           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT United States Court of Appeals
                                                   Fifth Circuit

                                                                            FILED
                                                                        December 11, 2007

                                       No. 06-40266                   Charles R. Fulbruge III
                                                                              Clerk

UNITED STATES OF AMERICA

                                                  Plaintiff - Appellee
v.

JOSE LUIS BETANCOURT

                                                  Defendant - Appellant



                   Appeal from the United States District Court
                        for the Southern District of Texas
                            USDC No. 1:03-CR-90-ALL


Before JONES, Chief Judge, and HIGGINBOTHAM and CLEMENT, Circuit
Judges.
PER CURIAM:*
       Jose Betancourt appeals the district court’s grant of summary judgment
in favor of the IRS on the question of whether his attorney, Baltazar Salazar, is
entitled to attorney’s fees for his representation of Betancourt. For the following
reasons, we AFFIRM.




       *
         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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
                                     No. 06-40266

                         I. FACTS AND PROCEEDINGS
      Jose Betancourt was convicted of two counts of possession with intent to
distribute cocaine and one count of conspiracy to possess with intent to
distribute more than five kilograms of cocaine. He was sentenced to serve 292
months in prison and to forfeit, inter alia, his fifty percent share of the proceeds
from a Texas lottery jackpot of over five million dollars.1 Betancourt and
Guadalupe Rosales had an oral agreement by which they would jointly purchase
fifteen lottery tickets twice a week and split any winnings. While his case was
on appeal, Betancourt entered into a written agreement with Rosales to release
Rosales’s share of the winnings (held by the government pending the appeal) in
exchange for a payment of $150,000 from Rosales. Betancourt entered a Consent
to Transfer Funds, pursuant to FED. R. CRIM. P. 32.2(d), allowing the district
court to order the release of Rosales’s share of the winnings. The district court
subsequently ordered the transfer to Rosales.
      However, Betancourt did not disclose to the court that he was to receive
payment for his consent to the transfer, and once the government learned of the
payment, it filed a motion for production of the agreement between Rosales and
Betancourt, asserting that any money Rosales might pay Betancourt was
forfeited property. The court ordered the disclosure of the agreement and
ordered that once the money was released by the government, Betancourt’s
counsel was to deposit $76,000 into the court’s registry.
      On April 14, 2005, the IRS sent a Notice of Levy to Rosales’s attorney,
Reynaldo Marino, indicating that he was forbidden from releasing the $150,000
to Betancourt because the money was subject to a lien on unpaid federal income
tax. Betancourt owed the IRS over $1.7 million. Betancourt challenged the



      1
          Betancourt appealed the sentence and forfeiture, and this court affirmed. United
States v. Betancourt, 422 F.3d 240, 252 (5th Cir. 2005).

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IRS’s Notice, and the district court ordered that Rosales deposit the entire
$150,000 into the court’s registry until the dispute was resolved.
       The IRS and Betancourt each moved for summary judgment. The IRS
asserted that it was entitled to the disputed funds in satisfaction of two Federal
Tax Liens filed in South Carolina and Texas in May of 2005. Betancourt’s
attorney, Baltazar Salazar, asserted that he had a superior claim on the money,
for while a federal tax lien ordinarily has first priority, such a lien is not valid
“against an attorney who, under local law, holds a lien upon or a contract
enforceable against [a judgment or other amount in settlement of a claim], to the
extent of his reasonable compensation for obtaining such judgment or procuring
such settlement.” 26 U.S.C. § 6323(b)(8). Salazar asserted that he had an
attorney’s lien against the entire $150,000, in compensation for his efforts in
procuring the settlement.          In support of his claims, Salazar submitted a
document, signed by Betancourt, granting him power of attorney and an
affidavit detailing his attorney’s fees generated by his representation of
Betancourt, which totaled $247,550.2 Salazar asserted that all of these fees
stemmed from his efforts at procuring the settlement, not for representing
Betancourt during the criminal proceedings.                 The district court granted
summary judgment to the IRS, finding that Salazar failed to prove the existence
of a lien or contract enforceable under Texas law. Betancourt appeals this
judgment.3




