United States v. Loisel,
No. 98-108-B (D.Me. 08/05/1998)
UNITED STATES DISTRICT COURT DISTRICT OF MAINE
Civ. No. 98-108-B
August 5, 1998
UNITED STATES OF AMERICA,
REGINALD D. LOISEL, ET AL.,
The opinion of the court was delivered by: Morton A. Brody United States District Judge
ORDER AND MEMORANDUM OF DECISION
BRODY, District Judge
Plaintiff, the United States ("the government"), filed this action to set aside, as fraudulent, a
conveyance of real property in Waterville, Maine, by Defendant Reginald D. Loisel, Sr.
("Taxpayer") to Defendants Tina Wellman and Reginald D. Loisel, Jr., and to foreclose federal tax
liens arising from the tax liability of Reginald D. Loisel, Sr. Before the Court is Defendants'
Motion to Dismiss. For the reasons stated below, Defendants' motion is DENIED. *fn1
I. MOTION TO DISMISS
In a Motion to Dismiss brought under Rule 12(b)(6) the Court takes all of Plaintiff's factual
averments as true and indulges every reasonable inference in Plaintiff's favor. Talbott v. C.R.
Bard, Inc., 63 F.3d 25, 27 (1st Cir.1995). The Court may grant Defendants' Motion to
Dismiss "only if it clearly appears, according to the facts alleged, that the plaintiff cannot
recover on any viable theory." Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 52 (1st
In its Complaint, the government alleges that on January 10, 1994, assessments were made against
Taxpayer for his federal income tax liabilities for the years 1987 through 1991, and that the
assessments, totaling $271,558.11, remain unpaid to date. The Complaint further alleges that
Taxpayer transferred the Waterville property in question to his children, Defendants Reginald D.
Loisel, Jr. and Tina Wellman, on January 23, 1992, after his tax liabilities had accrued. The
government alleges that the conveyance was made to defraud the government as a creditor and that
the conveyance was made without consideration and rendered Taxpayer insolvent. The government
seeks to have the allegedly fraudulent transfer set aside, the liens arising from Taxpayer's
liability foreclosed, Defendants ejected from the property, and the property sold.
In their Motion to Dismiss, Defendants, proceeding pro se, argue that the government has alleged
no legal ground for recovery. Specifically, Defendants claim that a lien cannot attach to
property that is no longer owned by Taxpayer and that was transferred before the assessments were
made in 1994. Defendants claim that when Taxpayer bequeathed his property to his children in 1992
there were no liens in place or other encumbrances upon the title and, therefore, that the
conveyance was valid.
The First Circuit has recently "untangle[d] the web of statutory and procedural requirements"
implicated by the government's foreclosure attempt:
Once the IRS makes an assessment of a taxpayer's liability, it has sixty days in which to "give
notice to each person liable for the unpaid tax, stating the amount and demanding payment
thereof." 26 U.S.C. § 6303(a). Once notice and demand are given and the tax goes unpaid, a lien
in favor of the United States automatically arises "upon all property and rights to property,
whether real or personal, belonging to such person." 26 U.S.C. § 6321. Whether and to what extent
a particular piece of property constitutes property of the taxpayer to which a federal tax lien
can attach is a question of state law. Aquilino v. United States, 363 U.S. 509, 512, 80 S. Ct.
1277, 1279-80, 4 L. Ed. 2d 1365 (1960). The lien arises at the time the assessment is made and
continues until the liability is satisfied or becomes unenforceable by lapse of time. 26 U.S.C. §
6322. The IRS may collect the tax by levy or by bringing a proceeding in court . . . . Markham v.
Fay, 74 F.3d 1347, 1353 (1st Cir. 1996).
In order for the government to prevail, therefore, it must prove that the property in question
belonged to Taxpayer at the time the assessment was made. It is uncontroverted that the
government did not make an assessment of Defendant's tax liability until 1994. Thus, the lien
on "property, whether real or personal, belonging to" Defendant did not arise until 1994, two
years after the property in question was transferred by Taxpayer to his children. Defendants
correctly assert that a lien cannot attach to property validly transferred before the government
makes an assessment. However, Defendants ignore the fact that the government seeks to set aside
that transfer as fraudulent.
Although the government does not specifically state in its Complaint under what state law it
seeks to invalidate the transfer, the language used suggests that it is alleging a claim under
the Maine Uniform Fraudulent Transfer Act ("MUFTA"), 14 M.R.S.A. §§ 3571-3582. *fn2 The Complaint
states that the January 23, 1992, conveyance was fraudulent as to the United States as creditor
of Taxpayer "because it was done with the intent to hinder, delay, or defraud the United States,"
and "because at the time of the transfer the Taxpayer was insolvent, or as a result of the
transfer he was rendered insolvent, and the transfer was for insufficient consideration." Pl.'s
Complaint ¶¶ 14, 15. This language is lifted directly from 14 M.R.S.A. §§ 3575(1)(A) and 3576(1).
Those provisions of the MUFTA provide:
Fraudulent Transfer. A transfer made or obligation incurred by a debtor is fraudulent as to a
creditor, whether the creditor's claim arose before or after the transfer was made or the
obligation was incurred, if the debtor made the transfer or incurred the obligation: A. With
actual intent to hinder, delay or defraud any creditor of the debtor . . . . 14 M.R.S.A. § 3575(1)
(A); see also Morin v. Dubois, --A.2d--, --, No. ARO-97-11, 1998 WL 351779, at *2 (Me. June 25,
Transfers without receipt of reasonably equivalent value. A transfer made or obligation incurred
by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the
obligation was incurred if the debtor made the transfer or incurred the obligation without
receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor
was insolvent at that time or the debtor became insolvent as a result of the transfer or
obligation. 14 M.R.S.A. § 3576(1).
Although the government could have been more precise in its pleading, the Court is satisfied that
the government's Complaint sufficiently alleges the necessary elements of a cause of action under
§ 3575(1)(A) or § 3576(1) and that Defendants have failed to demonstrate that the government
would not be entitled to relief under any set of facts it might prove in support of its claim.
The Court, therefore, DENIES Defendants' Motion to Dismiss.
Dated this 5th day of August, 1998.
*fn1 Defendants answered the government's complaint by filing a Motion to Dismiss on June 18,
1998. Noticing that Defendant Reginald D. Loisel, Jr. failed to place his signature in the space
allotted for such in the motion, the government moved for a default judgment against him pursuant
to Fed. R. Civ. P. 55. Defendants responded by filing a Motion for Extension of Time on July 13
and a second, identical Motion to Dismiss on July 20, this one containing Loisel, Jr.'s
signature. In light of the fact that Defendants are pro se, see Sisbarro v. Warden, Massachusetts
State Penitentiary, 592 F.2d 1, 2 (1st Cir. 1979) (citing Haines v. Kerner, 404 U.S. 519, 520
(1972)) (pro se pleadings are held to "less stringent standards than pleadings drafted by
lawyers"), that they corrected the technical error in a timely fashion, and that the presence of
a signature block on the motion for Loisel, Jr. put the government on notice that he in fact
intended to defend the claim, the Court denies the government's Motion for Entry of Default
Against Reginald D. Loisel, Jr. See 10 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice and Procedure § 2685 (2d ed. 1983) (the decision to enter a default judgment is
a decision committed to the "sound judicial discretion" of the trial judge). Defendants' Motion
for Extension of Time is dismissed as moot.
*fn2 Plaintiff does make passing reference to 14 M.R.S.A. § 3576(1) in its response to
Defendants' Motion to Dismiss.