
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                                 ____________________          No. 95-1712                     PROGRESSIVE CONSUMERS FEDERAL CREDIT UNION,                                Plaintiff, Appellant,                                          v.                              UNITED STATES OF AMERICA,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Reginald C. Lindsay, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                                Boudin, Circuit Judge,                                        _____________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Stahl, Circuit Judge.                                         _____________                                 ____________________               Stephen  M.  Sheehy, with  whom  Kaye,  Fialkow, Richmond  &               ___________________              ___________________________          Rothstein were on brief for appellant.          _________               Kevin M. Brown, Attorney, with  whom Donald K. Stern, United               ______________                       _______________          States Attorney, Loretta C. Argrett,  Assistant Attorney General,                           __________________          Gary R. Allen, and William S. Estabrook, Attorneys, Tax Division,          _____________      ____________________          Department of Justice, were on brief for appellee.                                 ____________________                                    March 19, 1996                                 ____________________                      BOWNES, Senior Circuit Judge.    On    October   8,                      BOWNES, Senior Circuit Judge.                              ____________________            1993,    Progressive    Consumer    Federal   Credit    Union            ("Progressive"),   plaintiff-appellant,  filed   a  complaint            against  the Internal  Revenue  Service  ("the  government"),            defendant-appellee, in the Land Court Department of the Trial            Court  of  Plymouth  County, Commonwealth  of  Massachusetts.            Progressive  sought  a  declaration  that  its  mortgage  had            priority  over  properly recorded  federal  tax  liens.   The            government  filed a notice of removal pursuant to 28 U.S.C.              1444, removing the action to the United States District Court            for  the  District  of  Massachusetts.   The  district  court            entered a  memorandum and order granting  the cross-motion of            the  United  States for  summary  judgment on  May  26, 1995,            holding  that  Progressive's  mortgage was  not  entitled  to            priority over  the federal tax liens  under the Massachusetts            common  law  doctrines  of  equitable  subrogation or  unjust            enrichment.                        The mortgage  at issue is secured  by real property            located in Marshfield, Massachusetts.  In  1987, as owners of            the property,  Jeremiah and Deborah Folkard  ("the Folkards")            executed  a  $150,000.00  mortgage note  which  was  properly            recorded in favor of the Miles Standish Federal Credit  Union            ("MSFCU").    Between 1988 and 1990,  the government recorded            six notices of tax liens on the Folkards' property for unpaid            federal taxes.  The  total amount of the liens,  exclusive of                                         -2-                                          2            interest accrued  since recording, was $94,560.93.   In 1990,            the   Folkards   refinanced   their   mortgage   debt,   then            $130,905.55, with MSFCU, executing a new note and mortgage to            secure   a  debt  of  $142,000.00.    At  the  time  of  this            transaction, MSFCU was presumably unaware of the existing tax            liens.   The 1987 mortgage  was discharged at  the moment the            new  mortgage  was recorded  on  November  26,  1990.    This            resulted  in priority of  the federal  tax liens,  because of            their recording dates, over the new mortgage.  On October 19,            1992,  MSFCU  assigned  its interest  in  the  1990 note  and            mortgage  to Progressive.  The record  does not  reflect when            Progressive  became  aware  of  the record  priority  of  the            federal tax liens over its mortgage.                                      I.  JURISDICTION                                   I.  JURISDICTION                                       ____________                      The  threshold issue  to be  decided in  this case,            whether the district  court properly exercised subject-matter            jurisdiction over  Progressive's  claim, was  raised for  the            first  time  on  appeal.    The  government argues  that  the            district court lacked jurisdiction  on two grounds:  (1)  the            government  has  not  waived   its  sovereign  immunity   and            therefore cannot  be sued;  and (2) the  Declaratory Judgment            Act,  28  U.S.C.     2201(a), specifically  bars  the  relief            requested.1    Lack  of  subject-matter jurisdiction  can  be                                            ____________________            1.  The district  court had prima facie  jurisdiction to hear                                        _____ _____            Progressive's claim because it involves issues of federal tax            liens and taxation.   See 28  U.S.C.    1331, 1340;  see also                                  ___                            ___ ____            United  States v. Brosnan,  363 U.S. 237,  240 (1960); United            _________________________                              ______            States v. Coson, 286 F.2d 453, 455-56 (9th Cir. 1961).                _______________                                         -3-                                          3            raised at any point during litigation.  There can be no doubt            of  our power and  duty to decide  the issue.   See Bender v.                                                            ___ _________            Williamsport  Area School  Dist., 475  U.S. 534,  541 (1986);            ________________________________            Wells Real Estate v. Greater Lowell Bd. of Realtors, 850 F.2d            ___________________________________________________            803, 813 (1st Cir. 1988).                            A.  Waiver of Sovereign Immunity                           A.  Waiver of Sovereign Immunity                               ____________________________                      It has long been established that the United States            is  not  subject  to  suit  without  a  waiver  of  sovereign            immunity,  and  that  any  such  waiver  is  to  be  strictly            construed.  Nickerson  v. United States,  513 F.2d 31,  32-33                        ___________________________            (1st  Cir.  1975).    The government  correctly  argues  that            Progressive wrongly  relies on  the Declaratory Judgment  Act            ("the Act"),  28 U.S.C.   2201(a), to constitute  a waiver of            sovereign  immunity because  the  Act  "neither provides  nor            denies a jurisdictional basis  for actions under federal law,            but  merely  defines  the  scope  of   available  declaratory            relief."  