Debbie Echols v. United States

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
March 5, 2010
No. 09-50538
Summary Calendar Charles R. Fulbruge III
Clerk
DEBBIE ECHOLS; RHONDA ECHOLS
Plaintiffs-Appellants
v.
UNITED STATES OF AMERICA
Defendant-Appellee
Consolidated with
No. 09-50541
DEBBIE ECHOLS; RHONDA ECHOLS
Plaintiffs-Appellants
v.
UNITED STATES OF AMERICA, via the Farm Service Agency
Defendant-Appellee
Appeals from the United States District Court
for the Western District of Texas
USDC Nos. 6:09-CV-33, 6:09-CV-12
Before JONES, Chief Judge, and DAVIS and WIENER, Circuit Judges.
Nos. 09-50538, 09-50541
PER CURIAM:*
Debbie Echols and Rhonda Echols (“Appellants”) sued the United States
to quiet title to real property in Limestone County, Texas (the “property”).
Because the United States does not own or claim any interest in the property,
we lack subject matter jurisdiction to resolve the dispute. 28 U.S.C. §§ 2409a,
2410.
For purposes of this appeal, the facts are not in dispute. The property was
initially owned by Arbra and Patsy Echols. In 1993, they executed a deed of
trust for the benefit of Arbra’s brother, Carlton Echols, and Carlton’s wife, Irene
Echols, to the predecessor of the Farm Services Agency (“FSA”). The deed of
trust offered the property as collateral to secure two notes for Carlton. Because
of death and illness, the secured notes fell into default. At the direction of the
FSA, Arbra and Irene entered voluntary liquidation in 1996. Appellants assert
that Arbra and Irene sold the property to them on April 26, 1996. They also
assert that they settled the FSA’s lien and properly recorded title. Appellants
thereafter acted in all respects as owners of the property with good title.
On March 6, 2007, the FSA foreclosed on the property and sold it to
Gulledge and Sons, LLC (“Gulledge”) via warranty deed. Appellants learned of
the sale in August 2007 when Trey Gulledge visited the land. Until that time,
Appellants believed that the FSA had no interest in the property and were
unaware of any actions by FSA to sell the property.
On January 20, 2009, Appellants filed a quiet title action in United States
District Court for the Western District of Texas under 28 U.S.C. § 2409a to
“declare that the title claims of defendant United States to such real property
are of no validity whatsoever” (Case No. 09-cv-00012). On January 22, 2009,
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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Nos. 09-50538, 09-50541
Appellants filed an action in the 77th District Court of Limestone County, Texas,
to set aside the sale and cancel the trustee’s deed under 28 U.S.C. § 2410. The
state court action was removed to the United States District Court for the
Western District of Texas by the government on February 10, 2009 (Case No. 09-
cv-00033). In support of both claims, Appellants alleged that the Farm Service
Agency had waived its lien in 1996, voided the deed of trust by refusal of
payment, and then seized and “conveyed” the property to a foreclosure purchaser
at public auction on March 6, 2007, despite knowledge of Appellants’ purchase
and warranty deed.
In separate rulings, the district court dismissed the claims for lack of
subject matter jurisdiction under §§ 2409a and 2410. Appellants appealed both
rulings, and this court consolidated the two cases on September 8, 2009.
This court reviews questions of subject matter jurisdiction de novo.
Hussain v. Boston Old Colony, Ins. Co., 311 F.3d 623, 628 (5th Cir. 2002). A
party suing the United States must allege both a basis for the court’s
jurisdiction, FED. R. CIV. P. 8(a)(1), and a specific statute containing a waiver of
the United States’s sovereign immunity from suit. Lundeen v. Minetta, 291 F.3d
300, 304 (5th Cir. 2002). Sovereign immunity is waived only by explicit,
unequivocal statutory language, which is strictly construed, in terms of its scope,
in favor of the sovereign. Lane v. Pena, 518 U.S. 187, 192, 116 S. Ct. 2092(1996). Absent a waiver of sovereign immunity, the federal government is
immune from suit. Loeffler v. Frank, 486 U.S. 549, 554, 108 S. Ct. 1965(1988).
Appellants cite two statutes that waive sovereign immunity: 28 U.S.C.
§§ 2409a and 2410. Both waive sovereign immunity in cases involving real
property disputes like the one at bar. Section 2409a subjects the United States
to suit where “the United States claims an interest, other than a security
interest or water rights,” in real property. 28 U.S.C. § 2409a(a). Section 2410
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Nos. 09-50538, 09-50541
subjects the United States to suit where “the United States has or claims a
mortgage or other lien.” 28 U.S.C. § 2410(a). Neither provision is applicable
here, because the United States does not own or claim an interest in the
disputed real property.
