. Wayside Church v. Van Buren Cty., 847 F.3d 812, 817 (6th Cir. 2017).
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II.
As a matter of first principles, the United States, as the sovereign, has immunity from most
lawsuits. Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 411–12 (1821); see also 1 William
Blackstone, Commentaries on the Laws of England *235 (“Hence it is, that no suit or action can
be brought against the [sovereign], even in civil matters . . . .”). That immunity deprives a federal
court of jurisdiction to hear cases brought against the United States. See United States v.
Sherwood, 312 U.S. 584, 586–87 (1941). But Congress can waive this immunity and allow
lawsuits against the federal government to go forward. Id. Such a waiver must be express, and
courts must construe it narrowly. Soriano v. United States, 352 U.S. 270, 276 (1957). Here,
Congress waived sovereign immunity from any action “to quiet title to . . . real or personal
property on which the United States has or claims a mortgage or other lien.” 28 U.S.C.
§ 2410(a)(1). Although Hunter named his complaint a “quiet title” action, he still must show that
he has actually brought a “quiet title” action as that term is used in § 2410. If he cannot, then
Congress did not waive sovereign immunity, and we lack jurisdiction over this suit.
Courts do not uniformly agree about the meaning of “quiet title” in § 2410. Some courts
have read the words “quiet title” narrowly. These courts have said that Congress waived immunity
only over disputes about title to property and not other, analogous disputes about interests in
property. E.g., Raulerson v. United States, 786 F.2d 1090, 1091–92 (11th Cir. 1986); cf. Hopkins
v. Walker, 244 U.S. 486, 490–91 (1917) (distinguishing between traditional quiet title actions and
analogous disputes about property interests); accord Holland v. Challen, 110 U.S. 15, 18 (1884).
This interpretation follows the old common law approach, where quiet title actions aimed to end
protracted lawsuits about who owned property. See Holland, 110 U.S. at 20. But other courts
have interpreted Congress’s waiver more broadly, saying that quiet title actions can also seek to
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remove a cloud over already established title. E.g., United States v. Coson, 286 F.2d 453, 457–58
(9th Cir. 1961); see also Nationstar Mortg., LLC v. Humphrey, No. 11–2185–STA, 2011 WL
3273077, at *4 & n.9 (W.D. Tenn. July 29, 2011) (collecting cases). This interpretation reflects
the fact that, when Congress added the words “quiet title” to § 2410, most states had enacted
statutes broadening quiet title actions to also include cloud-removal disputes. See Wehrman v.
Conklin, 155 U.S. 314, 322 (1894); see also Falik v. United States, 343 F.2d 38, 41–42 (2d Cir.
1965); Pub. L. No. 780, 56 Stat. 1026, 1026 (1942) (adding “quiet title” to § 2410). In this case,
we need not decide the precise extent to which Congress waived immunity because Hunter loses
under either interpretation.
Narrow title. Under the narrower title-interpretation, Hunter did not bring a quiet title
action because his complaint does not contest who holds title to the Lakeside Property. Instead,
his complaint seeks two things: (1) a declaratory judgment that the government’s tax liens have
priority over Sterling’s interest in the property and (2) an order forcing the government to enforce
its tax liens through a judicial sale. Neither request requires a determination of who holds title to
the Lakeside Property. Even if the government has superior tax liens, Sterling would still hold
uncontested title to the Lakeside Property. See Vereyken v. Annie’s Place, Inc., 964 F.2d 593, 596
(6th Cir. 1992). Nothing in Hunter’s complaint suggests otherwise. Accordingly, because Hunter
does not challenge who has title to the Lakeside Property, he has not brought a quiet title action
under the narrower title-interpretation. See Raulerson, 786 F.2d at 1091–92.
Clouded title. Alternatively, Hunter did not bring a quiet title action under the broader
cloud-interpretation because he does not seek to remove a cloud over his own title. Hunter’s
complaint does, in a sense, seek to remove a cloud over the Lakeside Property: the government’s
tax liens. But in order to remove that cloud over the Lakeside Property’s title, Hunter must have
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title to that property. Cf. Hopkins, 244 U.S. at 489 (“It hardly requires statement that in [cases to
remove cloud from a title] the facts showing the plaintiff’s title . . . are essential parts of the
plaintiff’s cause of action.”). Not only does Hunter lack title to the Lakeside Property, he also
lacks any property interest in it. Michigan law defines the scope of Hunter’s property rights. In
re Town Ctr. Flats, LLC, 855 F.3d 721, 724 (6th Cir. 2017). Michigan law gave Hunter a right to
redeem the Lakeside Property within six months of when Wells Fargo foreclosed on it and sold it
to Sterling. Mich. Comp. Laws § 600.3240(8). But what Michigan law giveth, it also taketh away.