McCarthy v. Marshall, 723 F.2d 1034, 1037 (1st Cir.                      ____________________            1983).   Title 28 U.S.C.   2410(a)(1) provides the only basis            for finding a waiver of sovereign immunity in this case.2                                            ____________________            2.  In relevant part, 28 U.S.C.   2410 provides:                        2410.   Actions affecting property on                                 which United States has lien                        (a)  Under the conditions prescribed in                      this section  and  section 1444  of  this                      title  for the  protection of  the United                      States, the United States  may be named a                      party in any civil  action or suit in any                      district court, or in any State court                                            -4-                                          4                      Under  section  2410,  the  government  waives  its            sovereign  immunity  in  both  quiet  title  and  foreclosure            actions.   See  28  U.S.C.     2410(a)(1),  (2).     A  party                       ___            bringing a  fore-closure under  this  section, however,  must            seek a judicial sale of the underlying property.  28 U.S.C.              2410(c).  We begin  by discussing whether Progressive's claim            of  priority  constitutes a  quiet  title  action within  the            meaning of 28 U.S.C.   2410(a)(1).                        The Scope of Quiet Title Actions Under                        The Scope of Quiet Title Actions Under                        _______________________________________                                28 U.S.C.   2410(a)(1)                                28 U.S.C.   2410(a)(1)                                ______________________                      The  government  contends that  Progressive's claim            does  not  fall within  the  coverage  of section  2410(a)(1)            because its claim  of priority  is not a  quiet title  action            within  the meaning of the  statute.  It  follows, argues the            government, that  because no  judicial sale has  taken place,            there  can  be no  waiver  of  sovereign  immunity and  hence            Progressive cannot maintain its cause of action.  We disagree            for the reasons that follow.                                             ____________________                      having jurisdiction of  the subject  mat-                      ter--                            (1) to quiet title to,                           . . .                      real  or personal  property on  which the                      United States has or claims a mortgage or                      other lien.                                         -5-                                          5                      Section   2410(a)(1)   has  never   been   read  to            incorporate  the formalistic distinctions  state law pleading            rules.  United  States v. Coson, 286 F.2d 453,  457 (9th Cir.                    _______________________            1961).  In Coson, the Ninth Circuit held that "[i]t  is plain                       _____            that the  words 'quiet title' . . . are not intended to refer            to a suit  to quiet title in the limited  sense in which that            term is sometimes used .  . . but that as used in the section            here referred to it comprehends a suit to remove a cloud upon            the  title of  a plaintiff."    Id.   Both the  text and  the                                            ___            history  of section 2410 support this view.   The quiet title            provision  was  inserted  by  amendment  to  the  predecessor            statute, following a recommendation  by the Attorney  General            of  the United States (future Justice Jackson).  The heart of            the recommendation stated:                      [U]nder   existing   law   there  is   no                      provision  whereby  the  owner   of  real                      estate  may clear his  title to such real                      estate    of  the  cloud of  a Government                      mortgage  or  lien  .   .  .  .  In  many                      instances  persons  acting in  good faith                      have   purchased   real  estate   without                      knowledge  of the  Government lien  or in                      the  belief  that   the  lien  had   been                      extinguished .  .  . .  It  appears  that                      justice  and  fair dealing  would require                      that a  method be provided  to clear real                      estate   titles    of   questionable   or                      valueless Government liens.              H.R. Rep. No. 1191,  77th Cong., 1st Sess. 2 (1941);  S. Rep.            No. 1646, 77th Cong., 2d Sess. 2 (1942).                        The government points out that, under Massachusetts            law, a plaintiff  must have both actual  possession and legal                                         -6-                                          6            title to maintain a quiet title action, see MacNeil Bros. Co.                                                    ___ _________________            v. Realty Co.  of Boston,  Inc., 131 N.E.2d  178 (Mass.  1956            _______________________________            (citing cases)), and suggests that  the contours of the state            law  cause  of  action  should guide  our  interpretation  of            section  2410(a)(1), particularly  where  the  state  law  is            consistent with federal common  law (as the government argues            it  is here).  That  is, the government  argues that Congress            intended to waive sovereign immunity only in those cases that            would  traditionally have been  termed "quiet title" actions;            because Progressive did not bring and  could not have brought            such an action,3  we should deem this case to  be outside the            scope of section 2410(a)(1).                      If, in  substance, the relief the  plaintiff sought            here--a declaration of the priority of Progressive's mortgage            over the government's tax  lien--is congruent with the relief            available  in   a  quiet  title  suit,   it  would  frustrate            congressional intent  to block plaintiff's  access to relief.            Congress, after all, was  concerned not with the niceties  of            common  law pleading,  but  with  practical  problems  facing            owners  whose property  was encumbered  by government  liens.            What label the state has attached to the cause of action is a            helpful   but   not  determinative   guide   to   the  proper                                            ____________________            3.  As  mortgagee,  Progressive  holds  legal  title  to  the            property, see J&W  Wall Sys.,  Inc. v. Shawmut  First Bank  &                      ___ _______________________________________________            Trust Co., 594 N.E.2d 859, 860 (Mass. 1992), but it is not in            _________            possession.                                         -7-                                          7            interpretation of the federal statute.  See Harrell v. United                                                    ___ _________________            States, 13 F.3d 232, 235 (7th Cir. 1993).            ______                      The government,  however, contends that  the relief            that  Progressive seeks  would not have  been available  in a            quiet  title action.  Progressive does not seek to remove the            government's  lien as  invalid, but  rather to  establish the            priority  of  its  own  mortgage over  the  concededly  valid            federal  tax lien.  Such relief would not have been available            in a  traditional quiet title  action, only in  a foreclosure            action,  where valid  but  junior liens  are extinguished  in            favor of a senior  lien.  It follows, argues  the government,            that because no judicial sale has taken place, see   2410(c),                                                           ___            there can be no waiver of sovereign immunity.                      A careful reading of the authorities, however, does            not support  the government's narrow portrayal  of the relief            available   to  quiet  title   plaintiffs.    The  government            principally  relies on  Kadson  v. G.W.  Zierden Landscaping,                                    _____________________________________            Inc., 541 F.  Supp. 991 (D. Md. 1982),  aff'd sub nom. Kadson            ____                                    ______________ ______            v.  United States, 707 F.2d 820 (4th  Cir. 1983).  In Kadson,            _________________                                     ______            suits  were brought by  tax sale purchasers  to foreclose all            equities  of redemption  in  properties on  which the  United            States  held tax  liens.   The district  court held  that the            suits were more properly characterized as foreclosure actions            than quiet title actions and that judicial sale  was required                                         -8-                                          8            in  order for sovereign immunity to be  waived.   Id. at 995-                                                              __            96.                      Unlike the plaintiffs  in Kadson, Progressive seeks                                                ______            only a determination of  priority between competing liens; it            never  initiated a  foreclosure action  and did  not seek  to            extinguish  the federal lien.  The  Kadson court cited United                                                ______             ______            States  v. Morrison, 247 F.2d  285, 289 (5th  Cir. 1957), for            ___________________            the proposition that  "priorities among  valid interests  are            the  subject  of  foreclosure  suits,"  whereas "the  alleged            invalidity  of adverse  interests are  the subjects  of quiet            title actions."  Kadson, 541 F. Supp. at 995.  This, however,                             ______            does not tell  the whole  story of the  Morrison opinion,  in                                                    ________            which the Fifth Circuit explained that the "relief sought [in            section 2410(a)(1)  claims], as traditional to  equity as the            woolsack, is  the judicial determination of  the validity and                                                             ____________            rank of the  competing liens."   Id. (emphasis  added).   The            ____________________________     ___            court  pointed out that it  was an "unsound  premise" to hold            that a quiet  title action "is one to  extinguish the lien of            the  United  States,  rather than  what  it  really  is --  a            determination  that  a tax  lien  does  not  exist, has  been            extinguished, or is inferior in rank."  Id. (emphasis added).                          ______________________    ___            Similarly, in   Estate of  Johnson,   836 F.2d 940  (5th Cir.                            __________________            1988),  the court rejected  the government's  contention that            foreclosure  is   the  only  relief   available  where   lien            priorities are in dispute.  It explained:                                          -9-                                          9                      [W]e think that section 2410, an integral                      part of  the Judicial Code rather than an                      administrative   mechanism  of   the  tax                      structure,    establishes    a   specific                      jurisdiction for these  suits as bills to                      quiet title  or  for foreclosure  of  the                      private  lien.  The jurisdiction does not                      depend  on  the  specific relief  sought,                      [e.g.]  foreclosure.  Rather  it rests on                      the   existence    of   the   traditional                      controversy  in  which  a  private  party                      asserts an ownership [interest]  which is                      superior  to  the  claimed  lien  of  the                      United States government. (Quoting United                                                         ______                      States                      ______                      v.  Morrison,  247  F.2d  285  (5th  Cir.                      ____________                      1957).             836 F.2d at 945.                                     Other  courts   have  adopted   this  logic.     In            Brightwell v.  United States,  805 F.  Supp. 1464 (S.D.  Ind.            ____________________________            1992), the  court reasoned:                      [While] [t]raditionally, actions to quiet                      title have sought  determinations of  who                      owns particular property,  . . .  [u]nder                      federal law, the  definition is  somewhat                      broader; a  party  may maintain  a  quiet                      title  action  against the  United States                      when  the  government   asserts  that   a                      federal  tax  lien  exists   against  the                      property, 28 U.S.C.    2410(a), and  thus                      lien   priority    disputes   have   been                      considered "quiet title" actions [for the                      purposes of section 2410].              805 F. Supp. at 1469 (citing McEndree v. Wilson, 774 F. Supp.                                         __________________            1292, 1295-96 (D.  Colo. 1991)).  Moreover,  while a priority            claim  of the  sort raised  by Progressive  has not  yet been            decided by this Circuit, we have held and reaffirm today that            section    2410(a)(1)   controversies    encompass   disputes            concerning  both the  "validity  and priority  of liens,"  as                                         -10-                                          10            distinguished from actions seeking "their extinguishment in a            manner not  permitted  by the  statutes."   