First, Appellants did not challenge the disclaimer or the court’s order in
the suit premised on § 2409a.1 The district court properly dismissed this suit for
lack of jurisdiction. See Leisnoi, Inc. v. United States, 313 F.3d 1181, 1184 (9th
Cir. 2002) (“Once the United States filed its disclaimer of the land . . . the plain
terms of § 2409a(e) deprived the district court of jurisdiction.”).2
Second, Appellants claim that the government waived its sovereign
immunity under § 2410. They assert that because of defects in the foreclosure,
the government still retains a lien, and therefore, § 2410 waives sovereign
immunity. Alternatively, Appellants contend that even if the government does
not have a lien, § 2410 still waives sovereign immunity when the government
failed to follow proper procedures. See Popp v. Eberlein, 409 F.2d 309 (7th Cir.
1969) (court retained jurisdiction under § 2410 to resolve dispute about whether
a public sale was corrupt); Aqua Bar & Lounge, Inc. v. U.S. Dep’t of Treasury,
1
Section 2409a(e) states:
If the United States disclaims all interest in the real property or interest therein
adverse to the plaintiff at any time prior to the actual commencement of the
trial, which disclaimer is confirmed by order of the court, the jurisdiction of the
district court shall cease unless it has jurisdiction of the civil action or suit on
ground other than and independent of the authority conferred by section 1346(f)
of this title.
2
Appellants assert, for the first time on appeal, that the government does have an
interest in the property despite the disclaimer. The Appellants cannot attack the disclaimer
for the first time in this court after failing to raise it at the district court level. Stewart Glass
& Mirror, Inc. v. U.S. Auto Glass Disc. Ctr., Inc., 200 F.3d 307, 316-17 (5th Cir. 2000) ("It is
a bedrock principle of appellate review that claims raised for the first time on appeal will not
be considered.").
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Nos. 09-50538, 09-50541
539 F.2d 935 (3d Cir. 1976) (the court retained jurisdiction under § 2410 to
determine whether a tax lien was properly imposed).
Under § 2410, the United States waives its sovereign immunity in a real
property dispute where “the United States has or claims to have a mortgage or
other lien.” A party can raise a claim “only if, at the time the § 2410(a) action is
commenced, the government still claims a lien or a mortgage on the property.”
Koehler v. United States, 153 F.3d 263, 266 (5th Cir. 1998) (internal quotations
and citations omitted). “If the government has sold the property prior to the
filing of the § 2410(a) suit, § 2410(a) does not apply.” Id. (internal quotations
and citations omitted). The cases cited by Appellants are not controlling as this
court has held that it may not review the validity of a foreclosure sale for
procedural errors because such review would be ruling on the merits of the case.
Id. at 267. In Koehler, the plaintiffs challenged the validity of a quitclaim deed
because the IRS failed to provide the plaintiffs with proper notice of a foreclosure
as required by IRS regulations. Id. at 265. The plaintiff claimed that the
quitclaim title was ineffective and, therefore, the government still had a lien.
The Koehler court rejected this reasoning, holding:
At its core, sovereign immunity deprives the courts of jurisdiction
irrespective of the merits of the underlying claim. If the specific
terms of the statute are not met, the federal courts have no
jurisdiction to address the merits of the plaintiff’s claim. Were we to
accept taxpayer’s argument, we would first have to find for her on
the merits and then reason backwards to find a waiver of sovereign
immunity. Because sovereign immunity is jurisdictional and,
therefore, deprives this court of the ability to hear the merits of the
claim altogether, such reasoning is inherently flawed. In the end,
because the plain and unambiguous terms of § 2410(a) have not been
met—i.e., the government no longer claims an interest in the
property—§ 2410(a) does not confer subject matter jurisdiction
irrespective of how meritorious taxpayer’s claims may be.
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Nos. 09-50538, 09-50541
Id. at 267 (emphasis added). Accordingly, even procedurally defective sales
prevent waiver of sovereign immunity under § 2410.
The foreclosure sale extinguished the United States’s lienholder interest
in the property. See Conseco Fin. Servicing Corp. v. J&J Mobile Homes, Inc.,
120 S.W.3d 878, 883 (Tex. App.– Fort Worth, 2003) (“in foreclosure prior
lienholders are divested of title to the property, and their liens are
extinguished”). Per Koehler, because the foreclosure sale took place before trial,
sovereign immunity is not waived. Appellants are free to raise these procedural
defects in the foreclosure in a quiet title suit against Gulledge, but they cannot
do so against the government.
Finally, Appellants assert that Koehler is inapplicable because it involved
a quitclaim deed and this case involves a general warranty deed. Appellants are
correct on the facts, but wrong on the law. While Koehler did involve a quitclaim
deed, its legal holding was broader. Koehler prevents this court from reviewing
a case under § 2410 if the disputed property is sold, even if the sale is
procedurally flawed. Koehler, 153 F.3d at 267. Determining whether the
foreclosure sale was invalid would require a resolution on the merits which
sovereign immunity prevents.
For the foregoing reasons, the district court’s judgment is AFFIRMED.
6