       2
         Salazar asserted that his fees included $54,000 for twenty trips between Houston and
Brownsville; $27,000 for the 120 hours he spent investigating the facts, interviewing witnesses
and reviewing documents; $55,000 for the 200 hours he spent preparing for trial; and $49,000
for the 200 hours he spent working on the state civil case against Betancourt. There is no
mention of the settlement with Rosales in the affidavit.
       3
        Though Betancourt is nominally the appealing party in this case, the dispute only
concerns Salazar at this point, so Appellant’s contentions are generally attributed to him.

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                         II. STANDARD OF REVIEW
      This court reviews the district court’s grant of summary judgment de novo.
Shell Offshore, Inc. v. Babbitt, 238 F.3d 622, 627 (5th Cir. 2001). The district
court’s grant of “[s]ummary judgment is appropriate if the record shows ‘that
there is no genuine issue as to any material fact and the moving party is entitled
to judgment as a matter of law.’” Id. (quoting FED. R. CIV. P. 56(c)).
                         III.     ANALYSIS
      Federal law determines the relative priority of a federal tax lien. United
States v. Equitable Life Assurance Soc'y of the U.S., 384 U.S. 323, 328, 330
(1966); United States v. McCombs, 30 F.3d 310, 321 (2d Cir. 1994). Federal law
follows the common law rule that a lien “first in time is the first in right.”
United States v. City of New Britain, 347 U.S. 81, 85 (1954) (internal quotation
marks omitted). A federal tax lien arises upon the assessment of the tax.
Hussain v. Boston Old Colony Ins. Co., 311 F.3d 623, 628 n.2 (5th Cir. 2002)
(citing United States v. McDermott, 507 U.S. 447, 448 (1993)). Neither party
disputes that Betancourt had unpaid taxes in 2002 and 2003, but the record also
contains no evidence of when the IRS assessed the tax, which would have
perfected its lien. See McDermott, 507 U.S. at 449. Salazar suggests that there
is a genuine issue of material fact about when the tax was assessed, which
should have precluded the district court from granting summary judgment to the
IRS. However, he does not actually point to any direct conflict between the facts
as asserted by the parties. The district court assumed that the tax must have
been assessed, creating the liens, by May 12, 2005, the date the IRS filed its
Notice of Lien in South Carolina. Salazar does not assert that he filed a formal
lien before this date, and the federal lien would thus ordinarily have priority
under the “first in time rule.”
      Salazar asserts that 26 U.S.C. § 6323(b)(8), which creates “superpriority”
status for certain attorney’s liens, establishes his right to the money. See United

