Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Industrial Bank, N.A. v. United States

October 16, 2008

INDUSTRIAL BANK, N.A., PLAINTIFF,
v.
UNITED STATES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge

MEMORANDUM OPINION

In this case, a creditor and the Internal Revenue Service battle over who holds a superior interest in certain settlement monies. Industrial Bank, N.A. brought this suit against the United States and the Commissioner of the IRS seeking a declaratory judgment that it has the superior claim to approximately $160,000 in monies from a settlement agreement between the Small Business Administration and Nexgen Solutions, Inc. The federal tax liens have priority in this case, and the government has a right of offset; thus, summary judgment will be granted in favor of the government.

I. FACTS

Pursuant to certain "no cost" contracts between Nexgen and the Small Business Administration ("SBA"), Nexgen agreed to set up an electronic procurement website to be used by small businesses seeking government contracts. Defs.' Mem. in Supp. of Mot. for Summ. J. ("Defs.' Mem."), Ex. 2 Klein Decl. ¶¶ 4, 7, 11, & 14. The SBA made no payments to Nexgen prior to the termination of the contracts. Instead, Nexgen was to receive payments directly from participants in its electronic marketplace. Id. ¶ 5. At the end of 2003, the SBA terminated its contracts with Nexgen "for the convenience of the government pursuant to the government's contractual rights." Id. ¶ 19. Then, on October 15, 2004, the government and Nexgen entered into a stipulation of settlement, whereby by the SBA paid $2.3 million to Nexgen immediately and retained $600,000 to reimburse small business participants who had made payments to Nexgen for services related to the electronic procurement website. The government wanted to ensure that small business participants who had made payments to Nexgen would be reimbursed for any losses they incurred from their participation in the electronic procurement website. Id. ¶ 24. Nexgen retained a reversionary interest in any monies remaining that were not used to reimburse small businesses. About $160,000 remains from this $600,000 fund; the remaining money is currently held by the Department of the Treasury. Id. ¶ 23.*fn1

Industrial Bank, N.A. (the "Bank") extended loans to Nexgen in 1996 and 1997, which were secured by collateral agreements covering all "accounts receivable and contract rights, chattel paper, general intangibles and instruments, inventory, equipment and proceeds thereof that Nexgen then owned or thereafter acquired." Pl.'s Mem. in Supp. of Mot. for Summ. J. ("Pl.'s Mem."), Ex. 1 Gamble Decl. ¶¶ 2-6. Nexgen defaulted on the loans. Id. ¶ 9. On September 1, 2000, the Bank obtained a judgment by confession against Nexgen. Id. ¶ 10.

The Bank contends that it has a right to the remaining $160,000 that is prior and superior to any right held by the government. The government has an interest in the monies pursuant to two notices of federal tax lien filed against Nexgen. The government filed the first notice on March 17, 2004, reflecting an amount due of $504,133.77, and the second notice on December 15, 2005, showing an amount due of $219,469.43. Defs.' Mem., Ex. 1 Weir Decl. ¶¶ 1-2. Nexgen has outstanding federal tax liabilities totaling $770,922.13, plus interest and statutory additions. Id. ¶¶ 5, 7, & 9.

II. SUMMARY JUDGMENT STANDARD

Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment must be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); see also Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C. Cir. 1995). Moreover, summary judgment is properly granted against a party who "after adequate time for discovery and upon motion . . . fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true. Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than "the mere existence of a scintilla of evidence" in support of its position. Id. at 252. In addition, the nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999). Rather, the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor. Id. at 675. If the evidence "is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted).

III. ANALYSIS

The Bank contends that it has a superior interest in the settlement proceeds as the holder of a confession judgment and that it has super-priority status under federal statute. In fact, the government's lien interest is superior; further, the government has a right of set-off.

A. Tax Lien Priority Over An Inchoate Lien

The federal tax liens in this case have priority over the Bank's confession judgment lien. Pursuant to statute, federal tax liens arise as follows:

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.