Opinion
Case No. 00-CV-0236-K (M)
October 17, 2002
ORDER
Before the Court is the Motion of the Plaintiff for Summary Judgment against Defendant Mark Lowrance.
Background Facts and Procedures
On or about December 4, 1995, Defendant's father, Robert Lowrance, filed his federal income tax return for the year 1994. The return showed a self-assessed balance of tax due of $2,390,074. The United States made several assessments against Robert Lowrance for taxes or interest due. On the date of each assessment, a federal tax lien arose pursuant to 26 U.S.C. § 6321 and 6322 and attached to all property and rights to property belonging to Robert Lowrance. Plaintiff filed notices of federal tax liens in Washington, Nowata, and Rogers Counties in Oklahoma and Ellis and Finney Counties in Kansas.
On August 9, 1996, Robert Lowrance filed for Chapter 11 Bankruptcy in the Northern District of Oklahoma, Case No. 96-03124-M. During bankruptcy, the bankruptcy court authorized the sale of several parcels of real property and stock on which the United States had federal tax liens. The federal tax liens attached to the proceeds of these sales. The bankruptcy court orders authorizing the sale of these assets required Robert Lowrance to deposit the proceeds into a separately-segregated account, and the bankruptcy court ordered Robert Lowrance not to withdraw any funds from the separately-segregated account without the consent of the Internal Revenue Service ("IRS") or by court order. The bankruptcy court orally granted Robert Lowrance's motion to dismiss his bankruptcy case on February 29, 2000, conditioned on the fact that the dismissal would not affect the liens attached to the proceeds from the sale of the aforementioned assets. The bankruptcy court signed the Order dismissing the case on March 13, 2000.
On March 1, 2000, Robert Lowrance wrote a check for $700,000 out of the separately-segregated account and deposited it into his debtor-in-possession account. On March 14, 2000, Robert Lowrance wrote check number 3350 worth $125,000 out of his debtor-in-possession account and deposited it into his Lowrance Trading Account. On March 30, 2000, Robert Lowrance used check number 1022 on his Lowrance Trading Account to purchase Official Check number 341315458, Bank of Oklahoma, dated March 30, 2000, payable to his son, Defendant Mark Lowrance. This Official Check is the subject of this action against Defendant Mark Lowrance.
Defendant received the Official Check for $40,000 on or about March 30, 2000, and he understood that the check was from his father. Defendant deposited the check into his personal account at Farm Credit of Southwest Kansas. At the direction of Robert Lowrance, Defendant then wrote a check on his Farm Credit account in the amount of $40,000 to the law firm of Eagleton, Eagleton and Harris ("E, E H") for its representation of Robert Lowrance in this lawsuit. As of January 1, 2000, Defendant knew that his father, Robert Lowrance, had tax problems, but he "did not know the exact nature or extent of his problems" (Exhibit C to dkt #91).
In the present action, Plaintiff filed its Complaint in this Court on March 20, 2000, naming Robert D. Lowrance and Bruce Johnson as defendants in order to reduce a federal tax assessment against Robert D. Lowrance to judgment and to foreclose federal tax liens against personal property. Plaintiff added Defendant Mark Lowrance as a defendant on July 23, 2001, alleging conversion by Defendant. Plaintiff filed this Motion for Summary Judgment against Defendant to determine that Defendant is liable to the United States for tortious conversion of $40,000.
Summary Judgment Standard
Summary judgment is appropriate if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). The Court must view the evidence and draw any inferences in a light most favorable to the party opposing summary judgment, but that party must identify sufficient evidence which would require submission of the case to a jury. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-52 (1986); Mares v. ConAgra Poultry Co., 971 F.2d 492, 494 (10th Cir. 1992). Where the nonmoving party will bear the burden of proof at trial, that party must go beyond the pleadings and identify specific facts that demonstrate the existence of an issue to be tried by the jury. See Mares, 971 F.2d at 494.
Discussion
In Oklahoma, the elements of the tort of conversion are "(1) that the plaintiff own certain property at the time of its conversion; (2) that defendant converted plaintiff's property by a wrongful act of disposition of the property; and (3) that damages are suffered by the plaintiff." Atwall v. Stifel, Nicolaus Co., Inc., No. CIV-91-107-C, 1991 U.S. Dist. LEXIS 20043, at *6 (W.D. Okla. Apr. 15, 1991). See also Continental Oil Co. v. Berry, 103 P.2d 69, 72 (Okla. 1940); White v. Webber-Workman Co., 591 P.2d 348, 350 (Okla.Ct.App. 1979).