Remis  v.  United                                                        _________________            States, 273 F.2d 293, 294 (1st Cir. 1960).             ______                      These  cases  undercut the  government's contention            that  a  quiet  title  action is  appropriate  under  section            2410(a)(1)  only where the plaintiff seeks  a decree that the            government's  lien is defective or  invalid and seeks to have            the  cloud removed  from  his  title.    In  support  of  its            position, the  government  primarily relies  on Raulerson  v.                                                            _____________            United  States,  786 F.2d  1090 (11th  Cir. 1986),  where the            ______________            court held that "section  2410 waives sovereign immunity only            in actual quiet  title actions, not suits  analogous to quiet               ______            title actions."  786 F.2d  at 1091.  The court concluded that            plaintiff Raulerson's  complaint was  not an action  to quiet            title because he had already forfeited title to  his property            and had waived his property interest  by the terms of a  plea            agreement.    Id.   The instant  case  is not  like Raulerson                          ___                                   _________            because Progressive  has title to the  Folkards' property and            has  not  waived  its   ownership  interest.     Furthermore,            Progressive  merely  seeks  a  determination   regarding  the            priority of its ownership interest.  The Raulerson plaintiff,                                                     _________            in contrast, sought  a declaration that  the IRS's claim  had            priority  over   the  valid  claims  of   other  branches  of            government to ensure that the IRS's jeopardy assessment would            not  be satisfied  from his  other assets.   Id.  at 1091-92.                                                         ___                                         -11-                                          11            Consistent  with  the  broad  construction  accorded  section            2410's   quiet  title   provision  by   a  number   of  other            jurisdictions, we hold that Progressive's claim falls  within            the meaning and scope of the statute.                      The Declaratory Judgment Act and Section 2410                    The Declaratory Judgment Act and Section 2410                    _____________________________________________                      In the alternative, the government argues that even            if we were to  hold that the district court  has jurisdiction            to  hear  Progressive's claim,  the Declaratory  Judgment Act            ("the Act"),  28 U.S.C.   2201(a), nonetheless bars the court            from granting the relief requested.   The Act provides, inter                                                                    _____            alia,  that a  federal district  court  has the  authority to            ____            grant declaratory  relief "[i]n a case  of actual controversy            within its jurisdiction, except with respect to Federal taxes            . . . ."  28 U.S.C.   2201(a).  A claim challenging the power            of the IRS to assess and  collect taxes is barred by the Act.            McCarthy v. Marshall, 723 F.2d 1034, 1037 (1st Cir. 1983).              ____________________                      Similarly,  "[w]hen  a    federal    tax lien    is            involved,            .  . . an action pursuant to  section 2410(a) will not lie if            its  sole  purpose  is  to  challenge  the  validity  of  the            underlying assessment."   Johnson v. United  States, 990 F.2d                                      _________________________            41,  42 (2d  Cir.  1993).   This is  because  the purpose  of            section 2410 is "to waive the government's immunity from suit            so as to permit  a court of proper jurisdiction  to determine            the  relative position  of  government liens  on property  as                                         -12-                                          12            against other lienors -- not to permit a collateral attack on            the  tax assessment."   Broadwell  v.  United States,  234 F.                                    ____________________________            Supp.  17, 18 (E.D.N.C. 1964), aff'd 343 F.2d 470 (4th Cir.),                                           _____            cert. denied, 382 U.S. 825 (1965); accord, McMillen v. United            _____ ______                       ______  __________________            States  Dep't of Treasury, 960 F.2d 187, 189 (1st Cir. 1991);            _________________________            Falik  v. United  States, 343  F.2d. 38,  41 (2d  Cir. 1965);            ________________________            Remis  v.  United States,  172 F.  Supp.  732, 733  (D. Mass.            ________________________            1959),  aff'd, 273 F.2d 293  (1st Cir. 1960).   Congress thus                    _____            did not intend section  2410(a)(1) to extend a new  remedy by            which  a plaintiff,  whether taxpayer  or third  party, could            contest  the  government's assessment  of  taxes.4   Where  a            plaintiff does not challenge  the underlying tax  assessment,            however, section 2410(a) has been recognized as a vehicle for            determining lien priority.   See Estate of  Johnson, 836 F.2d                                         ___ __________________                                            ____________________            4.  Congress did intend section 2410(a)(1) to be  a basis for            taxpayer challenges to the  procedural validity of tax liens.            See Robinson v. United  States, 920 F.2d 1157, 1161  (3d Cir.            ___ __________________________            1990)(where  IRS  failed  to  send notice  of  deficiency  to            taxpayer when lien filed); Rodriguez v. United States, 629 F.                                       __________________________            Supp. 333, 336  (N.D. Ill.  1986) (where IRS  failed to  send            notice  of deficiency  when  levied on  property); Ringer  v.                                                               __________            Basile, 645 F. Supp. 1517, 1525-26  (D. Colo. 1986)(where IRS            ______            violated  own procedures  when seized  property).   Likewise,            with regard  to  third party  nontaxpayer plaintiffs,  courts            have  adopted  the view  that  "[t]he  validity  of  a  lien,            depending  upon compliance  or  noncompliance with  statutory            requirements, or  the  priority of  a lien  validly filed  is            quite a far cry from  permitting a third party to  attack the            tax assessment  upon which a  properly filed lien  is based."            Pipola  v. Chicco,  169  F. Supp  229,  232 (S.D.N.Y.  1959),            _________________            modified,  274 F.2d 909 (2d Cir. 1960).  