When Hunter’s six-month window closed in October 2017, his “right, title, and interest in and to
the [Lakeside] property” extinguished. Conlin v. Mortg. Elec. Registration Sys., Inc., 714 F.3d
355, 359 (6th Cir. 2013) (quoting Piotrowski v. State Land Office Bd., 4 N.W.2d 514, 517 (Mich.
1942)); see also Mich. Comp. Laws § 600.3236. Without an interest in the Lakeside Property,
Hunter cannot remove a cloud from its title. Cf. Hopkins, 244 U.S. at 489.
Hunter argues that this broader cloud-interpretation also encompasses suits by a lienholder
who wants to determine lien priority—even if the lienholder does not hold title to the underlying
property. E.g., McEndree v. Wilson, 774 F. Supp. 1292, 1296–97 (D. Colo. 1991). But the courts
that have permitted such quiet title actions to resolve lien priority have done so only when the
plaintiff himself was a “private lienor.” United States v. Brosnan, 363 U.S. 237, 244–46 (1960);
United States v. Morrison, 247 F.2d 285, 290 (5th Cir. 1957). Here, Hunter is not a private lienor.
Instead, he seeks to adjudicate the priority of another party’s lien so that he can gain a derivative
benefit: lower tax liability. If the United States fully enforces its superior tax lien against the
Lakeside Property, Hunter argues, it will get more money. And if the United States gets more
money, Hunter will owe less in tax liability. But no court—not even those adopting the broader
cloud-interpretation—has ever suggested that Congress waived immunity from actions where a
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non-titleholding, non-lien-holding third party sues to gain a derivative benefit. See Kabakjian v.
United States, 267 F.3d 208, 209–11 (3d Cir. 2001) (allowing plaintiffs’ quiet title suit to proceed
when the plaintiffs alleged that they still owned the property because a tax sale was invalid). Doing
so would stretch the waiver beyond any reasonable limit. Since courts should interpret Congress’s
waiver of sovereign immunity narrowly, we decline to adopt such a broad reading here. Lane v.
Pena, 518 U.S. 187, 192 (1996). Accordingly, sovereign immunity bars Hunter’s suit against the
United States. Since he alleged no independent claim against Sterling, the district court
appropriately dismissed the case as to both defendants.
As a last resort, Hunter contends that we should equitably toll his right to redeem the
Lakeside Property—thus giving him the legal interest he needs to bring a quiet title action. He
alleges that both the government and Sterling secured his consent to dismiss the first lawsuit
without telling him that they would subsequently enter into an agreement to sell the Lakeside
Property. Then Hunter says that they waited until his redemption rights expired before bringing
an eviction action against him to effectuate that agreement. But see Mich. Comp. Laws
§ 600.5714(1)(g) (requiring a party to wait until redemption rights have lapsed before filing an
eviction action). Hunter claims that this conduct amounts to a “fraud on the court.” But Hunter
never argued before the district court that this conduct was fraudulent. Even making that
accusation for the first time now, he presents no facts backing it up. Thus, we decline to consider
this argument on appeal. See Knall Beverage, Inc. v. Teamsters Local Union No. 293 Pension
Plan, 744 F.3d 419, 424 (6th Cir. 2014) (“We do not address . . . arguments[] which were not fully
presented to the district court.”).
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* * *
Because Hunter has not brought a quiet title action under either the narrower title-
interpretation or the broader cloud-interpretation, the United States retains immunity from his suit.
Sovereign immunity deprives this court of jurisdiction over claims against the government.
Munaco v. United States, 522 F.3d 651, 652–53 (6th Cir. 2008) (quoting United States v. Mitchell,
463 U.S. 206, 212 (1983)). Hunter has alleged no independent claims against Sterling.
We affirm.
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