United States District Court, D. Kansas
MEMORANDUM AND ORDER
MONTI L. BELOT, District Judge.
This matter is before the court on the following:
1) Cross-Claimant Internal Revenue Service's (IRS) Motion for Summary Judgment foreclosing tax liens (Doc. 180) and Cross-defendants Ronald Leathers' and James Holden's response (Doc. 187); and
2) Ronald Leathers' and James Holden's Motion for Partial Summary Judgment on Priority of Assignment and Government Tax Liens (Doc. 183) and IRS' Response (Doc. 185).
I. Background and Procedural History
Louise Leathers owned certain real properties in Haskell County, Kansas. After her death in 1991, and subsequent litigation, the mineral interest in the Haskell County properties was distributed equally to Michael and Ronald Leathers. Ronald's share then dwindled to one-fourth interest after a judicial finding that Ronald's ex-wife would receive a fifty percent interest in his share.
During the years 1997 and 1999 to 2005, Ronald failed to file a tax return. The IRS assessed federal income taxes against Ronald for those years. The IRS also filed Notices of Federal Tax Liens (NFTLs) in Haskell County, Kansas and in Colorado Springs, Colorado, Ronald's last known residence. A NFTL was filed on April 28, 2005, for tax years 1997 through 2002. A second NFTL was filed on September 19, 2006 for the same tax years.
On October 6, 2006, Ronald conveyed "all right, title and interests... related to mineral rights' and chose(s) of action'" to the Dirt Cheap Mine Trust, a trust allegedly established to reacquire Ronald's mineral interest and royalty payments. On November 12, 2007, a tax assessment was completed by the IRS and mailed to Ronald for the tax years 2003 through 2005. On February 25, 2008, a NFTL was filed in Colorado and Kansas for the liabilities arising from tax years 2003 through 2005.
This action originally began as a state court lawsuit to quiet title and was filed by Michael Leathers in Haskell County, Kansas. In June 2008, Michael amended his petition to add the United States as a party, alleging that its tax liens filed in Haskell County for Ronald's unpaid assessments gave it a potential interest in the mineral rights that were the subject of the action. The United States removed the action to this court in July 2008. It added a cross-claim in June 2010 seeking to reduce its tax assessments to judgment. (Doc. 74).
On May 3, 2013, this court entered an order granting in part the IRS' motion for summary judgment on its cross-claim. The court granted the IRS' motion to reduce to judgment the assessments for tax years 1997 and 1999-2005. The court denied the IRS' motion for the tax year 1998. Additionally, the court found that the IRS had established a lien on all royalty proceeds in which Ronald retained an interest. However, the court rejected the IRS's contention that collateral estoppel precluded the trust from claiming an interest in the royalties and the court expressed no opinion on the validity of the trust or the purported assignment by Ronald. The issue of the priority of the IRS' liens was not before the court at that time.
The IRS now moves for summary judgment seeking to foreclose on its liens. (Doc. 180). Ronald and James Holden, Trustee for the Dirt Cheap Mine Trust, move for partial summary judgment on the priority of the tax liens. (Doc. 183).
II. Summary Judgment Standards
The rules applicable to the resolution of this case, now at the summary judgment stage, are well-known and are only briefly outlined here. Federal Rule of Civil Procedure 56(c) directs the entry of summary judgment in favor of a party who "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). An issue is "genuine" if sufficient evidence exists so that a rational trier of fact could resolve the issue either way and an issue is "material" if under the substantive law it is essential to the proper disposition of the claim. Adamson v. Multi Community Diversified Svcs., Inc. , 514 F.3d 1136, 1145 (10th Cir. 2008). When confronted with a fully briefed motion for summary judgment, the court must ultimately determine "whether there is the need for a trial-whether, in other words, there are any genuine factual issues that properly can be resolved only by a ...