Progressive does not            ________            challenge the procedural validity of the tax liens.  It  is a            matter  of record that the liens were properly filed with the            Plymouth County (Massachusetts) Registry of Deeds.                                          -13-                                          13            at 945 (executor's  claim of priority  of estate interest  in            estate over  federal tax lien constitutes  quiet title action            where it  does not  contest merits of  assessment); Morrison,                                                                ________            247 F.2d at  290-91 (property seller's  claim of priority  of            vendor's  lien over  federal  lien  constitutes  quiet  title            action  where no hazard posed to  revenues); First of America                                                         ________________            Bank - West  Michigan v.  United States, 848  F. Supp.  1343,            _______________________________________            1349 (W.D. Mich. 1993)  (nontaxpayer third party has standing            under  section 2410 to  "merely . . .  assert the priority of            its  lien over the federal tax lien"); McEndree, 774 F. Supp.                                                   ________            at  1296 (vendor of property eligible to maintain quiet title            action alleging priority of  equitable mortgage over  federal            tax liens where no challenge to tax assessment itself).                      Progressive's   claim  in   no  way   contests  the            legitimacy  of  the   government's  tax  assessment  or   the            taxpayers'  liability.   It follows  that "[s]ince  the quiet            title  action specifically  mandated  by section  2410 is  in            substance a suit for a declaratory judgment," the Declaratory            Judgment  Act will  not operate  as a  wrench to  deprive the            district court of its jurisdiction in this case.   Aqua Bar &                                                               __________            Lounge Inc., 539 F.2d at 940; see also McEndree, 774 F. Supp.            ___________                   ___ ____ ________            at  1297  (Section  2410(a)  provides  an  exception  to  the            Declaratory Judgment Act, as plaintiff's remedies are limited            to declaratory relief).                                            -14-                                          14                      In summary, because we conclude that the government            waives its  sovereign immunity under 28  U.S.C.   2410(a)(1),            and that the  Declaratory Judgment  Act poses no  bar to  the            relief sought,  we accordingly  hold that the  district court            properly    exercised   subject-matter    jurisdiction   over            Progressive's claim.                                   II.  THE MERITS                                    II.  THE MERITS                                         __________                      We  now turn  to the  substantive issue  on appeal:            whether  Massachusetts  law  entitles Progressive's  mortgage            priority  over  the  federal  tax  liens.                        Because  the  decision  to  grant  summary judgment            calls  a legal  standard  into play  we  review the  district            court's order granting summary judgment for the United States            de novo.  In re  Varrasso, 37 F.3d 760, 763 (1st  Cir. 1994);            __ ____   _______________            Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d  576, 581 (1st            _____________________________________            Cir. 1994); Quaker  State Oil Refining  Corp. v. Garrity  Oil                        _________________________________________________            Co., 884 F.2d 1510,  1513 (1st Cir. 1989).   Summary judgment            ___            is appropriate only when "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            district  court held and we  agree that because  there are no            disputed  material  issues   of  fact  summary  judgment   is            appropriate.                       As our  discussion of jurisdiction  relates, it  is            well-settled  that  federal law  determines  the priority  of                                         -15-                                          15            competing  federal  and state  created  liens.   See   United                                                             ___   ______            States v.  Rodgers, 461  U.S. 677, 683  (1983); Brosnan,  363            __________________                              _______            U.S.  at 240-41.  Section  6321 of the  Internal Revenue Code            ("the Code")  authorizes the government to  assert liens upon            "all  property  and  rights  to property"  belonging  to  the            taxpayer  for delinquent taxes.   26 U.S.C.    6321.  Section            6322 of the Code  further provides that "the lien  imposed by            section 6321 shall arise  at the time the assessment  is made            and shall  continue until  the liability  for  the amount  so            assessed  .  . .  is  satisfied or  becomes  unenforceable by            reason of lapse of time."  26 U.S.C.   6322.                        These provisions do not, however, grant federal tax            liens  automatic priority  over all other  liens.   I.R.S. v.                                                                _________            McDermott, --  U.S. --, 113  S. Ct.  1526, 1528 (1993).   The            _________            determination  of priority is governed by  the rule of "first            in time, first in right."  Id. at 1527.  A federal lien which                                       ___            attaches  first is thus senior, so long as notice is properly            filed.5  In  order for a state created  lien to take priority            over a later  assessed federal  lien it must  be "choate"  or            "perfected" so that "the identity of the lienor, the property            subject  to  the  lien,  and  the  amount  of  the  lien  are            established" prior  to the  filing of the  subsequent federal                                            ____________________            5.  The  Code provides  that "[t]he lien  imposed by  section            6321 shall not be valid as against any purchaser, holder of a            security  interest,  mechanic's  lienor,  or   judgment  lien            creditor until notice thereof . . .."  26 U.S.C.   6323(a).                                           -16-                                          16            lien.  United States v. New Britain, 347 U.S.  81, 84 (1954);                   ____________________________            United  States v.  Pioneer  Am. Ins.  Co.,  374 U.S.  84,  88            _________________________________________            (1963); see also Baybank Middlesex v. Elec. Fabricators Inc.,                    ___ ____ ___________________________________________            751  F.  Supp. 304,  310 (D.  Mass.  1990); United  States v.                                                        _________________            Rahar's Inn, Inc.,  243 F.  