Equity Trust Company v. Robert Curtis , 806 F.3d 833 ( 2015 )

Case: 15-60355 Document: 00513281865 Page: 1 Date Filed: 11/23/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 15-60355 November 23, 2015
Summary Calendar
Lyle W. Cayce
Clerk
EQUITY TRUST COMPANY, Custodian, FBO Jean K. Thoden IRA #95896,
also known as ETC CUSTFBO Jean K. Thoden IRA 95896,
Plaintiff - Appellant
v.
ROBERT A. MCDONALD, Secretary of Veterans Affairs, in his capacity as
head of an agency of the United States of America,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Mississippi
Before REAVLEY, SMITH, and HAYNES, Circuit Judges.
REAVLEY, Circuit Judge:
Borrowers defaulted on a loan guaranteed by the VA Home Loan
Guaranty Program, and the Secretary of Veterans Affairs acquired the
property through foreclosure. Later, after ad valorem property taxes imposed
by Jackson County, Mississippi went unpaid, the property was sold to
plaintiff–appellant Equity Trust Company at a tax sale. Equity Trust
Company claims that it acquired title by that tax sale and ultimately filed suit
to quiet title in a Mississippi state court. The defendant–appellee Secretary
removed the action to federal court and counter-claimed for declaratory relief.
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No. 15-60355
The district court determined the state court lacked subject matter jurisdiction
over Equity Trust Company’s suit and therefore dismissed it. The district
court further found that the tax sale was void and therefore quieted title in
favor of the Secretary. Both of these rulings are challenged on appeal.
I.
The Supreme Court has held that the Quiet Title Act “provide[s] the
exclusive means by which adverse claimants [may] challenge the United
States’ title to real property.” Block v. N. Dakota ex rel. Bd. of Univ. & Sch.
Lands, 461 U.S. 273, 286, 103 S.Ct. 1811, 1819 (1983). Equity Trust Company
ignores the Quiet Title Act and argues that Congress waived sovereign
immunity with 38 U.S.C. § 3720(a). That statute provides, generally, that the
Secretary may “sue and be sued” over “matters arising by reason of” the VA
loans program. 38 U.S.C. § 3720(a)(1). In Block, the Supreme Court held not
only that a Quiet Title Act claim in federal court is the “exclusive means” by
which a quiet title action may be brought against the federal government, it
also recognized “the rule that a precisely drawn, detailed statute preempts
more general remedies.” See 461 U.S. at 285–86, 103 S. Ct. at 1819. Block
controls. A quiet title action against the federal government must be brought
in federal court, and when the state court lacks subject matter jurisdiction, no
jurisdiction is added by removal to federal court. See Lopez v. Sentrillon Corp.,
749 F.3d 347, 350 (5th Cir. 2014), as revised (Apr. 28, 2014). The district court
rightly concluded it was without subject matter jurisdiction over the plaintiff’s
suit.
II.
Congress has the “Power to dispose of and make all needful Rules and
Regulations respecting the Territory or other Property belonging to the United
States.” U.S. Const. art. IV, § 3, cl. 2. This Property Clause of the Constitution
vests in the legislature “‘the absolute right to prescribe’ the manner in which
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its property is transferred.” In re Supreme Beef Processors, Inc., 468 F.3d 248,
252 (5th Cir. 2006) (en banc) (quoting Gibson v. Chouteau, 80 U.S. (13 Wall.)
92, 99 (1872)). Absent congressional permission, government officials may not
“release or otherwise dispose of” government property. Royal Indem. Co. v.
United States, 313 U.S. 289, 294, 61 S. Ct. 995, 997 (1941). Moreover, “for the
most obvious reasons of public policy,” the property of the federal government
“cannot be seized by authority of another sovereignty, against the consent of
the government.” United States v. Ansonia Brass & Copper Co., 218 U.S. 452,
471, 31 S.Ct. 49, 54 (1910).
The Secretary has statutory authority to purchase property and may
“sell, at public or private sale, exchange, assign, convey, or otherwise dispose
of any such property.” 38 U.S.C. § 3720(a)(5). “For the purpose of facilitating
the most expeditious sale, at the highest possible price,” real property
guaranteed by VA loans and obtained by the Secretary through foreclosure
must be listed “with real estate brokers under such arrangements as the
Secretary determines to be most appropriate and cost effective.” 38 U.S.C.
§ 3733(d)(2). Thus, “[t]he statutory scheme is clear: only the VA may sell
property acquired under the VA Home Loan Guaranty Program.” Yunis v.
United States, 118 F.Supp.2d 1024, 1036 (C.D. Cal. 2000).
Here, the property was sold pursuant to Mississippi state law. In the
absence of consent from the federal government, that sale was invalid. See
United States v. Alabama, 313 U.S. 274, 282, 61 S.Ct. 1011, 1014 (1941).
According to Equity Trust Company, the required congressional permission is
found in 38 U.S.C. § 3720(a)(6), which provides that acquisition of property by
the Secretary, “shall not deprive any State or political subdivision thereof of
its civil or criminal jurisdiction of, on, or over such property (including power
to tax) or impair the rights under the State or local law of any persons on such
property.”
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While the statute preserves local “power to tax,” it does not permit local
governments to seize and sell federal government property. Equity Trust
Company therefore relies on the latter half of the provision, which states that
acquisition of property shall not “impair the rights under the State or local law
of any persons on such property.” Equity Trust Company contends that that
Jackson County is a “person” within the meaning of 38 U.S.C. § 3720(a)(6),
meaning its right to sell the property at a tax sale was not impaired.
“A proceeding against property in which the United States has an
interest is a suit against the United States” implicating sovereign immunity.
See Alabama, 313 U.S. at 282, 61 S. Ct. at 1014. This includes tax sales. See
id. “Waivers of the Government’s sovereign immunity, to be effective, must be
‘unequivocally expressed.’” United States v. Nordic Village Inc., 503 U.S. 30,
33, 112 S.Ct. 1011, 1014 (1992) (quoting Irwin v. Department of Veterans
Affairs, 498 U.S. 89, 95, 111 S.Ct. 453, 457 (1990)). Further, “waivers of
sovereign immunity should be narrowly construed in favor of the United
States.” In re Supreme Beef Processors, Inc., 468 F.3d at 253.
Section 3720(a)(6) is not an unequivocal waiver of sovereign immunity
that permits Jackson County to sell federally owned property. 1 Indeed, Equity
Trust Company’s argument that Jackson County, Mississippi is a person
within the meaning of the statute is implausible. Section 3720(a)(6)
distinguishes between “State or political subdivision[s]” and “persons.” It also
distinguishes between “power” (of local governments) and “rights” (of persons).
1 Confronted with the same question, the Commonwealth Court of Pennsylvania
reached the same result. See In re Upset Tax Sale, Sept. 13, 2006, 976 A.2d 1271, 1277 (Pa.
Commw. Ct. 2009) (“[T]he language of 38 U.S.C. § 3720(a)(6) does not provide unequivocal
consent to a tax claim bureau to divest the V.A. of its property through an upset tax sale.”).
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The tax sale of federally owned real estate was null and void, and the district
court rightly quieted title in favor of the Secretary.
III.
The judgment of the district court is AFFIRMED.
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