As to element one, Defendant does not dispute that because of 26 U.S.C. § 6321 (2002) and the order of the bankruptcy court made pursuant to 11 U.S.C. § 349 (2002), the federal tax liens were attached to the funds paid to Defendant by Robert Lowrance. Element two requires that Defendant converted Plaintiff's property by a wrongful act of disposition of the property. Defendant essentially argues that he could not have converted the property because he was not the "owner" of the property. Defendant cites Dennis v. United States, 372 F. Supp. 563 (E.D. Va. 1974), for the proposition that the crucial question in the case at bar is one of ownership. Dennis, however, involved a plaintiff who gave to the defendant a "right to possess" funds in order for the defendant to transfer the funds to a charity. Id. at 567. The defendant, however, kept the funds for himself and was convicted of fraud for such. Id. at 565. Thereafter the IRS filed a tax lien against the defendant and filed a notice of levy against the funds, Id. The Court found that the "uncontested issue" in Dennis was of the taxability of the ill-gotten gains, that is whether the United States could levy against the funds in the first place because in the context of a government lien for failure to pay taxes, the taxpayer must be the owner of the property to which the lien will attach before the government can levy against it. Id. at 566. See also 26 U.S.C. § 6321. It was in deciding this issue that the court found the crucial question to be one of ownership. Dennis, 372 F. Supp. at 566. "Before the issue of conversion can be decided, ownership of the money must be established," Brown v. Oklahoma State Bank Trust Co. of Vinita, 860 P.2d 230, 233 (Okla. 1993). In the case at bar, however, ownership of the money is not contested. Therefore Dennis is not controlling authority as to the issue in this case.
In 1987, the Oklahoma Supreme Court defined conversion as "any act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein." Steenbergen v. First Fed. Sav. Loan of Chicasha, 753 P.2d 1330, 1332 (Okla. 1987) (citation omitted). See also Atwall, 1991 U.S. Dist. LEXIS at *6-7. The facts in the case at bar show that Defendant may have exercised the requisite dominion over the funds. In Defendant's Response to Plaintiff's Motion for Summary and Supporting Brief (dkt #91) and in Defendant's attached Affidavit (Exhibit A to dkt #91), Defendant states: "On April 3, 2000, I received official check no. 341315458 issued by Bank of Oklahoma . . . I deposited Bank of Oklahoma official check number 341315458 into my account . . . I wrote draft number 2149 on my account . . . to the law firm of [E, E H]." However, conversion requires an act of dominion that is wrongfully exerted over the property of another. See Steenbergen, 753 P.2d at 1332. Therefore the intent of the Defendant becomes an issue.
The Court recognizes that there are Oklahoma Supreme Court cases that have found no notice or knowledge required in a conversion claim. See Wilson v. Holmes, 50 P.2d 1081 (Okla. 1935); Clark v. Whiteus, 171 P. 746 (Okla. 1918). However, a more recent Oklahoma Supreme Court case did require notice, and the federal court "`must apply the most recent statement of state law by the state's highest court.'" Cooper v. Central Southwest Svcs., 271 F.3d 1247, 1251 (10th Cir. 2001) (citation omitted). In Installment Finance Corp. v. Hudiburg Chevrolet, Inc., 794 P.2d 751 (Okla. 1990), Hudiburg purchased a car with a facially clear certificate of title and then sold the car. Unbeknownst to Hudiburg, this clear title had been fraudulently obtained by a third party. In fact, Plaintiff had a lien on the car. The court found, "Being without any notice of the interest, Hudiburg innocently purchased the vehicle and sold it without committing any wrongful act. There being no evidence of wrongful dominion over the property, we find that Hudiburg did not tortiously convert the property." Id. at 753. The Restatement (Second) of Torts also includes intent and good faith among the factors that help determine the seriousness of the interference with the property.
(2) In determining the seriousness of the interference and the justice of requiring the actor to pay the full value, the following factors are important:
(a) the extent and duration of the actor's exercise of dominion or control;
(b) the actor's intent to assert a right in fact inconsistent with the other's right of control;
(c) the actor's good faith;
(d) the extent and duration of the resulting interference with the other's right of control;
(e) the harm done to the chattel;
(f) the inconvenience and expense caused to the other.
RESTATEMENT (SECOND) OF TORTS § 222A(2).
Here, the Plaintiff contends that Defendant did not need actual notice of the tax liens, but instead constructive notice was sufficient. Plaintiff also argues that the filing of the tax lien by the IRS constituted this constructive notice. However, the cases cited by the Plaintiff involve a bank or some other business that had constructive notice because of a filed security interest or filed mortgage. See First Nat'l Bank of Bethany v. American Gen. Fire and Cas. Co., 927 F.2d 1126, (10th Cir. 1991); United States Zinc Co. v. Colburn, 255 P. 688 (Okla. 1927). The Court finds that an individual, such as Defendant, is different from a business because unlike an individual, the business has a legal obligation to search for liens or security interests on property that it receives. The Court is not aware of any cases finding constructive notice on an individual because of a filed financing statement or filed tax lien. The only other evidence Plaintiff offers of Defendant's knowledge or notice is Defendant's statement that he knew that his father had tax problems, but he "did not know the exact nature or extent of his problems." The Court finds that this statement is not enough for the Court to summarily find that Defendant had notice of tile tax liens or had the requisite intent to have wrongfully converted the funds. Therefore a factual issue remains as to the second element of conversion, that is, whether Defendant converted Plaintiff's property by a wrongful act of disposition of the property. Because the Plaintiff has not met its burden to prove this second element of conversion, the Court does not reach the issue of damages.
Conclusion
Because factual issues remain, summary judgment is inappropriate.
IT IS THEREFORE ORDERED that the Motion for Summary Judgment of the United States of America (#77) is DENIED.
ORDERED.