Supp. 459, 460  (D. Mass.  1965).            _________________            Choateness of a state created lien is a matter of federal law            and mirrors the  standard applicable to liens asserted by the            government  under sections 6321 and 6322 of the Code.  United                                                                   ______            States v. First Nat'l Bank and Trust Co.,  386 F.2d 646, 647-            ________________________________________            48 (8th Cir. 1967)(citing United States  v. Vermont, 377 U.S.                                      _________________________            351,  354 (1964)).    State recording  statutes are  relevant            "only insofar  as controlling  federal authority dictates  or            sound  federal policy  counsels" their  application.   United                                                                   ______            States v. Lebanon Woolen  Mills Corp., 241 F. Supp.  393, 398            _____________________________________            (D.N.H.  1964).   Section 6323(i)(2)  of the  Code authorizes            application   of  the  common   law  doctrine   of  equitable            subrogation where provided by state law.6                      Just as federal law  governs the issue of priority,            it  is  equally well-settled  that "in  the application  of a            federal revenue  act, state  law controls in  determining the            nature of the legal  interest . . . in the property  . . . to            be reached by the  statute."  Aquilino v. United  States, 363                                          __________________________                                            ____________________            6.  "Where, under local law,  one person is subrogated to the            rights  of another with respect  to a lien  or interest, such            person shall be subrogated to such rights for purposes of any            lien  imposed by  section 6321  or 6324."   26 U.S.C.    6323            (i)(2).                                          -17-                                          17            U.S. 509, 513 (1960)(quoting Morgan v. Commissioner, 309 U.S.                                         ______________________            78, 82 (1940)); see also Maryland v. Louis, 451 U.S. 725, 746                            ___ ____ _________________            (1981)(courts must  proceed from "the  basic assumption  that            Congress  did not intend to displace state law").  "The point            at  which a  state created  security interest  attaches is  a            matter of state  law."  ICM Mortg.  Corp. v. Herring, 758  F.                                    ____________________________            Supp. 1425, 1426 (D. Colo 1991)(citing Sec. Pac. Mortg. Corp.                                                   ______________________            v. Choate, 897 F.2d 1057, 1058-59 (10th Cir. 1990)).  Federal            _________            revenue statutes  "creat[e]  no property  rights  but  merely            atta[ch] consequences, federally  defined, to rights  created            under state  law."  United  States v.  Bess, 357 U.S.  51, 55                                _______________________            (1958).  For this  reason, "it is critical to  determine when            competing state  created liens come into  existence or become            valid."   Matter  of  Fisher,  7  B.R.  490,  494  (W.D.  Pa.                      __________________            1980)(citing  Pioneer Am. Ins. Co., 374  U.S. 84, 87 (1963));                          ____________________            see also; Aquilino,  363 U.S. at 514 (Reconciliation of state            ___ ____  ________            law defining when a state created lien  becomes effective and            federal  law  governing   priority  between  competing  liens            "strikes  a  proper  balance   between  the  legitimate   and            traditional  interest which  the  State has  in creating  and            defining  the  property interest  of  its  citizens, and  the            necessity for a uniform administration of the federal revenue            statutes").                       The   government   argues   that  because   section            6323(i)(2)  explicitly  authorizes the  application  of local                                         -18-                                          18            laws  of subrogation and is  silent as to  the application of            the  doctrine of  unjust enrichment,  the district  court was            correct  in  deeming  the  latter  doctrine  inapplicable  to            Progressive's  claim.   We  disagree.   While  the  court was            correct in stating that  Congress gave an "explicit directive            with  respect  to determining  the  priority  of federal  tax            liens," it was incorrect  in holding that "there is  no basis            upon which  to  presume the  applicability  of a  common  law            doctrine" not  expressly provided  for by  the  statute.   To            essentially  translate a  directive for  a federal  scheme of            priority  into a preemption of state law governing the nature            and  extent of state created  liens was unwarranted.   To the            contrary,  federal courts  should  presume  applicability  of            state common law doctrines in determining the status of state            created liens.  Such determinations do not contravene federal            law simply because  they ultimately bear on the federal issue            of who was first in time in determining priority.                        Before  addressing  the  status   of  Progressive's            current mortgage, we  briefly review its  history.  In  1987,            MSFCU  financed the Folkards' first mortgage in the amount of            $150,000.00.   Between 1988 and  1990, the IRS  filed six tax            liens on the property, totalling $94,560.93.  In 1990,  MSFCU            refinanced   the   Folkards'   first   mortgage   debt,  then            $130,905.55,  by executing  a new  note to  secure a  debt of            $142,000.00.   The recording of the  1990 mortgage discharged                                         -19-                                          19            the 1987 mortgage, rendering the tax  liens senior to MSFCU's            second  mortgage on  the record  title to  the property.   In            1992,   MSFCU   assigned   its   mortgage   to   Progressive.            Progressive  argues  that   under  the  doctrine   of  unjust            enrichment, MSFCU  should be  reinstated to its  initial 1987            mortgage  position  and  that   Progressive  is  entitled  to            effectively occupy MSFCU's reinstated position.  We agree.                         A.  Massachusetts Common Law Doctrine                        A.  Massachusetts Common Law Doctrine                            _________________________________                                of Unjust Enrichment                                  of Unjust Enrichment                                  ____________________                      Under Massachusetts  law,  the doctrine  of  unjust            enrichment  provides   that  "where   a  mortgage   has  been            discharged by  mistake, equity  will set the  discharge aside            and reinstate the mortgage to the position  which the parties            intended  it to  occupy,  if the  rights  of the  intervening            lienholders have not been affected."  