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States v. Ripa, 323 F.3d 73, 80 (2d Cir. 2003). Under the statute, an attorney
holding a “lien upon or a contract enforceable” under local law against a
settlement or a judgment obtained by the attorney would have priority over the
federal tax lien “to the extent of his reasonable compensation for obtaining such
judgment or procuring such settlement.” 26 U.S.C. § 6323(b)(8); see also United
States v. Brosseau, 446 F. Supp. 2d 659, 661 (N.D. Tex. 2006).
      Federal courts look to local law to determine whether a lien is enforceable
under § 6323(b)(8). Ripa, 323 F.3d at 81 n.8. Texas does not, by statute, provide
for an automatic lien for attorneys on sums recovered by a client. See Johnson
v. Stephens Dev. Corp., 538 F.2d 664, 665 (5th Cir. 1976) (“Assuming that a lien
by [the attorney] would give him standing to oppose dismissal, we look to Texas
law to see if he has a lien [based on an attorney-client contract]. He does not.”);
United States v. Grubert, 191 F. Supp. 326, 327–28 (S.D. Tex. 1961); Tex. Mex.
Ry. Co. v. Showalter, 3 Willson 92 (Tex. Ct. App. 1886). An attorney in Texas
may claim a common-law lien, but only on funds that have come into his
possession. Grubert, 191 F. Supp. at 328; Showalter, 3 Willson 92. Here, the
funds never came into Salazar’s possession, and he does not assert that he had
a lien by the authority of any statute or Texas common law. In his appellate
brief, he does not cite to any Texas authority that would contradict the finding
of the district court that Texas law would not recognize his asserted lien on the
settlement amount.
      Salazar instead relies exclusively on the notion that he has an “equitable”
claim, arising in contract, on the settlement amount. He does not cite any Texas
or Fifth Circuit caselaw, or any statutory law, supporting his assertion that such
a claim might exist. The single case he cites for the proposition, United States
v. Kamieniecki, 261 F. Supp. 683 (D.N.H. 1966), was decided one month after the
effective date of § 6323(b)(8) and does not refer to it. See Federal Tax Lien Act
of 1966, Pub. L. No. 89-719, §§ 101, 114, 80 Stat. 1125, 1126, 1146 (1966). In

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Kamieniecki, the court found that “equitable principles” supported awarding
attorney’s fees to an attorney who could not satisfy the New Hampshire statute
governing attorney’s liens because his lien was “inchoate” at the time the federal
lien was perfected, since its amount was still unknown. Id. at 690–91. Notably,
the attorney had been awarded attorney’s fees as a part of the state court
judgment he obtained for his client. Id. at 690. The court found that it was clear
that the attorney’s efforts had led to the creation of the fund in question and that
“this [was] one of those very rare cases where equitable considerations compel
the awarding of compensation.” Id. at 691.
      The Kamieniecki court cited a decision of this court, United States v.
Hubbell, 323 F.2d 197 (5th Cir. 1963), in its holding. Kamieniecki, 261 F. Supp.
at 691. In Hubbell, “attorneys for the government assured the Court that fees
earned by appellees’ attorneys ‘would be taken care of.’” Hubbell, 323 F.2d at
201. The court thus held that the attorneys were entitled to some compensation
for their services despite the existence of a federal tax lien on the state court
judgment in question and remanded the case “for a determination of the amount
of reimbursement equitably due appellees and their attorneys for creating the
fund for the benefit of the government.” Id. Hubbell predates the enactment of
§ 6323(b)(8); whether equitable principles might still allow for an attorney to
recover despite his failure to satisfy the terms of the statute is now in doubt
because the statute itself does not provide for such an exception. See 26 U.S.C.
§ 6323. In any event, the facts here do not raise the equitable concerns present
in either Hubbell or Kamieniecki. Salazar was never promised by the United
States or any court that he would recover for his efforts at obtaining the
settlement, nor has he submitted any evidence of the extent of those efforts.
      Salazar does not point to any evidence of his efforts at procuring this
settlement, beyond the affidavit he submitted to the district court. The affidavit
details time spent preparing for Betancourt’s criminal trial and the civil case

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against him, but there is no mention in the affidavit of Salazar having
negotiated with Rosales’s attorney, prepared the terms of the settlement, or
engaged in other activities associated with the settlement reached between
Betancourt and Rosales. Salazar’s assertion to the district court that all of his
claimed attorney’s fees stemmed from his efforts to procure the settlement is
demonstrably false, based on his own affidavit. Moreover, the record suggests
that Salazar never intended for the government to know that Betancourt would
receive $150,000 in compensation for consenting to the release of the funds to
Rosales. Salazar fought to keep the terms of the agreement secret from both the
district court and the IRS. If an equitable justification for granting an attorney’s
lien superpriority over a federal tax lien still exists in the Fifth Circuit, Salazar’s
situation would not merit such treatment.
                                IV. CONCLUSION
      For the foregoing reasons, the judgment of the district court is
AFFIRMED.




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