North Easton Co-op Bank                                                  _______________________            v. MacLean, 15 N.E.2d  241, 245 (Mass. 1938)(second mortgagee            __________            not prejudiced by reinstatement of first mortgage where first            mortgage   had  been   discharged  by   mistake  upon   first            mortgagee's  acceptance  of  new  note without  knowledge  of            intervening lien)(citations omitted);  see also Provident Co-                                                   ________ _____________            Operative  Bank v. Talcott, Inc.,  260 N.E.2d 903, 909 (Mass.            ________________________________            1970)(assignee  of first  mortgagee declared holder  of first            mortgage  to prevent  unjust enrichment  of  second mortgagee            where   first   mortgagee    discharged   mortgage    through            inadvertence  and second  mortgagee's position  not adversely            affected  by  acts  of   first  mortgagee);  Piea  Realty  v.                                                         ________________                                         -20-                                          20            Papuzynski, 172 N.E.2d 841,  846 (Mass. 1961)(exchange of new            __________            mortgage notes for  old ones did not constitute  discharge of            old mortgage where  parties had no intent  to alter substance            or  priority of  old notes and  mortgagor's grantees  did not            show   adverse  change   of   position   in   reliance   upon            transaction).                        The government maintains that no "mistake" was made            because  MSFCU  intended  to  refinance the  Folkards'  first            mortgage, and so by  law must have intended the  consequences            of its actions  -- i.e.  the extinguishment  of its  original            security  interests.  Massachusetts  law,   however,  clearly            contemplates situations  where the intention to  renew is not            tantamount to  the intention to extinguish  existing security            interests upon refinancing a mortgage.   See North Easton Co-                                                     ___ ________________            op Bank, 15 N.E.2d at 245; Provident, 260 N.E.2d at 909; Piea            _______                    _________                     ____            Realty,  172 N.E.2d.  at 846;  see also  Financial Acceptance            ______                         ___ ____  ____________________            Corp. v.  Garvey, 380  N.E.2d 1332, 1335  (Mass. 1978)("Under            ________________            Massachusetts law the renewal  of a note in a  different form            does  not  operate to  discharge  a mortgage  where  the debt            itself has  not been paid  . . .  . even  where the new  note            includes a  new debt"); Worcester  N. Sav. Inst.  v. Farwell,                                    ____________________________________            198 N.E. 897, 899 (Mass. 1935)(where bank, due to  negligence            of its counsel, failed to discover later mortgage on property            and  discharged   first  mortgage  upon   refinancing,  first            priority restored  to bank  because bank  did not intend  for                                         -21-                                          21            discharge  of interest);  compare  ICM Mortg.  Corp., 758  F.                                      _______  _________________            Supp. at  1427  (where  refinancing  of  deed  of  trust  not            intended  to extinguish  security  interest, second  deed  of            trust  renewed  prior obligation,  resulting  in priority  of            state created lien  over federal tax lien);  see generally 33                                                         ___ _________            A.L.R. 149 ("It is a general rule  that the cancellation of a            mortgage  on the record is not conclusive as to its discharge            .  .  .  . [a]nd  where  the  holder  of  a  senior  mortgage            discharges  it  of  record, and  contemporaneously  therewith            takes  a new  mortgage,  he  will  not,  in  the  absence  of            paramount equities, be held to have subordinated his security            to  intervening   lien  unless   the  circumstances  of   the            transaction indicate  this to have been his intention . . . .            ").   We  are  thus convinced  that an  action  based on  the            failure to discover a properly recorded lien is precisely the            type of  inadvertence  the Massachusetts  doctrine of  unjust            enrichment aims  to rectify.  Furthermore,  we are persuaded,            in accord with Progressive's  view, that no reasonable lender            in MSFCU's position would have intended, upon refinancing, to            replace a first mortgage bearing the attachment of junior tax            liens with a second mortgage bearing the attachment of senior            tax liens,  thereby relinquishing its senior  interest on the            property.                        The  district  court  held  that  reliance  on  the            Massachusetts line of  unjust enrichment cases  was misplaced                                         -22-                                          22            because  such  cases  do   not  concern  federal  tax  liens.            Although  it is  true that  Massachusetts  case law  does not            address   reinstatement of a state created lien to a position            of  priority over  a  federal  government  lien, we  are  not            persuaded  by the district court's reasoning.   We think that            cases  involving the  reinstatement of  mortgages which  have            been inadvertently discharged to  the advantage of unintended            and  unexpected beneficiaries  are sufficiently  analogous to            Progressive's claim to warrant applicability.  Whether or not            federal  tax liens are involved  in such cases,  to us, seems            immaterial.   This  is mainly  because the  unjust enrichment            doctrine operates only to restore a state created lien to the            position  it occupied  prior  to  the inadvertent  discharge.            Reestablishing  the party's  position,  of  itself, does  not            disturb the status of  competing liens -- whether those  of a            private lienor or the federal government -- in terms of their            effective  dates  of  attachment  for  the  determination  of            priority.   It equitably determines the effective date of the            state  created lien  independent  of  other  existing  liens.            Federal law  remains intact to determine  both the choateness            of  the state  created  lien and  its  order of  priority  in            relation to any competing federal liens.                       Moreover,  while Massachusetts courts  have not had            occasion to  apply the doctrine  of unjust enrichment  to the            federal government under  this set of  circumstances, federal                                         -23-                                          23            courts have held  that the doctrine  is applicable where  the            federal  government is concerned;  and in  several instances,            have restored state created liens to their intended positions            without  regard  for the  United  States'  potential loss  of            priority under federal law. See  United States v. McCombs, 30                                        ___  ________________________            F.3d 310,  333 (2d  Cir. 1994)(holding that  where government            ran afoul of notice requirements of federal statute governing            priority  between  federal   tax  liens   and  interests   of            subsequent purchasers, to deny subsequent holder  of security            interest  priority over  tax lien  would allow  government to            "leap  frog" the interests vested in two prior mortgage liens            and   would  represent   "a   classic   example   of   unjust            enrichment");  Dietrich Indus.,  Inc. v.  United States,  988                           ________________________________________            F.2d 568,  573 (5th  Cir. 1993)(holding that  where purchaser            who paid  vendor's senior mortgage  debt as part  of purchase            transaction  with  expectation  that  property  was  free  of            additional encumbrances, to deny equitable subrogation remedy            "would give  the government an  unearned windfall in  that it            would elevate  the government's  liens for no  good reason");            Han  v.  United  States, 944  F.2d  526,  530  n.3 (9th  Cir.            _______________________            1991)(holding that  where purchasers of  residential property            paid off and discharged priority position lender unaware that            additional federal tax lien  attached to property, to require            the purchasers to pay a portion of the  taxpayer's delinquent                                         -24-                                          24            taxes  would "unjustly  enrich" and  "produce a  windfall" in            favor of the United States).                        Finally, we  note that no rights  of the government            are  impaired  by   MSFCU's  mortgage  reinstatement.     The            government argues that  the IRS is unlike  a private creditor            in that it does  not bargain for interest rates and  thus can            never be  unjustly enriched  where valid liens  have attached            for unpaid taxes.   But Progressive does not argue, nor do we            suggest, that  the government  would be unjustly  enriched by            the ultimate satisfaction of  its legitimate tax liens.   The            point is that  the government could not have  anticipated its            current priority status because from the outset its 1988-1990            liens  were clearly  junior  to MSFCU's  1987 mortgage  lien.            Absent the inadvertent discharge of MSFCU's mortgage in 1990,            the government would  not have gained serendipitous  priority            over  MSFCU's second mortgage lien in 1990.  This resulted in            the government's unjust enrichment at the expense of MSFCU in            1990,  and ultimately of Progressive  in 1992.   We hold that            because MSFCU extinguished its initial 1987 mortgage interest            by mistake upon refinancing  the Folkards' second mortgage in            1990, it  should be equitably  restored to its  original 1987            lien position.                       The government argues that the equities in favor of            MSFCU may  not  apply  to  Progressive because  there  is  no            evidence  that  Progressive   was  unaware  of   the  earlier                                         -25-                                          25            government lien when it  took the assignment of  the mortgage            from MSFCU.   But it is  hornbook law that the  assignee of a            mortgage succeeds to  all of the assignor's  rights power and            equities;  and  Massachusetts  has  applied this  rule  in  a            situation very like this  case.  Provident Co-operative Bank,                                             ___________________________            260 N.E.2d at 908 ("By virtue of her purchase from Provident,            Mrs.  Hutchinson succeeded  to all  of Provident's  rights in            relation to the mortgage assigned,  including the right to  a            judicial determination whether it  was a first mortgage or  a            second  mortgage.").     Thus  Progressive   may  assert  any            equitable rights and defenses  that MSFCU could have asserted            before it assigned the mortgage.                                    C.  Conclusion                                    C.  Conclusion                                        __________                      The parties  do not  dispute that  MSFCU's mortgage            lien was choate  as of its  original recording in  1987.   It            identified  the  lienor  as  MSFCU,  described the  Folkards'            property, and  established  the amount  of the  lien so  that            nothing  more  needed  to   be  done  for  the  lien   to  be            "perfected."  New Britain, 347 U.S. at 89.  MSFCU  was thus a                          ___________            holder  of a security interest in the Folkards' property that            attached before  the filing of  the federal    tax     liens             between     1988-1990.     See   26     U.S.C.    6323(h)(1).                                       ___            Because  we  hold  that MSFCU  should  be  restored   to  its            original mortgage  lien position and  that Progressive should            be subrogated to  that same position,  it follows that  under                                         -26-                                          26            the federal rule of priority, Progressive's mortgage is first            in time  and hence first in right over the tax liens asserted            by the government.                        We reverse the district court's decision and vacate                      We reverse the district court's decision and vacate                      ___________________________________________________            its  entry of summary judgment in favor of the United States.            its  entry of summary judgment in favor of the United States.            _____________________________________________________________            Summary judgment shall be entered in favor of Progressive and            Summary judgment shall be entered in favor of Progressive and            _____________________________________________________________            an appropriate  declaratory judgment order shall  be entered.            an appropriate  declaratory judgment order shall  be entered.            _____________________________________________________________            Costs awarded to Progressive.                  Costs awarded to Progressive.                  _____________________________                                         -27-                                          27
